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.
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.
Listed telecoms group issues profit warning due to flat revenue results
The companys 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 companys 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 groups 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.
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Hull-based broadband provider KCOM Group PLC (LON:KCOM) is to slash its dividend in half after warning that weaker-than-expected order intake would dent profits for the next two years.
KCOM, which sponsors the stadium of Hull City football club, said it hasnt been receiving as many orders as it had expected, while continued customer churn has also been an issue for one of its businesses.
It is the boards view that these trends will continue into the following financial year, read Tuesdays gloomy statement.
On top of that, KCOM is writing down the value of its NNS business by £32.2mln, which will be recognised in the upcoming interim results as a non-cash exceptional item.
As a result, the board now expects EBITDA for the current financial year ending 31 March 2019 to be c.5% below current market expectations. However, as a result of the factors outlined above, it is also the boards expectation that EBITDA for the financial year ending 31 March 2020 will be significantly below current market expectations.
Net debt has rocketed up to £108.5mln (Mar 18: £62.6mln) as a result of the decision to insource a managed service arrangement with a key partner, alongside the unwinding of certain deferred revenue balances.
Given that, net debt at the end of the fiscal year is now expected to be 10% above current market forecasts.
As such, the board has decided to review the groups 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 6p per share.