There's not too much excitement at Hull-based telecoms group, KCOM (KCOM). As expected, the group's UK-wide business services division saw sales decline by £10m to £138m and underlying cash profits squeezed by 10 per cent to £14.5m, which largely reflected lower revenue from a one-off network build contract. More encouragingly, perhaps, turnover from KCOM's strategic focus areas - such as local authorities and multi-site enterprises, which tend to carry higher margins - held steady at £122m.
KC, the part of the business offering telephony and broadband services in Hull and East Yorkshire, proved more resilient as underlying cash profits held steady at £27.8m. Expansion, too, is in the offing. After passing 15,000 homes and businesses with its fibre-to-the-premise network by October, KC plans to pass another 30,000 premises with its high-speed network by March 2015. Annual capital spending is pegged at £30m until the target is met.
Increases in working capital outflow, higher capital spending - plus meeting the group's share scheme obligations - pushed up net debt by a quarter to £93.4m, although stronger net cash flow from operations is expected in the second half. However, although the board has committed to a full-year 10 per cent dividend increase, uncertainty hangs over future dividend levels given the next actuarial valuation looms next April.
Broker finnCap forecasts full-year adjusted pre-tax profit of £52.3m and EPS of 7.5p, up from £51.1m and 7.1p, respectively, last year.
KCOM (KCOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 70p | MARKET VALUE: | £361.6m | |
| TOUCH: | 69.5-70p | 12-MONTH HIGH: | 86p | LOW: 65p |
| DIVIDEND YIELD: | 5.9% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 13p* | NET DEBT: | 137% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 199 | 27.0 | 3.86 | 1.33 |
| 2012 | 189 | 27.6 | 4.08 | 1.47 |
| % change | -5 | +2 | +6 | +11 |
Ex-div: 2 Jan Payment: 1 Feb *Includes intangible assets of £97.6m, or 19p a share | ||||
