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Keycom PLC (KCO)

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Thursday 14 February, 2013

Keycom PLC

Annual Financial Report


                                  KEYCOM PLC                                   

                 RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2012                  

Keycom plc (the "Company" and, together with its subsidiaries, the "Group"),
announces audited results for the year ended 30 September 2012.

The Directors of the Company accept responsibility for the content of this
announcement.


ENQUIRIES

Keycom PLC
Meri Braziel, CEO
Joanne Nixon, Company Secretary
T: 01785 717 777

Daniel Stewart & Company
James C Felix / James Thomas
T: 020 7776 6560


CHAIRMAN'S STATEMENT

This is my first report to you since I was invited to join the Board, which I
did on 1st October 2012, and became chairman in succession to Les Halpin who
had to step down for health reasons.

The year that ended on 30th September 2012 was not an easy one for the Company
with a number of changes at senior level and many challenges and some areas of
progress. We continue to be subject to competitive pricing pressures in our
traditional areas of business, especially in the higher education sector, but
are pleased that the military accommodation sector has continued to develop
well.

Trading results

Despite the difficult conditions, the total Group revenue for the year
increased by 5% to £7,066,000 (2011: £6,729,000) with the core activity of
broadband accounting for 77% of that revenue (2011: 74%). The revenue from
managed broadband services increased 9% to £5,429,000 (2011: £4,984,000).
Reductions in higher education broadband revenues were offset by the growth in
the military sector where we increased revenue by 76% to £1,408,000 (2011: £
800,000) after increasing the wireless broadband (WiFi) capability at many of
our sites.

The gross number of serviced broadband rooms at 30 September 2012 was 53,100
(2011: 46,000). Of that total, 28,000 rooms were in the education and
key-worker sectors and 25,100 in the military sector. The rooms in the military
sector have increased in the year by 8,000. The number of student rooms fell
during the year reflecting the loss of two contracts for 4,500 rooms and the
securing of contracts for 3,300 new rooms.

Revenue derived from the other activities, engineering maintenance and
training, decreased 6% to £1,637,000, with an operating profit of £112,000
(2011: £169,000). We have found that customers continue to defer training and
capital investment because of lack of confidence in the outlook for their
businesses.

Gross profit for the year after exceptional costs decreased by 3.6% to £
4,043,000 at a margin of 57% (2011: £4,195,000; 62% margin). Wages and salary
costs increased by 5.6% due to the need for additional staff on the
introduction of 24 hour customer support 7 days a week and higher senior
management costs. Administrative expenses, excluding depreciation and profit on
disposal of fixed assets, increased to £3,075,000 (2011: £2,541,000). The
company undertook financial and strategic reviews in 2012 with external
advisers, incurring one off consultancy costs. Recruitment and interim staffing
costs were higher as a result of the changes in the senior management team and
the Group incurred marketing and rebranding expenses, which it had not the
previous year. The Group EBITDA was £1,036,000 (2011: £1,654,000).

Financing costs of £511,000 (2011: £511,000) have remained similar to last year
despite an increase in the level of debt.

Depreciation increased to £1,378,000 (2011: £947,000) reflecting capital
expenditure on new customer sites, and accelerated depreciation of £155,000 as
a result of termination of a higher education contract.

In line with current accounting standards, we continue to recognise £600,000 of
the potential benefits of the Group's accumulated tax losses as a deferred tax
asset which is the same figure as was reported at the interim stage.

I regret we are reporting a net loss for the year of £4,740,000 (2011 profit: £
681,000), which includes the exceptional write-offs previously announced with
the half year's results and a substantial impairment of goodwill. The Board has
undertaken a detailed review of the goodwill associated with previous
acquisitions and decided to reduce this by £3,654,000, to bring it to a figure
that it believes to be more realistic.

Financing

Net debt increased by £528,000 to £3,998,000 during the year and this was in
addition to the £1,404,000 (net) of new share capital raised in March 2012,
which was used to fund capital expenditure on the expansion of military rooms
serviced.

It is vital to have access to additional finance in order to develop the
business as all contract wins entail new capital expenditure. Of the loans
outstanding at the year end, £2,698,569 of principal was provided by Les Halpin
who has agreed to defer receipt of interest for the time being. Les has
provided further loan finance of £700,000 since the year end. The board is
extremely grateful to him for his substantial and vital continuing support for
the Company. Shortly, we shall be putting proposals to shareholders for formal
approval for a restructuring of these loan facilities.

Outlook

Due to the nature of the business and in particular the long lead times for new
contracts in the education sector, we do not anticipate a significant change in
the trading results in 2012/13, and we are going to be incurring increased
financing charges. All costs are being reviewed to ensure that the operation is
as lean and efficient as possible.

We plan to continue participating in higher education sector tenders for new
outsourced contracts but will only bid at prices that justify the investment of
capital expenditure on acceptable terms. New tenders will not deliver new
student rooms before September 2013. In December 2012, we were awarded a
contract by a university for 250 rooms for delivery in September 2013. Existing
education and key worker customers continue to add rooms and there are 1,500
rooms in the pipeline for this sector in the current year.

Further new military sites have been added recently and we expect the revenue
growth to continue. For 2012/13 we will complete the rollout of WiFi across all
the military sites and plan to add 4,500 more rooms, taking the military sector
to nearly 30,000 potential users. We will focus on growing revenues from the
existing subscriber base and increasing the take up on existing sites.

We have updated the branding of all our operations bringing a fresh and
contemporary look to our online and print marketing materials. This includes
the military sector, trading under the name Media Force, which is now a well
recognised brand in the military accommodation sector. The previously acquired
brands of MCW and Masterpoint Engineering are no longer used. Training,
maintenance, and engineering has been re-organised as a new sector called
Corporate Solutions and trading under the Keycom brand. We hope that this will
encourage greater cross selling of services to existing and new customers.

People

As mentioned above there have been a number of senior management changes over
the last year. Both Rod Matthews and Graham Robertson stepped down from the
board and we are grateful to them for their efforts over many years to develop
and expand the business. Also Les Halpin was sadly forced to retire following
his being diagnosed with motor neurone disease and the debilitating
consequences that it can so rapidly bring. We all have reason to be extremely
grateful to Les for the support and advice he has provided to the business and
wish him all the very best for the future.

We are pleased to have welcomed Paula Benoit to the team as Commercial Director
during the second half of 2012 and James Blessing as Chief Technology Officer
who joined us recently and we look forward to working with them to further the
development of the Company.

Finally on behalf of all shareholders I must thank Meri Braziel and all those
who work in the Group for their individual contributions to the progress of the
business. I very much hope that the hard work and dedication they put in will
be rewarded, and that Keycom will become the successful and profitable business
which we all wish it to be.

Jocelin Harris - Chairman
14 February 2013



Statement of Comprehensive Income

30 September 2012

                                                         2012                    2011
                                                                                     
                                                 Pre-                   Post-        
                                          exceptional Exceptional exceptional        
                                                                                     
                                                £'000       £'000       £'000   £'000
                                                                                     
Revenue                                         7,066           -       7,066   6,729
                                                                                     
Cost of sales                                 (2,955)        (68)     (3,023) (2,534)
                                                                                     
                                              -------     -------     ------- -------
                                                                                     
Gross profit                                    4,111        (68)       4,043   4,195
                                                                                     
Administrative expenses                       (8,107)       (409)     (8,516) (3,333)
                                                                                     
                                              -------     -------     ------- -------
                                                                                     
Operating profit before depreciation,           1,036           -       1,036   1,654
impairment and exceptional items                                                     
                                                                                     
Profit on disposal of fixed assets                  -           -           -     155
                                                                                     
Depreciation                                  (1,378)           -     (1,378)   (947)
                                                                                     
Goodwill impairment                           (3,654)           -     (3,654)       -
                                                                                     
Exceptional items                                   -       (477)       (477)       -
                                                                                     
Operating (loss)/profit                       (3,996)       (477)     (4,473)     862
                                                                                     
Finance costs                                   (460)        (51)       (511)   (511)
                                                                                     
                                              -------     -------     ------- -------
                                                                                     
(Loss)/profit on ordinary activities          (4,456)       (528)     (4,984)     351
before taxation                                                                      
                                                                                     
Tax on profit on ordinary activities              244           -         244     330
                                                                                     
                                              -------     -------     ------- -------
                                                                                     
(Loss)/profit attributable to ordinary        (4,212)       (528)     (4,740)     681
shareholders                                                                         
                                                                                     
                                                 ====        ====        ====    ====
                                                                                     
Earnings per share:                                                                  
                                                                                     
(Loss)/profit per share - basic (pence)                               (0.68p)   0.11p
                                                                                     
(Loss)/profit per share - diluted                                     (0.68p)   0.11p
(pence)                                                                              
                                                                                     


Consolidated Statement of Financial Position

30 September 2012

                                                                 2012      2011
                                                                               
                                                                £'000     £'000
                                                                               
Non-current assets                                                             
                                                                               
Intangible assets                                               4,865     8,584
                                                                               
Tangible assets                                                 5,494     5,108
                                                                               
Deferred tax asset                                                644       400
                                                                               
                                                              -------   -------
                                                                               
                                                               11,003    14,092
                                                                               
                                                              -------   -------
                                                                               
Current assets                                                                 
                                                                               
Trade and other receivables                                     1,604     1,571
                                                                               
Cash and cash equivalents                                         133       433
                                                                               
                                                              -------   -------
                                                                               
                                                                1,737     2,004
                                                                               
Current liabilities                                           (2,328)   (2,737)
                                                                               
                                                              -------   -------
                                                                               
Net current liabilities                                         (591)     (733)
                                                                               
                                                              -------   -------
                                                                               
Total assets less net current liabilities                      10,412    13,359
                                                                               
Non-current liabilities                                       (3,344)   (2,910)
                                                                               
Accruals and deferred income                                  (1,697)   (1,838)
                                                                               
                                                              -------   -------
                                                                               
Net assets                                                      5,371     8,611
                                                                               
                                                                 ====      ====
                                                                               
Equity attributable to                                                         
equity holders                                                                 
                                                                               
Called-up equity share                                          7,616     6,116
capital                                                                        
                                                                               
Share premium account                                          18,122    18,122
                                                                               
Other reserves                                                    459       459
                                                                               
Retained earnings                                            (20,826)  (16,086)
                                                                               
                                                              -------   -------
                                                                               
Total equity                                                    5,371     8,611
                                                                               
                                                                 ====      ====
                                                                               

Consolidated Statement of Cash flows

30 September 2012

                                                               2012        2011
                                                                               
                                                              £'000       £'000
                                                                               
Cash flows from operating activities                                           
                                                                               
Loss/(Profit) on ordinary activities before taxation        (4,984)         351
                                                                               
Depreciation                                                  1,378         947
                                                                               
Goodwill Impairment                                           3,654           -
                                                                               
Net finance costs                                               511         511
                                                                               
                                                            -------     -------
                                                                               
Operating cash flows before movements in working                559       1,809
capital                                                                        
                                                                               
(Increase)/decrease in trade and other receivables             (33)         356
                                                                               
Decrease in trade and other payables                          (343)       (424)
                                                                               
                                                            -------     -------
                                                                               
Cash generated from operations                                  183       1,741
                                                                               
Corporation tax paid                                              -        (12)
                                                                               
                                                            -------     -------
                                                                               
Net cash from operating activities                              183       1,729
                                                                               
                                                               ====        ====
                                                                               
Cash flows from investing activities                                           
                                                                               
Interest paid                                                 (386)       (321)
                                                                               
Payments to acquire tangible non-current assets             (1,846)     (1,348)
                                                                               
Proceeds on disposal of tangible non-current assets              82           -
                                                                               
                                                            -------     -------
                                                                               
Net cash used in investing activities                       (2,150)     (1,669)
                                                                               
                                                               ====        ====
                                                                               
Cash flows from financing activities                                           
                                                                               
Issue of equity share capital                                 1,500           -
                                                                               
New loans                                                       400         500
                                                                               
New finance leases                                              532       1,382
                                                                               
Capital element of loans and leases repaid                    (704)     (1,746)
                                                                               
Deferred consideration paid                                    (61)       (233)
                                                                               
                                                            -------     -------
                                                                               
Net cash from financing activities                            1,667        (97)
                                                                               
                                                               ====        ====
                                                                               
Net decrease in cash and cash equivalents                     (300)        (37)
                                                                               
Cash and cash equivalents at beginning of year                  433         470
                                                                               
                                                            -------     -------
                                                                               
Cash and cash equivalents at end of year                        133         433
                                                                               
                                                               ====        ====

Notes

 1. The financial information set out herein in respect of the year ended 30
    September 2012 does not constitute the company's financial statements
    within the meaning of s434 Companies Act 2006 for that period but has been
    derived from the audited statutory financial statements for that period.
    The Group's statutory financial statements for the year ended 30 September
    2012 will be delivered to the Registrar of Companies shortly. The auditors
    have reported on those accounts; their report was unqualified and does not
    contain statements under s498 (2) or (3) Companies Act 2006.
   
 2. Exceptional Items
   
As detailed in the interim statement as result of a review we identified the
need for a reassessment of certain prepaid balances which are explained as
follows.

Firstly, the Company invested £229,000 over the past two years in a project to
deliver advertising income and that investment was held in prepayments on the
balance sheet. The project did not realise any bookings for advertising and
therefore the Directors considered it prudent to provide in full against this
investment. Work continues on new projects to increase the level of advertising
income from other sources.

Secondly, the Company prepaid certain expenses amounting to £203,000 which
related to the installation and activation of broadband services for military
sites. With the benefit of the review the Directors considered that these
expenses should be included as costs in the income statement and not included
in the prepaid balances. The impact of these changes has not been material to
any one year in isolation and accordingly no restatements were considered
necessary.

Lastly, in March 2012 the Company raised £1.5 million by issuing new shares at
the nominal value of the shares and consequently there was no share premium
arising on the issue. It therefore is not possible to offset the issue costs
against the share premium reserve. The costs of £96,000 associated with the
issue have been included in the income statement as an exceptional item.

 3. Goodwill Impairment
   
The Board has undertaken a detailed review of the goodwill associated with
previous acquisitions and decided to reduce this by £3,654,000, reflecting what
is in its view a more realistic figure.

a d v e r t i s e m e n t