A continued focus on higher-margin business has allowed telecom specialists KCom to grow its underlying pre-tax profit by 24 per cent in the year. What's more, after a decent dividend hike, management has committed to raise the current year's payout by 10 per cent – leaving the shares looking attractive.
True, group sales did fall slightly – reflecting the fact that, while growth is coming through from newly identified business-to-business areas such as managed services, that has yet to offset the declines in lower-margin areas within the group's core business communications unit. Meanwhile, the telephony and broadband unit has successfully mitigated declines in fixed line revenues with growth in broadband and bundled packages – fixed line sales now generate less than 10 per cent of the unit's revenues. Revenues here should be lifted further once KCom completes its superfast broadband rollout across 15,000 homes in Hull and East Yorkshire by the end of the year. Although that will involve a rise in capital expenditure to £30m this year, from £22m in 2012.
Espirito Santo Investment Bank expects pre-tax profit to fall to £48.5m for 2012, from £51.1m, giving EPS of 7.24p (7.41p in 2012) – as sales contract as part of the group's business realignment efforts.
KCOM (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 71p | MARKET VALUE: | £367m | |
| TOUCH: | 70-71p | 12-MONTH HIGH: | 85p | LOW: 63p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 14p* | NET DEBT: | 102% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 517 | 4.40 | 3.70 | 2.82 |
| 2009 | 472 | -111 | -20.7 | 1.50 |
| 2010 | 413 | 19.2 | 3.50 | 1.75 |
| 2011 | 395 | 32.9 | 4.40 | 3.60 |
| 2012 | 387 | 51.1 | 7.41 | 4.00 |
| % change | -2 | +55 | +68 | +11 |
Ex-div: 27 Jun Payment: 27 Jul *Includes intangible assets of £92, or 18p a share | ||||
