Kingston sees earnings fall 39% in first quarter

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The Independent Online

Kingston Communications, the Hull-based telecoms operator, reported steady progress in the construction of its national network yesterday but said first-quarter earnings shrank 39 per cent from a year earlier.

Kingston Communications, the Hull-based telecoms operator, reported steady progress in the construction of its national network yesterday but said first-quarter earnings shrank 39 per cent from a year earlier.

Its shares fell 6.8 per cent to 591p after the figures prompted ABN Amro, Kingston's broker, to cut its revenue forecast for the year.

Earnings before interest, tax, depreciation and amortisation (ebita) fell to £6m in the three months to the end of June from £7.5m in the fourth quarter and £9.9m in the first quarter of 1999/2000.

Much of the decline was due to Kingston's decision to stop carrying traffic for other operators, a low-margin business that nevertheless boosted profits a year ago.

The expansion of its national Torch business network and a related rise in staff costs also had an impact on earnings.

But the company said it was making steady progress by other measures, with turnover swelling to £53.2m, up 15.6 per cent from the fourth quarter and 12.7 per cent from a year ago.

"Turnover growth is pretty well on plan," the chief executive, Steve Maine, said. "Ebita losses are pretty well as we expected as we invest in both expansion and new businesses."

Sean Johnstone, an analyst at SG Securities, said the results were in line with his forecasts. "People are looking at the ebita margin, particularly in Yorkshire, and are saying the growth has waned," said Mr Johnstone. "We'll see the margin improving in the coming quarters."

Kingston's Torch division, its main source of growth now that its core residential business in Hull has matured, swung to a loss of £600,000 in the quarter. Mr Maine said the loss was partly because it had leased additional capacity from Fibernet but had not yet been able to sell it on.

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