2016 Final Results Meeting UK demand for full fibre connectivity
Greg Mesch Chief Executive Officer
About us Design, build, operate and own full fibre networks UK’s largest wholesale alternative provider Who of full fibre infrastructure Transforming public sector we are Building a new generation of future-proof services digital infrastructure for the UK Driving economic Delivering innovative scalable solutions to growth What our customers across the public sector, business, mobile and consumer broadband we do markets Unleashing business potential Legacy infrastructure cannot meet digital Enabling demands due to growth across all markets Why 5G & IoT innovation CityFibre is ensuring the UK can benefit from we do it a full fibre future 3
Results overview Met or exceeded our targets for the year • Revenue increased 140% to £15.4m 2,762 Financial • Gross margin increased to 88% 2016 highlights connections • Turned EBITDA positive on full year basis • Total connections 3,962 (2015 = 1,200) 13 Significant • Route kilometres of ducted fibre 3,383km Gigabit Cities operational launched (2015 = 743km) progress in 2016 • Service provider relationships 54 (2015 = 41) • Successful integration of acquired Commercial 54 national network footprint service • 42 metro networks now open for business supports providers • Conclusion of Ofcom review removes opportunity regulatory uncertainty over market 4
Our 3,400km network today CityFibre is ready for business • Integrated acquired national network assets • 24 cities now equipped with active platforms • Enhanced delivery capability: – Back end systems in place – Partner portal built and operating – Headcount bolstered to support increased customer base and planning capability – New partners being on-boarded March 2016 September 2016 September November 2016 Southend Northampton 2016 Business Parks Gigabit city Gigabit city Reading Gigabit initiative launched launched city launched launched January April 2016 September October 2016 December 2016 2016 Leeds and 2016 Onecom Milton Keynes Acquisition Bradford Acquisition of expands Gigabit City of KCOM Gigabit cities Redcentric Coventry / launched / assets launched assets Leicester / Gamma national Nottingham capacity contract 5
Market backdrop and regulation Shift in Government policy and Ofcom review improves the opportunity Ofcom shifts strategy UK fibre connectivity Full-fibre is the future of to fibre infrastructure lags behind global peers broadband, helping people to competition • At the end of 2016, the UK share digital content faster. remained bottom of the • Ofcom seeks a reduction in Philip Hammond, Chancellor OECD league table the UK’s dependency on Openreach and promotes • Government recognises the When it comes to digital a competitive full fibre build critical nature of fibre infrastructure, we all want to to >40% of UK premises investment be world leaders, right? I • Duct and Pole Access certainly want that for Britain. UK’s digital strategy consultation Fibre and 5G are the future. supports fibre roll out Matt Hancock, Minister DCMS Openreach separation • To invest in UK’s digital debate is over infrastructure and in “full The best driver for fibre” networks • BT retains control of investment and innovation Openreach capex • Digital Infrastructure is network based envelope and assets Investment Fund competition. • No forced fibre roll out • DCMS Public Sector Sharon White, Ofcom stimulus • 100% business rate relief for 5 years on new fibre infrastructure 6
Cross-selling across verticals CityFibre has national scale Estimated & cumulative Actual Metro cities Public sector Businesses Mobile cell sites Homes shared infrastructure sites Macro [small] 42 cities 29,400 294,000 8,400 [42,000] 4,200,000 50 cities 35,000 350,000 10,000 [50,000] 5,000,000 Partners 2,738 sites 380% Penetration 1,189 sites up 292% increase in in excess of Growth up 39% YoY YoY data traffic 26% to date 7
Terry Hart Chief Financial Officer
Key contracts in 2016 Driving revenue yield across our assets Market Connections ICV (£m) Term (yrs) Project net capex 1 ARR 2 Yield Incremental (off acquired assets) Bristol 100 1.5 6 Leeds/Bradford 350 4.9 6 MK/Northants 500 7.0 5 Reading/Bracknell 250 3.1 5 £11.2m £4.5m 40% Slough/Maidenhead 1.7 5 150 Leicester/Nottingham/Coventry 3.3 5 300 Sheffield/Rotherham/Doncaster 3.3 6 250 1,900 24.8 Incremental (off CityFibre built assets) Aberdeen (Public Sector) 6 109 2.0 Peterborough (Public Sector) 20 £2.2m £0.6m 32% 220 2.0 Southend-on-Sea 5 150 1.7 5.7 479 Greenfield Southend-on-Sea (Public Sector) 120 3.2 10 Cambridge/Southampton/Portsmouth 188 4.5 10 £8.2m £1.0m 12% Stirling (Public Sector) 41 1.9 6 349 9.6 Carrier Long Distance Network - £0.2m nm 25 6.1 Total added in 2016 (key contracts) £21.6m £6.3m 29% 2,753 46.2 1 Project capex net of connection fees 2 Annual recurring revenue upon phased completion of committed connections (city activations and migrations) 9
KPIs Continued commercialisation of network assets 2015-16 2014 2015 2016 Highlights % Growth CityFibre cities 12 16 42 ▲ 163% 24 inorganic (acquired from KCOM & Redcentric), 2 organic Orders 11 23 76 ▲ 225% £25m KCOM, £46m other key contracts Order book - Initial contract value (£m) 29 52 128 ▲ 144% Initial cash receivable for contract term, no account of renewals Cumulative ICV 22 42 106 ▲ 155% Visibility of future revenue at >90% GM Unrealised ICV Partners - Number of service providers 25 41 54 ▲ 29% Connections sold (cumulative) 941 1,429 1,888 ▲ Public sector sites 32% Top performing city: Coventry 354 connections 330 991 5,595 ▲ 465% Top performing city: Leeds 598 connections Business 37 37 37 ► - Trial city with MBNL (Three & EE) - Hull Mobile 1,308 2,457 7,520 ▲ 206% Top performing city overall: Edinburgh 691 connections sold Total Connections sold Total connected sites Completed Edinburgh anchor network build 735 857 1,189 ▲ 39% Public sector sites Added 2,108 from acquisitions during year 150 327 2,738 ▲ 737% Businesses Hull network completed, 37 sites now connected - 16 35 ▲ 131% Mobile sites 21.4% penetration at year end 0 208 2,852 ▲ n.m. FTTH 2,762 new connections added 885 1,200 3,962 ▲ 230% Total sites delivered (excluding FTTH) Network assets Metro network length (km) at period end 543 743 2,244 ▲ 208% 150km in Edinburgh delivered on schedule despite challenges - - 1,139 ▲ n.m. Acquired asset – in revenue production Long distance network length (km) at period end 2.4 3.3 3.4 ▲ 3% Top cities are approaching 5 connections per km Connections sold per metro kilometre 1.6 1.6 1.8 ▲ 9% Connections delivered per metro kilometre Human resources – employees at YE 76 105 143 ▲ 36% Growth primarily engineering and construction related 10
Update on York FTTH trial Proof points and performance Blended penetration rate Blended penetration rate 27% Proof points: 25% 23% ü Build delivered to schedule 21% ü Cost per home passed 19% <£500 17% Highest cabinet ü Using existing assets saved penetration 15% 20–25% and 12–18 months approaching 13% 40% 11% ü Consumer demand strong 9% and continuing to grow 7% ü Fault rates 1/10 th of legacy 5% networks • Trial successfully completed At 31 December 2016 • All JV restrictions on CityFibre lifted Homes passed: 13,309 • Pre-built metro networks in 42 cities Homes connected: 2,852 • High coverage of non-cable territories 11
Financial highlights Strong results for year ended 31 December 2016 Profit and Loss (£m) • Strong turnover growth, £4.9m contribution from KCOM and Redcentric, Organic revenue growth (Year to 31 Dec) 2016 2015 YoY of 63% (£4.1m), driven by Edinburgh project Turnover 140% 15.4 6.4 and increased incremental sales Cost of sales 106% (1.8) (0.9) • Gross margin expanded 170bps Gross profit 145% 13.5 5.5 Gross margin 87.6% 85.9% 2% • Underlying Admin costs increased only 31% to £11.1m (excluding non-recurring fees £2.8m, Administrative expenses 18.7 11.7 60% D&A £3.9m and share-based payments £0.9m) Operating loss (5.1) (6.2) (17%) • EBITDA positive achieved and strengthening Net financial expense (7.3) (0.1) n.m. Pre-tax loss (12.6) (6.4) 97% • Acquisitions added £95m in network assets and inventory Adjusted EBITDA 2.5 (2.9) n.m. • Network capex of £22.9m reflects expanded Balance sheet and cash flow (£m) build programme (Year to 31 Dec) 2016 2015 YoY • Cash position £16.7m, net debt £43.1m* Fixed assets 155.2 44.0 253% Trade and other receivables 8.1 6.0 35% Cash and equivalents 16.7 9.7 72% Total assets 185.6 61.4 202% Interest-bearing loans and borrowings 55.3 - n.m. Total equity 108.5 43.8 148% Network capex (excluding acquisitions) (22.9) (13.8) 59% Operating cash outflow (2.4) (5.4) (56%) *£59.8m of the debt facility drawn in the period, with £4.5m in transaction and 12 arrangement fees netted off of the balance sheet entry
Greg Mesch Chief Executive Officer
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