Cash-generative telecoms group KCOM is on course to hit its target of 10% per annum dividend growth after announcing a strong set of interim figures and some new contract wins.
Revenue rose by 1.6% year-on-year while profit before tax soared 22.7% for the six months ended 30 September.
Revenue grew from £194.8m last year to £198m this time round, while underlying profit before tax of £27m was up from £22m for the same period a year ago,
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The KC division, which provides consumer and business services in East Yorkshire, and Eclipse, which delivers internet based services to businesses nationally, saw revenue grow 1.0% to £63.5m from £62.5m the year before, despite a foreseen decline in revenue from the firm's East Yorkshire directory publication, KC Colour Pages.
The dip in KC Colour Pages' fortunes saw earnings before interest, tax, depreciation and amortisation (EBITDA) at KC and Eclipse slip to £30.3m from £30.7m the year before.
The other part of the KCOM business, Kcom & Smart421, saw revenue grow 2.5% to £137.7m from £134.4m last year, while EBITDA before exceptional items rose by 6.3% to £13.4m from £12.6m last year, reflecting further improvements in profit margin.
Group EBITDA before exceptional items rose 4.6% to £40.7m from £38.9m at the interim stage last year. Adjusted earnings per share rose from 3.03p to 3.86p.
Altium Securities said the interim figures means the company is well on the way to meeting the broker's full-year targets of revenue of £399.7m, underlying EBITDA of £77.1m and adjusted profit before tax of £49.0m.
"Encouragingly, Kcom has announced further contract wins across the public and private sector including Worldpay, and appointment as the preferred bidder for the Calderdale Council PSN, which will deliver revenue growth with relatively little capital outflow," the broker noted.
finncap, meanwhile, said the company's revenue figures were in line with the broker's expectations but EBITDA was a bit ahead. Net debt continues to improve ahead of finnCap's expectations. Net debt fell from £111.8m to £75.1m, while cash fell slightly from £13.8m to £13.67m.
"While we would not rule out tactical, bite-sized acquisitions, we continue to see the strong cash generation, reducing net debt from £180m three years ago, as a significant strength," finnCap analyst Andrew Darley said.
Both Altium and finnCap rate the shares as a "buy".
In a statement the company said: "Our focus for the Kcom brand continues to be on securing recurring revenue and driving long term sustainable growth. The contracts won in the period will strengthen further the contracted order backlog within Kcom and underpin multi-year revenue.
"The board remains committed to a minimum 10% growth per annum in the dividend for this, and the next financial year."
An interin dividend of 1.33p per share will be paid in February, a 0.23p rise from the same period last year.
The share price rose 0.4% to 74.5p by 11:46.
NR
-
What will 2024 general election mean for UK house prices?UK house prices have been seeing a spring bounce. But has Rishi Sunak’s snap election changed the property market’s outlook?
-
What will the general election mean for your taxes?Taxes are in focus as we race towards the 4 July general election. What can you expect from the two main parties?
