Connected with
our customers

KCOM Group PLC
Annual report and accounts 2017/18

KCOM KCOM KCOM

Connected with our customers

By listening to and learning from our customers, we design and deliver the right services to help them create greater value from the way they interact, collaborate and connect with what matters to them.




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Highlights

Revenue
£ million
£301.9m -8.9%
EBITDA1,2
£ million
£68.3m +1.0%
Profit before tax
£ million
£34.0m +11.5%
Net debt/(funds)2
£ million
£62.6m +47.6%
Proposed full year dividend
Pence per share
6.00p
  1. EBITDA is stated before exceptional items. All references to ‘EBITDA’ throughout the remainder of the report and accounts are before exceptional items, except where specifically highlighted in Note 4.
  2. Refer to glossary on page 121 of the 2017/2018 Annual Report for Alternative Performance Measures (APMs).

Our business at a glance

We make life easier and better for every customer

We help customers create greater value from the way they interact, collaborate and connect with what matters to them.


Enterprise

What we offer

We help large organisations make the most of technology to serve customers better and adapt to a faster paced and more competitive environment. Our offering to this market includes Contact Centre as a Service and cloud-based services, from consulting and design to implementation and in-life, managed and support services.

What makes us different

  • The breadth and depth of our cloud capability and experience.
  • Our partnerships with market leading technology providers.
  • Our culture and flexible ways of working including the use of Agile methodology.

Some of our customers

  • Bupa
  • HMRC
  • Jaguar Land Rover
  • NFU Mutual
  • Rail Delivery Group

Hull & East Yorkshire

What we offer

We provide internet-based services to households and businesses in Hull & East Yorkshire. Our flagship Lightstream broadband service offers customers a range of ultrafast speeds and data allowances to suit their needs.

What makes us different

  • Our investment in market-leading, full-fibre broadband technology.
  • Our deep understanding of our market and ability to engage closely with our customers.

Our customers

  • c140,000
    homes
  • c7,000
    small and medium businesses

National Network Services

What we offer

We provide connectivity-based services to national organisations to support their business operations and provide a platform for market differentiation and competitive advantage. Our core services for this market include managed Wide Area Networks (WANs) and call management services.

What makes us different

  • Our ability to offer a single, end-to-end managed service.
  • Our cloud capability and applications expertise.

Some of our customers

  • Domino’s
  • emPSN
  • Furniture Village
  • One Stop
  • RSPB
  • Staffordshire County Council

Review of 2018

Sustainable value for our shareholders

  • Continued progress:
    • year on year growth in EBITDA and profit before tax
    • recommended final dividend of 4.00 pence per share
    • extending minimum dividend commitment of 6.00 pence per share for the year ending 31 March 2019

We are proud to have played an important part in Hull’s UK City of Culture programme.”

Graham Holden
Non-Executive Chairman
8 June 2018

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Execution of our strategy

  • Sustainable momentum established across the business
  • Future focus on:
    • completing our fibre deployment in Hull & East Yorkshire
    • building further market opportunities to maximise the value of our Enterprise capability

The operating segments we established in the prior year allow for a better understanding of segmental performance and clearer communication of their individual strategies through to performance.”

Bill Halbert
Chief Executive
8 June 2018

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Further progress

  • EBITDA up 1% year on year despite lower revenue
  • Increase in statutory profit before tax of 11.5%
  • Strong net debt performance

Our Hull & East Yorkshire segment continues to perform well and during the year we saw growth across core channels.”

Jane Aikman
Chief Financial Officer
8 June 2018

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Our business model

Creating value from connections

  • People

    We want to provide an environment where we attract, retain, develop and enable all our people to demonstrate, grow and apply their capabilities, offering opportunities for everyone to reach their full potential.

    Customers and Partners

    We understand and anticipate the needs of our customers and align our products, services and solutions to meet those needs, leveraging our ecosystem as market-leading partnerships to create a unique and differentiated brand experience.

    Systems and processes

    Our organisation and customer experience is underpinned by robust processes and systems. The ability to understand, manage and interpret the data we hold is key to developing compelling propositions and providing clear and transparent information on segmental performance.

    Assets

    Our offerings to customers are underpinned by our technology platforms. We seek to invest in consolidating and transforming them to deliver new services and reduce operating costs and complexity.

  • Hull & East Yorkshire

    We provide communications and internet-based services to homes and businesses in the region.


    Enterprise

    We provide consulting, design, implementation and managed services related to Contact Centre as a Service and cloud-based business applications.


    National Network Services

    We provide network connectivity and IT services and applications to businesses nationally.


  • For shareholders

    6.00p

    Proposed full year dividend (pence per share)


    For customers

    164,000

    Premises passed by our Hull & East Yorkshire fibre deployment


    Employee engagement

    We offer personal growth and development opportunities across a wide range of disciplines. Our reward and recognition packages are closely aligned to business and personal performance.


    For KCOM

    Income and capital growth

    £34.0m

    Profit before tax


    More detail on how we create value can be seen in our business model download.


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Market opportunities

Enterprise

Using technology to help customers solve tomorrow’s complex problems

Supporting organisations to navigate change

Today’s enterprises, both public and private sector, operate increasingly in an environment where the need to respond ever more quickly to rising expectations, competition and regulations is driving a need for the flexibility and adaptability to address continuous change. This compels enterprises to invest in technologies to support and accelerate digital transformation.

We have the combination of capabilities and world‑leading partnerships required to take advantage of the fast-growing market for technology enabled business solutions. Our propositions are focused on two categories:

  • Contact Centre as a Service
  • Cloud services, incorporating cloud native innovation, migration services, identity management services, analytics and multi-cloud managed services

Download market
Enterprise
NFU Mutual chose KCOM to create a new claims vendor portal platform and infrastructure within the Microsoft Azure public cloud. As well as better engagement with suppliers and improved communication with customers regarding the status of their claim, the new platform can be scaled quickly and easily to handle peaks and troughs in demand.

Hull & East Yorkshire

Supporting customers to live and work in a connected world

Maximising the value of our fibre investment

Growth opportunities are based primarily on the substantial investment we have made in the deployment of full-fibre broadband across our Hull & East Yorkshire network. We plan to maximise those opportunities by continuing to increase take-up of our ultrafast Lightstream fibre services and by offering additional services that allow us to make returns on this investment.

The main areas for growth are:

  • Broadband and voice
  • The in-home/office experience
  • Mobility
  • Cloud services
  • Wholesale

Download market
Hull and east yorkshire
For Hull’s award-winning Atom Brewery, the internet is an essential means of spreading the word about its science-inspired beers, which include Schrodinger&s Cat, Quantum State and Pulsar. In the three years since it was established Atom has expanded to supply customers in all four corners of the world. Last year alone it produced 34 beers and sold more than 230,000 pints to ale lovers as far afield as Australia and Lapland.

National Network Services

Connectivity to support businesses on their technology journey

Connectivity is key

The connectivity solutions we deliver to customers in our National Network Services segment are critical to their business operations, underpinning in turn the services provided to their own customers and helping to create a platform for market differentiation and competitive advantage.

Within this segment our opportunities for growth are focused in three areas:

  • Managed Wide Area Networks
  • Health and Social Care Network
  • Call management

Download market
National network services
The RSPB is the largest nature conservation charity in the UK, working to preserve wildlife both in the United Kingdom and overseas. It chose KCOM to provide a managed wide area network connecting 190 sites, some in very remote locations, across the UK.

With reliable connectivity in place, it made the decision to move to a KCOM hybrid cloud platform, providing the flexibility to make the most of videoconferencing services, improve internal communication and collaboration and reduce staff travel time.

Our strategy

Driving operational excellence

Our value creation is underpinned by four strategic pillars

  • We understand and anticipate the needs of our customers and align our products, services and solutions to meet those needs, leveraging our ecosystem of market‑leading partnerships to create a unique and differentiated brand experience.


    Priorities for 2017/18

    We aimed to:
    • Introduce new propositions for consumers, business and wholesale partners in our Hull & East Yorkshire market;
    • Enhance the experience of our customers in our Hull & East Yorkshire market by making improvements to buying, fault resolution and billing processes;
    • Develop and launch a refreshed in-home service experience for customers in our Hull & East Yorkshire market;
    • Leverage our track record with key reference clients to win new customers for complex contact and cloud‑based projects;
    • Seek to expand further our relationships with existing customers and partners; and
    • Review our long-established partnership with BT to ensure that it remains fit for purpose to meet our future needs.
  • We want to provide an environment where we attract, retain, develop and enable all our people to demonstrate, grow and apply their capabilities, offering opportunities for everyone to reach their potential.


    Priorities for 2017/18

    We aimed to:
    • Move away from a recognition culture based on length of service and introduce a modern recognition platform that provides more transparent and relevant opportunities for reward and recognition;
    • Make the most of the professional communities we have established to improve workforce planning, succession planning and talent management processes;
    • Develop academies for all our professional communities, providing clear development solutions and pathways to support ownership of development by the individual; and
    • Drive benefit from a broad, company-wide resource pool of skilled talent that allows for focused and effective utilisation and prioritisation.
  • Our organisation and customer experience is underpinned by robust processes and systems. The ability to understand, manage and interpret the data we hold is key to developing compelling propositions and providing clear and transparent information on segmental performance.


    Priorities for 2017/18

    We aimed to:
    • Consolidate and build resilience into our existing IT systems and processes;
    • Invest in technology to improve the customer experience at each customer touchpoint from order to delivery; and
    • Provide greater granularity of segmental performance through the way we allocate costs.
  • Our offerings to customers are underpinned by our technology platforms. We seek to invest in consolidating and transforming them to deliver new services and reduce operating costs and complexity.


    Priorities for 2017/18

    We aimed to:
    • Create a single centre of excellence for our first line technical support teams with a new set of diagnostic tools and capabilities within our Customer Services Operation Centre; and
    • Design a programme of network transformation covering all our assets nationwide. This includes a plan to consolidate our data centre estate, simplify our national network architecture and move to a next-generation voice platform in Hull & East Yorkshire.

Download strategy

Sustainability

Operating with a positive effect on our stakeholders and society

Our sustainability strategy covers four main areas that are taken into account when making key business decisions: the communities in which we operate; our people; the relationships we have with our customers and suppliers; and the environment. The Board receives reports on each of these as appropriate. Responsibility for our sustainability strategy sits with our Chief Executive.

Our sustainability strategy is fully integrated and aligned with our business strategy. It is underpinned by three key objectives:

1
To use our expertise in communications technology to create a positive impact on all our stakeholders and the communities in which we operate.
2
To promote our values, both internally and in the way we do business with external stakeholders.
3
To engage and empower our people so they can make a positive contribution to our sustainability strategy and the causes that matter to them.
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sustainability

Directors’ report

Nomination report
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Audit report
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Financial statements

Balance sheets
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Cash flow statements
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