Kcom margins inch up in FY11

Telco-owned integrator claws back a little profitability, annual accounts reveal

The KCOM Group's IT integration business clawed back some much-needed margin in FY11 after a strategic shift in its services strategy.

Accounts recently filed with Companies House reveal that for the 12 months to 31 March 2011, Affiniti Integrated Solutions Ltd saw turnover grow 49.3 per cent year on year to £253.8m. The sales surge was chalked up to the transferral of revenue from the regional and partner services businesses of Kcom-owned ISP Mistral.

Affiniti, which the telco has owned since 2004 and now trades as Kcom, posted operating margins, before exceptional items, of 3.1 per cent in FY11. This compares with a loss of 4.3 per cent the preceding year.

Factoring in exceptional charges, operating losses for FY11 stood at £3m, compared with £11.8m in the prior year.

In the directors' report for the year, the general improvement in margins is attributed to Kcom's move away from low-margin maintenance and product business. As part of the shift, a number of maintenance contracts were sold to rival Phoenix in 2010.

Some staffing costs were also taken out of the business during the year, with average monthly employee numbers reduced from 812 to 782, although sales staff ranks more than doubled to 79. The two directors of the business – group executive chairman Bill Halbert and chief financial officer Paul Simpson – also saw their remuneration reduced in FY11.

Simpson was paid total emoluments of £268,000, more or less £100,000 less than the previous year. Halbert, meanwhile, trousered £391,000 in FY11, compared with £523,000 in the prior year.

"Over the past year, the Kcom brand has secured several key contract wins, specifically in the public sector, where the company recently won the contract for the Staffordshire County Council public sector network," says the directors' report.

"This highlighted the brand's ability to deliver complex and industry-leading solutions and the directors believe the business is now well placed to win similar contracts in the future."