LONDON (Alliance News) - Shares in KCOM Group PLC fell sharply on Tuesday in the wake of a profit warning and a cut in dividend payment.
KCOM shares were trading 36% lower at 59.00 pence each in morning trade.
The UK communications and IT services provider said earnings, before interest, taxes, depreciation and amortisation on pre-IFRS 15 basis for the year ending March 31 will be roughly 5% below current market expectations.
The profit warning was blamed on flat revenue growth in Enterprise division and continued customer churn in the National Network Services division, which will also lead to non-cash charge of GBP32.2 million in first half of 2019 financial year.
The company's Hull & East Yorkshire segment - the largest contributor to Ebitda - continues to perform well and in line with market expectations.
Net debt at end of 2019 financial year is estimated to be 10% higher than market views due to the company's decision to insource a managed service arrangement with a partner and unwind certain deferred revenue balances in the Enterprise segment. Net debt at September 30 stood at GBP108.5 million versus GBP67.8 million a year ago.
KCOM Group in addition expects the downward trend in Enterprise and National Network Services divisions to continue and consequently predicts Ebitda, pre-IFRS 15, for 2020 financial to be significantly below current market expectations.
The company has decided to cut its dividend payment to not less than 3.0p per share for 2019 financial from 6.0p announced previously.
"Taking these changes to the group's medium-term trading performance, cash flow and balance sheet into account, the board now considers it inappropriate to commit to continuing to pay an uncovered dividend," KCOM Group said.
KCOM is scheduled to release its results for the six months to September 30 on November 27.