The first-half revenue decline at KCOM (KCOM) stemmed largely from an expected reduction in its legacy activities within the National Network Services division. This fed through to lower pre-tax profits, which were squeezed further by more losses on software contracts in its enterprise business. The group’s shares fell 3 per cent in reply.
The group also plans to exit one of the aforementioned troublesome software contracts, which generated £1.7m in losses and a £4.5m provision for future losses. They are working with the long-standing customer to manage the remaining contracts. The meagre 1 per cent growth in enterprise sales was attributed to the dulling effect of this year's snap general election on public sector spending.
KCOM remains on track to deploy fibre to the remaining 25 per cent of premises in its Hull and East Yorkshire addressable market by March 2019. Bosses say they’ll have made fibre available to 75 per cent of premises (150,000 properties) by the end of this year. And they’ve already seen 44 per cent take-up of this fibre by customers.
Investment in this fibre infrastructure drove net debt up considerably, from £45.7m to £67.8m. Management expects this to continue rising, before falling away after the fibre roll-out has completed and customers have been connected.
Analysts at FinnCap forecast adjusted pre-tax profits of £28.2m and EPS of 4.5p for the year to March 2018, down from £38.5m and 6p in FY2017.
| KCOM (KCOM) | ||||
| ORD PRICE: | 99p | MARKET VALUE: | £509m | |
| TOUCH: | 98-99p | 12-MONTH HIGH: | 117p | LOW: 87p |
| DIVIDEND YIELD: | 6.1% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 19.7p* | NET DEBT: | 67% | |
| Half-year to | Turnover | Pre-tax | Earnings per | Dividend |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 165 | 16.1 | 2.5 | 2.0 |
| 2017 | 151 | 14.8 | 2.4 | 2.0 |
| % change | -8 | -8 | -7 | - |
| Ex-div: | 28 Dec | |||
| Payment: | 9 Feb | |||
| *Includes intangible assets of £95m, or 18.3p per share | ||||
