Latest News
July 29, 2010 - Keycom plc Placing
The Board of Keycom is pleased to announce that it has raised a further £550,000 in equity.
In the course of the acquisition of Masterpoint Engineering Limited in December 2008, the vendors agreed to take £750,000 in loan notes as part consideration. Pursuant to the sale and purchase agreement the vendors had the right to convert any outstanding loan notes into equity at 90% of the bid price in the market at any time. The amount remaining outstanding of the loan notes was £450,000 and the holders elected to exercise their option and convert those notes to equity. The issue price was 1.35 pence per share, representing 90% of the prevailing bid price and the corresponding shares issued as a consequence of the conversion was 33,333,334 ordinary shares of 1p.
The company announced a placing of shares on 7 July 2010 of 96,000,000 shares, with 81,000,000 shares issued immediately and a further 15,000,000 to be issued over the subsequent weeks. The company confirms that a further equity injection has been made of £100,000 and accordingly 5,000,000 further ordinary shares have been issued at 2.0 pence per share. It is expected that these shares will be admitted for trading on PLUS on 29 July 2010.
The remaining £200,000, arising from that placing commitment, is committed for subscription over the coming weeks. The further 10,000,000 shares will be issued at that time.
Following the issues referred to above, the Company's issued share capital is now 616,576,712 ordinary shares of 1p each.
The proceeds of the placing will be used to provide additional working capital.
July 22, 2010 - Announcement following AGM
Keycom plc held its Annual General Meeting (“AGM”) on 19 July 2010 at the offices of Beachcroft LLP at 100 Fetter Lane, London EC4A 1BN.
The directors confirm the following business was dealt with at the AGM:
All the ordinary business of the meeting was approved.
In respect of the special business, all the ordinary and special resolutions set out in the Notice of AGM dated 25 June 2010 were duly passed.
The number of shares in attendance at the meeting, in person or by proxy, was 440,505,723; representing 78.2% of the issued share capital. The votes cast in respect of each of the seven resolutions were identical, as follows:
in favour 440,505,723, against nil, abstentions nil.
Copies of the Notice of AGM can be obtained from the Company Secretary, Keycom plc, at University Court, Stafford Technology Park, Stafford ST18 OES or from the Company website – www.keycom.co.uk
July 6, 2010 - Keycom plc placing
The Board of Keycom is pleased to announce that it has raised £1.9 million through a placing of 96,000,000 ordinary shares of 1p each ("the Placing Shares") at a price of 2p per share ("the Placing"). Application has been made for 81,000,000 of the Placing Shares to be admitted to trading on PLUS. It is expected that admission of these shares will occur on 7 July 2010. The balance of 15,000,000 Placing Shares will be issued between the date of this announcement and 30 September 2010 and these shares will be admitted to trading on PLUS in due course.
Following completion of the Placing, the Company's issued share capital will be 578,243,378 ordinary shares of 1p each.
The proceeds of the placing will be used to provide additional working capital.
Commenting on the Placing, Rod Matthews, Executive Chairman and CEO of Keycom, said "I am delighted with the response we have received to this fundraising. The support from our existing shareholders has been very encouraging, especially in this difficult market environment. The armed forces accommodation share similar attributes to the student and key-worker market and the Company is excited about the continuing development of its customer base into this sector. With the sound financial footing that this Placing provides we look forward with confidence to the long term prospects for the Company".
May 28, 2010 - Interim Results for six months ended 31 March 2010
Chairman’s Statement
Keycom’s turnover was £3,101,000, representing an increase of 31% on the same period in the prior year. This increase has been the result of new contracts for broadband services into both student and military residential accommodation and the benefits of a full period’s trading of Masterpoint Engineering Limited (“Masterpoint”) following its acquisition on 22 December 2008.
The consolidated income statement for the six months in the prior year does not, therefore, reflect the full benefit of that acquisition, but only 14 weeks of the 26 week period.
Trading
The turnover for the period was £3,101,000 (2009: £2,369,000), a 31% growth on the same period last year.
EBITDA for the period improved by 110% to £740,000 (2009: £352,000)
Keycom, for the first time delivered a profit of £68,000 compared to a loss for the period in the prior year of £169,000; representing an improvement over the same period in the prior year of £237,000.
| Revenue | ||||
| 6 months ended 31 March | 2010 | 2009 | Change | |
| Broadband & voice managed services | 2,270 | 1,605 | 665 | +41% |
| Engineering & maintenance services | 666 | 632 | 34 | +5% |
| Training | 165 | 132 | 33 | +25% |
| Total | 3,101 | 2,369 | 732 | +31% |
| Gross profit | ||||
| 6 months ended 31 March | 2010 | 2009 | Change | |
| Broadband & voice managed services | 1,367 | 1,020 | 347 | +34% |
| Engineering & maintenance services | 467 | 379 | 88 | +23% |
| Training | 137 | 112 | 25 | +22% |
| Total | 1,971 | 1,511 | 460 | +30% |
Overall gross margin was 64% (2009: 64%). That is aligned to the gross margins in the broadband and voice managed services at 60% (2009: 64%). The engineering and maintenance services businesses generated a gross margin of 70% (2009: 60%), while the training revenue generated a gross margin of 83% (2009: 85%).
Administrative expenses continue to be kept under control; at £1,231,000 (2009: £1,159,000). Although turnover and gross profit have increased 31% and 30% respectively, the administrative expenses have only increased by 6%.
There have been no exceptional costs in the period (2009: £43,000; incurred as a consequence of the consolidation of the operations of the businesses following acquisition).
Funding
The balance sheet reflects net current liabilities of £4,609,000, a level similar to that at 30 September 2009. Current liabilities include deferred income of £1,011,000. Deferred revenue represents revenue committed by customers but not yet earnt. As the revenue is earnt over time it is released to the income statement. The high levels of current liabilities arise from the acquisitions of 2008, which were agreed at that time to be of short term duration. The company continues to refinance this debt with loans of longer terms.
The company has made loan repayments during the six month period of £1,118,000 and raised new loan finance of £1,576,000. That new loan finance has been raised on 4 and 5 year terms. Since 31 March 2010, the company has raised a further £900,000 to facilitate settlement of current liabilities.
The debt and leasing market continues to be difficult in the UK, but the company continues to make progress with fund raising, albeit on a timetable slower than is preferred.
During the six month period, the company has made capital expenditure of £920,000 in respect of new MOD broadband contracts and upgrades to university contracts. This expenditure has been made to ensure the development of the broadband revenues over the coming months and years.
Prospects
Keycom now has contracts for broadband services to 41,000 rooms, of which 11,000 are in the military sector. The development of the services into the military sector is very recent and will take a few months for the penetration and revenue to develop. Accordingly, there is very little revenue derived from those military rooms in these financial statements. The broadband revenue is derived from the 30,000 rooms in the student and key-worker sectors. The Company has a strong pipeline in the military sector which should lead to significantly more rooms being serviced in the medium term.
The increased scale now evident in the Company has moved the Company into profit and provides a firm base for further growth.
Rod A Matthews
Chairman
April 15, 2010 - Board Changes
Director Resignation
The Company announces that Richard R Morris has tendered his resignation from the Board with effect from 15 April 2010.
Mr Morris joined the board of Keycom on 27 January 2009 as a part of the terms of the acquisition of MCW Group Limited and Media Force (UK) LLP on 25 September 2008. As a part of the terms of those acquisitions Mr Morris was entitled to an earn-out clause for a period of eighteen months from the date of acquisition. That earn-out period has now passed and Mr. Morris is leaving to pursue other business interests.
February 26, 2010 - Announcement of Results to 30 September 2009
Chairman's Statement
I am pleased to report on progress for the Group during the year to 30 September 2009.
The focus of the business continues to be on the provision of broadband services to student accommodation; with an expansion into other multiple-occupancy sites such as NHS and key-worker locations and Ministry of Defence establishments, using the Group’s expertise in markets with similar end-user characteristics. The Group has deployed broadband utilising Ethernet, ADSL or wireless, according to the solutions appropriate for its customers.
Acquisitions
The Company has previously reported upon the purchase in September 2008 of the broadband contracts of Catalyst Management Limited.
The Company has also previously reported that, on 25 September 2008, it purchased the entire share capital of MCW Group Limited, a competitor in the market. These results consequently include an entire year of revenue and expenditure for that business. At the same time, the Company also purchased Media Force (UK) LLP which has contracts with military establishments to provide broadband services to residential accommodation for personnel in the armed forces, predominantly single living quarters. It has taken longer to obtain the formal lease agreements with the military establishments than would have been preferable; however, the effect of the delay has been mitigated by the consequential reduction in the deferred consideration payable for the acquisition due to the fixed period for the eligibility for deferred consideration. The operations of all three businesses acquired in September 2008 have been fully integrated into the Keycom business.
On 22 December 2008, the Company purchased the entire share capital of Masterpoint Engineering Limited (“Masterpoint”). Masterpoint has contracts for the provision of broadband services to student and key-worker residential accommodation and additionally provides engineering support services to businesses. The operations of that business have now been fully integrated into Keycom’s operations. With the acquisition occurring during the trading year, these results only include approximately nine months of operation of the Masterpoint contracts.
The activities of the above businesses which do not directly support students, key-workers and the military are complementary to these services and cross-selling opportunities are already being realised. The Group has also benefited from core competencies, particularly IT and CCTV capability which are being applied throughout the Group.
Trading results
A principal driver of value in the Keycom business is the number of rooms serviced. At 30 September 2009 the Group had 32,900 (2008: 16,200) active broadband rooms; and as at the date of the publication of these financial statements that number has increased to 38,200.
The Group generated a positive EBITDA for the year of £638,000 (2008: £(271,000)); an improvement over the prior year of £909,000.
Revenue for the year was £4,856,000 (2008: £1,917,000), a 153% growth on the same period last year.
Broadband services revenue increased 86% over the same period in the prior year to £3,140,000 (2008: £1,690,000). Following the acquisitions described above, the Group now has revenue derived from other activities generating revenue of £1,716,000 (2008: £227,000), an increase of £1,489,000.
Gross profit for the year has increased by 174% to £3,002,000 (2008: £1,094,000). Gross margin for the year was 62%, up from 57% in the previous year. Keycom decided to strengthen the customer relationships by significantly enhancing the broadband products provided and as a consequence the broadband gross margin has been reduced to 61% from 69% in the same
period in the prior year.
Broadband services now contribute 64% of the Group’s gross profit.
Administrative expenses, excluding depreciation, amortisation and exceptional items, have increased by 74% to £2,378,000 (2008: £1,365,000), primarily as a consequence of increased headcount associated with the acquisitions. However, the integration of the businesses and the resulting synergies have caused the administrative expenses to have fall from 71% of revenue in the year ended 30 September 2008 to 49% in the current year.
Financing costs of £345,000 (2008: £316,000) have remained at similar levels despite the acquisitions and the financing of them.
Depreciation has increased to £785,000 (2008: £433,000) as a result of the increased asset base following the acquisitions and subsequent capital expenditure.
As a result of the above, the loss for the period was £588,000 (2008: £1,016,000); an improvement over the prior year of £428,000.
Funding of the business
During the year, the Company raised new finance of £2,765,000 (2008: £11,780,000).
During 2008, the Company chose to focus on the conversion of convertible loan stock and the introduction of equity from new institutional shareholders. The acquisitions, which transformed the operating cashflow of the Group, left the Company with loans payable within twelve months to the previous owners of those businesses totaling £1.5 million. It was the Company’s intention, with the otherwise low level of gearing, to raise new lease and loan finance on three to five year terms to settle those liabilities and to fund capital expenditure on the new broadband contracts.
Unfortunately, the banking crisis which commenced at the end of 2008 affected the success of these plans. Additionally, the banks providing loans to three of the acquired businesses opted to enforce the change of control provisions in the relevant loan agreements to demand repayment of loans aggregating £0.5million, which was most unhelpful.
Despite the lack of lease finance available generally, the Company was successful in completing £2,765,000 of new lease finance, on a five-year term. The Company has completed an additional £0.5million four-year loan from its bankers in December 2009 and is close to completing further lease and loan finance arrangements.
As a consequence of the extended time taken to complete the new lease and debt finance, the Company has had to prevail upon the goodwill of its creditors, which has been developed over the past few years. The Company is particularly grateful to those creditors for their understanding and cooperation.
Current developments
The Company announced in May 2008 that it had been awarded the contract for the provision of broadband services to the residential student accommodation at The University of Edinburgh. The contract is for a five year term. Services commenced on 26 August 2009, for in excess of
6,000 student rooms; and are expected to generate revenue in excess of £750,000 per annum to Keycom. With the contract commencing on 26 August the income statement for the year reported in these financial statements only reflects the benefit of that contract for a five-week period. The full benefit of that new contract will be reflected in the income statements for the next five years.
The Company is also making progress with other new broadband contracts, particularly in the military accommodation market. The number of military broadband rooms serviced during the year ended 30 September 2009 was relatively modest; however, a great deal of progress has been made with the contracts since that date and the Group now has 7,750 military rooms available for service and in operation. We also have a very healthy pipeline.
The management is pleased with the growth, both organic and inorganic, of the Group’s supply of profitable broadband services and the step change in revenue and profits resulting from the acquisitions. We are delighted that considerable synergistic savings have been made in the areas of broadband cost of sales and administrative expenses. Accordingly the directors are satisfied that the increase of scale of the enlarged Group will generate the profits planned through the successful implementation of the Board’s strategy.
The Board is grateful to the existing and new shareholders for their support. Management remains confident in the team’s ability to continue the transformation of Keycom into a profitable and cash generative business.
Rod Matthews – Chairman
26 February 2010
March 17, 2009 - Directors' Appointment
The Company announces the appointment of two additional directors to the board of directors.
Richard R Morris is appointed as an executive director with specific responsibility for sales & marketing. Richard joined the Company in September 2008 following the acquisition of MCW Group Limited, a business delivering IT, communications and training including broadband managed services into the tertiary education sector, where Richard was the managing director. Richard has also been instrumental in introducing managed broadband services into the MOD sector, via Mediaforce LLP, also acquired by Keycom in September 2008. Richard completed his MBA at the University of Wales in 2000.
Steven R Charnock is appointed as a non-executive director. Steve qualified as a chartered accountant in 1986 and then joined Charterhouse Securities, an institutional stockbroker, as a building and construction analyst in 1986, later becoming a Managing Director and Head of Research. In the Reuters survey for UK smaller companies he was voted the number one construction analyst in 2000 and 2001 before leaving to set up his own consultancy business in early 2003. Steve is part of the management team of Cenkos Fund Managers, which manages the investments of Rapid Realisations Fund Limited, an AIM company.
The directorships of Messrs Morris and Charnock are detailed in the Appendix. There are no further disclosures required pursuant to paragraph 18 of appendix 1 of the Plus Market rules.
Directors’ Share Trading
The Company was notified on 16 March 2009 that certain directors carried out the following share dealings in the 1p ordinary shares of the Company:
- R A Matthews purchased 204,450 shares at 2.0p;
- G L Robertson purchased 204,450 shares at 2.0p.
Following the appointments of Richard Morris and Steven Charnock and dealings of the directors detailed above, the total directors' shareholding stood at 5.525% of the Company’s issued share capital; with the individual directors as follows:
| S R Charnock | 1,000,000 | 0.207% |
| R D Jeynes | 400,000 | 0.083% |
| R A Matthews | 6,243,113 | 1.295% |
| R R Morris | 15,000,000 | 3.110% |
| G L Robertson | 3,202,378 | 0.664% |
| N R W Ross | 800,000 | 0.166% |
Enquiries
| Keycom plc | 01785 717777 |
| Rod Matthews, Executive Chairman & CEO | |
| Graham Robertson, Finance Director & Company Secretary | |
| Seymour Pierce | 0207 107 8000 |
| Paul Davies | |
| Catherine Leftley |
Appendix
Richard Morris directorships:
MCW Group Limited
MCW Net Limited
Micro Computer World Limited
Octopus Business Consortium Limited
Red Owl Training Limited (resigned 26 January 2009)
Steven Charnock directorships:
Cenkos Fund Management Limited
Cenkos Fund Managers Limited
Concept Building Solutions UK Limited
Mitigation Services Limited
Service Solutions Group Limited
Value Works Procurement (Construction) Limited
BAA BAR Group Limited (resigned 24 April 2008)
Megablend Limited (resigned 28 November 2007)
Richlil Ltd (resigned 27 March 2006)
February 27, 2009 - Announcement of Results to 30 September 2008
Chairman's Statement
I am pleased to report on progress for the Group during the year to 30 September 2008, which transforms the financial stability of the Group.
The focus of the business continues to be on the provision of broadband services to student accommodation; with an expansion into other multiple-occupancy sites such as NHS and key-worker locations and Ministry of Defence establishments, using the Group’s expertise in markets with similar end-user characteristics. The Group has deployed broadband utilising Ethernet, ADSL or wireless, according to the solutions appropriate for its customers.
Funding of the business
During the year, the Company raised new finance of £11,780,000 (2007: £1,716,000). In February 2008 the Company completed a capital reorganization. At 30 September 2007 the Company had loan stock of £3,287,000 outstanding, loans from its institutional investors of £1,250,000 and accrued but unpaid interest of £667,000. The holders of that debt of £4,537,000, together with the accrued interest thereon, agreed to convert the entirety to ordinary shares. 78,722,805 ordinary shares were issued at an effective cash subscription price of 6.8 pence per share. The Board is particularly grateful to the holders of that debt for their willingness to agree to that conversion and the removal of those liabilities.
At the same time as the loan conversion the Company also raised a further £1,560,000 of equity finance. In addition, the Company raised further equity capital of £580,000 and £4,413,400 in June and September 2008 respectively, to fund the acquisitions described below. Further details of these acquisitions are set out in these financial statements. All the equity raised during the year was issued at 2.0 pence per share.
The capital reorganization and equity funding were designed to strengthen the balance sheet and create the financial capability to significantly enhance the growth of the business by pursuing the Group’s stated acquisition strategy to consolidate a fragmented market.
Acquisitions
The Company has previously reported upon the outsourcing agreement executed with a competitor, Catalyst Management Limited, giving Keycom the right to the economic benefit of the broadband contracts. The financing described above enabled the Company to exercise its right to purchase the contracts outright. Relationships with the customers have been developed during the course of that outsourcing period and new contracts have been signed with a number of those customers. The operations of that business have now been fully integrated into the business.
On 25 September 2008, the Company purchased the entire share capital of MCW Group Limited (“MCW”), a competitor in the market. These Issued on PLUS – 27 February 2009 results consequently only include one week of revenue and expenditure for MCW. The unaudited revenue of that company for the past twelve months prior to acquisition was approximately £2.1million with a gross profit of £1.2million, a gross margin of 58%. MCW has contracts for the provision of broadband services to student and keyworker residential accommodation and additionally provides technical, engineering and computer network support services to businesses. MCW is an accredited Microsoft Gold Partner and also provides software training. The operations of that business have now been fully integrated into the business.
At the same time, the Company also purchased Media Force (UK) LLP (“Mediaforce”). Mediaforce is a limited liability partnership executing contracts with military establishments to provide broadband services to residential accommodation for personnel in the armed forces, predominantly single living quarters. Mediaforce only commenced trading in autumn 2007 and has not yet filed accounts. Whilst the revenue for the past twelve months prior to acquisition was modest at £100,000; Keycom has purchased the business because of the significant pipeline of contract business including letters of intent for thousands of rooms. The revenue prospects for the business are considerable and the operations of Mediaforce have now been fully integrated into Keycom’s operations.
Since 30 September 2008, the Company purchased the entire share capital of Masterpoint Engineering Limited (“Masterpoint”) on 22 December 2008. The unaudited revenue of that company for the past twelve months prior to acquisition was approximately £2.2million with a gross profit of £1.5million, a gross margin of 68%. Masterpoint has contracts for the provision of broadband services to student and key-worker residential accommodation and additionally provides engineering support services to businesses. The operations of that business are currently being integrated.
The activities of those businesses which are not directly supporting students, key-workers and the military are complementary to these services and cross-selling opportunities are already being created.
Trading results
The loss for the period was £1,050,000 (2007: £2,396,000); an improvement over the prior year of £1,346,000.
The turnover for the year was £1,917,000 (2007: £1,766,000), a 9% growth on the same period last year.
Broadband services revenue increased 18% over the same period in the prior year to £1,690,000. As expected the traditional voice services continue to decline, now contributing only £227,000 of the turnover.
The gross profit for the year has increased to £1,094,000 (2007: £1,051,000). The gross margin for the year was 57%, down from 60% in the previous year; caused by the continued and expected decline in traditional voice, which now contributes a negative gross margin. Broadband gross margin has increased to 69% from 68% in the same period in the prior year.
The broadband services now contribute the entirety of the Company’s gross profit, up from 93% in the prior year. The traditional services are now delivering a negative gross profit, arising from the company continuing to deliver voice services to long term customers while an exit route is established, site by site. The Company ceased delivering voice services to four large university customers at the start of the 2008/09 academic year as students increasingly preferred mobile services. The Company maintains contracts for traditional voice to accommodate the needs of long term customers while there remains a prospect of revenue from the provision of managed voice services; and a customer relationship for future broadband services.
Administrative expenses, excluding depreciation, amortisation and exceptional items, has increased by 8% to £1,365,000 (2007: £1,263,000), primarily as a consequence of increasing the sales resource.
Interest payable of £316,000 (2007: £683,000) for the year includes an amount of £86,000 (2007: £186,000) reflecting the difference between the actual rate charged on the convertible loan stock and the effective rate following the adoption of Financial Reporting Standard 25.
Depreciation and amortisation has decreased to £467,000 (2007: £712,000).
As a result of the above, the loss for the period was £1,050,000 (2007: £2,396,000); an improvement over the prior year of £1,346,000.
Current developments
The Company announced, in May 2008, that it had been awarded the contract for the provision of broadband services to the residential student accommodation at The University of Edinburgh. The contract is for a five year term, commencing September 2009, for in excess of 6,000 student rooms; and expected to generate revenue in excess of £750,000 per annum to Keycom.
The Company is also making progress with other new broadband contracts.
The management is delighted with the growth, both organic and inorganic, in the Group’s supply of profitable broadband services and the step change in revenue and profits resulting from the acquisitions. The pro-forma revenue of the combined group for the past twelve months exceeded £6.4million. The directors are of the opinion that considerable synergistic savings can be made in the areas of broadband cost of sales and administrative expenses. Accordingly the directors are satisfied that the increase of scale of the enlarged group will generate the profits planned by the move to broadband services.
The Board is grateful to the existing and new shareholders for their confidence in the management team’s ability to continue to transform Keycom into a profitable and cash generative business.
Rod Matthews – Chairman
27 February 2009
December 23, 2008
The Board of Keycom is pleased to announce that it has agreed to purchase Masterpoint Engineering Limited ("Masterpoint") for a total consideration of £2.31 million. The consideration is to be satisfied by the way of a cash payment of £1.56 million and the issue of loan notes totalling £750,000, which are repayable over the course of the next twelve months.
Masterpoint has been, until this transaction, a competitor of Keycom in the student broadband market. It currently provides broadband services to approximately 6,600 student rooms, primarily in Glasgow and Leicester Universities. In addition, Masterpoint also provides engineering and maintenance services which account for about 40 per cent of their revenue. The turnover of the Masterpoint business for the last twelve months ended 30 June 2008 was £1.9 million generating a gross profit of £1.0 million.
Commenting on the acquisition, Rod Matthews, Executive Chairman and CEO of Keycom, said "I am delighted to be able to announce the acquisition of Masterpoint. Together with the acquisition of MCW, announced in September 2008, we now have 28,000 active broadband rooms in service with contracts already awarded for a further 20,000. We are also in active discussions on a number of other broadband contracts which will significantly further augment this base. We continue to view the long term prospects of the Company with confidence".
October 3, 2008 - Acquisition
The Board of Keycom is pleased to announce that it completed the acquisition of MCW Group Limited and Mediaforce (UK) LLP on 25 September 2008. Full details of the acquisition were announced on 22 September 2008
Keycom had also announced on 13 June 2008 the agreement to complete the purchase of broadband contracts from Catalyst Management Limited. The completion of that acquisition required the delivery of certain documentation in respect of the loan note element, which took a few months to finalise. That acquisition completed on 24 September 2008.
Registered holdings of in excess of 3% of the Company’s issued share capital are as follows:
| Cenkos Channel Islands Nominee | 25.92% |
| Chase Nominees Limited | 14.76% |
| Forest Nominees Limited | 11.55% |
| BNY (OCS) Nominees Limited | 6.66% |
| Hargeave Hale Nominees Limited | 5.78% |
| Smith & Williamson Nominees Limited | 4.97% |
| Leslie Halpin | 3.63% |
| Richard Morris | 3.11% |
| Ron Morris | 3.11% |
The Company's issued share capital is 482,243,378 ordinary shares of 1p each.
September 22, 2008 - Placing and Acquisition
The Board of Keycom is pleased to announce that it has raised £4.4 million through the issue of 220,670,000 ordinary shares of 1p each ("the Placing Shares") at a price of 2p per share ("the Placing"). Application has been made for the Placing Shares to be admitted to trading on PLUS. It is expected that admission will occur on 23 September 2008.
The Board of Keycom is also pleased to announce that it has agreed to purchase MCW Group Limited and Mediaforce (UK) LLP (together "MCW") for cash consideration of £2.1m and deferred consideration payable if certain business which MCW expects to receive after completion of MCW ("Completion") is so received. The sellers of MCW have agreed to subscribe on Completion for 30 million ordinary shares in Keycom at the placing price of 2p per share. Completion is expected to take place on or before 26 September 2008 and it is expected that admission of the shares will occur on 29 September 2008.
Following completion of the Placing and Completion, the Company's issued share capital will be 482,243,378 ordinary shares of 1p each.
MCW has been, until this transaction, a competitor of Keycom in the broadband market. MCW has contracts for the provision of broadband in student rooms and also rooms occupied by members of the armed services. MCW additionally provides technical and engineering services and provides training as an accredited Microsoft Gold Partner. The turnover of the MCW business for the last twelve months was £2.1 million generating a gross profit of £1.2 million.
The deferred consideration is calculated based upon the successful award of additional new broadband contracts, anticipated in particular in the armed forces. The vendors have a window of opportunity for a period of eighteen months to be eligible for that additional consideration which is based upon additional contracts entered into within 18 months of Completion. The amount paid is directly proportional to the number of rooms contractedin that period and will be funded from the cash- flow generated from those contracts. Keycom expects the deferred consideration to be in the range of £1.2 - £2.0 million; but it is possible that the amount could be higher if the Company were particularly successful in that area.
The proceeds of the placing will be used to fund the acquisition of MCW and to provide working capital. The Company also intends to continue its market consolidation strategy.
Commenting on the Placing and acquisition, Rod Matthews, Executive Chairman and CEO of Keycom, said "I am delighted with the response we have received to this fundraising. The support from both existing and new shareholders has been very encouraging, especially in this difficult market environment. We now have the necessary financial resources to continue our consolidation strategy and are delighted to be able to announce the acquisition of MCW. Together we now have 21,000 active broadband rooms in service with contracts already awarded for a further 19,000. We are in active discussions on a number of other broadband contracts which will significantly further augment this base. The armed forces accommodation share similar attributes to the student and key-worker market and the Company has been interested in extending its customer base into this segment. We are pleased that the acquisition of MCW provides such a significant step into that market, as the UK Government continues to improve the accommodation and services available to members of the armed forces. We look forward with confidence to the long term prospects for the Company".
Richard Morris, Chief Executive of MCW who will be joining the Keycom board on completion of the acquisition, said “I am really pleased that Keycom and MCW are coming together at such an exciting time in the development of the market sectors in which the companies operate. I am also delighted that I will be able to share in and contribute to Keycom’s ambitious plans.”
June 30, 2008 - Announcement of Interim Results to 31 March 2008
Chairman’s Statement
The Board of Keycom plc (“the Company”) announces the interim results for the group for the six month period ended 31 March 2008.
Six month interim results to 31 March 2008
Turnover continues to grow in the key business activity of broadband services, up 21% at GBP847,000 (2007: GBP701,000) for the six months, arising entirely from organic growth from the increase in broadband rooms under contract.
The decline in traditional voice service revenue experienced over the past few years has been less severe, with a decline of 25% at GBP103,000 (2007: GBP138,000).
Engineering service revenue is less predictable; and generated based upon the requirements of customers from time to time, rather than a line of business pursued by management.
Wi-Fi hotspot business in the first six months of the current year reflect a drop in revenue as the company transitions to a new model that it believes will deliver more sustainable revenues.
| Revenue 6 months ended 31 March | 2008 | 2007 | Change | |
| GBP (thousands) | ||||
| Broadband services | 847 | 701 | 146 | + 21% |
| Wi-Fi hotspot services | 44 | 135 | (91) | - 67% |
| Engineering services | 35 | 60 | (25) | - 42% |
| Traditional voice services | 103 | 138 | (35) | - 25% |
| Total | 1,029 | 1,034 | (5) | Nil% |
Basic broadband services revenue is now providing 82% of the company’s revenue, up from 68% in the same period in the prior year.
Broadband gross profit increased by 23% to GBP594,000 (2007: GBP481,000); representing a gross margin of 70% (2007: 69%). The overall gross margin for the period, however, declined slightly to 63%, from 66% in the previous year; with actual gross profit at GBP647,000 (2006: GBP687,000) caused primarily by the impact of the transition of the Wi-Fi hotspot business.
| Gross profit 6 months ended 31 March | 2008 | 2007 | Change | |
| GBP (thousands) | ||||
| Broadband services | 594 | 481 | 113 | + 23% |
| Wi-Fi hotspot services | 22 | 120 | (98) | - 82% |
| Engineering services | 20 | 48 | (28) | - 58% |
| Traditional voice services | 11 | 38 | (27) | - 71% |
| Total | 647 | 687 | (40) | - 6% |
The basic broadband services now contribute 92% of the Company’s gross profit, up from 70% in the prior year.
The gross margin from traditional voice services has fallen to 11% for the six months, down from 28% in the prior year as a consequence of the declining traditional service revenue. This revenue will progressively be eliminated.
A particularly attractive characteristic of the broadband revenue and margin stream is that it is essentially annuity in nature with a majority of the Keycom payments collected in advance by landlords (in room rent) or through annual payments by students and key workers.
Administrative expenses continue to be kept under control; at GBP685,000 (2007: GBP651,000). The Company chose to increase the sales resources and associated costs. The benefits of this should flow through in increased sales in the medium term.
The loss for the period is 7% lower than that of the previous year at GBP524,000 (2007: GBP561,000)primarily as a result of lower depreciation charges. With the conversion of the convertible loan stock on 28 February 2008, the interest charges for the second six months of the financial year will be significantly reduced.
Funding of the business
The Board reviews the funding of the business on a regular basis, taking into account the trading of the business, investments in the infrastructure and services and settlement of historic liabilities.
As announced in February and June 2008, the Company since 30 September 2007 has raised a total of GBP2.1million in cash to assist with the Company’s working capital requirements, to provide funding for the acquisition of the broadband contracts from Catalyst and to finance new developments. During the six month period the Company has also converted the convertible loan stock and accrued interest into equity. The effect of the placing of ordinary shares and the conversion of loan stock into equity in February 2008 is for the Company to have improved the shareholders’ funds at 31 March 2008 by GBP5.8m to GBP1.1m, from the deficit of GBP4.7m at 30 September 2007. The placing of a further GBP0.6m in June 2008 further improves that net asset position. The Board is grateful to its shareholders for their continuing support and confidence.
New developments
The Company continues to invest in future services, keeping abreast of market requirements. The focus continues to be on the introduction of broadband services to student and keyworker accommodation with many landlords including the Keycom broadband service as a utility included in the rent. Keycom has deployed broadband over Ethernet, wireless and ADSL, according to the solutions appropriate for its customers.
Keycom has recently announced that following a competitive tender process, it has been selected by the University of Edinburgh for the provision of broadband services into the University’s residential student accommodation. The contract is for a five year term, commencing September 2009, for in excess of 6,000 student rooms and will generate revenue in excess of GBP750,000 per annum to Keycom.
The management are confident in their strategy and anticipate growth of high margin business of an annuity nature transforming the profitability of the business.
June 24, 2008 - Contract Award
The Board of Keycom plc (“Keycom”) is pleased to announce that, following a competitive tender process, it has been selected by the University of Edinburgh (“the University”) for the provision of broadband services into the University’s residential student accommodation.
The contract is for a five year term, commencing September 2009, for in excess of 6,000 student rooms and will generate revenue in excess of £750,000 per annum to Keycom.
Keycom is in discussion with the University about the commencement of some services prior to September 2009; where that would be beneficial to the students.
Rod Matthews, Chairman & CEO, stated “we are delighted to have been awarded this contract at such a prestigious University. Keycom looks forward to providing a progressive and ever developing service to the students, and in some cases the staff, of the University.”
June 13, 2008 - Placing and Acquisition
The Board of Keycom plc (“the Company” or “Keycom”) is pleased to announce that it has agreed to exercise the option it had to acquire contracts and certain assets currently owned by Catalyst Management Limited (“Catalyst”) for total consideration of £1.4 million ("Catalyst Acquisition"). The consideration will be settled through a cash payment of £475,000 and the issue to the vendors of Catalyst (“the Vendors”) of loan notes to a value of £725,000 (the “Loan Notes”).
The Company is also pleased to announce that is has raised £580,000 through the issue of 29,000,000 ordinary shares at a price per share of 2 pence (“the Placing”). The proceeds of the Placing will be used both to contribute to the cash consideration for the Catalyst Acquisition and for the Company’s working capital requirements. It is expected that the Placing will complete on Friday 13 June 2008. In addition, the Vendors will subscribe for 10,000,000 ordinary shares at a price per share of 2 pence (the “Subscription”) on completion of the Catalyst Acquisition.
Application has been made for the Placing shares to be admitted to trading on PLUS. It is expected that admission will occur on Friday 13 June 2008. Application will be made for the Subscription shares to be admitted to trading on PLUS upon completion of the acquisition of the Catalyst contracts. The Placing shares and the Subscription shares will rank pari passu with the existing ordinary shares.
Following completion of the Placing and the Subscription, the Company’s issued share capital will be 231,573,378 ordinary shares.
Commenting on the Placing and Acquisition, Rod Matthews, Executive Chairman and CEO of Keycom, said “I am pleased to be able to announce the proposed acquisition of the Catalyst contracts, which is in line with our previously announced strategy of complementing Keycom’s organic growth with acquisitions. We continue to believe that Keycom is well placed to expand its business, both from organic and inorganic growth. I am also delighted that both existing and new institutional shareholders are supporting our plans through additional equity investment in the Company.”
Background to the Acquisition
On 2 April 2007, Keycom announced the conclusion of an outsourcing contract with Catalyst, under the terms of which Keycom would derive revenues from the broadband rooms under contract to Catalyst. This arrangement has been successful and important to Keycom’s continued expansion of the number of broadband rooms under management. Keycom also maintained an option to acquire the contracts outright. Today’s announcement means that following completion any future revenue streams derived from the ex-Catalyst contracts will be available to Keycom on a continuing basis. Since the agreement announced in April 2007, further contracts have been executed with Catalyst customers and the ex-Catalyst contracts now account for approximately 8,500 rooms. Catalyst has agreed, as a part of the contractual arrangements, not to compete with Keycom in the student and key-worker residential broadband market.
Terms of the Acquisition
As stated above, the Loan Notes have been issued to the Vendors to a value of £725,000. The Loan Notes will be interest bearing at a rate of 3% over the Bank of England Base Rate and repayable by the Company within twelve months. It has also been agreed that up to £425,000 of the redemption of the Loan Notes can be satisfied through the subscription for ordinary shares in the Company, at the prevailing bid price in the market of the Company’s shares.
Current Trading
The Company is pleased to confirm that it has continued to make progress on each of its strategic aims, those being increasing the number of its university residential accommodation broadband contracts and the extension of the product offering into complementary market areas, such as NHS and key-worker accommodation. As at 1 June 2008, the Company has 14,364 tertiary education broadband contracts and 1,561 NHS and key-worker contracts, which figures compare favourably to the average figures for the financial year 2006/07, which were 12,494 and 264 respectively.
The directors’ interest in shares of the Company remain as before at 10,236,591 ordinary shares, which will represent 4.42% of the capital of the Company following the Placing and Subscription.
February 28, 2008 - Placing and Capital Reorganisation
The Board of Keycom plc (“the Company” or “Keycom”) is pleased to announce that it has raised GBP1.56million through a placing of 78.0million ordinary shares ("Placing") at a price of 2.0 pence per share (“Placing Shares”). The Placing is conditional on the Placing Shares being admitted to trading on PLUS.
Keycom is also pleased to announce that it has reached agreement with certain of its major shareholders to undertake the conversion of certain debt instruments, including loan notes and accrued interest, into equity ("Capital Reorganisation"). The Capital Reorganisation is conditional on completion of the Placing. Further details of the Capital Reorganisation are given below.
Application has been made for the 78,015,000 Placing Shares issued today to be admitted to trading on PLUS which will rank pari passu with the existing ordinary shares. It is expected that admission will occur on 29 February 2008. This shareholding will represent 40.5% of the enlarged share capital of the Company.
Commenting on the Placing and Capital Reorganisation, Rod Matthews, Executive Chairman and CEO of Keycom, said “I am delighted to be able to announce the Placing and Capital Reorganisation today. Over the past three years, an enormous amount of work has been undertaken to position Keycom as a market leading provider of broadband services to the tertiary education market. The successful penetration of this market is ongoing and the Board of Keycom is now of the view that there are significant opportunities available to us through both organic growth and acquisition. The funds raised through the Placing will accelerate delivery of these strategic aims and, in combination with the Capital Reorganisation, ensure that the Company is well capitalised ahead of its proposed move to the AIM market within the next 18 months.”
Reasons for the Placing
The Directors believe that the Placing will benefit the Company to implement its strategy for growth, through:
- Organic growth: increasing penetration into the Company’s core market of students in tertiary education and the achievement of a higher level of revenues per room through an increased marketing presence.
- Complementary markets: the Directors have identified potential new target markets, being the supply of internet broadband services to key workers (e.g. employees of NHS Trusts) and residents in public and private shared multi-tenancy accommodation.
- Acquisitions: The Directors believe that Keycom operates in a fragmented market and that opportunities exist for the completion of complementary acquisitions; this placing strengthens the company's ability to positively participate in any market consolidation.
- New product offerings: The Directors believe that Keycom’s access to a large number of students and other tenants give rise to advertising channels which can be marketed to a number of corporate entities, including companies delivering financial, media and consumer products.
Current Trading
The Board of Keycom will be publishing its financial results on PLUS by 29 February and is pleased to announce that its turnover for the year to 30 September 2007 was GBP1.8million (2006: GBP 1.1million). The Board is also pleased to report an increase in gross profit to GBP1.1million (2006: GBP 0.6million); and an improvement in EBITDA of GBP0.6m on from the prior year.
The Board is pleased to announce that a number of strategic milestones have been achieved in the second half of the year, as follows:
- Keycom has made good progress in contracting for and delivering broadband services for key-workers in NHS Trusts and currently has contracts for more than 1,000 rooms. This demonstrates successful diversification of the Keycom offering in a market other than tertiary education.
- The Company has recently implemented a partnership with The Cloud Networks Limited which enables Keycom to provide national hot-spot access to the internet and to Keycom and university or other customers portals.
- The Company has contracted to and is delivering Internet Protocol Television services both to its own broadband customers and over other parties’ broadband networks.
- The Company has designed and built a WIMAX based metropolitan network across London, which significantly reduces the cost of bandwidth and time to market for the provision of services to new customers.
Capital Reorganisation
As announced in April 2007, certain of the funding of the Company has been through the issue of convertible loan notes to certain shareholders of the Company. Since April 2007, further loans have been made by the three principle institutional investors to an aggregate value of GBP1,250,000. Prior to the Capital Reorganisation, the principle value of such loan notes owed by the Company is GBP4,537,000 with accrued and unpaid interest of GBP794,000.
Conditional on completion of the Placing, it is proposed that all of the outstanding loan notes and accrued interest are converted into 78,722,805 ordinary shares (the “Capital Reorganisation Shares”), representing 40.9% of the issued share capital of the Company, as enlarged by the Placing. This represents an effective cash subscription price of 6.8pence per share. Application has been made for the Capital Reorganisation Shares issued today to be admitted to trading on PLUS which will rank pari passu with the existing ordinary shares. It is expected that admission will occur on 29 February 2008.
Following the Capital Reorganisation, the Company will have no convertible loan notes outstanding.
Shareholdings
Following the Placing, the directors’ holdings will be:
| Roger Jeynes | 400,000 | 0.2% |
| Rod Matthews | 5,377,928 | 2.8% |
| Graham Robertson | 2,997,928 | 1.6% |
| Nick Ross | 800,000 | 0.4% |
Following the Capital Reorganisation and Placing the significant shareholding interests in the Company will be:
| Chase Nominees Limited | 51,171,079 | 26.6% |
| BNY (OCS) Nominees Limited | 32,126,899 | 16.7% |
| Yew Tree Investments Limited | 25,000,000 | 13.0% |
| Smith & Williamson Nominees Limited | 15,350,000 | 8.0% |
| Electra Kingsway VCT 2 plc | 10,185,076 | 5.3% |
| Electra Kingsway VCT plc | 8,871,791 | 4.6% |
Following the Capital Reorganisation and Placing the total number of ordinary shares in issue will be 192,573,378.
In accordance with the resolutions passed at the last Annual General Meeting, Messrs Matthews and Robertson have today been granted share options of 3,700,000 and 1,500,000 respectively at an option price of 2pence per share, subject to performance conditions.
Appointment of Corporate Adviser and Broker
The Board is pleased to announce the appointment of Dawnay, Day Corporate Finance and Dawnay Day Corporate Brokers (a division of Dawnay Day Broking Ltd) as corporate advisers and brokers to the Company respectively, with immediate effect.
April 2, 2007 - Business Growth
Keycom is pleased to report that it has concluded an outsourcing contract with the Catalyst Management Limited group ("Catalyst") through which Keycom derives the revenue and profits from the broadband rooms under contract to Catalyst. Keycom has paid GBP 315,000 for the outsourcing contract. To date Catalyst has been a major competitor to Keycom.
This will increase the broadband rooms serviced by Keycom by approximately 6,500. The contracts involved are for university student accommodation and key worker accommodation in the NHS sector. This will result in a doubling of the broadband rooms.
The revenue from these contracts delivers gross profits at similar margins to those of Keycom's existing broadband activities. The similar nature of these activities means that the impact on overheads and administrative costs will be minor.
In parallel, Keycom has paid an option premium of GBP 50,000 to secure an option to purchase the outsourced contracts outright from Catalyst at any time in the next twelve months. In the event that Keycom exercised that option it would be required to pay approximately GBP 1.3 million.
June 1, 2006 - Acquisition of TeleGeneration Ltd
The Directors are pleased to announce that the Company has completed the acquisition of TeleGeneration Limited ("TeleGeneration") for a cash consideration of GBP 22,000 together with the issue of 2,860,000 new ordinary shares of 1p each.
Michael Beatty, who founded TeleGeneration in 2002, has entered into a service agreement with Keycom PLC and it is intended that he will be appointed to the board of directors of the Company.
TeleGeneration specialises in the provision of wireless hot spot internet access points for universities and city councils in the UK.
The net assets of TeleGeneration at 30 November 2005 was GBP 13,000. The turnover in the year ended 30 November 2005 was GBP 239,000 (2004: GBP 54,000) generating a positive EBITDA of GBP 56,000 (2004: GBP(1,000)).
THE ACQUISITION WILL ENHANCE KEYCOM'S REVENUE, EBITDA AND PROFITABILITY.
Rod Matthews, Chairman, said "I am delighted that TeleGeneration is becoming an important part of the Keycom business. Our respective product lines, customer bases and technology are highly compatible. Mike Beatty and Telegeneration both have excellent reputations within the industry. I have no doubt that this will allow us collectively to enhance our market position and deliver accelerated progress towards profitability."
Mike Beatty, founder of TeleGeneration, said "I am very pleased that the TeleGeneration team have joined Keycom and I look forward to contributing to an exciting future for the combined business. I will be working with Rod Matthews and his team in providing enriched opportunities for our collective existing and new customers and for our partners."
Following the allotment of the new shares described above, the number of shares in issue is 33,260,573.