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Keycom PLC (KCO)

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Monday 17 June, 2013

Keycom PLC

Interim results for the six months to 31 March ...


                                                                   17 June 2013

                                  KEYCOM PLC                                   

              INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2013              

Keycom plc (the "Company" or the "Group") announces unaudited interim results
for the six months to 31 March 2013.

For further information contact:

Keycom plc                                                Tel: 01785 717427    
Meri Braziel (Chief Executive)                                                 
                                                                               
Daniel Stewart and Company                                Tel: 020 7776 6550   
David Hart and James Felix                                                     



THE DIRECTORS OF THE COMPANY ACCEPT RESPONSIBILITY FOR THE CONTENTS OF THIS
ANNOUNCEMENT

                                   Keycom plc                                   

            Interim Results for the six months ended 31 March 2013             

Chairman's Statement

The results of the first six months of the 2012/13 financial year reflect the
continued transformation of the business. We have focused on improving the
balance sheet and I am glad to be able to report that in May the shareholders
approved the capital reorganisation described in the circular dated 15 April
2013. This included the conversion of £1.35 million of debt owed to Les Halpin
into equity and the restructuring of the remaining debt due to him over a much
longer repayment period and at a reduced interest rate, thereby reducing the
Company's interest costs. We have reduced capital expenditure significantly in
comparison to prior years and have taken the opportunity to reduce expenses
consistent with the continued efficient operation of the business.

The education market remains subject to competitive pricing pressure which has
impacted the results in this sector. Of the four public tenders for University
broadband announced since October 2012, the Company has been awarded three for
a total of over 3,800 incremental rooms, which will be installed by the start
of the 2013/14 academic year. However, two customers have not renewed their
contracts beyond the end of August 2013, which will result in the total number
of higher and further education rooms remaining at a similar level as today.

The military sector continues to grow encouragingly and we have increased the
number of subscribers by 14% during the 6 months under review. The company has
fitted WiFi to over 50% of the rooms in the military sector and continues to
roll out WiFi across all remaining locations.

As outlined in the annual report, the former training, maintenance and
engineering groups have been restructured as a new sector called Corporate
Solutions. This sector has been rebranded as Keycom and has a new logo and
website. The support for these customers is now 24x7, which has improved
customer retention. Whilst revenues were lower than in the prior year due to a
large customer cutting its training budget and old telephony hardware being
taken out of service, the revenue for IT support has been growing year on year.
A concerted effort is being made to market these services and to extend them
into new areas.

Trading

Turnover of £3,147,000 for the six month period ended 31 March 2013 was a
decrease of 10% from the prior year (2012: £3,485,000). The 21% decrease in the
revenue from the education sector was expected following the previously
announced reduction in the number of rooms contracted at the start of the year.
That reduction was partially mitigated by the 22% growth in revenues from the
delivery of broadband services to the military sector.

The military sector revenue for the first half year was £811,000 (2012: £
664,000). At the start of the new financial year the Company had 25,100
broadband rooms in operation in the military sector. During the six months
under review this number has increased by 2,900 to 28,000. On an annualised
basis, the current revenue run rate is over £1,700,000 per annum; we expect
this to continue to grow as personnel are redeployed back from Afghanistan and
take-up increases. Management remains confident that the military sector will
be a significant contributor to the future growth of the business.

Overall gross margin was 57% (2012: 58%). The gross margin achieved in the
broadband and voice managed services was improved to 57% (2012: 56%). Circuit
and transit costs were renegotiated at lower prices and mitigated partially the
margin impact of the two university contracts not renewed in 2012. The
corporate solutions businesses generated a lower gross margin of 57% (2012:
65%) as a result of lower training revenues.

Administrative expenses (excluding depreciation and exceptional costs) were £
1,699,000 for the six-month period (2012: £1,277,000). The company capitalised
less labour and related expenses in 2013, which resulted in an increase of
staff costs of £158,000. Marketing costs were also significantly higher than in
the previous year when they were minimal.

Operating profit before depreciation and exceptional items for the period was £
104,000 (2012: £742,000). The reported trading loss on ordinary activities
before tax was £890,000 (2012: £567,000 loss).

6 months ended 31 March

                          2013           2012                  Change            
                                                                           
Revenue                  £'000          £'000          £'000              %
                                                                           
Broadband &                                                                
voice managed                                                              
services:                                                                  
                                                                           
Education &              1,598          2,033           -435           -21%
key-worker                                                                 
                                                                           
Military                   811            664            147            22%
                                                                           
Total                    2,409          2,697           -288           -11%
                                                                           
Corporate                  738            788            -50            -6%
                                                                           
Total                    3,147          3,485           -338           -10%
                                                                           
Gross profit                                                               
                                                                           
Broadband &                                                                
voice managed                                                              
services:                                                                  
                                                                           
Education &                846          1,154           -308           -27%
key-worker                                                                 
                                                                           
Military                   534            354            180            51%
                                                                           
Total                    1,380          1,508           -128            -8%
                                                                           
Corporate                  423            511            -88           -17%
                                                                           
Total                    1,803          2,019           -216           -11%

Funding

The Company has made loan repayments during the six month period to funders
other than Les Halpin of £302,000. A further £700,000 has been provided by Les
Halpin and consolidated with his other loans with repayment over the next six
years as previously announced. Additional new lease finance of £81,000 has been
raised on a 4 year term. At 31 March 2013 the gross debt was £4,610,000, an
increase of £479,000 since 30 September 2012 and an increase of £794,000 since
31 March 2012. However since the period end, £1,350,000 of Les Halpin's debt
has been converted into equity.

The capital expenditure of £468,000 (2012: £912,000) during the period was in
respect of new MOD broadband contracts and upgrades to university contracts.
This expenditure has been made to ensure the development of the broadband
revenues in the future.

Prospects

The Company now provides broadband services to 57,400 rooms, of which 28,000
are in the military sector. The recent wins of over 3,800 rooms in the
education sector confirm that the Company has a competitive service offering to
this sector. The Company continues to have a strong and growing presence in the
military sector, which should lead to a significantly higher number of rooms
being serviced in the medium term. Focus will remain on the review and
reduction of all operational costs with a view to maintaining a competitive
cost structure. The Company is investing in marketing, sales, and a CRM system
to help grow the sales in all sectors.

Jocelin Harris
Jocelin Harris - Chairman
17 June 2013



Keycom plc

Consolidated statement of comprehensive income

for the six months ended 31 March 2013

                                                                               
                                                                               
                                             Six months  Six months     Year to   
                                            to 31 March to 31 March     30 Sept 
                     Note                          2013        2012        2012    
                                                  £'000       £'000       £'000   
                                                                               
Revenue               1                           3,147       3,485       7,066
                                                                               
Cost of sales                                   (1,344)     (1,466)     (3,023)
                                                                               
Gross profit                                      1,803       2,019       4,043
                                                                               
Administrative                                  (2,468)     (2,278)     (8,516)
expenses                                                                       
                                                                               
Operating profit                                    104         742       1,036
before depreciation,                                                           
impairment and                                                                 
exceptional items                                                              
                                                                               
Depreciation                                      (769)       (524)     (1,378)
                                                                               
Goodwill Impairment                                   -           -     (3,654)
                                                                               
Exceptional items                                     -       (477)       (477)
                                                                               
Operating (loss)/                                 (665)       (259)     (4,473)
profit                                                                         
                                                                               
Finance charges                                   (225)       (308)       (511)
                                                                               
(Loss)/profiton                                   (890)       (567)     (4,984)
ordinary activities                                                            
before taxation                                                                
                                                                               
Taxation                                              -         200         244
                                                                               
(Loss)/profit                                     (890)       (367)     (4,740)
attributable to                                                                
ordinary                                                                       
shareholders                                                                   
                                                                               
Earnings per share:                               Pence       Pence       Pence
                                                                               
Earnings per share - 2                           (0.12)      (0.05)      (0.68)
basic                                                                          
                                                                               
Earnings per share -  2                          (0.12)      (0.05)      (0.68)
diluted                                                                        

The Group has no recognised gains or losses other than those included in the
results above. All activities are continuing.

Keycom plc

Consolidated balance sheet

as at 31 March 2013

                                         As at         As at         As at
                                      31 March      31 March            30
                                          2013          2012     September
                                         £'000         £'000          2012
                                                                     £'000
                                                                          
Non-current assets                                                        
                                                                          
Goodwill                                 4,865         8,584         4,865
                                                                          
Property, plant and equipment            5,208         5,520         5,494
                                                                          
Deferred tax asset                         644           600           644
                                                                          
                                        10,717        14,704        11,003
                                                                          
Current assets                                                            
                                                                          
Trade and other receivables              1,759         1,395         1,604
                                                                          
Cash and cash equivalents                   39           199           133
                                                                          
                                         1,798         1,594         1,737
                                                                          
Current liabilities                                                       
                                                                          
Trade and other payables               (1,464)       (1,109)       (1,496)
                                                                          
Deferred consideration                    (23)          (87)          (45)
                                                                          
Borrowings                               (746)       (1,499)         (787)
                                                                          
                                       (2,233)       (2,695)       (2,328)
                                                                          
Net current liabilities                  (435)       (1,101)         (591)
                                                                          
Non-current liabilities                                                   
                                                                          
Deferred consideration                       -          (39)             -
                                                                          
Borrowings                             (3,864)       (2,317)       (3,344)
                                                                          
                                       (3,864)       (2,356)       (3,344)
                                                                          
Accruals & deferred income             (1,937)       (1,503)       (1,697)
                                                                          
Net assets                               4,481         9,744         5,371
                                                                          
Equity                                                                    
                                                                          
Ordinary shares                          7,616         7,616         7,616
                                                                          
Share premium account                   18,122        18,122        18,122
                                                                          
Other reserve                              459           459           459
                                                                          
Retained earnings                     (21,716)      (16,453)      (20,826)
                                                                          
Equity shareholders' funds               4,481         9,744         5,371



Keycom plc

Consolidated statement of changes in shareholders' equity

for the six months ended 31 March 2013

                                    Six months    Six months       Year to
                                   to 31 March   to 31 March            30
                                          2013          2012     September
                                                                      2012
                                                                          
                                         £'000         £'000         £'000
                                                                          
Opening equity                           5,371         8,611         8,611
                                                                          
New equity issued                            -         1,500         1,500
                                                                          
Net (loss)/profit for the period         (890)         (367)       (4,740)
attributable to equity                                                    
shareholders                                                              
                                                                          
Closing equity                           4,481         9,744         5,371



Keycom plc

Consolidated statement of cash flows

for the six months ended 31 March 2013

                                                                              
                                              Six months Six months    Year to
                                             to 31 March      to 31         30
                                                    2013 March 2012  September
                                                                          2012
                                                                              
                                        Note       £'000      £'000      £'000
                                                                              
Cash (absorbed)/generated by operations  3             2      (534)        279
                                                                              
Net interest paid                                   (85)       (60)      (386)
                                                                              
Net cash inflow/(outflow) from                      (83)      (594)      (107)
operating activities                                                          
                                                                              
Investing activities                                                          
                                                                              
Purchases of property, plant and                   (468)      (912)    (1,846)
equipment                                                                     
                                                                              
Deferred consideration paid                         (22)       (45)       (61)
                                                                              
Proceeds on disposal of tangible non                   -          -         82
-current assets                                                               
                                                                              
Net cash used in investing activities              (490)      (957)    (1,825)
                                                                              
Financing activities                                                          
                                                                              
Proceeds from issue of shares (net of                  -      1,404      1,404
expenses)                                                                     
                                                                              
Receipt of bank loans                                  -          -          -
                                                                              
Receipt of other loans & lease                       781        149        932
obligations                                                                   
                                                                              
Repayment of bank & other loans & lease            (302)      (236)      (704)
obligations                                                                   
                                                                              
Net cash generated by financing                      479      1,317      1,632
activities                                                                    
                                                                              
Net increase/(decrease) in cash and      4          (94)      (234)      (300)
cash equivalents                                                              
                                                                              
Cash and cash equivalents at start of                133        433        433
period                                                                        
                                                                              
Cash and cash equivalents at end of                   39        199        133
period                                                                        



Notes to the financial information

1. Segmental information

Revenue and operating profit

                       Six months ended  Six months ended    Year ended    
                         31 March 2013    31 March 2012   30 September 2012
                                                                           
                                   Gross            Gross             Gross
                        Revenue   profit  Revenue  profit   Revenue  profit
                          £'000    £'000    £'000   £'000     £'000   £'000
                                                                           
By class of business:                                                      
                                                                           
Education & Key-worker    1,598      846    2,033   1,154     4,021   2,047
                                                                           
Military                    811      534      664     354     1,408   1,087
                                                                           
Corporate                   738      423      788     511     1,637     977
                                                                           
                          3,147    1,803    3,485   2,019     7,066   4,111
                                                                           
S G & A Expenses                 (2,468)          (1,801)           (4,453)
                                                                           
Impairment of Goodwill                 -                -           (3,654)
                                                                           
(Loss) / Profit from               (665)              218           (3,996)
operations before                                                          
exceptional costs                                                          

2. Earnings per share

The calculation of earnings per share figures for the six months ended 31 March
2013 is based on the loss attributable to ordinary shareholders of £890,000
(six months loss 2012: £367,000) divided by the weighted average number of
shares in issue as detailed in the table below.

                              Six months to           Six months to                 Year to
                              31 March 2013           31 March 2012       30 September 2012
                                                                                           
                      Number of    Weighted   Number of    Weighted   Number of    Weighted
                         shares     average      shares     average      shares     average
                                                                                           
Basic - shares in   761,576,712 761,576,712 761,576,712 633,707,860 761,576,712 699,076,712
issue                                                                                      
                                                                                           
Share options that                        -                       -                       -
have a dilutive                                                                            
effect                                                                                     
                                                                                           
Diluted - adjusted                                                                         
number of shares                761,576,712             633,707,860             699,076,712

3. Reconciliation of operating profit to net cash inflow from operating
activities

                                        Six months  Six months      Year to
                                       to 31 March to 31 March           30
                                              2013        2012    September
                                                                       2012
                                                                         
                                             £'000       £'000        £'000
                                                                         
Operating (loss)/profit before               (665)       (259)      (4,473)
taxation                                                                 
                                                                         
Exceptional costs                                -          96           96
                                                                         
Depreciation and Impairment                    769         524        5,032
                                                                         
Operating cash flow before movements           104         361          655
in working capital                                                       
                                                                         
(Increase)/decrease in receivables           (170)         125         (33)
                                                                         
Decrease/ (increase) in payables                68      (1020)        (343)
                                                                         
Cash generated/(absorbed)by                      2       (534)          279
operations                                                               

4. Reconciliation of net cash flow to movement in net debt

                                        Six months  Six months      Year to
                                       to 31 March to 31 March           30
                                              2013        2012    September
                                                                       2012
                                                                         
                                             £'000       £'000        £'000
                                                                         
Net debt at start of period                (3,998)     (3,470)      (3,470)
                                                                         
Increase/(decrease) in cash in the            (94)       (234)        (300)
period                                                                   
                                                                         
Cash (inflow)/outflow from                   (479)          87        (228)
(increase)decrease in debt and lease                                     
financing                                                                
                                                                         
Net debt at end of period                  (4,571)     (3,617)      (3,998)

5. Analysis of net debt

                                        Six months  Six months      Year to
                                       to 31 March to 31 March 30 September
                                              2013        2012         2012
                                                                           
                                             £'000       £'000        £'000
                                                                           
Cash at bank net of overdrafts                  39         199          133
                                                                           
Bank loans                                   (228)       (390)        (314)
                                                                           
Other loans                                (2,397)     (2,224)      (1,922)
                                                                           
Lease obligations                          (1,985)     (1,202)      (1,895)
                                                                           
Net debt                                   (4,571)     (3,617)      (3,998)

The Interim Statement, which has been reviewed but not audited by the Group's
auditors CLB Coopers, was approved by the Board on 17 June 2013.

Copies of this statement will be sent to shareholders shortly and are available
to the public from the Company website www.keycom.co.uk.

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