Bigblu Broadband plc
Annual Report and Accounts 2019
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Content
Company Information
Company Overview
Strategic Report
Chairman’s Statement
Chief Executive Report
Financial Review
Principal Risks and Uncertainties
Governance
Directors’ Report
Board of Directors
Statement of Directors’ Responsibilities
Corporate Governance Statement
Independent Auditor’s Report
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28
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Consolidated Statement of Comprehensive Income
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Consolidated Statement of Financial Position
Company Statement of Financial Position
Consolidated Statement of Cash Flows
Company Statement of Cash Flows
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Notes to the Financial Statements
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Bigblu Broadband plc | Annual Report and Accounts 2019
Company Information
Directors
M Tobin OBE
A Walwyn
F Waters
S Clifton
P Howard
S Morana
C Mills
Company Registration Number
09223439
Company Secretary
B Harber
Registered Office
Broker & Nominated Adviser
Broadband House
108 Churchill Road
Bicester
Oxfordshire
United Kingdom
OX26 4XD
finnCap Ltd
60 New Broad St
London
EC2M 1JJ
Solicitors
Shepherd and Wedderburn LLP
10 St. Paul’s Churchyard
London
EC4M 8AL
Registrars
Auditors
Share Registrars Limited
The Courtyard
17 West Street
Farnham
Surrey
GU9 7DR
Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG
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COMPANY
OVERVIEW
Bigblu Broadband plc (AIM: BBB), is a leading
provider of alternative superfast broadband
solutions throughout Europe and Australia.
BBB delivers a portfolio of super-fast wireless
broadband
and
businesses unserved or underserved by fibre.
consumers
products
for
The Group has a significant target market with 27m customers in Europe with speeds of under 4 Mbps,
and a further 1m in Australia who have been identified as only suitable for either satellite or fixed
wireless broadband.
High levels of recurring revenue, increasing economies of scale and Government stimulation of the
alternative broadband market in many countries provide a solid foundation for significant organic growth
as demand for alternative super-fast broadband services increases around the world.
Acquisitive and organic growth have enabled BBB to grow rapidly since inception in 2008 during which
time the Company has completed 21 acquisitions across nine different countries. It is extremely well
positioned to continue growing as it targets customers trapped on the other side of the ‘digital divide’
with limited fibre broadband options.
BBB’s range of solutions includes satellite, next generation fixed wireless and 4G/5G delivering
between 30 Mbps and 150 Mbps for consumers, and up to 1 Gbps for businesses. BBB provides
customers ongoing services including hardware supply, installation, pre and post-sale support, billings
and collections, whilst offering appropriate tariffs depending on each end user requirements.
Importantly, as its core technologies evolve, and more affordable capacity is made available, BBB
continues to offer ever-increasing speeds and higher data throughputs to satisfy market demands for
‘video-on-demand’. Its alternative broadband offerings present a customer experience that is similar to
that offered by wired broadband and the connection can be shared in the normal way with PCs, tablets
and smart-phones via a normal wired or wireless router.
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Bigblu Broadband plc | Annual Report and Accounts 2019
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STRATEGIC REPORT
Chairman’s Statement
I am very pleased to be able to report another year of growth for the Group.
2019 has been a significant year for the Group. Having acquired 21 businesses since listing in our
target markets, 2019 was about consolidation, integration, operational improvements and working
with our network partners to ensure we provided the very best offerings to our customers across
our geographical footprint.
Customer numbers ended on c110k after organic growth of c10k customers and after the transfer
of customers to other networks or lost customers during migration of 13k. We have made significant
improvements in our back-end systems, the consolidation of the hubs and the customer journey
to ensure we are well placed going into 2020 to capitalise on opportunities in our target markets.
During the year, we generated strong growth in our core markets, with an 11% increase in constant
currency like-for-like revenues in the year (2018: 8%).
On 6th December 2018 the Group announced that it had been selected as a preferred partner by
Eurobroadband Infrastructure (“EBI”), a subsidiary of Eutelsat (NYSE/Euronext: ETL), to launch a
market leading superfast satellite broadband service to consumers and businesses across Europe
significantly extending our market offerings throughout Europe. Under this commercial arrangement
EBI will provide satellite network capacity, as well as assist with subscriber premises equipment,
installation and marketing to support the ‘Konnect’ brand. The Group will promote and sell satellite
broadband services while managing all activities related to subscriber management including
installation, billing and support. Based on a shared growth model, the Group will be an integral
part of EBI’s strategy of revitalising the distribution network over its KA-SAT satellite to boost the
deployment of internet access via satellite across Europe in line with EU 2020 targets.
We raised £12m of equity and debt funding during the year from existing and new investors. This
£12m funding package allows our UK fixed wireless business, Quickline (“QCL”) to significantly
increase the size and scale of its fixed wireless access (“FWA”) business to target a customer base
of approximately 30,000 subscribers over the next three years, with significantly increased revenue,
EBITDA and profitability anticipated as new capital is deployed and the business increases in
scale. This funding valued QCL at an enterprise value of £15m (pre new money), a significant
uplift compared to the valuation at the time of the acquisition in August 2017 of £8.4m. The funding
includes £4m of new equity initially with a further £4m of equity committed and a £4m revolving
credit facility provided by HSBC. This allows QCL to expand its infrastructure, consider selective
acquisitions and support BDUK investment in rural broadband projects. Compelling market
fundamentals exsist, given the digital divide in the UK with over a million homes still unable to
receive super-fast broadband services. Pure fibre to the home is widely considered uneconomic
in rural areas. FWA is a quicker and lower cost solution and is supported by government grants.
Finally reflecting the increasing scale and performance of the Group, we were delighted to agree a
new £30m revolving credit facility with Santander Bank UK plc in December 2019. This will be used
to replace the two tranches of loan notes totalling £12m issued in 2016 by Business Growth Fund
(“BGF”) (the “Loan Notes”) and the Group’s £10m revolving credit facility with HSBC plc (the “HSBC
Facility”) and to provide additional working capital to support the Group. The Group also announces
that HSBC has provided a new revolving credit facility to provide a £4m operational banking support
to the Group’s UK fixed wireless subsidiary QCL.
We thank Santander, BGF and HSBC for their continued support to the Group.
As stated last year, I am a strong believer that good corporate governance supports a group’s
long-term success. This is even more important for 2020 and beyond, given the speed of our
growth, the increased amounts of capital raised and the geographic spread and size of our
business. The structures, advisers and committees we have in place for establishing and
articulating the Board’s strategy and monitoring the performance of the Group’s management
continue to evolve.
Part of our governance regime is our continued regular communication with shareholders as our
strategy continues to progress. To this end, we have embarked on an inclusive investor relations
programme in 2020. This year the AGM will be held at 2.15pm on 21 May 2020 and such notice of
the AGM will be circulated to shareholders shortly.
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Bigblu Broadband plc | Annual Report and Accounts 2019 Strategic Report: Chairman’s Statement
Finally, I would like to thank Andrew Walwyn, his management team and all the staff in the Group for
their efforts in 2019. Everyone played their part in a demanding yet successful year in the Group’s
life. I, and the rest of the Board, fully recognise the uncertain nature that the COVID-19 virus brings
on a global scale and recognise that the team are working very hard to look after our existing
customers and support new customers requiring our service and so continue to look forward to the
remainder of 2020 with confidence.
Michael Tobin OBE
Chairman
26 March 2020
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Chief Executive Report
Overview
2019 was a pivotal year for the Company, and arguably the most
important year since listing - given it was the first period where
acquisition activity was minimal, and the importance of bolting
the last ten years together for future growth continued with the
the Company’s
integration of acquired businesses onto
operational platforms to underpin further organic growth.
We were pleased to launch 50 Mbps super-fast Satellite
products throughout our European Hubs during the period. This
cemented the Company’s leading position within the alternative
super-fast broadband industry, whilst expanding routes to market to
position the Company for strong organic growth in the current
financial year and beyond. Critical to our future growth remains new
satellite capacity – the first tranche of which is expected to
come on stream in October following the successful launch of
Eutelsat’s Konnect satellite in January 2020. We successfully
opened new operations in Greece and Hungary in the period
and more importantly, together with our network partners, we
have made good progress in connecting new customers in low
filled beam areas such as Southern Italy.
Our Australian business Skymesh, went from strength to strength
with year-on-year overall customer growth of c10% and of equal
importance, strong customer engagement with 40% of new
customers coming from word of mouth and a net promoter
score of 44. During the year Skymesh was also awarded the
Whistleout 2019 Best Satellite NBN Co provider. We further
reinforced our close working relationship with NBN Co as it
pro-actively extended the use of satellite in regional and remote
Australia.
in
Quickline, our fixed wireless operator
the UK, has
performed well since acquisition and we are now at the forefront of
broadband technology developments to deliver fixed wireless
services, with fibre-like performance. The market opportunity for
a fibre backed fixed wireless network roll-out has never been so
attractive with significant investment in the space, including
government support, which will mean many more homes and
businesses will get connected to next generation super-fast
and ultra-fast broadband sooner and cheaper than before. We
were therefore delighted to secure a £12m new equity and debt
funding package for Quickline in August 2019 to support the
build-out of its fibre backed fixed wireless infrastructure across
the UK in 2020. Since this funding was obtained the management
team has been strengthened and investment has been made in
new systems to support the future growth.
In Norway, we have been exceptionally busy launching the
Preferred Partner Program (“PPP”) in the Nordic region and this
is starting to gain good traction. In addition, we have had success
in attracting new customers and reducing churn following the
upgrade of towers in five regions across the country.
Preferred Partner Agreement
Our organic growth expansion was pleasing given
the
significant set-up costs and delays experienced throughout the
year due to operational difficulties within the partnerships between
Viasat and Eutelsat. These were completely out of our control but
resulted in us rebuilding all our operations in the affected
countries to transition into the PPP offering. In December 2017,
the Company signed an agreement with a joint venture between
responsible
Viasat and Eutelsat - Hybrid Retail Agreement. This covered
an initial five regions Spain, Poland and the Nordics (Norway,
this original agreement
Sweden and Finland). Under
Viasat and Eutelsat were
for all marketing
activities and owned the customers premises equipment. BBB was
responsible for supporting all needs of the customers including
sales activities, billings and collections via our multilingual IT
solution, contact centre,
installation network and channel
partners. In December 2018, BBB was awarded preferred partner
status with Eurobroadband Infrastructure (“EBI”) for the launch of
new European super-fast broadband services to consumers and
businesses across Europe with download speeds of up to
50 Mbps. Under this revised commercial arrangement, BBB
promotes and sells satellite broadband services while
managing all activities related to subscriber management including
installation, billing and support. Despite both contracts being with
Eutelsat and Viasat, they precluded selling both products in a
region and hence BBB chose to pivot into those services
that are the best for the customer and provided much greater
geographical coverage, albeit at a significant cost and disruption
to the business. We do not anticipate such material costs in the
future.
Importantly, while increasing upfront investment, the PPP offering
provides the Company with an increased geographic reach,
increased customer control, more attractive commission
payments and a better product offering.
The Company has ultimately benefited from being involved in the
strategic ambitions of two of the World’s largest satellite operators
and the Company expects to benefit significantly going forward
as its network partners launch new services across Europe and
further afield.
The most significant news events were the raising of the
funding from new and existing investors to support our UK fixed
wireless access ambitions with Quickline, and the completion of the
refinancing of the BGF and HSBC plc facilities with a new £30m
revolving credit facility with Santander UK, thus ensuring that the
Company is well funded with a stronger balance sheet going into
another period of growth.
Total Revenue
Total revenue including recurring airtime and other income
including equipment, installation sales and network support
increased by 12.2% to £62.1m (FY18: £55.4m). Revenue in
satellite was £49.8m (FY18: £40.6m) and revenue in fixed
wireless was £12.3m (FY18: £14.8m - which included additional
grant income recognised that was not repeated in FY19).
Recurring airtime revenue, defined as revenue generated from
the Company’s broadband airtime, which is typically linked to
contracts at £48.6m represented 78.1% of total revenue.
Adjusted EBITDA for the period was £10.2m (£11.7m after
IFRS 16 adjustment) representing an adjusted EBITDA margin
of 16.5% compared to £6.8m in FY18 and an adjusted EBITDA
margin of 12.3%, demonstrating the good progress made in
driving acquired businesses forward, the quality of the consumer
offering and the consolidation of certain hubs.
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Bigblu Broadband plc | Annual Report and Accounts 2019 Strategic Report: Chief Executive Report
Net organic customer growth in 2019 showed a year on year
increase of 9%. During the period, following transition to the
PPP program, we rationalised c.13k customers who were
utilising non-competitive network offers during the period. These
customers have either been disconnected or migrated to
other providers. This was a positive decision taken to move
away / migrate these customers onto alternate packages
(FY18 net organic growth c.3k with no migrations) - leaving
a closingcustomer base of c.110k compared to FY18 (c.113k).
Importantly, the Company met its total revenue and EBITDA
targets once again despite the challenges and set up costs
faced during the period. Average Revenue Per User (“ARPU”)
improved by 6% year on year to £43.80 (FY18: £41.50) and average
customer churn (excluding the rationalised customer base)
reduced to 20.5% (FY18: 21.9%).
Eutelsat and Viasat Relationships
In December 2018, we were selected as a preferred partner
(“PPP”) by Eurobroadband Infrastructure (“EBI”), a joint venture
between Eutelsat and Viasat, Inc. to offer super-fast satellite
broadband services across our European territories.
Previously we operated under a sales and marketing
agreement (the “Hybrid Retail Agreement”) with the European
joint venture company established between
broadband
Viasat, Inc. and Eutelsat Communications. The main changes
are summarised as follows:
Existing PPP agreement
Historic HRA
Agreement with
EBI – 51% Eutelsat 49%
Viasat
EBR – 51% Viasat 49%
Eutelsat
Branded
Bigblu
Viasat
typical customer, nowadays this is north of 50 Mbps and only
a combination of our satellite and fixed wireless solutions will
ensure that all customers can be served and not left on the other
side of the digital divide.
2020 has already seen the launch of Eutelsat’s Konnect
satellite which becomes operational in the last quarter of this
year with anticipated selling from September and activations
expected to commence in October, promising to deliver speeds
of 100Mbps. However, this is just the first of many launches over
Europe with Viasat 3 and Eutelsat’s VHTS coming on-line in 2022
offering even faster speeds of around 200Mbps and with combined
capacity to supply over 1 million households with broadband. The
sector is at a true inflection point where the satellite product now
matches (and sometimes) exceeds its terrestrial equivalent in
terms of speed.
Mirroring the improvements in satellite, we see our fixed
wireless platforms moving from strength to strength increasing their
footprints and
in speeds. Whilst we own our
infrastructure in Norway and the UK, we also offer virtual fixed
wireless solutions in Italy and Australia.
increase
Continued Underlying Organic Growth
Whilst the future is exciting, the focus remains firmly on
organic growth and the Company reported a 11% increase in
like-for-like revenue when compared
the prior period.
This increase was primarily driven by increased net new
customer additions, improving ARPU’s from customers as well as
further government and network support.
to
Working with our network partners is a key aspect in driving
organic growth in our existing and new markets especially as we
target low fill beams for new growth opportunities.
SAC Marketing
Incurred primarily by BBB
and recovered via up front
commission granted by
EBI earned for each new
activation
Customer premise
equipment
Supported via up front
commission granted by EBI
Provided by Viasat
Incurred primarily by Viasat
Acquisitive Growth
The Company maintains an active list of pipeline opportunities in
all jurisdictions and reviews acquisitions as appropriate.
In language / in market
sales
Installation services
Subscriber billings and
management
Provided by BBB
Provided by BBB
Accelerating Technology Evolution
Provided by BBB with
support from EBI
Provided by BBB with
support from Viasat
Products
Provided by BBB
Provided by BBB
Customer care
Provided by BBB
Provided by BBB
Logistics services
Provided by BBB
Provided by BBB
Countries
15
5
The move to PPP improved the product suite with increased
download speeds and extended data allowances for customers
across multiple markets but resulted in us rationalising 13k
customers. There continues to be ongoing discussions between
Eutelsat and Viasat on satellite capacity over Europe and we will
continue to navigate through these discussions to work with our
partners Eutelsat and Viasat as well as other network providers.
Strategy
is
the
to be
leading provider of alternate
Our strategy
super-fast broadband solutions in Europe and Australia. What is
extremely exciting
is changing
significantly and accelerating at pace, where in the past a
service of 30 Mbps was seen as an appropriate solution to a
the market place
that
is
in build, will usher
New satellites from our partners, which are fully funded and
already
in a completely different
satellite broadband proposition. From the final quarter of 2020, the
Company expects to be able to offer a fibre like service from
the sky, with 100 Mbps download speeds and unlimited data
allowances across key European markets. Furthermore from
2022, we expect to be able to offer our customers between 200
Mbps and 300 Mbps download speeds.
Our fixed wireless businesses are also benefiting
from
significant advances in technology, improving speeds and
throughput.
The Company has now demonstrated the first gigabit capable
network with a pioneering mmWave technology, utilising the
newly released 60 GHz spectrum. Importantly, all customers who
have been connected to the Company’s networks in Norway and
the UK within the last year are now able to be connected at up to
100 Mbps if desired.
Marketing
We use a digital-first strategy to both acquire new customers,
retain and up-sell (ensuring our customers are on the most
appropriate package) to our existing base. For customer
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acquisition, we target in-market prospects based on geography,
broadband speed and purchase intent. Channels used vary
depending on in-country results, blending Facebook, Google,
Bing and lead-generation partners in order to achieve our internal
KPI’s in terms of cost per lead and cost per activation. We
deploy a suite of engaging content from ad copy, through to static
display ads and video. Most important of all is word of mouth or
customer referral hence the importance of looking after our existing
customers.
visibility afforded by the high percentage of recurring revenues.
Our robust model and infrastructure continued to underpin growth in
customers and revenues per user. Whilst we are facing
satellite capacity constraints in certain markets, the timely launch
of the Eutelsat Konnect Satellite (launched in January 2020) will
significantly increase capacity in our core markets and also
provide enhanced speeds and bandwidths for customers.
Continued government support for connectivity also provides
scope for further demand for our alternative solutions.
Looking beyond the challenging global backdrop and capacity
shortages, the Board remains very convinced that there is plenty
of scope for the Company to take advantage of the long term
global growth opportunities. These include, but are not limited
to, the launch of new super-fast satellite broadband services
within the European arena, rolling-out next-generation fixed
further growth across Australia.
wireless networks and
Importantly, sales through partnership agreements have been
gaining strong traction through compelling consumer product
offerings and increased marketing spend.
In the current environment, whilst we are clearly dealing with
unprecedented events, we continue to monitor potential impacts
on the business. As a global business with customers in some
of the countries that have been most affected by COVID-19, we
continue to support staff and customers during these difficult
times. We develop products and solutions with our network
partners that will enable customers to operate as effectively as
possible, particularly at a time where increasing numbers of
customers are likely to be working from home. Against this
backdrop we are seeing a surge in customer demand across
most areas of the business as the need for fast broadband in the
home increases, especially in our target markets where the digital
divide exists. We continue to work with our installation partners to
provide this support to our customers.
The Board is working hard and taking action to mitigate any
COVID-19 impacts so as to manage any short-term disruption
to the business or for customers.
The investment in global systems including our Cloud Based IT
platform and telephony system is significantly reducing risks to the
business and assisted in supporting our customers. In addition,
the Board’s current view is that the business has strong recurring
revenues of c.80%, strong network partners and installer
support. We also enjoy excellent relationships with our main funding
partners in Santander and HSBC. Whilst the Board recognise
that it is difficult to predict with absolute certainty the impact
COVID-19 will have on the business and indeed our customers,
the Board recognises the robust nature of the business, including
but not limited to, delivering a product existing and potential
customers urgently need, strong underlying recurring revenue,
ready access to additional funding and underlying strong cash
generation underpins future growth prospects.
Whilst there may be short-term challenges in the current climate
created by COVID-19, the Board believes that the Company
continues to be well positioned and it is therefore confident in
the long-term prospects for the business. The Company aims
to continue leveraging its increased scale while also benefiting
from improved management systems to ensure the Company can
continue to deliver shareholder value.
Continued Government Support
We remain focused on helping governments across Europe
achieve their stated targets to deliver ‘universal broadband
coverage’ with download speeds of at least 30 Mbps by 2020 and
coverage to more than 50% of households with speeds of at least
100 Mbps by 2025.
such as
technologies
satellite and
We remain convinced that it will be difficult for governments to
meet these challenging targets without the use of super-fast
alternative
fixed
wireless broadband. Indeed, many governments have already
launched ‘intervention schemes’. These are aimed at artificially
stimulating the market and educating consumers about the options
available to them - given that fixed fibre broadband is unlikely to
become a reality for many in the foreseeable future. Across Europe,
there are now government funded support schemes in the UK,
France, Germany, Spain and Hungary where the hardware and
installation costs of getting online with satellite or fixed wireless
are subsidised.
A similar scheme exists in Australia, where since entering the
Australian satellite broadband market in March 2017 following
the acquisition of BorderNET, the Company commanded a 50%
market share of net new adds under the Government funded
NBN Co scheme during the last six months of the financial period.
This performance has continued into Q1 FY20. Looking forward,
other countries and governments are expected to launch similar
schemes in the near future.
Post Balance Sheet Events
On 16 December 2019 we announced the agreed new £30m
revolving credit facility with Santander Bank UK plc. This will be
used to replace the two tranches of loan notes totalling £12m
issued in 2016 by BGF (the “Loan Notes”) and the Group’s £10m
revolving credit facility with HSBC plc (the “HSBC Facility”) and
to provide additional working capital to support the Group. This
leaves a redemption premium of £5.5m repayable in 2024 and
BGF with a matching option on 4.9m shares at 112.5p and an
option on 1.8m shares at 135.0p. The Group also announced that
HSBC plc will continue to provide a £4m revolving credit facility
and operational banking support to the Group’s UK fixed wireless
subsidiary Quickline.
lead a £6m
Additionally, Quickline was selected
Government-backed project to boost rural connectivity in North
Yorkshire, England’s largest rural county.
to
Current Trading and Outlook
The Company has now successfully positioned itself at the
forefront of the alternative super-fast broadband industry.
Our exciting product portfolio and expanding
to
market mean the Company is now one of the largest and most
recognised companies in the industry.
routes
During the current year to date, the Company continued to
grow its customer base while still benefiting from the strong
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Bigblu Broadband plc | Annual Report and Accounts 2019
Going Concern
The Directors have prepared and reviewed projected cash
flows for the Company, reflecting its current level of activity and
anticipated future plan for the next 12 months. The Company
is currently loss-making, mainly as a result of amortisation and
including additional depreciation.The
exceptional charges
business continues to grow the number of users in a number
of key
the
short-term business model of the Company by which the
Company becomes profitable and delivers a return on the
investments.
target markets and continues
review
to
Strategic Report: Chief Executive Report
The latest management information in terms of volumes,
debt position, ARPU and churn are in fact showing a strong
position compared to prior year and budget and indeed the
business is seeing a significant increase in demand across all main
territories of the business as a result of government’s response to
COVID-19 resulting in the remote working of individuals across
our key territories. Accordingly, we continue to adopt the going
concern basis in preparing these results.
While we are yet to understand the full impacts of COVID-19, the
Board has identified the key risks and these include,:
•
•
•
•
•
Slower revenue growth, EBITDA and cash generation if
sales activities, installations or activations decrease over the
period
Reduced ARPU if market pressures result in discounting
customer products to support them
Increased churn could be experienced if services levels
are not as expected due to volumes of traffic, personnel
shortages and capacity constraints
Increased bad debt as customers suffer income loss
Potential banking covenant breaches if profit or cash
minimum targets not met
The Board also recognises a number of significant mitigating
factors that could protect the future going concern of the
business. These include:
•
•
•
•
•
•
The current situation has resulted in a significant increase in
demand for our products as the global workforces are forced
to work from home
Super-fast broadband is already an essential utility for
many and even more so now, it is likely to be one of the last
services that customers will stop paying for
Increased self-install / tripods to offset any installation delays
Reduced CAPEX / discretionary spend
Support from Network Partners for the business and
customers
Strong support from banking partners
Andrew Walwyn
CEO
26 March 2020
in
The Board has conducted stress tests against our covenants and
business valuation metrics to ensure that we can manage the
risks that COVID-19 presents. We recognise that a number of
our business activities could be impacted, and we have reflected
these
including supply chain disruptions,
closure of hubs, delays in sales or installations, earnings, or cash
generation. By modelling sensitivities in specific KPIs such as
volume of activations, churn, ARPU, margin, overhead and
FOREX, management is satisfied that it can manage these risks
over the going concern period.
this analysis
Furthermore, management has in place and continues to develop
robust plans to protect EBITDA and cash during this period of
uncertainty and disruption. Under this plan identified items include
reducing discretionary spend, postponing discretionary Capex,
reducing marketing, freezing all headcount increases, working
with suppliers on terms particularly our network partners and
ultimately seeking relief, as appropriate, from the various forms of
Government support being put into place.
As a consequence, despite the obvious near-term challenges
facing the business, the Board believes that the Company is well
placed to manage its business risks and longer-term strategic
objectives, successfully.
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Impact - IFRS 15 has been adopted without any material impact
on comparative numbers. The new PPP contract income stream,
entered into post 01 December 2018, has been accounted for
under IFRS 15.
IFRS 16 – Leases - is effective for annual reporting periods
beginning on or after 1 January 2019, with earlier application
permitted (as long as IFRS 15 is also applied). This is the chosen
route of BBB.
IFRS 16
to report
The objective of
that
is
(a) faithfully represents lease transactions and (b) provides a basis
for users of financial statements to assess the amount, timing and
uncertainty of cash flows arising from leases. To meet that
objective, a lessee should recognise assets and liabilities arising
from a lease.
information
IFRS 16 introduces a single lessee accounting model and
requires a lessee to recognise assets and liabilities for all leases
with a term of more than 12 months, unless the underlying asset
is of low value. A lessee is required to recognise a right-of-use
asset representing its right to use the underlying leased asset
and a lease liability representing its obligation to make lease
payments.
Impact - BBB has chosen to use the modified retrospective ap-
proach to adoption which means there are no restatements to the
prior year figures. The impact of IFRS 16 on FY18 has had no
change as we have adopted the modified retrospective approach
permitted by the standard. FY20 impact is currently expected to
be in line with FY19, at around £1.5m. A summary of FY19 is as
follows:
•
•
Statement of Comprehensive Income – increase in adjusted
EBITDA from £10.2m to £11.7m
o EBITDA increased by £1.5m representing the removal
of operating leases reported
o Depreciation increased by £1.2m representing the
annual charge for all operating leases
o Non cash interest charge increased by £0.3m
Statement of Financial Position
o
Fixed assets increased by net book value of £5.1m
o A corresponding £5.1m increase in finance leases, with
£0.7m being
than 12 months and £4.4m
representing the period greater than 12 months for all
lease commitments
less
Financial Review
2019 was characterised by an underlying strong
trading
performance across the Company’s key indicators. This is
discussed below, after an explanation of changes to the
presentation of figures and the Group’s accounting policies
following
International Financial
Reporting Standards (“IFRS”).
the adoption of relevant
Changes in presentation and accounting policy
These are the first full year results which are presented following
the adoption of IFRS 9, IFRS 15 and IFRS 16.
IFRS 9 – Financial Instruments - specifies how an entity
should classify and measure financial assets, financial liabilities,
impairment provisions and contracts to buy or sell non-financial
items. IFRS 9 requires an entity to recognise a financial asset
or a financial liability in its statement of financial position when
it becomes party to the contractual provisions of the instrument.
At initial recognition, an entity measures a financial asset or a
financial liability at its fair value plus or minus, in the case of
a financial asset or a financial liability not at fair value through
profit or loss, transaction costs that are directly attributable to the
acquisition or issue of the financial asset or the financial liability.
These two classification categories replace the multiple models
and classification in place under the previous IAS 39.
Impact - IFRS 9 has not resulted in any material financial
changes but additional disclosures
IFRS 15 - Revenue from contracts with customers - establishes
the principles that an entity applies when reporting informa-
tion about the nature, amount, timing and uncertainty of reve-
nue and cash flows from a contract with a customer. Applying
IFRS 15, an entity recognises revenue to depict the transfer of
promised goods or services to the customer in an amount that
reflects the consideration to which the entity expects to be enti-
tled in exchange for those goods or services. To recognise rev-
enue under IFRS 15, an entity applies the following five steps:
in
1.
2.
the performance obligations
identify the contract(s) with a customer;
the contract.
identify
Performance obligations are promises in a contract to
transfer to a customer goods or services that are distinct;
3. determine the transaction price. The transaction price is
the amount of consideration to which an entity expects to
be entitled in exchange for transferring promised goods or
services to a customer. If the consideration promised in a
contract includes a variable amount, an entity must estimate
the amount of consideration to which it expects to be entitled
in exchange for transferring the promised goods or services
to a customer;
5.
4. allocate the transaction price to each performance obligation
on the basis of the relative stand-alone selling prices of each
distinct good or service promised in the contract;
recognise revenue when a performance obligation
is
satisfied by transferring a promised good or service to a
customer (which is when the customer obtains control of that
good or service). A performance obligation may be satisfied
at a point in time (typically for promises to transfer goods to
a customer) or over time (typically for promises to transfer
services to a customer). For a performance obligation
satisfied over time, an entity would select an appropriate
measure of progress to determine how much revenue should
be recognised as the performance obligation is satisfied.
12
Bigblu Broadband plc | Annual Report and Accounts 2019
Financial Review
and a charge relating to the adoption of IFRS 16 of £1.2m.
Strategic Report: Financial Review
This is summarised below:
FY 19
£000
FY18
£000
Comments
Base depreciation
3,365
3,523
Useful life of Fixed
wireless assets review
adjustment
-
3,106
To align group policy
IFRS 16 impact
1,245
-
Early adoption
Reported depreciation
4,610
6,629
Amortisation decreased slightly to £7.4m in FY19, from £7.5m in
FY18, mainly due to the completed amortisation of acquisitions
made in 2016, which are written off over a 24-month period,
offset against increased amortisation for acquisitions completed
in FY18 and FY19, and an impairment of previous acquisitions
of £3.3m.
The Company incurred charges identified as exceptional in
nature during the period, including costs related to fundraising,
acquisitions, business consolidations and the initial start-up costs
associated with partnership agreements as the business pivoted
into the PPP agreement with Eutelsat and are described in more
detail below.
Interest costs increased slightly during the year to £2.6m (FY18:
£2.2m) as a result of increased interest charges for the draw
down on the Revolving Credit Facility (“RCF”) with HSBC plc
during the period, which increased by £3.3m to £8.2m, and
finance charges on IFRS 16 adoption of £0.3m.
FY19
£000
Comments
FY18
£000
Underlying Interest
2,340
2,167
Increase in RCF
IFRS 16 impact
282
-
Early adoption
Reported Interest
2,622
2,167
This RCF was repaid in full in December 2019 other than the
redemption premium which is not due until May 2024. This was
replaced by the Santander facility announced in December 2019.
The difference between the charge and the interest paid in the
cash flow statement relates to the accrued redemption premium
on the BGF debt; as at the end of the financial year a total of
£2.4m has been accrued out of a total £5.5m. In accordance with
previous years the redemption premium is included within other
creditors and not net debt.
The tax credit arises from the release of deferred tax on
amortised customer base intangible assets.
Total revenue increased by £6.7m to £62.1m, an increase of
12.2% (FY18: £55.4m), driven by organic growth as well as the net
impact of acquisitions and disposals in the previous period
impactingduring the current period. Constant currency like
for like revenue growth was 11%, after adjusting for customer
rationalisation (FY18: 8%) as the Company continued to add net
new customers during the year, at an improved rate, an improved
average revenue per user (“ARPU”) and an increase in other
income including installations, services, network support and
grants during the period.
Total customers at the period end were c.110k (FY18: c113k).
During the year we added c.9k net adds (FY18: c.3k) and we
rationalised c.13k customers (returned to networks or cancelled
from networks). This compares with FY18 as follows:
FY19
£000
FY18
£000
Comments
Opening base
113
100
Acquisition
Gross Adds
1
33
21
28
FY 18 Italy and Germany
18% increase
Churn
(24)
(25)
Reduced as percentage of base
Base Manage-
ment
(13)
(11)
FY18 disposal of fibre customers
in Australia. FY19 rationalisation of
customers following move to PPP
Closing Base
110
113
The sales revenue mix across the Company at the end of the
period was c.80% Satellite and c.20% Fixed Wireless (FY18
c.72% Satellite and c.28% Fixed Wireless).
ARPU, calculated by dividing total revenues from all sources by
the average customer base, increased in 2019 to £43.80 per
month (FY18: £41.50) as we sought to offer better packages to
customers with increased revenue from services, installations,
network support and grant income.
Churn rates (defined as the number of subscribers who
discontinue their service as a percentage of the average
total number of subscribers within the period, excluding the
rationalisation of customers), decreased
to an average
annualised churn rate of 20.5% in FY19 (FY18: 21.9%). In the
first three months of FY20 the churn rate has reduced further
supporting the importance of regular review of our customers
tariffs and ensure where appropriate we migrate customers to up
to date product offerings.
Gross profit margins improved to 43.8% FY19 (FY18: 40.6%) as
a result of improved product sales mix and additional high margin
other income, including data packages and network support.
Distribution and Administrative Expenses, pre items identified
as exceptional in nature, reduced to £15.5m (FY18: £15.7m)
representing 25.0% of revenue (FY18: 28.3%) due to reduction
across most categories as hubs have been consolidated. This
reduction is despite an increased marketing investment in the
period from £1.2m to £1.9m, representing 3% of revenue
(FY18: 2%).
Depreciation decreased to £4.6m in FY19 from £6.6m in FY18.
In FY18 there was an additional charge of £3.1m following a full
review of the useful economic life of fixed wireless assets in the
UK and Norway, offset by increased depreciation charges in 2019
13
Group results
Adjusted EBITDA (before share based payments and specific
items relating to M&A, integration and the establishment of the
network partnerships) for the full year increased 50% to £10.2m
(FY18: £6.8m). A reconciliation of the adjusted EBITDA to
statutory operating loss of £5.6m (FY18: £13.0m loss) is shown
below:
AUDITED
AUDITED
12 months to
12 months to
30 November
30 November
Adjusted EBITDA
IFRS 16 adoption
Revised adjusted EBITDA
Depreciation - Core
Depreciation – IFRS 16
Amortisation
Impairment charge
Adjusted EBIT
Share based payments
Exceptional items relating to M&A, integration
and the establishment of the network
partnerships (see 4) below)
Statutory operating loss
2019
£000
10,208
1,487
11,695
(3,365)
(1,245)
(4,071)
(3,286)
(272)
(437)
(4,921)
(5,630)
) c
£0.4m (FY18: £1.9m) of specific set up costs incurred
in relation to the agreement with Eutelsat and costs
associated with the HRA agreement with Viasat. These
one off costs were incurred in setting up business
operations in Greece, Hungary, including statutory
entities, legal, telecommunications licenses, websites,
rebranding, finance, IT and identifiable headcount cost
incurred in going live in these territories.
Adjusted EBITDA and revised Adjusted EBITDA
The combination of increasing sales of new products and oper-
ational improvements resulted in adjusted EBITDA growing to
£10.2m from £6.8m in FY18 a 50% increase year on year. In ad-
dition, due to the adoption of IFRS 16 we present a reconciliation
below between adjusted and revised adjusted EBITDA:
EBITDA
Audited
Audited
12 months to
30 November
2019
£000
12 months to
30 November
2018
£000
Growth
Adjusted
10,208
6,806
50%
Consistent with 2018
presentation and
accounting policy
Changes due to
accounting policy
2018
£000
6,806
-
6,806
(6,629)
-
(7,491)
-
(7,314)
(395)
(5,290)
(12,999)
- IFRS 16
1,487
-
Company Statutory Results and EBITDA Reconciliation
1. Adjusted EBITDA
(before share based payments,
depreciation, intangible amortisation, impairment of goodwill,
acquisition, employee related costs, deal related costs,
start-up costs and IFRS 16 adjustment) was £10.2m (FY18:
£6.8m)
2. Depreciation decreased to £4.6m in FY19 from £6.6m in
FY18. In FY18 there was an additional charge of £3.1m
following a full review of the useful economic life of fixed
wireless assets in the UK and Norway, offset by increased
depreciation charges in 2019 and a charge relating to the
adoption of IFRS 16 of £1.2m.
3. Total amortisation decreased slightly to £7.4m in FY19,
from £7.5m in FY18. Underlying amortisation reduced
significantly (down 45% on FY18) mainly due to the completed
amortisation of acquisitions made in 2016, which are
written off over 24-month period, offset against
amortisation for acquisitions completed in FY18 and FY19.
During the year we undertook a full review of acquisitions
and the carrying value of Goodwill. A decision was made to
impair two UK acquisitions by £3.3m as they were fully
consolidated within the underlying books and records of
Bigblu Operations, the core UK trading entity and no
longer had separate brands, websites, invoicing or indeed
communications.
Consistent with 2019
presentation and
accounting policy
Revised
Adjusted
11,695
6,806
72%
Revenue and Adjusted EBITDA in FY19 and the comparative
period is segmented by the following categories as follows:
Revenue
Adjusted EBITDA
Audited
Audited
Audited
Audited
12 months
to
12 months
to
12 months
to
12months to
30 November 30 November
30 November
30 November
2019
£000
19,119
28,078
14,891
-
-
2018
£000
16,406
23,779
15,166
-
-
62,088
55,351
2019
£000
6,474
4,388
2,807
2019
£000
2,462
6,524
1,505
(3,461)
(3,685)
1,487
11,695
-
6,806
UK
Europe¹
Australia
Plc and Central
Costs²
IFRS 16³
Total
¹Europe includes Norway, France, Ireland, Poland, Italy and Germany, Sweden, Finland, Poland and Spain
²Central costs include finance, IT, marketing and plc costs
4. The Company incurred significant expenses in the period,
that are considered exceptional in nature and appropriate to
identify. These comprise:
) a
£2.5m
(FY18: £2.4m) of net acquisition, deal,
legal and other costs relating to fundraising and M&A
activities, during the period. These costs comprise
mainly professional and legal fees. Such identifiable costs
included the successful fundraise costs for Quickline
£2.0m (FY18: £1.0m) employee
redundancy
have
termination and
hubs
or
consolidated.
costs where
agreed
divisions
be
been
to
) b
14
Bigblu Broadband plc | Annual Report and Accounts 2019
The Company’s total customer base of c110k as at 30 November
2019 was split as follows:
the future growth (£0.7m). Consequently, EBITDA
reduced by c.£2.9m. Churn in the Fixed Wireless
base reduced to 18% in FY19, from 20% in FY18
Strategic Report: Financial Review
•
•
•
UK: 20% (FY18: 23%)
Europe: 44% (FY18 49%)
Australia: 37% (FY18: 28%)
The above analysis shows some clear swings year on year from
both a revenue and EBITDA prospective, and is explained as fol-
lows
1. UK / Europe
) a
) b
from FY18), and
the new PPP customer contract
Revenue in satellite increased mainly due to organic
customer growth and additional revenue associated
with
in FY19
this combined with
(up £9.4m
reductions
improved gross margins and cost
increased EBITDA in FY19 (up c.£4.8m from FY18).
Churn in satellite base reduced to 22% in FY19, from
27% in FY18 PPP revenue is all received in the UK
and reallocated, as appropriate to Europe based on
activations.
Revenue
in FY19 reduced by
c.£2.4m due a one-off benefit of £2.2m in relation to
additional grant income recognised in FY18 and
churn
(£0.2m).
Furthermore, post the refinancing of Quickline the
management
team have been strengthened and
investment has been made in new systems to support
in fixed wireless
the Nordic
increasing
region
in
2. Australia – The reduction
in revenue was a direct
consequence of the disposal of the Fibre business in FY18
which impacted revenue in FY19 by £0.8m. This was
offset by increased revenues of £0.5m from the continued
growth every month in customer numbers. Importantly,
EBITDA improved by 87% following the disposal of the fibre
business and the cost control actions taken subsequently.
3.
IFRS adjustments - In FY19 there was an IFRS 16 adjustment
of £1.5m.
is
Average revenue per user (“ARPU”) increased by c6% to
£43.80 per month in FY19 to (FY18: £41.50). Customer average
annualised churn was 20.5% (FY18: 21.9%) in the period.
Whilst customer churn
line with management
expectations at
this stage, we are confident churn will
continue to reduce as we continue to invest in our customer
engagement programmes, our network suppliers offering more
compelling services and significant improvements in our customer
support platforms come on-stream as planned. Churn has
reduced in the main due to the migration of certain customers to
better network packages and the launch of PPP in core regions.
in
Performance against Key Performance Indicators
The Group utilises a number of Key Performance Indicators (‘KPI’s’) to measure performance against our strategy. A description of
these KPI’s and performance against them is set out below.
KPI
2019
2018
Description
Customer Base
110,041
113,520
Represents total gross organic connections plus acquisitions
less disposals, less lost customers (churn) and base
management since inception.
2019 performance
(3%) change
Customer Net Organic
Connections
10,536
2,983
Represents Gross organic connections less lost customers
(churn)
Significant increase in performance YOY – c.250% increase
Customer Net Connects
(3,479)
13,280
Represents net organic connections plus acquisitions less
disposals, churn and base management in the period.
Whilst customer net organic connections grew significantly
there was base management of c13k whereas FY18
included c23K M&A
Revenue
£62.1m
£55.4m
Revenue represents that element of billings recognised in
the period, including from bases or companies acquired from
their date of acquisition and government grants
Includes one acquisition this year generating revenues of
£0.2m. Remainder comes from organic and acquisitions
growth in 2018 annualised and government grants
Organic Revenue Growth
15.5%
8.2%
Adjusted EBITDA
EBITDA %
£11.7m
18.9%
£6.8m
12.3%
Operating Cash Flow
£7.2m
£4.9m
Organic revenue growth compares current and prior period
revenue, treating acquired businesses as if they had been
owned for the relevant period in both years on a constant
currency basis
Earnings before share based payments, depreciation,
intangible amortisation, impairment costs, acquisition costs,
one-off employee related costs, deal related costs and
start-up costs is the measure of the Group’s operating
performance. It evaluates performance without factoring in
financing decisions, accounting decisions or tax
environments or provisions for potential legal costs, share
based payments, acquisition costs and fund-raising fees.
Operating cash flow relates to the amount of cash generated
from the Group's operating activities and is calculated as
follows: Profit/(Loss) before Tax adjusted for Depreciation,
Amortisation, Share Based Payments and adjusting for
changes in Working Capital and non-cash items.
Continued growth in current year, impacted by increased
churn in core markets and delays in JV
Includes contributions from one acquisition this year.
Remainder comes from current year organic and acquisitions
in 2018 annualised. £1.5m due to accounting policy change,
being adoption of IFRS16 Leases.
Operating cash flow improved due to increased EBITDA and
working capital management.
Free Cash Flow
(£3.9m)
£1.1m
Cash (used)/generated by the Group after investment in
capital expenditure and servicing debt.
Free Cash Flow declined in year mainly due to increase
capital expenditure and interest payments.
EPS
(13.9p)
(25.8p)
Earnings per share (EPS) is the portion of a Group's profit
allocated to the weighted average of each outstanding
share, allowing for the May share issue and capital structure
change of 15 shares for each 1.
EPS during the year was loss of 13.9p in 2019 compared to
a loss of 25.8p in 2018
15
Operating and Free Cash Flow
The Group delivered a revised adjusted EBITDA in the year of
£11.7m after adoption of IFRS 16 (2018: £6.8m). Operating cash
flow including M&A (Mergers and Acquisitions) related costs
and working capital movements was £7.2m inflow (2018: £4.9m
inflow), which represents a conversion of 67% (2018: 72%) of
adjusted EBITDA.
Interest paid in the period amounted to £2.1m (FY 2018 £1.5m)
and the Group received approximately £3.6m from the sale of
30.3% of the share capital of the Quickline Communications
business and other bank support of £3.3m (FY 2018 £0.4m)
which enabled it to invest in further growth. At 30 November
2019, the Group had cash in the bank of £6.0m (2018 £5.1m).
Operating analysis – isolating impact of M&A and exceptional
items
As a result of the changes to adjusted EBITDA and the Cash gen-
erated by operations we also set out below a comparison of the
ratio under the old and new basis
Cash generated by operations / adjusted EBITDA
2019
2018
As reported for 2018 presentation and accounting policy
Consistent with 2019 presentation and accounting policy
%
67
62
%
72
72
2019
£000
(5,630)
17,325
2018
£000
(12,999)
19,805
11,695
6,806
(2,431)
(2,417)
Using the new basis (due to the adoption of IFRS 16), the
cash conversion from operations has reduced by 10 ppts
being 5 ppts on like for like basis and 5 ppts impact from IFRS 16
increasing EBITDA. This reduction is due to the 50% increase in
adjusted EBITDA £10.2m (FY18: £6.8m) and cash generated from
operating activities increasing by 48% to £7.2m (FY18: £4.9m),
which subsequently reduces the cash conversion percentage.
(1,999)
(980)
Underlying Cashflow performance
Operating Loss from Continuing Operations
Add back: non-cash items and M&A related costs
Adjusted EBITDA
Fundraise, legal and related costs associated with acquisition and
disposal activity
Employee related costs associated with consolidations in the
regions
Partnership investment start-up costs
Other cash flow items including working capital and foreign
exchange variances
Operating Cash Flow
Interest paid
Tax Paid
Capital expenditure
Free Cash Flow
(626)
558
7,197
(2,144)
-
(8,913)
(3,860)
(1,893)
3,354
4,870
(1,478)
(18)
(2,282)
1,092
Statutory Cash flow Analysis
Operating cash flows improved to £7.2m in FY19 (FY18: £4.9m)
in an improvement of 48% reflecting in the main an improvement
in Adjusted EBITDA. This results in an operating cash flow to
adjusted EBITDA (pre IFRS 16 adjustment) conversion of 62%
(FY18: 72%).
In terms of working capital, during the year we have had great
support from our main airtime suppliers and we will continue to
work with them to ensure that trading and payment terms are
appropriate alongside marketing and product support
to
ultimately ensure that the customer continues to get better
product offerings.
Tax and interest paid increased to £2.1m in FY19 from £1.5m in
FY18 following the increase in the RCF facilities during the year
and the interest element in relation to the adoption of IFRS 16
(£0.3m)
The net summary of the above is an Equity free cash outflow to
(£3.9m) in FY19 from a £1.1m inflow in FY18 and is summarised
as follows:
Consistent with 2018 presentation
and accounting policy
Changes due to accounting policy
IFRS 16
Consistent with 2019
presentation and accounting policy –
UNDERLYING
Operating Cash Flows¹
Interest and Tax
Purchase of assets
Equity free cash flow (outflow)/inflow
Unaudited
12 months to
30 November 2019
£000
Audited
12 months to
30 November 2018
£000
6,915
4,870
42%
282
7,197
(2,144)
(8,913)
(3,860)
-
4,870
48%
(1,496)
(2,282)
1,092
¹Underlying Operating Cash flows is before interest, tax and exceptional items relating to M&A, integration costs
and investment in network partnerships
16
identify underlying cash generation within
The underlying cash flow performance analysis seeks to
clearly
the
Company and separately identify the cash impact of M&A activities,
identified exceptional items and the treatment of IFRS 16 and is
presented as follows:
Audited
12 months to
30 November
(Pre IFRS 16)
IFRS 16
Impact
Audited
12 months to
30 November
Audited
12 months to
30 November
2019
£000
10,208
-
10,208
2,426
(1,518)
2019
£000
1,487
1,487
-
24
11,116
1,511
(1,862)
(8,913)
(282)
-
341
1,229
(3,337)
(2,093)
-
-
(5,089)
1,229
(865)
-
6,876
(1,229)
922
-
2019
£000
10,208
1,487
11,695
2018
£000
6,806
-
6,806
2,426
2,824
(1,494)
12,627
(2,228)
7,402
(2,144)
(8,913)
1,570
(3,337)
(2,093)
(3,860)
(865)
5,647
922
(1,496)
(2,282)
3,624
(5,152)
2,620
1,092
(13,667)
14,190
1,615
Underlying adjusted EBITDA
IFRS 16 adoption
Revised underlying adjusted
EBITDA
Underlying movement of
working capital
Forex and non-cash
Underlying operating cash
flow before interest, tax
Capex and exceptional
items
Tax and interest paid
Purchase of Assets
Underlying free cash flow
before exceptional and
M&A items
Cash Exceptional items
Cash impact of M&A Activity
Underlying free cash flow
after exceptional and M&A
items
Investing activities
Financing activities
INCREASE IN CASH
BALANCES
1
2
3
4
5
6
7
8
9
10
1.
is shown as an adjusted
IFRS 16
item between
underlying adjusted EBITDA and revised underlying adjusted
EBITDA. The £1.5m is offset by £1.2m in Financing
activities and £0.3m in non - cash interest. The net impact
therefore eliminates to zero on the increase in cash balances.
2. Underlying movement
in working capital was a
benefit of £2.4m (FY18: £2.8m). This
is despite a
precautionary measure to increase stock by £2.1m towards
the end of the year to support the PPP growth strategy.
Bigblu Broadband plc | Annual Report and Accounts 2019 Strategic Report: Financial Review
Working capital benefitted from an increase in creditors as a
result of the agreed deferred payment of £3.2m for PPP kit.
an outflow of £3.9m (FY18: inflow £1.1m)
Net debt and Cash
3. Forex and non-cash outflow of £1.5m (FY18: Outflow £2.2m)
relate to the exchange movement in the Condensed
consolidated statement of comprehensive income and the
Condensed consolidated statement of financial position,
as well as costs/income where there is no impact on
operating cashflow.
4. This resulted in an underlying operating cash flow before
Interest, Tax, Capital expenditure and Exceptional items of
£12.6m (FY18: £7.4m), and an underlying operating cash
flow to EBITDA conversion of 123.7% (FY18: 108.7%).
Cash
Debt
Net Debt
Audited
12 months to
30 November
2019
Audited
12 months to
30 November
2018
£000
5,989
(20,187)
(14,198)
£000
5,067
(16,979)
(11,912)
5. Tax and interest paid was £2.1m (FY18: £1.5m) with the
difference to the condensed consolidated statement of
comprehensive income being accrued interest of £0.5m.
6. Purchase of assets in FY19 were £8.9m. These purchas-
es covered the rental equipment of £5.5m, fixed wireless
investment of £2.1m, as well as installations and IT costs of
£1.3m.
7. Cash Exceptional items of £3.3m (FY18: £5.2m) is net of
non-cash exceptional items including provisions made in
accordance with IAS 37 which are expected to be incurred
in 2020.
8. Cash impact of M&A activity was an outflow of £2.1m
(FY18: £2.6m inflow) and includes the £2.0m deferred
consideration paid to previous owners of Quickline (UK
£2.0m) and Sat Internet (Germany £0.2m) - it was accrued
in 2018 and reversed in 2019 with the majority relating to the
payment to Quickline for exceeding their set performance
criteria.
9. Purchase of intangibles in FY19 was £0.7m compared
to £1.5m in FY18 due to less M&A activity. FY19 consists
of Software development costs of our Pathfinder project
(£0.2m). FY18 covered both the Italian and German assets
acquired at acquisition.
10. In addition, there were purchase of investments in FY19
relating to the acquisition of JHCS (£0.2m) compared to
£8.2m in FY18 which related to the acquisitions of the Italian
and German businesses.
a.
In FY19 the major financing activities related to the:
•
•
•
Company draw down of an additional £3.3m
from the RCF with HSBC plc to support the
deferred consideration payments to QCL (£2.0m)
and Italian and German businesses after 1 year of
performance.
£3.6m, net, was received due to the part disposal
(30.3%) to new Shareholders of Quickline.
Principal elements of lease payments in relation to
IFRS 16 adoption (Outflow £1.2m)
b.
In FY18 the major financing activities related to:
•
•
The share issue for £12m to fund the acquisitions
of the Italian and German businesses, offset by
£0.1m of costs.
The drawdown of £0.4m from the RCF and the
receipt of £1.5m in cash from the acquisitions.
This resulted in an underlying Free Cash Flow in the year being
Net debt increased by £2.3m in the period to £14.2m from £11.9m.
Cash increased by £0.9m and debt increased by £3.3m. Debt
increased following drawdowns of the RCF facility with HSBC plc
which were required to support the purchase of fixed assets of
£8.9m (FY18: £2.3m) and support Quickline’s earnout payment of
£2m following successful post acquisition performance.
The table above excludes the lease liabilities of £5.7m recognised
for the first time in 2019 after the adoption of IFRS 16. Including
this amount would give a total net debt of £19.9m and a ratio of
net debt to adjusted EBITDA of 1.70x. For covenant reporting this
has no impact.
Opening Net (Debt) / Cash
(11,912)
(13,127)
2019
£000
2018
£000
Facilities Received
Debt on acquisition
Facilities Repaid
Movement in Cash
Movement in Net Debt
Closing Net Debt
(3,350)
-
142
922
(2,286)
(14,198)
(400)
(400)
400
1,615
1,215
(11,912)
Applying our bank’s adjusted measure of financial leverage, the
Group’s year-end net debt to EBITDA ratio was 1.39x, reducing
from 1.75x at the previous year-end.
Net cash and cash equivalents
Bank loans
BGF loan
Other loans / Finance Leases
Net Debt
Adjusted Net Debt / EBITDA
Capital expenditure
2019
£000
5,989
(8,250)
(11,728)
(209)
(14,198)
1.39x
2018
£000
5,067
(4,900)
(11,728)
(351)
(11,912)
1.75x
Purchase of assets of £8.9m in FY19, excluding IFRS 16
adoption (£5.2m), compares
the
Company invested in providing PPP customers with equipment
c£6.5m, including installation of £1.0m (FY18: Nil), previously
supplied direct by networks. In addition, the Company invested
£2.1m (FY18: £1.2m) in its fixed wireless infrastructure and IT
development costs.
in FY18 as
to £2.3m
17
Taxation
The reported tax credit in the year was £231k (2018: £1,870k
credit) against a reported pre-tax loss of £8.3m (2018: £15.2m).
The underlying effective tax rate measured against adjusted loss
before tax is 19% (2018: 19%).
Creditor days increased to 120 days from (FY18: 107 days)
due to extended terms from our airtime providers and agreed
payments to a key supplier in Australia in respect of the disposal
of the fibre business.
Balance Sheet
There was a step change in the balance sheet following the
investment in capital expenditure during the year to support
the PPP roll out in Europe, the continued investment in fixed
wireless and the impact of the adoption of IFRS 16. The changes are
highlighted as follows:
Fixed Assets have increased in the year to £15.9m (FY18:
£5.5m), following a planned capital expenditure investment as
a direct result of a transition out of the HRA (CAPEX incurred
by Viasat) to the PPP (CAPEX incurred by the Company). The
main components of the £10.4m increase include the purchase
of rental equipment of £5.5m (c.17k customers at £310 each),
fixed wireless investment of £2.1m and the adoption of IFRS 16
creating a right to use asset (£5.2m), adjusted by depreciation
provided in the year (£3.4m) and foreign exchange movements.
to £29.4m
Intangible Assets decreased
(FY18: £36.1m)
following amortisation charges (£4.1m) and an impairment of
prior year acquisitions (£3.3m) in the year. Total amortisation
reduced slightly to £7.4m in FY19 (FY18: £7.5m). Underlying
amortisation reduced significantly (down by 45% on FY18)
mainly due to the completed amortisation of acquisitions made in
FY16, which are written off over 24-month period, offset against
amortisation for acquisitions completed in FY18 and FY19
(small acquisition made earlier in the year of JHCS (£0.2m)).
During the year we undertook a full review of acquisitions and the
carrying value of Goodwill. A decision was made to impair two UK
acquisitions (Bigblu Services Limited - previously Avonline
Satellite Services Ltd a business purchased in FY16) and
BeyonDSL (a previous customer base acquisition in FY18)
resulting in a one off charge of £3.3m as they were fully
consolidated within the underlying books and records of Bigblu
Operations Limited, the core UK trading entity and no longer had
separate brands, websites, invoicing or indeed communications.
Total net debt increased in the year by £2.3m to £14.2m
(FY18: £11.9m) and is explained further in the Cash Flow
Analysis section.
As at 30 November 2019, the Group had a cash balance of £6.0m
and £1.8m of headroom under the HSBC plc facility. The increase
in cash is largely due to the continued support of our network
partners. However, we recognise as we work closer with our
network partners across existing and new territories, there will
be a desire to reduce creditor days. We will continue to work with
them to ensure payment terms are appropriate for our size of
business alongside the ongoing marketing and product support
obligations to ensure the Company can deliver consistently im-
proving products and services to its customers.
Earnings per share
On 28 May 2018 the Group reorganised its share capital by way
of a consolidation (the “Consolidation”). Upon implementation
of the Consolidation, every 15 ordinary shares of 1p each in the
capital of the Group (“Existing Ordinary Shares”) then in
issue were consolidated into 1 new ordinary share of 15p
(“New Ordinary Share”). The weighted average number of shares
for last year and the earnings per share has been restated to
reflect the Consolidation.
Basic earnings per share from continuing operations was a loss of
13.9p in the year, compared with a loss in 2018 of 25.8p. Adjusted
earnings per share (i.e. before amortisation of intangibles, share
based payments, start-up costs and accelerated depreciation)
moved from a loss of 0.2p last year to a profit of 8.2p this year.
2019
2018
Basic earnings per share
Basic adjusted earnings per share
(13.9p)
8.2p
(25.8p)
(0.2p)
Goodwill and Amortisation
FY19
£000
FY18
£000
Comments
Adjusted EPS and Statutory EPS
Underlying Amortisation
4,071
7,491
2016 acquisitions now
fully amortised
Additional charge - Impairment
3,286
-
BBS Limited/BeyonDSL as
integrated with BBO Ltd
Adjusted EPS loss per share decreased from 25.8p to 13.9p. As
for EBITDA, the revision to accounting policies and changes in
presentation impact the results. We have therefore provided a
reconciliation to previous presentation and policies to aid users
of these accounts:
Reported Amortisation
7,357
7,491
Creation of Right of use asset
Upon the adoption of IFRS 16, an additional fixed asset of £5.2m
was created. A corresponding liability was also created.
Working Capital
Inventory days increased to 41 days (FY18: 22 days) as we
sought to ensure that there was sufficient stock in all markets and
channels through Brexit.
Debtor days decreased to 20 days from (FY18: 32 days) following
strengthening of the recovery team and implementation of auto
suspend in several regions.
Adjusted EPS
Audited
12 months to
30 November
2019
Audited
12 months to
30 November
2018
Pence
Pence
Growth
(13.8)
(25.8)
47%
(0.1)
(13.9)
-
(25.8)
-
47%
As reported with 2018 presenta-
tion and accounting policy
Changes due to accounting policy
- IFRS 16
Consistent with 2019 presentation
and accounting policy
Adjusted EPS movement in IFRS 16 adoption is (0.1p) due to the
foreign exchange element of the calculations (£38k).
18
Bigblu Broadband plc | Annual Report and Accounts 2019 Strategic Report: Financial Review
Accounting standards
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), as endorsed
and adopted for use in the EU. Changes to IFRS this year that
have a material impact on the Group’s results include IFRS 16
Leases which was adopted early. IFRS 9 Financial Instruments
and IFRS 15 Revenue from Contracts with Customers also came
into effect from January 2018 but had no material impact on the
Group’s results requiring the restatement of comparatives. New
revenue streams have however been accounted for applying the
principles of IFRS 15.
Dividend
At this stage given the investment in organic growth opportunities
being considered, the directors do not recommend the payment
of a dividend (2018: Nil)
On behalf of the Board
Frank Waters
Chief Financial Officer
26 March 2020
19
19
Principal Risks and Uncertainties
The Board and management regularly review and monitor the key risks involved in running and operating the business. The future
success of the Group is dependent on the Board’s ability to implement its strategy. The model for the future development of the Group
is reliant on its ability to achieve a critical mass of customers, its ability to derive revenue from these customers by providing excellent
technical support, a value-added service, solution delivery and delivering operational gearing. The table below sets out a number of
the material risks together with relevant mitigating factors.
Dependence on satellite owners and satellite infrastructure
Risk: The Group is dependent on its ability to purchase
broadband capacity from satellite owners. The terms upon which
satellite owners sell such capacity may change to the Group’s
detriment and the Group may not be able to secure capacity from
the satellite owners with which it currently deals.
Mitigation: The Board is in regular dialogue with the network
providers to ensure appropriate capacity exists in target markets
at an affordable price. New satellites and capacity changes from
time to time, so it is vital the relationship with the satellite owners,
both in Europe and Australasia, continues to prosper.
In the event of the failure of a satellite, the Group may not be able
supply broadband access to parts of its customer base, which
would have an adverse impact on the Group’s relationship with its
customers and its revenues, its operational results of operations
and its prospects.
Overbuild by fibre in areas where the Group has presence
Risk: Operators, either commercially or
through
Government Schemes, overbuilds the Group’s existing wireless
network. This increases price competition and could provide
faster speeds (potentially up to Ultrafast) than wireless internet
is currently capable of. This would reduce Group revenues and
could potentially make certain areas unviable.
funded
Key contract terms
Risk: The Group’s current contractual agreements with the
satellite owners are typically non-exclusive, are terminable
immediately or within a short timeframe of giving notice, do not
contain restrictive covenants which would prevent the satellite
owners from directly competing with the Group and do not contain
express provisions obliging them to continue providing services
to the Group.
Lack of spare capacity within satellite fleets
there
the satellite fleets
is
significant
for a much
capacity
Risk: Currently
within
larger number of
customers, while competition between satellite owners serves
to keep the wholesale cost of the capacity in proportion to
(albeit typically still more expensive than) a fibre broadband of-
fering.
spare
Mitigation: Group strategy is to focus in rural areas where fibre is
not commercially viable thereby avoiding direct competition with
fibre operators where possible.
Mitigation: The Board work closely with satellite owners as
partners to develop short, medium and longer-term sales plans,
target opportunities and markets. This is especially so with the
agreement signed with Eurobroadband Infrastructure (“EBI”), a
subsidiary of Eutelsat (Euronext: ETL), “EBI”
Mitigation: The Board works closely with the satellite owners to
identify potential congestion issues and in the development of
ways to overcome these challenges.
The Group seeks to maximise coverage availability to its
customers by having relationships with a range of satellite
broadband providers.
However, the nature of satellite broadband coverage means that
whilst there is excess capacity overall, in specific locations certain
satellites can have very limited availability if their capacity is al-
ready full or in the peripheral areas of satellite coverage.
In the event that there is insufficient capacity, the Group may be
unable to provide services to existing customers or to accept new
customers which may have an adverse effect on the Group’s
relationship with its customers, revenues, results of operations
and prospects.
20
Bigblu Broadband plc | Annual Report and Accounts 2019 Strategic Report: Principal Risks and Uncertainties
Acquisitions
Risk: The Group believes there is an opportunity to continue
acquisition of customers by way of accretive bolt-ons in existing
markets.
Mitigation: Roll up strategies are inherently risky. This risk is
mitigated as far as possible by working closely with existing
management
teams, professional advisors and network
operators to reduce the risks during the acquisition stage.
Dedicated resources are employed internally to support the due
diligence process and to on-board the businesses into the Group
and further enhance our operating system capabilities to reduce
on going risk.
However, there can be no guarantee the Group will be able
to agree terms with potential sellers of assets, or that, if terms
are agreed, that the new customer base can be retained and
integrated into the Group’s operations. This would slow down
inorganic growth plans.
The Group intends to conduct appropriate due diligence in
respect of its acquisition targets and to identify any material
issues that may affect the decision to proceed with the purchase.
During the due diligence process the Group is only able to rely
on the information that is available to it. That information may not
be accurate or remain accurate during the due diligence process.
More broadly, there can be no guarantee that due diligence
undertaken will be adequate or reveal all relevant facts or
uncover all significant liabilities. If due diligence fails to identify
key information, or if the Group considers such material risks
to be commercially acceptable, the Group may be forced to
write-down or write-off assets of the target acquired. This may
have a material adverse effect on the Group’s business, financial
condition or results of operations.
In addition, following an acquisition, the Group may be subject
to significant, previously undisclosed liabilities of the acquired
business that were not identified during due diligence and which
could have a material adverse effect on the Group’s financial
condition and results of operations, especially if the due
diligence is required to be undertaken in a short timeframe or in a
competitive situation.
Competition from existing/emerging alternative technologies
Risk: There may be competition from existing and emerging
alternative technologies, such as 4G, and 5G, improved versions
of the wide area radio network or mesh radio technologies. In
the event that such technologies become widely available, the
Group’s subscriber base, revenues, results from operations and
prospects may be adversely affected
Mitigation: The Board recognises this risk and seeks to
mitigate it by regular dialogue in the marketplace with other solution
providers to ensure the Group’s offering is adjusted accordingly to
meet the market demands.
Government policy and increased investment in fibre roll-out
Risk: Given the importance of digital connectivity to the economy,
it may be the case that many Governments further invest in fibre
roll-out thus reducing the market size for satellite and wireless
broadband.
Mitigation: Recent government announcements in the UK
and Australia indicate support will be provided for satellite and
wireless providers. We remain confident this will continue within
the jurisdictions in which we operate.
System reliance
Risk: The Group believes the proprietary technology platform,
Pathfinder, built on Microsoft technology is a key contributor
to the operational success of the business. In the event of a
system failure of the platform or any other technology or system
operated by a third party, short term operations would be affected
adversely. This is especially important as we on-board new
acquisitions.
Mitigation: Continued and sustained development and testing of
the existing systems is undertaken regularly. Enhancements are
rolled out during the course of the year.
21
Dependence on key executives
Risk: The performance of the Group will depend heavily on
its ability to retain the services of the Board and to recruit,
motivate and retain further suitably skilled personnel. The loss of the
services of key individuals may have an adverse effect on the
business, operations, customer relationships and results.
to ensure
Mitigation: The Board will continue
the
management team are appropriately incentivised and that there
is scope to appropriately incentivise new key personnel where
required. The Group operates a share option scheme which
enables employees to benefit from continued growth. It also
ensures that the management team, staff and shareholders
objectives are aligned.
that
Fraud, including cyber attacks
Risk: As a provider of broadband solutions, the Group is a
potential target and products may have vulnerabilities that may
be targeted by attacks specifically designed to disrupt the Group’s
business and harm its reputation.
Mitigation: The Group have dedicated technical staff who
focus on investigation and mitigation of risks related to fraud and
cyber-attacks.
If an actual or perceived breach of security occurs in the Group’s
internal systems, it could adversely affect the markets perception
of the Group’s products or internal control systems. In addition, a
security breach could affect the Group’s ability to provide support
for customers.
COVID -19 and similar
Risk: Global responses to the coronavirus disease 2019
(COVID-19) outbreak continue to rapidly evolve. COVID-19 has
already had a significant impact on global financial markets, and it
will have implications for many businesses including BBB.
Some of the key risks that could impact on the BBB group include,
but are not limited to:
Supply chain disruptions, unavailability of personnel, closure of
hubs, delays in sales or installations, earnings, or cash generation.
Delays in planned business expansions and the launching of new
products.
In addition, BBB is aware of the risks posed by the increasingly
broad effects of COVID-19 as a result of its negative impact on
the global economy and major financial markets
Future funding
Risk: Should the Group decide to accelerate its growth
strategy, new funding, either debt and/or equity, will be required.
No assurance can be given that any such additional financing will
be available or that, if available, it will be on terms acceptable to
the Group. Furthermore, any additional equity capital may dilute
shareholders’ ownership interests in the Group and may have
an adverse impact on the value of the Group’s equity. The terms
of financing may also adversely affect shareholders’ holdings or
rights or may contain restrictive covenants. If adequate additional
funding cannot be obtained, the Group may have to abandon or
limit any planned acquisitions which may have a material adverse
effect on the Group’s business, financial condition, future trading
performance and prospects.
Force majeure
Risk: The Group’s operations now or in the future may be
adversely affected by risks outside its control, including space
debris damaging or destroying satellites, labour unrest, civil
disorder, war, subversive activities or sabotage, fires, floods,
explosions or other catastrophes, epidemics or quarantine
restrictions.
22
Mitigation: The BBB Board and Management has considered
the effects as best possible with the information currently
available and the Government guidance given in each jurisdiction
and has taken precautionary measures which include the testing and
enforcement of
- Home working, self isolation
- Integrated telephony systems
- Business continuity
Entities must carefully consider their unique circumstances and
risk exposures when analysing how recent events may affect their
financial reporting. Specifically, financial reporting and related
financial statement disclosures need to convey all material effects
of COVID-19.
Mitigation: The Board will seek additional funding as appropriate
and at the appropriate time to achieve the strategic goals of the
Group. This may involve acceleration of the funding requirements
should the relevant opportunities arise.
With that in mind the Directors will continuously review funding
and capital requirements relative to acquisition opportunities that
it negotiates.
Mitigation: This continues to be monitored by the Board with
our professional advisors, satellite and wireless operators and
insurance specialists.
Bigblu Broadband plc | Annual Report and Accounts 2019 General economic conditions
Risk: Market conditions, particularly those affecting telecoms
and technology companies may affect the ultimate value of
the Group’s share price, regardless of operating performance.
The Group could be affected by unforeseen events outside its
control, including, natural disaster, terrorist attacks and political
unrest and government legislation or policy. Market perception of
telecoms and technology companies may change which could
impact on the value of investors’ holdings and impact on the
ability of the Group to raise further funds. General economic
conditions may affect exchange rates, interest rates and inflation
rates.
Brexit
Risk: The Board is monitoring the impact that Brexit may have on
the Group’s performance but awaits clearer guidance on what this
might look like in reality once the decisions are made.
Strategic Report: Principal Risks and Uncertainties
Mitigation: This continues to be monitored by the Board with our
professional advisors.
linked
is primarily
Mitigation: A significant part of the business arises within the
EU but
these
countries rather than the specific trade in goods. The systems are
developed in such a way to provide maximum flexibility in billings and
collections and we are in regular dialogue with Santander and our
Network Partners to assess risks
to airtime provision
in
The Strategic Report was approved by the Board of Directors on 26 March 2020 and was signed on its behalf by:
Andrew Walwyn
Chief Executive Officer
23
GOVERNANCE
Directors’ Report
The Directors present their report together with the audited financial statements for the year ended 30 November 2019.
Results and dividends
The consolidated statement of comprehensive income for the year is set out on page 46. No dividend has been declared or is proposed
for the year (2018: Nil).
Directors and their interests
The Directors who served during the year are set out below, together with their beneficial interests in the ordinary shares of the Group.
Biographical details are included on pages 26-27.
Michael Tobin
Andrew Walwyn
Frank Waters
Simon Clifton
Paul Howard
Stephen Morana
Christopher Mills*
Total
Appointed
29 Sept 2015
12 May 2015
12 May 2015
29 Sept 2016
29 Sept 2015
10 Feb 2017
23 May 2018
2019
Ordinary
shares of 15p each
236,553
2,968,438
314,780
1,866,030
149,577
199,783
258,334
5,993,495
Share
options
226,667
954,729
585,908
585,963
133,333
133,333
-
2,619,933
2018
Ordinary
shares of 15p each
227,277
2,968,438
296,480
1,866,030
149,577
199,783
258,334
5,965,919
Share
options
226,667
755,240
848,753
429,953
133,333
133,333
-
2,527,279
* Mr Christopher Mills also has an indirect interest in a further 13,050,000 shares in the Group (through his interests in Oryx International Growth Fund Limited, Harwood Capital LLP and North
Atlantic Smaller Companies Investment Trust). His total indirect and direct holdings is 13,308,334 shares representing 23.1% of the issued share capital.
The Group has established an EMI option scheme and an ‘unapproved’ share option scheme, pursuant to which the CEO and other
members of staff have been or may be granted share options. The number and exercise price of options over ordinary shares in the
Group held by Directors at the end of the year were as follows:
Michael Tobin
Michael Tobin
Andrew Walwyn
Andrew Walwyn
Frank Waters
Simon Clifton
Paul Howard
Paul Howard
Stephen Morana
Total
EMI Share
options
-
-
233,333
51,942
217
-
-
-
-
285,492
Exercise price
Remaining
Remaining exercise
(pence)
share options
price (pence)
-
-
78.75
114.45
114.45
-
-
-
-
133,333
93,333
-
48,057
86,450
100,000
66,667
66,666
133,333
727,839
78.75
114.45
114.45
114.45
114.45
114.45
78.75
131.25
Following consultation with a number of shareholders and as highlighted in last year’s report the Group has established a Long Term
Incentive Plan (“LTIP”), pursuant to which the CEO and other members of staff have been or may be granted shares. The number
and exercise price of ordinary shares in the Group held by Directors and other staff members at the end of the year were as follows:
Andrew Walwyn
Frank Waters
Simon Clifton
Other staff members
Total
LTIP Share
options
621,396
499,241
485,963
1,197,741
2,804,341
Exercise
price (pence)
15.0
15.0
15.0
15.0
The Directors’ beneficial interests in share options shown in the table above comprise options issued under the EMI option scheme,
the “unapproved” option scheme and the LTIP.
24
Bigblu Broadband plc | Annual Report and Accounts 2019 Governance: Directors’ Report
There are a number of performance conditions as well as time restrictions relating to the financial year ended 30 November 2019
attached to these options.
Frank Waters exercised and subsequently sold options over 423,115 shares during the year realising a gain of £225k. Apart from this
no Director options were exercised, lapsed or forfeited during the year.
Directors’ Remuneration
The following table shows emoluments paid to Directors during the financial year:
Current Directors:
Michael Tobin (Non-Executive Director and Chairman)
Andrew Walwyn (Chief Executive Officer)
Frank Waters (Chief Financial Officer)
Simon Clifton (Chief Technology Officer)
Paul Howard (Non-Executive Director) *
Stephen Morana (Non-Executive Director)
Christopher Mills (Non-Executive Director)
Year ended 30 November 2019
Year ended
30 November 2018
Salary/fees
Bonus
£000
£000
BIK
£000
Pension
Total emoluments
Total emoluments
£000
£000
£000
85
244
194
189
75
57
52
--
60
48
112
-
-
-
-
3
3
-
-
-
-
-
10
8
3
-
-
-
85
317
253
304
75
57
52
69
340
274
276
52
46
-
896
220
6
21
1,143
1,057
* Paul Howard was appointed Chairman of Quickline Communications Holdings Ltd in August 2019
Service Contracts
The Chief Executive Officer, Chief Financial Officer and Chief Technology Officer have entered into service contracts with the Group
that are terminable by either party on not less than 12 months prior notice. The non-executive Directors have entered into service
contracts with the Group that are terminable by either party on not less than 3 months prior notice.
Pensions and Private Healthcare
There are pensions and private healthcare arrangements in place for the Chief Executive Officer, Chief Financial Officer and Chief
Technology Officer.
Substantial shareholdings
As at 30 November 2019 the Group was aware of the following interests in 3% or more of its issued voting share capital:
Shareholder
% holding
No. of shares
Harwood Capital LLP
BGF Investment Management Limited
Herald Investment Management Ltd
Canaccord Genuity Wealth Management
Mr Andrew Walwyn
Gresham House Asset Management
Hargreaves Lansdown
UBS collateral account
Tellworth Investments
Mr Simon Clifton
Employee involvement
23.0
13,050,000
7.9
6.8
6.3
5.2
4.7
4.7
4.3
4.1
3.2
4,544,444
3,891,111
3,605,000
2,968,438
2,703,644
2,686,177
2,492,227
2,332,257
1,866,030
The Group’s policy is to encourage involvement at all levels,
as it believes this is essential for the success of the business.
their views and
Employees are encouraged
suggestions in respect of the Group’s performance and policies.
to present
Financial risk management objectives and policies
instruments comprise cash,
liquid
The Group’s financial
resources and various items, such as trade receivables and trade
payables that arise directly from its operations. The main risks
arising from the Group’s financial instruments are currency risk,
interest rate risk, credit risk and liquidity risk. The Directors review
the policies for managing each of these risks on an on-going basis
and they are summarised in note 24 to the financial statements.
Directors’ indemnity and insurance
Pursuant to the Company’s articles of association, the Company
has granted an indemnity to its Directors and officers under which
the Company will indemnify them, subject to the relevant article,
against all costs, charges, losses and liabilities incurred by them
in the performance of their duties. The Company has also ar-
ranged directors’ and officers’ liability insurance.
25
Board of Directors
Michael Tobin OBE: Non-Executive Chairman
Appointment
Michael
Chairman in September 2015
joined
the Board and became
Committee Membership
Michael chairs the Board’s remuneration and
nomination committees and is a member of
the audit committee.
Independence
The Board consider Michael
independent Director.
to be an
External appointments
Michael currently holds numerous Non-Exec
Directorships including Teraco in South Af-
rica, Datapipe in the USA, Iconic in Madrid,
Basefarm in Norway, Eurodiesel in Belgium,
Chayora in Hong Kong and TeamRock,
Popshack and PeoplePerHour in the UK,
where he is also Chairman of Ultrahaptics.
He is also an advisor to the board of OCom
in Amsterdam.
Michael is a highly successful serial technology entrepreneur & pioneer with over 30
years’ experience in the telecoms & technology sector.
As Chief Executive, Michael Tobin OBE led TelecityGroup plc, a leading FTSE250
Technology company from 2002 to 2015.
Michael joined Redbus in 2002 delisting it from the main market to AIM and then took it
private, winning the London Business Awards “Business Turnaround of the Year” award
in 2005. After engineering the merger with Telecity he successfully re-listed TelecityGroup
in October 2007 winning the accolade of UK Innovation Awards IPO of the year 2008 and
the techMARK Achievement of the year in the same year.
Subsequently he grew the business from £6m market cap in 2002 to being a top
performer in the FTSE250 worth over £2Bn, being recognized as Britain’s Most admired
Tech Company in 2012.
Prior to joining TelecityGroup, Michael headed-up Fujitsu’s e-Commerce operations
in Frankfurt, Germany. Before that, he ran ICL’s Danish outsourcing subsidiary out of
Copenhagen Denmark. He also held several senior positions based in Paris for over
11 years including Business Development Director at International Computer Group
coordinating global distribution of IT infrastructure. As a Non-Exec Director, Michael was
instrumental in transforming PACNET in Hong Kong from a Sub Sea Cable operator to a
successful Datacentre operator culminating in its sale in 2016 to Telstra for $800m.
Michael was named ‘UK IT Services Entrepreneur of the Year’ by Ernst & Young in
2009, 2010 & 2011; PWC Tech CEO of the Year 2007; London Chamber of Commerce
‘Business Person of the Year’ for 2009 & 2010; In 2009 was named techMARK
‘Personality of the Year’; In 2007 & 2009 he was the winner of the DCE Outstanding
Leader of the Year, and in 2008 won ‘Data Centre Business Person of the Year’ at the
Data Centre Leaders awards. He was awarded ‘Outstanding Contribution to the Indus-
try’ at the Data Centre Europe awards and in 2011 received a Lifetime Achievement
Award for services to the industry. In 2005 he was named number 31 of Britain’s Top 50
Entrepreneurs.
In 2015 Michael was honoured in the Queens New Year’s Honours List with the Order of
the British Empire medal for Services to the Digital Economy.
Paul Howard: Non-Executive Director
Paul spent over 15 years with J.P Morgan Cazenove as a telecoms and media analyst
and was one of Cazenove’s youngest ever partners. He won numerous awards from
Reuters and Starmine and was Head of the Number One ranked European telecoms
research team as ranked by the Institutional Investor in 2011. Paul left Cazenove in 2011
and became an investor and non-executive director of various small telecoms compa-
nies. He also spent a year with Morgan Stanley in 2015 helping their Select Risk equity
trading business. Paul has a BSc from Durham University in Maths and is a qualified
accountant.
Appointment
Paul joined the Board in September 2015.
Committee Membership
Paul serves on the Board’s remuneration and
audit committees.
Independence
The Board consider Paul to be an independent
Director.
External appointments
Paul is an advisor to Oakley Advisory and
joined the business in March 2015
Stephen Morana: Non-Executive Director
Stephen has a wealth of technology, financial and equity capital markets experience. Until
recently, Stephen was CFO of Zoopla Property Group plc, the FTSE250 digital media
group, which also owns the uSwitch business. Before that he spent a decade at Betfair
plc during which time he acted as CFO and interim CEO. He was part of the management
team that grew the business from an early stage start-up to a multi-billion-pound listed
business, which ultimately merged with Paddy Power to create one of the world’s largest
public online betting and gaming companies.
Appointment
Stephen joined the Board in February 2017.
Committee Membership
Stephen chairs the Board’s audit committee
and serves on the nomination committee.
Independence
The Board consider Stephen to be an
independent Director.
External appointments
Stephen holds a number of non-executive
roles.
26
Bigblu Broadband plc | Annual Report and Accounts 2019 Christopher Mills: Non-Executive Director
Governance: Board of Directors
Christopher founded Harwood Capital Management in 2011, a successor of the former
parent company of Harwood, J O Hambro Capital Management which he co-founded in
1993. He is Chief Executive and Investment Manager of North Atlantic Smaller Compa-
nies Investment Trust plc and Chief Investment Officer of Harwood Capital LLP. He is
a Non-Executive Director of several companies. Christopher was a Director of Invesco
MIM, where he was head of North American Investments and Venture Capital, and of
Samuel Montagu International.
Appointment
Christopher joined the Board in May 2018.
Committee Membership
None
Independence
The Board consider Christopher to be an
independent Director.
External appointments
Christopher holds a number of non-executive
roles.
Andrew Walwyn: Chief Executive Officer
Andrew began his career at Carphone Warehouse before moving to DX Communications
as Sales Director. Following the sale of DX to Telefonica, Andrew took on the role as
Managing Director of Tiny Computers where he oversaw the sale of the ISP business to
Tiscali and the eventual sale of the company to Time Computers.
In 2008, Andrew co-founded Bigblu Broadband having identified the gap in the market for
satellite broadband
Appointment
Andrew joined the Board as CEO on the
completion of the reverse acquisition in May
2015.
Committee Membership
Andrew serves on the Board’s nomination
committee.
Independence
Executive – non-independent
External appointments
None
Frank Waters: Chief Financial Officer
Frank qualified as a Chartered Accountant (ICAS) with Ernst & Young in 1989. Frank
has spent the last 20 years, primarily as finance director, in a number of fast growing
entrepreneurial companies in the mobile, consumer electronics and technology sectors.
Frank was instrumental in the sale of DX Communications alongside Andrew Walwyn to
what is now Telefonica.
Frank joined Bigblu Broadband in the autumn of 2013 and, as Chief Financial Officer, is
responsible for finance, commercial, legal, regulatory, and M&A matters.
Appointment
Frank joined the Board as CFO on the
completion of the reverse acquisition in May
2015.
Committee Membership
None
Independence
Executive – non-independent
External appointments
Frank holds a number of non-executive direc-
torships in sports clubs.
Simon Clifton: Chief Technology Officer
Appointment
Simon joined the Board in September 2016
following the fundraise and acquisitions in
summer 2016.
Committee Membership
None
Independence
Executive – non-independent.
External appointments
None
Simon co-founded the business with Andrew Walwyn in 2008 and has a background in
mobile telecoms and alternative broadband technologies.
Since 2003 Simon has been at the forefront of the development of satellite broadband
as a technology for both the consumer and business markets in Europe, and foresaw
the disruptive opportunity for the company presented by the arrival of Ka band satellite
communications in 2010.
Simon is responsible for leveraging the satellite owners’ investment in capacity and for
the company harnessing the growing and abundant commodity market in Ka band spec-
trum, and then delivering it as a consumable satellite broadband product that address
particular geographical and vertical market opportunities globally.
Simon also has responsibility for integrating complimentary technologies like fixed wireless
broadband into the business portfolio, as well as R&D and supplementary product
development like VOIP and TV services. Simon has served as the CTO of the Group
since its inception and has previously been involved with several successful, fast growing
entrepreneurial companies.
27
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Strategic Report,
Directors’ Report and the financial statements in accordance with
applicable law and regulations.
UK Company law requires the directors to prepare Group and
Company Financial Statements for each financial year.
Under that law the directors are required to prepare Group
Financial Statements in accordance with International Financial
Reporting Standards (‘IFRS’) as adopted by the EU and the rules
of the London Stock Exchange for companies trading securities on
the Alternative Investment Market. The Directors have chosen to
prepare the Group financial statements in accordance with IFRS
as adopted by the EU.
The Group financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position, financial
performance and cash flows of the Group for that year.
In preparing each of the group and company financial statements,
the directors are required to:
•
select suitable accounting policies and then apply them con-
sistently;
• make judgements and estimates that are reasonable and
•
•
prudent;
state that the group had complied with IFRS, subject to any
material departures disclosed and explained in the financial
statements;
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business.
The directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any
time the financial position of the Group and to enable them to
ensure that the financial statements comply with the requirements
of the Companies Act 2006 and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
On behalf of the Board
Andrew Walwyn
Chief Executive Officer
26 March 2020
Corporate Governance Statement
Dear Shareholder,
At Bigblu Broadband plc all our stakeholders are important to
us. The design and operation of a robust governance structure
appropriate for a Group of our scale and ambition is critical to
meeting their needs. Our approach to governance is based on
the concept that good corporate governance enhances long-term
shareholder value and sets the culture, ethics and values for the
rest of the Group.
The Board has ultimate responsibility for reviewing and approv-
ing the Annual Report and Accounts and it has considered and
endorsed the arrangements for their preparation. The Directors
confirm the Annual Report and Accounts, taken as a whole is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy.
Michael Tobin OBE
26 March 2020
28
Quoted Companies Alliance Code for Small &
Mid-sized Quoted Companies 2018
The board of Bigblu Broadband Group plc (the “Company”)
is responsible for the Group’s corporate governance policies
and recognises the importance of high standards of corporate
governance and integrity. The Group adopted the Quoted Companies
Alliance Code for Small & Mid-sized Quoted Companies 2018
(the “QCA Code”) in September 2018. This statement sets out
how the Group complies with the 10 principles of the QCA Code.
fast broadband services
1. Strategy & business model
The Company is an alternative broadband provider who markets
and delivers
to homes and
businesses mainly located in areas of poor or underserved telecoms
infrastructure. The Company’s target customers are homes
and businesses who are not served by fibre broadband.
The Company is technology agnostic and uses a variety of
technologies to deliver a super-fast broadband service to target
customers including satellite broadband, 4G, 5G and licensed
and unlicensed spectrum fixed wireless broadband (point to point
and point to multi-point).
The Company is active and has customers in 32 countries
including many countries in Europe and Australia and had
approximately 110,000 customers as at 30th November 2019.
The Company operates from a number of strategic bases in the
Bigblu Broadband plc | Annual Report and Accounts 2019
UK, France, Norway, Spain Germany, Italy, Poland, Portugal and
Australia. The Company has grown strongly since listing on AIM
in May 2015 both organically and by acquisition. The Company
has acquired and integrated 21 businesses in 7 countries in the
last 4 years. The Company works closely with network partners to
ensure we get the best customer offer in a particular jurisdiction.
it
The Company’s cloud-based global billing and customers
service (ERP) platform, Pathfinder, enables
to support
customers around the world in any language the customer
chooses, with the system supporting multiple currencies and
VAT jurisdictions. The Company also has one phone system
across all territories enabling flexibility in delivering customer
support. The Company uses satellite capacity from a number of
different satellite owners to enable it to provide satellite broadband
services and these include but are not limited to Eutelsat, SES
Astra, Viasat, Avanti, and NBNCo. The Company makes its
decisions on which satellite operator to use in each country based
on a mixture of quality of their services, their product roadmap,
business model, resultant price structure, and the amount of
capacity available in a particular market.
Satellite design and processing efficiency continue to progress at
a pace resulting in continually improving satellite economics with
each new satellite launch allowing the Company to continue to
improve its broadband offerings and keep pace with the growth
in internet demand. Since the Company’s inception in 2008,
headline consumer satellite broadband speeds in Europe have
increased from 4 Mbps to 50 Mbps and the Company, working
with its satellite owner partners, believes that speeds and data
allowances will continue to increase exponentially over the next
3 – 5 years.
Our FW business in QCL continues to grow with a new
management team in place, which will strengthen processes and
IT, with the recruitment of a new COO, a new Head of Systems
and a new Project Manager shortly. Development of a new FW
billing platform on Sonar progresses and will bring enhanced
functionality. The business continues to work closely with the
government and local authorities on ITTs/Grants/RGVs/BDUK,
with QCL leading a £6 million project to boost rural connectivity in
North Yorkshire, England’s largest rural county.
The Company could face challenges if consumer demand for
faster broadband services and continual increases in data
consumption were not matched by exponential improvements
in satellite economics by the satellite fleet operators. The wide
number of satellite operators coming to the market with new
business models and technologies mean that the Company per-
ceives this risk as relatively small.
The Company embraces new technologies like 4G and 5G and
indeed is itself helping to develop and design new hardware to
bring technologies like fixed broadband via 5G to the mainstream
market. Many of the Company’s existing fixed wireless customers
are already being connected to fixed 5G type services.
The Directors believe there is a significant opportunity to continue
to grow the Company’s subscriber base organically and also
through acquisition by consolidating the currently fragmented
market of alternative broadband providers across Europe and
Australia.
2. Understanding and meeting shareholder needs
and expectations
The AGM is the main forum for dialogue with shareholders and
the Board. The Notice of Meeting is sent to shareholders at least
21 days before the meeting. The chairs of the Board and all
Governance: Corporate Governance Statement
committees, together with all other Directors, routinely attend
the AGM and are available to answer questions raised by
shareholders.
from
investors
is also obtained
Feedback
through direct
interaction between the CEO, CFO and CTO at meetings
following the publication of its full-year and half-year results.
The Company also holds an open retail investor meeting shortly
after results have been published. There is also regular dialogue
with investors through the medium of the Company’s corporate
broker (finnCap), and through the Company’s Investor Relations and
Financial PR agency Walbrook PR.
The Company has a dedicated investor relations website at www.
bbb-plc.com which aims to keep all types of investor fully informed
and up to date on the Company’s activities, share price and future
meetings as well as supplying documents and information which
may be of general interest.
Details of specific contacts at finnCap and Walbrook PR are
published on all the Company’s RNS releases and on the
Company’s investor website.
3. Taking into account wider stakeholder & social
responsibilities & their implications for long-term
success
The long-term success of a business and good Corporate
Governance includes the Board considering the Company’s
impact on the communities it operates in, the environment
and society as a whole. The group’s stakeholders include
shareholders, customers, members of staff, suppliers, regulators,
industry bodies and creditors including lenders. The Board works
hard to identify the Company’s stakeholders and understand their
needs, interests and expectations.
The principal ways in which their feedback on the Group is
gathered are via meetings, conversations, surveys and online
reviews. Following this feedback, the Group has continued and
evolved its clearly defined customer-focused and people-led
strategy.
Every company should consider
its corporate social
responsibilities (CSR). Any CSR policy should include a narrative
on social and environmental issues and should show how these
are integrated into the Company’s strategy. Integrating CSR
into strategy will help create long-term value and reduce risk to
shareholders and other stakeholders. The Company see CSR as
a very important area for consideration and are currently in the
process of finalising a CSR Policy.
The Directors are aware of the impact the business activities
have on the communities in which it operates and has in
place an environmental policy. The Group’s responsibilities to
stakeholders including staff, suppliers and customers and
wider society are also recognised and this is evidenced and
underpinned by our values:
•
•
Customers – Grow profitable elements of the business whilst
putting the customer first
Innovation –
Industry
exceeding customers’ expectations
leading product design always
• Quality – Excellence in operations, processes and systems
Environment – Engaging with and supporting
•
communities in which we work
Team Work – Support and engage with our people
•
the
29
4. Embedding effective risk management
The board of the Company ensures that its risk management
framework identifies and addresses all the relevant risks and
threats that the business may be subject to in the execution of
its business plan. These include extended business activities
including key customers and its supply chain. The section
“Principal Risks and Uncertainties” on pages 20 to 23 of this
Annual Report identifies these risks and how the Board and
the business mitigate these risks. The board of the Company
meets regularly during the year and continually reappraises and
discusses the tactics and strategy employed to mitigate these
risks.
5. Maintaining a balanced and well-functioning
board
The Board and its committees
The Board is responsible for the effective oversight of the Group.
It also agrees the strategic direction and governance structure
that will help achieve the long-term success of the Group and
deliver shareholder value. The Board takes the lead in areas such
as strategy, financial policy and making sure a sound system of
internal control is maintained. The Board’s full responsibilities
are set out in the schedule of matters reserved for the Board
described below. The Board delegates authority
its
Committees to carry out certain tasks on its behalf, so that it
can operate efficiently and give the right level of attention and
consideration to relevant matters.
to
Role of the Board and management
Role of Chairman and Chief Executive Officer
the
There
running of the Board and the executive responsible for the Group’s
business.
is a clear division of responsibilities between
The Chairman is responsible for leadership of the Board,
ensuring its effectiveness and setting the agenda for Board
meetings. Once strategic objectives have been agreed by
the Board, it is the Chief Executive Officer’s responsibility to ensure
they are delivered upon and consistently to be accountable to the
Board. The day to day operations of the Group are managed by
the Chief Executive Officer and his management team.
Board processes
The full Group Board met eight times in the financial year under
report and is scheduled to meet eight times in the current financial
year and at any other time as may be necessary to address any
specific significant matters that may arise.
The agenda for Board meetings is prepared in conjunction with
the Chairman. Submissions are circulated in advance and for
regular Board meetings will include operational and financial
updates together with papers relating to specific agenda items.
Management prepare monthly finance reports which allow
the Board to assess the Group’s activities and review its
performance. Members of management are regularly involved
in Board discussions and Directors have other opportunities for
contact with a wider group of employees.
To assist in the execution of its responsibilities, the Board has
established an Audit Committee, a Remuneration Committee
and a Nominations Committee together with a framework for the
management of the consolidated Group including a system of
internal control.
The Board is ultimately responsible for the Group’s system of
internal control and for reviewing its effectiveness.
30
This includes financial, operational and compliance controls and
the
risk-management systems. The Board has reviewed
effectiveness of the system of internal control during the year in
conjunction with the External Auditors.
Internal control systems are designed to meet the Group’s
is exposed.
particular needs and
Accordingly, the internal control systems are designed to manage
rather than eliminate the risk of failure to achieve business objectives
and by their nature can only provide reasonable and not absolute
assurance against misstatement and loss.
the risks
to which
it
Role and Responsibilities of the Board
The Board’s primary role is the protection and enhancement
of long-term shareholder value. To fulfil this role, the Board is
the overall management and corporate
responsible
governance of the consolidated Group including its strategic
direction, establishing goals for management and monitoring the
achievement of these goals.
for
From time to time the Board may delegate or entrust to any
Director holding executive office (including the CEO) such
of its powers, authorities and discretions for such time and on
such terms as it thinks fit. During 2018, the Board reviewed and
updated the “Delegation of Board authority” which establishes
those matters which it is considered appropriate remain within
the overall control of the Board (or its committees) and those
which are delegated to the CEO (or onwards as appropriate).
In addition to overall Group strategy, the Board approves the
annual budget and retains control over corporate activity
(mergers, acquisitions, partnerships, material disposals and
investments) and material contract and financing decisions (over
and above set value/credit-risk limits). The Board considers that
the current authority remains appropriate for the Board.
Management’s role is to implement the strategic plan established
by the Board and to work within the corporate governance and
internal control parameters established by the Board.
The Board has approved a schedule of matters reserved for its
decision; specifically, the Board is responsible for:
Guiding the Group’s long-term strategic aims, leading to its
approval of
its budgetary and
business plans:
the Group’s strategy and
•
•
•
•
•
Approval of significant investments and capital expenditure
Approval of annual and half-year results
Ensuring maintenance of a sound system of internal
control and risk management (taking into consideration
recommendations of the Audit Committee)
Ensuring adequate succession planning for the Board
and Executive management (taking into consideration the
recommendations of the Nomination Committee)
Determining the remuneration policy for the Directors and
the senior management team (taking into consideration the
recommendations of the Remuneration Committee)
Board focus during the year
Strategy:
•
During FY19, the Board worked with management to identify
and anticipate industry trends to ensure that the Group’s
strategy is designed to address these trends as well as other
industry dynamics, such as the competitive landscape. The Board
also considered various fundraises, in particular the funding raised
to support the growth of Quickline, the Group’s UK fixed wireless
business. In addition, the Board considered the refinancing of the
BGF and HSBC debt. The Board also reviewed relationships with
the Group’s main partners and suppliers including the HRA with
Bigblu Broadband plc | Annual Report and Accounts 2019
Financials:
EBR and the PPP with EBI.
•
During FY19, the Board reviewed the Group’s operating results
and financial statements with management and the Group’s
external auditors. The Board also reviewed and approved the
Budget and operating plan for the financial year.
Fundraising:
•
During FY19, the Board worked with management to identify
and source appropriate funding options to accelerate the growth
of Fixed Wireless in the UK and also to consider the wider
funding structure of the Group. The Board were delighted with the
support from HSBC, BGF and Harwood Capital as well as
new and existing shareholders throughout the 2019 and with
Santander post the year end.
to review
• Governance:
The Board continues
its governance structure
following the adoption of the QCA Code to ensure, where
possible, the Company is compliant with the requirements
applicable to a publicly listed Group and the QCA Code.
In addition, the control environment was improved with the
recruitment of additional Operational HR and systems resources
Table of Attendance
Governance: Corporate Governance Statement
and starting the Hub consolidation.
Business performance:
•
In FY19, the Board received and reviewed reports from
management on the performance of the Group’s business. The
Board engaged in discussions with management on various
aspects of business performance, Key Performance Indicators,
including business drivers, industry trends, risks, opportunities
and the competitive landscape.
Board committees
Prior to listing in May 2015, the Board established the Audit
and Risk Committee (chaired by Stephen Morana) to oversee
financial reporting, internal control and the management of the
risks the Group faces. The Board also established a Nomination
Committee (chaired by Michael Tobin OBE) to lead the process
for appointments to the Board and a Remuneration Committee
(chaired by Michael Tobin OBE) which has the responsibility of
helping to develop and manage the Group’s Remuneration Policy.
The committee reports can be found on pages 33 to 34 and each
committee’s full terms of reference are available on our website.
The table below summarises the attendance of the Directors and committee members at the scheduled Board and committee meet-
ings held during the year:
Board
Audit and Risk Committee
Remuneration Committee
Nomination Committee***
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Michael Tobin OBE*
Andrew Walwyn
Frank Waters
Simon Clifton
Paul Howard
Stephen Morana**
Christopher Mills
8
8
8
8
8
8
8
8
8
8
8
8
7
7
2
-
-
-
2
2
-
1
-
-
-
2
2
-
3
-
-
-
3
-
-
3
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The figures in the “held” column represent the number of meetings a Director was eligible to attend as a Director and the “attended” column represents the number of meetings attended by
that Director.
* Michael Tobin OBE is Chairman of the Board and Chairman of the Nomination and Remuneration Committees.
** Stephen Morana is Chairman of the Audit and Risk Committee.
***It was deemed not necessary to hold a meeting of the Nomination Committee during 2019 however it is envisaged that the Nomination Committee will meet at least one in the next financial
year.
6. Having appropriate experience, skills and
capabilities on the board
dustry and leading a Group listed on the London Stock Exchange
are crucial to the Board’s ability to lead the Group successfully.
Board Composition, Qualification and Experience
The Board currently comprises seven (2018 seven) Directors.
The number and/or composition may be changed where it is felt
that additional expertise is required in specific areas, or when an
outstanding candidate is identified.
The composition, experience and balance of skills on the Board
are periodically reviewed to ensure that there is the right mix on
the Board and its Committees and they are working effectively.
The Board comprises a Non-Executive Chairman (who, for the
purposes of the QCA Code was independent on appointment),
three Non-Executive Directors, two of whom are considered by
the Board to be independent for the purpose of the QCA Code.
There are three Executive Directors who are considered by the
Board to be non-independent for the purpose of the QCA Code.
The current members of the Board have a wide range of skills and
experience. The Board believes that a membership that combines
detailed knowledge of the Group’s operations, the technology in-
The composition of the Board is determined using the following
principles:
•
•
•
•
a majority of the Board should be non-executive Directors.
Currently there are 4 non-executive Directors and from 3 ex-
ecutive Directors.
the role of Chairman is to be filled by a non-executive Di-
rector,
the Board should have enough Directors to serve on various
committees of the Board without overburdening the Directors
or making it difficult for them to fully discharge their respon-
sibilities,
Directors appointed by the Board are subject to election by
shareholders at the following annual general meeting and
thereafter one third of Directors are subject to retire by rota-
tion each year.
The Company Secretarial service is provided by a professional
services company in order to conform to requirements.
31
Key Board Roles
Chairman
Leads the Board
Chief Executive Officer
Leads the management team
Non-Executive Directors
Promotes highest standard of corporate governance
Challenges strategic matters
Supports the Chairman to ensure appropriate governance
standards spread through the Group
Raises strategic initiatives aimed at improving shareholder
returns in line with the strategic direction of the Group
Promotes a culture of openness and debate
Oversees implementation of all Board-approved actions
Acts as intermediary between Directors when required
Challenges strategic initiatives presented by Executive
Directors as well as assists in the development concept of
Group Strategies
Available to shareholders to address any concerns or issues
that they feel have not adequately been addressed through
usual channels of communication.
Encourages constructive relations between Executive and
Non-Executive Directors
Ensures that the Board is made aware of the employees'
views on relevant issues
Integral role in succession planning
Facilitates effective contributions by the Non-Executive
Directors
Develops proposals for the Board to consider in conjunction
with fellow Executive Directors
Non-Executive Director Independence
the
The Board considers and reviews
independence of
Non-Executive Directors on an annual basis as part of the
Directors’ performance evaluation. In carrying out the review,
consideration is given to factors such as their character,
judgement, commitment and performance on the Board and
relevant committees and their ability to provide objective
challenge to management.
The Board considers its Independent Non-Executive Directors
bring strong
judgement and considerable knowledge and
experience to the Board’s deliberations.
As noted in the Annual Report on Remuneration on page 38,
Michael Tobin OBE, Paul Howard and Stephen Morana all
participate in the Company’s share option plan. Notwithstanding
this, in character and judgement, this is evidenced by the valuable
contributions they make at Board and Committee meetings, and in
particular, the knowledge and experience they bring to the roles as
Chairman, Non-Executive Directors and Committee members. In
addition, whilst Christopher Mills is considered Non-Independent
Christopher provides enormous contribution guidance and
support to the business and is considered to be independent in
character and judgement.
Appointment and Tenure
All Non-Executive Directors serve on the basis of letters of
appointment which are available for inspection upon request. The
letters of appointment set out the expected time commitment of
Non-Executive Directors who, on appointment, undertake that
they will have sufficient time to meet what is expected of them.
Non-Executive Directors are appointed for an initial three-year
term and the continuation of their appointment is conditional on
satisfactory performance and subject to annual re-election at the
Company’s Annual General Meetings.
Executive Directors serve on the basis of service agreements
which are also available for inspection upon request. Further
details on the Executive Directors’ service agreements are included
in the Annual Report on Remuneration, on page 38.
Director Training
The Chairman is responsible for the induction of new Directors
and ongoing development of all Directors. The Board received
tailored training as appropriate for service on a listed Company
Board. New Directors receive a full, formal and tailored
induction on
to provide an
understanding of the Group’s business, governance and key
stakeholders. The induction process typically includes an induction
pack, operational site visits, meetings with key individuals and
the Board designed
joining
the Group’s advisors, and briefings on key business, legal and
regulatory issues facing the Group.
As the business environment changes, it is important to ensure
refreshed and
the Directors’ skills and knowledge are
updated regularly. Accordingly, the Nomad ensures that updates on
corporate governance, regulatory and technical matters are
provided to Directors at special sessions in between formal Board
meetings. In this way, Directors keep their skills and knowledge
relevant so as to enable them to continue to fulfil their duties
effectively.
Information and Support Available to Directors
All Board Directors have access to the Company Secretary,
who advises them on Board and governance matters. The Chief
Executive Officer, Chief Financial Officer and the Company
Secretary work together to ensure that Board papers are clear,
accurate, delivered in a timely manner to Directors, and of
sufficient quality to enable the Board to discharge its duties.
As well as the support of the Company Secretary, there is a
procedure in place for any Director to take independent
professional advice at the Group’s expense in the furtherance of
their duties, where considered necessary or advisable.
Director Election
Following recommendations from the Nomination Committee,
taking into account the results of the Board’s performance
evaluation process, the Board considers that all Directors
continue to be effective, committed to their roles and have
sufficient time available to perform their duties. In accordance
with the Company’s Articles of Association one third of Directors
are to retire by rotation excluding those appointed during the year
and those re-elected at the Group’s AGM in 2019 as set out in the
Notice of AGM.
Directors’ Conflicts of Interest
Directors must keep the Board advised, on an ongoing basis,
of any interest that could potentially conflict with those of the
Company. Where the Board believes that a significant conflict
exists, the Director concerned is either not present or does not
take part in discussions and voting at the meeting whilst the item
is considered.
Directors have a statutory duty to avoid situations in which
they have, or may have, interests that conflict with those of the
Company, unless that conflict is first authorised by the Directors.
This includes potential conflicts that may arise when a Director
takes up a position with another Company. The Company’s
Articles of Association allow the Board to authorise such
potential conflicts, and there is in place a procedure to deal
32
Bigblu Broadband plc | Annual Report and Accounts 2019
Governance: Corporate Governance Statement
Governance: Corporate Governance Statement
with any actual or potential conflict of interest. The Board deals
with each appointment on its individual merit and takes into
consideration all the circumstances.
10. Communicating with shareholders and other
relevant stakeholders
All other appointments have been authorised by the Board and
have been included in the conflicts register.
Independent professional advice and access to Company
information
Each Director has the right of access to all relevant Group
information and to the Group’s management and, subject to
prior consultation with the Chairman, may seek independent
professional advice at the Group’s expense. A copy of any advice
received by the Director is to be made available to all other
members of the Board.
Shareholder engagement
Responsibility for shareholder relations rests with Andrew
Walwyn, the Group’s Chief Executive Officer. He ensures that
there is effective communication with shareholders and is
responsible for ensuring that the Board understands the views
of shareholders. Andrew is supported by the Group’s corporate
brokers with whom he is in regular dialogue. As a part of a
comprehensive investor relations programme, formal meetings
with investors are scheduled to discuss the Group’s interim and
final results. In the intervening periods, the Group continues its
dialogue with the investor community by meeting key investor
representatives and holding investor roadshows as appropriate.
7. Evaluating board performance
Annual General Meeting
Board Evaluation and Effectiveness
The Board and its Committees were formed upon listing in May
2015 and are reviewed from time to time. A Board Effectiveness
Review was carried out at the beginning of 2019 with the
results being analysed and reported to the Board. A small
number of proposed recommendations were made and are being
implemented by the Board.
8. Ethical values & behaviours
The Company operates a corporate culture that is based on
ethical values and behaviours. The Executive Directors
(comprising Andrew Walwyn, Frank Waters and Simon Clifton)
communicate regularly with staff through meetings and messages
to ensure best-in-class ethical standards and to provide clear
guidance on how the members of staff are expected to behave
towards their colleagues, suppliers, customers, shareholders and
on their wider responsibilities to the communities within which
they operate. In addition, we launched Blu Buzz, an online Portal
to ensure communication constantly improves across the Group
and all the company’s policies are displayed.
9. Maintaining governance structures and
processes
The Chairman is responsible for leadership of the Board,
ensuring its effectiveness and setting the agenda for Board
meetings. Once strategic objectives have been agreed by
the Board, it is the Chief Executive Officer’s responsibility to
ensure they are delivered upon. The day to day operations of the
Group are managed by the Chief Executive Officer and the wider
management team comprising the Chief Financial Officer and the
Chief Technical Officer.
The division of responsibilities between the Chairman, Chief
Executive Officer and Non-Executive Directors is set out in
writing in their contracts and agreed by the Board. The roles of
the Chairman and the Chief Executive Officer are separate with a
distinct division of responsibilities. The partnership between
Michael Tobin OBE and Andrew Walwyn is based on mutual trust
and facilitated by regular dialogue between the two. The separation
of authority enhances independent oversight of the executive
management by the Board and helps to ensure that no one
individual on the Board has unfettered authority.
the AGM will be circulated
This year the Company’s Annual General Meeting (“AGM”)
will be held at 2.15pm on 21 May 2020 and such notice
to shareholders shortly.
of
All shareholders have the opportunity to attend and vote,
in person or by proxy, at the AGM. The notice of the AGM
can be found on our website and in a notice, which is
being mailed out at the same time as this Report. The Notice of
AGM sets out the business of the meeting and an explanatory
note on all proposed resolutions. Separate resolutions are
proposed in respect of each substantive issue. The AGM is
the Company’s principal forum for communication with private
shareholders.
Risk management and internal controls
The Audit Committee report explains the process carried out for the
assessment of the effectiveness of the Group’s risk management
and internal control systems on page 36.
Independent auditor and audit information
Each person who is a Director at the date of approval of this
report confirms that, so far as the Director is aware, there is no
relevant audit information of which the Group’s auditor is unaware
and each Director has taken all the steps that he or she ought
to have taken as a Director to make himself or herself aware of
any relevant audit information and to establish that the Group’s
auditor is aware of that information. This confirmation is given
and should be interpreted in accordance with the provisions of the
Companies Act 2006.
to
Haysmacintyre LLP have expressed
continue as the Group’s auditor. As outlined in the Audit and Risk
Committee report on page 35, resolutions proposing their
reappointment and to authorise the Audit and Risk Committee to
determine their remuneration will be proposed at the next AGM.
their willingness
On behalf of the Board
For the roles and responsibilities of the Board please see section
6 on page 31.
Ben Harber
Company Secretary
26 March 2020
33
Nomination Committee Report
Nomination Committee Report
The role of the Nomination Committee is documented in its terms
of reference which were reviewed and adopted by the Board of
Directors in May 2016. The Nomination Committee is chaired by
Michael Tobin OBE, and its other member is Stephen Morana
who is also a Non-Executive Director.
Role and responsibilities
•
The Committee’s assessments will be reviewed with the
Chairman of the Board and the Chief Executive Officer,
following which a candidate may be recommended to the
Board for appointment.
Michael Tobin OBE
Nomination Committee Chairman
26 March 2020
the Board
in discharging
The Committee assists
its
responsibilities relating to the composition and make-up of the
Board and any Committees of the Board. It is also responsible
for periodically reviewing the Board’s structure and identifying
potential candidates to be appointed as Directors or Committee
members as the need may arise. The Committee is responsible
for evaluating the balance of skills, knowledge and experience
as well as the size, structure and composition of the Board and
Committees of the Board, retirements and appointments of
additional and replacement Directors and Committee members
and makes appropriate recommendations to the Board on such
matters, having regard to the Company’s aim to be an equal
opportunity employer, addressing
social
responsibility by promoting equality and diversity in its workforce.
A copy of the Committee terms of reference is available on the
Company’s website.
corporate
its
Meetings during the year
It was deemed not necessary to hold a meeting of the Nomination
Committee during 2019 however it is envisaged that the
Nomination Committee will meet at least once in the next financial
year.
Process for Board appointments
When the Company decides to appoint a Non-Executive Director:
•
•
•
The Committee Chairman, or search consultants where en-
gaged, will submit a short-list of candidates to members of
the Committee and the Chief Executive Officer for them to
review and enable them to suggest other candidates.
The Committee Chairman, one other Committee member
and the Chief Executive Officer will then meet short-listed
candidates selected by the Committee. In addition, potential
candidates will be given the opportunity to meet with Execu-
tive Directors as appropriate. If the Chairman wishes to pro-
ceed with the selection process, the candidate will then be
invited to meet all members of the Committee.
After meeting the candidate, the Committee will decide
whether to recommend the candidate to the Board for
appointment.
• Where an exceptional candidate is identified the process
may be shortened by Committee decision.
When the Company decides to appoint an Executive Director:
•
•
The Committee Chairman and the Chief Executive Officer or,
where engaged, search consultants, will submit a short-list of
one or more candidates to the Committee following meetings
with Executive management.
Some or all of the Committee members will then meet the
candidates selected for interview.
34
Bigblu Broadband plc | Annual Report and Accounts 2019
Governance: Corporate Governance Statement
Audit Committee Report
The role of the Audit Committee is documented in its terms of
reference which were reviewed and adopted by the Board in May
2016. The annual report on the role and activities of the Audit
Committee are as follows:
Membership of the Committee
The Committee was chaired by Stephen Morana with Michael
Tobin OBE and Paul Howard being the other members of
the Committee. All members and the Chair are Independent
Non-Executive Directors. All of the members of the Committee have
extensive experience of the technology industry as well as financial
procedures and controls. During the year ended 30 November
2019, the Committee met two times. The table on page 46
summarises the attendance of members at committee meetings:
•
•
understandable and provides the information necessary
for shareholders to assess the Group’s position and
performance, business model and strategy;
to monitor and keep under review the adequacy and
effectiveness of the Group’s financial controls and risk
management systems, including a review of the Group’s
risk management framework; and monitoring and reviewing
the appropriateness of timing of creation of a Group internal
audit function together with an annual internal audit plan; and
to review the Group’s policies and procedures for preventing
and detecting fraud, its systems and controls for preventing
bribery, its Code of Conduct and its policies for ensuring
that the Group complies with relevant regulatory and legal
requirements. The full terms of reference of the Committee
can be found on the Group’s website.
During the year-ended 30 November 2019 the Committee:
Only members of the Committee have the right to attend meet-
ings, though the Committee may invite others to attend if it is
considered appropriate or necessary. The external auditors are
invited to attend meetings of the Committee on a regular basis as
is the Chief Financial Officer where appropriate. The Chairman,
the Chief Executive Officer and members of the finance function
may also be invited to Audit Committee meetings at the discretion
of the Committee. The Committee plans to meet at least twice
during the year.
•
•
•
Roles and activities
The purpose of the Committee is to assist the Board in the effective
discharge of its responsibilities for financial reporting, corporate
control and risk management. The Committee is responsible for
monitoring the integrity of the Group’s financial statements,
including its annual and half-yearly reports, interim management
statements, preliminary result announcements and any other formal
announcements relating to its financial performance prior to
release. The Committee oversees the relationship between the
Group and its external auditors and makes recommendations
to the Board on their appointment. In addition, the Committee
monitors and reviews the external auditor’s independence and
objectivity and the effectiveness of the audit process, taking into
account relevant legal, professional and regulatory requirements.
The terms of reference of the Committee also includes the
following responsibilities:
•
•
•
•
•
•
•
•
to increase shareholder confidence and to ensure the
credibility and objectivity of published financial information
to assist the Board in meeting its financial reporting
responsibilities
to assist the Board in ensuring the effectiveness of the
Group’s accounting and financial controls
to strengthen the independent position of the Group’s ex-
ternal auditors by providing channels of communication be-
tween them and the Non-Executive Directors;
to review the performance of the Group’s external auditing
functions
to review and challenge significant accounting and treasury
policies, the clarity and completeness of disclosures in
financialreports and significant estimates and judgements;
to review the findings of the audit with the external auditors
where requested by the Board, to review the content of
the annual report and accounts and advise the Board
on whether, taken as a whole, it is fair, balanced and
reviewed and approved the year-end and interim results and
accounts;
discussed with the external auditors and reviewed and
approved the annual audit plan and receive their findings
and reports of the annual audit and interim review; and
received, reviewed and challenged the half-year and year-end
accounting papers prepared by management covering
significant accounting policies, significant
transactions,
judgemental areas, estimates, disclosures and going
concern.
Significant issues
Revenue recognition
The Group principally generates revenue from sales of airtime,
data, hardware and installation in connection with supplying
Broadband services and network recharges. There is a risk
therefore that revenue is inappropriately recognised if revenue is
incorrectly apportioned to a product or service.
A detailed revenue recognition policy is in place, and follows
IFRS 15, and
for
recognition dependent upon the individual nature of the goods or
services sold. The Group’s external auditors have reported to the
Committee that they have reviewed the revenue recognition
policy and processes as well as performing detailed testing of
revenue recognition across the year and found revenue to be
appropriately accounted for.
As a result of the above and after providing appropriate challenge
the Committee has concluded that the revenue recognition for the
Group is appropriate.
includes processes and procedures
Goodwill and intangibles carrying value
At 30 November 2019, the Group had on its balance sheet
goodwill of £25.8m (2018: £29.0m) and other intangibles of £3.6m
(2018: £7.1m) that has primarily arisen as a consequence of
acquisitions. Management perform impairment reviews annually,
or more frequently if there is an indication of impairment, based
on the Group’s hubs. The cash flow forecasts used for each hub
are based on the latest Board approved budgets.
Management prepare an accounting paper for review by the
Committee that details the methodology applied, key assumptions
used and the impact of sensitivity analysis. This includes a
discounted cashflow, taking into consideration the Group debt
value, equity value, the cost of debt and cost of equity, and a
growth rate of 2% pa.
Having considered the impairment reviews performed, the
35
Committee is satisfied that the carrying value of goodwill and
intangibles at 30 November 2019 is appropriate, after an
impairment of £3.3m of goodwill relating to Bigblu Services
Limited, an acquisition made in 2016, and BeyonDSL, an
acquisition made in 2018.
Internal controls and risk environment
Whilst the Board is ultimately responsible for the establishment,
monitoring and review of effectiveness of control systems
throughout the Group, each of the individual Company leaders
drive the process through which risks and uncertainties are
identified. The Board recognises that rigorous internal control
systems are critical to managing the risks in achieving its strategic
objectives. The Board further acknowledges that these systems
are designed to manage rather than eliminate risk in the Group.
The normal process for identifying, evaluating and managing
significant risks faced by the Group would be overseen by a Risk
and Compliance Committee, in association with work performed
by an internal audit function. Currently, this has not been required
and instead the Group operations team have taken a lead role
in looking at controls in the various jurisdictions. It is the Board’s
intention and desire, that as the Hubs are consolidated, that
within a year a Risk and Compliance Committee will be
established and will design a risk framework in order to capture
and evaluate control weaknesses and risks facing the business.
In the meantime, where the Board defines an identified risk as
significant, procedures exist to ensure that necessary action is
taken to rectify or mitigate as appropriate. The aforementioned
functions will provide additional assurance to an established
Audit and Risk Committee who will have ultimate responsibility
for the oversight and review of the adequacy and effectiveness
of the Group’s systems of internal controls. In addition, the
Committee
the absence of an established Audit and
Risk Committee from time to time engage with External
consultants to review aspects of the business as appropriate.
Such findings are / will bediscussed at the Audit Committee.
in
supported by the group operations team. Each legal entity has
a Finance Director or Controller allocated who has responsibility
and accountability for providing information which is in accordance
with agreed policies and procedures. The financial information for
each entity is subject to a review at reporting entity and Group
level by the Group Finance Director and also the Chief Financial
Officer. The Annual Report is reviewed by the Audit Committee in
advance of presentation to the Board for approval.
The Directors, by using appropriate procedures, systems and the
employment of competent personnel, have ensured that measures
are in place to secure compliance with the Group’s obligation to
keep adequate accounting records. The accounting records are
kept at the registered office of the Group or relevant statutory
entity office.
How we manage risk
To enhance effective governance and risk management oversight
in the future, it is intended that the Group will, as appropriate,
establish an additional layer of risk management in the Audit
Committee with the appointment of an Internal Auditor following
the consolidation of hubs. This function is authorised by the Board
to provide an additional level of assurance to the Audit Committee
in overseeing risk management and internal control activities.
It will also provide the business with a framework for risk
management, upward reporting of significant risks and policies
and procedures.
On a half yearly basis, the Audit Committee will review the status
the
on risk exposures and risk management
business within a pre-agreed risk management framework. The risk
management framework will be designed to identify, evaluate,
analyse and mitigate or manage risks appropriate to the
achievement of the business strategy.
throughout
The Group will adopt a two-pronged approach to identifying risks:
The external auditors provide a supplementary, independent and
autonomous perspective on those areas of the internal control
system which they assess in the course of their work. Their find-
ings are regularly reported to the Audit Committee and the Board.
a. a bottom-up approach at the business function level;
where risks are managed at the operational level with an
appropriately defined escalation process in place for those
risks rated as high; and
Key elements of the control environment are:
•
annual budgets and strategic plans prepared for all business
units
• monitoring of performance against budget and forecast with
reporting to the Board on a regular basis
• monthly review of detailed key performance indicators
•
all contracts are reviewed at a level of detail appropriate to
the size and complexity of the contract
timely reconciliations are performed for all significant bal-
ance sheet accounts
clearly defined organisational structure and authorisation
lines
an operations team reviews key business processes, con-
trols and their effectiveness, as well as identifying, assessing
and managing significant control issues; and
the Audit Committee, which assesses the overall appropri-
ateness of the Group’s internal control environment.
•
•
•
•
The preparation and issue of financial reports is managed
by the Group Finance Team, as delegated by the Board. The
Group’s financial reporting process is controlled using the Group
accounting policies and reporting systems. The Group Finance
Team supports all reporting entities with guidance on the
preparation of financial information. This is especially important
for new acquisitions. In the current year, this process was
36
b. a top-down approach at the Executive level; where the
principal risks and uncertainties are identified and managed.
A series of risk identification approaches will be used including
adding risk discussions into team meetings.
All identified risks will be assessed against a pre-defined
scoring matrix and prioritised accordingly. Any risks identified in
the bottom-up approach deemed to be rated as higher risk are
escalated in line with pre-defined escalation procedures for
further evaluation. The Group’s risk appetite is considered by
the Board and evaluated to ensure appropriateness of risk
management and mitigation.
Whistle-blowing and anti-bribery
Whistleblowing and Anti Bribery policies are in place in the Group
enabling employees to confidentially report matters of concern
directly to Non-Executive Directors, and that all Executives are
reminded of their responsibility in relation to Anti Bribery Legislation.
This is also a regular topic on the Board Meeting agendas.
Bigblu Broadband plc | Annual Report and Accounts 2019
Governance: Corporate Governance Statement
External Auditor
The Audit Committee reviews and makes recommendations with
regard to the appointment and reappointment of the external
auditors. In making these recommendations, consideration
is given to auditor effectiveness and independence, partner
rotation and any other factors that may impact the reappointment
of the external auditors. There are no contractual restrictions on
the choice of external auditors.
The Audit Committee is confident that the effectiveness and
independence of the external auditors is not impaired in any way.
The Committee will continue to assess the effectiveness and
independence of the external auditors.
The external auditors may perform certain non-audit services for
the Group, any such non-audit services require pre-approval by
the Audit Committee and are only permitted to the extent allowed
by relevant laws and regulations.
During the year-ended 30 November 2019, the non-audit
services provided by Haysmacintyre LLP primarily related to tax
compliance activities, a review of the half year reporting and a
review of transfer pricing arrangements. Full details of auditor’s
remuneration are shown in note 4 to the Financial Statements.
Review of effectiveness of External Auditors
An important role of the Committee is to assess the effectiveness
of the external audit process. In performing this assessment, the
Committee:
•
•
reviewed the annual audit plan and considered the auditors
performance against that plan along with any variations to it
• met with the audit engagement partner to review the audit
findings and responses received to questions raised by the
Committee
held regular meetings with the audit engagement partner,
including with the absence of executive management
considered their length of tenure
reviewed the nature and magnitude of non-audit services
provided; and
reviewed
confirmation presented to the Committee.
the external Auditors own
independence
•
•
•
Based on the assessment performed, the Committee has
recommended to the Board that a resolution to reappoint
Haysmacintyre LLP be proposed at the next Annual General
Meeting.
Stephen Morana
Chairman of the Audit Committee
26 March 2020
37
37
Annual statement of the remuneration
committee chairman
In advance of its listing, the Remuneration Committee reviewed
the Group’s remuneration structure to ensure it aligns with
the forward-looking strategy, is able to motivate and retain the
executive team over the next key phase in the Group’s
development, and o ensure it takes into account market
practice and best practice for a listed Group. The remuneration
structure for Executive Directors applied throughout the financial
year and is carried forward as appropriate into the new financial year
commencing 1 December 2019, is set out in the Remuneration
Policy below. As reported previously during the year the Committee
continued the Long-Term Incentive Plan for certain senior
executives to ensure their interests are aligned with that of the
shareholders.
Our remuneration arrangements reflect that we compete for
talent in a competitive market against other telecommunications
companies. The Committee has also carefully considered the
expectations of our Funders and UK shareholders in formulating
our policy and has included claw back provisions in our incentive
schemes for Directors and Board Members, to align with
developing best practice. The overarching principles of our
Remuneration Policy are to provide a competitive package of
fixed and variable pay that will enable the Group to ensure it can
attract and retain executives with the right skills and experience
to drive the long-term success of the Group.
The Committee believes that our remuneration arrangements
can achieve these goals through the application of stretching
performance targets and strong shareholder alignment through
our equity incentives.
Remuneration decisions in FY19
The activities of the Committee and key decisions in FY19 are
set out below:
•
•
•
•
Executive salaries were reviewed. No specific adjustments
were made in the current year save an increase of 2.4%%,
reflecting the performance of the enlarged Group and their
additional global responsibilities. This is in line with awards
made to other team members
The basis and awards under the bonus scheme were
updated and linked intrinsically to delivering revenue,
EBITDA and Cash targets
Non-Executive Director salaries were increased in June
2018
An award of Options under the Long-term Incentive Plan was
made
The Group achieved forecast results in the year-ended 30
November 2019, with revenue of £62.1m (2018: £55.4m) and
adjusted EBITDA of £10.1m (2018: £6.8m). As a result, Andrew
Walwyn, Frank Waters and Simon Clifton will receive bonuses
of 37.5% percent of their respective salaries. Additional uplift
bonuses can be earned when performance materially exceeds
targets. No such bonuses were awarded during the period.
As Chairman of Bigblu Broadband Remuneration Committee,
I am pleased to present the Board of Directors’ Remuneration
Report for the year ended 30 November 2019, which has been
prepared by the Committee and approved by the Board. In line
with the UK reporting regulations, this report is divided into three
sections:
•
•
•
The Annual Statement by the Remuneration Committee
Chairman;
The Directors’ Remuneration Policy, which details the
Group’s remuneration policies and their link to Group strategy,
as well as projected pay outcomes under various performance
scenarios; and
The Annual Report on Remuneration, which focuses on our
remuneration arrangements and incentive outcomes for
the year under review and how the Committee intends to
implement the Remuneration Policy in FY19
The role of the Remuneration Committee is documented in its
Terms of Reference which were reviewed and adopted by the Board
of Directors in May 2016. The objectives of the Remuneration
Committee are to ensure that the Group’s Directors and senior
executives are fairly rewarded for their individual contributions to
the Group’s overall performance by determining their pay and other
remuneration and to demonstrate to all shareholders that the
general policy relating to, and actual remuneration of individual
senior executives of the Group, is set by a committee of the Board
members who have no personal interest in the outcome of the
decisions and who will give due regard to the interests of the
shareholders and to the financial and commercial health of the
Group.
The Remuneration Committee intends that its policy and practice
should align with and support the implementation of the Group’s
strategy and effective risk management for the long term. The
policy is intended to motivate the right behaviours and to ensure
that any risk created by the remuneration structure is acceptable
to the Committee and within the risk appetite of the Board and its
strategy.
The remuneration package for executive Directors comprises a
combination of annual salary, annual performance bonus and
share options / Long Term Incentive Plans with performance
criteria. Remuneration for non-executive Directors consists of an
annual fee plus options. There were additional fees awarded for
serving on Board committees and non-executive Directors are not
entitled to bonuses.
The members of the Remuneration Committee are Michael
Tobin OBE and Paul Howard. The Chief Executive Officer, the
Chief Financial Officer or other Non-Executive Director, may be
invited to Remuneration Committee meetings at the discretion
of the Committee. The Committee plans to meet at least twice
during the year.
The agenda for Remuneration Committee meetings is prepared in
conjunction with the Chairman of the Committee. Submissions are
circulated in advance and may include remuneration benchmark
surveys and best practice guidelines together with papers relating
to specific agenda items.
Remuneration policy for FY19 and future years
Bigblu Broadband plc was listed on the Alternative Investments
Market (AIM) in May 2015.
38
Bigblu Broadband plc | Annual Report and Accounts 2019 Governance: Corporate Governance Statement
Long-Term Incentive Plan
Following consultation with External Advisors, the Company’s
Nominated Advisor and a Panel of Shareholders last year an
LTIP was put in place to further ensure Executives are fully
aligned with Shareholder Returns and to remove the subjectivity
surrounding Option awards. The basis of the award is in line with
best practice and is calculated by reference to two metrics, actual
BBB share price performance and relative performance versus a
basket of similar companies in the following weightings:
•
•
50% on how the actual BBB share price performs and
50% compared to how BBB performs against a basket of
similar Companies
An award was made in the current year to Senior Executives as
follows;
During the course of the year the following Executive Directors
were granted awards under the LTIP as follows
Director
Andrew Walwyn
Frank Waters
Simon Clifton
Options
199,489
160,273
156,010
Price
Date
Vesting
15p
15p
15p
October 2019
October 2021
October 2019
October 2021
October 2019
October 2021
Directors’ remuneration policy
This section describes the Group’s proposed remuneration
structure for Directors which, if approved, will apply for up to three
years from the date of the Annual General Meeting.
The overarching principles of our remuneration policy are to
provide a competitive package of fixed and variable pay that will
enable the Group to ensure it has executives with the right skills
and experience to drive the success of the Group, and that their
remuneration is linked to shareholder interests and the Group’s
long-term success. Our remuneration philosophy is:
•
•
•
to promote the long-term success of the Group, with stretching
performance targets which are rigorously and consistently
applied
to provide appropriate alignment between the Group’s
strategic goals, shareholder returns and executive reward
to have a competitive mix of base salary and short and
long-term incentives, with an appropriate proportion of the
package determined by stretching targets linked to the
Group’s performance
Executive Directors’ fixed and variable remuneration arrangements
have been determined taking into account:
•
•
•
•
•
the role, experience in the role, and performance of the
Executive Director
the location in which the Executive Director is working
remuneration arrangements at UK listed companies of a
similar size and complexity
remuneration arrangements at UK
telecommunications
companies of a similar size and complexity, including
companies with which the Group competes for talent
best practice guidelines for UK listed companies set by
institutional investor bodies
Future policy table
The key components of Executive Directors’ remuneration are as follows:
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Fixed Pay
Type
Base
Salary
To attract and retain talent of the right
calibre and with the ability to contribute
to strategy, by ensuring base salaries
are competitive in the relevant talent
market
Pension
Provide post-retirement benefits
participants
equitable manner.
for
in a cost-efficient and
Benefits
To provide competitive benefits for each
role.
Base salaries are usually reviewed
annually, with reference to individual
performance, Group
performance,
market competitiveness, salary increases
across the Group and the position hold-
er’s experience, competence and criti-
cality to the business.
Any increases are generally effective
from 1 December.
Pension contributions are provided
by the Group as part of a legislatively
compliant Workplace Pension Scheme
that requires an overall contribution of
9% of gross base salary to be made
by Year 3 of the scheme. This overall
percentage contribution will be made
up from a combination of contributions
from the Executive Directors and
the Group, with a choice of funding
vehicles through either the Group Plan
or by contributions being made to a per-
sonal SIPP chosen and set up by the
Executive Director.
relocation
Benefits currently include the provision
of private medical and dental insurance,
life insurance, permanent health and
disability insurance and car allowance.
package
Reasonable
including annual
visitation
allowance, legal fees allowance and
health insurance.
Travel and subsistence allowances in
line with the Group Expenses Policy
and other benefits may be provided
based on individual circumstances.
family
Executive Director salary increases will
normally be in line with those for the
wider executive employee population.
However, higher salary increases may
be made where there is a change in role
or responsibilities.
Group performance against market
expectations is taken into account when
determining appropriate salary levels.
None
None
The CEO, CFO and CTO will receive a
matching contribution of 1 percent (year
1), 3 percent (year 2) and 4.5 percent
of salary (in Year 3 of the scheme)
under his opt-in to the Group Workplace
to
Pension Scheme.
the
applicable maximum
contribution
(£2,000 FY17).
The Committee does not anticipate
pension benefits as being at a cost to
the Group that would exceed 10 percent
of base salary, notwithstanding future
changes to pension legislation.
Subject
Benefits currently include the provision
of private medical and dental insurance,
life insurance, permanent health and
disability insurance and car allowance.
Reasonable relocation package including
annual family visitation allowance, legal
fees allowance and health insurance.
Travel and subsistence allowances in
line with the Group Expenses Policy
and other benefits may be provided
based on individual circumstances.
39
Variable Pay
Type
Annual
Bonus
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Aims to focus executives on achieving
financial targets relevant to the business
priorities for the financial period.
The base bonus opportunity for Executive
Directors will be up to 75 percent of
base salary.
Up to 75 percent of maximum will vest
for target performance. Performance
above base performance can result in
additional bonuses being paid linked to
improved performance - ie paying for
themselves.
The annual bonus will be based on
achievement of financial targets (e.g.
revenue growth, cash conversion,
EBITDA).
to
The Committee has discretion
adjust the formulaic bonus outcome
downwards (or upwards with shareholder
consultation) within the limits of the
plan, to ensure alignment of pay with the
underlying performance of the busi-
ness.
Performance measures and targets are
set prior to or shortly after the start of
the relevant financial period.
At the end of the financial period,
the Remuneration Committee will
determine the extent to which the
targets have been achieved.
Awards are typically delivered in cash;
however, the Committee has discretion
to defer awards in cash or in shares.
The Committee has discretion and the
contractual legal vehicle, to reduce or
recoup the bonus in the event of serious
financial misstatement or misconduct.
In extreme cases of misconduct, the
Committee may claw back annual
bonus payments previously made.
Non- Executive Directors’ Fees
Type
Purpose and link to strategy
Operation
Maximum opportunity
Performance metrics
Non-
Executive
Directors’
Fees
the
time commitment
To reflect
in
preparing for and attending meetings,
the duties and responsibilities of the
role and the contribution expected from
the Non-Executive Directors.
None
increases
Any
to Non-Executive
Director fees will be considered as a
result of the outcome of a review
process and taking into account wider
market factors, e.g. inflation. There is
no prescribed individual maximum fee.
Further details are set out below.
Monthly invoiced fee for Chairman.
Monthly invoiced fees for Non-Executive
Directors.
Additional fees paid to the
Chairmen of Board Committees may
be paid if there is a material increase in
time commitment required.
Non-Executive Directors
do
no
incentive
in any bonus
participate
schemes, nor do they receive any
pension or benefits
than
nominal travel expenses). Non-Executive
Directors will participate
the
in
Company’s share option schemes.
(other
Notes to the policy table
•
•
•
Revenue growth, adjusted EBITDA and cash generation and
cash conversion are considered to be the best measures
of the Group’s annual performance given our current size
and stage of growth and will continue to determine at least
75% of the achievement criteria for annual bonus awards.
The Committee will keep this under review and may select
alternative measures as the Group evolves and strategic
priorities change.
nnual bonus targets will be selected prior to, or shortly
after, the start of the financial period. Financial targets will
be calibrated with reference to the Group’s budget for the
upcoming financial period and the Group’s performance over
the prior financial period.
Differences in remuneration policy operated for other
employees
• Other senior and key-role employee remuneration has some
of the same components as set out in the policy, being base
salary, annual bonus, long-term incentive participation and
pension provision. However, there is no provision for Medical
insurance, Permanent Health Insurance, Life assurance
or Car Allowance for non-Executive employees. Annual
bonus and long-term incentive arrangements share a similar
structureand pay-out arrangement, although the mix between
performance-based and
the
maximum award, varies by seniority and role.
time-based awards, and
In recruiting a new Non-Executive Director, the Committee will
use the policy as set out in the table below.
Non-Executive Directors
The appointments of each of the Chairman and the Non-Executive
Directors are for a fixed term of 3 years, and subject to one third
retirement by rotation and re-election at the AGM. Their letters
of appointment set out the terms of their appointment and are
available for inspection upon request. They are not eligible to
participate in the annual bonus scheme, nor do they receive
any additional pension or expenses (other than nominal travel
expenses) on top of the fees disclosed below. They do however
have eligibility to participate in the Company’s Share Schemes.
Non-Executive Directors appointment may be terminated at any
time upon written notice or in accordance with the articles and
receive no compensation on termination.
Non-Executive
Director
Role
Appointment
date
Re-appointment
date
Term of
appointment
Michael Tobin
Chairman
September 2015
May 2019
3 years
Paul Howard
Stephen Morana
Christopher Mills
Non-Executive
Director
Non-Executive
Director
Non-Executive
Director
September 2015
May 2019
3 years
February 2017
April 2017
3 years
May 2018
May 2019
3 years
Executive Directors
Each of the Executive Directors entered into a service agreement
with the Company as follows.
Executive
Director
Andrew Walwyn
Frank Waters
Simon Clifton
Role
Contract date
Re-appointment
date
Notice period
Chief Executive
Officer
Chief Financial
Officer
Chief Technology
Officer
May 2015
May 2018
12 months
May 2015
May 2018
12 months
September 2016
April 2017
12 months
The Employer is entitled to terminate an Executive Director’s
employment by payment of a cash sum in lieu of notice, equal to (i)
the basic salary and bonuses that would have been payable, and (ii)
the cost that would have been incurred in providing the Executive
Director with medical insurance benefits for any unexpired
portion of the notice period (the ‘‘Payment in Lieu’’). The Company
can alternatively choose to continue providing the medical
insurance benefits under item (ii) instead of paying a cash sum
40
Bigblu Broadband plc | Annual Report and Accounts 2019 Governance: Corporate Governance Statement
representing their cost. The Payment in Lieu can be paid typically
in one lump sum or alternatively monthly instalments over the no-
tice period. The Company’s policy on termination payments is to
consider the circumstances on a case-by-case basis, taking into
account the executive’s contractual terms, the circumstances of
termination and any duty to mitigate.
The Committee will continue to monitor market trends and devel-
opments over the next year in order to assess ongoing relevance
for the Company’s remuneration practices. The Committee wel-
comes feedback from our shareholders as we remain committed
to an open and transparent dialogue and hope to receive your
support at the forthcoming AGM. On behalf of the Remuneration
Committee.
Michael Tobin
Chairman of the Remuneration Committee
26 March 2020
41
41
Independent Auditor’s Report
Opinion
We have audited the financial statements of Bigblu Broadband
Plc (the ‘parent company’) and its subsidiaries (the ‘group’)
for
the year ended 30 November 2019 which comprise
the Consolidated Statement of Comprehensive Income, the
Consolidated and Parent Company Statement of Financial
Position, the Consolidated and Parent Company Statements
of Cash Flows, the Consolidated and Parent Company Statements
of Changes in Equity and notes to the financial statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
In our opinion, the financial statements:
•
•
give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 30 November 2019 and of the
group’s loss for the year then ended;
have been properly prepared in accordance with IFRSs as
adopted by the European Union; and have been prepared
in accordance with the requirements of the Companies Act
2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described
in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group
in ccordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including
the FRC’s Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
•
•
the directors’ use of the going concern basis ofaccounting in
the preparation of the financial statements is not appropriate;
or
the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to
continue to adopt the going concern basis of accounting for
a period of at least twelve months from the date when the
financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not
due to fraud) we identified. These matters included those
which had the greatest effect on the overall audit strategy, the
allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on
these matters.
42
42
Bigblu Broadband plc | Annual Report and Accounts 2019
Independent Auditor’s Report
Audit risk
How we responded to the risk
Impairment of intangible assets
Our audit work included, but was not restricted to, the following:
As shown in note 11 of these financial statements the Group held
£29.4m of intangible assets at the year end, in the form of good-
will and other intangibles.
• We assessed Management’s impairment review process
to challenge Managements’
and performed analysis
assumptions.
For the year ended 30 November 2019 management assessed
for indicators of impairment in each of the cash-generating units
(CGU’s) for goodwill.
The assessment was based on the future cash flows of each
CGU using a discounted cash flow model. An impairment was
recognised when the goodwill value exceeded the recoverable
amount.
• We reviewed each cash generating unit for indicators of
impair
• We reviewed Management’s forecasted cash flows that
feed into the discounted cash flow model and challenged
assumptions around this with reference to historic results,
market trends and future expectations.
• We assessed the appropriateness of the growth and discount
rates used by Management and challenged Management
on those that fell outside of our expectations.
• We reviewed the amortisation rates of other intangibles and
Significant management judgement and estimation uncertainty is
involved in this area, where the primary inputs are:
challenged these.
• We recalculated
the amortisation
to ensure
it was
Estimating forecast cash flows;
Selecting an appropriate discount rate and other variables within
the cash flow model.
For the other intangible assets, they are amortised over two to
three years.
Given the value of the goodwill and intangible assets we consider
this to be a significant risk.
arithmetically correct.
• We ensured there were no indicators of impairment for other
intangibles.
Revenue Recognition
Our audit work included, but was not restricted to, the following:
As shown in note 2 of these financial statements the Group
earned £62.1m of revenue during the financial year.
The group generates this revenue from the sale of airtime, data,
hardware and installation in connection with the supply of broadband
services.
There is a risk therefore that revenue is inappropriately recognised
or revenue is incorrectly apportioned to a product or service.
• We completed substantive testing on all income streams
across the group, ensuring that income has been recognised
correctly based on the agreement / contracts in place.
• We reviewed the new PPP contract income stream during
the year and ensured that all the income streams in relation
to this have been accounted for correctly.
• We completed cut off testing across all income streams,
ensuring that it has been recognised in the correct period.
• We ensured that IFRS 15 had been appropriately adopted
by considering the standard and which of the Group income
streams were impacted by this.
Going Concern
Our audit work included, but was not restricted to, the following:
Management’s rationale for their going concern assessment is
set out in note 1 of these financial statements.
The group is financed by a mixture of debt and equity. There has
been both a debt and equity raise in the financial year.
The Group made a loss of £8.3m in the year before tax and has
been loss making in prior periods. It also has net assets of £6.5m.
Given the above factors, we consider this to be a significant risk
area.
• We obtained budgets and cashflow forecasts, reviewed the
methodology behind these, ensured they were arithmetically
correct and challenged the assumptions underpinning them.
• We obtained post year end trading results and compared
these to budget to ensure budgeting is reasonable and
results are in line with expectations.
• We completed sensitivity analysis on the budgets provided
to assess the change in turnover or costs that would need to
occur to push the Group into a cash negative position.
• We reviewed the post year end covenant reporting.
• We discussed plans for the Group going forward with
management, including their assessment of sensitivities sur-
rounding the potential impact of the COVID-19 pandemic,
ensuring these had been incorporated into the budgeting
and would not have an impact on the going concern status
of the group.
• We reviewed the post year end activity which included the
refinancing of the RCF facility and BGF loan.
• We reviewed the post year end cash balance to ensure no
evidence of liquidity issues.
43
Our application of materiality
We apply the concept of materiality both in planning and performing
our audit, in evaluating the effect of misstatements and in forming
an opinion. For the purpose of determining whether the financial
statements are free from material misstatement, we define
materiality as the magnitude of a misstatement or an omission
from the financial statements, or related disclosures, that would
make it probable that the judgement of a reasonable person relying
on the information would have been changed or influenced by
the misstatement or omission. We also determine a level of
performance materiality, which we used to determine the extent
of testing needed to reduce to an appropriately low level the risk
that the aggregate of uncorrected and undetected misstatements
exceeds materiality for the financial statements as a whole.
The materiality for the Group financial statements as a whole
was set at £500,000 (30 November 2018: £544,000). This was
determined with reference to 1% of turnover and 5% of EBITDA,
being the Group’s main KPI’s.
On the basis of our risk assessment and review of the Groups
control environment, performance materiality was set at 75%
of materiality, being £375,000 (30 November 2018 – 75% of
materiality being £408,000).
The reporting threshold to the audit committee was set as 5% of
materiality, being £25,000 (30 November 2018 – £27,200). If in
our opinion differences below this level warranted reporting on
qualitative grounds, these would also be reported.
The materiality for the Parent Company financial statements was set
at £334,000 (30 November 2018: £544,000). This was determined
with reference to 1% of gross assets, as the company is a holding
company for investments and debt and equity raises and does
not trade.
On the basis of our risk assessment and review of the Parent
Company’s control environment, performance materiality was set
at 75% of materiality, being £250,500 (30 November 2018 – 75%
of materiality being £408,000).
The reporting threshold to the audit committee was set as 5% of
materiality, being £16,700 (30 November 2018 – £27,200). If in
our opinion differences below this level warranted reporting on
qualitative grounds, these would also be reported.
An overview of the scope of our audit
Our audit scope included obtaining an understanding of the Group
and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement at the
Group level. Audit work to respond to the assessed risks was per-
formed directly by the audit engagement team who performed full
scope audit procedures on the Parent Company and each indi-
vidual subsidiary, with the use of overseas component auditors
where appropriate.
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual re-
port, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our re-
sponsibility is to read the other information and, in doing so, con-
sider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement
in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we con-
clude that there is a material misstatement of this other informa-
tion, we are required to report that fact. We have nothing to report
in this regard.
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
•
•
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been
prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course
of the audit, we have not identified material misstatements in the
strategic report or the directors’ report.
We have nothing to report in respect of the following matters in
relation to which the Companies Act
2006 requires us to report to you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements are not in agreement
with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by
law are not made; or
we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or er-
ror.
In preparing the financial statements, the directors are responsi-
ble for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of ac-
counting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in
44
Bigblu Broadband plc | Annual Report and Accounts 2019
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state
to them in an Auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume re-
sponsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Ian Cliffe
(Senior Statutory Auditor)
For and on behalf of haysmacintyre, Statutory Auditors
25 March 2019
10 Queen Street Place
London
EC4R 1AG
Independent Auditor’s Report
45
45
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Revenue
Cost of sales
Gross profit
Distribution expenses
Administrative expenses
Operating loss
Finance costs
Loss before tax
Taxation on operations
Loss for the financial year
Other comprehensive expense
Foreign currency translation difference
Notes
2019
£’000
2018
£’000
2
62,088
55,351
Non-current assets
Assets
(34,868)
(32,859)
Property, plant and equipment
27,220
22,492
Intangible assets
(17,098)
(10,931)
Deferred tax asset
Investments
(15,752)
(24,560)
Total non-current assets
3
7
8
(5,630)
(2,622)
(8,252)
(12,999)
(2,167)
(15,166)
231
1,870
(8,021)
(13,296)
Current assets
Cash and cash equivalents
Inventory
Trade and other receivables
Total current assets
(879)
(394)
Total assets
Total comprehensive expense for the year
(8,900)
(13,690)
Notes
2019
£’000
2018
£’000
10
11
12
18
13
14
15
15,865
29,362
52
643
5,517
36,087
53
882
45,922
42,539
5,989
3,911
8,325
5,067
1,950
9,893
18,225
16,910
64,147
59,449
Current liabilities
Trade and other payables
16
(32,789)
(31,313)
Total comprehensive expense for the year is
attributable to:
Owners of Bigblu Broadband Plc
Non-controlling interests
(8,816)
(13,690)
Non-current liabilities
(84)
-
Other payables
Loss per share from operations
Basic and diluted EPS
9
(13.9p)
(25.8p)
In accordance with section 408 of the Companies Act 2006 the
parent company has not presented its own Income Statement,
which resulted in a profit of £3,710k (2018: loss £27,828k).
All results relate to continuing operations.
The notes on pages 50 to 64 form an integral part of these
financial statements.
Loans
Deferred tax liability
Total liabilities
Net assets
Equity
Share capital
Share premium
Share option reserve
Other equity reserve
Foreign exchange translation reserve
Reverse acquisition reserve
Listing cost reserve
Merger relief reserve
Retained losses
Capital and reserves attributable to owners of Bigblu
Broadband Plc
Non-controlling interests
Total equity
17
17
18
19
19
20
20
20
20
20
20
(4,409)
(409)
(20,187)
(16,979)
(234)
(657)
(24,830)
(18,045)
(57,619)
(49,358)
6,528
10,091
8,636
23,900
2,282
271
(2,225)
(3,317)
(219)
16,233
8,506
23,900
1,460
271
(2,156)
(3,317)
(219)
16,233
(42,412)
(34,587)
3,149
10,091
3,379
6,528
-
10,091
Approved by the Board on 26 March 2020 and signed on its
behalf by:
Andrew Walwyn
Chief Executive Officer
46
Bigblu Broadband plc | Annual Report and Accounts 2019
Statement of Financial Position and Cash Flows
Company Statement of Financial Position
Consolidated Statement of Cash Flows
Assets
Non-current assets
Investments
Current assets
Cash and cash equivalents
2019
£’000
2018
£’000
Notes
2019
Notes
£’000
2018
£’000
Loss for the year
(8,021)
(13,296)
12
5,625
5,625
5,625
5,625
Adjustments for:
Interest charge
-
915
2,622
2,167
Trade and other receivables
15
36,859
26,680
36,859
27,595
Liabilities
Current liabilities
Trade and other payables
16
(3,884)
(2,632)
Non-current liabilities
Non-current loans
Net assets
Equity
Share capital
Share premium
Share option reserve
Other equity reserve
Listing cost reserve
Merger relief reserve
Retained losses
Total equity
17
(19,978)
(16,628)
18,622
13,960
19
19
20
20
20
20
8,636
8,506
23,900
23,900
2,282
271
(219)
1,460
271
(219)
16,233
16,233
(32,481)
(36,191)
18,622
13,960
Goodwill impairment
Amortisation of intangible assets
Release of grant creditors
Depreciation of property, plant and equipment - owned assets
Depreciation of property, plant and equipment - ROU assets
Tax credit
Share based payments
Foreign exchange variance and other non-cash items
(Increase) / decrease in inventories
11
11
10
3,286
4,071
-
7,491
(605)
(2,556)
3,365
1,245
6,629
-
(231)
(1,870)
437
118
(1,961)
395
(130)
(474)
Decrease / (Increase) in trade and other receivables
1,615
(4,445)
Increase in trade and other payables
Loss on disposals of fixed assets
1,241
10,896
15
63
Cash generated from continuing operations
7,197
4,870
Interest paid
Tax paid
(2,144)
(1,478)
-
(18)
Net cash inflow from operating activities
5,053
3,374
Approved by the Board on 26 March 2020 and signed on its
behalf by:
Investing activities
Purchase of property, plant and equipment
Andrew Walwyn
Chief Executive Officer
Purchase of intangibles
Purchase of investments
Net cash used in investing activities
Financing activities
Cash within subsidiaries acquired
Proceeds from issue of ordinary share capital
Proceeds from bank revolving credit facility
Loans (paid)/received within subsidiaries acquired
Investment by non-controlling interest
Principal elements of lease payments
10
11
11
11
(8,913)
(2,282)
(665)
(5,498)
(200)
(8,169)
(9,778)
(15,949)
-
37
1,491
11,948
3,350
(142)
3,631
(1,229)
400
351
-
-
Net cash generated from financing activities
5,647
14,190
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
922
5,067
1,615
3,452
Cash and cash equivalents at end of year
5,989
5,067
Of the net increase in cash and cash equivalents £189k is an
increase in short term deposits (2018: £Nil)
The notes on pages 50 to 64 form an integral part of these
financial statements.
47
Company Statement of Cash Flows
2019
£’000
2018
£’000
Profit (loss) for the year
3,710
(27,828)
Adjustments for:
Interest charge
Share based payments
2,320
437
2,137
395
(Increase) / decrease in trade and other receivables
(10,179)
13,767
Increase in trade and other payables
1,252
919
Cash (outflow) / inflow from operating activities
(2,460)
(10,610)
Interest paid
(1,842)
(1,448)
Financing activities
Proceeds from issue of ordinary share capital
Proceeds from bank revolving credit facility
Intercompany loans
37
3,350
-
11,948
400
-
Net cash generated from financing activities
3,387
12,348
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(915)
915
-
290
625
915
The notes on pages 50 to 64 form an integral part of these
financial statements.
48
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I
Notes to the Financial Statements
1. Accounting Policies
General information and basis of preparation
Bigblu Broadband plc is a public limited company, incorporated
and domiciled in England and Wales under the Companies Act
2006. The address of its registered office is 108 Churchill Road,
Bicester, Oxfordshire, England OX26 4XD. The Company’s
ordinary shares are traded on the AIM Market operated by
the London Stock Exchange. The financial statements of
Bigblu Broadband plc for the year ended 30 November 2019 were
authorised for issue by the Board on 26 March 2020 and the
balance sheets signed on the Board’s behalf by Andrew Walwyn.
the Group’s operations and
The nature of
its principal
activitiesis the provision of satellite and wireless broadband
telecommunications and associated / related services and
products.
The Group prepares its consolidated financial statements in
accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the EU. The financial statements have
been prepared on the historical cost basis.
The consolidated financial statements are for the 12 months to
30 November 2019. This review covers the consolidated results
of Bigblu Broadband plc and its subsidiary undertakings from the
date of acquisition.
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts in the financial statements. The areas involving a higher
degree of judgement or complexity, or areas where assumptions
or estimates are significant to the financial statements are
disclosed further. The principal accounting policies set out below
have been consistently applied to all the years presented in these
financial statements, except as stated below.
Standards issued and applied for the first time in 2019
The following new and revised Standards and Interpretations
have been adopted in the current year.
•
•
•
•
•
•
•
Amendments to IFRS 9 Financial Instruments
IFRS 16 Leases
IFRS 15 Revenue recognition
IAS 10 Transfers of Investment property
Annual Improvements to IRS Standards 2014 – 2016 Cycle
Amendments to IAS 28 Investments in Associates and Joint
Ventures
IFRIC 22 Foreign currency transactions
With the exception of IFRS 16 the adoption of these standards
has not had a material impact on the financial statements.
Of the standards and interpretations in issue but not yet effective,
none is expected to have a material impact on the results and
financial position of the Group.
IFRS 16 Leases is effective from 1 January 2019 but the Company
has adopted it early as at 1 December 2018. The standard
eliminates the classification of leases as either operating or
finance leases and introduces a single accounting model.
Lessees are required to recognise a right-of-use asset and related
lease liability for their operating leases and show depreciation of
leased assets and interest on lease liabilities separately in their
income statement. IFRS 16 requires the Company to recognise
substantially all of its operating leases on the balance sheet.
The Company adopted IFRS 16 on a modified retrospective
basis. Accordingly, prior year financial information has not been
restated and will continue to be reported under IAS 17: Leases.
The right-of-use asset and lease liability have initially been
measured at the present value of remaining lease payments, with
the right-of-use asset being subject to certain adjustments.
When applying IFRS 16, the Company has applied the following
practical expedients, on the date of initial application:
-
applying a single discount rate to a portfolio of leases with
reasonably similar characteristics
relying on previous assessments on whether leases are
onerous as an alternative to performing an impairment
review – there were no onerous contracts as at 1 December
2018
accounting for operating leases with a remaining lease term
of less than 12 months as at 1December 2018 as short-term
leases
excluding initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and using
hindsight in determining the lease term where the contract
contains options to extend or terminate the lease.
-
-
-
The right-of-use asset and lease liability recorded at 1 December
2018 were £5,041k and £5,591k respectively.
The following table reconciles the opening balance for the lease
liabilities as at 1 December 2019 based on the operating lease
obligations as at 30 November 2018:
Operating lease commitments disclosed as at 30 November 2018
Discounted using the lessee’s incremental borrowing rate of at the date of
initial application
Add: finance lease liabilities recognised as at 30 November 2018
Add: contracts reassessed as lease contracts
Lease liability recognised as at 1 December 2018
2019
£’000
1,023
966
139
4,437
5,542
1,206
4,336
5,542
Standards issued and not yet effective
The following new and revised Standards and Interpretations are
issued. The Group intends to adopt these standards in 2020 and
are currently not effective:
Of which are:
Current lease liabilities
Non-current lease liabilities
•
Definition of Material – Amendments to IAS 1 and IAS 8 (ef-
fective 1 January 2020)
Lessor accounting
The Group did not need to make any adjustments to the accounting
for assets held as lessor under
operating leases (see note 21) as a result of the adoption of IFRS
16.
50
Bigblu Broadband plc | Annual Report and Accounts 2019
Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set
out in the Strategic Report on pages 3 to 34. The financial position
of the Group, its cash flows and liquidity position are described in
the Finance Review on pages 12 to 29. In addition note 24 to the
financial statement includes the Group’s objectives, policies and
processes for managing its capital, its financial risk management
objectives, details of its financial instruments and its exposures to
credit risk and liquidity risk.
As at 30 November 2019 the Group generated an adjusted
EBITDA before a number of non-cash and start-up costs expenses
as shown on page 23, of £10.2m (2018: £6.8m), and with cash
inflow from operations of £7.2m (2018: inflow of £4.9m) and a
net increase in cash and cash equivalents of £0.9m in the year
(2018: increase £1.6m). The Group balance sheet showed net
cash at 30 November 2019 of £6.0m (2018: £5.1m).
Having reviewed the Group’s budgets, projections and funding
requirements, and taking account of reasonable possible changes
in trading performance over the next twelve months, particularly
in light of COVID 19 risks and counter measures, the Directors
believe they have reasonable grounds for stating that the Group
has adequate resources to continue in operational existence for
the foreseeable future. Accordingly, the Directors continue to
adopt the going concern basis in preparing the Annual Report
and Accounts.
The Board has concluded that no matters have come to its
attention which suggest that the Group will not be able to maintain
its current terms of trade with customers and suppliers or
indeed that it could not adopt relevant measures as outlined in the
Strategic report to reduce costs and free cash flow. The latest
management information in terms of volumes, debt position,
ARPU and Churn are in fact showing a positive position
compared to prior year and budget as a result of each government’s
response to COVID-19 resulting in the remote working position
of individuals across our key territories. The forecasts for the
combined Group projections, taking account of reasonably
possible changes in trading performance, indicate that the Group
has sufficient cash available to continue in operational existence
throughout the forecast year and beyond. The Board has considered
various alternative operating strategies should these be necessary
and are satisfied that revised operating strategies could be adopted
if and when necessary. As a consequence, the Board believes
that the Group is well placed to manage its business risks, and
longer-term strategic objectives, successfully.
Revenue
Revenue is recognised at an amount that reflects the consider-
ation to which the entity expects to be entitled in exchange for
transferring goods or services to a customer net of sales taxes
and discounts. The Group principally obtains revenue from pro-
viding the following telecommunications services: airtime usage,
service charges, connection fees and equipment sales. Products
and services may be sold separately or in bundled packages.
Revenue streams from contracts under the PPP commercial ar-
rangement recognised for the first time in 2019 are accounted for
in compliance with IFRS 15 when the performance obligations are
settled as follows:
-
-
Upon installation: installation fees and bonuses
Upon activation: activation fees and bonus, equipment and
logistics bonuses, public subsidies
Upon achieving agreed targets: marketing support
28 days after cancellation or when damaged kit returned:
non-return of kit fees, damaged kit fees.
-
-
Notes to the Financial Statements
Revenue for equipment sales is recognised when the invoice is
raised.
Revenue for service charges, connection fees and airtime usage
are recognised at the time services are performed which is when
the performance obligation is settled.
Foreign currency
For the purpose of the consolidated financial statements, the
results and financial position of each Group company are ex-
pressed in Pounds Sterling, which is the functional currency of
the Group, and the presentation currency for the consolidated
financial statements.
In preparing the financial statements of the individual companies,
transactions in currencies other than the entity’s functional cur-
rency (foreign currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet
date, monetary assets and liabilities that are denominated in for-
eign currencies are retranslated at the rates prevailing on the bal-
ance sheet date. Non-monetary items that are measured in terms
of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
profit and loss for the year.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group’s foreign operations are
translated at exchange rates prevailing on the balance sheet
date. Income and expense items are translated at the average
monthly rate of exchange ruling at the date of the transaction,
unless exchange rates fluctuate significantly during that month,
in which case the exchange rates at the date of transactions are
used.
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation and impairment losses, if any.
Depreciation is calculated under the straight-line method to write
off the depreciable amount of the assets over their estimated
useful lives. Depreciation of an asset does not cease when the
asset becomes idle or is retired from active use unless the asset
is fully depreciated.
Land
Building improvements
0% on cost
20% on cost
Fixtures, fittings & infrastructure
10% - 25% on cost
IT hardware and software
Motor vehicles
Rental Stock
25% on cost
25% on cost
25% on cost
The depreciation method, useful lives and residual values are re-
viewed, and adjusted if appropriate, at the end of each reporting
year to ensure that the amounts, method and years of deprecia-
tion are consistent with previous estimates and the expected pat-
tern of consumption of the future economic benefits embodied in
the items of the property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when the
cost is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Group and the cost of
the asset can be measured reliably. The carrying amount of parts
that are replaced is derecognised. The costs of the day-to-day
servicing of property, plant and equipment are recognised in profit
or loss as incurred. Gains or losses on disposal are included in
Statement of Comprehensive Income.
51
Goodwill
Goodwill on acquisitions comprises the excess of the aggregate
of the fair value of the consideration transferred, the fair value
of any previously held interests, and the recognised value of
the non-controlling interest in the acquiree, over the net of the
acquisition date amounts of the identifiable assets acquired and
liabilities assumed.
Goodwill is carried at cost less accumulated impairment losses.
Goodwill is tested for impairment annually or more frequently
if events or changes in circumstances indicate a potential
impairment and using discount cashflow valuations based on
future operating profits. Gains and losses on the disposal of an
entity include the carrying amount of goodwill relating to the entity
sold.
Intangible Assets and Amortisation
Goodwill and Intellectual Property are reviewed annually for im-
pairment and the carrying value is reduced accordingly. Other
intangible assets are amortised from the date they are available
for use over their estimated useful lives as per below and this is
charged to profit or loss on a straight-line basis:
•
•
•
Customer Contracts – 2 years
Software – 3 years
Intellectual Property – 3 years
Intangible assets recognised in a business combination
Intangible assets acquired in a business combination and
recognised separately from goodwill are initially recognised at
their fair value at the acquisition date.
Amortisation is charged to profit or loss on a straight-line basis
(Within administration expenses) over the estimated useful lives
of the intangible asset unless such lives are indefinite. These
charges are included in other expenses in profit or loss. Intangible
assets with an indefinite useful life are tested for impairment
annually. Other intangible assets are amortised from the date
they are available for use. The useful lives are as follows:
•
•
Customer Contracts – 2 years
IP – 3 years
Investments
Investments are recorded at cost. Investments are reviewed
for impairment when events or changes in circumstances
indicate that the carrying amount may not be fully recoverable.
Investments in subsidiaries are stated at cost and reviewed for
impairment on an annual basis.
Inventories
Inventories are stated at the lower of cost and net realisable value.
Costs of inventories are determined on a first-in-first-out basis.
Net realisable value represents the estimated selling price for
inventories less all estimated costs of completion and costs to
make the sale.
Trade and Other Receivables
Trade and other receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an
active market. Trade and other receivables are measured at
amortised cost less impairment losses.
The collectability of debt is assessed on a monthly basis such that
individual and collective impairment provisions are made as and
when required.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and demand
deposits and other short-term, highly liquid investments that are
readily convertible to a known amount of cash and are subject to
an insignificant risk of changes in value.
Trade and Other Payables
Trade and other payables are obligations to pay for goods or ser-
vices that have been acquired in the ordinary course of business
from suppliers. Accounts payables are classified as current liabil-
ities if payment is due within one year. If not, they are presented
as non-current liabilities. Trade payables are recognised initially
at fair value and subsequently measured at amortised cost using
the effective interest method.
Impairment of Non-Financial Assets
The Group assesses annually whether there is any indication
that any of its assets have been impaired. If such indication
exists, the asset’s recoverable amount is estimated and compared
to its carrying value. Where it is impossible to estimate the
ecoverable amount of an individual asset, the Group estimates
the recoverable amount of the smallest cash-generating unit to
which the asset is allocated. If the recoverable amount of an
asset (or cash-generating unit) is estimated to be less than its
carrying amount an impairment loss is recognised immediately
in profit or loss, unless the asset is carried at a revalued amount,
in which case the impairment loss is recognised as revaluation
decrease. For goodwill, intangible assets that have an indefinite
life, and intangible assets not yet available for use, the recoverable
amount is estimated annually and at the end of each reporting
year if there is an indication of impairment.
Financial Instruments
The Group classifies financial instruments, or their component
parts, on initial recognition as a financial asset, a financial liability
or an equity instrument in accordance with the substance of the
contractual arrangement. Financial instruments are recognised
when the Group becomes a party to the contractual provisions
of the instrument. Financial instruments are recognised initially
at fair value plus transactions costs that are directly attributable
to the acquisition or issue of the financial instrument, except for
financial assets at fair value through profit or loss, which are
initially measured at fair value, excluding transaction costs (which
is recognised in profit or loss). Financial assets are de-recognised
when the rights to receive cash flows from the investments have
expired or have been transferred and the Group has transferred
substantially all risk and rewards of ownership.
Equity Instruments
Equity instruments issued by the Group are recorded at the value
of proceeds received, net of costs directly attributable to the issue
of the instruments.
BGF Convertible Loan
The Company’s subordinated and unsecured convertible £2.4m
2024 loan facility with the BGF has been accounted for using split
accounting to recognise separate debt and equity components.
The debt component is recognised on the date of inception or
modification at the fair value of a similar liability that does not have
an equity conversion option. The equity element is recognised as
the difference between the fair value of the financial instrument
as a whole and the fair value of the debt component. Any direct-
ly attributable transaction costs are allocated to the equity and
debt components in proportion to their initial carrying amounts.
Subsequently, the debt component is measured at amortised cost
using the effective interest rate method. A redemption premium
interest reserve is accrued monthly at £57k, over 96 months,
repayable in 2024.
52
Bigblu Broadband plc | Annual Report and Accounts 2019 Leases
a) As a lessee
The Group leases various offices, warehouses, items of equipment
and vehicles. Its Quickline and Breiband subsidiaries also lease
space for locating equipment for their fixed wireless network
infrastructures and fibre comprising part of their backbone
networks.
As indicated above the Group has adopted IFRS 16 Leases from
1 December 2018 resulting in a change of accounting policy.
Until 30 November 2018. leases of property, plant and equipment
where the Group, as lessee, had substantially all the risks and
rewards of ownership, were classified as finance leases. Leases
in which a significant portion of the risks and rewards of ownership
were not transferred to the Group as lessee were classified as
operating leases (note 21). Payments made under operating
leases (net of any incentives received from the lessor) were
charged to profit or loss on a straight-line basis over the period
of the lease.
Under the new policy the Group assesses whether a contract
contains a lease, at the date of its inception. The Group
recognises a right-of-use asset and a corresponding lease
liability with respect to all lease agreements in which it is the
lessee, except for short-term leases (defined as leases with a
lease term of 12 months or less) and leases of low value assets.
For these leases, the Group recognises the lease payments as
an operating expense on a straight-line basis over the term of the
lease unless another systematic basis is more representative of
the time pattern in which economic benefits from the leased asset
are consumed.
The lease liability is initially measured at the present value of
the lease payments that are unpaid at the commencement date
discounted by using the rate implicit in the lease. If that rate
cannot be readily determined, which is generally the case for
leases in the Group, the lessee’s incremental borrowing rate is
used, being the rate that the individual lessee would have to pay
to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with
similar terms, security and conditions.
Lease payments included in the measurement of the lease
liability comprise:
•
•
•
•
•
lease payments
in-substance fixed
Fixed
(including
payments), less any lease incentives.
variable lease payment that are based on an index or a
rate, initially measured using the index or rate as at the
commencement date
amounts expected to be payable by the Group under resid-
ual value guarantees
the exercise price of a purchase option if the Group is
reasonablycertain to exercise that option, and
payments of penalties for terminating the lease, if the lease
term reflects the Group exercising that option.
The lease liability is included in payables in the Statement of
Financial Position under either Current or Non-Current Liabilities
according to when the future lease payments fall due.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to
reflect the payments made.
Right-of-use assets are measured at cost comprising the
following:
•
•
the amount of the initial measurement of lease liability
any lease payments made at or before the commencement
date less any lease incentives received
Notes to the Financial Statements
•
•
any initial direct costs, and
restoration costs
Right-of-use assets are generally depreciated over the shorter of
the asset’s useful life and the lease term on a straight-line basis.
If the Group is reasonably certain to exercise a purchase option,
the right-of-use asset is depreciated over the underlying asset’s
useful life.
The right-of-use assets are included in Property, plant and
equipment in the Statement of Financial Position.
Payments associated with short-term leases of equipment and
vehicles and all leases of low-value assets are recognised on a
straight-line basis as an expense in profit or loss. Short-term leases
are leases with a lease term of 12 months or less. Low-value
assets comprise rental of small amounts of space for locating
network infrastructure equipment and small items of office
equipment. During 2019 the amount accounted for as low
value assets was £69k as a result of excluding leases for space to
locate repeater equipment owned by Breiband with an individual
annual cost of less than £500.
b) As a lessor
Lease income from operating leases where the Group is a lessor
is recognised in income on a straight line basis over the lease
term (note 21) Initial direct costs incurred in obtaining an operating
lease are added to the carrying amount of the underlying
asset and recognised as expense over the lease term on the
same basis as lease income. The respective leased assets are
included in the balance sheet based on their nature. The Group
did not need to make any adjustments to the accounting for assets
held as lessor as a result of adopting the new leasing standard.
Current and deferred taxation
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the Statement of Comprehensive Income,
except that a charge attributable to an item of income and
expense recognized as other comprehensive income or to an
item recognized directly in equity is also recognised in other
comprehensive income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax
rates and laws that have been enacted or substantively enacted
by the reporting date in the countries where the Group operates
and generates income.
Deferred tax balances are recognized in respect of all timing
differences that have originated but not reversed by the Statement
of Financial Position date, except that:
•
•
The recognition of deferred tax assets is limited to the
extent that it is probable that they will be recovered against
the reversal of deferred tax liabilities or other future taxable
profits; and
Any deferred tax balances are reversed if and when all
conditions for retaining associated tax allowances have been
met.
Deferred tax balances are not recognised in respect of permanent
differences except in respect of business combinations, when
deferred tax is recognised on the differences between the fair
values of assets acquired and the future tax deductions available
for them and the differences between the fair values of liabilities
acquired and the amount that will be assessed for tax. Deferred
tax is determined using rates and laws that have been enacted or
substantively enacted by the reporting date.
Employee Entitlements
Liabilities for wages and salaries, including non-monetary
benefits for annual leave, which is expected to be settled within
12 months of the reporting date are recognised in other payables
in respect of employee’s services up to the reporting date and
are measured at the amounts expected to be paid when the
53
(d) Forecasting
The Group prepares medium-term forecasts based on Board
approved budgets and 3-year financial models. These are used
to support judgements in the preparation of the Group’s financial
statements including the decision on whether to recognise
deferred
the Group’s going concern
assessment.
tax assets and
for
(e) Goodwill and other intangible assets
Judgement is required in the annual impairment test of goodwill
to ascertain if there are any signs of impairment. This test
covers the future EBITDA performance against the carrying value
of the Goodwill. The Group values other intangibles based on the
following:
•
•
Intellectual property based on estimated fair value
Customer contracts have been valued by taking an average
length of contract multiplied by an average margin per month.
A discount rate has been applied to the calculated value to
reflect customer churn and doubtful debts. The margin and
applied discount will vary dependant on the customer base
which factors in location, economy and history of the previous
business.The contract value will be reviewed annually for
impairment.
(f) Trade and other receivables
Judgement is required in ascertaining the collectability of debt
and impairment provisions are made accordingly. Impairment is
determined on the age of the debt and suitable provisions are
then provided where appropriate.
2. Revenue
Recurring revenue- airtime
Recurring revenue – other
Other non recurring revenue
2019
£’000
46,804
1,750
13,534
62,088
2018
£’000
45,104
4,921
5,326
55,351
Other non-recurring revenue includes government grant income.
Segmental split of revenue:
The Group’s operations are located throughout Europe and in
Australia, with the head office located in the United Kingdom. The
assets of the Group, cash and cash equivalents, are split across
each of the regions, with the non-current assets shown below.
The Group currently has one reportable segment – provision of
broadband services – and categorises all revenue from operations
to the segment. The chief operating decision maker is the Chief
Financial Officer. The Group’s revenue from external customers,
and the non-current assets by geographical location is detailed
below:
External revenue by
location of customer
Non-current assets by
location of assets
2019
£’000
18,944
28,253
14,891
62,088
2018
£’000
16,405
23,780
15,166
55,351
2019
£’000
31,537
12,080
3,588
47,205
2018
£’000
29,684
8,650
3,323
41,657
United Kingdom
Europe
Rest of World
liabilities are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and measured at the rates
paid or payable. The liabilities for employee entitlements are
carried at the present value of the estimated future cash flows.
Pensions
The Group operates a defined contribution scheme, the pension
cost charge represents the contributions payable.
Research & Development
Expenditure incurred at the research stage is written off to the
income statement as an expense when incurred. An intangible
asset arising from development is capitalised when the Company
demonstrates technical feasibility of completing the intangible
asset, intention to complete and use or sell the asset, ability to use
or sell the asset, existence of a market or, if to be used internally,
the usefulness of the asset, availability of adequate technical,
financial, and other resources to complete the asset and the cost
of the asset can be measured reliably.
Government Grants
Grants are received as a subsidy towards both assets and
expenditure.
Grants in relation to assets are initially recognised as deferred
income and released to the Statement of Comprehensive Income
over the useful life of the asset.
Grants in relation to expenditure are initially recognised as
deferred income and released to the Statement of Comprehensive
Income to match the related costs.
Critical accounting judgements and key areas of estimation
uncertainty
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectation of future events that are believed to be reasonable
under the circumstances
(a) Revenue recognition
If the consideration promised by a customer is variable, a company
will estimate it using either the expected value or the most likely
amount, depending on which amount better predicts the amount
of consideration to which the company will be entitled. Some or
all of the estimated amount of variable consideration is included
in the transaction price only to the extent that it is highly probable
that a significant reversal in the amount of cumulative revenue
recognised will not occur when the uncertainty associated with
the variable consideration is subsequently resolved.
(b) Property, plant and equipment
Depreciation is derived using estimates of its expected useful life
and residual value, which are reviewed annually. Management
determines useful lives and residual values based on experience
with similar assets.
(c) Share based compensation
The Group issues equity settled share based payments to certain
Directors and employees, which have included grants of shares,
warrants and options in the current year. Equity settled share
based payments are measured at fair value at the date of
grant, with the charge being recognised within the statement of
comprehensive income over the year of service to which the grant
relates.
The fair value is measured using a Black-Scholes framework. The
Directors have used judgement in the calculation of the fair values
of the share based compensation which has been granted during
the year, and different assumptions in the model would change
the financial result of the business.
54
Bigblu Broadband plc | Annual Report and Accounts 2019 Notes to the Financial Statements
3. Loss from Operations
7. Finance Costs
The loss before tax has been arrived at after charging the following:
Depreciation of property plant & equipment - owned assets (Note 10)
3,365
6,629
BGF unsecured loan interest payable
Depreciation of property plant & equipment - ROU assets (Note 10)
1,265
-
Bank loan interest payable
Amortisation of intangible assets (Note 11)
4,071
7,491
Revolving Credit Facility interest payable
2019
2018
£’000
£’000
Goodwill Impairment charges (Note 11)
Operating lease payments (Note 21)
Operating lease receipts (Note 21)
Share based payments (Note 23)
3,286
1,515
283
437
-
Lease interest expense
680
298
395
Total interest payable
BGF redemption premium and finance charges
Total finance costs
Wages & salaries and social security costs (Note 5)
12,813 12,409
2019
£’000
2018
£’000
1,200
1,200
12
344
286
59
182
7
1,842
1,448
780
689
2,622
2,137
Interest is payable on the BGF Unsecured Loan, Revolving Credit
Facility and Bank Loan at 10%, 4.346% and 4.3% respectively.
Hire purchase and finance lease interest is payable at 6%. Inter-
est paid in the year amounts to £1.8m
8. Taxation
a) Tax credit for the year
UK Corporation tax
Overseas corporation tax
Deferred tax credit
141
112
Current tax credit
b) Tax reconciliation
Pension costs (Note 5)
Loss on disposal of Fixed Assets
Foreign exchange differences
4. Auditor’s Remuneration
Audit services
Fees payable to the Group’s auditor for the audit of the Group’s
annual accounts
Fees payable to the Group’s auditor for other services:
Audit of the accounts of subsidiaries
Tax fees
Advice re financial restructure
5. Staff Costs
The aggregate remuneration of all employees
(including directors) comprised:
Wages and salaries
Social security costs
Pension costs
305
15
879
287
63
394
2019
2018
£’000
£’000
45
45
81
10
5
57
10
-
2019
2018
£’000
£’000
11,337
11,241
1,476
1,168
305
287
13,118 12,696
The average monthly number of people (Including the Executive
Directors) employed during the year by category of employment:
Loss on ordinary activities before tax
Tax at UK corporation tax rate of 19% (2018: 19%)
Tax effect of expenses that are not deductible in determining taxable
profit
Fixed asset differences
R&D adjustment
Adjustment for period periods
Deferred tax not recognised
Other timing differences
Number Number
Changes in deferred tax rate
172
137
35
78
32
71
285
240
Tax credit at effective tax rate for the year
c) Deferred Tax
The deferred tax included in the balance sheet is as follows:
2019
2018
£’000
£’000
922
194
6
21
882
115
43
17
1,143
1,057
Deferred tax asset
Deferred tax liability
Operating staff
Sales staff
Management and administrative staff
6. Directors’ Remuneration
Salaries
Fees
Benefits
Pension costs
The highest paid director’s aggregate remuneration was £317k
(2018: £340k) including pension contributions of £10k (2018:
£7k). Details of directors’ remuneration, including pension contri-
butions, are set out in the Directors’ Report on page 29.
2019
£’000
(200)
153
2018
£’000
(448)
30
(184)
(1,452)
(231)
(1,870)
2019
£’000
2018
£’000
(8,252)
(15,166)
(1,568)
(2,882)
(153)
2,650
239
(393)
267
155
(155)
(233)
1,288
(1,239)
-
89
(227)
61
(231)
(1,870)
2019
£’000
2018
£’000
643
(234)
409
882
(657)
225
55
9. Loss Per Share
Basic earnings per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary
shares in issue during the year.
IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per
share, or increase the loss per share. For a loss-making Group with outstanding share options, net loss per share would be decreased
by the exercise of options. Therefore, as per IAS33:36 the antidilutive potential ordinary shares are disregarded in the calculation of
diluted EPS.
Reconciliation of the loss and weighted average number of shares used in the calculation are set out below:
Basic and diluted EPS
Loss for the financial year
Less: adjustment for non-controlling interest
Loss attributable to shareholders
Basic and diluted EPS
Loss attributable to shareholders
Loss
£’000
30 November 2019
Weighted Average Number of Shares
Per Share Amount
Pence
(8,021)
84
(7,937)
56,932,172
(13.9)
Loss
£’000
30 November 2018
Weighted Average Number of Shares
Per Share Amount
Pence
(13,296)
51,551,407
(25.8)
The loss attributable to shareholders is the loss for the financial year of £8.0m (2018: £13.3m) less the loss attributable to
non-controlling interests of £0.1m (2018: nil).
10. Property, Plant & Equipment - Group
Cost
At 1 December 2017
Exchange Differences
Additions
Disposals
Acquired through business combinations
At 30 November 2018
Adoption of IFRS 16
At 1 December 2018
Exchange Differences
Additions
Disposals
Asset reclassification
At 30 November 2019
Accumulated Depreciation
Restated at 1 December 2017
Exchange Differences
Depreciation on Acquisition
Depreciation charge
Disposals
At 30 November 2018
Adoption of IFRS 16
At 1 December 2018
Exchange Differences
Depreciation charge
Disposals
Depreciation on reclassified assets
At 30 November 2019
Net book value
At 30 November 2019
At 30 November 2018
Land & Buildings
Fixtures, Fittings
& Infrastructure
IT Hardware
& Software
Motor Vehicles
Rental Stock
£’000
229
-
-
-
-
229
1,702
1,931
(106)
1,472
(332)
51
3,016
68
-
-
23
-
91
1,040
1,131
(48)
361
(332)
11
1,123
1,893
138
£’000
11,799
54
1,505
(49)
140
13,449
8,530
21,979
(1,969)
1,833
(2)
(284)
21,557
4,862
131
96
5,553
(24)
10,618
4,196
14,814
(1,737)
2,205
(2)
(221)
15,059
6,498
2,831
£’000
1,371
14
43
(1)
178
1,605
-
1,605
(45)
285
(186)
(449)
1,210
474
3
127
175
(1)
778
-
778
(30)
145
(185)
195
903
307
827
£’000
156
2
112
(116)
43
197
82
279
(8)
101
(56)
7
323
68
4
33
48
(78)
75
35
110
(7)
92
(49)
-
146
177
122
£’000
2,358
15
622
-
769
3,764
-
3,764
(228)
6,712
(254)
675
10,669
1,094
15
226
830
-
2,165
-
2,165
(61)
1,807
(247)
15
3,679
6,990
1,599
Total
£’000
15,913
85
2,282
(166)
1,130
19,244
10,314
29,558
(2,356)
10,403
(830)
-
36,775
6,566
153
482
6,629
(103)
13,727
5,271
18,998
(1,883)
4,610
(815)
-
20,910
15,865
5,517
56
Bigblu Broadband plc | Annual Report and Accounts 2019 Right of Use assets
Group Property, Plant & Equipment includes the following values
for Right of Use assets
Leased assets 2018
As at 30 November 2018, motor vehicles included the following
amounts where the Group was a lessee under finance leases
Notes to the Financial Statements
Cost
Accumulated depreciation
Net book value
2019
£’000
2018
£’000
-
-
-
169
(59)
110
Land &
Buildings
Fixtures,
Fittings &
Infrastructure
Motor
Vehicles
£’000
£’000
£’000
Total
£’000
1,702
(101)
1,306
(332)
2,575
1,040
(46)
294
(332)
956
1,619
662
8,577
(593)
127
-
8,111
4,245
(371)
874
-
4,748
3,363
4,332
251
10,530
(6)
57
(28)
274
94
(4)
77
(21)
146
128
157
(700)
1,490
(360)
10,960
5,379
(421)
1,245
(353)
5,850
5,110
5,151
Cost
At 1 December 2018
Exchange Differences
Additions
Disposals
At 30 November 2019
Accumulated Depreciation
At 1 December 2018
Exchange Differences
Depreciation charge
Disposals
At 30 November 2019
Net book value
At 30 November 2019
At 30 November 2018
11. Intangible Assets - Group
Cost
At 1 December 2017
Additions
Transfers in from Investments
Reclassification to deferred tax
Reclassification of goodwill
Exchange Differences
Acquired through business combinations
At 30 November 2018
Additions
Reclassification of IP
Disposals
Exchange Difference
Acquired through business combinations
At 30 November 2019
Accumulated amortisation
At 1 December 2017
Exchange Differences
Impairment charge
Amortisation
At 30 November 2018
Exchange Differences
Impairment charge
Amortisation
At 30 November 2019
Net book value
At 30 November 2019
At 30 November 2018
Godwill
Customer contracts
Software
Intellectual Property
£’000
20,959
-
-
-
(528)
467
8,169
29,067
-
-
-
(101)
214
29,180
1
-
110
-
111
(6)
3,286
-
3,391
25,789
28,956
£’000
17,442
474
292
(547)
528
119
2,880
21,188
-
-
-
(439)
96
20,845
11,002
29
-
6,743
17,774
(348)
-
1,221
18,647
2,198
3,414
£’000
587
960
-
-
-
-
-
1,547
540
529
-
1
-
2,617
242
-
-
628
870
(8)
-
764
1,626
991
677
£’000
2,451
49
-
-
-
(1)
551
3,050
-
(529)
(56)
-
15
2,480
-
-
-
10
10
-
-
2,086
2,096
384
3,040
Total
£’000
41,439
1,483
292
(547)
-
585
11,600
54,852
540
-
(56)
(539)
325
55,122
11,245
29
110
7,381
18,765
(362)
3,286
4,071
25.760
29,362
36,087
The carrying amount of goodwill has been reduced to its recoverable amount through recognition of impairment losses of £3.3m
against goodwill of which £3.0m relates to Bigblu Services Ltd. The carrying value of Bigblu Services Ltd is £3.1m recoverable value
in use at 30 November 2019. This was calculated based on forecast future cashflow discounted at a rate of 6.3%. Clannet Ltd and
BeyonDSL are now carried at a recoverable amount of nil. Impairment charges are included in Administrative Expenses in the Statement
of comprehensive income.
The carrying amount of Quickline Communications Ltd is unaffected by the disposal of a non-controlling interest in QCL Holdings Ltd
detailed in note 12.
57
Additons
JHCS Limited - On 15 January 2019,Quickline Communications
Limited, at that time a wholly owned subsidiary of Bigblu
Broadband Operations Ltd, acquired the entire share capital of
JHCS Ltd. The book value at acquisition, which is equivalent to
fair value of the assets, was as follows:
Liabilities
Intellectual Property
Customer Contracts
Deferred Tax
Total book value and fair value
Total consideration
Satisfied by:
Cash
Deferred consideration – see below
Fair Value
£’000
(109)
15
96
(16)
(14)
200
25
175
200
Deferred consideration of £175k is an agreed sum payable over
22 months from January 2019.
Goodwill arising on acquisition
Goodwill arising from acquisition made in the year was as follows:
Consideration
Less: Fair value of assets & liabilities acquired
Godwill
Total
£’000
200
(14)
214
The above consideration includes deferred consideration of
£175k.
Revenue and Profits from acquisitions in the year
Revenue and profit after tax included in the Consolidated
Statements of Comprehensive Income for the year ended 30
November 2019, from the acquisitions in the year are as follows:
Post-acquisition
Revenue
Profit after tax
Like for like revenue
£’000
39
2
190
In April 2019 the operations of JHCS were integrated with that
of QCL. Revenue from the JHCS customers was recognised as
revenue in the accounts of QCL.
Like for like revenue represents income of the Group as though
acquisitions took place at the beginning of the year.
12. Investments
Subsidiaries
Customer Contracts
Opening balance:
Additions during the year:
Group
2019
£’000
-
53
53
53
Group
2018
£’000
-
345
345
Company
2019
Company
2018
£’000
5,625
-
£’000
5,625
-
5,625
5,625
345
5,625
5,625
Reclassification to intangible assets
-
Closing balance
53
(292)
53
-
-
5,625
5,625
Subsidiary Undertakings
Bigblu Broadband plc and its subsidiaries hold more than 20% of
the share capital of the companies overleaf:
Non-controlling Interest in QCL Holdings Ltd
In August 2019 QCL Holdings Limited (“QCL”), a subsidiary of
BBB and new holding company for Quickline Communications
Limited (“Quickline”) secured £12m of new equity and debt
funding to support the build-out of its fibre backed fixed wireless
network business across the UK.
This £12m funding allows Quickline to significantly increase the
size and scale of its fixed wireless access (“FWA”) business to
target a customer base of approximately 30,000 subscribers
over the next three years, with significantly increased revenue,
EBITDA and profitability anticipated as new capital is deployed
and the business increases in scale. The transaction values QCL
at an enterprise value of £15m (pre new money), a significant
uplift compared to the valuation at the time of BBB’s acquisition of
Quickline in August 2017 of £8.4m.
The funding includes £4m of new equity initially with a further £4m
of equity committed and a £4m revolving credit facility provided
by HSBC. This will allow Quickline to expand its infrastructure,
consider selective acquisitions and target grants issued by BDUK
to support investment in rural broadband projects.
Compelling market fundamentals exist given the digital divide in
the UK with over a million homes still unable to receive superfast
broadband services. Pure fibre to the home is widely considered
uneconomic in rural areas. FWA is a quicker and lower cost
solution and is supported by government grants. Current government
programmes largely managed by BDUK include a £200m Rural
Gigabit Connectivity Programme and a Rural Gigabit Voucher
scheme worth up to £3,500 for each SME and up to £1,500 per
residential premise.
QCL plans to invest around £20m over the next three years,
including funds provided by potential government grants and
internal cash flows, targeting a customer base of around 30,000
and a significant increase in revenue and profitability.
As a result of the disposal of shares in QCL BBB’s shareholding
in QCL will initially reduce to 69.7% but BBB will continue to fully
consolidate QCL into its accounts as it retains control. BBB is
expected to benefit from QCL’s increased valuation, revenues and
profitability as the accelerated growth strategy is implemented.
The new funding reduces BBB’s gearing to approximately
1.0x - 1.5x net debt/EBITDA, allowing BBB to continue investing
across the Group and maintain a robust balance sheet. The
transaction is expected to be significantly earnings enhancing in
the year to November 2021, once the initial investment has been
made.
Funds managed by Harwood Capital, which manages or advises
BBB’s two largest shareholders, are providing £7.75m of equity.
Paul Howard (BBB non-executive director) is providing £0.25m
and has become Chairman of QCL. Simon Clifton (BBB CTO
and co-founder) has joined the board of QCL. Steve Jagger,
Quickline’s founder and CEO, is re-investing his final earn-out
payment of £1.4m into QCL for an initial shareholding of 7.7%.
The shares in QCL held by the Harwood Funds, Paul Howard
and Steve Jagger (other than any Growth Shares as referred to
below) have a capital preference on a capital return equal to 1.25
times the subscription price. The preference will be increased,
after the second anniversary of issue of each tranche of their
shares, at 10% per annum compounded annually and accrued
quarterly.
In addition, Steve Jagger, Paul Howard and certain members
of the QCL management team will be eligible to acquire growth
shares in QCL which will entitle them to 10% of the value realised
in the event of a sale of Quickline or liquidity event above a hurdle
linked to the post investment value of QCL plus the investors’
capital preference (“Growth Shares”). The growth share scheme
will be put in place shortly and is designed to ensure that its
participants are appropriately incentivised to deliver QCL’s growth
objectives over the medium to longer term.
58
Bigblu Broadband plc | Annual Report and Accounts 2019 Subsidiary Undertakings
Bigblu Broadband plc and its subsidiaries hold more than 20% of the share capital of the companies below:
Notes to the Financial Statements
Bigblu Services Holding Limited
(Formerly Avonline Satellite
Services Holdings Ltd)
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
Ordinary
Bigblu Operations Limited
50,000 of £1.60 each 50,000
of £1 each 50,000 of £18.80
each
Ordinary
Bigblu Operations Limited
100 of PLN0.02 each
Bigblu Operations Limited
(Formerly Satellite Solutions
Worldwide Limited)
Bigblu Ireland Limited (Formerly
Europasat Satellite (Ireland)
Limited)
Europasat (France) SAS
Europasat Sp Z.o.o. *
Address & Country of
Incorporation
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
Century House, Harold's Cross Road,
Dublin 6W Ireland
Atelier Village PMI 3-38 Rue Jean
Jacques Mention Espace Industriel
Nord
80000 Amiens France
Połczyńska 31A, 01-001 Warszawa
Poland
Bigblu Services Limited (Former-
ly Avonline Satellite Services Ltd)
Breiband.no.as
SkyMesh Pty Ltd
BorderNET Internet Pty Ltd
QCL Holdings Ltd
Quickline Communications Ltd
Clannet Broadband Ltd *
JHCS Ltd *
Open Sky S.R.L.
Sat Internet Services GmbH *
Getinternet GmbH *
Orbitcom GmbH *
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
Høgdaveien 1, 1540 Vestby Norway
37 Baxter Street, Fortitude Valley QLD
4006, Brisbane Australia
37 Baxter Street, Fortitude Valley QLD
4006, Brisbane Australia
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
Broadband House,
108 Churchill Road, Bicester,
Oxfordshire OX26 4XD England
3 Priory Court, Saxon Way, Hessle,
East Yorkshire, HU13 9PB England
Corso San Felice e Fortunato 105
36100, Vicenza Italy
Justus-von-Liebig Straße 26
Neustadt am Rübenberge Germany
Justus-von-Liebig Straße 26
Neustadt am Rübenberge Germany
Justus-von-Liebig Straße 26
Neustadt am Rübenberge Germany
Class of Share
Parent Company
No of Shares
% held by parent
Ordinary
Bigblu Broadband plc
20,266 of £0.01 each
100%
Ordinary
Bigblu Operations Limited
100 of €1 each
100%
Ordinary
Bigblu Operations Limited
5,000 of €1 each
100%
Ordinary
Ordinary
Ordinary
Bigblu Services Holdings
Limited
2 of £1 each
100%
Bigblu Operations Limited
1,700,412 of 1.40Nok each
Bigblu Operations Limited
20,898,680 of £0.196 each
Ordinary
SkyMesh Pty Ltd
2,863,105 of £0.09 each
Ordinary
Bigblu Broadband plc
9,900,000 of £0.00001
69.7%
Ordinary
QCL Holdings Ltd
28,571,428 of £0.07 each
100%
Ordinary
Quickline Communications Ltd
4 of £1 each
100%
Ordinary
Quickline Communications Ltd
100 of £1 each
Ordinary
Bigblu Operations Limited
30,000 shares of 1€ each
Ordinary
Bigblu Operations Limited
25,000 shares of 1€ each
Ordinary
Sat Internet Services GmbH
25,000 shares of 1€ each
Ordinary
Sat Internet Services GmbH
25,000 shares of 1€ each
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Satellite de Sabedoria Lda *
Rua Comendador Armindo da Fonseca
6A 3100-436 Pombal Portugal
Europasat Iberica Sociedad
Limitada *
Calle Estrasburgo, 5 - NAV 7, las Ro-
zas de Madrid, 28232 , Madrid Spain
Ordinary
Sat Internet Services GmbH
1 share of 5,000€
Ordinary
Bigblu Operations Limited
300 of €10 each
*These companies are exempt from annual audit.
13. Cash and cash equivalents
15. Trade and other receivables
Cash and bank accounts
Short term deposits
14. Inventory
Finished goods
There is no material difference between the amounts stated
above and replacement cost.
Write down of inventories to net realisable value amounted
to £266k (2018: £100k). These costs were recognised as an
expense during
in Administrative
Expenses.
the year and
included
Group
2019
£’000
2018
£’000
Trade receivables
5,800
5,067
Other receivables
189
-
Prepayments and accrued income
5,989
5,067
Amounts due from group undertakings
Group
Company
2019
£’000
2,618
2,605
3,102
-
2018
£’000
4,811
2,707
2,375
2019
£’000
-
25
148
2018
£’000
-
68
86
-
36,686
26,526
8,325
9,893
36,859
26,680
Group
2019
£’000
2018
£’000
3,911
1,950
Movement in provision for impairment of receivables
Individually impaired
As at 1 December 2018
Charged to Income statement
Utilised
As at 30 November 2019
2019
2018
£’000
£’000
1,329
613
2,199
1,273
(1,732)
(557)
1,796
1,329
59
The average credit days taken on sales of goods and services is 20
days (2018: 32 days). No interest is charged on receivables. Trade
receivables are provided for based on estimated irrecoverable
amounts from the sale of goods and services, determined by
reference to past default experience and likelihood of recovery as
assessed by the directors.
Included in the Group’s trade receivable balance are debtors with
a carrying amount of £931k (2018: £826k) which are past due
at the reporting date. The directors consider that the carrying
amount of trade receivables approximates to their fair value.
Post a significant period of acquisition and growth, in FY19
the company initiated a significant restructure of both Senior
Management roles and geographic locations, such that a number
of smaller offices are now managed out of a smaller number of
hubs. The costs of this restructuring largely covers redundancy
costs of £766k, with some additional incidental direct costs
attributable to the restructure, committed and communicated as
at 30 November 2019. This is both to enable a staggered and
controlled reorganisation and to enable compliance with local
regulatory issues. The remaining provision allows for £278k of
redundancy costs and £50k of legal costs.
Accounts receivable ageing:
Current
30-60 days
60-90 days
90-120 days
As at 30 November 2019
2019
£’000
2018
£’000
2,043
3,057
296
30
249
2,618
389
204
1,161
4,811
The provision covers all debts in excess of 60 days past due
excluding the reseller network and balances related to the
commercial relationship with Viasat and the EBI Preferred
Partner Programme.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected
credit losses, trade receivables have been grouped based on
shared credit risk characteristics and the days past due. The
expected loss rates are based on the payment profiles of sales
over a period of 12 months before 30 November 2019 or 1
December 2019 respectively and the corresponding historical
credit losses experienced within this period. The historical loss
rates are adjusted to reflect current and forward-looking information
on macroeconomic factors affecting the ability of the customers to
settle the receivables.
16. Trade and other payables
Movements in the provision for restructuring costs were as follows:
Carrying amount at start of year
Charged to profit and loss
Restructuring costs
17. Non-current liabilities
Unsecured Loan
Revolving credit facility
Other loans
Total loans
Lease liabilities
Other payables
Total
Group
2019
£’000
-
328
328
2018
£’000
-
-
-
Group
Company
2019
£’000
2018
£’000
2019
£’000
2018
£’000
11,728
11,728
11,728
11,728
8,250
4,900
8,250
4,900
209
351
-
-
20,187
16,979
19,978
16,628
4,409
-
96
313
-
-
-
-
24,596
17,388
19,978
16,628
The Unsecured Loan is subordinated and repayable in May 2024.
Interest is charged quarterly at a fixed rate of 10% pa. The unse-
cured Revolving Credit Facility obtained during the year is repay-
able by May 2024, and attracts interest at a fixed rate of 4.346%.
Finance leases attract interest at a rate of 6%. Other payables
relate to deferred consideration payable greater than one year.
Current
Group
2019
£’000
Group
2018
£’000
Company
2019
Company
2018
£’000
£’000
Maturity of lease liabilities
Trade payables
11,750
9,677
Amounts due to group undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Lease liabilities
-
2,760
6,162
10,869
1,248
32,789
-
2,954
9,226
9,413
43
561
251
253
-
266
108
-
206
Due 1 – 2 years
Due 2 – 5 years
2,819
2,052
Total
-
-
Group
2019
£’000
1,211
3,198
4,409
2018
£’000
35
61
96
31,313
3,884
2,632
2018 include only those liabilities comprising minimum lease lia-
bilities on contracts identified as finance leases.
Trade payables principally comprise amounts outstanding for
trade purchases and ongoing costs. The average creditors days
taken for trade purchases is 120 days (2018: 107 days). The
Group has financial risk management policies in place to ensure
that all payables are paid within the credit time frame. Within
other payables is £1.5m (FY2018: £6.4m) of deferred consideration
which relates to future years profits in relation to acquisitions
made during 2018 and 2019. The directors consider that the
carrying amount of trade and other payables approximates to
their fair value.
Provisions:
Included in Other payables above are the following provisions:
Maturity of loans
Due 1 – 2 years
Due 2 – 5 years
Due over 5 years
Total
Group
2019
£’000
209
11,728
8,250
20,187
Group
2018
Company
2019
Company
2018
£’000
447
11,728
4,900
17,075
£’000
£’000
-
11,728
8,250
19,978
-
11,728
4,900
16,628
Restructuring costs
60
Group
2019
£’000
328
2018
£’000
-
Bigblu Broadband plc | Annual Report and Accounts 2019
BGF loan and equity warrants
A fully subordinated £12m 2024 unsecured loan note facility and
associated equity warrants (the ‘BGF loan and option’) were
received from BGF in 2016. These instruments are accounted
for using split accounting which involves first determining the
carrying amount of the debt component. This is done by measuring
the net present value of the discounted cash flows of interest
and capital repayments, ignoring the possibility of exercise of the
equity warrants. The discount rate is the market rate at the time
of inception for a similar liability that does not have an associated
equity instrument. On this basis the debt component, held within
‘other non-current liabilities’, had a fair value as at 30 November
2019 of £11.7m (2018: £11.7m), and the equity component,
held within ‘other equity reserves’, a fair value of £0.3m (2018:
£0.3m). As at 30 November 2019, the fair value of the debt
component remained unchanged with a £830k (2018: £830k)
charge going to finance costs in the income statement. This
charge is split £141k (2018: £141k) within underlying interest
charges and £689k (2018: £689k) within non-underlying finance
costs, the latter amount being the additional annual charge
associated with the redemption premium.
18. Deferred Taxation
At 1 December
Transfer to Statement of Comprehensive Income
Deferred taxation transfer
At 30 November
Deferred tax is provided as follows:
Accelerated capital allowances
Intangible assets
Geographical split of deferred tax asset:
United Kingdom
Europe
Rest of the World
19. Share Capital
2019
£’000
2018
£’000
(225)
(184)
-
(409)
644
(1,452)
583
(225)
563
882
(154)
(657)
409
225
52
581
10
643
68
803
11
882
No. of Shares
Share Capital
Share Premium
Notes to the Financial Statements
20. Other Capital Reserves – Group
Listing cost reserve
The listing cost reserve arose from expenses incurred on AIM
listing.
Foreign exchange translation reserve
The foreign exchange translation reserve is used to record exchange
difference arising from the translation of the final statements of
foreign operations.
Share option reserve
The share option reserve is used for the issue of share options
during the year and charges relating to previously issued options.
Merger relief reserve
The merger relief reserve relates to share premium attributable to
shares issued in relation to the acquisition of Bigblu Operations
Limited in May 2015, and the current year acquisitions. Costs of
£Nil (2018: £0.4m) were offset against the merger relief reserve
during 2019.
Other Equity Reserve
Other Equity relates to the equity element of the BGF Convertible
Loan described in note 17.
Share Premium
Share premium represents the excess consideration over
nominal value net of issue costs and amounts to £23.9m (2018:
£23.9m). Costs of £Nil (2018: £Nil) were offset against the share
premium account during 2019 in relation to funds raised from the
issue of shares.
21. Lease Arrangements
The Group as Lessee
The statement of profit or loss shows the following amounts re-
lating to leases:
Depreciation of ROU assets
Land & buildings
Fixtures, fittings & infrastructure
Motor vehicles
Leased assets 2018
No.
£
£
Interest expense (included in finance cost)
At 30 November 2018
56,704,078
8,505,609
23,900,242
Shares issued in the year
Shares issued at 15p each
At 30 November 2019
866,801
57,570,879
130,020
8,635,629
-
23,900,242
Expense relating to short term leases
(included in administrative expenses)
Expense relating to leases of low-value assets
(included in administrative expenses)
All shares issued during the year were as a result of share option
exercises generating a total value of £515k of which £185k was
credited to the Share Option Reserve.
The total cash outflow for leases was £1,515k.
The Group as lessor
2019
2018
£’000
£’000
294
874
77
1,245
286
108
69
-
-
-
-
-
-
-
2019
£’000
2018
£’000
283
298
On 28 May 2018 the Company reorganised its share capital by
way of a consolidation (the “Consolidation”). Upon implementation
of the Consolidation, every 15 ordinary shares of 1p each in
the capital of the Company (“Existing Ordinary Shares”) then
in issue were consolidated into 1 new ordinary share of 15p
(“NewOrdinary Share”).
All issued share capital is fully paid up. All ordinary shares have
a par value of £0.15.
Minimum lease receipts under operating leases recognised as
income in the year
At the balance sheet date, the Group had outstanding commitments
for future minimum lease receipts under non- cancellable operating
leases, which fall due as follows:
Within one year
Within 2 – 5 years
2019
£’000
365
10
375
2018
£’000
66
6
72
61
22. Related Party Transactions
Transactions between the Company and its subsidiaries, which
are related parties, have been eliminated on consolidation and
are not disclosed in this note.
Remuneration of key management personnel
The remuneration of the directors, and the key management
personnel of the Group, is set out below in aggregate for each
of the categories specified in IAS 24 Related Party Disclosures.
Short- term employment benefits
Pension costs
Share based payments
2019
£’000
1,166
28
437
2018
£’000
1,093
17
395
1,631
1,505
23. Share-Based Payments
Share Options
The Group has share option schemes for employees of the
Group. Options are exercisable at the price agreed at the time of
the issue of the share option. The performance conditions vary
between employees. If the options remain unexercised after a
period of 5 years from date of grant the options expire. Options
are forfeited if the employee leaves the Group before the options
vest unless agreed by the Board. Details of the share options
granted during the year are as follows:
2019
2018
Number of
Share
Options
Weighted
Average
Exercise
price
Number of
Share
Options
Weighted
Average
Exercise
price
Outstanding at beginning of year
5,243,469
98.99p
2,995,242
88.15p
Exercised during the year
Cancelled during the year
(866,801)
(202,665)
59.52p
-
66.05p
(140,000)
Granted during the year
1,072,251
22.77p
2,388,227
Outstanding at end of year
5,246,254
57.60p
5,243,469
Exercisable at end of year
1,195,964
102.04p
1,337,242
-
114.45p
113.50p
98.99p
81.65p
Detailed Plan Rules
The Plan was offered for the first time in 2018 and the remunera-
tion committee of the Board of the Company shall have the right
to decide, in its sole discretion, whether or not further awards will
be granted in the future and to which employees those awards
will be granted.
The rules were clear that grants were at the discretion of the
Board including TSR (Total Shareholder Return) considerations
that needed to be taken into account before further awards could
be made.
Warrants
The Group has issued warrants to investors. Warrants are
exercisable at the price agreed at the time of issue and can be
exercised from 6 months following admission to AIM for a year
of 3 years. There are no performance conditions attached. If the
warrants remain unexercised after a year of 3 years from date of
grant the warrants expire. Details of the warrants granted during
the year are as follows:
2019
2018
Weighted
average
Exercise
price
Number of
Warrants
Weighted
average
Exercise
price
Number of
Warrants
Outstanding at beginning of year
108,464
15.0p
108,464
15.0p
Cancelled
(108,464)
Outstanding at end of year
Exercisable at end of year
-
-
108,464
108,464
No warrants were outstanding at 30 November 2019. Warrants
outstanding at 30 November 2018 had a weighted average
exercise price of 15.0p and a weighted average remaining
contractual life of 1 year. The inputs into the Black-Scholes model
are as follows:
The options outstanding at 30 November 2019 had a weighted
average exercise price of 57.60p (2018: 98.99p), and a weighted
average remaining contractual life of 2 years (2018: 2 years). The
inputs into the Black-Scholes model are as follows:
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk-free rate
2019
£’000
-
-
-
-
-
2018
£’000
67.5p
15.0p
50%
2 yrs
5%
Weighted average share price
Weighted average exercise price
Expected volatility
Expected life
Risk-free rate
2019
£’000
2018
£’000
118.05p
118.05p
114.45p
114.45p
50%
1.83yrs
5%
50%
3yrs
5%
Long Term Incentive Plan
During 2018 an executive long-term incentive plan (LTIP) was
put in place following consultation with a number of shareholders
with performance criteria based on 2 key metrics: 50% based on
how the BBB share price performs and 50% based on how BBB
performs against a basket of similar companies. Due to there
being no share scheme in operation in 2017, an exceptional
initial LTIP award of 200% of salary was agreed for participants
on launch of the scheme. It was agreed that awards would be
considered annually by the Remuneration committee but that
future awards would be 100% of salary.
Awards would be granted annually as part of a formal, annual,
grant policy:
•
•
within six weeks following the announcement of results; or
when exceptional circumstances exist (e.g. the normal grant
is delayed for some reason or an out of policy award needs
to be granted).
Expected volatility was determined by assessing the movements
of the share price since the readmission to AIM in May 2015. The
Group recognised total expenses of £437k (2018: £395k), related
to equity-settled share-based payment transactions as follows:
Share option charge
24. Financial Risk Management
2019
£’000
437
2018
£’000
395
Background
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group’s objectives, policies and processes for
managing those risks and the methods used to measure them.
Further quantitative information in respect of these risks is presented
throughout the financial statements. There have been nosubstantive
changes in the Group’s exposure to financial instrument risks, its
objectives, policies and processes for managing those risks or
the methods used to measure them from previous periods unless
otherwise stated in this note. The “financial instruments” which
are affected by these risks comprise borrowings, cash and liquid
resources used to provide finance for the Group’s operations,
together with various items such as trade debtors and trade creditors
62
Bigblu Broadband plc | Annual Report and Accounts 2019 that arise directly from its operations, inter-company payables and
receivables, and any derivatives transactions (such as interest
rate swaps and forward foreign currency contracts) used to
manage the risks from interest rate and currency rate volatility.
General objectives, policies and processes The Board has overall
responsibility for the determination of the Group’s risk management
objectives and policies and, whilst retaining ultimate responsibility
for them, it has delegated the authority for designing and operating
processes that ensure the effective implementation of the objectives
and policies to the Group’s finance function. The Board receives
monthly reports through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives
and policies it sets. The overall objective of the Board is to set
policies that seek to reduce risk as far as possible without unduly
affecting the Group’s competitiveness and flexibility. Further details
regarding these policies are set out below:
Capital risk management
The Group manages its capital to ensure that entities in the Group
will be able to meet their financial obligations as they arise while
maximising the return to stakeholders. The capital structure of the
Group consists of cash and cash equivalents and equity attributable
to equity holders of the parent, comprising issued capital, reserves
and retained earnings as disclosed in Notes 19 to 20. The Group
raised £4.0m in August 2019 from the sale of a non-controlling
interest in the capital of a subsidiary QCL Holdings Ltd, together
with a commitment to a further £4.0m equity and arrangement
of a £4.0m revolving credit facility. The Group intends to use the
majority of these funds to invest in future growth by expanding its
FWA infrastructure and making selective acquisitions (see note
12 for more details).
Credit risk
The Group’s principal financial assets are bank balances and cash,
trade and other receivables and investments. The Group’s exposure
to credit risk is primarily attributable to its trade receivables.
Credit risk is managed locally by the management of each business
unit. Prior to accepting new customers, credit checks are obtained
from reputable external sources. The amounts presented in the
balance sheet are net of allowance for doubtful receivables (see
note 15 for more details). An allowance for impairment is made
where there is an identified loss event which, based on previous
experience, is evidence of a reduction on the recoverability of the
cash flows. The credit risk on liquid funds and derivative financial
instruments is limited because the counterparties are banks with
low credit risk assigned by international credit-rating agencies. The
Group has no significant concentration of credit risk, with exposure
spread over a large number of counterparties and customers.
The Group has no significant concentration of credit risk, other
than with its own subsidiaries, the performances of which are
closely monitored. The Directors confirm that the carrying
amounts of monies owed by its subsidiaries approximate to their
fair value.
Liquidity risk
Liquidity risk arises from the Group’s management of working
capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due. The
Group’s policy is to ensure that it will always have sufficient cash
to allow it to meet its liabilities when they become due. To achieve
this aim, the cash position is continuously monitored to ensure that
cash balances (or agreed facilities) meet expected requirements
for a period of at least 90 days. The Board monitors annual cash
budgets and updated forecasts against actual cash position on a
monthly basis. At the balance sheet date, these projections indicated
that the Group expected to have sufficient liquid resources to
meet its obligations under all reasonably expected circumstances.
The maturity of financial liabilities is detailed in Note 17.
Notes to the Financial Statements
Market risk
Market risk arises from the Group’s use of interest bearing and
foreign currency financial instruments. It is the risk that the fair
value of future cash flows of a financial instrument will fluctuate
because of changes in interest rates (interest rate risk) or foreign
exchange rates (currency risk).
Interest rate risk
The Group finances its operations through a mixture of retained
profits, equity capital and bank facilities, including hire purchase
and lease finance. The Group borrows in the desired currency
at floating or fixed rates of interest and may then use interest
rate swaps to secure the desired interest profile and manage
exposure to interest rate fluctuations.
Borrowings contractual maturities and effective interest rate
analysis
In respect of interest bearing financial liabilities, the table in note
17 indicates the undiscounted amounts due for the remaining
contractual maturity (including interest payments based on the
outstanding liability at the year end) and their effective interest
rates. The ageing of these amounts is based on the earliest dates
on which the Group can be required to pay. The HSBC facility is
reported quarterly to the bank in the form of convenat complicance
reporting, which monitors actuals performance by a number of
specific monetary measurements.
Non-interest bearing liabilities
Details of trade and other payables falling due within one year are
set out in Note 16.
Currency risk
The main currency exposure of the Group arises from the ownership
of its subsidiaries in Europe and Australia. It is the Board’s policy
not to hedge against movements in the Sterling/Australian Dollar,
Sterling/Norwegian Kroner and Sterling/Euro exchange rate.
Other currency exposure derives from trading operations where
goods and services are exported or raw materials and capital
equipment are imported. These exposures may be managed by
forward currency contracts, particularly when the amounts or periods
to maturities are significant and at times when currencies are
particularly volatile.
Trading
It is, and has been throughout the period under review, the
Group’s policy that no trading in financial instruments shall be
undertaken.
25. Financial instruments
The Group has the following financial instruments:
Financial assets
Cash & cash equivalents
Trade receivables
Amounts owed by group undertakings
Other receivables
Total
Financial liabilities
Trade payables
Amounts owed to group undertakings
Accruals
Other creditors
Lease liabilities
Total
Group
2019
£’000
5,989
2,618
-
2,605
11,212
Group
2018
Company
2019
Company
2018
£’000
£’000
£’000
5,067
4,811
-
-
915
-
-
36,686
26,526
2,707
12,585
25
68
36,711
27,509
11,750
9,677
-
8,488
6,162
5,657
-
5,853
9,226
139
561
251
266
108
2,819
2,052
-
-
-
-
32,057
24,895
3,631
2,426
The carrying value of financial instruments is a reasonable
approximation of fair value due to the short-term maturities of
these instruments.
63
26. Post Balance Sheet Events
Refinancing of Existing Debt Facilities
In December 2019 the Company agreed a new £30m revolving
credit facility with Santander Bank UK plc. This will be used to
replace the two tranches of loan notes totalling £12m issued in
2016 by Business Growth Fund (“BGF”) (the “Loan Notes”) and the
Group’s £10m revolving credit facility with HSBC plc (the “HSBC
Facility”) and to provide additional working capital to support
the Group. HSBC will continue to provide a £4m revolving credit facility
and operational banking support to the Group’s UK fixed wireless
subsidiary QCL Holdings Limited (“QCL”). This provides the Group
with combined facilities of £34m with Santander and HSBC.
The facility with Santander is a 3-year loan agreement with an option
to extend for up to a further 2 years. Interest terms are on a ratchet
to LIBOR according to the Group’s net leverage ratio. This replac-
es, in its entirety, the BGF Loan Notes which bore interest at a fixed
coupon, and the HSBC Facility which had an interest charge at a mar-
gin related to LIBOR. As a result, there will be a significant reduction
in the Group’s annual cost of debt and net interest payments. Further
details on the BGF Loan Notes and HSBC Facility are included below.
BGF continues to own 4.5m shares in BBB. As part of BGF’s
initial subscription for the Loan Notes in 2016, BGF had options over
4.9m ordinary shares at an exercise price of 112.5p, expiring August
2021, and a £2.4m convertible Loan Note convertible at an exercise
price of 135p per share. As part of the refinancing, BBB has agreed to
extend the 4.9m options to May 2024 and granted BGF an additional
1.8m options at an exercise price of 135p expiring May 2024 to
replace the conversion rights within the £2.4m convertible Loan Note
which is being redeemed in full. This is beneficial to the Company
as the redemption premium would otherwise have been payable
immediately on early redemption.
BGF has also agreed to defer the repayment of the £5.5m
redemption premium on the Loan Notes from May 2021 to May 2024
to align with the options above.
The Board considers that there are a number of key benefits as a
result of the agreement with Santander, which effectively enables it to
re-finance debt with a coupon of 10% with a more flexible revolving
credit facility with a margin of only 3-4%.As such, the refinancing of
existing debt facilities will support the Group for the next stage of its
growth strategy and will:
•
•
•
•
•
reduce the Group’s cost of debt;
provide additional funding headroom to support accelerated
growth;
provide a simplified capital and covenant structure;
defer amortising principal repayments under the BGF Loan
Notes and HSBC Facility which will enhance cash flow; and
improve our free cash flow and increase our EPS via reduced
finance charges, which the Directors believe will increase value
for shareholders.
Details of New facility - Santander RCF
A new £30m revolving credit facility (RCF) for an initial 3-year term,
extendable by 1 year on up to two occasions (at the option of BBB)
with no annual clean down payments required. Interest margin
on LIBOR ratchets according to prior quarter’s net leverage ratio
(Net Debt / LTM EBITDA), and the cost of debt is therefore expected
to reduce as net debt decreases over the term of the loan. The facility
includes customary covenants, including:
•
•
•
Net Leverage (Net Debt / 12m EBITDA)
Interest cover
Capex control linked to budgets
The Security on the facility will entail cross-guarantees from material
Group companies, although QCL and its subsidiaries are carved out
and not regarded as a borrower or part of the Group for the loan
purposes.
Santander will also acquire first ranking security (share pledge) over
BBB’s shares in QCL.
Refinancing highlights
BGF have granted consent to the refinancing of the £12m in
principal Loan Notes on the following terms:
•
•
•
Deferral of the £5.5m redemption premium previously due at the
earlier of redemption of the notes or May-21, but now deferred
until May-24
Preservation and extension of the existing share options
over 4.9m shares at 112.5p from current expiry date of
ug-21 to May-24, therefore keeping them aligned to the
redemption premium with the expectation of a cashless
settlement of the redemption premium in shares.
Issuance of new options as replacement for the convertible loan
note of £2.4m to be redeemed, on the same terms as the original
loan conversion of 1.8m shares at 135p.
The initial refinancing drawdown of c. £22.9m includes repayment of
the BGF and HSBC principal, the BGF early redemption charge, fees
and working capital.
When compared against the previous BGF Loan Notes and HSBC
Facility, over the five-year period to 2024 the refinancing is expected
to result in estimated total net cash benefit of c. £14m to the Group
arising from:
•
•
c. £2.0m cash savings due to the lower interest margin; and
£12m arising from deferral of the scheduled BGF principle
repayments to May-24
The current P&L interest charge includes BGF interest rate of 10%
on the £12m Loan Notes, the effective interest charge for the of the
£5.5m redemption premium over the life of the instrument (July 2016
to May 2024) and the HSBC facility finance charges. The Santander
RCF reflects a lower and simpler variable interest margin over LIBOR
(which depends on the Group’s net leverage ratio). This is expected to
result in finance savings of c. £2.0m over the five-year period to FY24.
Group headroom immediately post-refinancing equals c. £13.1m,
being c. £7.1m unused Santander RCF and c. £6m cash. This
reflects an immediate headroom increase of £5.35m against the
current headroom of £1.75m on the HSBC Facility.
Quickline is carved out and will maintain its existing £4m RCF facility
with HSBC, which has a separate and distinct security package.
Selection of Quickline to lead rural connectivity project
In February 2020 the Company’s subsidiary, Quickline Communications
(“Quickline”), was selected to lead a £6m project to boost rural
connectivity in North Yorkshire.
The project will focus on bringing mobile connectivity to the County
where 35% of the population currently has no 4G mobile coverage.
It will also test how superfast mobile connectivity can benefit North
Yorkshire in boosting tourism, tackling social isolation and acting as
an early warning system for flooding emergencies.
Other partners with Quickline include a mix of specialist small to medium
enterprises (SMEs) and the universities of York and Lancaster. The
partnership has secured £4.5m of Government funding with a further
£2m being added by the industry partners.
The project, which is a continuation of the technical partners’ previous
work with the 5G Rural Integrated Testbed project (“5GRIT”), will
investigate how rural mobile connectivity can help eliminate the
not-spots of North Yorkshire by developing new technologies, apps
and services tailored for rural areas. It aims to understand how the
public, private and community sectors can work together to reduce
the cost of delivering mobile access in rural areas.
The project is supported by the Department of Digital, Culture, Media
and Sports, as part of the 5G Rural Connected Communities Trials
and Testbed programme. This £30m programme supports national
projects to determine how best to use the 5G technology to deliver
services across the entire nation.
COVID-19
Finally, post year end the COVID-19 pandemic was declared across the
World. This has had no impact on any balances as at 30 November 2019
and any potential impact on the going concern status of the Group
has been assessed in the going concern notes on pages 10 and 11 of
the Chief Executive Report.
64
Bigblu Broadband plc | Annual Report and Accounts 2019
65
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Bigblu Broadband plc | Annual Report and Accounts 2019 67
Broadband House
108 Churchill Road
Bicester
Oxon OX26 4XD
United Kingdom
Tel: +44 (0)1869 222 900
Fax: +44 (0)1869 722 799
www.bbb-plc.com
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Bigblu Broadband plc | Annual Report and Accounts 2019