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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Cityfibre | LSE:CITY | London | Ordinary Share | GB00BH581H10 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 80.90 | 80.80 | 81.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMCITY
RNS Number : 7537K
CityFibre Infrastructure Hldgs PLC
26 September 2016
For immediate release 26 September 2016
CITYFIBRE INFRASTRUCTURE HOLDINGS PLC
('CityFibre' or the 'Group' or the 'Company')
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED 30 JUNE 2016
Strong commercial and operational momentum in H1
CityFibre (AIM: CITY), a leading designer, builder, owner, and operator of fibre optic infrastructure in 40 UK towns and cities, is pleased to announce financial results for the six months to 30 June 2016.
Financial Highlights:
-- Turnover up 147% year-on-year in the period, to GBP6.6m (H1 2015 GBP2.7m); -- Gross margin stable year-on-year at 86%; -- Adjusted EBITDA* positive, at GBP0.4m (H1 2015 GBP1.8m loss);
-- New contracts with initial contract value ('ICV') of GBP53.8m added, versus GBP23.2m for full financial year 2015 and GBP8.1m in H1 2015;
-- GBP90m acquisition of KCOM's 2,200km national duct and fibre assets covering 24 cities across the UK closed 18 January 2016;
-- Period end cash, cash equivalents, and short term deposits of GBP18.1m, with net debt of GBP26.7m.
Operating Highlights:
-- New contracts signed comprising 3,702 new customer connections, over eight times the level added in H1 2015 (458);
-- Total core metro network route fibre kilometres increased by 232%, to 2,050 (618); -- Total connected customer premises up 243% year-on-year, to 3,490 (1,017);
-- Acquired, integrated and brought into commercial production 2,200km of fibre and duct assets covering 24 cities and a national long distance network;
-- New service provider contracts signed for seven Gigabit City launches across acquired metro footprints, with initial commitments generating 1,200 incremental customer connections;
-- Strong incremental sales on all assets, accounting for 93% of new connections sold excluding KCOM anchor commitment (45% including KCOM anchor commitments);
-- UK's first dark fibre-based FTTT network in Hull now fully operational, delivering a 380% increase in data traffic on a new ring-based architecture;
-- York FTTH JV trial deployment now complete, passing approximately 11,000 homes at period end, now approximately 14,000 premises passed and achieving all target objectives in terms of penetration and deployment costs;
-- Service provider relationships rose to 49, from 33 at H1 2015, including new trading relationships with KCOM, Level 3, SSE Enterprise Telecoms, Exa Networks and Gigaclear.
* Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, also excluding share-based payments and significant non-recurring expenses. Further detail is set out in the Financial Review section of this document.
Post-period Highlights:
-- GBP3.3m service provider contract signed with Exa Networks covering Sheffield, Doncaster and Rotherham, covering 250 connections and bringing the total number of acquired metro footprints under active commercialisation to 10;
-- GBP1.7m service provider contract with Onecom for the Southend-on-Sea network, adding 150 business customer connections and making Onecom CityFibre's 50(th) service provider partner;
-- Acquisition of 137km of fibre network assets from Redcentric Plc (AIM: RCN) for GBP5.0m, backed by a GBP4.5m revenue commitment under a 10-year lease-back agreement. Transaction adds 188 customer connections to the CityFibre estate and significant new network presence in Cambridge, Portsmouth and Southampton, along with incremental coverage in existing CityFibre footprints bringing CityFibre to 40 towns and cities across the UK with major duct and fibre presence. Redcentric becomes CityFibre's 51(st) service provider relationship;
-- Peter Manning to step down as Non-Executive Chairman with effect from 16 January 2017; -- Strong performance year-to-date and trading comfortably in line with full-year expectations.
Greg Mesch, CEO of CityFibre, commented:
"We have had a very strong six months underpinned by an excellent performance by our commercial and operations teams, in which we have amassed a significant new business pipeline.
"In less than three years we have created a highly competitive business underpinned by a dense fibre network across 40 UK cities. Moreover, we've completed two transformational projects that demonstrate the future potential direction of the UK fibre market, a dark fibre mobile project (FTTT) with Three and EE and the completion of the trial of gigabit speed Fibre-to-the-Home (FTTH/P) with Sky and TalkTalk.
"Our business now sits at the forefront of transforming the UK's digital infrastructure and remains well placed to capitalise on a number of significant near term commercial opportunities."
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
For further information, please contact:
Hot Features
Premium
CityFibre Infrastructure Holdings www.cityfibre.com
plc
Greg Mesch, Chief Executive Officer Tel: 0845 293
0774
Terry Hart, Chief Financial Officer
James Enck, Head of Investor Relations Tel: 0333 150
6283
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 / Steven Tredget / Tel: 020 3100
Richard Bootle 2000
Vigo Communications www.vigocomms.com
Jeremy Garcia / Fiona Henson Tel: 020 7830
9700
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 40 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 an estimated 28,000 public sector sites, 7,800 mobile masts, 280,000 businesses and 4.0 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 2016 marked a period of significant growth for the Group, both organically and from acquisition.
Contract value added and customer connections sold
CityFibre added GBP53.8m in new initial contract value ('ICV') in the period versus the H1 2015 result of GBP8.1m, and a 133% increase over the GBP23.1m of contract value added in full year 2015. Initial contract value is defined as the value of the initial period of contractual commitment to the first renewal date, taking no account of revenues post-renewal. Typical contract life ranges from five up to 20 years.
Customer connections sold in the period totalled 3,702, an increase of eight times above the 458 connections sold in the first half of 2015, and a 209% increase over the 1,200 connections sold in full year 2015.
The Group ended the first half with 49 carrier/service provider relationships, up from 33 at the end of the first half of 2015, including new trading relationships with KCOM, Level 3, SSE Enterprise Telecoms, Exa Networks and Gigaclear.
Connected customer premises and network
The Group closed out the first half of financial year 2016 with 3,490 connected customer premises and a total of 3,150 route kilometres of ducted fibre operational (2,050 kilometres of metro local access and 1,100 of long distance network). This compares with 1,017 connected customer premises and 618 route kilometres of network in the first half of 2015. Principal organic additions to the network footprint, excluding the acquisition of assets from KCOM, included Aberdeen, Edinburgh, and Kirklees.
Transformational asset acquisition
On 18 January 2016, the Company completed the GBP90m acquisition of 2,200 kilometres of duct and fibre network assets from KCOM Group plc, which brought to the Group portfolio 24 metro network footprints, of which 21 were completely new markets for CityFibre, as well as a national long-haul fibre network connecting 22 cities and key internet peering points in Greater London. The acquisition constituted a reverse takeover for the purposes of AIM Rules, and the Company was readmitted to trading upon the transaction closing.
Anchor contracts and incremental sales
New anchor contract relationships accounted for 55% of new connections sold and 52% of ICV added during the period. Accordingly, incremental sales on existing assets accounted for 45% of new connections and 48% of new contract value added in the period.
The principal new anchor relationship signed in the first half was with KCOM, in connection with the asset acquisition, under which the vendor committed to a minimum revenue guarantee of GBP25m over five years, potentially extending to a total commitment of GBP75m over 15 years, in respect of its existing customer connections on the acquired assets.
Excluding the initial five-year revenue commitment from KCOM, incremental business accounted for 93% of new connections sold and 89% of new contract value added.
Commercialisation of acquired assets
Following the close of the KCOM asset acquisition, the Group has undertaken a detailed audit, integration and commercialisation programme on the acquired assets. In less than six months since the KCOM asset acquisition close, as at 30 June 2016 the Company had signed service provider minimum commitments to bring seven cities into commercial production, comprising 1,200 committed customer connections and ICV of GBP16.5m. Additionally, the Group generated the first new business on the acquired long distance network ('LDN') via a GBP2.3m, 15-year indefeasible right of use ('IRU') with SSE Enterprise Telecoms, bringing the total ICV delivered on the acquired assets to GBP18.8m.
Completion of the trials in both FTTT and FTTH communications infrastructure projects
CityFibre's two industry-leading projects in Fibre-to-the-Tower (FTTT) and Fibre-to-the-Home (FTTH) both delivered significant milestones in the first half.
The 56-kilometre FTTT network serving MBNL, Three UK and EE in Kingston-upon-Hull became fully operational in June, with the connection of the final radio sites. Since its sites went live on the CityFibre infrastructure, Three UK has reported a 380% increase in data traffic across its connected sites, reflecting the vastly enhanced user experience enabled by CityFibre's multiple fibre ring architecture. The project marks the first dark fibre-based FTTT network deployment in the UK and represents a template for further deployments across CityFibre's extensive 40-city footprint, which the Group estimates is capable of addressing approximately 7,800 macro sites.
The York FTTH trial with joint venture partners Sky and TalkTalk was substantially completed in the period. Under CityFibre's proprietary reference design, approximately 11,000 homes were passed by 30 June 2016 and made ready for service, connected by 1,150 kilometres of newly deployed fibre. One key objective of the trial, to deliver a cost per home passed of below GBP500, was achieved. Penetration of homes passed at the end of June stood at approximately 11% after only three months of active marketing, well ahead of expectations and a very encouraging indication of likely levels of demand for true FTTH services across the broader UK market. At present, the network passes approximately 14,000 homes, with over 2,000 taking service, for a penetration rate of 15%. The Board and Management are extremely pleased with the results of the trial, which strongly underlines the potential to deliver an FTTH rollout of up to 4m homes in multiple cities across the CityFibre footprint by leveraging the Group's existing assets and reference design architecture.
Post period developments
On 3 August 2016, the Group announced the signing of a service provider deal for its acquired networks in Sheffield and environs (Doncaster and Rotherham). The six-year, GBP3.3m deal commits CityFibre partner Exa Networks to delivering 250 school and business connections across the three networks under an existing national framework agreement.
The Sheffield deal brings the number of acquired footprints brought into production to 10, comprising Bristol, Leeds, Bradford, Milton Keynes, Northampton, Reading, Bracknell, Sheffield, Doncaster and Rotherham. Since taking control of the acquired assets, the Group has sold 1,450 connections with a combined ICV of GBP22.1m, as at 23 September 2016.
On 9 September 2016, the Group announced the signing of a service provider agreement for its Southend-on-Sea network currently under construction. The five-year, GBP1.7m agreement, with Hampshire-based Onecom, covers 150 business connections in Southend. Onecom is the largest service provider in the Vodafone Partners Programme, serving over 300,000 customer connections nationally. Onecom became CityFibre's 50(th) channel partner, taking the Group half way to its medium term target of 100 service provider relationships.
Redcentric fibre asset acquisition
The Group today announced the acquisition of 137km of metro local access fibre network assets from Redcentric Plc for a cash consideration of GBP5.0m. In return, the vendor is committing to a minimum revenue guarantee of GBP4.5m under a 10-year lease-back agreement for continued use of the network to serve its existing customer base.
The transaction adds 188 Redcentric customer connections to the CityFibre estate and significant new network presence in Cambridge, Portsmouth, and Southampton, along with complementary incremental coverage in a number of existing CityFibre footprints. As part of the transaction, Redcentric has also entered into a framework agreement with CityFibre for the use of CityFibre's infrastructure across its national footprint in future.
The additional network assets take CityFibre's footprint to 40 towns and cities, including 25 of the top 30 outside Greater London. The expanded CityFibre footprint now addresses an estimated 28,000 public sector sites, 280,000 businesses, 7,800 cell sites and 4m homes. Redcentric becomes the 51(st) addition to the Group's growing list of valued service provider partners.
Resignation of Non-Executive Chairman
The Board was notified on 23 September 2016 of the intention of Non-Executive Chairman Peter David Manning to step down effective 16 January 2017, the third anniversary of the Group's IPO and after three-and-a-half years of service. Under Peter's careful stewardship, the Company has grown from a small, privately-held business with large aspirations, to a rapidly growing and asset-rich public company with significant scope and scale in the national fibre infrastructure market. Having taken the company through a period of rapid growth through to EBITDA positive, including admission to AIM, three major acquisitions, and nearly GBP300m in capital formation, Peter now wishes to spend more time developing his portfolio of private equity-financed companies. The Board and executive team wish to thank him for the major contributions he has made to the Company's development over the three-and-a-half years since his appointment, and wishes him well in his future endeavours.
Market environment and outlook
Global internet protocol traffic is forecast to grow at a compound annual growth rate of 22% to 2020. The legacy of underinvestment in communications infrastructure over the past two decades leaves the UK in critical need of alternative sources of investment in order to secure its future economic competitiveness. CityFibre's investment in alternative wholesale infrastructure plays a critical role in providing superior connectivity options for providers of IT and Internet services to the public sector, businesses, mobile and consumers.
Against this background, there are number of regulatory reviews currently underway by Ofcom. Amongst the more constructive elements of these reviews are stated objectives of promoting more alternative investment in fibre infrastructure and lessening the market's considerable reliance on Openreach. CityFibre welcomes these objectives, given its role as the leading alternative investor in fibre infrastructure in the UK.
However, the Group has elected to appeal the conclusions of the Business Connectivity Market Review consultation and lodged its appeal with the Competition Appeal Tribunal in July, based on a view that Ofcom committed a number of procedural errors in the consultation. Both BT Group and TalkTalk have also lodged appeals in the process. The Group will update on the outcome of the case at the appropriate time.
The Referendum vote in favour of leaving the EU has provoked much commentary and analysis, but the Company has to date seen no changes in customer behaviour or demand, and the pipeline of new business remains strong.
Performance year-to-date has been strong and the Group is trading comfortably in line with full year expectations.
Financial review
Profit and loss
Turnover in the period was GBP6.6m, an increase of 147% over the comparable prior period, driven principally by the initial contribution from the KCOM revenue commitment as well as the full year effect of new cities coming online and business-as-usual on other existing assets. Excluding the KCOM commitment, organic revenue growth was 60%.
Gross margin was stable at 86%, reflecting the ongoing high operating leverage characteristic of the business model as the Group continues to add new business at gross margin above 90%.
Administrative expenses grew to GBP9.9m, largely attributable to an increased depreciation charge of GBP1.7m reflecting the increase in the asset base following the KCOM asset acquisition, as well as associated transaction and transition fees. Excluding non-cash items and non-recurring costs, administrative expenses were GBP5.3m, an increase of 28.8% over the prior period. Within this, staff costs only increased by 23.5%, to GBP3.6m, and SG&A rose by 42.1%, to GBP1.7m.
The Group added 26 new full-time equivalent staff (FTEs) in the period, ending the first half with 131 FTEs.
Reported EBITDA loss was GBP2.3m, due largely to non-recurring costs. In the first half, the Group incurred costs of GBP1.7m relating to the acquisition and transition of KCOM national network assets. Additionally, the Group incurred costs of GBP0.5m relating to advisory and legal fees connected with the appeal lodged against Ofcom with the Competition Appeal Tribunal in response to the 2016 Business Connectivity Market Review, a triennial review which affects the structure of the regulated leased line market. The Board believes this action is essential to ensure that the Group's interests are properly represented and protected.
Adjusted EBITDA turned positive for the first time in the period, at GBP0.4m, a significant improvement from the GBP1.8m loss posted in the first half of 2015. A reconciliation of reported EBITDA to adjusted EBITDA appears overleaf.
Net finance costs of GBP3.3m in the period reflect the arrangement and initial interest costs associated with the senior secured debt facilities undertaken in conjunction with the KCOM asset acquisition. This includes GBP0.4m in relation to amortisation of arrangement fees.
Net loss for the period of GBP7.5m largely reflects the impact of non-recurring costs, higher depreciation and financing costs.
EBITDA reconciliation
Six months Six months Twelve
to 30 to 30 months
Jun 2016 Jun 2015 to 31
Dec 2015
GBP'000 GBP'000 GBP'000
Operating loss per
interim accounts (4,193) (2,776) (6,159)
Add-back:
Depreciation 1,745 821 1,707
Amortisation 117 57 233
EBITDA (2,331) (1,898) (4,219)
Regulatory fees 466 - 220
Acquisition and transition 1,722 - -
costs(1)
Share-based payments
charge 556 82 343
Operational and financing
costs in respect of
the Acquisition and
Joint Venture - - 736
Adjusted EBITDA(2) 413 (1,816) (2,920)
Notes:
1 Acquisition and transition costs are solely in regard to the KCOM asset acquisition and include staff performance-related bonuses in connection with the transaction.
2 Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, also excluding share-based payments and significant non-recurring expenses, which the Board believes gives a better indication of the underlying financial performance of the business.
Balance sheet
The increase in net property, plant and equipment posted in the period is largely attributable to the asset acquisition from KCOM Group plc, which closed on 18 January 2016.
During the first half, the Group drew down GBP44.8m of its GBP100m senior secured debt facilities, leaving GBP55.2m undrawn at period end. Gross debt of GBP39.9m is shown net of transaction and arrangement fees of GBP4.9m.
Period end cash was GBP18.1m, comprising GBP8.1m cash and cash equivalents and a further GBP10m in short term deposits.
Cash flow
Cash outflow from operations increased to GBP3.8m from GBP2.2m in the prior half-year, predominantly due to the classification of GBP3.1m of inventory purchased as part of the asset acquisition from KCOM. Aside from this one-off purchase there is a positive movement of GBP1.5m compared to 2015, reflecting the improved underlying performance of the business and favourable working capital movements.
Total acquisition of property, plant and equipment was GBP98m in the period, principally comprising GBP87m of the total GBP90m asset acquisition. Additional network capex was GBP10.8m on existing projects and city expansion activities.
Net cash from financing activities was predominantly attributable to the GBP80m equity placing completed on 14 January 2016, as well as the draw-down of senior debt facilities to partially fund the acquisition and subsequent new business.
KCOM asset acquisition
On 18 January 2016 the Group completed the acquisition of certain network assets from KCOM Group plc. The acquisition constituted a reverse takeover under Rule 14 of the AIM Rules for Companies, requiring de-listing and readmission, which occurred on 14 January 2016.
The acquisition for GBP90m resulted in CityFibre adding network assets, inventory and stock onto its balance sheet.
The acquisition was funded by an GBP80m placing of new equity at 50p per share and a loan facility of GBP100m with Proventus Capital Partners III AB, of which GBP35m was utilised in the asset purchase, the balance being available for capital projects.
The Group is treating this transaction as an acquisition of assets, as per IAS 16, rather than a business combination as per IFRS 3. Completion occurred on 18 January 2016, therefore this acquisition was recognised during the first half of financial year 2016.
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
2016 2015 2015
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Continuing operations
Revenue 6,632 2,687 6,408
Cost of sales (937) (366) (888)
------------- ------------- -----------------
Gross profit 5,695 2,321 5,520
Administrative expenses (9,888) (5,097) (11,679)
Operating loss (4,193) (2,776) (6,159)
Finance cost (3,311) (147) (278)
Finance income 24 115 170
Share of post-tax
losses of equity accounted
Joint Venture (17) (32) (126)
Loss on ordinary activities
before taxation (7,497) (2,839) (6,393)
Income tax 5 15 31
Loss for the financial
period and total comprehensive
losses attributable
to the equity holders
of the parent company (7,492) (2,824) (6,362)
Loss per share
Basic and diluted
loss per share (0.03) (0.03) (0.06)
------------- ------------- -----------------
Consolidated Statement of Financial Position
At 30 At 30 At 31
June June December
2016 2015 2015
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Assets
Non-current assets
Property, plant and
equipment 141,654 35,058 43,987
Intangible assets 1,208 592 905
Investment in Joint
Venture 572 815 609
Total non-current assets 143,434 36,465 45,501
Current assets
Inventory 3,336 83 190
Trade and other receivables 7,657 3,883 5,994
Investment in short-term
deposits 10,000 14,000 -
Cash and cash equivalents 8,146 12,233 9,731
Total current assets 29,139 30,199 15,915
Total assets 172,573 66,664 61,416
Equity
Issued capital 2,713 1,113 1,113
Share Premium 137,943 63,243 63,243
Share warrant reserve 85 85 85
Share-based payments
reserve 1,638 855 1,081
Merger reserve 331 331 331
Profit and loss account (29,537) (18,506) (22,044)
Total equity 113,173 47,121 43,809
Liabilities
Non-current liabilities
Interest bearing loans
and borrowings 39,897 1,190 -
Deferred revenue 11,233 9,912 9,746
Deferred consideration 457 423 448
Deferred tax - 16 -
Total non-current liabilities 51,587 11,541 10,194
Current liabilities
Interest bearing loans - 914 -
and borrowings
Deferred revenue 2,159 2,894 2,152
Trade and other payables 5,654 4,194 5,261
Total current liabilities 7,813 8,002 7,413
Total liabilities 59,400 19,543 17,607
Total equity and liabilities 172,573 66,664 61,416
Consolidated statement of cash flows
For the Six Months Ended 30 June 2016
Six months Six months Twelve
to 30 to 30 months
June June to 31
2016 2015 December
2015
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Cash flows from operating
activities
Loss before tax (7,498) (2,839) (6,393)
Amortisation of intangibles 117 57 233
Finance income (24) (115) (170)
Finance costs 3,311 147 278
Depreciation 1,745 821 1,707
Share-based payments charge 557 82 343
Increase in inventory (3,145) - (107)
(Increase)/decrease in
receivables (2,629) 24 (1,990)
Increase/(decrease) in
payables 3,271 (295) 837
Right of use income (68) (131) (224)
Share of loss from associated
company 17 32 126
Transaction Fees 582 - -
Tax paid - - -
Net cash utilised in operating
activities (3,764) (2,217) (5,360)
Cash flows from investing
activities
Interest received 72 123 222
Investment in short-term (10,000) - -
deposits
Receipts from short-term
deposits - 15,000 29,000
Acquisition of intangibles (296) (54) (350)
Acquisition of property,
plant and equipment (98,246) (3,283) (12,703)
Proceeds on disposal of
property, plant and equipment - - 17
Capitalised staff costs (1,312) (878) (2,404)
Transaction costs (1,077) - -
Net cash (utilised in)/received
from investing activities (110,859) 10,908 13,782
Cash flows from financing
activities
Proceeds from issue of 80,000 - -
share capital
Costs of issuing share (3,555) - -
capital
Costs of issuing debt (5,326) - -
Loan drawdown 44,800 - -
Repayment of borrowings - (538) (2,604)
Interest paid (2,880) (106) (273)
Net cash received from/(utilised
in) financing activities 113,039 (644) (2,877)
Net (decrease)/increase
in cash and cash equivalents (1,585) 8,047 5,545
Cash and cash equivalents
at beginning of period 9,731 4,186 4,186
Cash and cash equivalents
at end of period 8,146 12,233 9,731
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 2015 1,111 63,243 85 773 331 (15,680) 49,863
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period - - - - - (2,824) (2,824)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Issue of new
ordinary shares 2 - - - - - 2
Issue of shares
held by the JSOP - - - - - (2) (2)
Share based payments - - - 82 - - 82
Balance at 30
June 2015 1,113 63,243 85 855 331 (18,506) 47,121
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period - - - - - (3,538) (3,538)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Share based payments - - - 226 - - 226
Balance at 31
December 2015 1,113 63,243 85 1,081 331 (22,044) 43,809
---------- ---------- ---------- ------------- ---------- ----------- ---------
Loss and total
comprehensive
income for the
period - - - - - (7,493) (7,493)
---------- ---------- ---------- ------------- ---------- ----------- ---------
Issue of new
ordinary shares 1,600 78,400 - - - - 80,000
Share issue costs - (3,700) - - - - (3,700)
Share based payments - - - 557 - - 557
-
---------- ---------- ---------- ------------- ---------- ----------- ---------
Balance at 30
June 2016 2,713 137,943 85 1,638 331 (29,537) 113,173
---------- ---------- ---------- ------------- ---------- ----------- ---------
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 2016 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 2015 and are consistent with those that the company expects to apply in its financial statements for the year ended 31 December 2016.
The financial information for the periods ended 30 June 2015 and 30 June 2016 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 2015 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 2015 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 of the Company have been prepared on a going concern basis and in accordance with International Financial Reporting Standards ("IFRS") and 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 Group intends to examine the potential impact of the adoption of these standards for the Group during 2016.
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 2016. The results of subsidiary undertakings are included from the date of acquisition.
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 as CityFibre Infrastructure Holdings plc, due to all shareholders of CityFibre Holdings Limited being issued shares in the same proportion, and the continuity of ultimate controlling parties. 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. The carrying value of the investment is carried at the nominal value of the shares issued.
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 of a JV using the equity method, from the date that significant influence commenced, based on present ownership interests. Under the equity method, investments in JVs 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 JV, less any impairment in the value of the investment and the Group's share of any gain on contribution of assets to the JV.
Initially, the investment in the JV is recognised at the fair value of the assets contributed and the services provided by the Group to the JV. Subsequently a share of the profits, made on services provided and disposal of property, plant and equipment to the JV, are eliminated against the value of the investment; the share of profits is determined by the Group's share of ownership of the JV.
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 JV 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 invoicing relates, and is recognised from the date at which the network service becomes available for use by the customer.
Installation revenue is recognised on a straight line basis over the period of construction of the asset, from post-contract signature mobilisation to customer handover. Management believes this is the best reflection of the effort required to deliver services to customers.
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 related.
The Group has provided the JV with a right-of-use over certain network assets in York; revenue is recognised to the extent that this relates to the provision of services to the JV. The assets contributed under the right-of-use are treated as being disposed of by the Group.
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 - Duct 40 years Network assets - Fibre 20 years Plant and machinery 5 years Fixtures and fittings 3 years 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.
Internally generated website costs that are directly attributable to websites 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.
Net realisable value is based on estimated selling price less additional costs to completion and disposal.
Finance costs
Finance costs are charged to profit 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 income on a straight line basis over the lease term.
Financial liabilities and equity
Most of the Group's financial liabilities, including its trade payables and bank loans are initially recognised at their fair value, net of any issue costs, and subsequently measured 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 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.
Short-term investments
Short-term investments are amounts held on cash deposit at financial institutions.
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 life 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.
All goods and services received in exchange for the grant of any share warrants are measured at their fair values. In the absence of information on the fair value of the services provided, the fair value of services received in return for the warrant issued is measured by reference to the fair value of the warrant issued. The fair value of the warrant was estimated by management using the Black-Scholes 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.
Joint Share Ownership Plan (JSOP)
As the company is deemed to have control of its JSOP trust, it is treated as a subsidiary and consolidated for the purposes of the interim financial statements. The JSOP's assets (other than investments in the company's shares), liabilities, income and expenses are included on a line-by-line basis in the interim financial statements. The ESOP's investment in the company's shares is deducted from equity in the consolidated statement of financial position as if they were treasury shares.
Key judgments 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.
The Group depreciates the PPE, 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 PPE. 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.
Installation revenue, which is deemed separately identifiable from network lease revenue, is recognised on a straight line basis over the period of construction of the asset, from post-contract signature mobilisation to customer handover. 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.
The value of network assets acquired from third parties are recorded at fair value. This is assessed with reference to a range of factors, including original cost, market value and services provided over the network.
The value of the investment in the JV is calculated based on the market value of an equivalent share in the JV. The value of assets contributed to the JV has been calculated based on the proportion of the network that is to be used by the JV.
Significant customer contracts for network lease sales have been deemed to be service contracts, with revenue recognised as per the revenue recognition policy. Management do not consider the nature of the contracts to be an indefeasible right of use (IRU).
2. SHARE CAPITAL
As at As at
30 Jun 31 Dec
2016 2015
GBP'000 GBP'000
Authorised, called up, allotted
and fully paid
265,672,644 (2015: 105,672,644)
ordinary shares of GBP0.01 each 2,656 1,056
5,653,865 (2014: 5,653,865) deferred
ordinary shares of GBP0.01 each 57 57
--------- ---------
2,713 1,113
Ordinary shares movement 2016
Number
As at 1 January 2016 105,672,644
14 January 2016 - shares issued
at GBP0.50 per share 160,000,000
As at 30 June 2016 265,672,644
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFLAAEIEFIR
(END) Dow Jones Newswires
September 26, 2016 02:01 ET (06:01 GMT)
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