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Keycom PLC (KCO)

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Tuesday 30 June, 2009

Keycom PLC

Half Yearly Report

RNS Number : 7161U
Keycom PLC
30 June 2009
 



30 June 2009


KEYCOM PLC 


INTERIM RESULTS FOR THE SIX MONTHS TO 31 MARCH 2009


Keycom plc (the 'Company' or the 'Group'), is pleased to announce unaudited interim results for the six months to 31 March 2009.


FINANCIAL HIGHLIGHTS


  • 130% rise in revenue to £2,369,000 (2008: £1,029,000) 

  • EBITDA improvement to £352,000 (2008: £(38,000))

  • £345,000 reduction in loss to £169,000 (2008: £(514,000)) *

  • Gross profit margin improvement to 64% (2008: 63%)

* Re-stated in accordance with IFRS 


Enquiries:

   

Keycom plc     

Rod A Matthews, Chief Executive

01785 717777                                                    

www.keycom.co.uk 


Seymour Pierce         

Nandita Sahgal

020 71078338

    

Tom Sheldon

020 71078087    
www.seymourpierce.com





Keycom plc


Interim Results for the six months ended 31 March 2009


Chairman's Statement 

 

Keycom's turnover was £2,369,000 an increase of 130% on the same period in the prior year. That increase has arisen from the acquisitions of MCW Group Limited and Mediaforce (UK) LLP in September 2008 and the subsequent acquisition of Masterpoint Engineering Limited ('Masterpoint') on 22 December 2008.


The consolidated income statement for the six months does not, therefore, reflect the full benefit of that latest acquisition, but only 14 weeks of the 26 week period.

 

Trading 


The turnover for the period was £2,369,000 (2008: £1,029,000), a 130% growth on the same period last year.  


The loss for the period was £169,000 (2008: £514,000); a 67% improvement over the same period in the prior year of £345,000.

 

Revenue
6 months ended 31 March
 
2009
 
2008
 
Change
 
£'000
£'000
£'000
 
Broadband & voice managed services
1,605
994
611
+ 61%
Engineering & maintenance services
632
35
597
n/a
Training
132
-
132
n/a
Total
2,369
1,029
1,340
 +130%



The traditional voice is not separately analysed as it now represents only £50,000 (2008: £103,000) in the six month period.

 

Gross profit
6 months ended 31 March
 
2009
 
2008
 
Change
 
£'000
£'000
£'000
 
Broadband & voice managed services
1,020
627
393
+ 63%
Engineering & maintenance services
379
20
359
n/a
Training
112
-
112
n/a
Total
1,511
647
864
+ 134%



Overall gross margin was 64% (2008: 63%). That is aligned to the gross margins in the broadband and voice managed services at 64% (2008: 63%). The engineering and maintenance services businesses generated a gross margin of 60%, while the training revenue generated a gross margin of 85%.


Administrative expenses continue to be kept under control; at £1,159,000 (2008£685,000). Although turnover and gross profit have increased 130% and 134% respectively, the administrative expenses have only increased by 69%. 


Exceptional costs of £43,000 (2008: £Nil) have been incurred as a consequence of the consolidation of the operations of the businesses following acquisition.


Acquisition


The Company completed the acquisition of Masterpoint on 22 December 2008 and information on that transaction is contained in our last audited financial statements.  Masterpoint, prior to that acquisition, was a competitor in the broadband and voice managed services tertiary education market.


Masterpoint has long term contracts for the provision of broadband services to approximately 6,600 rooms in aggregate at the University of Glasgow and the University of Leicester.


IFRS


Since the publication of those financial statements the board of directors has resolved to adopt International Financial Reporting Standards. The most significant impact of that change is the method of treatment of the write down of goodwill, as disclosed in the audited financial statements.


Funding


The balance sheet reflects net current liabilities of £3,469,000. That includes deferred income of £1,167,000 which is not strictly a current liability; it represents revenue committed by customers but not yet earnt. As the revenue is earnt over time it is released to the income statement; and the amount as at 31 March will all have been earnt by 30 June 2009.


Borrowings of £2,136,000 are payable within the next twelve months, the majority of which falls due after the start of the new academic year 2009/10. To mitigate the effect of the borrowings falling due before that time, the Company has completed, since 31 March 2009, a lease financing of £1.25 million with a five year repayment term.


Prospects


The Company is pleased to have created the foundation to enable the recent acquisitions to be made and the integration of the acquisitions has proceeded to plan. 


The key drivers for the acquisitions made were to enhance Keycom's position in the student sector, while increasing our position in the provision of services for key-workers and creating a strong position in the military sector providing multi-media services for residents in military accommodation. We are already seeing signs of success in all three areas. 


Keycom has previously announced significant progress in the organic growth of the business through new contracts, with the contract for the provision of broadband, TV and voice services into over 6,000 student rooms for the University of Edinburgh commencing in September 2009 being particularly noteworthy. The Company has also made significant progress in obtaining agreements to provide broadband services to military accommodation.


Prior to the start of the 2008/09 academic year and the acquisitions, the Company was providing broadband services to 15,000 rooms. With the acquisitions and new contracts that has increased to a current level of 29,000 rooms. Taking account of new contracts awarded, that number will exceed 40,000 rooms from September 2009, a 170% increase in a twelve month period.  The Company also has a strong pipeline which should lead to significantly more rooms being serviced in the medium term. The increased scale now evident in the Company provides a firm base for further growth. 



Rod A Matthews

Chairman 

30 June 2009 


 

Keycom plc

Consolidated income statement

for the six months ended 31 March 2009







Note


Six months

to 31 March 2009

  £'000



Six months

to 31 March 2008*

£'000



Year to 30 September 2008*

£'000








Revenue







Continuing operations


1,831


1,029


1,885

Acquisitions


538


-


32



2,369


1,029   


1,917

Cost of sales


(858)


(382)


(823)

Gross profit


1,511


647


1,094


Administrative expenses



(1,159)



(685)



(1,365)

Operating profit/(loss) before depreciation and exceptional items



352



(38)



(271)

Depreciation


(349)


(203)


(433)

Exceptional costs - administrative expenses


(43)



-


Operating profit/(loss)








Continuing operations


(236)


(241)


(707)

Acquisitions


196


-


3



(40)


(241)


(704)

Investment income  


-



4

Finance charges 


(129)


(273)


(316)


Loss on ordinary activities before taxation 



(169)



(514)



(1,016)








Taxation


-


-


-  


Loss attributable to ordinary shareholders



(169)



(514)



(1,016)


Earnings per share: 



Pence



Pence



Pence


Earnings per share - basic


6


(0.04)



(0.81)



(0.72)

Earnings per share - diluted

6

(0.04)


(0.81)


(0.71)

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


* Re-stated in accordance with IFRS 


 

Keycom plc

Consolidated balance sheet

as at 31 March 2009







As at 

 31 March 2009

  £'000


As at

 31 March 2008*

£'000


As at

30 September 2008*

£'000








Non-current  assets







Goodwill


9,145


184


6,800

Property, plant and equipment


1,873


660


1,358

Investments


-


984


-





11,018



1,828



8,158


Current assets







Trade and other receivables


1,446


593


1,499

Cash and cash equivalents


155


223


1,437



1,601


816


2,936








Current liabilities







Trade and other payables


1,436


743


966

Deferred consideration


290



290

Deferred income


1,167


172


832

Current tax


41


-


Borrowings


2,136


349


1,304



5,070


1,264


3,392









Net current assets/(liabilities)



(3,469)



(448)



(456)








Non-current liabilities







Deferred consideration


1,190


-


1,210

Borrowings


428


361


392



1,618


361


1,602









Net assets



5,931



1,019



6,100


Equity 







Ordinary shares


4,822


1,926


4,822

Share premium account


17,095


14,408


17,095

Other reserve


459


459


459

Retained earnings


(16,445)


(15,774)


(16,276)


Equity shareholders' funds




5,931



1,019



6,100


* Re-stated in accordance with IFRS 


Keycom plc

Consolidated statement of changes in shareholders' equity

for the six months ended 31 March 2009




Six months to 31 March 2009

Six months to 31 March 2008*

Year to 

30 September 2008*


£'000

£'000

£'000





Opening equity

6,100

(4,664)

(4,664)





Net loss for the period attributable to equity shareholders

(169)

(514)

(1,016)

Issue of ordinary shares (net of expenses)

-

6,197

11,780





Closing equity

5,931

1,019

6,100


* Re-stated in accordance with IFRS 

  Keycom plc

Consolidated cash flow statement

for the six months ended 31 March 2009




Six months to 31 March 2009

Six months to 31 March 2008*

Year to 

30 September 2008*


Note

£'000

£'000

£'000











Cash generated/(absorbed) by operations

7

922

(1,139)

(1,601)






Net interest paid


(129)

(64)

(103)






Net cash inflow/(outflow) from operating activities


793

(1,203)

(1,704)






Investing activities





Interest received


-

4

4

Proceeds from disposal of property, plant and equipment


-

-

-

Purchases of property, plant and equipment


(418)

(61)

(630)

Deferred consideration paid


(20)

-

-

Acquisition of subsidiaries and businesses


(1,762)

(199)

(2,926)

Cash acquired with subsidiaries and businesses


283

-

(368)

 




Net cash used in investing activities

(1,917)

(256)

(3,920)






Financing activities





Proceeds from issue of shares (net of expenses)


-

6,197

11,780

Receipt of bank loans


-

-

-

Receipt of other loans & lease obligations


150

-

-

Repayment of bank loans


(20)

(14)

(28)

Repayment of other loans


(231)

(4,255)

(4,381)

Repayment lease obligations


(59)

(68)

(160)







Net cash generated by financing activities



(160)


1,860


7,211






Net increase/(decrease)  in cash and cash equivalents

8

(1,284)

401

1,587






Cash and cash equivalents at start of period


1,404

(178)

(183)







Cash and cash equivalents at end of period



120


223


1,404



* Re-stated in accordance with IFRS 

  Notes to the financial information


 

1.    Basis of preparation


The Group's interim results for the six months ended 31 March 2009 have been prepared in accordance with International Financial Reporting Standards (IFRS) for the first time and on a historical basis. As a consequence, a number of the accounting policies adopted in the preparation of these statements are different to those adopted in preparing the financial statements for the year ended 30 September 2008, which were prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP). 


The comparative figures are an abridged version of the Group's full financial statements, adjusted for the impact of IFRS accounting policies and, together with other financial information contained in these interim results, do not constitute statutory financial statements of the Group within the meaning of section 240 of the Companies Act 1985.


Statutory financial statements for the year ended 30 September 2008 have been filed with the Registrar of Companies for England and Wales and have been reported on by the Group's auditors. The report of the auditors was not qualified and did not contain a statement under section 273(2) or (3) of the Companies Act 1985.



2. Transitional arrangements


The Group has adopted IFRS from October 2008, the date of transition. The Group is required to define its accounting policies under IFRS and then apply these policies retrospectively in determining the opening balance sheet under IFRS at the date of transition. 


Reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group's net income and equity are included in note 4 of these statements.



3. Accounting policies


The accounting policies used in the preparation of this financial information are:


Basis of consolidation


The consolidated financial statements incorporate the financial statements of the Company and all Group undertakings. These are adjusted, where appropriate, to conform to Group accounting policies. The results of companies acquired or disposed of are included in the consolidated income statement after or up to the date that control passes respectively.


Business combinations


Acquisitions are accounted for using the purchase method as required by IFRS 3 Business Combinations.


Goodwill


Goodwill arising on the acquisition of subsidiary undertakings or businesses, representing any excess of the fair value of the consideration given over the fair value of the identifiable assets and liabilities acquired, is recognised as an asset. Goodwill is reviewed for impairment at least annually and any impairment is recognised in the income statement and is not subsequently reversed. Goodwill is carried at cost less accumulated impairment losses.

 

Deferred consideration


Deferred consideration is the amount, in the opinion of the Directors, of additional consideration that will be paid in cash or satisfied by the issue of shares in respect of acquisitions previously made. If the effect can be determined with reasonable accuracy and certainty and is material, the deferred consideration is determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money.


Exceptional items


Exceptional items are those significant items which are separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's financial performance.

  4. 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 October 200731 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 31 March 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 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


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


  d Reconciliation of Consolidated income for the six months ended 31 March 2008 





Accounting policy changes under IFRS






UK GAAP  

  £'000



Goodwill amortisation

£'000




IFRS

£'000







Revenue






Continuing operations

1,029


-


1,029

Acquisitions

-


-


-


1,029


-


1,029

Cost of sales

(382)


-


(382)

Gross profit

647


-


647


Administrative expenses


(898)



10



(888)


Operating profit






Continuing operations

(251)


10


(241)

Acquisitions

-


-


-


(251)


10


(241)

Investment income  

-


-


-

Finance charges 

(273)


-


(273)


Loss on ordinary activities before taxation 


(524)



10



(514)







Taxation

-


-


-


Loss attributable to ordinary shareholders


(524)



10



(514)


Earnings per share: 


Pence





Pence


Earnings per share - basic


(0.83)





(0.81)

Earnings per share - diluted

(0.83)




(0.81)


e Reconciliation of Consolidated income for the year ended 30 September 2008 





Accounting policy changes under IFRS





UK GAAP

Audited   

  £'000



Goodwill amortisation

£'000



IFRS

Re-stated

£'000







Revenue






Continuing operations

1,885


-


1,885

Acquisitions

32


-


32


1,917


-


1,917

Cost of sales

(823)


-


(823)

Gross profit

1,094


-


1,094


Administrative expenses


(1,832)



34



(1,798)


Operating profit/(loss)







Continuing operations

(741)


34


(707)

Acquisitions

3




3


(738)


34


(704)

Investment income  

4


-


4

Finance charges 

(316)


-


(316)


Loss on ordinary activities before taxation 


(1,050)



34



(1,016)







Taxation

-


-


-


Loss attributable to ordinary shareholders


(1,050)



34



(1,016)


Earnings per share: 


Pence





Pence


Earnings per share - basic


(0.74)





(0.72)

Earnings per share - diluted

(0.74)




(0.71)


 

 5. Segment information


Revenue and operating profit



Six months ended 

31 March 2009

Six months ended 

31 March 2008*

Year ended

30 September 2008*



Revenue £'000

Operating profit

£'000


Revenue £'000

Operating profit

£'000


Revenue £'000

Operating profit

£'000


By class of business:








Broadband & voice managed services


1,605


224


994


5


1,855


(208)


Engineering & maintenance


632


29


35


2


57


4


Training


132


35


-


-


5


1




2,369


288


1,029


7


1,917


(203)


Central costs



(328)



(248)



(501)


Profit/(loss) from operations



(40)



(241)



(704)


* Re-stated in accordance with IFRS 



6. Earnings per share


The calculation of earnings per share figures for the six months ended 31 March 2009 is based on the loss attributable to ordinary shareholders of £169,000 (six months 2008: £514,000; twelve months 2008: £1,016,000) divided by the weighted average number of shares in issue as detailed in the table below.  



Six months to 

31 March 2009

Six months to 

31 March 2008*

Year to 

30 September 2008*


Number of shares

Weighted average

Number of shares

Weighted average   

Number of shares

Weighted average   


Basic - shares in issue


482,243,378


482,243,378


192,573,378


63,243,276



482,243,378


141,863,103


Share options that have a dilutive effect



-



-



264,495

Diluted - adjusted number of shares



482,243,378



63,243,276




142,127,598


* Re-stated in accordance with IFRS

 

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



Six months to 31 March

 2009

Six months to 31 March 2008*

Year to 

30 September 2008*


£'000

£'000

£'000

Operating profit/(loss)

(40)

(241)

(704)

Depreciation

349

203

433






Operating cash flow before movements in working capital


309


(38)


(271)





(Increase)/decrease in receivables

741

(42)

(393)

Decrease in payables

(128)

(1,059)

(937)






Net cash inflow/(outflow) from operating activities


922


(1,139)


(1,601)


* Re-stated in accordance with IFRS

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



Six months to 31 March

 2009

Six months to 31 March 2008*

Year to 

30 September 2008*


£'000

£'000

£'000





Net debt at start of period

(259)

(5,139)

(5,139)





Increase/(decrease) in cash in the period

(1,284)

401

1,587

Cash inflow/(outflow) from decrease/(increase) in debt and lease financing


(590)


(1,509)


1,741

Non cash flow changes - conversion of convertible loan stock


-


2,742


2,742

Non cash flow changes - debt acquired on acquisitions

(276)

-

(1,190)





Net debt at end of period

(2,409)

(487)

(259)


* Re-stated in accordance with IFRS


9. Analysis of net debt



Six months to 31 March

 2009

Six months to 31 March 2008*

Year to 

30 September 2008*


£'000

£'000

£'000





Cash at bank net of overdrafts

120

223

1,404

Bank loans

(279)

(176)

(305)

Other loans

(1,947)

(321)

(1,103)

Lease obligations

(303)

(213)

(255)

Net debt

(2,409)

(487)

(259)


* Re-stated in accordance with IFRS


10. Acquisition


The Company completed the acquisition of Masterpoint on 22 December 2008 and information on that transaction is contained in the audited financial statements for the year ended 30 September 2008. Masterpoint, prior to that acquisition, was a competitor in the broadband and voice managed services tertiary education market.


The cost of acquisition of that company was £2.45million, resulting in additional goodwill of £2.35million. The company has, among other contracts, long term contracts for the provision of broadband services to approximately 6,500 rooms at the University of Glasgow and the University of Leicester.

 


The Interim Statement, which has been reviewed but not audited by the Group's auditors CLB Coopers, was approved by the Board on 26 June 2009.


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








This information is provided by RNS
The company news service from the London Stock Exchange
 
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