Broadband and communications provider KCOM reported a slight fall in revenue and earnings in the first half, but said that this was still a 'solid performance in challenging conditions'.
However, the company reported a large increase in net debt from £75.3m at March 31st to £94.3m, partly due to a working capital outflow associated with a number of unconnected on-off factors, an increase in capital expenditure and the purchase of £10m KCOM shares as part of its share scheme obligations. This was the first increase in net debt in four years following seven consecutive six-month periods of decreases.
The firm expects a "modest reduction" in net debt in the second half but it will still be higher year-on-year, mainly due to share scheme purchases.
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Shares were down 3.3% at 68.95p in early trading on Tuesday morning.
Revenue in the six months to the end of September slipped 4.7% from £198m the year before to £188.7m, which KCOM said reflects the "anticipated reduction in certain areas".
In particular, the decline was attributable to a £7.7m year-on-year fall in the revenue associated with a specific one-off network build contract.
Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 3.9% from £40.7m to £39.1m. However, profit before tax improved by 2.2% from £27.0m to £27.6m due to a reduction in interest costs and lower depreciation.
The company raised its dividend by 10.5% from 1.33p to 1.47p per share.
KCOM said: "While we expect the macro-economic uncertainty to continue to slow decisions on new investments across our markets, we remain very confident about the group's prospects, its underlying strength and continuing cash generative capacity.
"We anticipate that KC will continue to outperform its peer group and remain confident that Kcom will continue to gain market share despite the difficult trading environment."
