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Keycom PLC (KCO)

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Friday 26 February, 2010

Keycom PLC

Final Results

RNS Number : 7126H
Keycom PLC
26 February 2010
 



26 Feb 2010

 

KEYCOM PLC

 

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2009

 

Keycom plc (the "Company" and, together with its subsidiaries, the "Group"), is pleased to announce audited results for the year ended 30 September 2009.

 

FINANCIAL HIGHLIGHTS

 

·     153% rise in revenue to £4,856,000 (2008: £1,917,000)

 

·     EBITDA improvement of £909,000 to £638,000 (2008: £(271,000))

 

·     £428,000 reduction in loss to £588,000 (2008: £1,016,000) *

 

·     Gross profit margin improvement to 62% (2008: 57%)

 

*  Re-stated in accordance with IFRS 

 

 

Enquiries:

   

Keycom plc                                                                                                  01785 717777

Rod A Matthews, Chief Executive                                                                                                                                               

www.keycom.co.uk 

 

Seymour Pierce Limited                 

Nandita Sahgal                                                                                              020 71078338

Tom Sheldon                                                                                                 020 71078087

www.seymourpierce.com

 



KEYCOM PLC

ANNOUNCEMENT OF RESULTS TO 30 SEPTEMBER 2009

 

CHAIRMAN'S STATEMENT

I am pleased to report on progress for the Group during the year to 30 September 2009.

The focus of the business continues to be on the provision of broadband services to student accommodation; with an expansion into other multiple-occupancy sites such as NHS and key-worker locations and Ministry of Defence establishments, using the Group's expertise in markets with similar end-user characteristics.  The Group has deployed broadband utilising Ethernet, ADSL or wireless, according to the solutions appropriate for its customers.  

 

Acquisitions

 

The Company has previously reported upon the purchase in September 2008 of the broadband contracts of Catalyst Management Limited.

 

The Company has also previously reported that, on 25 September 2008, it purchased the entire share capital of MCW Group Limited, a competitor in the market.   These results consequently include an entire year of revenue and expenditure for that business.  At the same time, the Company also purchased Media Force (UK) LLP which has contracts with military establishments to provide broadband services to residential accommodation for personnel in the armed forces, predominantly single living quarters.   It has taken longer to obtain the formal lease agreements with the military establishments than would have been preferable; however, the effect of the delay has been mitigated by the consequential reduction in the deferred consideration payable for the acquisition due to the fixed period for the eligibility for deferred consideration.  The operations of all three businesses acquired in September 2008 have been fully integrated into the Keycom business.

 

On 22 December 2008, the Company purchased the entire share capital of Masterpoint Engineering Limited ("Masterpoint").   Masterpoint has contracts for the provision of broadband services to student and key-worker residential accommodation and additionally provides engineering support services to businesses. The operations of that business have now been fully integrated into Keycom's operations.  With the acquisition occurring during the trading year, these results only include approximately nine months of operation of the Masterpoint contracts.

 

The activities of the above businesses which do not directly support students, key-workers and the military are complementary to these services and cross-selling opportunities are already being realised.   The Group has also benefited from core competencies, particularly IT and CCTV capability which are being applied throughout the Group.

 

Trading results

 

A principal driver of value in the Keycom business is the number of rooms serviced.  At 30 September 2009 the Group had 32,900 (2008: 16,200) active broadband rooms; and as at the date of the publication of these financial statements that number has increased to 38,200.

 

The Group generated a positive EBITDA for the year of £638,000 (2008: £(271,000)); an improvement over the prior year of £909,000.

 

Revenue for the year was £4,856,000 (2008: £1,917,000), a 153% growth on the same period last year. 

 

Broadband services revenue increased 86% over the same period in the prior year to £3,140,000 (2008: £1,690,000).  Following the acquisitions described above, the Group now has revenue derived from other activities generating revenue of £1,716,000 (2008: £227,000), an increase of £1,489,000.

 

Gross profit for the year has increased by 174% to £3,002,000 (2008: £1,094,000).   Gross margin for the year was 62%, up from 57% in the previous year.   Keycom decided to strengthen the customer relationships by significantly enhancing the broadband products provided and as a consequence the broadband gross margin has been reduced to 61% from 69% in the same period in the prior year.

 

Broadband services now contribute 64% of the Group's gross profit. 

 

Administrative expenses, excluding depreciation, amortisation and exceptional items, have increased by 74% to £2,378,000 (2008: £1,365,000), primarily as a consequence of increased headcount associated with the acquisitions.  However, the integration of the businesses and the resulting synergies have caused the administrative expenses to have fall from 71% of revenue in the year ended 30 September 2008 to 49% in the current year.

 

Financing costs of £345,000 (2008: £316,000) have remained at similar levels despite the acquisitions and the financing of them. 

 

Depreciation has increased to £785,000 (2008: £433,000) as a result of the increased asset base following the acquisitions and subsequent capital expenditure.

 

As a result of the above, the loss for the period was £588,000 (2008: £1,016,000); an improvement over the prior year of £428,000.

 

Funding of the business

During the year, the Company raised new finance of £2,765,000 (2008: £11,780,000).   

During 2008, the Company chose to focus on the conversion of convertible loan stock and the introduction of equity from new institutional shareholders.  The acquisitions, which transformed the operating cashflow of the Group, left the Company with loans payable within twelve months to the previous owners of those businesses totaling £1.5 million.  It was the Company's intention, with the otherwise low level of gearing, to raise new lease and loan finance on three to five year terms to settle those liabilities and to fund capital expenditure on the new broadband contracts.   Unfortunately, the banking crisis which commenced at the end of 2008 affected the success of these plans.  Additionally, the banks providing loans to three of the acquired businesses opted to enforce the change of control provisions in the relevant loan agreements to demand repayment of loans aggregating £0.5million, which was most unhelpful.

Despite the lack of lease finance available generally, the Company was successful in completing £2,765,000 of new lease finance, on a five-year term.  The Company has completed an additional £0.5million four-year loan from its bankers in December 2009 and is close to completing further lease and loan finance arrangements.

As a consequence of the extended time taken to complete the new lease and debt finance, the Company has had to prevail upon the goodwill of its creditors, which has been developed over the past few years.  The Company is particularly grateful to those creditors for their understanding and cooperation. 

Current developments

 

The Company announced in May 2008 that it had been awarded the contract for the provision of broadband services to the residential student accommodation at The University of Edinburgh.   The contract is for a five year term. Services commenced on 26 August 2009, for in excess of 6,000 student rooms; and are expected to generate revenue in excess of £750,000 per annum to Keycom.  With the contract commencing on 26 August the income statement for the year reported in these financial statements only reflects the benefit of that contract for a five-week period.  The full benefit of that new contract will be reflected in the income statements for the next five years.

 

The Company is also making progress with other new broadband contracts, particularly in the military accommodation market.  The number of military broadband rooms serviced during the year ended 30 September 2009 was relatively modest; however, a great deal of progress has been made with the contracts since that date and the Group now has 7,750 military rooms available for service and in operation.  We also have a very healthy pipeline.

 

The management is pleased with the growth, both organic and inorganic, of the Group's supply of profitable broadband services and the step change in revenue and profits resulting from the acquisitions.   We are delighted that considerable synergistic savings have been made in the areas of broadband cost of sales and administrative expenses.  Accordingly the directors are satisfied that the increase of scale of the enlarged Group will generate the profits planned through the successful implementation of the Board's strategy.

 

The Board is grateful to the existing and new shareholders for their support.  Management remains confident in the team's ability to continue the transformation of Keycom into a profitable and cash generative business.

 

 

 

 

Rod Matthews - Chairman

 

26 February 2010

 

 



Consolidated Income Statement

Year ended 30 September 2009


2009

2008


£'000

£'000

Revenue



Continuing operations

3,431

1,885

Acquisitions

1,425

32


-----------------------------

-----------------------------


4,856

1,917

Cost of sales

(1,854)

(823)


-----------------------------

-----------------------------

Gross profit

3,002

1,094




Administrative expenses

(3,249)

(1,798)


-----------------------------

-----------------------------

Operating profit/(loss) before depreciation and exceptional items

638

(271)

Depreciation

(785)

(433)

Exceptional items

(100)




Operating profit/(loss)



Continuing operations

(767)

(707)

Acquisitions

520


-----------------------------

-----------------------------


(247)

(704)




Interest receivable

4

4

Interest payable and similar charges

(345)

(316)


-----------------------------

-----------------------------

Loss on ordinary activities before taxation

(588)

(1,016)




Tax on profit on ordinary activities


-----------------------------

-----------------------------

Loss attributable to ordinary shareholders

(588)

(1,016)


==============================

==============================

Loss per share:



Loss per share - basic (pence)

(0.12)p

(0.72)p

Loss per share - diluted (pence)

(0.12)p

(0.71)p




 

*  Re-stated in accordance with IFRS 

 

 

 

 

 

 

 


Consolidated Balance Sheet

30 September 2009                                         


2009

2008*


£'000

£'000

Non-current assets

Intangible assets

8,667

6,800

Tangible assets

3,492

1,358

Investments


-------------------------------

-------------------------------


12,159

8,158


-------------------------------

-------------------------------

Current assets

Trade and other receivables

2,064

1,499

Cash at bank

70

1,437


-------------------------------

-------------------------------


2,134

2,936

Current liabilities

(6,770)

(3,392)


-------------------------------

-------------------------------

Net current liabilities

(4,636)

(456)


-------------------------------

-------------------------------

Total assets less current liabilities

7,523

7,668

 

Non-current liabilities

(2,011)

(1,602)


-------------------------------

-------------------------------

 


5,512

6,100


==============================

==============================

 

Equity attributable to equity holders of the parent

Called-up equity share capital

4,822

4,822

Share premium account

17,095

17,095

Equity reserve

-  

-  

Other reserves

459

459

Retained reserves

(16,864)

(16,276)


-----------------------------------

-------------------------------

Total equity

5,512

6,100


=====================================

==============================

 

*  Re-stated in accordance with IFRS 

 



NOTES

1.     Loss per share is calculated using the weighted average number of ordinary shares in issue of 482,243,378 (2008: 141,863,103) for the year to date.

2.     The financial information set out herein in respect of the years ended 30 September 2009 and 30 September 2008 does not constitute the company's financial statements within the meaning of s434 Companies Act 2006 for those periods but has been derived from the audited statutory accounts for those years and the unaudited financial information within the Chairman's Statement in the 2009 accounts. The Group's statutory accounts for the year ended 30 September 2009 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.

 

3.     Explanation of transition to IFRS

 

This note sets out the changes in accounting policies which have arisen from the adoption of IFRS. The re-stated balance sheets as at 1 October 2007, 31 March 2008 and 30 September 2008 have been included, together with the re-stated income statements for the six months ended 31 March 2008 and the year ended 30 September 2008.

 

Differences between IFRS and UK GAAP

In accordance with the provisions of IFRS 1, the Group has retrospectively applied all relevant accounting standards effective at 30 September 2009.  However, the Group has taken advantage of the optional exemption from full retrospective application in relation to business combinations that occurred before the date of transition to IFRS.  Accordingly, goodwill arising on acquisitions prior to 1 October 2007 has been stated at its carrying amount at that date and has been subjected to an impairment review in accordance with the principles of IAS 36.

 

Goodwill amortisation - IFRS 3, Business Combinations

 

In accordance with IFRS, goodwill is no longer amortised but is subject to regular impairment reviews. An adjustment has been made to remove the goodwill amortisation charge under UK GAAP.

 

a  Reconciliation of consolidated balance sheet and equity at 1 October 2007  




Accounting policy changes under IFRS




 

UK GAAP

Audited  

   £'000


 

Goodwill amortisation

£'000


 

IFRS

Re-stated

£'000







Non-current  assets






Goodwill

184


-


184

Property, plant and equipment

742


-


742

Investments

785


-


785

 

 

 

1,711


 

-


 

1,711

 

Current assets






Trade and other receivables

551


-


551

Cash and cash equivalents

48


-


48


599


-


599







Current liabilities






Trade and other payables

766


-


766

Deferred consideration

-


-


-

Deferred income

354


-


354

Current tax

-


-


-

Borrowings

1,313


-


1,313


2,433


-


2,433







 

Net current assets/(liabilities)

 

(1,834)


 

-


 

(1,834)







Non-current liabilities






Deferred consideration

-


-


-

Deferred tax

-


-


-

Borrowings

4,541


-


4,541


4,541


-


4,541







 

Net assets

 

(4,664)


 

-


 

(4,664)

 

Equity






Ordinary shares

358


-


358

Share premium account

9,246


-


9,246

Equity reserve

992


-


992

Retained earnings

(15,260)


-


(15,260)

 

Equity shareholders' funds

 

(4,664)


 

-


 

(4,664)

 

 

b  Reconciliation of consolidated balance sheet and equity at 31 March 2008  

 




Accounting policy changes under IFRS




 

 

UK GAAP  

   £'000


 

Goodwill amortisation

£'000


 

 

IFRS

£'000







Non-current  assets






Goodwill

174


10


184

Property, plant and equipment

660


-


660

Investments

984


-


984

 

 

 

1,818


 

10


 

1,828

 

Current assets






Trade and other receivables

593


-


593

Cash and cash equivalents

223


-


223


816


-


816







Current liabilities






Trade and other payables

743


-


743

Deferred consideration

-


-


-

Deferred income

172


-


172

Current tax

-


-


-

Borrowings

349


-


349


1,264


-


1,264







 

Net current assets/(liabilities)

 

(448)


 

-


 

(448)







Non-current liabilities






Deferred consideration

-


-


-

Deferred tax

-


-


-

Borrowings

361


-


361


361


-


361







 

Net assets

 

1,009


 

10


 

1,019

 

Equity






Ordinary shares

1,926


-


1,926

Share premium account

14,408


-


14,408

Other reserve

459


-


459

Retained earnings

(15,784)


10


(15,774)

 

Equity shareholders' funds

 

1,009


 

10


 

1,019

 

 

  

 

 

 

 

c  Reconciliation of consolidated balance sheet and equity at 30 September 2008  

 




Accounting policy changes under IFRS




 

UK GAAP

Audited  

   £'000


 

Goodwill amortisation

£'000


 

IFRS

Re-stated

£'000







Non-current  assets






Goodwill

6,766


34


6,800

Property, plant and equipment

1,358


-


1,358




-



 

 

 

8,124


 

34


 

8,158

 

Current assets






Trade and other receivables

1,499


-


1,499

Cash and cash equivalents

1,437


-


1,437


2,936


-


2,936







Current liabilities






Trade and other payables

966


-


966

Deferred consideration

290


-


290

Deferred income

832


-


832

Current tax

-


-


-

Borrowings

1,304


-


1,304


3,392


-


3,392







 

Net current assets/(liabilities)

 

(456)


 

-


 

(456)







Non-current liabilities






Deferred consideration

1,210


-


1,210

Borrowings

392


-


392


1,602


-


1,602







 

Net assets

 

6,066


 

34


 

6,100

 

Equity






Ordinary shares

4,822


-


4,822

Share premium account

17,095


-


17,095

Other reserve

459


-


459

Retained earnings

(16,310)


34


(16,276)

 

Equity shareholders' funds

 

6,066


 

34


 

6,100

 

 

 

 

 


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