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Software contract issues hit KCOM enterprise growth

Half year numbers from KCOM Group saw a muted performance from the enterprise side of the business with contract issues largely to blame for the problems

Comms specialist KCOM has been promoting its enterprise growth form most of this year but the shine has been taken off its progress with downbeat first half numbers.

The firm has been going through a transformation that is based around a strategy that is focused on delivering broadband in the Hull and East Yorkshire region and enterprise IT services.

Interim results for KCOM Group's first six months ended 30 September indicated that there had only been a 1% increase in enterprise revenue with the general election and the exit from a potential contract having a negative impact on growth.

The firm lost £1.7m on complex software contracts and has made future provisions of £4.5m to cover future losses. Without those losses enterprise would have grown by 5% year-on-year.

Group revenue was down by 8% and pre-tax profits also dropped by the same level with the firm expecting that situation as it continued to wind down some of its legacy activities in the National Network Services. The focus on costs continued, with the indirect costs down by 12% compared to the first half of last year.

Back in September the firm invested in more staff to support its ambitions on the enterprise side of the business and the firm indicated to investors that those efforts should start delivering in the medium term.

“In the context of today’s economic and political uncertainties, our results demonstrate encouraging progress. Our headline performance was offset by the expected decline in the legacy activities in National Network Services and ongoing issues with previously identified software development contracts within Enterprise," said Bill Halbert, chief executive at KCOM.

“In Enterprise, despite performance having been affected in the first half by the slowdown in government spending caused by the General Election and by continuing issues with the previously identified software development contracts, there was underlying growth alongside new contract wins and renewals," he added.

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