24th May 2005 07:02
Kingston Communications(Hull)PLC24 May 2005 24 May 2005 KINGSTON COMMUNICATIONS (HULL) PLC (KCOM.L) - PRELIMINARY ANNOUNCEMENT OF AUDITED RESULTS FOR YEAR ENDED 31 MARCH 2005 "We are greatly encouraged by the progress we are making in integrating ournewly-acquired businesses and look forward to the year ahead with continuedconfidence." Michael Abrahams, Chairman Kingston Communications (HULL) PLC (KCOM.L) ("Kingston" or the "Group") todayannounces its audited preliminary results for the year ended 31 March 2005. Summary Year ended Year ended Change 31 March 2005 31 March 2004 over (£ million) (£ million) prior year (%)Business results excludingdiscontinued operations andexceptional items 1 Turnover 364.3 294.7 23.6EBITDA 62.9 50.7 24.0Operating profit excludingamortisation of intangible fixedassets 25.9 3.9Profit /(loss) before tax 2 8.6 (6.1)Adjusted basic earnings per share(pence) 3 4.1 (1.2)Reported results 4Turnover 366.5 324.2 13.0EBITDA 58.7 43.5 34.9Operating profit/(loss) 12.6 (109.6)Profit /(loss) before tax 7.0 (118.6)Basic earnings/(loss) per share(pence) 3.0 (31.2)Dividend per share (pence) 5 0.9 nil 1 Includes continuing operations and acquisitions but excludes discontinued activities and exceptional items. 2 Profit before tax of £8.6 million represents operating profit excluding discontinued activities, exceptional items less net interest payable and similar charges. 3 Adjusted basic earnings per share represents earnings per share before exceptional items, amortisation of intangible fixed assets and deferred taxation. 4 Reported results include the results of discontinued operations and exceptional items. 5 Includes proposed final dividend of 0.54 pence and interim of 0.36 pence. Highlights • Operating profit, excluding discontinued operations, exceptional items and amortisation of intangible fixed assets, of £25.9 million (2004: £3.9 million). • Proposed final dividend of 0.54 pence per share, resulting in a total dividend of 0.9 pence per share (2004: nil). • Group turnover excluding discontinued activities, up 23.6 per cent to £364.3 million (2004: £294.7 million). Group turnover from continuing operations, excluding acquisitions, up 3.2 per cent to £304.0 million (2004: £294.7 million). • Group EBITDA excluding exceptional items and discontinued activities up 24.0 per cent to £62.9 million (2004: £50.7 million). EBITDA, excluding acquisitions, exceptional items and discontinued activities, up 12.2 per cent to £56.9 million (2004: £50.7 million) with margins increasing to 18.7 per cent from 17.2 per cent. • Positive net cash flow before interest of £14.0 million (2004: £14.3 million) after incurring exceptional cash costs of £3 million. Closing net debt of £163.6 million (2004: £94.2 million) reflects the net investment in acquisitions and disposals in the year of £72.2 million. • Integration of new businesses on track with encouraging early sales wins from our broader service portfolio. • Disposal of the Group's French operations for Euros 47 million (subject to French Competition Authority approval) focuses Group strategy on UK market and will improve the Group's net debt position. Chairman, Michael Abrahams said, "We started the financial year with clearobjectives to improve the Group's financial performance and to pay a dividend toshareholders. We have achieved this and have further improved the quality of theGroup's earnings by moving into market segments with higher quality recurringrevenues. We are greatly encouraged by the progress we are making in integrating ournewly-acquired businesses and look forward to the year ahead with continuedconfidence." Chief Executive, Malcolm Fallen said, "This has been a transformational year forKingston. "In our underlying business, our focus on discrete customer segments andreducing our cost base has helped us not only to achieve consistent revenuegrowth, but also to improve margins and operating cash flows. "Strategically, we have accelerated the repositioning of the Group as a providerof integrated, converged communications services in the UK. The acquisitions ofOmnetica, Technica and Eclipse have reduced our exposure to increasinglycommoditised basic telecommunication services. The disposal of Omnetica's Frenchand Italian operations has led to a clear focus on the UK market. At the sametime, we have added substantial breadth and depth to the Group's capabilities. "Although still in the relatively early stages of the integration phase, we havealready won a number of orders based on the enhanced service portfolio we cannow offer across the combined enlarged customer base. "Our focus in the new financial year is to deliver the full benefits from theacquisitions we have made, as well as further improvement in the Group's overallperformance." For further information please contact: Kingston Communications (HULL) PLC:Corporate Communications & Investor Relations Kingston Communications:Anita Pace Tel: 01482 602666 Mobile: 07770 744322 The Maitland Consultancy:Colin Browne Tel: 020 7379 5151 Mobile: 07733 103800 Business and Operating review We set clear objectives for the year. These were: • To broaden our capabilities to meet our customers' changing needs in key vertical markets, reduce our dependency on basic voice services and increase the level of recurring revenues • To achieve sustainable, profitable growth • To deliver returns to our shareholders These objectives have been achieved. We have also responded to the changing needs of our target customers byexpanding our capabilities in the areas of broadband services, data and IPnetwork services and storage solutions through the acquisitions of Eclipse,Omnetica and Technica respectively. These acquisitions, combined with ourexisting operations, have enabled us to accelerate our strategic positioning inthe UK market as a high-quality, converged communications integration provider. The disposal of the Italian and French operations of Omnetica for a combinedconsideration of Euros 51 million underlines our strategy of focusing on the UKmarket. The French disposal is subject to French Competition Authority approvalbut is expected to be completed during the summer of 2005. The Group has performed strongly during the year with turnover from continuingoperations increasing 23.6 per cent to £364.3 million as a result of organicgrowth and acquisitions. Group EBITDA, before exceptional items and excludingdiscontinued operations, has increased from £50.7 million to £62.9 million. Thisstrong growth reflects improvements in our continuing operations and the partyear contributions from Eclipse and Omnetica. Turnover from continuing operations, before acquisitions, has shown consistentgrowth across the year, increasing by 3.2 per cent to £304.0 million (2004:£294.7 million) with a corresponding EBITDA improvement from £50.7 million to£56.9 million with margins improving to 18.7 per cent (2004: 17.2 per cent). Thesteady turnover growth in continuing operations has been achieved by focusing onhigher quality, recurring revenues. Exceptional costs of £3.7 million in thecontinuing operations of the Group (2004: £7.9 million) include provisions forredundancies and onerous property leases arising from the drive for continuedefficiency. In line with the expectations we had at the time, the acquisitions made duringthe year have made an immediate positive impact on the Group. The combinedcontribution from Eclipse over six months and Omnetica over three months hasbeen £60.2 million of turnover and £6.1 million of EBITDA before exceptionalitems. The Group reported an operating profit excluding discontinued operations,exceptional items and amortisation of intangible fixed assets of £25.9 million(2004: £3.9 million). This strong growth demonstrates the Group's continuedimprovement in operating performance. Adjusted basic earnings per share, excluding discontinued operations,exceptional items, amortisation of intangible fixed assets and deferred tax, was4.1 pence (2004: Loss 1.2 pence). In light of the improved financial performanceof the Group, the Board is proposing a final dividend of 0.54 pence per share,resulting in a full year dividend payment of 0.9 pence per share (2004: nil). Affiniti Change over 2005 2004 prior year (£ million) (£ million) (%)Turnover 248.8 190.1 30.9EBITDA 24.3 13.7 77.4 Affiniti, launched in April 2005, is our national business-to-business operationcreated by bringing together our Business Services division, Omnetica andTechnica. Affiniti reinforces our position in the UK market and combines a rangeof complementary skills and capabilities that strengthen our customerproposition and enable us to help our customers exploit the benefits ofconverged communications. Turnover from Affiniti grew 30.9 per cent to £248.8 million (2004: £190.1million), including one quarter's contribution from Omnetica. EBITDA increased77.4 per cent also reflecting the 3 month contribution from Omnetica and theimprovement in the operating performance of underlying activities. As indicated at the half year, the first phase of the integration process was toorganise the new business around our extended customer base with focus on thosediscrete customer segments where we have a strong market position. This has beenachieved and we are now focusing on the next phase - integrating the servicedelivery capabilities, processes and systems. We have already seen benefits coming through from the acquisitions as ourenlarged customer base provides real opportunities to sell and deliver ourextended breadth of capabilities. We are developing and extending relationships with a number of existingcustomers including EMBC and Ford of Europe, underlining our commitment todelivering high quality, sustainable revenues from current as well as newcustomers. We also secured some important new contracts - University of Dundeeand SportsWorld. During the second half of the year, we secured some significant managed servicescontracts within our target sectors. Warwickshire Police selected us for theprovision of an advanced data and telephony network to carry all of the force'scommunications traffic using IP technology, while Bolton Council agreed acontract for the provision of a fully-managed, IP-based communicationsinfrastructure. It is the combination of the strength of our capabilities and the quality of thecustomer base that provides an exciting opportunity for future growth. Our nearterm challenge is to ensure the continued successful operational integration ofthe businesses so that we can maximise this opportunity. Our expertise has received significant industry endorsement. During the year wewere named as Cisco's IP Communications Partner of the Year, Services Partner ofthe Year and Scottish Partner of the Year, and won Nortel's Best Customer Focusaward. Our internet services have also won awards: the Internet ServiceProviders Association (ISPA) named us Best Internet Carrier and Best SumoBusiness Broadband service provider. East Yorkshire and Contact Centres Change over 2005 2004 prior year (£ million) (£ million) (%)Turnover 103.5 93.2 11.1EBITDA 39.2 37.5 4.5 Turnover in East Yorkshire and Contact Centres increased 11.1 per cent to £103.5million (2004: £93.2 million). This includes 6 months' contribution fromEclipse. EBITDA increased to £39.2 million (2004: £37.5 million), an increase of4.5 per cent year on year. Our East Yorkshire operation continues to experience strong growth in broadband,both in its core regional market via the Karoo brand and nationally via EclipseInternet. Overall, our internet customer base, on a like-for-like basis, hasincreased 58 per cent from 66,000 to 104,000 with 70 per cent of all internetcustomers having broadband connections. The migration of customers to broadband and the resulting strong access revenuesare offsetting the effects of the national trend of declining dial-up internettraffic. Our expansion into Lincoln and Grimsby is continuing as planned, with theinfrastructure build due for completion in June 2005. We have already securedsignificant contracts in this area, including APS Student Services Limited, theUniversity of Lincoln and Millenium Chemicals. Again, our internet services have received industry endorsement, with EclipseInternet being named by ISPA as Best Heavy Business Broadband service provider. During the second half of the year we have invested in and developed ourcapability in the provision of outsourced directory enquiries (DQ) services andsecured a significant contract with Independent Radio News. During the year our experience and capability in the contact centre market wasrecognised at the European DQ Awards, where we were named Best Wholesale Serviceprovider. Publishing Services Change over 2005 2004 prior year (£ million) (£ million) (%)Turnover 12.7 12.4 2.4EBITDA 7.2 7.4 (2.7) Turnover in Publishing Services increased to £12.7 million (2004: £12.4million), a 2.4 per cent increase year on year. The small decline in EBITDA to£7.2 million (2004: £7.4 million) reflects the reduction in the volume of workfor BT towards the end of the year. Our Publishing Services business continues to perform well in the East Yorkshirearea, underpinned by the strong performance of our Hull Colour Pages directory. In addition to the publication of our traditional regional directories, we haveprovided directory publishing services to BT as it has re-established itspresence in the UK classified directories market. As anticipated, the volume ofwork on this short-term BT contract has declined materially during the secondhalf of the year. Group Earnings The strength of the Group's performance is reflected in the growth of operatingprofit, before discontinued operations, exceptional items and amortisation ofgoodwill, to £25.9 million (2004: £3.9 million). Group depreciation costs have reduced in the year to £37.5 million (2004: £52.6million). This reduction reflects, in part, the impact of the accelerated writedown of our network assets undertaken in 2004 coupled with a tight control oncapital investment aimed at improving operating margins. Amortisation of intangible assets of £8.7 million (2004: £2.5 million) hasincreased as a result of the goodwill arising on the consolidation of theacquisitions of Eclipse and Omnetica. We are currently amortising this goodwillover ten years. The Group reported a pre-tax profit on the sale of the satellite and broadcastbusiness in April 2004 of £2.9 million. In February 2005, the Group sold itsshares in Intelsat, for £0.9 million, realising a profit of £0.3 million. Duringthe year the Group has taken an exceptional charge of £0.1 million to write downour investment in the Spectrum Venture Management Fund. Reported profit on ordinary activities before interest and tax of £15.6 millioncompares to a loss of £111.1 million in the prior year. Net interest payable and similar charges of £8.6 million have increased from£7.5 million in the prior year. Interest costs for the Group increased in thesecond half of the year as a result of the increase in debt arising from theacquisitions of Omnetica and Eclipse. The anticipated sale of the Frenchoperations of Omnetica will have a favourable impact on interest costs in thenext financial year. During the year, we have recorded a taxation credit of £5.6 million (2004: £0.2million). This credit arises from the recognition of a deferred tax assetreflecting our current view as to the utilisation of unclaimed capitalallowances in the Group. Profit after tax was £12.6 million compared to a loss of £118.4 million in theprior year. Group Financing and Investment The Group's net debt has increased by £69.4 million over the year to £163.6million (2004: £94.2 million). The increase is driven by net investment inacquisitions and disposals of £72.2 million. The major part of the net debt increase relates to the cash element of theconsideration paid for Omnetica in December 2004, an amount of £97.7 million. Atthis time, the Group entered into a new £225 million five year bank facility tofinance both the acquisition and ongoing funding requirements. Investment to fund continued growth and drive operational improvement in thebusiness has continued, with capital expenditure of £36.9 million in the year(2004: £37.2 million). Cash financing costs increased during the year to £11.1 million (2004: £6.7million) reflecting both increased borrowings and the costs associated witharranging the new facility. Group net cash flow before acquisitions, disposals and before interest in theyear was £14.0 million (2004: £14.3 million). This includes the cash impact ofthe exceptional restructuring undertaken in the prior year of £3 million. The net debt position of the Group will benefit from the anticipated disposal ofthe French operations of Omnetica for a cash consideration of Euros 47 million.The disposal, which is subject to French Competition Authority approval, shouldbe completed during the summer of 2005 and the proceeds will be used to repaydebt. Dividend In light of the improved financial performance of the Group, the Board isproposing a final dividend of 0.54 pence per share, resulting in a full yeardividend payment of 0.9 pence per share. The decision reflects the progress theGroup has made to date and the Board's confidence in the Group's prospects. Asoutlined at the time of our interim results, our future policy is to increasedividends in line with underlying earnings before amortisation of intangiblefixed assets. Subject to shareholder approval at the Company's Annual GeneralMeeting on 22 July, the final dividend will be payable on 29 July toshareholders registered at the close of business on 24 June 2005. IFRS With effect from 1 April 2005, the Group will be adopting InternationalFinancial Reporting Standards ('IFRS') in its consolidated financial statements.We have undertaken a specific project to review the transition to IFRS and todetermine the impact of these adjustments on reported results. We are on trackto meet its reporting obligations, and the first set of results the Group willpublish under IFRS will be the interim statement for the six months ending 30September 2005. The Group will also be restating its comparative results for thesix months ended 30 September 2004 and the year ended 31 March 2005, inaccordance with IFRS. Outlook The Group has accelerated its strategic repositioning as a provider ofintegrated, converged communications services in the UK. The acquisitions ofOmnetica, Technica and Eclipse, followed by the sale of Omnetica's French andItalian operations, have reduced our exposure to increasingly commoditised basictelecommunication services, leading to a clear focus on the UK market. At thesame time, we have added substantial breadth and depth to the Group'scapabilities. The new financial year has begun in line with our expectations as we start tosee early benefits from the initial stages of the integration of the businesses.We look forward to delivering further improvement in the Group's overallperformance in the year ahead. ENDS Consolidated Profit and Loss AccountFor the year ended 31 March 2005 Before Exceptional TOTAL Exceptional items items £'000 £'000 £'000Turnover- Continuing 304,033 - 304,033- Acquisitions 60,249 - 60,249- Discontinued 2,255 - 2,255 ----------- ----------- ----------- 366,537 - 366,537 Operating costs before depreciation andamortisation (303,352) (4,500) (307,852) ----------- ----------- -----------Group EBITDA- Continuing 56,868 (3,681) 53,187- Acquisitions 6,050 (325) 5,725- Discontinued 267 (494) (227) ----------- ----------- ----------- 63,185 (4,500) 58,685 Depreciation and other amounts written offtangible assets (37,453) - (37,453) ----------- ----------- ----------- Group EBITA- Continuing 22,269 (3,681) 18,588- Acquisitions 3,653 (325) 3,328- Discontinued (190) (494) (684) ----------- ----------- ----------- 25,732 (4,500) 21,232 Amortisation of intangible fixed assets (8,669) - (8,669) Group operating profit- Continuing 16,661 (3,681) 12,980- Acquisitions 592 (325) 267- Discontinued (190) (494) (684) ----------- ----------- ----------- 17,063 (4,500) 12,563 Profit on sale or termination of 2,898operationsProfit on sale of fixed asset investments 311 Amounts written off fixed asset (141)investments Profit on ordinary activities beforeinterest and taxation 15,631 Net interest payable and similar charges (8,638) -----------Profit on ordinary activities beforetaxation 6,993 Taxation 5,637 -----------Profit on ordinary activities after 12,630taxation Dividends (4,168) -----------Profit for the financial year 8,462 -----------Basic earnings per share 3.03p Adjusted basic earnings per share 4.09p Diluted earnings per share 3.02p Adjusted diluted earnings per share 4.08p Consolidated Profit and Loss AccountFor the year ended 31 March 2004 Before Exceptional TOTAL Exceptional items items £'000 £'000 £'000Turnover- Continuing 294,684 - 294,684- Discontinued 29,512 - 29,512 ----------- ----------- ----------- 324,196 - 324,196 Operating costs before depreciation andamortisation (268,798) (11,879) (280,677) ----------- ----------- -----------Group EBITDA- Continuing 50,650 (7,879) 42,771- Discontinued 4,748 (4,000) 748 ----------- ----------- ----------- 55,398 (11,879) 43,519 Depreciation and other amounts written offtangible assets (52,645) (97,942) (150,587) ----------- ----------- -----------Group EBITA- Continuing 3,870 (105,821) (101,951)- Discontinued (1,117) (4,000) (5,117) ----------- ----------- ----------- 2,753 (109,821) (107,068) Amortisation of intangible fixed assets (2,543) - (2,543) Group operating profit/(loss)- Continuing 1,437 (105,821) (104,384)- Discontinued (1,227) (4,000) (5,227) ----------- ----------- ----------- 210 (109,821) (109,611) Amounts written off fixed asset (1,456)investments ----------- Loss on ordinary activities beforeinterest and (111,067)taxation Net interest payable and similar charges (7,503) -----------Loss on ordinary activities before (118,570)taxation Taxation 216 -----------Loss on ordinary activities after taxation (118,354) Dividends - -----------Loss for the financial year (118,354) -----------Basic loss per share (31.18p) Adjusted basic loss per share (1.19p) Diluted loss per share (31.18p) Adjusted diluted loss per share (1.19p) Statement of Total Recognised Gains and LossesFor the year ended 31 March 2005 2005 2004 £'000 £'000 Profit/(loss) on ordinary activities after 8,462 (118,354)taxationExchange movements 210 41 --------------- ---------------Total recognised gains and losses for the year 8,672 (118,313) --------------- --------------- Consolidated Balance SheetAs at 31 March 2005 2005 2004 £'000 £'000Fixed assetsIntangible assets 202,465 26,497Tangible assets 232,331 250,312Investments 1,087 1,660 ---------------- ---------------- 435,883 278,469 ---------------- ----------------Current assetsStocks 13,042 2,154Debtors 134,312 74,387Cash at bank and in hand 28,189 6,589 ---------------- ---------------- 175,543 83,130 Creditors: amounts falling due within one year (169,505) (101,198) ---------------- ----------------Net current assets/(liabilities) 6,038 (18,068) ---------------- ---------------- Total assets less current liabilities 441,921 260,401Creditors: amounts falling due after more thanone year (191,506) (100,812)Provisions for liabilities and charges (5,541) (5,637) ---------------- ----------------Net assets 244,874 153,952 ---------------- ---------------- Capital and reservesCalled up share capital 51,454 38,033Share premium account 352,229 282,374Profit and loss account (158,809) (166,455) ---------------- ----------------Equity shareholders' funds 244,874 153,952 ---------------- ---------------- Consolidated Cash Flow StatementFor the year ended 31 March 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 49,964 51,461 Returns on investments and servicing of (11,132) (6,677)financeTaxation (101) -Capital expenditure and financial investment (35,952) (37,151)Acquisitions and disposals (72,227) -Equity dividends paid (1,390) - ---------------- ----------------Net cash (outflow)/ inflow before managementof liquid resources and financing (70,838) 7,633Management of liquid resources (1,926) -Financing 92,438 (13,004) ---------------- ----------------Increase / (decrease) in cash in the year 19,674 (5,371) ---------------- ---------------- Reconciliation of Net Cash Flow to Movement in Net DebtFor the year ended 31 March 2005 2005 2004 £'000 £'000 Increase / (decrease) in cash in the year 19,674 (5,371)(Increase) / decrease in debt and lease (92,907) 13,004financingFinance leases acquired with subsidiaries (643) -Issue costs of new long term loans 3,467 35Cash inflow from short term deposits 1,926 - ---------------- ----------------Change in net debt resulting from cash flows (68,483) 7,668Other non-cash movements (895) (768) ---------------- ----------------Movement in net debt in the year (69,378) 6,900 Net debt at beginning of financial year (94,221) (101,121) ---------------- ----------------Net debt at end of financial year (163,599) (94,221) ---------------- ---------------- Reconciliation of Operating Loss to Operating Cash FlowsFor the year ended 31 March 2005 2005 2004 £'000 £'000 Group operating profit / (loss) 12,563 (109,611) Depreciation and amounts written off tangible 37,453 150,587fixed assetsAmortisation of intangible fixed assets 8,669 2,543 ---------------- ----------------EBITDA 58,685 43,519Profit on sale of fixed assets (300) (380)(Increase) / decrease in debtors (4,550) 9,330Decrease in stocks 809 102Decrease in creditors (3,654) (1,026)Non cash movement in respect of employee share (1,026) (84)schemes ---------------- ----------------Net cash inflow from operating activities 49,964 51,461 ---------------- ---------------- Segmental Analysis Year Year ended ended 31 Mar 31 Mar 2005 2004 £'000 £'000TurnoverAffiniti 248,802 190,133Kingston Communications East 103,453 93,218Yorkshire & Contact CentresPublishing Services 12,672 12,418Other (645) (1,085) ---------- ---------Total - continuing activities 364,282 294,684Discontinued activities 2,255 29,512 ---------- ---------Group total 366,537 324,196 ---------- --------- Group EBITDA Affiniti 24,269 13,714Kingston Communications East Yorkshire& Contact Centres 39,165 37,533Publishing Services 7,192 7,402Other (7,708) (7,999) ---------- ---------Total - continuing activitiesbefore restructuring costs 62,918 50,650Restructuring costs (4,006) (7,879) ---------- ---------Total - continuing activities 58,912 42,771Discontinued activities (227) 748 ---------- ---------Group total 58,685 43,519 ---------- --------- Group operating profit/(loss) Affiniti (4,839) (17,612)Kingston Communications East Yorkshire& Contact Centres 28,201 22,025Publishing Services 7,019 7,159Other (13,128) (10,135) ---------- ---------Total - continuing activitiesbefore operating 17,253 1,437exceptional itemsOperating exceptional items (4,006) (105,821) ---------- ---------Total - continuing activities 13,247 (104,384)Discontinued activities (684) (5,227) ---------- ---------Group total 12,563 (109,611) ---------- --------- Segmental Analysis (continued) Year Year ended ended 31-Mar 31-Mar 2005 2004 £'000 £'000Group operating assets Affiniti 174,632 112,986Kingston Communications East Yorkshire& Contact Centres 85,966 82,780Publishing Services (270) (246)Other 139,085 18,392Discontinued activities - 32,718Less non operating assets (154,539) (92,678) ---------- ---------Group net assets 244,874 153,952 ---------- --------- Capital expenditure Affiniti 23,112 22,542Kingston Communications East Yorkshire & Contact Centres 12,303 10,742Publishing Services 116 268Other 293 229Discontinued activities 1,203 3,730 ---------- ---------Group total 37,027 37,511 ---------- --------- Group Turnover Year ended 2005 2005 Year ended 2004 2004 31 Mar 2005 H2 H1 31 Mar 2004 H2 H1 £m £m £m £m £m £m Affiniti 248.8 151.4 97.4 190.1 96.1 94.0East Yorkshire &Contact Centres 103.4 56.1 47.3 93.2 46.6 46.6Publishing Services 12.7 3.1 9.6 12.4 3.9 8.5Other (0.6) 0.9 (1.5) (1.0) (0.4) (0.6) ---------- -------- ------- --------- ------- -------Total - ContinuingActivities 364.3 211.5 152.8 294.7 146.2 148.5 Discontinued 2.2 0 2.2 29.5 15.1 14.4Activities ---------- -------- ------- --------- ------- ------- Total 366.5 211.5 155.0 324.2 161.3 162.9 ---------- -------- ------- --------- ------- ------- Group EBITDA Year ended 2005 2005 Year ended 2004 2004 31 Mar 2005 H2 H1 31 Mar 2004 H2 H1 £m £m £m £m £m £m Affiniti 24.3 15.5 8.8 13.7 7.7 6.0East Yorkshire &Contact Centres 39.1 20.5 18.6 37.5 19.5 18.0Publishing 7.2 1.5 5.7 7.4 1.8 5.6ServicesOther (7.7) (4.5) (3.2) (7.9) (3.4) (4.5) --------- -------- ------- --------- ------- --------Total - continuingactivities beforerestructuring costs 62.9 33.0 29.9 50.7 25.6 25.1 Restructuring (4.0) (4.0) - (7.9) (4.0) (3.9)costs --------- -------- ------- --------- ------- --------Total - continuingactivities 58.9 29.0 29.9 42.8 21.6 21.2 Discontinued (0.2) (0.5) 0.3 0.7 (1.2) 1.9Activities --------- -------- ------- --------- ------- -------- Total 58.7 28.5 30.2 43.5 20.4 23.1 --------- -------- ------- --------- ------- -------- Operating Data Operating data Year Year ended ended 31 Mar 2005 31 Mar 2004East Yorkshire division No of lines - residential ('000) 163 165No of lines - business ('000) 103 101 ---------- ----------No of lines - total ('000) 266 266 No of calls - local (millions) 174 186No of calls - out of area (millions) 210 210 ---------- ----------No of calls - total (millions) 384 396 No of minutes - local (millions) 850 773No of minutes - out of area (millions) 1,297 1,529 ---------- ----------No of minutes - total (millions) 2,147 2,302 Note: calls on the East Yorkshire network are untimed and charged at a flat rateof 5.5p (excl. VAT) Notes to the Preliminary Announcement 1. The financial information set out in the announcement does not constitute the company's statutory accounts for the year ended 31 March 2005 or 2004, but is derived from those accounts. The financial information for theyear ended 31 March 2004 is derived from the statutory accounts for that yearwhich have been delivered to the Registrar of Companies and those for the yearended 31 March 2005 will be delivered to the Registrar of Companies followingthe Annual General Meeting. The auditors reported on those accounts, theirreport was unqualified and did not contain a statement under s237(2) or (3)Companies Act 1985. The financial information contained within this Preliminary Announcement wasapproved by the Board on 23 May 2004. 2. Accounting policies Accounting policies applied to the preliminary financial information areconsistent with those used for the 2004 accounts. 3. Profit/(loss) on ordinary activities before taxation The Group operating profit / (loss) is stated after charging / (crediting): Year ended Year ended 31 March 2005 31 March 2004 £000 £000Operating lease rentals:- Hire of plant and machinery 2,050 3,495- Other operating leases 5,260 3,845 Auditors' remuneration for audit services 243 120 Auditors' remuneration for non-audit services 171 56 Release of prior year network operating cost accrual (2,378) (1,936) Non recurring operating items:- Restructuring, redundancy and other costs 4,500 11,879 Depreciation of owned assets- Continuing 34,517 46,670- Acquisitions 2,361 -- Discontinued 457 5,975 Depreciation of leased assets- Continuing 82 120- Acquisitions 36 - Profit on disposal of fixed assets (300) (380) Amortisation of capitalised development expenditure- Continuing 310 508- Acquisitions 42 - Accelerated write down of assets:- Continuing - 97,942 Amortisation of intangible assets:- Continuing 5,298 1,925- Acquisitions 3,019 -- Discontinued - 110 Employee share and long term incentive schemes 465 119 4. Taxation Analysis of tax credit in the year. The (credit)/charge based on the profit/(loss) for the year comprises: Year ended Year ended 31 March 2005 31 March 2004 £000 £000UK corporation tax:- profit for the period (4) -- adjustment in respect of the previous period - (216) Overseas corporation tax:- profit in the period 25 - ----------- -----------Total current tax 21 (216) UK deferred tax:Origination and reversal of timing differences inrespect of:- profit in the period (excluding exceptional items) (5,658) -Total deferred tax (5,658) - ----------- -----------Tax on profit(loss) on ordinary activities (5,637) (216) ----------- ----------- 5. Earnings/(Loss) Per Share For the year ended 31st March 2005, the calculation of the basic earnings perordinary share of 3.03p was based on the weighted average of 417,503,168ordinary shares in issue during the year and profit after taxation of£12,630,000. The adjusted basic earnings per ordinary share of 4.09p iscalculated using the same number of shares referred to above and earnings of£17,073,000. For the year ended 31st March 2004, the calculation of the basic loss perordinary share of 31.18p was based on the weighted average of 379,539,162ordinary share in issue during the year and loss after taxation of £118,354,000.The adjusted loss per ordinary share of 1.19p is calculated using the samenumber of shares referred to above and loss of £4,534,000. Adjusted earnings per share figures are presented. These exclude the effects ofoperating and non-operating exceptional items, deferred taxation andamortisation of intangible assets to allow comparison to the prior year on acomparable basis. Diluted earnings per share is based on the weighted average number of ordinaryshares in issue, adjusted to reflect conversion of all dilutive potentialordinary shares. Dilutive potential ordinary shares comprise share optionsgranted to employees. For the year ended 31 March 2005, the calculation of the diluted earnings perordinary share of 3.02p was based on the weighted average of 418,549,569ordinary shares and profit after taxation of £12,630,000. The adjusted dilutedearnings per ordinary share of 4.08p are calculated using the same number ofshares referred to above and earnings of £17,073,000. For the year ended 31 March 2004, the impact of share options was anti-dilutiveand these were therefore excluded from the calculations of diluted weightedaverage share capital. The adjustments to basic earnings per share to reconcile to adjusted and dilutedearnings per share for the year ended 31 March 2005 are as follows: Shares Profit Earnings No £000 Per share pence Basic 417,503,168 12,630 3.03Options 1,046,401 - - ------------ --------- --------Diluted 418,549,569 12,630 3.02 Adjustments:Exceptional items - 1,432 0.34Deferred taxation - (5,658) (1.36)Amortisation of intangible assets - 8,669 2.08 ------------ --------- --------Adjusted basic 417,503,168 17,073 4.09 ------------ --------- --------Adjusted diluted 418,549,569 17,073 4.08 ------------ --------- -------- The adjustments to basic earnings per share to reconcile to adjusted and dilutedearnings per share for the year ended 31 March 2004 are as follows: Shares Loss Earnings No £000 Per share pence Basic 379,539,162 (118,354) (31.18)Options - - - ------------ --------- --------Diluted 379,539,162 (118,354) (31.18) Adjustments:Exceptional items - 111,277 29.32Deferred taxation - - -Amortisation of intangible assets - 2,543 0.67 ------------ --------- --------Adjusted basic 379,539,162 (4,534) (1.19) ------------ --------- --------Adjusted diluted 379,539,162 (4,534) (1.19) ------------ --------- -------- 6. Dividends Year ended Year ended 31 March 2005 31 March 2004 £000 £000Equity dividends on ordinary shares:- interim paid of 0.36 pence per share (2004:£Nil) 1,390 -- final proposed of 0.54 pence per share (2004:£Nil) 2,778 - --------- --------- 4,168 - --------- --------- 7. Acquisitions and disposals Eclipse On 30 September 2004, the Group acquired Eclipse Networking Limited. Theconsideration paid was £12,625,000, including acquisition costs. For the period since acquisition, turnover of £7,578,000 and operating profit of£882,000 in respect of Eclipse is included within the consolidated profit andloss account as continuing operations - acquisitions, and reported withinKingston Communications East Yorkshire and Contact Centres. The provisional fair value to the Group of net assets acquired is shown below: Book value of Fair value Provisional fair assets acquired adjustments value to the Group of assets acquired Intangible fixed assets 100 - 100Tangible fixed assets 922 18 940Stocks 43 (42) 1Debtors 1,407 (255) 1,152Cash at bank and in hand 1,856 - 1,856Creditors (2,371) (164) (2,535)Deferred taxation (220) - (220) --------- --------- ----------Net assets acquired 1,737 (443) 1,294Goodwill 11,331 --------- --------- ----------Total consideration 12,625 Satisfied by:Cash 9,500Kingston Communications (HULL) PLC shares 2,953Acquisition costs 172 ----------Total consideration 12,625 Omnetica On 31 December 2004, the Group acquired the Omnetica Group. The considerationpaid was £180,642,000 including acquisition costs. For the period since acquisition, the following results are included in respectof the Omnetica group within the consolidated profit and loss account ascontinuing operations - acquisitions, and reported within Affiniti. £000TurnoverUK 36,801France 15,856Group eliminations (128) ------------- 52,529EBITDAUK 4,613France 806Group eliminations (487) ------------- 4,932Operating profit/(loss) before amortisationUK 2,521France 232Group eliminations (487) ------------- 2,266Operating profit/(loss)UK 8France 213Group eliminations (487) ------------- (266) The provisional fair value to the Group of net assets acquired is shown below: Book value of Fair value Provisional assets acquired adjustments fair value to the Group of assets acquiredIntangiblefixedassets-goodwill 57,611 (57,611) -Tangible fixed assets 13,571 - 13,571Stocks 13,843 (2,147) 11,696Debtors 43,679 (926) 42,753Cash at bank and in hand 12,842 - 12,842Creditors (114,364) (308) 114,672Deferred tax asset 3,462 - 3,462 --------- --------- ---------Net liabilitiesacquired 30,644 (60,992) (30,348)Settlement of Omnetica indebtedness 41,159Related Shares:
KCOM