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Keycom PLC (KCO)

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Monday 30 June, 2008

Keycom PLC

Interim Results

RNS Number : 7343X
Keycom PLC
30 June 2008
 



KEYCOM PLC

ANNOUNCEMENT OF INTERIM RESULTS TO 31 MARCH 2008



CHAIRMAN'S STATEMENT



The Board of Keycom plc ('the Company') announces the interim results for the group for the six month period ended 3March 2008.


Six month interim results to 31 March 2008


Turnover continues to grow in the key business activity of broadband services, up 21% at GBP847,000 (2007GBP701,000) for the six months, arising entirely from organic growth from the increase in broadband rooms under contract.   


The decline in traditional voice service revenue experienced over the past few years has been less severe, with a decline of 25% at GBP103,000 (2007: GBP138,000).


Engineering service revenue is less predictable; and generated based upon the requirements of customers from time to time, rather than a line of business pursued by management.


Wi-Fi hotspot business in the first six months of the current year reflect a drop in revenue as the company transitions to  new model that it believes will deliver more sustainable revenues. 


Revenue
6 months ended 31 March
 
2008
 
2007
 
   Change
GBP (thousands)
 
 
 
 
Broadband services
847
701
146
+ 21%
Wi-Fi hotspot services
44
135
(91)
- 67%
Engineering services
35
60
(25)
- 42%
Traditional voice services
103
138
(35)
- 25%
Total
1,029
1,034
(5)
Nil%

 

 


Basic broadband services revenue is now providing 82% of the company's revenue, up from 68% in the same period in the prior year. 
Broadband gross profit increased by 23% to GBP594,000 (2007: GBP481,000); representing a gross margin of 70% (2007: 69%). The overall gross margin for the period, however, declined slightly to 63%, from 66% in the previous year; with actual gross profit at GBP647,000 (2006: GBP687,000) caused primarily by the impact of the transition of the Wi-Fi hotspot business 

Gross profit
6 months ended 31 March
 
2008
 
2007
 
   Change
GBP (thousands)
 
 
 
 
Broadband services
594
481
113
+ 23%
Wi-Fi hotspot services
22
120
(98)
- 82%
Engineering services
20
48
(28)
- 58%
Traditional voice services
11
38
(27)
- 71%
Total
647
687
(40)
- 6%


 

The basic broadband services now contribute 92% of the Company's gross profit, up from 70% in the prior year.


The gross margin from traditional voice services has fallen to 11% for the six months, down from 28% in the prior year as a consequence of the declining traditional service revenue. This revenue will progressively be eliminated. 


A particularly attractive characteristic of the broadband revenue and margin stream is that it is essentially annuity in nature with a majority of the Keycom payments collected in advance by landlords (in room rent) or through annual payments by students and key workers.


Administrative expenses continue to be kept under control; at GBP685,000 (2007GBP651,000). The Company chose to increase the sales resources and associated costs. The benefits of this should flow through in increased sales in the medium term. 


The loss for the period is 7% lower than that of the previous year at GBP524,000 (2007GBP561,000)primarily as a result of lower depreciation charges.  With the conversion of the convertible loan stock on 28 February 2008, the interest charges for the second six months of the financial year will be significantly reduced.



Funding of the business

The Board reviews the funding of the business on a regular basis, taking into account the trading of the business, investments in the infrastructure and services and settlement of historic liabilities.


As announced in February and June 2008, the Company since 30 September 2007 has raised a total of GBP2.1million in cash to assist with the Company's working capital requirements, to provide funding for the acquisition of the broadband contracts from Catalyst and to finance new developments.  During the six month period the Company has also converted the convertible loan stock and accrued interest into equity.  The effect of the placing of ordinary shares and the conversion of loan stock into equity in February 2008 is for the Company to have improved the shareholders' funds at 31 March 2008 by GBP5.8m to GBP1.1m, from the deficit of GBP4.7m at 30 September 2007. The placing of a further GBP0.6m in June 2008 further improves that net asset position.  The Board is grateful to its shareholders for their continuing support and confidence.


New developments


The Company continues to invest in future services, keeping abreast of market requirements.  The focus continues to be on the introduction of broadband services to student and keyworker accommodation with many landlords including the Keycom broadband service as a utility included in the rent  Keycom has deployed broadband over Ethernet, wireless and ADSL, according to the solutions appropriate for its customers. 


Keycom has recently announced that following a competitive tender process, it has been selected by the University of Edinburgh for the provision of broadband services into the University's residential student accommodation. The contract is for a five year term, commencing September 2009, for in excess of 6,000 student rooms and will generate revenue in excess of GBP750,000 per annum to Keycom.



The management are confident in their strategy and anticipate growth of high margin business of an annuity nature transforming the profitability of the business.



ROD MATTHEWS - Chairman & CEO

 

 

GROUP PROFIT AND LOSS ACCOUNT

        SIX MONTHS


        TO 31 MARCH


2008

2007


GBP'000

GBP'000

Turnover

1,029

1,034

Cost of sales

(382)

(347)

Gross profit

647

687




Administrative expenses

(685)

(651)

Exceptional costs - administrative expenses

Depreciation

(213)

(332)


(898)

(983)




LOSS FOR THE PERIOD BEFORE INTEREST & TAXATION

(251)

(296)




Interest payable

(273)

(265)

Tax on loss on ordinary activities

-  

-  




Loss for the PERIOD

(524)

(561)




Loss per share (pence)

(0.83)

(1.57)






NOTES


  • Loss per share is calculated using the weighted average number of ordinary shares in issue of 63,243,276 (200735,835,573) for the year to date.

  • The auditors, CLB Coopers, have reviewed but not audited these interim results.



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