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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Kcom Group Plc | LSE:KCOM | London | Ordinary Share | GB0007448250 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 120.00 | 120.00 | 120.20 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMKCOM
RNS Number : 3609Q
KCOM Group PLC
29 November 2016
29 November 2016
KCOM GROUP PLC (KCOM.L) ANNOUNCES UNAUDITED INTERIM RESULTS TO 30 SEPTEMBER 2016
Highlights
-- Further progress with our strategy: -- Shift in Enterprise focus towards high value integration and cloud based solutions -- Accelerated fibre deployment in Hull and East Yorkshire, with market leading take-up
-- Integration of the business behind a single brand, enabled by investment in systems and processes
-- Banking facility extended giving 5 year period on existing terms -- Interim dividend of 2.00 pence (2015: 1.97 pence)
-- Reconfirming dividend commitment of no less than 6.00 pence per annum for current and next financial year
Hot Features
Premium
Unaudited Unaudited
Six months Six months Movement
ended ended on
30 Sept 30 Sept prior
2016 2015 period
GBPm GBPm %
---------------------------------- ------------ ------------ -----------
Results before exceptional
items
Revenue 165.3 177.9 (7.1)
EBITDA 32.0 37.2 (14.0)
Operating profit 18.9 26.3 (28.1)
Profit before tax 17.7 24.6 (28.0)
Adjusted basic earnings per
share (pence)(*) (Note 5) 2.78 3.82 (27.2)
Reported results
Net cash (outflow)/inflow
from operations (5.0) 35.9 (113.9)
Net debt (Note 8) 45.7 103.0 (55.6)
Profit before tax 16.1 24.2 (33.5)
Basic earnings per share (pence)
(Note 5) 2.52 3.76 (33.0)
Interim dividend per share
(pence) (Note 6) 2.00 1.97 1.5
*Adjusted basic EPS is basic EPS adjusted for the post tax impact of exceptional items.
Commenting on the results, Chief Executive Bill Halbert says:
"Our transformation continues to progress well. At the beginning of the year, we came together under a single brand enabling us to simplify the way we work. We are investing more in our systems and changing the size and skills of our teams, in order to focus more tightly on our strategic growth areas of Enterprise and Hull and East Yorkshire.
The disposal of certain national network assets last year was a fundamental part of our journey. The proceeds received gave us the opportunity to increase investment in our focus areas and has enabled us to continue to restructure the business.
Within our Enterprise segment, there is an ongoing shift towards more complex high value customer solutions. We are becoming recognised as a trusted technology partner for organisations looking to exploit communications and IT services to achieve their business ambitions. We are in the process of implementing such solutions for Bupa, Association of Train Operating Companies (ATOC) and Shoosmiths, while strengthening also relationships with other key customers, such as HMRC and National Farmers Union Mutual (NFUM).
Within Hull and East Yorkshire, our accelerated fibre deployment continues to achieve market leading take-up rates and we remain on target to make ultrafast services available to two thirds of our customer base by December 2017. The Group's interim dividend will be 2.00p per share and we re-confirm our commitment to a minimum full year dividend of 6.00p per share for this and the next financial year."
Outlook
We remain confident in our ability to exploit the opportunities that exist in our chosen markets, under our new single brand. Investment plans will be focused on fibre deployment in Hull and East Yorkshire, transformation of our existing network technologies, and on systems, processes, skills and capabilities. We are creating a simplified business which can operate on a reduced cost base and generate sustainable value for shareholders.
As previously outlined, capital expenditure is likely to peak over this year and the subsequent year, as we continue the fibre deployment and other key near term investments. As we focus investment more tightly around Enterprise and our Hull and East Yorkshire market, we expect to see continued revenue decline in other legacy areas. This trend is expected to continue during the second half of the financial year.
The Board remains confident in the continued transformation of the business and the sustainable value creating opportunities it will unlock in the medium term.
For further information please contact:
Bill Halbert, Chief Executive Officer
Jane Aikman, Chief Financial Officer
Cathy Phillips, Investor relations
KCOM Group PLC
01482 602595
Lulu Bridges / Mike Bartlett
Tavistock Communications
020 7920 3150
Review of the half year
The six months to 30 September 2016 is our first period operating as a single business under one KCOM brand. This supports our longer term business transformation whilst enabling us to simplify the way we work to achieve efficiencies and associated cost savings.
The proceeds from the sale of certain national network assets in January 2016 are being reinvested to support the accelerated deployment of fibre in Hull and East Yorkshire and the continued reshaping of the business, in support of our strategy.
Our results for the period show a decrease in revenue and EBITDA. This arises, as expected, from a shift in focus away from commodity business towards value driven solutions, coupled with the additional cost of our fibre network outsource.
The performance in our Hull and East Yorkshire market continues to benefit from strong fibre take-up. In the Enterprise market, where we are uniquely positioned, we continue to shift our focus towards significant integration and collaboration contracts with key customers.
In September, we completed the extension of our banking arrangements, securing a facility of GBP180 million for a further five years through to December 2021, on existing terms. This medium term certainty reduces the Group's risk and provides further opportunities for growth.
Segmental performance
The following analysis relates to the Group's reported segments in the period ended 30 September 2016 and all results are stated before exceptional items.
30 Sept 30 Sept 30 Sept 30 Sept
2016 2015 2016 2015
Revenue Revenue Contribution Contribution
GBPm GBPm GBPm GBPm
------------------------- --------- --------- -------------- --------------
Hull and East Yorkshire 50.4 52.2 36.0 35.5
Enterprise 68.3 75.4 13.7 15.2
SMB National 48.5 52.9 11.6 12.8
Total 167.2 180.5 61.3 63.5
Shared (1.9) (2.6) (29.3) (26.3)
------------------------- --------- --------- -------------- --------------
EBITDA EBITDA
GBPm GBPm
------------------------- --------- --------- -------------- --------------
Total 165.3 177.9 32.0 37.2
------------------------- --------- --------- -------------- --------------
Hull and East Yorkshire
Our Hull and East Yorkshire segment offers communication based services for consumers, small and medium businesses and public sector organisations within Hull and East Yorkshire.
During the period, our accelerated deployment of fibre has resulted in a further 26,000 premises being passed. We have passed 104,000 premises to date and expect to reach 150,000 premises passed by December 2017 (more than two thirds of our customer base). Fibre take up here remains strong with 9,000 further premises connected in the period, including 1,000 businesses, taking the total connected so far to 33,000 properties.
Despite a small overall decline in revenue within this segment, our underlying contribution percentage has increased in comparison to the prior year; this was enhanced by a one-off supplier credit received during the period.
Within the consumer channel, our fibre deployment has enabled us to access more customers and increase our Average Revenue Per User (ARPU) by 2%, resulting in market leading take-up rates in excess of 30 per cent of homes passed. Broadband connection volumes have grown in the period.
The business channel experienced a small reduction in revenue as a result of a decline in legacy voice services, alongside lower Public Sector expenditure on bandwidth following migration to a Public Services Network and consolidation of estate.
Wholesale revenues decreased slightly and, as anticipated, our non-core contact centre and publishing revenues have continued to decline.
Enterprise
Our Enterprise segment offers converged communication and IT solutions to our largest customers. This segment continues to benefit from increased investment, and represents the Group's best opportunity for growth, by exploiting our unique position in those converged services.
We continue to expand our relationship with our largest customer, HMRC, however given the scale of the revenue earned in the prior year from the early project phase of that contract, together with the anticipated decline in network based legacy activities has meant that we have seen, as signalled, a relative decline in overall revenues from the Enterprise segment. Other than this, revenue shows a small increase.
SMB National
Our SMB National segment offers communication services to medium sized business customers outside of Hull and East Yorkshire.
The SMB National market is no longer core to our strategy as it is increasingly difficult to differentiate our services in this highly commoditised market. As a result, SMB National has not benefitted from the increased investment we have made in our Enterprise and Hull and East Yorkshire segments.
Our results for the period reflect this, with a solid revenue and contribution performance, albeit behind the comparative period. We anticipate this trend continuing in the second half of the year.
Shared costs
Our shared segment provides technical and engineering support, alongside IT, Finance, Estates, Legal and HR services. This segment also includes PLC costs such as share scheme expenses and certain pension costs.
This segment includes higher network costs following the sale of some of our national network assets in the prior period. Offsetting this, our underlying costs have decreased as we have continued to simplify the way we work to achieve efficiencies.
Exceptional items
Our continued business transformation has resulted in the need to restructure our business in order to provide the right number of people with the right skills and bring together our activities under a single brand. As a result, and in line with our accounting policy, the Group incurred costs of GBP1.7 million during the period. We expect further restructuring costs in the second half of the year.
Refinancing, net debt and cash flow
In September, we agreed a new five year GBP180 million revolving credit facility, on the same terms as our existing arrangements.
Net debt at 30 September 2016 is GBP45.7 million (30 September 2015: GBP103.0 million), representing a net debt to EBITDA ratio of 0.66x (30 September 2015: 1.36x).
The GBP53.1 million increase in net debt compared to 31 March 2016 (net funds of GBP7.4 million) is explained by outflows relating to strategic capital investment (GBP27.1 million), dividends (GBP20.4 million) pensions (GBP4.7 million) and tax
(GBP4.9 million) in addition to movements in working capital.
Our working capital outflow of GBP25.9 million includes an GBP18 million VAT payment to HMRC in relation to the disposal of certain network assets in the prior year. Whilst fluctuations in our working capital occur during the year, our days' sales outstanding was 39, which is broadly in line with the prior period (30 September 2015: 41 and 31 March 2016: 32).
Dividend
The Group's interim dividend is 2.00 pence per share (30 September 2015: 1.97 pence), which is consistent with the Board's previously stated commitment to pay a total dividend of no less than 6.00 pence per year for the years ending 31 March 2017 and 31 March 2018. The dividend will be paid on 1 February 2017 to shareholders registered on 30 December 2016. The ex-dividend date is 29 December 2016.
Pensions
The IAS 19 pension liability at 30 September 2016 is GBP44.1 million (30 September 2015: GBP16.1 million and 31 March 2016: GBP14.4 million). The increase from 31 March arises as a result of a lower discount rate used to calculate the schemes' liabilities, offset by a strong asset performance.
The agreed level of deficit repair payment (across both schemes) for the year ending 31 March 2017 is GBP6.7 million
(31 March 2016: GBP2.0 million). In addition to this amount, the Group makes pre-agreed payments to its pension schemes through the asset backed partnerships. The full year payment for both the current year and prior year is GBP2.7 million.
Our triennial valuation (as at 31 March 2016) is in the process of being finalised.
Capital investment
The Group's capital investment during the period is consistent with previous guidance of full year capital expenditure of at least GBP40 million.
The disposal of certain national network assets in the prior year enabled increased capital investment to drive our business transformation.
Cash capital expenditure during the period was GBP27.1 million (30 September 2015: GBP17.4 million). Key strategic projects in the period include the deployment of fibre (GBP7.1 million), alongside targeted customer specific and funded investment
(GBP6.2 million).
The Group's depreciation and amortisation charge for the period is GBP13.2 million (30 September 2015: GBP10.9 million), the increase resulting from the higher capital investment in recent years.
Tax
The Group's tax charge is GBP3.2 million (30 September 2015: GBP5.1 million). The current year effective tax rate is 20.1%, broadly in line with the prevailing rate of corporation tax.
Principal risk and uncertainties
The Group has a number of risks and uncertainties which have been identified through the risk management framework. The risks set out below could have a material adverse impact on the Group:
-- maintaining revenue in our Enterprise segment while network based revenue declines - revenue from legacy activities may decline faster than the revenue from new services grows;
-- substitute technologies entering the market - the development of substitute technologies without the need for a fixed line would present a competitive threat within the consumer part of our business;
-- upgrading our network equipment - our equipment requires upgrading as demand for broadband and cloud based services increases;
-- accuracy, security and confidentiality of customer data - security of customer data is of paramount importance to our customers and therefore to us;
-- customer service and delivery - delivering exceptional service to our customers is one of our key strategic aims and therefore the risk of failing to do this is a key risk for us to mitigate; and
-- security and resilience of our networks and IT systems - our networks and IT systems are key to all that we do and are crucial in delivering service to our customers.
The risks outlined above are disclosed in more detail on pages 25 and 26 of the Annual report and accounts to
31 March 2016 and it is the view of the directors that these risks and uncertainties remain appropriate for this interim statement.
Forward looking statements
Certain statements in this interim statement are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements.
We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.
Consolidated interim income statement
Note Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
------------------------------- ----- ------------ ------------ ----------
Revenue 165,326 177,890 349,222
Operating expenses (148,122) (152,050) (257,438)
Operating profit 17,204 25,840 91,784
Analysed as:
EBITDA before exceptional
items 1 32,041 37,197 74,937
Exceptional credits 2 - 2,700 47,331
Exceptional charges 2 (1,671) (3,129) (6,445)
Depreciation of property,
plant and equipment (7,149) (6,291) (13,744)
Amortisation of intangible
assets (6,017) (4,637) (10,295)
Finance costs 3 (1,149) (1,632) (3,057)
Share of profit of associates 12 5 16
Profit before tax 1 16,067 24,213 88,743
Tax 4 (3,234) (5,081) (17,609)
Profit for the period
attributable to owners
of the parent 12,833 19,132 71,134
Earnings per share (pence)
Basic 5 2.52 3.76 13.96
Diluted 5 2.49 3.73 13.82
Consolidated interim statement of comprehensive income
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ---------
Profit for the period 12,833 19,132 71,134
Other comprehensive income:
Items that will not be reclassified
to profit or loss
Remeasurements of retirement
benefit obligations (33,887) 13,659 12,130
Tax on items that will not
be reclassified 6,019 (3,001) (2,426)
-------------------------------------- ------------ ------------ ---------
Total items that will not
be reclassified to profit
or loss (27,868) 10,658 9,704
-------------------------------------- ------------ ------------ ---------
Items that may be reclassified
subsequently to profit or
loss
Cash flow hedge fair value
movements - (442) (442)
Tax on items that may be
reclassified - 88 (569)
-------------------------------------- ------------ ------------ ---------
Total items that may be reclassified
subsequently to profit or
loss - (354) (1,011)
-------------------------------------- ------------ ------------ ---------
Total comprehensive (expense)/income
for the period attributable
to owners of the parent (15,035) 29,436 79,827
Consolidated interim balance sheet
Unaudited Unaudited Audited
as at as at as at
30 Sept 30 Sept 31 Mar
2016 2015 2016
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 51,372 51,372 51,372
Other intangible assets 47,004 39,974 44,637
Property, plant and equipment 100,886 90,606 93,592
Investments 61 38 49
Deferred tax assets 12,295 10,947 8,356
211,618 192,937 198,006
---------------------------------- ----- ---------- ---------- ----------
Current assets
Inventories 5,053 2,399 2,638
Trade and other receivables 77,606 92,450 65,431
Cash and cash equivalents 8 16,660 14,221 14,857
Derivative financial instruments - 224 -
---------------------------------- ----- ---------- ---------- ----------
99,319 109,294 82,926
---------------------------------- ----- ---------- ---------- ----------
Assets classified as held - 41,766 -
for sale
---------------------------------- ----- ---------- ---------- ----------
99,319 151,060 82,926
Total assets 310,937 343,997 280,932
---------------------------------- ----- ---------- ---------- ----------
Current liabilities
Trade and other payables (113,141) (123,672) (126,235)
Current tax liabilities (2,419) (5,106) (5,459)
Bank overdrafts 8 (2,699) - (1,645)
Derivative financial instruments (2) - (11)
Finance leases (2,587) (3,021) (3,271)
Provisions for other liabilities
and charges (297) (784) (738)
Non-current liabilities
Borrowings 8 (54,133) (108,687) -
Retirement benefit obligations 7 (44,076) (16,100) (14,350)
Deferred tax liabilities (6,037) (4,334) (6,875)
Finance leases (2,944) (5,482) (3,680)
Provisions for other liabilities
and changes (2,171) (963) (2,401)
---------------------------------- ----- ---------- ---------- ----------
Total liabilities (230,506) (268,149) (164,665)
---------------------------------- ----- ---------- ---------- ----------
Net assets 80,431 75,848 116,267
Capital and reserves,
attributable to owners
of the parent
Share capital 51,660 51,660 51,660
Share premium account 353,231 353,231 353,231
Accumulated losses (324,460) (329,043) (288,624)
Total equity 80,431 75,848 116,267
---------------------------------- ----- ---------- ---------- ----------
Consolidated interim statement of changes in shareholders' equity
Share Hedging
Share premium and translation Accumulated
capital account reserve losses Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2015 (audited) 51,660 353,231 442 (341,454) 63,879
--------------------------- ---- -------- -------- ---------------- ----------- --------
Profit for the period - - - 19,132 19,132
Other comprehensive
income - - (442) 10,746 10,304
--------------------------- ---- -------- -------- ---------------- ----------- --------
Total comprehensive
income for the
period ended 30 September
2015 (unaudited) - - (442) 29,878 29,436
--------------------------- ---- -------- -------- ---------------- ----------- --------
Deferred tax charge
relating to share
schemes - - - 28 28
Current tax credit - - - - -
relating to share
schemes
Deferred tax charge
relating to asset-backed
Partnership - - - 269 269
Purchase of ordinary
shares - - - (150) (150)
Employee share schemes - - - 880 880
Dividends 6 - - - (18,494) (18,494)
--------------------------- ---- -------- -------- ---------------- ----------- --------
(17,467) (17,467)
--------------------------- ---- -------- -------- ---------------- ----------- --------
At 30 September 2015
(unaudited) 51,660 353,231 - (329,043) 75,848
--------------------------- ---- -------- -------- ---------------- ----------- --------
Profit for the period - - - 52,002 52,002
Other comprehensive
income - - - (1,611) (1,611)
--------------------------- ---- -------- -------- ---------------- ----------- --------
Total comprehensive
income for the
period ended 31 March
2016 (audited) - - - 50,391 50,391
--------------------------- ---- -------- -------- ---------------- ----------- --------
Deferred tax charge
relating to share
schemes - - - 97 97
Current tax credit
relating to share
schemes - - - 90 90
Deferred tax credit
relating to asset-backed
Partnership - - - (269) (269)
Purchase of ordinary
shares - - - (300) (300)
Employee share schemes - - - 588 588
Dividends 6 - - - (10,178) (10,178)
(9,972) (9,972)
--------------------------- ---- -------- -------- ---------------- ----------- --------
At 31 March 2016 (audited) 51,660 353,231 - (288,624) 116,267
--------------------------- ---- -------- -------- ---------------- ----------- --------
Profit for the period - - - 12,833 12,833
Other comprehensive
income - - - (27,868) (27,868)
Total comprehensive
income for the
period ended 30 September
2016 (unaudited) - - - (15,035) (15,035)
--------------------------- ---- -------- -------- ---------------- ----------- --------
Deferred tax credit
relating to share
schemes - - - (102) (102)
Deferred tax credit
relating to asset-backed
Partnership - - - 262 262
Purchase of ordinary
shares - - - (1,310) (1,310)
Employee share schemes - - - 703 703
Dividends 6 - - - (20,354) (20,354)
- - - (20,801) (20,801)
--------------------------- ---- -------- -------- ---------------- ----------- --------
At 30 September 2016
(unaudited) 51,660 353,231 - (324,460) 80,431
--------------------------- ---- -------- -------- ---------------- ----------- --------
Consolidated interim cash flow statement
Unaudited Audited
Unaudited six months year
six months ended ended
ended 30 Sept 31 Mar
30 Sept 2015 2016
Note 2016 GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Operating profit 17,204 25,840 91,784
Adjustments for:
- depreciation and amortisation 13,166 10,928 24,039
- (increase)/decrease in
working capital (25,885) 5,445 23,385
- restructuring cost and
onerous lease payments (671) (1,870) 533
- pension deficit payments (4,697) (2,526) (6,565)
- Share based payment charge 703 - 1,468
Tax paid (4,872) (1,900) (7,206)
Loss/(profit) on sale of
property, plant and equipment 69 - (47,065)
Net cash generated from
operations 8 (4,983) 35,917 80,373
-------------------------------- ---- ------------- ----------- ---------
Cash flows from investing
activities
Purchase of property, plant
and equipment (16,211) (11,998) (16,959)
Purchase of intangible
assets (9,381) (4,252) (11,467)
Proceeds on disposal of
investments - - 90,000
Net cash used in investing
activities (25,592) (16,250) 61,574
-------------------------------- ---- ------------- ----------- ---------
Cash flows from financing
activities
Dividends paid 6 (20,354) (18,494) (28,672)
Interest paid 8 (534) (1,700) (2,794)
Repayment of bank loans (5,000) (45,000) (175,000)
Drawdown of bank loans 60,000 50,000 70,000
Capital element of finance
lease repayments (1,479) (1,112) (2,829)
Purchase of ordinary shares 8 (1,309) (150) (450)
Net cash used in financing
activities 31,324 (16,456) (139,745)
-------------------------------- ---- ------------- ----------- ---------
Increase/(decrease) in
cash and cash equivalents 749 3,211 2,202
Cash and cash equivalents
at the beginning of the
period 13,212 11,010 11,010
Cash and cash equivalents
at the end of the period 8 13,961 14,221 13,212
-------------------------------- ---- ------------- ----------- ---------
Notes to the unaudited interim financial information
1. Segmental analysis
As part of our continued business transformation, our activities came together under a single brand on 31 March 2016.
As a result of this change, the Group's previous brands were consolidated and our operating segments were updated. The operating segments continue to be based on customer type and geographic service location. The operating segments are as follows:
Hull and East Yorkshire - Our Hull and East Yorkshire segment offers communication based services for consumers, small and medium businesses and public sector organisations within Hull and East Yorkshire;
Enterprise - Our Enterprise segment offers communication and collaboration solutions to our largest customers;
SMB National - Our SMB National segment offers communication services to our medium sized business customers outside of Hull and East Yorkshire; and
Shared - Our shared segment provides technical and engineering support, alongside IT, Finance, Estates, Legal and HR services. This segment also includes PLC costs such as share scheme expenses and certain pension costs.
From 1 April 2016 KCOM has one business-wide EBITDA and segment EBITDA is no longer reported to the Board as a measure of segmental performance.
The profitability metric used to assess segmental performance is contribution, which represents gross margin plus certain costs, directly attributable to that segment.
Revenue Contribution
--------------------------------- ---------------------------------
Unaudited Unaudited Audited Unaudited Unaudited Audited
six six year six six year
months months ended months months ended
ended ended ended ended
30 Sept 30 Sept 31 30 Sept 30 Sept 31
2016 2015 Mar 2016 2015 Mar
GBP'000 GBP'000 2016 GBP'000 GBP'000 2016
GBP'000 GBP'000
-------------------- ---------- ---------- --------- ---------- ---------- ---------
Before exceptional
items
Hull and East
Yorkshire 50,365 52,231 104,515 36,022 35,468 71,220
Enterprise 68,266 75,426 147,666 13,721 15,208 29,770
SMB National 48,639 52,883 102,281 11,581 12,761 24,338
Total 167,270 180,540 354,462 61,324 63,437 125,328
Shared (1,944) (2,650) (5,240) (29,283) (26,240) (50,391)
-------------------- ---------- ---------- --------- ---------- ---------- ---------
EBITDA
-------------------- ---------- ---------- --------- ---------------------------------
Total before
exceptional
items 165,326 177,890 349,222 32,041 37,197 74,937
-------------------- ---------- ---------- --------- ---------- ---------- ---------
Exceptional
items (1,671) (429) 40,886
-------------------- ---------- ---------- --------- ---------- ---------- ---------
Total after
exceptional
items 165,326 177,890 349,222 30,370 36,768 115,823
-------------------- ---------- ---------- --------- ---------- ---------- ---------
A reconciliation of EBITDA to total profit before tax is provided as follows:
Unaudited Unaudited Audited
six months six months Year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
EBITDA post exceptional items 30,370 36,768 115,823
Depreciation (7,149) (6,291) (13,744)
Amortisation (6,017) (4,637) (10,295)
Finance costs (1,149) (1,632) (3,057)
Share of profit of associates 12 5 16
------------------------------- ------------ ------------ ---------
Profit before tax 16,067 24,213 88,743
------------------------------- ------------ ------------ ---------
The split of total revenue between external customers and inter-segment revenue is as follows:
Unaudited Unaudited Audited
six six year
months months ended
ended ended 31 Mar
30 Sept 30 Sept 2016
2016 2015 GBP'000
GBP'000 GBP'000
Revenue from external customers
Hull and East Yorkshire 48,095 49,535 98,911
Enterprise 68,254 75,426 147,522
SMB National 48,639 52,883 102,281
Shared 338 46 508
--------------------------------- ---------- ---------- ---------
Total 165,326 177,890 349,222
Inter-segment revenue
Hull and East Yorkshire 2,270 2,696 5,604
Enterprise 12 - 144
SMB National - - -
Shared (2,282) (2,696) (5,748)
--------------------------------- ---------- ---------- ---------
Total - - -
165,326 177,890 349,222
--------------------------------- ---------- ---------- ---------
2. Exceptional items
Exceptional items are separately disclosed by virtue of their size or incidence to improve the understanding of the Group's financial performance.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
Profit on sale of national
network - - 44,486
Ofcom settlement - 2,700 2,845
Exceptional credits - 2,700 47,331
----------------------------- ----------- ----------- --------
Restructuring costs (1,671) (2,274) (4,130)
Onerous lease costs - (855) (2,315)
Exceptional charges (1,671) (3,129) (6,445)
----------------------------- ----------- ----------- --------
(Charged)/credited to profit
before tax (1,671) (429) 40,886
----------------------------- ----------- ----------- --------
Our continued business transformation has resulted in the need to restructure our business in order to provide the right number of people with the right skills and bring together our activities under a single brand. As a result, and in line with our accounting policy, the Group incurred costs of GBP1.7 million during the period.
In January 2016, the Group sold the infrastructure relating to its national telecommunications network for a consideration of GBP90.0 million. The profit on sale (GBP44.5 million) includes the net book value of assets disposed (GBP42.4 million) in addition to other associated costs (net GBP3.1 million).
Ofcom determined settlement relates to a settlement of claims relating to an industry-wide regulatory ruling; treated as exceptional in accordance with our accounting policy.
Onerous lease costs in prior periods arose as a result of rationalisation of the Group's property portfolio.
The tax credit on exceptional items is GBP0.3 million. The cash flow impact of exceptional items is GBP1.7 million.
3. Finance costs
Unaudited Unaudited Audited
six six months Year
months ended ended
ended 30 Sept 31 Mar
30 Sept 2015 2016
2016 GBP'000 GBP'000
GBP'000
Finance costs (929) (1,852) (2,922)
Retirement benefit obligation (220) (600) (954)
Fair value gain on financial
instruments - 820 819
------------------------------ --------- ----------- --------
Charged to profit before tax (1,149) (1,632) (3,057)
------------------------------ --------- ----------- --------
4. Tax
Taxes on income in interim periods are accrued using the tax rate that would be applicable to the expected total annual earnings. The Group's effective rate is 20.1% (2015: 21.0%).
5. Earnings per share
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
No. No. No.
For basic earnings per share 510,141,695 509,352,876 509,543,003
Share options in issue 4,490,038 3,384,917 5,225,401
------------------------------- ----------- ----------- -----------
For diluted earnings per share 514,631,733 512,737,793 514,768,404
------------------------------- ----------- ----------- -----------
Earnings GBP'000 GBP'000 GBP'000
------------------------------- ----------- ----------- -----------
Profit attributable to equity
holders
of the company 12,833 19,132 71,134
------------------------------- ----------- ----------- -----------
Adjustments:
Exceptional items 1,671 429 (40,886)
Tax on exceptional items (334) (86) 8,177
------------------------------- ----------- ----------- -----------
Adjusted profit attributable
to equity
holders of the company 14,170 19,475 38,425
------------------------------- ----------- ----------- -----------
Earnings per share Pence Pence Pence
Basic 2.52 3.76 13.96
Diluted 2.49 3.73 13.82
Adjusted basic 2.78 3.82 7.54
Adjusted diluted 2.75 3.80 7.46
6. Dividends
Unaudited Unaudited Audited
six six year
months months ended
ended ended 31 Mar
30 Sept 30 Sept 2016
2016 2015 GBP'000
GBP'000 GBP'000
Final dividend for the year
ended
31 March 2015 of 3.58 pence
per share - 18,494 18,494
Interim dividend for the
year ended
31 March 2016 of 1.97 pence
per share - - 10,178
Final dividend for the year
ended 20,354 - -
31 March 2016 of 3.94 pence
per share
Total 20,354 18,494 28,672
------------------------------- ---------- ---------- ---------
The proposed interim dividend for the six months ended 30 September 2016 is 2.00 pence per share. In accordance with IAS 10 'Events after the balance sheet date', dividends declared after the balance sheet date are not recognised as a liability in these financial statements.
7. Retirement benefit obligation
Reconciliation of funded status to balance sheet
Unaudited Unaudited Audited
six six year
months months ended
ended ended 31 Mar
30 Sept 30 Sept 2016
2016 2015 GBP'000
GBP'000 GBP'000
Present value of defined
benefit obligation (294,152) (222,600) (227,538)
Fair value of plan assets 250,076 206,500 213,188
Deficit (44,076) (16,100) (14,350)
---------------------------- ----------- ----------- -----------
Principal financial assumptions
Unaudited Unaudited Audited
six six year
months months
ended ended
30 Sept 30 Sept ended
2016 2015 31 Mar
% % 2016
%
RPI Inflation 3.00 3.05 2.95
CPI Inflation 2.00 2.05 1.95
Rate of increase to pensions
in payment 2.00 2.00 2.00
Discount rate for scheme
liabilities 2.15 3.75 3.45
------------------------------ ---------- ---------- --------
8. Movement in net debt
Unaudited Unaudited
six six months Audited
months ended Year
ended 30 Sept ended
30 Sept 2015 31 Mar
2016 GBP'000 2016
GBP'000 GBP'000
Opening net debt 7,412 (99,348) (99,348)
Closing net debt (45,703) (102,969) 7,412
(Increase)/decrease in the
period (53,115) (3,621) 106,760
-------------------------------------- --------- ----------- --------
Reconciliation of movement
in the period
Net cash flow from operations (4,983) 35,917 80,373
Cash capital expenditure (27,071) (17,362) (31,255)
Proceeds on sale of property,
plant and equipment - - 90,000
Interest (534) (1,700) (2,794)
Dividends (20,354) (18,494) (28,672)
Purchase of ordinary shares (1,309) (150) (450)
Movement in finance leases 1,420 (493) (53)
Non cash movement in loan arrangement
fees (271) - -
Other (13) (1,339) (389)
-------------------------------------- --------- ----------- --------
(Increase)/decrease in the
period (53,115) (3,621) 106,760
-------------------------------------- --------- ----------- --------
Net debt comprises:
Unaudited Unaudited
six six Audited
months months year
ended ended ended
30 Sept 30 Sept 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
Cash and cash equivalents (including
bank overdrafts) 13,961 14,221 13,212
Borrowings (net of debt issue
costs) (54,133) (108,687) 1,151
Finance leases (5,531) (8,503) (6,951)
------------------------------------- --------- --------- --------
Total net debt (45,703) (102,969) 7,412
------------------------------------- --------- --------- --------
In September 2016 the Group re-negotiated its multi-currency revolving credit facility. The GBP180.0m facility provided by a group of five core relationship banks matures in December 2021. The Group considers that this facility will provide sufficient funding to support the Group's growth. In addition, short-term flexibility of funding is available under the
GBP10.0 million overdraft facility provided by the Group's clearing banks.
9. Basis of preparation and publication of unaudited interim results
General information
KCOM Group PLC is a company domiciled in the United Kingdom.
The Group has its primary listing on the London Stock Exchange. Details of the principal activities of the Group are disclosed on pages 2 to 3 and in the Strategic report in the Group's 2016 annual report and accounts.
This condensed consolidated interim financial information was approved for issue on 29 November 2016.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2016 were approved by the Board of directors on 8 June 2016 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
The condensed consolidated interim financial information has been reviewed, not audited. The review opinion is disclosed on page 20.
This condensed consolidated interim financial information will be published on the Company's website. The maintenance and integrity of the website is the responsibility of the directors. The work carried out by the auditors does not involve consideration of these matters. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 September 2016 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously Financial Services Authority) and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended
31 March 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
Going concern
The Group meets its day-to-day working capital requirements through its bank facilities. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. After making enquires, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.
10. Accounting policies
The accounting policies adopted are consistent with those published in the Group's 2016 annual report and accounts, except as described below.
Tax policy
Taxes on income in interim periods are accrued using the tax rate that would be applicable to the expected total annual earnings.
Assets classified as held for sale
Assets are classified as assets held for sale when their carrying amount is to be recovered through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. Once classified as held for sale, intangibles assets and property, plant and equipment are no longer amortised or depreciated.
11. Significant judgements and estimates
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the Group's 2016 annual report and accounts, with the exception of changes in estimates that are required in determining the provision for income taxes (see Note 10).
12. Financial risk management and financial instruments
Financial risk factors
The Group's activities expose it to a variety of financial risks; currency risk, interest-rate risk, liquidity risk, and credit risk. The Group's overall risk management strategy is approved by the Board and implemented and reviewed by senior management. Detailed financial risk management is then delegated to the Finance departments which have a specific policy manual that sets out guidelines to manage financial risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 March 2016. There have been no changes in the Group's risk management processes or policies since the year end.
Financial instruments
The Group accounts for financial instruments in accordance with IFRS 13. This standard requires disclosure of fair value measurements by level of the following hierarchy;
1. Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
2. Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2)
3. Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Consistent with the March 2016 year end, all of the Group's financial instruments fall into hierarchy level 2. The fair value of financial assets and liabilities is obtained from third party sources.
Fair values
The fair value of bank borrowings is GBP49.8 million (March 2016: GBPNil) compared to a book value of GBP54.1 million
(March 2016: GBPNil). The fair value of cash flows has been estimated using a rate based on the weighted average borrowing rate of 1.57%.
13. Related party transactions
There are no material related party transactions.
14. Subsequent events
In October, we received a provisional Notification from Ofcom. This stated that Ofcom believes KCOM may have failed to comply fully with a required "General Condition" between 2009 and 2015. We are carrying out a review, with the help of independent experts and will respond to Ofcom shortly, following which Ofcom will make its determination. There is a risk that the final outcome may result in a financial penalty, which we are not currently in a position to quantify.
15. Statement of directors' responsibilities
The directors confirm that these condensed interim financial statements have been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- material related party transactions in the first six months and any material changes in the related party transactions described in the Group's 2016 annual report and accounts.
The directors of KCOM Group PLC are listed in the KCOM Group Annual Report for 31 March 2016. Except for the change listed below.
Paul Simpson (resigned 30 September 2016)
Jane Aikman (appointed 17 October 2016)
Signed by Order of the Board on 29 November 2016 by:
Independent review report to KCOM Group PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed KCOM Group PLC's condensed consolidated interim financial statements (the "interim financial statements") in the unaudited interim results of KCOM Group PLC for the 6 month period ended 30 September 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements, comprise:
-- the consolidated interim balance sheet as at 30 September 2016;
-- the consolidated interim income statement and statement of comprehensive income for the period then ended;
-- the consolidated interim cash flow statement for the period then ended;
-- the consolidated interim statement of changes in shareholders' equity for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
The interim financial statements included in the unaudited interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 9 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The unaudited interim results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the unaudited interim results in accordance with the Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the unaudited interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the unaudited interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
Leeds
29 November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BPBBTMBBTTFF
(END) Dow Jones Newswires
November 29, 2016 02:01 ET (07:01 GMT)
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