The benefits of the major restructuring programme completed by telecoms specialist Kcom last year really shone through in these half-year results, which revealed a return to topline growth after years of retrenching from low value services and customers.
The introduction of bundled voice and data services a year ago helped it to take advantage of demand for high bandwidth services and overcome the steadily deteriorating demand for legacy voice to deliver a 3 per cent underlying sales increase in its telephony business, KC. Similarly, it has seen steady growth in the number of broadband connections it's selling to small business through its Eclipse division.
But, as executive chairman Bill Halbert explained, the real growth engine is the enterprise-focused Kcom divisions, and its cloud specialist Smart421. Kcom is a key beneficiary of the government's Public Service Network programme, which is consolidating public sector telecoms provision on a regional basis to save money. Kcom has won three of the four tenders so far and believes it is well positioned to take advantage of what could be as many as 70 tenders left to come.
Broker Investec expects underlying full-year pre-tax profit of £47.5m and EPS of 6.5p (£46.7m and 6.9p in 2011).
KCOM GROUP (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 76p | MARKET VALUE: | £393m | |
| TOUCH: | 75-76p | 12-MONTH HIGH: | 85p | LOW: 50p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 13p* | NET DEBT: | 114% | |
| Half-yearto 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 195 | 23.2 | 3.21 | 1.10 |
| 2011 | 198 | 27.0 | 3.86 | 1.33 |
| % change | +2 | +16 | +20 | +21 |
Ex-div: 14 Dec Payment: 1 Feb *Includes intangible assets of £91.7m, or 18p a share | ||||
