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KCOM issues profit warning and cuts dividend plans

Staff Writer |
Telecoms provider KCOM Group updated the market on its trading outlook for the 2019 and 2020 financial years, reporting that its performance for the current financial year ending 31 March 2019, on a pre-IFRS 15 basis, would be weaker than originally expected.

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The London-listed firm, which holds a monopoly on fixed-line services in the East Yorkshire city of Hull, said that was primarily the result of flat revenue - driven by lower-than-expected order intake- in its enterprise segment, and continued customer churn in its National Network Services (NNS) division.

Its board said it believed those trends would continue into the following financial year.

"The performance of the group's NNS segment has resulted in the Board's decision to impair the carrying value of goodwill in NNS," the board said in its statement.

"A non-cash exceptional item of £32.2m will be recognised in the group's upcoming interim results."

KCOM said its Hull & East Yorkshire segment, which was the largest contributor to group EBITDA, continued to perform "well" and in line with market expectations.

That good performance was expected to continue during the second half of the financial year, supported in part by the anticipated December launch of a new unlimited fibre broadband portfolio for consumer customers.

As a result, the board said it now expected EBITDA, pre-IFRS 15, for the current financial year to be about 5% below current market expectations.

However, it was also the board's expectation that EBITDA for the financial year ending 31 March 2020 would be "significantly below" current market expectations.

The group's net debt at 30 September was £108.5m, widening from £67.8m year-on-year, which included a material permanent one-off working capital outflow, which was principally the cash impact of the decision to insource a managed service arrangement with a key partner in order to drive down costs, alongside the unwind of certain deferred revenue balances in the enterprise segment, the board explained.

It said it expected the group's net debt at 31 March 2019 to be about 10% higher than current market expectations.

"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 said.

"As such, the board has decided to review the group's ongoing dividend policy, resolving to pay a dividend of not less than 3p per share for the current financial year ending 31 March 2019, rather than the previously-stated commitment to pay 6 pence per share."

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