Connected Research

Union policy research in the 21st century

KCom posts declining EBITDA

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KCom Group produced its annual accounts for 2008/09 this morning. The figure that most Connect members will have had their good eye on was EBITDA – earnings before interest, depreciation and amortisation – since their pay rises are linked to the company’s achievements of its EBITDA target. Unfortunately, the news was not good at the headline level, since reported EBITDA declined by 6.1%, to £65.1m.

Interestingly, EBITDA in the largest part of the company’s business – Telecoms and Internet Services – rose by a healthy 6.2% to 66.1m. Unfortunately, this was counterbalanced by a drop in EBITDA in the company’s Integration and Managed Services and Information Services arms, as well as negative (albeit improving) ‘other’ figures (although, given that these latter largely refer to head office costs and support services, it is difficult to see how these can reasonably report positive earnings).

The pay review date is 1 July and full details of what – if anything – members receive this year will need to wait until the publication of the May inflation figures, which will be on 16 June (the other half of the pay formula is geared to the May RPI-X figure; in April, this was 1.7%, down from 2.2% in March). It must also be stressed here that it is not absolute EBITDA that is the key, but the company’s performance against its EBITDA target.

The company has been running a strategic review since the publication of its interim results in November 2008 which has resulted in a range of activity over the last six months, including the loss of 150 jobs in Integration and Managed Services, although our anecdotal evidence is that the actual job loss figures have been somewhat higher. We note with a fair degree of irony in this context the research recently published by Affiniti, KCom’s IT and communications solutions business, which reported that ‘cut now, suffer later’ philosophies could leave IT departments ill-equipped to meet commitments in the upturn. We have also noted the company’s apparent preference for abiding by only the minimum of its commitments under redundancy consultation legislation.

The company is anticipating ‘a significant period of change over the next twelve months as these initiatives are delivered and further refinements to [the] business model are undertaken’ but it believes that, nevertheless, it is in the process of gaining an ‘excellent platform on which to build’. Bill Halbert, who has been carrying out the the chief executive role while being Group Executive Deputy Chairman, has been promoted to the role of Group Executive Chairman. This would leave the company without a specific managing director and we would suggest that the company’s strategic positioning is unlikely to be assisted by the continued vacancy at that level.

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Written by Calvin

02/06/2009 at 4:12 pm

Posted in Telecoms companies

Tagged with ,

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