KCom sees hesitancy among business customers

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TELECOMS group KCom said it is trading in line with expectations despite hesitant spending among its big customers.

The Hull-based group, formerly called Kingston Communications, reported a strong performance from its KC domestic arm but weaker-than-expected performance in its Kcom business services division. It pledged to hike its dividend as planned.

The company said net debt increased in its first half due to share scheme purchases and planned increases in capital spending.

KC, which serves Hull and East Yorkshire with telephone and internet services, “continues to make a strong contribution to group results”, said the company.

“The ability now to offer bundled services is allowing us to deliver more value to our customers and the response continues to be positive,” the group said.

Its Kcom business, which serves businesses ranging from major plcs to local authorities and Government departments, delivered year-on-year growth in its multi-year order backlog, but this was lower than previously anticipated “due to the uncertain environment for business investment decision-making”.

Executive chairman Bill Halbert said: “I am pleased to report that, despite challenging market conditions, the group continues to make progress towards achieving its longer-term objectives.

“The continuing macro-economic uncertainty is resulting in slower new business investment decision making and this is likely to remain the case through the second half of the year.

“Nevertheless, we remain confident about the underlying strength and continuing cash generative capacity of the group and are pleased to reconfirm our commitment to delivering a minimum 10 per cent increase in full-year dividend.”

Andrew Darley, analyst at FinnCap stockbrokers, said the update “continues the tone of the muted fixed-line outlook evident across most telco stocks in May/June”.

The brokerage cut its 2013 underlying earnings target – expressed as EBITDA – by four per cent and its revenue forecast by five per cent.

But Mr Darley said: “KCom remains in a relative position of strength with strong cash flow, and dividend growth reassurance; (our) target remains 110p and any weakness will present a buying opportunity.”