The he Na Nationwide tionwide Builder uilder of of G Giga igabit Cit bit Cities ies 2015 20 15 Fina Financ ncial ial Resu esults lts Apr pril il 20 2016 16
Cit CityFibr yFibre organic pr ic projec ject: : Edinb Edinburgh M Metro Network
2015 Results Overview • Sales of 1,110 connections for TCV of £23.2m (+109%) • Turnover up +67% Year on Year to £6.4m Financials • Gross margin further expanded to 86% • Turned the corner on EBITDA, -£2.9m vs. -£3.6m in 2014 • Connected customer premises +36%, to 1,200 (2014: 885) • Route KMs of ducted metro fibre +37%, to 743 (2014: 543) KPIs • Service provider relationships expanded to 41, from 25 in 2014 • Three new city wins – Edinburgh, Glasgow and Newport • Closed £90m acquisition of KCOM’s 24 city metro duct/fibre network and 1,100 km national network Post period • Closed £180m financing (£80m placing, £100m debt) highlights • 2500+ connections and £37.5m TCV added YTD (£12.5m organic) • EBITDA positive in Q1 2016 and continuing upward trajectory - Former KCOM Metro City - LDN interconnect POPs - CityFibre Metro City 3
Acquir Acquired ed footprint: Bristol ootprint: Bristol Metr etro N o Netw etwor ork
Transformational Acquisition KCOM acquisition established scale: • £90m acquisition of 2,200 km of national fibre assets – 21 new cities • KCOM anchor contract, 15 year term, £5m per annum Financial resources to drive growth: • January 2016 – closed £80m equity and £100m debt facility • Fully funded for a 50 city metro footprint – c.20% coverage of the UK Leveraging our position as a national infrastructure: • Accelerated rollout: • Footprint expansion accelerated by 5 to 7 years • Our wholesale model is now available across 37 cities - KCOM Metro City, total route length 1,100km • - 1,100 km LDN is interconnected to major data centres CityFibre now in 24 of the top 30 cites outside of London • A large scale alternative to BT Openreach: CityFibre: York KCOM: Leeds • Estimated reinstatement value of combined assets >£200m • Attractive to national providers with expanded footprint • Potential for FTTP rollout to business parks across expanded footprint • Enabler for larger scale mobile FTTT and consumer FTTH rollouts • Quickly commercialising assets: • Focus on launching new Gigabit Cities on acquired assets • 450 circuits added in first 90 days since close • First capacity sale on the LDN 5
Market Backdrop Global IP traffic: 23% CAGR between 2014 – 2019 Ofcom regulatory reviews 180 • 160 Ofcom’s Strategic Review of Digital Communications (DCR), 140 published February 2016, sets a new path for regulation: Exabytes per month 120 100 Greater investment in pure fibre networks 80 60 Competition to BT Openreach, and the encouragement of 40 Source: CityFibre, Cisco VNI third party infrastructure (in addition to BT and Virgin) 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F 2016F 2017F 2018F 2019F Greater access to BT’s ducts and poles (DPA, PIA) • • Global IP traffic will increase 3x in the next 5 years BCMR – mandating Dark Fibre from BT, pricing under review, • Global mobile data will grow 3x faster than fixed IP traffic with potential appeal or challenge possible • Metro traffic will account for 66% of total IP traffic by 2019 The UK’s fibre infrastructure lags behind other countries Supportive market dynamics • As a specialist fibre infrastructure builder and integrator, we are ideally placed to take advantage of DPA, using BT’s ducts to supplement CityFibre’s own ducted infrastructure, potentially lowering deployment costs • BT’s acquisition of EE will motivate its competitors to seek alternative infrastructure solutions Source Ofcom 2015 • The “Gigabit City” phenomenon is building momentum worldwide – in the UK, CityFibre is the recognised leader • UK fibre connectivity continues to lag behind • BT has limited desire to invest in fibre to the premises • Problem is magnified outside London 6
Recapping Our Model Low Risk Deployment Strategy, Well-Planned City Design Principle Sites connected at maturity Public Sector 300 – 400 Business 575 – 700 Mobile 75 – 100 950 – 1,200 Total Metro area Consumer FTTH Payback on incremental capex Model to drive high recurring Network gross margin >90% c.2 years revenue yield 7
Accelerating the ‘Gigabit City’ Rollout Metro Cities Addressable Public Addressable Addressable Mobile Addressable Homes Shared Infrastructure Sector Sites Businesses Sites (Cumulative) (Cumulative) (Cumulative) (Cumulative) Macro Cells [Small Cells] 37 Cities 26,000 260,000 7,400 [22,000] 3,700,000 50 Cities 35,000 350,000 10,000 [30,000] 5,000,000 Platform for FTTH Partners Focus on commercialization - growing partners and revenues across metro assets expansion Gigabit City commercialisation underway: ISP partner expansion underway: Aiming to grow to 100 service provider • Up to 10 Gigabit City Launches on new assets in 2016 relationships by 2018 • Bristol – 100 connections sold • Leeds/Bradford – 350 connections sold 120 100 • Standard products and pricing to be released across 80 59 entire footprint 60 31 9 40 • FTTP business park solution being reviewed 20 41 41 41 41 25 0 2013 2014 2015 2016 2017 2018 - Current Partners - New Partner Targets 8
Commercialisation of KCOM Assets and Greenfield Build Bristol – 100 connections committed • Gigabit City launch partner Triangle Networks committing to a minimum of 100 connections • Six-year contract, TCV £1.5m, limited incremental build required Leeds-Bradford – 350 connections committed • Local ISPs Exa Networks and Diva Telecom committing 250 and 100 sites, respectively • Six-year contracts, combined TCV £4.9m, good coverage and limited incremental capex Reading to Slough – first sale on the national core • 15-year IRU, first capacity sale on the national long distance network • TCV of £2.3m, limited incremental capex Southend-on-Sea (greenfield build) • 10-year contract covering 120 connections over a 50km network build • Direct procurement by the council, £3.2m TCV, high capex coverage 9
20 2015 15 Fina Financ ncial ial Res esults ults
2015 Financial Review Profit and loss (£m) Revenue growth driven by full year effect of a number of early (Year to 31 December) 2015 2014 YoY projects and contributions from new anchor city projects. Revenues from the business vertical improved by £1.0m Turnover 6.4 3.8 67% Cost of sales 56% (0.9) (0.6) Gross margin expansion of 0.9% reflects profitability of new business Gross profit 5.5 3.3 68% Gross margin 0.9% 86.1% 85.2% Non-cash and non-recurring costs of £3.2m primarily relating to depreciation, share-based payments and KCOM transaction Administrative expenses (11.7) (10.7) 9% Operating loss (6.2) (7.5) -17% Normalised administrative costs +22%, reflecting business expansion Net financials and associates (0.2) 0.4 n.m. Pre-tax loss Capex of £13.8m split 83% new Gigabit Cities/17% incremental (6.4) (7.1) -9% business on existing assets Adjusted EBITDA (2.9) (3.6) -20% Post transaction close added £90m in PP&E, Q1 cash position Balance sheet and cash flow (£m) £23m (As at 31 December) 2015 2014 YoY 14.7 15 Net PP&E 44.0 31.8 38% Trade and other receivables 6.0 3.7 61% 10 6.4 Cash, equivalents and deposits 9.7 33.2 -71% 3.8 5 2.4 Total assets 61.4 70.1 -12% 1.9 Total liabilities 17.6 20.3 -13% 0 Total equity 43.8 49.9 -12% -3.0 -2.9 -3.6 -5 2013 2014 2015 Consensus 2016 Network capex (13.8) (4.5) 207% Revenue Adj. EBITDA Operating cash outflow (5.4) (3.6) 51% 11
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