Affiniti parent launches review
KCom reveals it will review its operations after admitting its IT services business struggled in the first half
Affiniti parent KCom has launched a strategic review of its business after reporting a fall in revenues and profits for the first half of its financial year.
The Hull-based giant - formerly known as Kingston Communications - admitted it had been a “challenging” six months for its Integration and Managed Services (I&MS) arm, which comprises Cisco Gold partner Affiniti and several smaller businesses. It also announced that its chief executive, Malcolm Fallen, is standing down.
In the wake of the results, Kcom is undertaking a strategic review of its business, with support from advisors JPMorgan Cazenove and Oakley Capital Corporate Finance.
The review will do little to dispel long-running rumours that Affiniti may be spun off due to a perceived lack of fit with KCom's traditional telecoms business. Affiniti has been in the KCom group since Kingston’s £169m acquisition of Omnetica in 2004, which it immediately rebranded under the Affiniti banner.
Kcom declined to go into detail but said the review “is looking at all aspects of the Group's current operations to determine how best to enhance shareholder value”.
A representative for the group told CRN: "It is very much business as usual for Affiniti. All options are open for the strategic review and nothing is pre-determined."
KCom’s total revenue for the six months to 30 September declined 6.8 per cent year on year to £243.6m, primarily due to lower project sales within I&MS. Group earnings before interest, taxes, depreciation and amortisation (EBITDA) before exceptional items dropped only fractionally to £35.9m, thanks to the strength of KCom’s Telecoms & Internet Services (T&IS) business.
Within I&MS, first-half revenue declined by 11.3 per cent, while EBITDA before exceptional items plunged from £4.6m to £200,000.
KCom has implemented a range of initiatives aimed at slashing I&MS’ cost base, which it said are already having a positive impact on performance. This includes headcount reductions at Affiniti, which at the end of September had 1,024 employees – down from 1,117 last year. The firm is also consolidating I &MS' network operating centres from three down to two units, which it expects to yield annual savings of £700,000.
With Fallen departing, existing management teams will now report into Bill Halbert, who has been promoted from senior independent director to executive deputy chairman.
Chairman Michael Abrahams has also indicated he will retire next July and a search is underway to find a replacement.
Abrahams said: “Overall, the Group financial performance has been resilient in challenging market conditions. The Group remains well financed with committed banking facilities in place until March 2012. The Board is determined to make further improvements to all aspects of the Group's performance and is undertaking a strategic review of Group activities with its advisors to that effect.”