KCOM Group Cuts 150 Jobs, Remains Cautious
31 January 2009 - 2:01AM
Dow Jones News
U.K. telecommunications and Internet service provider KCOM Group
PLC (KCOM.LN) Friday said it will cut 150 jobs in its struggling
integration and managed services business, where revenue fell 10%
for the 2008 full fiscal year from 2007.
The company said in a trading statement for the quarter ending
Dec. 31, that it expects trading to remain challenging, but expects
its integration and managed services (IM&S) division to return
to profitability, before exceptional items, during the final
quarter of the financial year.
Hull, England-basedKCOM, formerly Kingston Communications, has
around 2,700 staff in the U.K. The announcement of job losses at
KCOM's IT services business comes after BT Group PLC (BT) earlier
in January said failings at its Global Services division would lead
to a GBP340 million charge and vastly reduced earnings.
KCOM previously posted a net loss of GBP101 million for the
six-month period ended Sept. 30, compared with a net profit of
GBP7.2 million in the same period a year earlier, attributing the
losses to a GBP107 million charge for impairment of goodwill
following a poor performance at its IM&S division.
Still, KCOM Friday said the division was improving, and
contributed to a year on year increase before exceptional items in
group operating profit and profit before taxation, in the nine
month period to Dec. 31.
KCOM announced last year a reshuffle of its board. Chief
executive Malcolm Fallen and Chairman Michael Abrahams stepped down
to be replaced by senior independent director Bill Halbert, the
founding CEO of BT Group PLC's (BT) IT services subsidiary,
Syntegra.
"The current economic uncertainty has hit us as more clients are
watching their costs and not renewing contracts," Chairman Bill
Halbert said in an interview with Dow Jones Newswires. "It's not so
much pressure from our competitors that's a concern it's more
specifically about keeping our pipeline intact and maintaining a
good topline."
KCOM's future is now geared towards delivering higher value,
high margin end-to-end services to businesses. "It's not nearly a
matter of just cutting costs," Halbert said, "We're now aiming to
change the shape of the business to increase its
profitability."
To achieve this, the focus will be on delivering all-inclusive
service packages to clients and signing multi-year contracts that
would ensure a constant revenue stream.
KCOM, whose customers include British Airways PLC (BAY.LN) and
Visa Inc. (V) also announced that it wasn't seriously effected by
the collapse of another client, Lehman Brothers (LEH) last
September.
The group also said it anticipates a reduction in net debt as at
March 31, saying that it has a solid financial base with a
committed bank facility in place until 2012.
"We're staying cautious because of the current state of the
market, but we're confident that there's a strength and resilience
in our telecoms and Internet services business," Halbert said.
At 1426 GMT, KCOM shares traded up 13.2% or 2 pence, at 15p. The
shares have lost 75% of their value in the past 12 months.
Company Web site: www.kcom.com
-By Elliott Ball, Dow Jones Newswires; 44-20-7842-9314;
elliott.ball@dowjones.com
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