KCOM Regulatory News (KCOM)

31 Mar 2006 07:03

Kingston Communications(Hull)PLC31 March 2006 KINGSTON COMMUNICATIONS (HULL) PLC (KCOM.L) PRE-CLOSE STATEMENT Kingston Communications (HULL) PLC ("Kingston") is holding its normal series ofpre-close period meetings with analysts, ahead of its preliminary resultsannouncement on 23 May. Approach Further to the announcement made on 10 November 2005, Kingston announces thatthe discussions relating to an unsolicited potential offer for the Company haveended because the parties failed to agree on price and structure. Trading update As expected, overall the Group will deliver a stronger second half performancethan experienced in the first half both in revenues and earnings. We have made progress in the implementation of our strategic repositioningtowards the delivery of integrated converged communications services whilst atthe same time reducing our exposure to capital intensive and increasinglycommoditised legacy business. The market continues to evolve at an ever increasing pace reflecting both a highlevel of competition and continued migration towards IP-delivered services. Acombination of regulatory change and shifts in technology is enabling us todevelop a more flexible approach in delivering services to our customers. Kingston Communications Trading has been particularly strong throughout the year. Our broadband servicecontinues to grow with the customer base likely to exceed 119,000 at the fullyear, some 61 per cent higher than last year. Activity in our traditional incumbent business has been focused on managing thecontinued effects of both mobile and internet services on traditional voicerevenues. The launch of KC Talk, our bundled access and usage packages, togetherwith the growth in our broadband business have increased the level ofsubscription-based revenues within our traditional licensed area. Affiniti In a challenging market environment, the business integration process hasestablished a stable platform for managing the continued transition of Affinitiin to a leading provider of integrated communications and managed services. Ourpipeline of prospects has improved, order intake levels have risen during thesecond half and churn has reduced. We have seen some significant new customerwins including Toyota, together with renewals and service extensions withexisting customers such as the Environment Agency. At the same time, the Affiniti business mix has continued to move away fromtraditional network services, particularly those delivered through our partnerchannels, into delivering more complex managed solutions direct to customers,which is leading to a longer implementation and billing cycle. Whilst orderintake has strengthened, revenues and earnings will be below expectations forthe second half due to this longer implementation cycle. Information Services Our information services business has continued to perform well during the halfyear. To build on the success of our existing retail and wholesale directory enquiriesservice, we have acquired the business of 118800 Limited for £1.187 million.This will be funded by £1.012 million in cash and the issue of 254,916 newshares to the value of £175,000. Application has been made to admit the newordinary shares to the Official List of the UK Listing Authority and to tradingon the market for listed securities of the London Stock Exchange plc. Thisacquisition will allow us to increase our retail presence and exploit ouroutsourced wholesale call handling capabilities. Outlook The outlook for the Group reflects robust underlying organic growth in thedelivery of both broadband services and integrated communications services toenterprise and public sector customers. At the same time the mix of our businesscontinues to shift away from network intensive services. The impact of thischange is to reduce the anticipated level of capital expenditure within ourbusiness model along with a commensurate reduction in EBITDA margins, but itwill enable the Group to continue to generate anticipated cash flows. In the light of the change in our business mix and the increased commoditisationof legacy network services, the Group will be making a further impairmentprovision against the carrying value of its network assets. Michael Abrahams, Chairman, said: "We have a clear strategy to develop thebusiness. We recognise the challenges in the market and have made good progressin our repositioning to minimise their impact whilst capitalising on theopportunity to deliver integrated converged communication services. Acombination of clarity of strategy and strength of management gives the Boardconfidence in the future of the Company and our ability to deliver returns toshareholders." ENDS Note to editors For further information, please contact: Kingston Communications (HULL) PLCCorporate CommunicationsAnita Pace Tel: 01482 602666 Mobile: 07770 744322 The Maitland ConsultancyColin Browne/Michelle Jeffery Tel: 020 7379 5151 About Kingston Communications Kingston Communications is a leading provider of communications solutions tobusinesses and public sector organisations throughout the UK. The Kingston Group includes Affiniti, the communications integrator created fromthe coming together of Kingston Communications' Business Services division,Omnetica and Technica in 2005. Affiniti provides secure voice, data, video,mobile, wireless and storage solutions that enable businesses to exploit theopportunities that come with converged communications. Kingston's national capabilities have been built on its strong foundationswithin East Yorkshire, where the company has been providing leading edgeservices to residential and business customers for over 100 years and where ithas been a pioneer in the use of ADSL technology. The Kingston Group also includes Eclipse Internet, an established and growingbroadband ISP that delivers internet connectivity and services to businesses andconsumers throughout the UK. This information is provided by RNS The company news service from the London Stock Exchange