Encouraging signs of growth for KCom

The Hull-based group said trading is in line with market expectations, although half-year sales are expected to be lower due to offloading contracts to Phoenix IT and quitting lower value work.

The firm is quitting lower-margin business such as product reselling – where it buys and stocks technology from firms such as Cisco at a discount and sells it on for more – as well as maintenance activities associated with product reselling.

But after a tough period of restructuring that saw redundancies and falling revenues, it is now targeting growth.

KCom said it is strengthening its financial position by driving down debt, controlling working capital and cost control.

Earlier this year, the group announced plans to close its defined benefit pension schemes to future payments, and as of October it will operate a single defined contribution scheme.

Defined contribution schemes are usually less generous than final-salary or defined benefit pensions.

Companies are under growing pressure to restructure their pension schemes as a healthier, ageing population, combined with fluctuating asset values, wreak havoc with balance sheets. Earlier this year, insurer Aviva and PC World owner DSG International revealed plans to close their final salary pension schemes. KCom had pension liabilities of 50.4m at the end of March, an improvement on 61m a year earlier.

The group added it is in ongoing talks with its banks about financing, and expects to provide clarity on this with its interim results in November.

KCom had net debt of 116.8m at the end of March, compared with 157.9m a year earlier. It has a multi-currency revolving credit facility of 250m, provided by a group of five banks, but this matures in February 2012.

Analyst Andrew Darley at stockbrokers finnCap issued a buy recommendation. "We remain positive on the stock but sceptical

of a return to growth in excess of the peer group norm," he said.

"Nevertheless, the stock's stability, a year on from the unveiling of the new strategic shape and direction, is laudable."