24 Nov 2009 07:00
24 November 2009
KCOM GROUP PLC (KCOM.L) ANNOUNCES
UNAUDITED INTERIM RESULTS TO 30 SEPTEMBER 2009
KCOM Group PLC (KCOM.L) ("KCOM Group" or the "Group") today announces its unaudited interim results for the half year ended 30 September 2009.
Highlights
Net cash inflow from operations improved by £11.1m to £32.0m (2008: £20.9m).
The continued strong cash performance has seen net debt reduce by a further £11.7 million in the period since 31 March 2009, to £146.2 million (2008: £180.2 million) and by £34.0 million in the last 12 months.
Revenue reduction to £210.8 million (2008: £243.6 million) consistent with decision to focus on long term profitable customer relationships whilst exiting low margin commodity based operations.
EBITDA before exceptional items improved to £37.0 million (2008: £34.4 million) reflecting lower operating costs across the Group.
Profit before tax and exceptional items increases 71.2 per cent to £16.2 million (2008: £9.4 million).
Maintained interim dividend of 0.5 pence (2008: 0.5 pence).
Summary
| Unaudited Six months ended 30 Sept 09 (£ million) | Unaudited Six months ended 30 Sept 08 (£ million) | Change over prior period (%) | |
| Results from continuing operations before exceptional items (note 1) | |||
| Revenue | 210.8 | 243.6 | (13.5) |
| Operating profit | 20.0 | 16.0 | 25.0 |
| EBITDA | 37.0 | 34.4 | 7.5 |
| Profit before tax | 16.2 | 9.4 | 72.3 |
| Reported results | |||
| Net cash inflow from operations | 32.0 | 20.9 | 53.1 |
| Net debt (note 6) | 146.2 | 180.2 | (18.9) |
| Profit/(loss) before tax Basic earnings/(loss) per share (pence) | 13.3 1.89 | (103.0) (19.71) | |
| Dividend per share (pence) | 0.5 | 0.5 |
Bill Halbert, Executive Chairman, said "These encouraging results demonstrate the real progress that the Group has made as a result of implementing a series of strategic and operational changes. The actions taken have resulted in a simplified business and a stronger competitive and financial position. Whilst continuing to concentrate our efforts on improving the overall financial strength of the Group, we will increasingly seek to maximise the growth opportunities that are now available to us."
For further information please contact:
| KCOM Group PLC: | |
| Bill Halbert, Executive Chairman Paul Simpson, CFO | Tel: 01924 882952 (PA: Annette Watling) |
|
| |
| The Maitland Consultancy: | |
| Tel: 0207 369 5151 | |
| Brian Hudspith & Amanda Martyr | Mobile: 07771 825606 / 07770 802555 |
Business and Operating Review
Group overview
Group revenue reduction of 13.5 per cent to £210.8 million (2008: £243.6 million) is in line with our expectations. There has been a favourable movement in the business mix of revenue, such that approximately 90 per cent of the current year revenue is recurring (i.e. contracted or run rate) in nature compared to a total of 81 per cent for the same period in 2008.
Despite the reduction in revenue, Group EBITDA before exceptional items has increased to £37.0 million (2008: £34.4 million). This improvement reflects a reduction in Group overhead expenses consistent with the actions the Board has undertaken to reduce both the absolute amount of overhead and the complexity of the Group.
Continued strong working capital management coupled with lower overall borrowing costs has seen net financing costs reduce by £2.8 million to £3.8 million (2008: £6.6 million).
The combination of these factors has resulted in a Group profit before taxation and exceptional items of £16.2 million compared to £9.4 million in the previous period.
Kingston Communications overview
The Kingston Communications ("KC") reporting segment includes the financial results of the Hull and East Yorkshire Licensed Area activities, the Eclipse Internet business ("Eclipse") and the Information Services business. The KC results have been historically reported under the Telecoms and Internet and Information Services segments.
Overall the KC businesses have reported a 4.4 per cent decline in revenue to £64.9 million (2008 restated: £67.9 million). That decline primarily reflects continued fixed line call volume reduction within Hull and East Yorkshire and churn within the Eclipse Internet customer base. A core objective for this newly focused business is to reverse those trends.
Despite this, EBITDA before exceptional items increased to £30.7 million (2008 restated: £29.9 million) benefiting from improved network delivery costs within Eclipse and a reduction in SG&A.
As in previous years, the first half reported results include the recognition of the revenue and profitability associated with the publication of the Hull Colour Pages directory for 2009.
At the end of September, the Group committed to spend £2.75 million as part of its ongoing investment in the Hull and East Yorkshire network. This will upgrade the IP core network infrastructure thereby improving network performance and providing a more effective platform for the launch of new products and next generation services.
Kcom overview
The Kcom reporting segment comprises the financial results of the newly created Kcom managed communications services business ("Kcom"), including the Smart 421 business ("Smart"). These results were previously reported as Integration & Managed Services, with the mid-market enterprise activities previously included in the Telecoms and Internet Services segment.
The strategy for Kcom is to focus on higher value added services and, as a result, we have exited certain low margin revenue streams. Reported revenue consequently shows a 16.7 per cent decline to £147.2 million (2008 restated: £176.7 million). During the course of the period, we have won a range of new contracts with, amongst others, the South West Grid for Learning (through Research Machines), Gloucestershire Constabulary, Specsavers, Toyota, Hermes (formerly Parcelnet) and Abellio (formerly Travel London). Our revised strategy with the enhanced capability, following the arrangement with BT, is already creating new opportunities that were previously unavailable to us.
EBITDA before exceptional items increased to £10.7 million (2008 restated: £7.2 million). This EBITDA improvement reflects the significant steps taken to reduce operating costs, such as the 150 employee headcount reduction undertaken in January 2009 and the development of the strategic relationship with BT.
PLC and associated costs ("PLC")
This segment includes Public Company, central and share scheme expenses and the costs, excluding current and past service costs, associated with the Group's defined benefit pension schemes. The net costs from the PLC segment amounted to £4.4 million (2008 restated: £2.6 million). The increase is due to a charge of £2.3 million (2008: £0.7 million) that represents the net cost of the interest charge on plan liabilities and the expected return on scheme assets.
Group Operating Profit
Group operating profit is £17.1 million (2008: loss of £96.5 million) reflecting the improvement in EBITDA, reduced depreciation and amortisation and the significant reduction in the quantum of exceptional items reported (£2.9 million in the current year compared to £112.5 million in the previous year). Group operating profit before exceptional items increased 25 per cent to £20.0 million (2008: £16.0 million).
Depreciation and amortisation has reduced by 7.6 per cent to £17.0 million (2008: £18.4 million). With depreciation consistent with the prior year at £10.9 million (2008: £10.8 million), the reduction arises as a result of a decrease in amortisation of intangible assets and, specifically, reduced amortisation of intangible assets relating to acquisitions of £3.9 million (2008: £4.5 million).
The exceptional items incurred during the year reflect redundancy costs of £1.3 million (2008: £2.5 million) with the balance of £1.6 million relating to one-off expenses associated with activities undertaken to transform the Group.
Finance costs
Net finance costs in the period amounted to £3.8 million (2008: £6.6 million) reflecting both the lower level of net bank debt and lower effective borrowing costs.
Taxation
The taxation charge of £3.6 million (2008: £1.2 million credit to the Income Statement), reflects the partial unwind of the Group's deferred taxation asset and represents a 27.1 per cent effective tax rate on a profit before taxation of £13.3 million (2008: a loss of £103.0 million).
Dividend
The interim dividend is 0.5 pence per share (2008: 0.5 pence). The dividend will be paid on 1 February 2010 to shareholders registered on 18 December 2009.
Pension scheme
Liabilities associated with the Group's retirement benefit obligations have increased to £71.9 million (2008: £12.9 million). This increase arises as a consequence of a £11.6 million fall in the value of investment assets held by the two schemes and an increase of £47.4 million in the value of retirement benefit liabilities. The increase in the valuation of scheme liabilities is a result of the reduction in the AA corporate bond yield to 5.4 per cent (2008: 7.3 per cent). Whilst there has been a decline in the valuation of scheme assets since the prior period, the assets have increased in value by £9.5 million since 31 March 2009.
Balance sheet
The reduction in total consolidated equity to £12.2 million (2008: £70.0 million) primarily reflects the £59.0 million increase in liabilities associated with the Group pension schemes.
Cash flow and net debt
Net debt has reduced to £146.2 million (2008: £180.2 million) as a result of a strong net cash inflow from operations of £32.0 million (2008: £20.9 million). Net debt has also reduced by £11.7 million from £157.9 million as at 31 March 2009.
Cash out flows associated with the purchase of tangible and intangible assets have reduced to £10.0 million (2008: £14.9 million) reflecting in part the benefits of lower capital intensity following development of the BT relationship.
The net debt reduction has been achieved despite payments of £8.6 million in respect of exceptional restructuring expenses and £4.9 million in respect of a pensions enhanced transfer value exercise. The majority of these cashflow payments were recognised in the Income Statement for the year ended 31st March 2009. Underlying net cash flow performance is therefore particularly strong reflecting the reduction in working capital employed in the business and in particular to the reduction in the resale of third party networking infrastructure within the Kcom business.
Outlook
The Board remains confident that the actions it has undertaken over the last twelve months will see a continued improvement in the overall quality of the Group's activities. We anticipate exiting the year with an improved overall financial position and with an increasing ability to exploit the growth opportunities that are now available to us.
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 have been 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.
Principal Risk & Uncertainties
The risks and uncertainties faced by the Group as disclosed on pages 12 and 13 of the Annual Report and Accounts to 31 March 2009 are still valid.
ENDS
Consolidated Interim Income Statement
| Unaudited | Unaudited | Audited | ||
| Six months | Six months | Year | ||
| ended | ended | ended | ||
| 30-Sep 2009 | 30-Sep 2008 | 31-Mar 2009 | ||
|
| Note | £'000 | £'000 | £'000 |
| Revenue | 1 | 210,770 | 243,571 | 472,439 |
| Operating expenses | (193,673) | (340,026) | (571,688) | |
|
|
|
| ||
| Group operating profit/(loss) | 17,097 | (96,455) | (99,249) | |
| Analysed as: |
|
| ||
| Group EBITDA | 1 | 37,016 | 34,421 | 65,141 |
| Exceptional items - impairment of goodwill | 2 | - | (106,890) | (106,890) |
| Exceptional items - other | 2 | (2,900) | (5,595) | (22,380) |
| Depreciation of property, plant and equipment | (10,940) | (10,773) | (20,331) | |
| Amortisation of intangible assets | (6,079) | (7,618) | (14,789) | |
| Finance costs | (3,865) | (6,751) | (12,304) | |
| Finance income | 30 | 156 | 197 | |
| Share of profit of associates |
| 5 | 6 | 11 |
| Profit/(loss) before taxation | 13,267 | (103,044) | (111,345) | |
| Taxation | 3 | (3,603) | 1,216 | 4,863 |
| Profit/(loss) for the period | 9,664 | (101,828) | (106,482) | |
|
|
|
| ||
| Profit/(loss) for the period attributable | ||||
| to equity holders of the Company |
| 9,664 | (101,828) | (106,482) |
| Earnings/(loss) per share | ||||
|
| ||||
| Basic | 4 | 1.89 | (19.71) | (20.70) |
| Diluted | 4 | 1.89 | (19.71) | (20.70) |
Statement of Comprehensive Income
| Unaudited | Unaudited | Audited | ||
| Six months | Six months | Year | ||
| ended | ended | Ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
|
|
| £'000 | £'000 | £'000 |
| Profit/(loss) for the period | 9,664 | (101,828) | (106,482) | |
| Other comprehensive income | ||||
| Cash flow hedges | 431 | 836 | (6,568) | |
| Actuarial losses on retirement benefit obligation | (16,338) | (4,542) | (53,550) | |
| Tax on items taken directly to equity | 3,065 | 153 | 14,957 | |
| Other comprehensive loss for period | (3,178) | (105,381) | (151,643) | |
| Total comprehensive loss for the period attributable to equity holders |
| (3,178) | (105,381) | (151,643) |
Consolidated Interim Balance Sheet
| Unaudited | Unaudited | Audited | ||
| As at | As at | As at | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Non-current assets | ||||
| Goodwill | 86,932 | 85,520 | 86,410 | |
| Other intangible assets | 16,092 | 25,802 | 20,502 | |
| Property, plant and equipment | 128,912 | 131,833 | 131,009 | |
| Investments | 1,058 | 846 | 1,049 | |
| Deferred tax assets | 59,049 | 40,960 | 59,424 | |
|
|
| 292,043 | 284,961 | 298,394 |
| Current assets | ||||
| Inventories | 3,199 | 12,460 | 4,117 | |
| Trade and other receivables | 73,042 | 108,533 | 86,469 | |
| Cash and cash equivalents | 9,863 | 20,390 | 17,508 | |
|
|
| 86,104 | 141,383 | 108,094 |
| Total assets |
| 378,147 | 426,344 | 406,488 |
| Current liabilities | ||||
| Trade and other payables | (125,883) | (140,240) | (136,944) | |
| Non-current liabilities | ||||
| Bank loans | (154,340) | (199,063) | (174,195) | |
| Retirement benefit obligations | (71,939) | (12,858) | (60,993) | |
| Long term provisions and other payables | (13,742) | (4,205) | (13,737) | |
| Total liabilities |
| (365,904) | (356,366) | (385,869) |
| Net assets |
| 12,243 | 69,978 | 20,619 |
| Capital and reserves, attributable to equity holders of the Company | ||||
| Share capital | 51,660 | 51,660 | 51,660 | |
| Share premium account | 353,231 | 353,231 | 353,231 | |
| Hedging and translation reserve | (6,840) | 133 | (7,271) | |
| Retained earnings | (385,808) | (335,046) | (377,001) | |
| Total equity |
| 12,243 | 69,978 | 20,619 |
Consolidated Interim Statement of Changes in Shareholders' Equity
| Hedging | |||||
| Share | and | ||||
| Share | Premium | Translation | Retained | ||
| Capital | Account | Reserve | Earnings | Total | |
|
| £'000 | £'000 | £'000 | £'000 | £'000 |
| At 31 March 2008 | 51,627 | 353,111 | (703) | (219,350) | 184,685 |
| Loss for the period | - | - | - | (101,828) | (101,828) |
| Increase in fair value of financial derivative instruments | - | - | 836 | - | 836 |
| Actuarial losses on defined benefit pension schemes | - | - | - | (4,542) | (4,542) |
| Tax on items taken directly to equity | - | - | - | 153 | 153 |
| Total comprehensive income for the period ended 30 September 2008 | - | - | 836 | (106,217) | (105,381) |
| Shares issued in the period | 33 | 120 | - | - | 153 |
| Employee share schemes | - | - | - | 233 | 233 |
| Dividends | - | - | - | (9,712) | (9,712) |
| 33 | 120 | - | (9,479) | (9,326) | |
| At 30 September 2008 | 51,660 | 353,231 | 133 | (335,046) | 69,978 |
| Loss for the period | - | - | - | (4,654) | (4,654) |
| Decrease in fair value of financial derivative instruments | - | - | (7,404) | - | (7,404) |
| Actuarial losses on defined benefit pension schemes | - | - | - | (49,008) | (49,008) |
| Tax on items taken directly to equity | - | - | - | 14,804 | 14,804 |
| Total comprehensive income for the period ended 31 March 2009 | - | - | (7,404) | (38,858) | (46,262) |
| Employee share schemes | - | - | - | 281 | 281 |
| Purchase of ordinary shares | - | - | - | (795) | (795) |
| Dividends | - | - | - | (2,583) | (2,583) |
| - | - | - | (3,097) | (3,097) | |
| At 31 March 2009 | 51,660 | 353,231 | (7,271) | (377,001) | 20,619 |
| Profit for the period | - | - | - | 9,664 | 9,664 |
| Increase in fair value of financial derivative instruments | - | - | 431 | - | 431 |
| Actuarial losses on defined benefit pension schemes | - | - | - | (16,338) | (16,338) |
| Tax on actuarial loss on defined benefit pension schemes | - | - | - | 3,065 | 3,065 |
| Total comprehensive income for the period ended 30 September 2009 | - | - | 431 | (3,609) | (3,178) |
| Employee share schemes | - | - | - | 434 | 434 |
| Purchase of ordinary shares | - | - | - | (466) | (466) |
| Dividends | - | - | - | (5,166) | (5,166) |
| - | - | - | (5,198) | (5,198) | |
| At 30 September 2009 | 51,660 | 353,231 | (6,840) | (385,808) | 12,243 |
Consolidated Interim Cash Flow Statement
| Unaudited | Unaudited | Audited | ||
| Six months | Six months | Year | ||
| Ended | ended | Ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
|
| £'000 | £'000 | £'000 | |
| Net cash flow from operating activities | ||||
| Operating profit/(loss) | 17,097 | (96,455) | (99,249) | |
| Adjustments for: | ||||
| Depreciation and amortisation | 17,019 | 18,391 | 35,120 | |
| Impairment of goodwill | - | 106,890 | 106,890 | |
| Restructuring costs | (8,556) | (2,941) | (7,691) | |
| Pension enhanced transfer value payment | (4,900) | - | - | |
| Decrease/(increase) in working capital | 10,784 | (4,775) | 26,478 | |
| Employee share schemes | 575 | 233 | 712 | |
| Loss on sale of property, plant and equipment | - | (437) | - | |
| Income taxes paid |
| - | (53) | - |
| Net cash inflow from operations |
| 32,019 | 20,853 | 62,260 |
| Cash flows from investing activities | ||||
| Proceeds from sale of businesses | - | 1,450 | 1,450 | |
| Earn-out payment on acquisition | (522) | - | (891) | |
| Purchase of property, plant and equipment | (7,966) | (11,888) | (20,060) | |
| Proceeds from sale of property, plant & equipment | - | - | 25 | |
| Purchase of intangible assets | (2,082) | (3,040) | (4,747) | |
| Purchase of investments | - | - | (176) | |
| Net cash used in investing activities |
| (10,570) | (13,478) | (24,399) |
| Cash flows from financing activities | ||||
| Dividends paid | (5,166) | (9,712) | (12,295) | |
| Issue costs of long term loans | (458) | (153) | (318) | |
| Interest paid | (3,361) | (7,857) | (13,352) | |
| Interest received | 30 | 156 | 196 | |
| Capital element of finance lease repayments | (139) | (650) | (815) | |
| Repayment of bank loans | (20,000) | - | (25,000) | |
| Net cash used in financing activities | (29,094) | (18,216) | (51,584) | |
|
|
| |||
| Decrease in cash and cash equivalents | (7,645) | (10,841) | (13,723) | |
| Cash and cash equivalents at the beginning of the period | 17,508 | 31,231 | 31,231 | |
| Cash and cash equivalents at the end of the period |
| 9,863 | 20,390 | 17,508 |
Notes to the unaudited interim financial information
1. Segmental Analysis
KCOM Group PLC operates two separate businesses - Kingston Communications and Kcom. These businesses have separate management teams and offer different products and services. PLC includes Public Company central and share scheme expenses, eliminations and the costs, excluding current and past service costs, associated with the Group's defined benefit pension schemes.
The chief operating decision-maker of the Group is the KCOM Group PLC Board. The Board considers the performance of Kingston Communications and Kcom in assessing the performance of the Group and making decisions about the allocation of resources. Segment disclosures have been presented on this basis.
| Restated | Restated | |||
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Revenue | ||||
| Kingston Communications | 64,941 | 67,941 | 127,969 | |
| Kcom | 147,223 | 176,744 | 345,568 | |
| PLC (1) | (1,394) | (1,114) | (1,098) | |
| Total | 210,770 | 243,571 | 472,439 | |
| Group EBITDA | ||||
| Kingston Communications | 30,747 | 29,856 | 57,892 | |
| Kcom | 10,671 | 7,214 | 14,203 | |
| PLC (1) | (4,402) | (2,649) | (6,954) | |
| Total - before exceptional items | 37,016 | 34,421 | 65,141 | |
| Exceptional items: | ||||
| Kingston Communications | (303) | (159) | (2,728) | |
| Kcom | (1,194) | (109,737) | (118,374) | |
| PLC (1) | (1,403) | (2,589) | (8,168) | |
| Total exceptional items | (2,900) | (112,485) | (129,270) | |
| EBITDA post exceptional items | 34,116 | (78,064) | (64,129) | |
| A reconciliation of total EBITDA to total profit/(loss) before income tax is provided as follows: | ||||
| EBITDA post exceptional items | 34,116 | (78,064) | (64,129) | |
| Depreciation | (10,940) | (10,773) | (20,331) | |
| Amortisation | (6,079) | (7,618) | (14,789) | |
| Finance costs | (3,865) | (6,751) | (12,304) | |
| Finance income | 30 | 156 | 197 | |
| Share of profit of associates | 5 | 6 | 11 | |
| Profit/(loss) before tax | 13,267 | (103,044) | (111,345) | |
(1) LC includes Public Company central and share scheme expenses, eliminations and the costs, excluding current and past service costs, associated with the Group's defined benefit pension schemes.
The split of total revenue between external customers and inter-segment revenue is as follows:
| Restated | Restated | |||
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Revenue from external customers | ||||
| Kingston Communications | 64,104 | 68,055 | 129,864 | |
| Kcom | 146,300 | 175,089 | 341,696 | |
| PLC (1) | 366 | 427 | 879 | |
| Total | 210,770 | 243,571 | 472,439 | |
| Inter-segment revenue | ||||
| Kingston Communications | 837 | 871 | 1,549 | |
| Kcom | 923 | 8,707 | 13,704 | |
| PLC (1) | (1,760) | (9,578) | (15,253) | |
| Total | - | - | - | |
| 210,770 | 243,571 | 472,439 |
| Restated | Restated | |||
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Total assets | ||||
| Kingston Communications | 115,216 | 113,524 | 87,511 | |
| Kcom | 265,715 | 303,004 | 278,907 | |
| PLC | (2,784) | 9,816 | 40,070 | |
| 378,147 | 426,344 | 406,488 |
(1) PLC includes head office costs, shared services, eliminations, share scheme expenses and the costs, excluding current and past service costs, associated with the Group's defined benefit pension schemes.
2. Exceptional items
Exceptional items are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance. Restructuring costs arise as a result of organisational changes following the integration of acquisitions. Onerous lease provisions arise as a result of continued rationalisation of the Group's property portfolio.
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Exceptional items: | ||||
| - Restructuring costs | 2,900 | 2,507 | 14,597 | |
| - Loss on Lehman Brothers | - | 1,000 | 1,000 | |
| - Onerous lease provision | - | 2,088 | 6,977 | |
| - Reversal of impairment of unlisted fixed asset investment | - | - | (194) | |
| Exceptional items - other | 2,900 | 5,595 | 22,380 | |
| Exceptional items - impairment of goodwill | - | 106,890 | 106,890 | |
| Charged to operating profit/(loss) | 2,900 | 112,485 | 129,270 | |
| Charged to profit/(loss) before taxation | 2,900 | 112,485 | 129,270 | |
| The loss of £1.0m on Lehman Brothers in the prior period arose through a combination of the loss incurred on specific project work in progress and the write off of outstanding trade receivables following their bankruptcy in the period. The goodwill impairment in the prior period is an impairment of the carrying value of the Kcom division.
| ||||
3. Taxation
The taxation (charge)/credit on activities is set out below:
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30-Sep | 31-Mar | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Corporation tax | - | (53) | (53) | |
| Deferred tax | (3,603) | 1,269 | 4,916 | |
| Group total | (3,603) | 1,216 | 4,863 |
There are no unprovided deferred tax assets in respect of accelerated capital allowances at 30 September 2009 or 31 March 2009 (2008: £nil).
4. Earnings per share
| Unaudited | Unaudited | Audited | |||
| Six months ended | Six months ended | Year ended | |||
| 30-Sep | 30-Sep | 31-Mar | |||
| 2009 | 2008 | 2009 | |||
| Weighted average number of shares | No. | No. | No. | ||
| For basic earnings/(loss) per share | 510,993,457 | 516,569,976 | 514,388,032 | ||
| Share options in issue | 680,042 | 2,990,773 | 1,962,524 | ||
| For diluted earnings/(loss) per share | 511,673,499 | 519,560,749 | 516,350,555 | ||
| Earnings/(loss) per share | |||||
| pence | pence | pence | |||
| Basic | 1.89 | (19.71) | (20.70) | ||
| Diluted | 1.89 | (19.71) | (20.70) | ||
5. Dividends
| Unaudited | Unaudited | Audited | |
| Six months ended | Six months ended | Year ended | |
| 30-Sep | 30-Sep | 31-Mar | |
| 2009 | 2008 | 2009 | |
| £'000 | £'000 | £'000 | |
| Final dividend for the year ended 31 March 2008 of 1.88 pence per share | - | 9,712 | 9,712 |
| Interim dividend for the year ended 31 March 2009 of 0.5 pence per share | - | - | 2,583 |
| Final dividend for the year ended 31 March 2009 of 1.0 pence per share | 5,166 | - | - |
| Total | 5,166 | 9,712 | 12,295 |
The proposed interim dividend for the six months ended 30 September 2009 is 0.5 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 this set of interim financial information.
6. Movement in net debt
| Unaudited | Unaudited | Audited | ||
| Six months ended | Six months ended | Year ended | ||
| 30-Sep | 30 Sep | 31 March | ||
| 2009 | 2008 | 2009 | ||
| £'000 | £'000 | £'000 | ||
| Opening net debt | 157,900 | 168,905 | 168,905 | |
| Closing net debt | 146,242 | 180,246 | 157,900 | |
| Reduction/(increase) in the year | 11,658 | (11,341) | 11,005 | |
| Reconciliation of movement in the year | ||||
| Net cashflow from operations | 32,019 | 20,853 | 62,260 | |
| Capital expenditure | (10,048) | (14,928) | (24,958) | |
| M&A investments | (522) | 1,450 | 559 | |
| Interest | (3,789) | (7,907) | (13,474) | |
| Dividends | (5,166) | (9,712) | (12,295) | |
| Other | (836) | (1,097) | (1,087) | |
| Reduction/(increase) in the year | 11,658 | (11,341) | 11,005 |
7. Basis of preparation and publication of interim results
General information
KCOM Group PLC is a company domiciled in the United Kingdom.
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 2009 were approved by the Board of directors on 9 June 2009 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 237 of the Companies Act 1985.
This condensed consolidated interim financial information has been reviewed, not audited.
Basis of preparation
This condensed consolidated interim financial information for the six months ended 30 September 2009 has
been prepared in accordance with the Disclosure and Transparency Rules of the 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 2009, which have been prepared in accordance
with IFRSs as adopted by the European Union.
Accounting policies
Except as described below, the accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 March 2009, as described in those annual financial
statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to
expected total annual earnings.
The following new standards and amendments to standards are mandatory for the first time for the
financial year beginning 1 April 2009.
IAS 1 (revised), 'Presentation of financial statements'. The most significant change within IAS1 (revised) is the requirement to produce a statement of comprehensive income setting out all items of income and expense relating to non-owner changes in equity. There is a choice between presenting comprehensive income in one statement or in two statements comprising an income statement and a separate statement of comprehensive income. The Group has elected to present comprehensive income in two statements. In addition, IAS 1 (revised) requires the statement of changes in shareholders' equity to be presented as a primary statement. The other revisions to IAS 1 have not had a significant impact on the presentation of the Group's financial information. The interim financial statements have been prepared under the revised disclosure requirements.
IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting', and requires the disclosure of segment information on the same basis as the management information provided to the chief operating decision maker.
Operating segments are reported in a manner consistent with the internal reporting provided to
the chief operating decision-maker. The chief operating decision-maker has been identified as the
Board of directors.
The following new standards, amendments to standards and interpretations are mandatory for the first
time for the financial year beginning 1 April 2009, but are not currently relevant for the group.
IFRIC 13, 'Customer loyalty programmes'.
IFRIC 15, 'Agreements for the construction of real estate'.
IFRIC 16, 'Hedges of a net investment in a foreign operation'.
The following new standards, amendments to standards and interpretations have been issued, but are
not effective for the financial year beginning 1 April 2009 and have not been early adopted:
IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. The Group will apply IFRS 3 (revised) to all business combinations from 1 April 2010.
The impact of adopting other standards, both mandatory and those not yet effective, is not considered material to the group's results.
8. Statement of directors' responsibilities
The directors confirm that this condensed set of interim financial statements has 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 4.2.7 and DTR 4.2.8.
The directors of KCOM Group PLC are listed in the KCOM Group Annual Report for 31 March 2009
Signed by Order of the Board on 24 November 2009 by: