TIDMCITY
RNS Number : 0344S
CityFibre Infrastructure Hldgs PLC
28 September 2017
For immediate release 28 September 2017
CITYFIBRE INFRASTRUCTURE HOLDINGS PLC
('CityFibre' or the 'Group' or the 'Company')
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE
2017
Focusing on densification and active layer commercialisation of
our 42 revenue generating cities
CityFibre (AIM: CITY), a leading designer, builder, operator and
owner of duct and fibre optic infrastructure in 42 UK towns and
cities, is pleased to announce unaudited financial results for the
half year to 30 June 2017.
Overview
CityFibre is now the largest alternative owner of wholesale duct
and fibre infrastructure outside London, having materially
completed the acquisition of substantially all the major fibre
related duct infrastructure available across the UK.
Following the successful finance raise and Entanet acquisition
in August, the Group is now focused on the densification of its
existing city networks and expanding active layer services across
our footprint to accelerate value creation.
Ownership of our existing metro duct infrastructure is expected
to accelerate our FTTH/P ("Fibre To The Home" residential consumer
and "Fibre To The Premises" enterprise products) roll-out per city
by up to 18 months and reduce the cost per home passed by up to
25%.
Financial Highlights:
-- Turnover up 36% to GBP9.0m (H1 2016: GBP6.6m);
-- Gross margin improved to 88% (H1 2016: 86%);
-- Adjusted EBITDA(*) up 302% to GBP1.7m (H1 2016: GBP0.4m);
-- New contracts with initial contract value ('ICV') of GBP11.0m
added, taking total cumulative ICV to GBP135.9m, and unrealised ICV
to GBP103.1m;
-- Period end cash and cash equivalents of GBP7.9m, with net debt of GBP57.4m.
Operating Highlights:
-- New contracts sold comprising 712 new customer connections
(H1 2016: 3,702, of which 1,782 were organic), bringing cumulative
connections sold to 7,993;
-- Total connected customer premises up 21% YoY, to 4,235 (H1 2016: 3,490);
-- Total core metro network route fibre kilometres increased 20%
YoY, to 2,417 (H1 2016: 2,011);
-- York FTTH/P trial passed 13,582 homes at period end, with 896
customer premises connected in the period, for total penetration of
28% with several early cabinets over 40%; CityFibre remains the
designer, builder, and operator of the network, anchored on our
owned core 125km metro infrastructure.
*Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation, also excluding share-based payments and
significant non-recurring expenses.
Post-period Highlights:
-- Completion of Share Placing and Offer for Subscription on 28
July 2017, raising gross proceeds of GBP201.8m. Principal uses of
proceeds include:
-- The commencement of construction of Fibre to the
Home/Premises ('FTTH/P'), addressing the residential and enterprise
markets in five to ten UK towns and cities during 2018;
-- The expansion of CityFibre's fibre metro networks from 42 UK
towns and cities today to not less than 50 towns and cities by
2020; and
-- Acquisition of Entanet International Limited ('Entanet') for
GBP29.0m on a cash and debt-free basis, completed on 2 August 2017,
adding c.1,500 channel partners, 45,000 broadband customer circuits
and 3,500 leased line circuits with a significant recurring revenue
base. This deal supports the Company's focus on wholesale active
and passive fibre services and accelerates the commercialisation of
CityFibre's fibre assets.
Regulatory developments:
-- The Competition Appeal Tribunal's ('CAT') dismissal of the
Business Connectivity Market Review ('BCMR') and associated dark
fibre regulatory remedy, leaving CityFibre as the only willing dark
fibre provider within our footprint in the near term;
-- Launches of both HM Treasury's Digital Infrastructure
Investment Fund ('DIIF') and the Department for Culture Media and
Sport's ('DCMS') Local Fully Fibre Networks ('LFFN') government
stimulus packages of a minimum GBP1.5 billion for full fibre
infrastructure investment demonstrating the government's commitment
to competitive fibre-based infrastructure;
-- The introduction of 100% business rates relief on new fibre builds for five years; and
-- The launch of an in-depth review by the Advertising Standards
Authority to address confusion in the full fibre market from the
advertising approach of partial fibre operators.
Greg Mesch, CEO of CityFibre, commented:
"Our focus since the IPO has been on consolidating our position
across the UK's second tier cities by anchoring new city builds and
acquiring existing duct and fibre infrastructure. Having materially
completed the acquisition of significantly all major duct
infrastructure available across the UK's cities outside London,
CityFibre is now the largest alternative owner of critical fibre
and duct infrastructure across 42 UK towns and cities. I am pleased
we have now completed a truly transformational financing and
accelerative acquisition. We can now begin the next phase of
delivering Gigabit Britain - driving deeper into all of our cities
and preparing them for full fibre roll-outs over a period of
time."
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
CityFibre Infrastructure Holdings www.cityfibre.com
plc
Greg Mesch, Chief Executive Officer Tel: 020 3510
0602
Terry Hart, Chief Financial Officer
James Enck, Investor Relations Tel: 0333 150
6283
Morten Singleton, Investor Relations Tel: 0333 150
6270
finnCap (Nomad and Joint Broker) www.finncap.com
Stuart Andrews / Christopher Raggett Tel: 020 7220
(Corporate Finance) 0500
Simon Johnson (Corporate Broking)
Liberum (Joint Broker) www.liberum.com
Steve Pearce / Richard Bootle Tel: 020 3100
2000
Vigo Communications www.vigocomms.com
Jeremy Garcia / Fiona Henson / Natalie Tel: 020 7830
Jones 9703
About CityFibre:
CityFibre is the national builder of Gigabit Cities, as the UK's
largest alternative provider of wholesale fibre network
infrastructure. It has major metro duct and fibre footprints in 42
towns and cities across the UK and a national long distance network
that connects these cities to major data-centres across the UK and
to key peering points in London.
The company has an extensive customer base spanning service
integrators, enterprise and consumer service providers and mobile
operators. Providing a portfolio of active and dark fibre services,
CityFibre's networks address 44,000 public sites, 7,300 mobile
masts, 349,000 businesses and over 4 million homes.
CityFibre is based in London, United Kingdom, and its shares
trade on the AIM Market of the London Stock Exchange (AIM: CITY).
Further information on the company can be found at
www.cityfibre.com
Operational Review
The six months to 30 June 2017 marked a period of continued
strong growth for the Group, despite a challenging macro
environment in the public sector market due to the general election
and delays to government funding announcements. The post-period
acquisition of Entanet, GBP201.8m fundraise, and launch of the
FTTH/P initiative leave the Group extremely well-placed and
well-capitalised to capture the very significant market
opportunities emerging as the UK continues to transition to a
digital based service economy and the rebuilding of the digital
infrastructure begins to accelerate.
Contracts, connections and network enablement
CityFibre added GBP11.0m in new initial contract value ('ICV')
in the period, taking gross cumulative ICV to GBP135.9m, and
unrealised ICV to GBP103.1m.
Customer connections sold in the period totalled 712, taking
cumulative connections sold to 7,993. In the first half of 2016 the
Group added 3,702 connections sold, of which 1,920 were added
through the KCOM asset acquisition.
In the public sector we added 83 connections sold in the half
year versus 449 in the same period last year, largely a reflection
of the effect of the snap election call, associated purdah, and the
effect of the delays to the launches of the DIIF and LFFN
schemes.
In the enterprise sector we added 616 connections sold in the
half year versus 1,306 in the same period last year. 1,200 of these
additions in H1 2016 related to launch partner contracts in the
larger city networks acquired from KCOM. This year's launch deals
are proportionately smaller, securing 440 additional connections
sold, largely associated with the smaller city networks acquired
from KCOM. During the period, the Group signed new launch partners
on acquired assets in Wakefield, Exeter, Plymouth, Cambridge,
Cheltenham and Gloucester, comprising 410 connections and total ICV
of GBP6.2m. Additionally, in the Tier 1 carrier market, the Group
also on-boarded Zayo Group, Colt Technology Services, and Gamma
during H1 2017.
The order book should not be expected to fully translate into an
immediate delivery of connections and associated revenues, but will
come through over time:
-- Certain launch contracts include time limited exclusivity
arrangements of up to 24 months in return for committed revenues
over the contract term of typically 4 to 6 years, contributing
significant additions to the order book. Once the exclusivity
periods end the cities become open to the full wholesale channel.
Our focus in the first half of this year has been on fulfilling
these launch partner contracts, which required enablement of active
services across our network as well as delivery to associated
orders.
-- The order book includes several large dark fibre commitments,
but currently relates mainly to orders for active layer services,
including major call off contracts for 18 cities, of which 16
relate to KCOM acquired city infrastructure. Dark fibre services
are available across all 42 of our towns and cities. 15 cities are
currently enabled for delivery of active layer services with a
further 6 expected to be enabled by the end of the year, and more
subsequently.
-- The enablement of a city for active services requires the
procurement or securing of a site for a PoP, the deployment of
associated PoP electronics and the construction of a fibre
connection from the PoP to our metro network. This can take up to
and sometimes over a year. For several of the assets acquired from
KCOM last year we additionally need to refurbish the duct and fibre
network infrastructure mainly through the blow-through of
incremental fibre in the core ring. We focused our attention on
enabling the larger cities acquired from KCOM in 2016, leaving the
smaller cities for enablement through 2017 and 2018.
Our progress has been marginally slower than we had anticipated,
but we are comfortable launch partner commitments are ultimately
coming through to fulfilment and we are making good progress on our
active layer network enablement.
Connected customer premises and network
At the end of June 2017 the Group had 4,235 connected customer
premises and a total of 3,556 route kilometres of operational
ducted fibre (2,417 kilometres of metro local access and 1,139
kilometres of long distance network). This compared with 3,490
connected customer premises and 3,150 route kilometres of network
at the end of the first half of 2016. Principal organic additions
to the network footprint included Southend, Stirling, and the
network extension in Peterborough.
Products and services
At period end, CityFibre operated dark fibre services across its
entire footprint and active services (Ethernet and Internet access)
across a growing proportion of the network. The Group's established
track record of offering wholesale Ethernet and Internet access
products to partners has seen revenues from active services grow to
approximately one fifth of Group revenues in the period under
review. This proportion is expected to increase. Firstly with the
addition of Entanet's leased line estate and large Channel Partner
ecosystem to the Group in August 2017 - significantly expanding the
Group's scale and scope of operation in Ethernet and associated
product sets. And secondly with an accelerated roll-out of active
services across the full network.
Board and employees
On 28 February 2017 Christopher ('Chris') Stone was appointed as
the Company's Non-Executive Chairman, following the departure from
the Board of Peter Manning in January 2017.
Chris is a technology and services industry veteran with a
strong track record of building successful, global businesses in
the sector. Most notably he was responsible for leading the
transformation of Northgate Information Solutions (then called
McDonnell Douglas Information Systems) between 1999 to 2011 to
become the world's second largest specialist HR technology and
services business and the leading provider of software and services
to the UK public sector.
Chris is currently Executive Chairman of NCC Group plc, a cyber
security and risk mitigation solutions provider. He is also a
Non-Executive Director (formerly Chief Executive Officer) of Radius
Worldwide, an expansion services company offering accounting, HR,
legal, tax and compliance support to companies' international
operations. He led the business during its successful acquisition
by private equity firm, HG Capital, in August 2013.
Chris has also previously held senior roles at Accenture,
Electronic Data Systems, Digital Equipment Company, Fitness First
and CSR, where he served as Non-Executive Director and Chairman of
the Remuneration Committee.
Post period end the Group announced that Leo Van Doorne has
stepped down from the Board as Non-Executive Director of the
Company with effect from 20 September 2017. The Board would like to
thank him for his immense contribution.
Also on 20 September, CityFibre appointed Spencer Lake
('Spencer') as a Non-Executive Director of the Company. Spencer was
also appointed as a member of the Company's Audit Committee.
Spencer has built a 29-year career in investment banking, most
recently as Vice Chairman of HSBC Global Banking & Markets, a
role he held until 2016. During his decade-long tenure with HSBC,
Spencer held several global senior roles in areas such as running
Debt Capital Markets and Acquisition Finance for four years; Global
Markets (including FICC, equities and research) for three years;
and Capital Financing (structured and unstructured lending,
financing and investment banking products) for three years. Prior
to HSBC, Spencer spent 17 years at Merrill Lynch in senior roles
spanning real estate finance, investment banking, and debt capital
markets in New York, Hong Kong and London. Before Merrill Lynch,
Spencer worked for two years at JP Morgan in real estate investment
banking.
Earlier this year, Spencer was appointed as Vice Chairman of
Fenergo, a client lifecycle management software provider for
financial services companies. Spencer is also a senior advisor to
nCino (cloud-based bank operating system), Callsign (AI-based
identity authentication), Astuta (data management), and the
International Capital Market Association (ICMA).
In addition to the Directorate changes, the Group added 20 new
employees and contractors during the period, ending the first half
with 163 full-time equivalent staff (FTEs).
Post period developments
Focusing on network densification and active layer roll-out
On 5 July 2017 CityFibre announced both a GBP201.8m equity
finance raising, through a combination of a placing and an offer
for subscription, and the acquisition of Entanet International
Limited. A Prospectus containing full details of the Capital
Raising was published on 11 July 2017 and a General Meeting in
connection with the Capital Raising was held on 27 July 2017, with
all resolutions duly passed and the finance raising completed at
55p per share on 28 July.
The finance raising enables the Group to move on to the next
phase of our development focusing on the densification and active
commercialisation of our existing city networks.
The proceeds of the Placing and the Offer for Subscription will
be used as follows:
1. The commencement of construction of Fibre to the
Home/Premises ('FTTH/P'), addressing the residential and enterprise
markets in five to ten UK towns and cities during 2018;
2. The expansion of CityFibre's metro networks from 42 UK towns
and cities to no fewer than 50 towns and cities by 2020. This
expansion of our metro model includes the extension of active layer
services across our fibre network, where demand and economics
justify this; and
3. The acquisition of Entanet, a provider of wholesale
communications services, for a consideration of GBP29 million in
cash (on a cash-free, debt-free basis and subject to adjustments).
This deal supports the Company's focus on wholesale active and
passive fibre services and accelerates the commercialisation of
CityFibre's fibre assets. Entanet adds c.1,500 channel partners
that will be enabled to sell across our 42 towns and cities.
1. FTTH/P and densification of cities
We have announced that we will commence FTTH/P roll-outs in five
to ten cities and we now are working on city selection, enabling
these cities to support full FTTH roll-outs and arranging service
provider agreements to effect this critical step. These will be in
conjunction and consultation with our service provider customers.
Accordingly, we are in the advanced stages of discussions with
major service providers across public sector, business, mobile and
consumer markets.
One critical component of these discussions is the pricing for
consumer FTTH/P services, which we believe can be equal or lower,
depending on volume commitments, to the existing copper-based
infrastructure pricing of the incumbent. So we aim to offer a
superior product at a competitive price, without the need for
service providers to pay incremental fees for the recovery of
investments made relatively recently in outdated legacy
infrastructure.
Our focus on network densification follows CityFibre's
successful participation in the FTTH/P trial in York. The trial
demonstrated strong demand from ISPs and consumers for gigabit
speed FTTH/P services, and showed the propensity for consumers to
switch to FTTH/P connections. York was chosen as the site of the
trial roll-out specifically because it is considered to be
representative of a typical UK city, including in terms of its
market demographics, home density and partial (39%) Virgin cable
presence. This remains the largest wholesale trial of its kind in
the UK. The trial demonstrated the commercial viability of FTTH/P
in the UK, with deployment costs in line with expectations and
penetration in some cabinet areas already above 40% after less than
two years in commercial production.
In addition to the demand dynamics, the York trial also provided
proof points around the cost estimates for FTTH/P roll-out. Having
existing core network and PoP facilities infrastructure in the
cities in which we initially plan to roll-out FTTH/P we estimate we
will save up to 18 months of deployment time per city. We expect
this to also save up to 25% on the total costs of rolling out the
network. The rollout of FTTH/P will also enhance the value of our
associated metro networks by providing us with a far greater
network capillarity which puts us in a better position to win
incremental public sector, small cell, macro cell and smart city
connections. Furthermore, FTTH/P will enable CityFibre to offer
fibre-based services to SMEs which are significantly cheaper than
point-to-point fibre leased lines, by deploying dense GPON based
architecture covering entire business parks, for example. There is
also significant scope to flex both speeds and reliability of the
FTTH/P roll-out through adding better splitter ratios to GPON
deployment selectively and relatively inexpensively through a
straight-forward re-patching exercise.
One further benefit of a full-fibre network to homes and
businesses is the dramatically lower fault rates typical of such
networks, which we estimate are significantly less than those of a
typical copper-based network, perhaps as much as 1/20(th) the fault
rate.
2. Expansion of Metro footprint from 42 towns and cities to
50
CityFibre will continue to extend its current metro footprint
selectively, ensuring that each new metro project is anchored by
long term contracts that deliver a satisfactory return on the
initial capital investment required while also covering a
substantial portion of projected capital expenditure. The same
policy will apply to the extension or expansion of existing town
and city networks to serve public sector, business and mobile
customers.
3. Entanet acquisition
On 5 July 2017, the Group announced the proposed acquisition of
Entanet International Limited ('Entanet') for GBP29.0 million on a
cash-free and debt-free basis, net of a deferred element of GBP4.7
million. The acquisition completed on 2 August 2017.
Entanet is a wholesale communications provider that uses third
party networks owned by other suppliers such as BT Wholesale,
Openreach, Virgin, Vodafone, TalkTalk Business and others, to
deliver a wide range of connectivity and broadband products and
services to Channel Partners, including Ethernet, private and wide
area networks, IP and PSTN telephony, colocation, hosting and
associated services.
The Entanet acquisition brings together two complementary
wholesale capabilities: CityFibre's national wholesale fibre
infrastructure and Entanet's established wholesale Ethernet product
portfolio and commercial relationships with Channel Partners.
Entanet will become the primary route for CityFibre to market its
full-fibre connectivity through Entanet's network of Channel
Partners.
Entanet's strategy is focused on the development and growth of
wholesale communications services. It packages data communications
products, including broadband and leased line internet
connectivity, IP telephony and hosting services and makes these
products and services available nationally, with approximately
1,500 Channel Partners that serve the business and residential
markets having conducted business with Entanet in the 12 months
ended 31 December 2016. The Directors believe that the Entanet
acquisition will significantly enhance the Group's wholesale fibre
capability and accelerate its future growth. By combining
CityFibre's fibre infrastructure with Entanet's established
Ethernet and other wholesale products, systems and relationships
with Channel Partners, the Group expects to realise the following
synergies and benefits, estimated by the Directors to deliver cost
synergies of over GBP3 million per annum within three years of
completion of the acquisition:
-- Increase Relationships with Channel Partners - The
acquisition is expected to give CityFibre access to new Channel
Partners due to Entanet's existing position as a wholesale provider
with approximately 1,500 Channel Partners having conducted business
with Entanet in the 12 months ended 31 December 2016. This
represents a significant potential increase in CityFibre's indirect
routes to market;
-- Achieve Synergies - Entanet's services operate on the
networks of a number of suppliers, including BT Wholesale,
Openreach, Virgin Media, Colt Technology, TalkTalk Wholesale and
Vodafone. It currently services over 45,000 broadband connections
and over 3,500 leased lines. A proportion of these connections
originate and/or terminate in CityFibre's existing or expanded city
footprint, giving rise to the opportunity to migrate these
connections to the Company's fibre infrastructure over time;
-- Trading and Support Interfaces - The acquisition is expected
to give CityFibre access to Entanet's wholesale systems that
provide a layer of automated order and billing capabilities as well
as customer portals and support systems;
-- Complementary Products - The acquisition is expected to
enable CityFibre to utilise Entanet's wholesale product portfolio
enhancing CityFibre's own wholesale fibre capabilities;
-- National Ethernet Capability - The national networks leased
by Entanet from other suppliers support the end-to-end Ethernet
capabilities that are required as part of CityFibre's product
development. The acquisition is expected to accelerate both the
timescale and scope of CityFibre's Ethernet strategy, enabling
faster take up of the Group's fibre connectivity by national
Channel Partners. The acquisition is expected to enable Entanet to
offer the delivery of wholesale services across CityFibre's fibre
infrastructure in both existing and future metro towns and cities,
providing differentiated gigabit speed full-fibre connectivity
services through its established base of Channel Partners.
We have already commenced the engineering and resourcing
required to enable Entanet to fully leverage the CityFibre suite of
products and services across all 42 towns and cities. Enablement of
Entanet active layer services on CityFibre infrastructure requires
the lighting up of our LDN, city PoPs and cable links in several
cities between CityFibre and Entanet PoPs. Edinburgh has already
been connected with an order sold, ordered and delivered. A further
11 cities are planned for enablement this year, and 11 more in
2018.
Debt refinancing process
As the Group evolves and matures, management expects that the
debt capacity of the business will increase and the cost of debt
will become significantly lower than those of its existing
facilities. Generally, infrastructure businesses are well-suited to
long-term debt structures and are anticipated to form a material
proportion of our optimised mature capital structure. Following the
recent equity raise, Management is in the early stages of reviewing
the Group's near term capital structure requirements and has begun
a process to assess its options for refinancing its existing debt
facilities in 2018. It is expected that this should bring down the
cost of debt significantly from the early stage facilities secured
with Proventus (when the business was EBITDA-negative) and will
provide further capital for our development of the FTTH/P
opportunity.
Market environment and outlook
Momentum in the Public Sector market was affected by the snap
general election call, and associated purdah, as well as the delays
to the announcement of both the DIIF and LFFN stimulus programmes.
These caused public sector customers to defer infrastructure
investment decisions. Two material public sector opportunities have
now shifted into 2018 which will cause revenue for this segment to
fall marginally below our initial expectations. Despite this
backdrop, the pipeline of opportunities in public sector networks
has actually increased significantly. Though we did not close any
major PSN deals in H1, none have been lost. The creation of the
LFFN stimulus programme by the DCMS has provided further impetus
for cities to commission the creation of more core gigabit fibre
networks to serve their own estate and local businesses, and we
welcome this new catalyst to the development of the market.
The Group continues to develop significant commercial
opportunities in the mobile connectivity segment, to improve
economics and performance for macro cell sites. Although there have
been no major signings in H1, we now have near-term regulatory
clarity around dark fibre. The CAT's rejection of Ofcom's BCMR
findings this summer means CityFibre is now left as the only major
willing provider of dark fibre into the UK market outside London.
This is an ideal position for CityFibre as mobile operators look to
future-proof their macro and micro site networks for both existing
and future 5G services, and we remain excited by the scale of the
opportunity here.
The Business segment continues to develop in line with our
previously stated five-year penetration target of 7.5% to 10% per
city. A number of our key cities now stand at more than 5%
penetration in terms of connections sold, and we believe the
Entanet acquisition will accelerate the introduction of a broader
range of products and price points into the Business segment and
will drive further continued incremental sales.
Our organic progress to date in signing up channel partners has
been significantly enhanced by the acquisition of Entanet, which we
closed in August. Our combined offering, now leveraging Entanet's
c.1,500 channel partner network and service provision platform and
CityFibre's extensive network footprint, is already showing early
signs of accelerating the take-up of our services. Overall Group
revenue for the financial year will be significantly increased as
Entanet begins to contribute.
Having completed the raising of significant funds the main focus
for CityFibre is now on the densification of its existing cities
and the incremental investment in FTTH/P deployment. The exact
timing and quantum remains under discussion with potential ISP
partners and, as set out previously, we are in advanced discussions
with ISPs. In anticipation of the fund raising we committed
investment during H1 on detailed planning, engineering work and
construction contracting for FTTH/P roll-outs across several of our
cities and further resources are now being applied to detailed city
designs, construction planning, colocation facilities and
construction firm contracting. Over GBP0.3m of costs were incurred
in H1 in relation to FTTH/P roll-out activities, and these costs
are expected to increase into the second half of 2017, and
2018.
Overall the Board is very comfortable with the outlook for the
Group and confident in CityFibre's strong strategic position.
Regulatory Developments
Since we last reported there have been a number of significant
developments that have continued the trend towards a more
supportive evolution of the regulatory environment towards
CityFibre and UK broadband infrastructure investors more
generally.
BCMR
On 6(th) July 2016 CityFibre lodged an appeal against Ofcom's
2016 Business Connectivity Market Review ('BCMR') on concerns that
the regulation could harm competitive investment in full fibre
infrastructure to businesses. TalkTalk and BT also lodged appeals
with the Competition Appeal Tribunal ('CAT').
In August 2017 the CAT issued its ruling in relation to the
market definition issues arising in the BCMR. The CAT found
unanimously in favour of the appellants' arguments, and against
Ofcom, effectively annulling the 2016 BCMR and remitting it back to
Ofcom for reconsideration.
The BCMR had been the foundation for the pricing controls of all
leased lines and the basis for Ofcom's Dark Fibre Access ('DFA')
remedy. As a result of the CAT ruling, these remedies cannot now be
introduced in the form prescribed in the BCMR. Ofcom must now
undertake a new review in consultation with the industry, likely to
delay implementation of a dark fibre remedy for perhaps 18 months.
Consequently, CityFibre remains the only wholesale provider of
scale of dark fibre services into the UK market.
Digital Infrastructure Investment Fund
On 3 July 2017 the UK Government officially launched the Digital
Infrastructure Investment Fund ('DIIF'). The fund, initiated with
GBP400m of HM Treasury funds and expected to be at least matched by
other institutional investors, has been set up to incentivise and
accelerate full-fibre deployment across the UK by alternative
providers.
The exact details of the DIIF are still to be finalised, but
three fund managers have been appointed to allocate the fund's
investments, and CityFibre is already engaged in early stage
discussions with them to scope out how the DIIF might serve as a
potential source of additional future funding for future CityFibre
projects.
Local Full Fibre Networks ('LFFN') programme
In the Spring budget the DCMS announced its intent to engage
with both communications providers and local bodies to develop
delivery approaches and incorporate these into a first wave of
investment projects totalling GBP200m. The aim is to fund
locally-led projects across the UK to leverage local and commercial
investment in full fibre. By harnessing public sector internet
demand, upgrading connections to schools and other public sector
buildings, and offering new full fibre connection vouchers to
increase business take-up, the LFFN aims to incentivise substantial
new commercial investment to connect homes and businesses with full
fibre networks, such as those developed by CityFibre.
Business rates relief
On 4 July 2017 the Telecommunications Infrastructure Bill was
introduced to Parliament, delivering on the Government's promise to
introduce 100 per cent relief on non-domestic business rates on
investments in new fibre for a period of five years. This should
act as another accelerator for full-fibre deployment in the UK.
Advertising standards
On 10 July 2017 the Advertising Standards Authority announced it
would conduct an in-depth review of fibre advertising. This
followed on from evidence presented by CityFibre and other UK
full-fibre players showing that the current advertising rules on
fibre broadband have the potential to mislead consumers. At
present, advertising rules allow broadband products that rely on a
final copper connection to the premises to be advertised as
"fibre". We believe that reform of these rules, so that "fibre
means fibre", is essential to empower consumers to make informed
choices between copper-based and full-fibre products.
Financial review
Profit and loss
Turnover in the period was GBP9.0m, an increase of 36% over the
comparable prior period driven by revenue of GBP1.9m from new
contracts sold since H1 2016.
Gross margin increased to 88% from 86%, reflecting the ongoing
high operating leverage characteristic of the business model as the
Group continues to add new business at a gross margin above
90%.
Administrative expenses decreased to GBP9.4m, largely
attributable to transaction and transition fees associated with the
acquisition of KCOM assets in H1 2016. Removing the effect of these
costs, the underlying administrative costs (excluding depreciation
and amortisation) increased by 18%. Staff costs grew by 17% to
GBP4.2m reflecting headcount growth of 24% to 163 Full Time
Employees at period end. Sales, General and Administrative expenses
grew by 21% to GBP2.0m.
Reported EBITDA profit was GBP0.7m, an improvement of GBP3.0m
from the prior period loss of GBP2.3m, principally due to the
effect of non-recurring costs from 2016.
Adjusted EBITDA was GBP1.7m, a significant improvement from the
GBP0.4m profit posted in the first half of 2016. This also includes
over GBP0.3m of costs incurred in H1 in relation to FTTH/P roll-out
activities. A reconciliation of reported EBITDA to adjusted EBITDA
appears overleaf.
Net finance costs were GBP4.3m, up from GBP3.3m in the prior
period. Finance costs are based on interest costs on debt drawn
down plus amortised finance costs. The difference reflects a higher
level of debt drawn down this period as well as timings of the draw
downs.
Net loss for the period of GBP5.9m, an improvement of GBP1.6m
from 2016, reflects the improved gross margin and the reduction in
administrative expenses.
EBITDA reconciliation
Six months Six months Twelve
to 30 to 30 months
Jun 2017 Jun 2016 to 31
Dec 2016
GBP'000 GBP'000 GBP'000
Operating loss per
interim accounts (1,502) (4,193) (5,141)
Add-back:
Depreciation 2,125 1,745 3,572
Amortisation 70 117 358
EBITDA* 693 (2,331) (1,211)
Fees in connection
with regulatory review 368 466 904
Share-based payments
charge 600 556 908
Operational and financing
costs in respect of
the Acquisition** - 1,722 1,884
Adjusted EBITDA*** 1,661 413 2,485
*EBITDA is a non-statutory classification, defined as earnings
before interest, tax, depreciation and amortisation.
** Operational and financing costs in respect of the Acquisition
include performance-related bonuses for key staff connected with
the KCOM transaction.
***Adjusted EBITDA is earnings before interest, tax,
depreciation and amortisation, also excluding share-based payments
and significant non-recurring expenses, and serves as a proxy for
the underlying financial performance of the business.
Balance sheet
The increase in net property, plant and equipment posted in the
period is due to the continued expansion of the Group's metro
footprint.
During the first half, the Group drew down a further GBP5.5m of
its GBP100m senior secured debt facilities, leaving a total of
GBP65.3m drawn at period end. Total borrowings include GBP4.1m of
unamortised finance costs, giving a figure of GBP61.2m on the
balance sheet. The GBP30m Revolving Credit Facility included in the
facilities remains undrawn. The Board continues to review the
Group's options regarding debt refinancing in the first half of
2018.
Period end cash was GBP7.9m and net debt was GBP57.4m.
Cash flow
Cash outflow from operations decreased to GBP1.2m from GBP3.8m
in the prior period, although the first half of 2016 included the
classification of GBP3.1m of inventory purchased as part of the
asset acquisition from KCOM. Excluding this non-recurring item,
there is a negative movement of GBP0.5m in the first of 2017
compared to the first half of 2016.
Total acquisition of property, plant and equipment was GBP7.7m
in the period, principally comprising network capex.
consolidated statement of comprehensive income
For the Six Months ended 30 June
Six months Six months Twelve
to 30 to 30 months
June June to 31 December
2017 2016 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 9,036 6,632 15,363
Cost of sales (1,117) (937) (1,827)
------------- ------------- -----------------
Gross profit 7,919 5,695 13,536
Administrative expenses (9,421) (9,888) (18,677)
------------- ------------- -----------------
Operating loss (1,502) (4,193) (5,141)
Finance cost (4,315) (3,311) (7,341)
Finance income 15 24 45
Share of post-tax
losses of equity accounted
Joint Venture (118) (17) (147)
------------- ------------- -----------------
Loss on ordinary activities
before taxation (5,920) (7,497) (12,584)
Income tax - 5 -
------------- ------------- -----------------
Loss for the financial
period and total comprehensive
losses attributable
to the equity holders
of the parent company (5,920) (7,492) (12,584)
Loss per share
Basic and diluted GBP(0.02) GBP(0.03) GBP(0.05)
loss per share
------------- ------------- -----------------
Consolidated Statement of Financial Position
At 30 At 30 At 31
June June December
2017 2016 2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Assets
Non-current assets
Property, plant and
equipment 163,876 141,654 155,159
Intangible assets 1,282 1,208 1,211
Investment in Joint
Venture 314 572 433
------------- ------------- -----------
Total non-current assets 165,472 143,434 156,803
Current assets
Inventory 4,002 3,336 3,986
Trade and other receivables 11,122 7,657 8,070
Investment in short-term - 10,000 -
deposits
Cash and cash equivalents 7,892 8,146 16,722
------------- ------------- -----------
Total current assets 23,016 29,139 28,778
Total assets 188,488 172,573 185,581
------------- ------------- -----------
Equity
Issued capital 2,713 2,713 2,713
Share Premium 137,943 137,943 137,943
Share warrant reserve 85 85 85
Share-based payments
reserve 2,700 1,638 2,100
Merger reserve 331 331 331
Profit and loss account (40,548) (29,537) (34,628)
------------- ------------- -----------
Total equity 103,224 113,173 108,544
Liabilities
Non-current liabilities
Interest bearing loans
and borrowings 61,157 39,897 55,280
Deferred revenue 11,305 11,233 11,091
Deferred consideration - 457 450
Total non-current liabilities 72,462 51,587 66,821
Current liabilities
Deferred revenue 3,163 2,159 2,864
Trade and other payables 9,639 5,654 7,352
------------- ------------- -----------
Total current liabilities 12,802 7,813 10,216
Total liabilities 85,264 59,400 77,037
Total equity and liabilities 188,488 172,573 185,581
------------- ------------- -----------
Consolidated statement of cash flows
For the Six Months Ended 30 June 2017
Six months Six months Twelve
to 30 to 30 months
June June to 31
2017 2016 December
2016
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating
activities
Loss before tax (5,920) (7,498) (12,584)
Amortisation of intangibles 70 117 358
Finance income (15) (24) (45)
Finance costs 4,315 3,311 7,341
Depreciation 2,125 1,745 3,572
Share-based payments charge 600 557 908
Increase in inventory (16) (3,145) (3,797)
Increase in receivables (3,081) (2,629) (3,023)
Increase in payables 609 3,184 4,145
Right of use income 2 19 29
Share of loss from associated
company 118 17 147
Transaction Fees - 582 582
Net cash utilised in operating
activities (1,193) (3,764) (2,367)
Cash flows from investing
activities
Interest received 15 72 73
Investment in short-term - (10,000) -
deposits
Acquisition of intangibles (140) (296) (517)
Acquisition of property,
plant and equipment (7,686) (98,246) (110,560)
Costs of acquiring property,
plant and equipment - (1,077) (1,077)
Capitalised labour costs (1,438) (1,312) (2,946)
Net cash utilised in investing
activities (9,249) (110,859) (115,027)
Cash flows from financing
activities
Proceeds from issue of
share capital - 80,000 80,000
Costs of issuing share
capital - (3,555) (3,562)
Debt finance costs paid - (5,326) (5,320)
Drawdown of borrowings 5,500 44,800 59,800
Interest paid (3,888) (2,880) (6,533)
------------- ------------- -----------
Net cash received from
financing activities 1,612 113,039 124,385
Net (decrease)/ increase
in cash and cash equivalents (8,830) (1,585) 6,991
Cash and cash equivalents
at beginning of period 16,722 9,731 9,731
------------- ------------- -----------
Cash and cash equivalents
at end of period 7,892 8,146 16,722
------------- ------------- -----------
Consolidated Statement of Changes in Equity
Share Share Share Share-based Merger Retained Total
capital premium warrant payments reserve Earnings
reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1
January 2016
(audited) 1,113 63,243 85 1,081 331 (22,044) 43,809
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period (unaudited) - - - - - (7,492) (7,492)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Issue of new
ordinary shares
(unaudited) 1,600 78,400 - - - - 80,000
Share issue costs
(unaudited) - (3,700) - - - - (3,700)
Share-based payments
(unaudited) - - - 556 - - 556
Balance at 30
June 2016 2,713 137,943 85 1,637 331 (29,536) 113,173
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period (unaudited) - - - - - (5,092) (5,092)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Share-based payments
(unaudited) - - - 463 - - 463
Balance at 31
December 2016
(audited) 2,713 137,943 85 2,100 331 (34,628) 108,544
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period (unaudited) - - - - - (5,920) (5,920)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Share-based payments
(unaudited) - - - 600 - - 600
Balance at 30
June 2017 (unaudited) 2,713 137,943 85 2,700 331 (40,548) 103,224
---------- ---------- ---------- ------------- ---------- ----------- ---------
Notes to the Interim Financial Statements
1. ACCOUNTING POLICIES
CityFibre Infrastructure Holdings plc (the "Company") is a
company registered in England and Wales. The interim financial
statements for the period ended 30 June 2017 comprise the Company
and its subsidiaries (together referred to as the "Group").
The principal accounting policies applied in the preparation of
these interim financial statements are summarised below. They have
all been applied consistently throughout the current and preceding
period.
Basis of preparation
The financial information presented in this preliminary
announcement has been prepared in accordance with the recognition
and measurement requirements of International Financial Reporting
Standards issued by the International Accounting Standards Board,
as adopted by the European Union. The principal accounting policies
adopted in the preparation of the financial information in this
preliminary announcement are unchanged from those used in the
annual report and accounts for the year ended 31 December 2016 and
are consistent with those that the company expects to apply in its
financial statements for the year ended 31 December 2017.
The financial information for the periods ended 30 June 2016 and
30 June 2017 presented in this preliminary announcement does not
constitute the company's statutory accounts for those periods, and
are unaudited. The company's Annual Report and Accounts for the
year ended 31 December 2016 has been audited and filed with the
Registrar of Companies. The Independent Auditors' Report on the
company's Annual Report and Accounts for the year ended 31 December
2016 was unqualified and did not draw attention to any matters by
way of emphasis and did not contain statements under s498(2) or (3)
of the Companies Act 2006.
Basis of accounting
The financial statements have been prepared on a going concern
basis and in accordance with International Financial Reporting
Standards ('IFRS') and their interpretations issued by the
International Accounting Standards Board ('IASB'), as adopted by
the European Union. They have also been prepared with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS.
The Group has not adopted any Standards or Interpretations in
advance of the required implementation dates. The implications of
these new accounting standards on the Group have not yet been fully
evaluated.
Basis of consolidation
The interim financial statements incorporate the results of
CityFibre Infrastructure Holdings plc and all of its subsidiary
undertakings as at 30 June 2017. The results of subsidiary
undertakings are included from the date of acquisition.
CityFibre Infrastructure Holdings PLC was incorporated on 13
November 2013, and on 11 January 2014 it acquired the issued share
capital of CityFibre Holdings Limited by way of a share-for-share
exchange. The latter had six wholly owned subsidiaries: CityFibre
Limited, CityFibre Networks Limited, Fibrecity Holdings Limited,
Gigler Limited, CityFibre Metro Networks Limited and Fibrecity
Bournemouth Limited. The consideration for the acquisition was
satisfied by the issue of 115,383 Ordinary Shares in CityFibre
Infrastructure Holdings PLC to the shareholders of CityFibre
Holdings Limited.
The accounting treatment in relation to the addition of
CityFibre Infrastructure Holdings plc as a new UK holding Company
of the Group falls outside the scope of the IFRS 3 'Business
Combinations'. The share scheme arrangement constituted a
combination of entities under common control. The reconstructed
Group was consolidated using merger accounting principles as
outlined in Financial Reporting Standard 6 ('FRS') Acquisitions and
Mergers (UK) and treated the reconstructed Group as if it had
always been in existence. Any difference between the nominal value
of shares issued in the share exchange and the book value of the
shares obtained is recognised in a merger reserve.
The Company has taken advantage of merger relief available under
Companies Act 2006 in respect of the share for share exchange as
the issuing company has secured more than 90% equity in the other
entity.
Joint ventures
Joint ventures are joint arrangements whereby the parties that
have joint control of the arrangement have rights to the net assets
of the arrangement.
These interim financial statements include the Group's share of
the total recognised gains and losses of a joint venture using the
equity method, from the date that significant influence commenced,
based on present ownership interests, less any impairment losses.
Under the equity method, investments in joint ventures are carried
in the Consolidated Statement of Financial Position at cost as
adjusted for post-acquisition changes in the Group's share of the
net assets of the joint venture, less any impairment in the value
of the investment and the Group's share of any gain on contribution
of assets to the joint venture.
Revenue
Revenue represents network lease sales and installation sales to
external customers, sales of internet services to residential
customers, and recharge of work performed for the joint venture at
invoiced amounts less value added tax or local taxes on sales.
Where revenue arising from installation and connection services is
separable from network lease services, these elements are
recognised as if they were separate contracts.
Network lease revenue is recognised evenly over the period to
which the services are provided, and is recognised from the date at
which the network service becomes available for use by the
customer.
Installation revenue is recognised on a percentage completion
basis over the period of construction of the asset, from
post-contract signature mobilisation to customer handover.
Management apply a straight line basis as this closely approximates
revenue recognised on a stage of completion basis and the effort
required to deliver services to customers.
It is considered by management that the above revenue
recognition policies are suitable for recognising revenue arising
from the Group's key market verticals.
Revenue attributable to infrastructure sales in the form of
Indefeasible-Rights-of-Use ('IRUs') with characteristics which
qualify the transaction as an outright sale, or transfer of title
agreements, are recognised at the later of delivery or acceptance
by the customer.
Accrued income is recognised when services are provided in
advance of the customer being invoiced.
Deferred revenue is recognised when services are invoiced in
advance of the period over which the services are provided.
Revenue from internet services provided to residential customers
is recognised on a monthly basis, commencing when services are
provided.
Revenue from work performed for the JV is recognised during the
period to which the work relates.
All revenue streams are wholly attributable to the principal
activity of the Group and arise solely within the United
Kingdom.
Property, plant and equipment
Property, plant and equipment are stated at cost, net of
depreciation and any provisions for impairment. Where network
assets are acquired as part of a contract including a provision of
services, the asset is initially recognised at fair value to
include the value of these services. Depreciation is calculated so
as to write off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset as follows:
Leasehold property 5 years
Network assets 40 years
- Duct
Network assets 20 years
- Cabling
Plant and machinery 5 years
Fixtures and 3 years
fittings
Motor vehicles 3 years
Useful economic lives and residual values are assessed annually.
Any impairment in value is charged to the statement of
comprehensive income.
Intangible assets
Customer contracts, which have arisen through business
combinations, are assessed by reviewing their net present value of
future cash flows. Customer contracts are amortised over their
useful life not exceeding six years.
Software costs that are directly attributable to IT systems
controlled by the Group are recognised as intangible assets and the
costs are amortised over their useful lives not exceeding three
years. Amortisation is included in general administrative costs in
the statement of comprehensive income.
Impairment of non-current assets
Whenever events or changes in circumstance indicate that the
carrying amount of an asset may not be recoverable an asset is
reviewed for impairment. An asset's carrying value is written down
to its estimated recoverable amount (being the higher of the fair
value less costs to sell and value in use) if that is less than the
asset's carrying amount.
Inventory
Inventory is stated at the lower of cost and net realisable
value. Cost is based on the cost of purchase on a first in, first
out basis. Inventory includes equipment necessary to install fibre
optic networks and also includes the cost of specific network
assets allocated for sale under indefeasible right of use (IRU)
agreements.
Net realisable value is based on estimated selling price less
additional costs to completion and disposal.
Certain network assets were classified as inventory assets
during 2016. The Group intends to sell these network capacity
assets on a regular basis where it is considered to be a
strategically viable product.
Finance costs
Finance costs are charged to the profit or loss over the term of
the debt so that the amount charged is at a constant rate on the
carrying amount. Finance costs include issue costs, which are
initially recognised as a reduction in the proceeds of the
associated capital instrument.
Operating leases
Rentals paid under operating lease commitments are charged to
the profit or loss on a straight line basis over the lease
term.
Financial liabilities and equity
Financial liabilities, including trade payables and bank loans,
are recognised when the Group becomes party to the contractual
arrangements of the instrument and are recorded at amortised cost
using the effective interest method. All related interest charges
on loans are recognised as an expense in 'finance cost' in the
statement of comprehensive income.
Financial liabilities and equity are classified according to the
substance of the financial instrument's contractual obligations,
rather than the financial instrument's legal form.
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability. The Group's ordinary shares are classified as
equity instruments. Incremental costs directly attributable to the
issue of ordinary shares are recognised as a deduction from equity,
net of any tax effects.
Financial assets
Trade and other receivables are initially recorded at their fair
value and subsequently carried at amortised cost, less provision
for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivable. Bad debts are written off when identified.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and cash in
hand, and short-term highly liquid investments with an original
maturity of three months or less.
Share based payments
The Group issues equity-settled share-based payments to certain
employees. Equity-settled share-based payments are measured at fair
value at the date of the grant. The fair value at the grant date is
determined using two different models. For share options that
include market-based vesting criteria, the Monte Carlo model has
been used, with the expense recognised over the expected vesting
period of the options. For all other options the Black-Scholes
model has been used, with the calculated value expensed over the
vesting period. The value of the expense is dependent upon certain
key assumptions including the expected future volatility of the
Group's share price at the date of the grant.
The Group also issues cash-settled share-based payments to
certain employees. The payments are measured at fair value at the
date of the grant, and are subsequently revalued at each balance
sheet date, using the Monte Carlo model.
Taxation
Current tax is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or
substantively enacted by the date of the statement of financial
position.
Deferred taxation is the tax expected to be payable or
recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the balance sheet liability method.
Deferred taxation liabilities are recognised on all taxable
temporary differences. Deferred taxation assets are recognised to
the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be
utilised.
Deferred taxation is calculated at the tax rates that are
expected to apply in the period when the liability is settled or
the asset is realised based on tax laws and rates that have been
enacted at the statement of financial position date. The carrying
value of deferred taxation assets is reviewed at each statement of
financial position date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
against which taxable temporary differences can be utilised.
Deferred tax is charged or credited to the statement of
comprehensive income, except when it relates to items charged or
credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Pension Costs
Contributions to the Group's defined contribution pension scheme
are charged to the statement of comprehensive income in the period
in which they become payable.
Key judgements and sources of estimation uncertainty
The preparation of the financial statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect application of policies and reported
amounts in the financial statements. The areas involving a higher
degree of judgement or complexity, or where assumptions or
estimates are significant to the financial statements are detailed
below.
Assessment of useful economic lives of property, plant and
equipment
The Group depreciates the property, plant and equipment, using
the straight-line method, over their estimated useful lives. The
estimated useful life reflects management's estimate of the period
that the Group intends to derive future economic benefits from the
use of the Group's property, plant and equipment. Changes in the
expected level of usage and technological developments could affect
the useful economic lives of these assets which could then
consequentially impact future depreciation charges.
Impairment of non-current assets
Property, plant and equipment is recorded at historical cost
less accumulated depreciation and any accumulated impairment
losses. Network assets comprises assets purchased at cost and fair
value and built at cost, together with capitalised labour directly
attributable to the cost of construction.
The carrying values of property, plant and equipment and
intangible assets other than goodwill, within a cash generating
unit, are reviewed for impairment only when events indicate the
carrying value may be impaired. Impairment indicators include both
internal and external factors. Examples of internal factors include
analysing performance against budgets and assessing absolute
financial measures for indicators of impairment. Examples of
external considerations assessed for indications of impairment
include wider economic factors.
Where impairment indicators are present, the recoverable amounts
of assets are measured. Asset recoverability requires assessment as
to whether the carrying value of assets can be supported by the net
present value of future cash flows derived from such assets, using
cash flow projections which have been discounted at an appropriate
rate. In calculating the net present value of the future cash
flows, certain assumptions are required to be made in respect of
uncertain matters. In particular, management has regard to
assumptions in respect of revenue mix and growth rates.
Classification of network assets as inventory
Certain network assets were classified as inventory assets
during 2016. Management believes this classification is appropriate
given that the Group intends to sell network capacity assets on a
regular basis where it is considered to be a strategically viable
product.
Revenue recognition of installation revenues
Installation revenues are a proportion of the total contract
value; management assess this and give appropriate consideration to
a range of factors in determining installation revenues on a
contract by contract basis. Factors include contract length,
technical challenges in delivering the contract and assessment of
any associated local economic issues.
2. SHARE CAPITAL
As at As at
30 Jun 31 Dec
2017 2016
GBP'000 GBP'000
Authorised, called up, allotted
and fully paid
265,672,644 (unaudited) ordinary
shares of GBP0.01 each (31 December
2016 (audited): 265,672,644) 2,656 2,656
5,653,865 (unaudited) deferred
ordinary shares of GBP0.01 each
(31 December 2016 (audited): 5,653,865) 57 57
--------- ---------
2,713 2,713
3. SUBSEQUENT EVENTS
Equity Raise
On 28 July 2017 the Group raised gross proceeds of GBP201.8m
from an equity placing and an offer for subscription. This capital
raising required the allotment of 366,978,818 new shares, which
were funded at 55p per share.
Acquisition of Entanet
On 2 August 2017 the Group completed the acquisition of 100% of
Entanet International Limited, for GBP29.0m on a cash and debt-free
basis. This is being treated as a business combination as per IFRS
3.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DDGDCDDDBGRR
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