Kingston Communications is an established UK communications company. The Group's national business-to-business capabilities encompass the provision of fully integrated and managed network solutions, complemented by the delivery of voice, data and call handling services in the towns and cities served by the Kingston Communications network. This infrastructure comprises twenty-five metropolitan fibre networks and a long distance broadband network, which was initiated for service in May 2001. Kingston's new media activities include the DSL-based interactive television service, KIT, and satellite broadband content, storage and distribution arm, Kingston inmedia. The Group's East Yorkshire network operation has served business and residential customers since 1904.

Half-year Report

KCOM Group PLC (KCOM.L) announces its unaudited interim results for the six months ended 30 September 2018.

Summary

· Group revenue1 declined by 5%

· Group EBITDA1 up by 2%

· Hull & East Yorkshire continues to perform well and in line with market expectations

― Full-fibre deployment remains on target to be available to 100% of addressable market by March 2019

― Percentage of broadband customers taking full-fibre continues to increase

· Poor performance in national business segments driven by:

― Revenue decline in NNS, due to continuing churn

― Broadly flat revenue in Enterprise reflecting disappointing order intake performance

· NNS performance results in non-cash exceptional impairment of goodwill of £32.2 million

· Increase in net debt to £108.5 million (1.6x net debt: EBITDA), driven by:

― Capital investment in Hull & East Yorkshire segment

― Material working capital outflow, due to insourcing a managed service arrangement and unwind of deferred revenue balances in Enterprise

· Interim dividend of 1.00p (2017: 2.00p), reflecting Board's previously announced decision to revise full year dividend commitment to a minimum of 3.00p per share

Graham Sutherland, Chief Executive Officer said, "Despite only joining the business last month, I believe KCOM has considerable skills, assets and capabilities. The full fibre rollout in Hull and East Yorkshire leads the market, provides us with sustainable cash flows and enables the further development of our service offering. However, the current financial performance of our two national businesses is below our expectations, in particular, in National Network Services where we are experiencing high levels of customer churn. In the second half of the year, we will focus on three key priorities - review of our business strategy to identify how we create the best value from KCOM's assets, implementing initiatives to improve business performance and improving transparency through clear metrics on which our progress can be measured. We will be in a position to share outputs from the strategic review in March."


Outlook

The strong performance in Hull & East Yorkshire is expected to continue during the second half of the year, supported in part by the launch in early December of a new unlimited fibre broadband portfolio for consumer customers.

While we have started to take action to address some of the issues in our national segments, we anticipate that the trading performance in Enterprise and National Network Services will remain challenging during the second half of the year and that this will continue into next year. As a business, we are seeking to address these medium-term challenges by reducing cost and complexity at the same time as identifying those opportunities to deliver value from KCOM's assets. The Board believes that the Group has the potential to execute well on those opportunities.

The Board previously announced its intention to recommend a minimum full year dividend of 3.00p per share for the current year.


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