Bigblu Broadband Plc
Annual Report 2022

Plain-text annual report

l i B g b u B r o a d b a n d p c l | A n n u a l R e p o r t i & F n a n c a i l S t a t e m e n t s 2 0 2 2 Bigblu Broadband plc Bigblu Broadband plc Annual Report & Financial Statements for the year ended 30 November 2022 A Company Registered in England & Wales No. 09223439 265204 Bigblu_Cover with Spine.indd 2-3 265204 Bigblu_Cover with Spine.indd 2-3 25/04/2023 10:53 25/04/2023 10:53 Company Information SOLICITORS Burness Paull LLP 50 Lothian Road Festival Square Edinburgh, EH3 9WJ REGISTRARS Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR AUDITORS Haysmacintyre LLP 10 Queen Street Place London EC4R 1AG DIRECTORS M Tobin OBE A Walwyn F Waters P Howard C Mills P Moses COMPANY REGISTRATION NUMBER 09223439 COMPANY SECRETARY B Harber REGISTERED OFFICE 6th Floor 60 Gracechurch Street London EC3V 0HR BROKER & NOMINATED ADVISER finnCap Ltd 60 New Broad St London EC2M 1JJ 2022 CONTINUING BUSINESS HIGHLIGHTS TOTAL REVENUE £31.2m – up 15.1% 2022 2021 £31.2m £27.1m Adjusted EBITDA £5.1m – up 11.4% 2022 2021 £5.1m £4.6m Net Cash £4.2m 2022 2021 EPS £4.2m £5.2m Loss 5.0p Loss 5.0p Profit 46.9p Basic 2022 2021 Adjusted 2022 4.4p 2021 4.3p Contents OVERVIEW 1........Company Overview 2........Company Snapshot STRATEGIC REPORT 4........Chairman’s Statement 6........Chief Executive Report 11......Financial Review 22......Principal Risks and Uncertainties 25......Section 172 (1) Statement GOVERNANCE 26......Directors’ Report 31......Board of Directors 34......Statement of Directors’ Responsibilities 35......Corporate Governance Statement 48......Annual Statement of the Remuneration Committee Chairman FINANCIAL STATEMENTS 54......Independent Auditor’s Report 59...... Consolidated Statement of Comprehensive Income 60......Consolidated Statement of Financial Position 61......Company Statement of Financial Position 62......Consolidated Statement of Cash Flows 63......Company Statement of Cash Flows 64......Consolidated Statement of Changes in Equity 65......Company Statement of Changes in Equity 66......Notes to the Financial Statements IBC.....Company Information 265204 Bigblu_Cover with Spine.indd 5-6 265204 Bigblu_Cover with Spine.indd 5-6 25/04/2023 10:53 25/04/2023 10:53 Company Overview Technology that opens doors to the world Bigblu Broadband plc (AIM: BBB.L), is a leading provider of alternative superfast* and ultrafast** broadband solutions throughout Australasia and the Nordics. BBB delivers a portfolio of superfast and ultrafast wireless broadband products for consumers and businesses typically unserved or underserved by fibre. 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 ultrafast broadband services increases around the world. BBB’s range of solutions includes satellite, next generation fixed wireless and 4G/5G FWA delivering between 30 Mbps and 500Mbps for consumers, and up to 1 Gbps for businesses. BBB provides customers with a full range of services including hardware supply, installation, pre- and post-sale support, billings and collections, whilst offering appropriate tariffs depending on each end user’s 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 broadband and broadband services. BBB’s 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. * Superfast is defined as broadband speeds in excess of 30Mbps ** Ultrafast is defined as broadband speeds in excess of 100Mbps Bigblu Broadband plc / Annual Report and Accounts 2022 1 265204 Bigblu_pp001-pp024.indd 1 265204 Bigblu_pp001-pp024.indd 1 25/04/2023 10:55 25/04/2023 10:55 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCompany Snapshot OVERVIEW The Group utilises a number of Key Performance Indicators (‘KPIs’) to measure performance against our strategy. A description of these KPIs and performance against them for continuing operations is set out below: CUSTOMER NUMBERS CUSTOMER NUMBERS CUSTOMER NUMBERS CUSTOMER NUMBERS CUSTOMER NUMBERS AUSTRALASIA 13% 13% 13% 13% 87% 87% 87% 87% REVENUE REVENUE REVENUE REVENUE REVENUE 2% 2% 2% 2% 13% 13% 13% 13% 85% 85% 85% 85% ADJUSTED EBITDA ADJUSTED EBITDA ADJUSTED EBITDA ADJUSTED EBITDA ADJUSTED EBITDA (15%) (15%) (15%) (15%) 19% 19% 19% 19% 96% 96% 96% 96% Australasia Australasia Australasia PLC Australasia PLC PLC PLC Nordics Nordics Nordics Nordics CUSTOMER NUMBERS (‘000) REVENUE (£m) 51.5 £26.5m ADJUSTED EBITDA (£m) £5.0m includes Customer numbers closed up 3.5% on the prior year (FY21: 49.7k), which the customers acquired from Clear (2.2k). Net growth of 1.8k over the course of the year inclusive of 2.2k customers acquired with the Uniti acquisition Revenues increased to £26.5m (PY: £21.8m), up 21.6% (LFL excluding the Clear acquisition is 14.2%) on prior year. The increase in revenue of 31% was a result of the continued organic growth in customer numbers and an improved APRU improved by EBITDA 25% following the acquisition, adding £0.3m, and continued cost efficiencies across the company Nordics CUSTOMER NUMBERS (‘000) REVENUE (£m) 7.9 £4.0m ADJUSTED EBITDA (£m) £1.0m Revenue in the year reduced by £0.6m (13%) due to the loss of customers through exceptional churn reduced by Adjusted EBITDA £0.9m (47%) in the year due to the impact of the cyber-attack and lower customers the decrease in Reflecting customer numbers associated with the impact of the satellite cyber-attack on the satellite provider to our Norwegian business and the demounting of non-profitable sites PLC REVENUE (£m) £0.7m Revenue in line with prior year ADJUSTED EBITDA (£m) (£0.9m) Reduced by 31% in the year as we managed to control costs along with revenue remaining consistent 2 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 2 265204 Bigblu_pp001-pp024.indd 2 25/04/2023 10:55 25/04/2023 10:55 OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS Australasia Nordics United Kingdom KEY Operational Locations 265204 Bigblu_pp001-pp024.indd 3 265204 Bigblu_pp001-pp024.indd 3 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 3 Chairman’s Statement 2022 was a year of continued progress for the Group and we look forward to 2023 as we seek to create further value for our Shareholders MICHAEL TOBIN OBE Chairman We started the year with the acquisition of customers and certain assets from Clear Networks in Australia and in December 2022 we announced the conditional purchase of the satellite operations of Harbour ISP PTY LTD, a subsidiary of Uniti Group LTD in Australia. In both instances these acquisitions were accretive in nature and helped cement our fully owned subsidiary SkyMesh’s leading position in the marketplace. Working closely with Kacific, our New Zealand network partner we are seeing traction in this marketplace following the relaxing of COVID travel restrictions. In the Nordics we have continued to right size the business, demounting unprofitable sites as well as launching new products to ensure that we offer our customers a wide range of wire free products that best suit their needs. Last year we announced the disposal of our majority interest in Quickline to funds managed by Northleaf Capital Partners (“the Disposal”) and this was completed in June 2021. The conditions attached to achieving the deferred consideration were not met during the period. As previously disclosed, Quickline faced challenges in securing 5G equipment reflecting the global supply issues affecting microchips and associated delays in the commercial launch of stand-alone 5G services which has impacted the timing of 5G being approved by the DCMS as a gigabit capable service. This resulted in zero deferred consideration being receivable. More positively, both 5G and FTTP build programmes are now accelerating, supported by a headcount of c200 and Quickline is still targeting to pass 500,000 premises as per the original business plan. Northleaf continues to be a great partner, having provided significant additional capital to support the business. The Company retains a 4.0% stake in this rapidly growing and well-financed alternative network operator. 4 Bigblu Broadband plc / Annual Report and Accounts 2022 In December the company announced the conditional purchase by its fully owned Australian business, SkyMesh PTY LTD of the satellite operations of Harbour ISP PTY LTD, a subsidiary of Uniti Group LTD in Australia (the “Acquisition”), for a total consideration of up to AUD$4.72m (c.£2.7m), to be satisfied from existing cash resources including our revolving credit facilities with Santander. The satellite operations being acquired currently consist of c.6k customers. Post completion following the relevant approvals having been obtained, the customer base will be transferred to SkyMesh who will provide full ongoing support services from its Australian Customer Engagement Centre. Pursuant to the terms of the acquisition agreement, Uniti will continue to provide services for up to three months post completion to ensure a smooth transition of the customer base. The transfer of the customer base is expected to be immediately earnings enhancing. Following completion, the Directors anticipate that the acquired operations are expected to generate annualised revenues of c.£2.5m and EBITDA of c.£0.7m with positive cash generation, enabling the Group to continue to reinvest and grow the business in the Australian market. Pro forma previous 12 months revenue and underlying adjusted EBITDA for the operations being acquired were £2.4m and £0.6m respectively. The Directors believe that the profitability of operations being acquired should improve under Bigblu Broadband’s ownership due to the Group’s better operational gearing and economies of scale and SkyMesh’s dedicated focus on customers in this sector. The Board will continue to focus on creating significant shareholder value through the rapid scaling of its Australasian Operations. In addition, the Board also continues to explore all options to realise value for BBB shareholders from SkyMesh, which could include a potential ASX listing of SkyMesh. 265204 Bigblu_pp001-pp024.indd 4 265204 Bigblu_pp001-pp024.indd 4 25/04/2023 10:55 25/04/2023 10:55 Customer net growth up 1.0% 0.6k Average Revenue Per Unit (FY21: £39.30) £43.03 Recurring revenue (FY21: 93%) Net cash (FY20: £5.2m) 93% £4.2m Adjusted operating cash flow to EBITDA conversion (FY21: 114%) 113% In addition, we continued to have excellent support from our main banking partner Santander and agreed to an extension of the existing Revolving Credit Facilities in November 2022 from £5m to £10m. The Board will continue to focus on enhancing shareholder value from the Continuing Group, which has significant opportunities for continued growth and value realisation. As it did with the Harbour acquisition, it will consider further strategic M&A opportunities that are accretive in nature. I am very pleased to be able to report another year of growth for the Continuing Group. The highlights are as follows: • Customer connections ended on 59.4k after growth of 0.6k customers after exceptional churn relating to the Cyber-attack (1.6k, 1.8k including demounting) in the Nordics with one of our key network partners. We have continued to invest in our back-end systems, to ensure we are well placed going into 2023 to capitalise on opportunities in our target markets. Part of our governance regime is our continued regular communication with shareholders as our strategy continues to progress. To this end, we embarked upon an inclusive investor relations programme in 2020 which has continued throughout 2021 and 2022, and we will continue to interact with shareholders in a regular and proactive manner. This year the AGM will be held on 23 May 2023 and such notice of the AGM will be circulated to shareholders shortly. Finally, I would like to thank Andrew Walwyn, his management team and all the staff in the Group for their efforts in 2022. Everyone played their part in a demanding yet successful year in the Group’s life. I, and the rest of the Board, fully 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 2023 with confidence. • During the year, we generated revenue of £31.2m in our business, a 12.3% increase in like-for-like revenues as well as improved profitability, and a higher adjusted free cash flow generation. Michael Tobin OBE Chairman 20 March 2023 As stated in previous years, I am a strong believer that good corporate governance supports a group’s long-term success. This is very important for 2023 and beyond, given the planned growth of the continuing operations and the very exciting opportunities in Australasia and the Nordics. 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 function well and add value for the group’s shareholders, at the same time ensuring a strong focus on realising shareholder value. 265204 Bigblu_pp001-pp024.indd 5 265204 Bigblu_pp001-pp024.indd 5 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 5 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWChief Executive Report The Group has continued its objectives of widening the product offerings in each territory with our network partners while still benefiting from the strong visibility afforded by the high percentage of recurring revenues. ANDREW WALWYN CEO SkyMesh has continued to be the market leader in the satellite broadband market with a total market share post the recent Uniti transaction of c.40% (FY21: c.36%). is consolidating SkyMesh its purchase of Clear Networks and expanded into NZ during the year and the recently announced acquisition of the satellite customers of Uniti further strengthens our position in the market During the Period the Group invested in refining and enhancing the Company’s service proposition in the Nordic market to support the next generation ultrafast broadband via wireless 5G FWA 6 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 6 265204 Bigblu_pp001-pp024.indd 6 25/04/2023 10:56 25/04/2023 10:56 OVERVIEW We started the year with a couple of initial setbacks, including a cyber-attack to one of our satellite providers affecting c.3k customers in Norway, as well as a delayed 5G launch in the region due to chip shortages. Despite this we are satisfied with the continued progress shown by the Group in the Period. Extensive effort has been made across the business units to switch customers into more attractive packages at the expense of net adds, with c.9k migrations in the period and net adds of 0.6k, of which c.2.2k were associated with the Clear acquisition in Australia. We ended the period with 59.4k customers. The recently completed Uniti transaction has increased our total customer base to c.66k and we remain focused on our strategy in Australia of organic growth combined with targeting suitable bolt-on acquisition opportunities. In addition, we remain focused on creating and realising shareholder value for BBB Shareholders and in this regards we are exploring all options for the Australasian business including a potential ASX listing. The necessary investment made to improve our offerings in Norway, resulted in c.1k new FWA 5G customers at the period end. Work is still required to improve the performance of the Norwegian business including product offerings, costs and systems. We also remain focused on ensuring our operations are run as efficiently as possible and post period end regrettably we have had to make some headcount reductions in our Norwegian business. Despite the global economic environment, the Group continues to demonstrate strong year-on-year revenue growth underpinned with a high percentage of recurring revenue. We remain confident in our ability to deliver further attractive returns for shareholders from our operations in Australasia and to realise a return from the Norwegian business together with the 4.0% equity stake in Quickline. As we enter the new financial year, there are opportunities for each business unit to deliver further shareholder value as we continue to support customers unserved and underserved in the digital divide, whilst at the same time improving our product range. Operationally we will remain focused, in conjunction with our network partners, on increasing gross adds and reducing churn as well as ensuring our customers are on the most suitable packages and receive the best customer support. Alongside this, we will continue to seek to deliver against our strategic objective of maximising and realising shareholder value. OPERATIONAL REVIEW The Group has two distinct businesses, in Australasia and the Nordics, with a total of c66k customers post the Uniti acquisition and given their respective strengths, each of the business units has potential opportunities to enhance further shareholder value. AUSTRALASIA Our Australian business SkyMesh, is the leading Australian satellite broadband service provider having been named Best Satellite NBN Provider for the fourth year in succession (2019- 2022). SkyMesh has continued to be the market leader in the satellite broadband market with a total market share post the recent Uniti transaction of c.40% (FY21: c.36%). SkyMesh is consolidating its purchase of Clear Networks and expanded into NZ during the year and the recently announced acquisition of the satellite customers of Uniti further strengthens our position in the market. Our Australasian business performed well during the year. As a result of a growth in customers together with ARPU improvements, SkyMesh revenues increased to £26.5m (PY: £21.8m), up 21.6% (LFL excluding the Clear acquisition is 14.2%) on prior year, with adjusted EBITDA of £5.0m, up 25.1% on prior year (FY21: £4.0m). The Clear acquisition contributed EBITDA of £0.3m. This trading performance supported both a positive adjusted operating cash inflow of £5.6m and a positive adjusted underlying free cash flow, before group transfers of £4.4m. Customer numbers closed at 51.5k at year end, an increase of 3.5% on the prior year (FY21: 49.7k), which includes the customers acquired from Clear (2.2k). Post period end, we completed the acquisition of the Uniti satellite operations with c.6k customers which are now in the process of being transferred to SkyMesh by the Company’s half year. The emergence of 5G and LEO satellite technologies is expected to lead to accelerated uptake of non-fibre broadband internet services in Australasia. Starlink has launched in the region with strong initial promotional offers. This is impacting current churn rates and we are monitoring such marketing activity. We believe we can counter such threats to the business by expanding the product offerings as well as addressable markets. Further acquisitions and new product opportunities are emerging as SkyMesh heads into 2023 with its product offering likely to offer faster speeds / capacity, leading to continued increases in customer numbers. The Board’s focus will be on organic growth with our network partners together with suitable accretive bolt on acquisitions that could accelerate the Company’s presence into the wider Australasia region and importantly accelerate the scaling of the Australasian business. In addition, the Board continues to explore all options to realise value for BBB shareholders from SkyMesh, which could include an ASX listing of SkyMesh. Bigblu Broadband plc / Annual Report and Accounts 2022 7 265204 Bigblu_pp001-pp024.indd 7 265204 Bigblu_pp001-pp024.indd 7 25/04/2023 10:56 25/04/2023 10:56 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCHIEF EXECUTIVE REPORT (CONTINUED) NORDICS Reflecting the decrease in customer numbers associated with the impact of the satellite cyber-attack on the satellite provider to our Norwegian business and the demounting of non-profitable sites, BB Norge (rebranded Brdy AS.no), ended FY22 with customer numbers at 7.9k, down on the previous year (FY21: 9.1k). Consequently, revenues for BB Norge were £4.0m, down 13.0% on the prior year (FY21: £4.6m). After some initial delays, the 4G/5G FWA revenue stream has grown in FY22 and is now contributing to early growth in new customers and revenue. Adjusted EBITDA for the region was £1.0m, down 47.3% on prior year (FY21: £1.9m). Adjusted operating cash was an outflow of £0.1m and adjusted underlying free cash flow was an outflow of £1.0m following capital expenditure of £0.7m and set up costs associated with the 5G FWA of £0.2m. As noted above, post period end further cost saving initiatives were implemented in the region and regrettably we have had to make some headcount reductions in this business. During the Period the Group invested in refining and enhancing the Company’s service proposition in the Nordic market to support the next generation ultrafast broadband via wireless 5G FWA, delivering speeds up to 500 Mbps with unlimited data packages. As reported previously this is beginning to show early momentum with growing traction in the market (c.1k customers) and great customer satisfaction being reported. The Board continues to evaluate the opportunity to refine and enhance the Group’s service proposition in the Nordic market. Initiatives include the launch of new satellite offerings across the region offering speeds of 50Mbps and unlimited capacity. The Directors consider that the Group’s ability to offer a combination of services including our own Fixed Wireless network, 5G FWA via Telenor and satellite solutions in the Nordics provides the Group with potential scope to expand its presence and reach in this region and create shareholder value. At the same time the Board are examining all opportunities to realise shareholder value including full or partial disposal, partnership, or a merger. OPERATIONAL PERFORMANCE Net customer growth in 2022, was approximately 0.6k (post the 1.8k loss of customers in the Nordics following the cyber-attack event and demounting, and the 2.2k net adds from the Clear acquisition), resulting in a closing continuing customer base of 59.4k (FY21: 58.8k). Total revenue including recurring airtime and other income (equipment sales and installation sales) covering continuing operations for 12 months shows a solid underlying performance of £31.2m (FY21: £27.1m) with revenue growth of 15.1%. Revenue in satellite was £24.7m, up on prior year by 14% (FY21: £21.7m) due in the main to customer growth, plan switching in Australasia, and the satellite base acquired from Clear. Revenue in fixed wireless was £4.9m, up on prior year by 7% (FY21: £4.6m) Revenue in 5G was £0.9m in the year (FY21: £nil) due to growth in Norway. PLC added £0.7m (FY21: £0.7m) from services related revenue. Recurring revenue, defined as revenue generated from the Group’s broadband airtime, which is typically linked to contracts at £28.9m represented 93% of total revenue (FY21 £25.6m represented 94% of total revenue). Average Revenue Per User (“ARPU”) increased 9.5% year on year to £43.03 (FY21: £39.30) due in the main to a higher percentage mix of larger packages across the Australian region. Average underlying customer churn increased to 28.4% (FY21: 21.3%) as a result of the removal of COVID Support tariffs in Australia and the continued fibre encroachment in Norway. Adjusted EBITDA for the period was £5.1m, showing a solid underlying performance, and representing an adjusted EBITDA margin of 16.3% compared to £4.6m in FY21 on a like for like basis and an adjusted EBITDA margin of 16.9%. This continues to demonstrate the progress made in driving the quality of the consumer offering, the margin review work being undertaken and improving cost efficiencies. 8 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 8 265204 Bigblu_pp001-pp024.indd 8 25/04/2023 10:56 25/04/2023 10:56 ACCELERATING TECHNOLOGY EVOLUTION PRODUCTS The Nordics have entered the 5G market through an agreement with Telenor allowing the Group to promote a ‘white-label’ offering of self-install wireless broadband, which is a niche product and, although it has run approximately six months behind schedule, at c 1k customers at the period end it will allow the Group to target a far wider customer audience across Norway. Thanks to our partnerships on satellite broadband access, we have also been able to stabilise our customer base allowing us to now have a good foundation for the launch of the next generation satellites over the coming years. Across Australasia, SkyMesh expects to be able to offer a fibre like service via satellite from the sky, with 100 Mbps download speeds, <70 milli-second latency and unlimited data allowances across its key territories over the next couple of years with the launch of significant new satellite capacity. With the acquisition of Clear Networks there will also be an increased focus on the business market and new product offerings from NBN Co will allow expansion into the fixed wireless market with a view to combining satellite and fixed wireless technologies to offer high quality services to both the residential and business sectors in regional and remote areas. MARKETING Whilst we use a digital-first strategy to both acquire and retain new and existing customers we also promote our Refer-a- friend programmes in country. For customer 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 customer testimonial videos. Most important of all is word of mouth or customer referral, hence the importance of looking after our existing customers by proactively migrating them to more appropriate tariffs in our Australasian business. CONTINUED GOVERNMENT SUPPORT We remain focused on helping governments in our current markets to achieve their targets of delivering ultrafast and gigabit capable broadband connections nationwide. We remain convinced that it will be difficult for governments to meet these challenging targets without the use of alternative technologies such as fixed wireless and satellite broadband. Indeed, many governments have already launched ‘intervention schemes”. These are aimed at stimulating the market and educating consumers about the options available to them - given that full fibre broadband to the premises is unlikely to become a reality for many customers. In Australia, SkyMesh commanded a 55% market share of net new adds under the Government funded NBNCo scheme during the last financial year. This performance has continued into Q1 FY23. POST BALANCE SHEET EVENTS We highlight the following post balance sheet events: SKYMESH, AUSTRALIA The Company announced that its fully owned Australian business, SkyMesh PTY LTD had completed the acquisition of the satellite operations of Harbour ISP PTY LTD, a subsidiary of Uniti Group LTD in Australia (the “Acquisition”). The total cash consideration paid on completion was AUD$4.72m (£2.7m) with a retention of AUD$0.2m (£0.1m), to be paid in March 2023 post reconciliation of customer numbers. The cash consideration paid on completion was satisfied from existing cash resources including our revolving credit facilities with Santander. The satellite operations acquired consisted of c.6k customers. The customer base is being transferred to SkyMesh who will provide full ongoing support services from its Australian Customer Engagement Centre. Pursuant to the terms of the acquisition agreement, Uniti will continue to provide services for up to three months post completion to ensure a smooth transition of the customer base. As previously announced, the Directors anticipate that the acquired operations are expected to generate annualised revenues of c.£2.5m and EBITDA of c.£0.7m with positive cash generation, enabling the Group to continue to reinvest and grow the business in the Australian market. The Directors believe that the profitability of operations acquired should improve under Bigblu Broadband’s ownership due to the Group’s better operational gearing, economies of scale and SkyMesh’s dedicated focus on customers in this sector. 265204 Bigblu_pp001-pp024.indd 9 265204 Bigblu_pp001-pp024.indd 9 25/04/2023 10:56 25/04/2023 10:56 Bigblu Broadband plc / Annual Report and Accounts 2022 9 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCHIEF EXECUTIVE REPORT (CONTINUED) POST PERIOD REDUNDANCIES / REORGANISATIONS Since the year end the Group has gone through a reorganisation of our Norwegian business and also reflected on our reduced UK scale. This has resulted in redundancies in our Norway business and our UK head office. In Norway we are examining splitting the business into two legal entities, recognising the different attributes of each being our satellite and 5G technology business, typically lower CAPEX, and our infrastructure business, typically higher CAPEX. This has resulted in making approximately 30% of the workforce in our Nordic business redundant in the first quarter of 2023, with an annualised cost saving of c.£0.4m. Due to the size of the Group, after the recent disposals in FY20 and FY21, the Group has sought to reduce head office costs to a level sustainable for the current continuing operations. This will result in approximately 75% of the central team being made redundant, with annualised savings in the region of £0.5m. The internal process has commenced with all planned redundancies expected to be complete by May 2023. STRATEGY Within the business units, we have worked continuously with our network partners in the regions to offer our customers a selection of products that best suits their needs. We continue to see the demand for our products increasing with an element of home working in the Nordics and Australasia now being the norm, and the consequential need for faster broadband solutions to the home. Whilst recognising the pressure on individuals and companies’ disposable income and profits, we firmly believe that the updated solution set that the Group offers to its customers is becoming more important and a very necessary utility cost. The opportunity in the super-fast broadband market remains exciting across the businesses as it is changing significantly and accelerating at pace. Where in the past a service of 30Mbps was seen as an appropriate solution to a typical customer, nowadays this is upward of 50Mbps and our satellite, fixed wireless and FWA 5G solutions will ensure that all unserved and underserved customers can receive an appropriate solution. We are pleased that our network partners are continuously developing products to meet customer needs. Specifically, following the recent acquisitions for the SkyMesh business in Australia, the Board believes that its strategy of organic growth complemented by further bolt-on acquisitions should accelerate the Company’s presence into the wider Australasia region as it considers all options to realise value for shareholders, including a potential spin out ASX listing, as previously announced. The Board continues to believe the business has the potential to achieve 100,000 customers in the region over the next three years through organic and acquisitive growth. 10 Bigblu Broadband plc / Annual Report and Accounts 2022 In Norway, following the launch of new FWA 5G products and the new satellite offerings, we are showing early signs of stabilising, although the business remains cash consumptive. The Board will continue to look at all opportunities to maximise shareholder value from its operations in Australasia, Norway and its retained 4.0% stake in Quickline. OUTLOOK The Group has positioned itself at the forefront of the alternative super-fast and ultrafast broadband industry in its chosen markets. Similar to many businesses, there are current headwinds which require addressing and consideration in how we operate and deliver services, including existing and new customers’ disposable incomes, inflationary pressures together with competition from other providers such as Starlink. We continue taking the actions necessary in carefully extending our product offerings, upgrading our systems and reducing our cost base to address such challenges head on. Since the period end, the Group is growing customers, revenues and profitability, supported by the Harbour acquisition. The Group has continued its objectives of widening the product offerings in each territory with our network partners while still benefiting from the strong visibility afforded by the high percentage of recurring revenues. Across our operations, work continues to improve the performance by upgrading the systems and reducing the cost base. We continue to 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, whether full time or part time. The Board believes that the Group has valuable assets that have established important strategic positions in their respective territories and the Board therefore believes that it is well positioned to ensure it can continue to focus on maximising and delivering enhanced shareholder value. Andrew Walwyn CEO 20 March 2023 265204 Bigblu_pp001-pp024.indd 10 265204 Bigblu_pp001-pp024.indd 10 25/04/2023 10:56 25/04/2023 10:56 Financial Review important year 2022 was another for the Group having demonstrated strong progress against its internal and market expectations for Revenue, EBITDA and cash targets as well as identify and complete accretive acquisitions of Clear and Harbour in Australia FRANK WATERS CFO 12.3% Like for like revenue growth on a constant Currency basis £5.1m Adjusted EBITDA up 11% for the continuing Business (FY21: £4.6m) £5.8m Adjusted operating cashflow inflow (FY21: Inflow £5.2m) £3.7m Adjusted free cash flow inflow (FY21: Inflow £2.1m) 265204 Bigblu_pp001-pp024.indd 11 265204 Bigblu_pp001-pp024.indd 11 25/04/2023 10:56 25/04/2023 10:56 Bigblu Broadband plc / Annual Report and Accounts 2022 11 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWFINANCIAL REVIEW (CONTINUED) 2022 was another important year for the Group having demonstrated strong progress against its internal and market expectations for Revenue, EBITDA and cash targets as well as identify and complete important acquisitions in Australia in the period and just after. We reviewed and increased our Revolving Credit Facilities (“RCF”) with continued support from Santander and the Group generated adjusted operating cash in excess of 100% of EBITDA. FINANCIAL REVIEW Total revenue including recurring airtime and other income (equipment sales and installation sales) in the period was £31.2m (FY21: £27.1m). Adjusted EBITDA was £5.1m (FY21: £4.6m), representing an adjusted EBITDA margin of 16.3% (FY21: 16.9%). The focus of the Board now turns to creating additional shareholder value from the remaining business units being our Australasian operations (SkyMesh Australia, Brdy New Zealand) and, our Nordics business (Brdy). In addition, the Company also continues to hold a valuable minority interest in Quickline. The Board remains focused on delivering further increases in shareholder value from its remaining business units through organic growth whilst considering selective accretive acquisitions in the territories we operate in. Depreciation, including ‘right of use assets’, increased to £3.0m in FY21 from £1.4m in FY21, an increase of £1.6m analysed as follows; depreciation associated with the tower upgrade program investment in Norway in FY21 (£0.5m), an impairment write down of old assets in the Norwegian region (£1.0m), and the assets acquired through the Clear acquisition (£0.1m) Amortisation increased to £0.7m in FY22 from £21k in FY21 due to the amortisation on the customer base acquired from Clear Networks in the year (£1.4m), which will be written off over a 2-year period from acquisition. Finance costs were £0.1m in FY22 relating to the undrawn RCF facility in the period compared with £0.8m in FY21 where there were drawn RCF facilities. FINANCIAL REVIEW – CONTINUING OPERATIONS KEY PERFORMANCE INDICATORS FOR CONTINUING OPERATIONS The Group utilises several 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 2022 2021 Description 2022 performance Customer Base 59,385 58,832 2,336 6,024 Underlying Customer Net Organic Connections Gross Underlying Churn 28.4% 21.3% gross organic Represents total connections plus acquisitions, less disposals, less lost customers (churn) and base management, including demounting Represents gross connections in the period less lost customers (churn) in the period. Includes M&A and excludes exceptional churn. Gross underlying churn defined as the number of subscribers who discontinue their service as a percentage of the average total number of subscribers within excludes exceptional churn in association with the demounting program in Norway the period and 1% increase despite cyber-attack and delayed 4G / 5G launch Net connections split c.1.8k Australia and c.0.5k Norway. The focus during the period was on switchers with c 9k during the period. Switchers arise where we proactively migrate a customer to a more appropriate tariff during the period. Underlying churn rate of 30.3% (FY21: 28.6%) in Australia following removal of COVID support and 22.4% (FY21: 15.2%) in Norway. (35.1% (FY21: 39%) in Norway Including demounting churn) ARPU £43.03 £39.30 Calculated by dividing total revenues from all sources by the average customer base Higher by 9.5% due in the main to improved product mix. 12 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 12 265204 Bigblu_pp001-pp024.indd 12 25/04/2023 10:56 25/04/2023 10:56 KPI 2022 2021 Description 2022 performance Revenue £31.2m £27.1m Adjusted EBITDA £5.1m £4.6m £5.8m £5.2m £3.7m £2.1m Adjusted Operating Cash Flow – Continuing Operations Adjusted Free Cash Flow – Continuing Operations Basic EPS (5.0p) 46.9p Adjusted EPS 4.4p 4.3p from sales includes Revenue all operations. Like for like (LFL) revenue treats acquired businesses as if they were owned for the same period across both the current and prior year and adjusts for constant currency, omitting any distinct differences the numbers. Business disposed of in the period are excluded from the calculation. that skew 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. Adjusted 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. Adjusted Free cash flow being cash (used)/ generated by the Group after investment in capital expenditure, servicing of debt and payment of taxes and excludes items identified as exceptional in nature. Basic Earnings per share (EPS) is the portion of the Continued and discontinued business’s loss of £2.9m (FY21: Profit £27.0m) divided by the weighted average number of shares. Adjusted Earnings per share (EPS) is the Continued business’s profit/(loss) after tax before exceptional costs, share based payments, impairment of Fixed Assets and deferred tax adjustments, divided by the weighted average number of shares. Total Revenue increased by 15.1%. Adjusted EBITDA increase of 11.4% (£0.5m) driven by revenue growth and the acquisition of customers from Clear Networks, which contributed £0.2m of EBITDA in FY22. EBITDA Margin of 16.3% (FY21: 16.9%) following increased marketing spend of £0.2m and £0.2m increased Australian Headcount costs. Adjusted operating cash inflow was £5.8m (FY21: £5.2m), an improvement of £0.6m YOY, due to increased EBITDA forex and non-cash (£0.5m), charge lower working capital improvement year on year £0.9m. (£0.9m), and lower in inflow inflow free cash improved £0.6m, Adjusted the year was £3.7m (FY21: £2.1m), an improvement of £1.6m YOY. Operating cash lower capital expenditure of £0.8m at £1.4m (FY21: £2.2m) and lower interest by £0.3m at £0.1m (FY21: £0.4m), offset by increased tax charge of £0.1m at £0.6m (FY21: £0.5m) Represents increased loss in the year. Prior year reflected the gain on disposal of majority to Northleaf in Quickline interest Increased marginally post EBITDA improved 265204 Bigblu_pp001-pp024.indd 13 265204 Bigblu_pp001-pp024.indd 13 25/04/2023 10:56 25/04/2023 10:56 Bigblu Broadband plc / Annual Report and Accounts 2022 13 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWFINANCIAL REVIEW (CONTINUED) Total customers at the period end including in-flight customers for continuing operations were 59.4k (FY21: 58.8k). During the year we delivered underlying 2.4k net adds (FY21: 6k). This is summarised as follows: Opening base Switched out customers Switched in customers Gross Adds Acquisition Churn Underlying Net Growth Exceptional churn Closing Base FY22 000 58.8 (9.0) 9.0 16.7 2.2 (16.5) 2.4 (1.8) 59.4 FY21 000 57.2 (3.0) 3.0 20.4 - (14.4) 6.0 (4.4) 58.8 Underlying 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) increased to an average annualised churn rate of 28.4% in FY22 (FY21: 21.3%), before exceptional churn of 1.8k, relating to the cyber-attack in Norway during the year (1.6k) and the final elements of the demounting project commenced in FY21 (0.2k). Revenue in satellite was £24.7m, up on prior year by 14% (FY21: £21.7m) due in the main to customer growth, plan switching in Australasia, and the satellite base acquired from Clear. Revenue in fixed wireless was £4.9m, up on prior year by 7% (FY21: £4.6m) Revenue in 5G was £0.9m in the year (FY21: £nil) due to growth in Norway. PLC added £0.7m (FY21: £0.7m) from services related revenue. In our Nordics business underlying churn was 22.4% (35.1% including exceptional demounted customers). (FY21: 15.2%). In our Australian business underlying churn was 30.3% (FY21: 28.6%) due to the removal of COVID Support packages and continued technical challenges on the Skymuster plus product, which will be updated in FY23 to an improved product which would be more attractive in terms of speed and data packages, which should reduce churn. Competitors, such as Starlink, have also contributed to the churn with aggressive marketing, and we continue to work with NBNCo to counter this. In the first three months of FY23, underlying churn has slightly reduced, and importantly we are starting to roll out next generation products in Australia, New Zealand and Norway. REVENUE Total revenue including recurring airtime and other income (equipment sales and installation sales) for the period increased by £4.1m (15.1%) to £31.2m (FY21: £27.1m). Total revenue on a like- for-like and constant currency basis increased in the year by 12.3%, (FY21: increase 15.3%) as the Group continued to add customers during the year but importantly improved ARPU by 9.5%. ARPU, calculated by dividing total revenues from all sources by the average customer base, in 2022 was £43.03 per month (FY21: £39.30) due to higher revenues, specific to the Skymuster Plus products in Australia as well as switching customers to more appropriate packages. 14 Bigblu Broadband plc / Annual Report and Accounts 2022 revenue, defined as Recurring from the Group’s broadband airtime, which is typically linked to contracts and monthly subscriptions, was £28.9m in the period, representing 93% of total continuing revenue (FY21: 94%). revenue generated MARGINS AND PROFITABILITY Gross profit margin was c.43%. (FY21: c.45%) due in the main to the planned product mix changes. In Norway increased 5G revenue at lower margins resulted in a 10.6% decrease in margins from 79.7% to 71.2%. In Australia gross profit improved 2.5% from 35.8% to 36.7% due to product mix. Distribution and Administrative Expenses, pre-exceptional costs, increased to £11.7m (FY21: £9.0m) due to increased headcount costs, marketing costs, depreciation and amortisation on the customer acquisition from Clear. Post items identified as exceptional in nature, these expenses increased to £14.8m (FY21: £13.1m) representing 47.3% of revenue (FY21: 48.2%) due to specific deal related and operational exceptional costs. Adjusted EBITDA increased 11.4% for the period at £5.1m representing an adjusted EBITDA margin of 16.3% compared to £4.6m in FY21 and an adjusted EBITDA margin of 16.9%. 265204 Bigblu_pp001-pp024.indd 14 265204 Bigblu_pp001-pp024.indd 14 25/04/2023 10:56 25/04/2023 10:56 CONTINUING OPERATIONS ANALYSIS A reconciliation of the adjusted EBITDA to adjusted PAT of £2.6m (FY21: £2.5m profit) is shown below: Adjusted EBITDA Depreciation Impairment of Fixed Assets Amortisation Adjusted EBIT Share based payments Continuing Operations operating profit – pre-exceptional items Exceptional items relating to M&A and restructuring activities Continuing Operations Statutory operating loss – post exceptional items Adjusted EBIT Interest charge Tax (charge) / credit Impairment of Fixed Assets Amortisation Deferred taxation adjustment in Norway Adjusted PAT 1 2 2 3 4 5 6 7 7 7 2022 £000 5,101 (2,076) (966) (702) 1,357 (309) 1,048 (2,707) (1,659) 1,357 (124) (1,031) 966 702 714 2,584 2021 £000 4,577 (1,390) - - 3,187 (163) 3,024 (3,922) (898) 3,187 (798) 76 - - - 2,465 GROUP STATUTORY RESULTS AND EBITDA RECONCILIATION 1 Adjusted EBITDA (before share based payments, depreciation, intangible amortisation, impairment of goodwill, refinancing, fundraising, acquisition, employee related costs, deal related costs and start-up costs) improved 11.4% to £5.1m (FY21: £4.6m). 2 Total depreciation increased to £3.0m in FY22 from £1.4m in FY21 due to the capitalisation of costs associated with the upgrading project in Norway last financial year now being depreciated (£0.5m), an impairment depreciation charge of £1.0m due to historic infrastructure assets written down in Norway following the demounting exercise, and depreciation of assets acquired with Clear (£0.1m). 3 Amortisation increased to £0.7m from Nil in FY21 as a result of the acquisition of the Clear customer base. During the year we undertook a full review of the carrying value of Goodwill, with the review resulting in no requirement for an impairment. 4 The Group incurred expenses in the period that are considered exceptional in nature and therefore appropriate to identify. These comprise: a. £1.3m (FY21: £2.0m) of acquisition, deal, legal and other costs relating to M&A and restructuring activities during the period. These costs comprise mainly professional and legal fees. c. £0.5m (FY20: £0.6m) associated with the cost of the demounting program in Norway. d. £0.1m (FY20: £nil) associated with the new RCF facility with Santander. e. £0.3m (FY20: £nil) development costs for the new Pathfinder system in Australia. f. £0.1m setup costs for the New Zealand operations. 5 The interest charge in the year related to the RCF facility with Santander of £0.1m (FY21: £0.7m). 6 The tax charge of £1.0m (FY20: £0.2m) relates to our Australia business on taxable profits (£0.3m) and a deferred tax asset adjustment relating to our Norway business (£0.7m). Prior year also included a deferred tax credit adjustment in our Norwegian business of £0.3m. 7 Adjustments a. Impairment depreciation charge of £1.0m due to historic infrastructure assets written down in Norway following the demounting exercise. b. Amortisation of £0.7m following the acquisition of the Clear customer base. c. Deferred tax adjustment of £0.7m relating to our Norway b. £0.4m (FY21: £0.4m) employee restructuring costs business. primarily in the Nordics. Bigblu Broadband plc / Annual Report and Accounts 2022 15 265204 Bigblu_pp001-pp024.indd 15 265204 Bigblu_pp001-pp024.indd 15 25/04/2023 10:56 25/04/2023 10:56 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW FINANCIAL REVIEW (CONTINUED) Customer Base, Revenue, Adjusted EBITDA in FY22 and the comparative period for Continuing Group is segmented by the following categories as follows: Customer Base Revenue Adjusted EBITDA Australia Norway Pre-Central Central Revenue and Costs1 2022 Number 000’s 51.5 7.9 59.4 - % 87% 13% 100% 2021 Number 000’s 49.7 9.1 58.8 - % 84% 16% 100% Total 59.4 100% 58.8 100% 2022 £m 26.5 4.0 30.5 0.7 31.2 2021 £m 21.8 4.6 26.4 0.7 27.1 % 22% (13%) 15% 0% 15% 2022 £m 5.0 1.0 6.0 (0.9) 5.1 2021 £m 4.0 1.9 5.9 (1.3) 4.6 1 Central revenue includes recharges for services and central costs include finance, IT, HR and plc costs. Customer Connections by Technology 2022 Fixed Wireless/5G 000’s 7.5 5.0 12.5 Satellite 000’s 44.0 2.9 46.9 Total 000’s 51.5 7.9 59.4 % 87% 13% 100% 2021 Fixed Wireless/5G 000’s 7.3 7.5 14.8 Satellite 000’s 42.4 1.6 44.0 Total 000’s 49.7 9.1 58.8 Australia Norway Total % 25% (47%) 2% 31% 11% % 84% 16% 100% From the above analysis for Continuing Operations year on year movements from a Customer Base, Revenue, Adjusted EBITDA and product mix perspective are analysed as follows: 1 Australasia a. There was customer net growth of 1.8k over the course of the year, including the c2.2k from the Clear acquisition. b. During the year there were a number of customers switching contracts (c.9k). c. The increase in revenue of £4.7m was a result of the continued growth in customer numbers, the acquisition of customers from Clear, and an improved ARPU from £37.83 to £43.65. 2 Norway a. Net underlying customers growth was 0.6k before exceptional churn of 1.8k relating to customers associated with the demounting (0.2k) and the cyber-attack (1.6k). b. Revenue in the year reduced £0.6m due to the loss of these customers, although ARPU increased from £35.81 to £39.32 due to price increases in the year. c. Adjusted EBITDA reduced by £0.9m, to £1.0m during the year, reflecting the lower revenue and fixed costs associated with operating leases. 3 PLC a. Revenue was in line with prior year at £0.7m relating to d. Importantly, EBITDA improved by 25% following continued invoiced support services to a third party. cost efficiencies across the company. b. With lower costs this resulted in EBITDA losses improving by 31% at £0.9m. 16 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 16 265204 Bigblu_pp001-pp024.indd 16 25/04/2023 10:56 25/04/2023 10:56 CASHFLOW PERFORMANCE Adjusted Free Cash Flow in the year, before exceptional and M&A activities undertaken by the Group, was an inflow of £3.7m (FY21: inflow £2.1m). This reflects the improved operating cashflow of £0.6m, lower capital expenditure of £0.8m at £1.4m (FY21: £2.2m) and lower interest by £0.3m, at £0.1m (FY21: £0.4m), offset by increased tax charge of £0.1m at £0.6m (FY21: £0.5m). The underlying cash flow performance analysis seeks to clearly identify underlying cash generation within the Continuing Group, and separately identify the cash impact of identified exceptional items including refinancing, fundraising M&A activity cash costs and is presented as follows: Adjusted EBITDA Underlying movement of working capital Forex and other non-cash items Adjusted operating cash inflow before interest, tax Capex and exceptional items Tax and interest paid Purchase of Assets Adjusted free cash inflow before exceptional and M&A items. Exceptional items relating to refinancing, fundraising, M&A, integration and the establishment of network partnerships. Free cash inflow/(outflow) after exceptional items Investing activities Movement in cash from Discontinued operations Movement in working capital from discontinued operations Financing activities Decrease in cash balances Note 1 2 3 4 5 6 7 8 9 10 2022 £000 5,101 777 (113) 5,765 (663) (1,432) 3,670 (2,707) 963 (1,154) (120) - (695) (1,006) 2021 £000 4,577 1,742 (1,085) 5,234 (906) (2,208) 2,120 (3,922) (1,802) 31,041 (2,209) (2,339) (34,796) (10,105) 1 Underlying movement in working capital was an inflow of £0.8m (FY21: inflow £1.7m). This reflects the inflow of receipts from accrued income (£2.8m), lower receipts in Trade Debtors (£0.2m), the outflow of investment in 5G stock (£0.4m) and increased Creditors payments (£1.4m). 5 Purchases of assets in FY22 were £1.4m (FY21: £2.2m). These purchases included the fixed wireless investment in Norway of £0.7m, installations and IT costs of £0.3m and other £0.4m. 6 Exceptional items relating to M&A, finance raising and restructuring costs of £2.7m. 2 Forex and non-cash represent an improvement on FY21 of a lower outflow in the year £0.1m (FY21: outflow £1.1m). This reflects the currency revaluation of key balance sheet accounts using the closing rate as at 30 November of a charge £0.2m (FY21: £0.9m) and non-cash movements relating in a credit of £0.1m (FY21: Charge £0.2m). 3 This resulted in an adjusted operating cash flow before Interest, Tax, Capital expenditure and Exceptional items of £5.8m inflow (FY21: £5.2m inflow), and an adjusted operating cash flow to EBITDA conversion of 113% (FY21: positive 114%). 4 Tax and interest paid was £0.7m (FY21: £0.9m) on a like-for-like basis. This covers interest on the RCF facility and leases (£0.1m) and monthly taxation paid by our Australian business (£0.5m). Final corporation tax calculations for the financial year show year-on-year tax savings in excess of £0.4m. 7 In FY22 investing activities include the acquisition of customers and assets of Clear Networks (£1.2m). In FY21 sales proceeds from the disposal of subsidiaries were £31.1m cash (excluding consideration satisfied by equity investments) less the purchase of intangibles (£0.1m). 8 Relates to costs associated with the discontinued operations (£2.2m in FY21 retained by the entities disposed of in the year). 9 Represents the movement in the Group’s working capital due to the deconsolidation of the disposed businesses in FY21. 10 The outflow in the year of £0.7m relates to lease principal payments. In FY21 the major financing activities included the return of capital to shareholders of £26.1m outflow, the repayment of the Santander RCF facility £8.4m together with £0.8m lease principal payments, offset by the issuance of shares from the exercise of options generating an inflow of £34.8m. Bigblu Broadband plc / Annual Report and Accounts 2022 17 265204 Bigblu_pp001-pp024.indd 17 265204 Bigblu_pp001-pp024.indd 17 25/04/2023 10:56 25/04/2023 10:56 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWFINANCIAL REVIEW (CONTINUED) NET CASH RECONCILIATION Opening Net Cash Loss after tax from Continuing operations Interest charge Depreciation Impairment of Fixed Assets Amortisation Tax charge / (credit) Share Based payments Exceptional costs Adjusted EBITDA Forex movement and other non-cash Movement in Working Capital Cash inflow from Continuing operations Interest paid Tax paid Underlying inflow from Continuing operations Purchase of Assets Adjusted free cash inflow before exceptional and M&A items Exceptional items relating to refinancing, fundraising, M&A, integration and the establishment of network partnerships Adjusted free cash inflow/(outflow) after exceptional and M&A items Investment activities (Pre cash used and retained by Discontinued operations) Movement in working capital from discontinued operations Financing activities Movement in Cash from Continuing operations Outflow of cash from Discontinued operations Movement in Net Cash Decrease in Debt Closing Net Cash 2022 £000 5,201 (2,814) 124 2,076 966 702 1,031 309 2,707 5,101 (118) 782 5,765 (124) (539) 5,102 (1,432) 3,670 (2,707) 963 (1,154) - (695) (886) (120) (1,006) - 4,195 2021 £000 7,419 (1,620) 798 1,390 - - (76) 163 3,922 4,577 (1,085) 1,742 5,234 (411) (495) 4,328 (2,208) 2,120 (3,922) (1,802) 31,041 (2,339) (34,796) (7,896) (2,209) (10,105) 7,887 5,201 18 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 18 265204 Bigblu_pp001-pp024.indd 18 25/04/2023 10:56 25/04/2023 10:56 Cash and net debt for the overall Group is summarised as follows: Opening Net Cash Decrease in loans: offset in financing activities Facilities Repaid Cash outflow from operating activities Cash generated in investing activities Cash outflow from financing activities Movement in Net Cash Closing Net Cash Composition of closing net debt Net cash and cash equivalents Bank loans Net Cash Net Cash Net cash and cash equivalents Discontinued operations cash Adjusted net cash Adjusted Net Cash (Debt) / Adjusted EBITDA Adjusted Net Cash (Debt) inc IFRS16 / Adjusted EBITDA Net cash reduced from £5.2m in 2022 to a net cash position of £4.2m, a reduction of £1.0m in the year, as detailed in the net cash reconciliation above. 2021 includes the repayment of the debt (£8.4m) and the return of Capital (£26.1m) The table above excludes the lease liabilities of £1.4m (FY21: £1.4m). Including this amount would give a total adjusted net cash of £2.8m (FY21: Adjusted net cash £3.8m) and a ratio of adjusted net cash to adjusted Group EBITDA before IFRS 16 of 0.54x (FY21: Adjusted net cash 0.82x). 2022 £000 5,201 - (512) 200 (694) (1,006) 4,195 4,195 - 4,195 4,195 - 4,195 0.82x 0.54x 2021 £000 7,419 7,887 (1,640) 22,591 (31,056) (2,218) 5,201 5,201 - 5,201 5,201 - 5,201 1.13x 0.82x CONSOLIDATED STATEMENT OF FINANCIAL POSITION There was a step change in the balance sheet following the performance in the year with increased Revenue (£31.2m) and EBITDA (£5.1m). Fixed Assets reduced in the year to £2.9m (FY21: £4.1m), following the purchase of new fixed assets (£1.4m), less disposals (£0.1m), and adjusted for depreciation provided in the year (£3.0m) and positive foreign exchange movements £0.2m. Intangible Assets increased to £7.4m (FY21: £5.6m) due to the IP addresses and contracts relating to the Clear acquisition £2.3m plus software development of £0.2m less amortization of £0.7m. Software development costs of £0.4m were reclassified from PP&E. Following a review in FY22 there was no requirement for an impairment of the carrying value of the Company’s goodwill. 265204 Bigblu_pp001-pp024.indd 19 265204 Bigblu_pp001-pp024.indd 19 25/04/2023 10:56 25/04/2023 10:56 Bigblu Broadband plc / Annual Report and Accounts 2022 19 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWFINANCIAL REVIEW (CONTINUED) WORKING CAPITAL DILUTED EPS Inventory days increased to 24 days (FY21: 13 days) as we purposefully increased stock holdings in Norway by £0.4m, to £1.1m (FY21: 0.7m) to support the 5G offering given global shortages during the financial year. Diluted EPS is a calculation used to gauge the quality of a company’s earnings per share (EPS) if all share options are exercised. Diluted EPS was a loss of 5.0p per share in 2022 from a profit of 45.6p in 2021. Trade Debtor days slightly increased to 9 days (FY21: 7 days) with a £0.2m increase in the closing Trade Debtors year on year. Trade Creditor days increased to 77 days (FY21: 81 days) due to agreed revised extended payment terms with suppliers to support our 5G growth in Norway. EARNINGS PER SHARE Basic earnings per share Diluted earnings per share Adjusted basic earnings per share 2022 (5.0p) (5.0p) 4.4p 2021 46.9p 45.6p 4.3p The Group delivered a basic loss per share of 5.0p (2021: basic profit per share of 46.9p as a result of the material exceptional profit) and fully diluted loss per share of 5.0p (2021: fully diluted profit per share of 45.6p). Adjusted earnings per share was a profit per share of 4.4p (2021: profit per share of 4.3p). BASIC EPS Basic EPS was a loss of 5.0p per share in 2022, down from a profit of 46.9p in 2021, largely due to the sale of the discontinued businesses in FY21. BASIC ADJUSTED EARNINGS PER SHARE Basic EPS was a profit of 4.4p per share in FY22 from a profit of 4.3p in FY21. STREAMLINED ENERGY AND CARBON REPORTING Large UK companies are required to report their levels of greenhouse gases (GHG) emissions in their annual report and accounts. This obligation is for Scope 1 (direct) and Scope 2 (indirect) emissions, only to the extent that emissions are the responsibility of the Company. Direct emissions originate from combustion of natural gas and fleet vehicles, whilst indirect emissions are based on purchased electricity. following Emissions are calculated the UK Government GHG Conversion Factors for Group Reporting 2020 and UK Government Environmental Reporting Guidelines. Emissions are based on the Group’s UK sales and operations. An intensity ratio of carbon dioxide equivalent (CO2e) per £1m of revenue has been selected which will allow a comparison of performance over the time and with other similar types of businesses. The data below represents the GHG emissions from the UK disposal of Quickline for the period up to the 10 June 2021. Continuing UK operations comprising only central and head office functions emit less than 40MWh and are regarded as a low energy user. Accordingly, no emission or energy consumption figures for the Company are included in the following table. Carbon emissions for non-UK subsidiaries are not reported. Source of Emissions Direct Emissions – Scope 1 – Gas and Vehicle fleet Indirect Emissions – Scope 2 – Electricity Indirect emissions – Scope 3 – Employee cars Gross Emissions Turnover – UK discontinued operations £m Tonnes CO2e per £1m of revenue Energy consumption used to calculate emissions – MWh 20 Bigblu Broadband plc / Annual Report and Accounts 2022 2022 Tonnes CO2e - - - - - - - 2021 Tonnes CO2e 113 3 - 116 3.2 35.6 846 265204 Bigblu_pp001-pp024.indd 20 265204 Bigblu_pp001-pp024.indd 20 25/04/2023 10:56 25/04/2023 10:56 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. There have been no changes to IFRS standards this year that have a material impact on the Group’s results. No forthcoming new IFRS standards are expected to have a material impact on the financial statements of the Group. DIVIDEND The directors do not recommend the payment of a dividend (2021: £Nil). GOING CONCERN The Directors have prepared and reviewed projected cash flows for the Group, reflecting its current level of activity and anticipated future plan for the next 12 months, from the date of signing. The Group is currently loss-making, mainly as a result of depreciation, amortisation and exceptional charges. The business continues to grow customer numbers and revenue in key target markets and continues to monitor the short-term business model of the Group. The Board have 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 • 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 with an increased RCF facility of £10m The Board has conducted stress tests against our business performance metrics to ensure that we can manage any continuing risks. We recognise that a number of our business activities could be impacted, and we have reflected these in this analysis including supply chain disruptions, 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. 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. The Board believes that the Group is well placed to manage its business risks and longer-term strategic objectives successfully. The latest management information shows a strong net cash position, and in terms of volumes, ARPU and churn, we 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. Accordingly, we continue to adopt the going concern basis in preparing these results. • Increased CAPEX costs to support growth targets or shipping delays On behalf of the Board The Board also recognises a number of significant mitigating factors that could protect the future going concern of the business. These include: • 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 Frank Waters Chief Financial Officer 20 March 2023 265204 Bigblu_pp001-pp024.indd 21 265204 Bigblu_pp001-pp024.indd 21 25/04/2023 10:56 25/04/2023 10:56 Bigblu Broadband plc / Annual Report and Accounts 2022 21 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW 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 either through organic or inorganic customers growth, in Satellite, Fixed Wireless and 5G and its ability to derive revenue from these customers by providing excellent technical support, a value-added customer service, solution delivery and operational gearing. The table below sets out a number of the material risks together with relevant mitigating factors, with the risk rating explained on page 24. Risk Description Mitigation Risk Rating Medium 9 The Board is in regular dialogue with network providers to ensure appropriate capacity and products exists in Australasia and Nordics 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 Australasia and the Nordics, continues to prosper. The Board work closely with satellite owners, as partners, to develop short, medium and longer-term sales plans, target opportunities and markets. This close working relationship ensures that our activities are goal congruent with our service providers and our value add to their business is well understood. The board are in regular dialogue with network operators to ensure appropriate product availability in the territories we operate in. Medium 9 Medium 12 Low 3 Service level agreements exist with satellite operators whose satellites are used with mission critical businesses. Despite this the Cyber-attack impacted on our Norwegian customers this year. Newer satellites in 2023 with steerable beams and a wider list of satellite providers should reduce the risk. inherently risky. Roll up strategies are 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. In addition, dedicated resources are deployed 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. Dependence on satellite owners and satellite infrastructure for capacity and key contract terms Dependence on 5G providers for capacity and key contract terms Dependence on satellite infrastructure Acquisitions The Group is dependent on its ability to purchase broadband capacity from satellite owners in Australasia and the Nordics. 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. 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, its governments partners and consequently its revenues, its operational results and its prospects. The Group has, and is, extending its product offering to include 5G, via partnerships with network operators. The Group’s current contractual agreements are typically non-exclusive and in the event of termination or cancellation could have an adverse consequence on performance and future prospects. In the event of the failure of a satellite as was the case in the Cyber-attack, the Group may not be able to 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, and its prospects. The Group believes there is an opportunity to continue acquisition of customers by way of accretive bolt-ons in existing markets. The Group intends to conduct appropriate due diligence in respect of acquisition targets and to identify any material issues that may affect the decision to proceed with the purchase or give cause for concern post-acquisition in terms of performance or liabilities identified subsequent. 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. Any of these outcomes may have a material adverse effect on the Group’s business, financial condition, or results of operations. 22 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 22 265204 Bigblu_pp001-pp024.indd 22 25/04/2023 10:56 25/04/2023 10:56 Risk Description Mitigation Competition from existing/ emerging alternative technologies Government policy and increased investment in fibre roll-out System reliance Dependence on key executives There may be competition from existing and emerging alternative technologies, such as Starlink, fibre to the premises, 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. 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. The Group believes the proprietary technology platform, Pathfinder, built on Microsoft technology is a key contributor to the operational success of the business as well as the more localised systems. 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. 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. 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 and changing landscape Risk Rating Medium 9 Government announcements in Australia indicate support will continue to be provided for satellite and wireless providers. We remain confident this will continue within the jurisdictions in which we operate, with a fibre offering now available to our customer base. Medium 6 Continued and sustained development and testing of the existing systems is undertaken regularly. Enhancements are rolled out during the course of the year to reduce risks. Medium 8 Medium 9 The Board will continue to ensure that the management team are appropriately incentivised and that there is scope to appropriately incentivise new key personnel where required. The Group operates various share option schemes and management incentive plans which enable employees to benefit from continued growth and delivering shareholder returns. It also ensures that the management team, staff and shareholders objectives are aligned. Fraud, including cyber attacks 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. The Group have technical staff including outside specialist contractors who focus on investigation and mitigation of risks related to fraud and cyber-attacks. Medium 8 Ineffective Control environment Force majeure 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. The financial performance of the Group depends on operating within a robust control framework. The breaching of this environment would result in loss to the business as well as risks associated with reputation. 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. Biannual review undertaken of key risk areas by consultants as appropriate Medium 6 This continues to be monitored by the Board with our professional advisors, satellite and wireless operators and insurance specialists. Medium 6 Bigblu Broadband plc / Annual Report and Accounts 2022 23 265204 Bigblu_pp001-pp024.indd 23 265204 Bigblu_pp001-pp024.indd 23 25/04/2023 10:56 25/04/2023 10:56 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWPRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Risk Description Mitigation Foreign Exchange Rate Volatility The geographic spread of the Group means that financial results are affected by movements in foreign exchange rates, with only 2% of the Group’s revenue currently being generated in Sterling. The risk presented by currency fluctuations may affect business forecasting and create volatility in the results and cash holdings. The Group monitors foreign exchange exposure regularly and, when a transactional exposure is not covered through a natural hedge, consideration will be given in entering into a hedge arrangement such as forward contracts and Options. Risk Rating Medium 6 This continues to be monitored by the Board with our professional advisors. Medium 9 General economic conditions 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. The 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. CORPORATE RESPONSIBILITY BBB is committed to being an equal opportunities employer and is focused on hiring and developing talented people. The health and safety of our employees, and other individuals impacted by our business, is taken very seriously, and is reviewed by the Board on an ongoing basis. A Company statement regarding the Modern Slavery Act 2015 is available on the Company’s website at www.bbb-plc.com. As a manufacturer and distribution business, there is a risk that some of the Group’s activities could have an adverse impact on the local environment. Policies are in place to mitigate these risks, and all of the businesses within the Group are committed to full compliance with all relevant health and safety and environmental regulations. The Strategic Report was approved by the Board of Directors on 20 March 2023 and was signed on its behalf by: Andrew Walwyn Chief Executive Officer 20 March 2023 Severity 5 Catastrophic 4 Critical 3 Moderate 2 Marginal 1 Negligible 5 Frequent 4 Probable 25 High 20 High 20 High 15 10 5 Serious Serious Medium 16 12 8 4 Serious Serious Medium Medium y t i l i b a b o r P 3 Occasional 2 Remote 15 12 9 6 Serious Serious Medium Medium 10 8 6 4 Serious Medium Medium Medium 1 Improbable 5 4 Medium Medium 3 Low 2 Low 3 Low 2 Low 1 Low Probability 1. Improbable (unlikely to occur) 2. Remote (unlikely, though possible) 3. Occasional (likely to occur occasionally during standard operations) 4. Probable (not surprised, will occur in a given time) 5. Frequent (likely to occur, to be expected) Severity 1. Negligible (the risk will not result in serious corporate disruption, or has a remote possibility of loss) 2. Marginal (the risk could cause corporate disruption, or loss but its effects would not be serious) 3. Moderate (the risk can result in corporate disruption or loss) 4. Critical (the risk can result in corporate disruption or loss) 5. Catastrophic (the risk is capable of causing serious corporate disruption and or loss) 24 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp001-pp024.indd 24 265204 Bigblu_pp001-pp024.indd 24 25/04/2023 10:56 25/04/2023 10:56 Section 172 (1) Statement FOR THE YEAR ENDED 30 NOVEMBER 2022 and regulatory compliance. As a result of these activities, the Board has an overview of engagement with stakeholders, and other relevant factors, which enable the directors to comply with their legal duty under section 172 of the Companies Act 2006. For details on how the Board operates and the way in which the Board and its committees reach decisions, including the matters we discussed during the year, see pages 35 to 42. KEY STRATEGIC DECISIONS Decisions taken by the Board and its committees consider the interests of our key stakeholders, the impacts of these decisions and the need to foster the Group’s business relationship with customers, suppliers and other stakeholders, as well as engagement with our employees. Papers submitted to the Board consider the impact on key stakeholders. Directors have had regard to the matters set out in section 172(1) (a)-(f) of the Companies Act 2006 when discharging their section 172 duties. DIRECTORS’ REMUNERATION POLICY Back in 2018 we sought the guidance from our major Institutional Investors on developing a new Directors’ Remuneration Policy (the Policy) regarding Long Term Incentive Plans “LTIP’s”. The Group HR director and our NOMAD liaised with various stakeholders including the Executive Committee and all non-executive directors to understand their views of the current remuneration arrangements of the Group and the alignment of remuneration to our strategy and priorities over the medium term. These views were shared with the Remuneration Committee alongside information on the wider workforce remuneration structure, external market practice, corporate governance regulations and institutional guidelines. This was implemented. Post the Disposal, consideration was given to ensuring we continue to have in place a remuneration structure including Management Incentive Plans that benefits the Group’s employees whilst ensuring executive reward aligns with shareholders’ short and mid-term interests. No changes were made during the period. In accordance with section 172 of the Companies Act 2006 each of our directors acts in the way that they consider, in good faith, would most likely promote the success of the Group for the benefit of its members as a whole. CONSEQUENCES OF ANY DECISIONS IN THE LONGER-TERM • • • • interests of our colleagues need to foster the Group’s business relationships with suppliers, customers and other key stakeholders impact of the Group’s operations on communities and the environment desirability of the Group maintaining a reputation for high standards of business conduct • need to act fairly as between members of the Group. The directors take into account the views and interests of a wider set of stakeholders, and you can find out more about how the Group engages with its stakeholders below and on pages 36 and 42. During the year the Board and its committee’s received papers, presentations and reports, participated in discussions and considered the impact of the Group’s activities on its key stakeholders (wherever relevant). We acknowledge that every decision we make will not necessarily result in a positive outcome for all of our stakeholders and the Board frequently has to make difficult decisions based on competing priorities. By considering the Group’s purpose and values together with its strategic priorities and having a process in place for decision making, we do, however, aim to balance those different perspectives. IN TERMS OF PARTICULAR STAKEHOLDER GROUPS • • Customers, employees, suppliers, community and environment: see the future prospects and key performance indicator sections of the Strategic Report. Additionally, other forms of interaction with different groups are maintained, including employee forums where appropriate, newsletters and group broadcasts. Shareholders: we would guide you to the entire report and to take advantage of the details in the investor sector of our portal on the website (www.bbb-plc.com). HOW DOES THE BOARD ENGAGE WITH STAKEHOLDERS? fundraising The Board will sometimes engage directly with stakeholders on certain issues such as remuneration schemes, strategic direction, investment and issues. The Board considers information from across the organisation to help it understand the impact of the Group’s operations, and the interests and views of our key stakeholders in maximising shareholder value. It also reviews strategy, financial and operational performance, as well as information covering areas such as key risks, and legal 265204 Bigblu_pp025_pp053.indd 25 265204 Bigblu_pp025_pp053.indd 25 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 25 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWDirectors’ Report FOR THE YEAR ENDED 30 NOVEMBER 2022 The Directors present their report together with the audited financial statements for the year ended 30 November 2022. RESULTS AND DIVIDENDS The results include those of BBB PLC and its subsidiaries for the full year including continued and discontinued activities and are set out in the financial statements on pages 54 to 95. The Directors do not recommend the payment of a final dividend for the financial year ended 30 November 2022. 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 31 to 33. Michael Tobin Andrew Walwyn1 Frank Waters Paul Howard2 Christopher Mills4 Philip Moses3 Total Appointed 29 Sept 2015 2022 Ordinary shares of 15p each 489,823 12 May 2015 3,294,004 12 May 2015 29 Sept 2015 23 May 2018 21 May 2020 325,090 149,577 258,334 - 2022 Share options - 215,815 218,324 133,333 - - 2021 Ordinary shares of 15p each 489,823 3,294,004 325,090 149,577 258,334 - 2021 Share options - 350,790 326,766 133,333 - - 4,516,828 567,472 4,516,828 810,889 1 2 3 4 In December 2022 Andrew Walwyn purchased 26,549. Following the purchase, he has a beneficial interest in 3,320,553 Ordinary Shares, representing 5.68% of the Company’s issued share capital. In December 2022 Paul Howard purchased 66,666 shares. Following the purchase, he has a beneficial interest in 216,243 Ordinary Shares, representing 0.37% of the Company’s issued share capital. In December 2022 Philip Moses purchased 10,000 Ordinary Shares. Following the purchase Philip Moses has a beneficial interest representing 0.02% of the Company’s issued share capital. In February 2023 Christopher Mills purchased a total of 200,000 shares, increasing his indirect interest to 14,700,000 shares in the Company (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 14,958,334 shares representing 25.3% of the issued share capital. As at the 30 November included in the above were 451,125 Share options vested but remaining unexercised. DIRECTORS’ INSURANCE AND INDEMNITIES The Group maintains directors’ and officers’ liability insurance which gives appropriate cover for any legal action brought against its directors. In accordance with section 236 of the Companies Act 2006, qualifying third- party indemnity provisions are in place for the directors in respect of liabilities incurred as a result of their office, to the extent permitted by law. Both the insurance and indemnities applied throughout the financial year ended 30 November 2022 and through to the date of this report. DIRECTORS SHARE OPTIONS 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. As explained in the Company’s 6 September 2021 circular to shareholders, adjustments were made to all options granted under the above schemes that were outstanding at the time the return of value detailed in that document became effective. In particular, the exercise price payable under those options was reduced by 45 pence per share (being an amount equal to the return of value). 26 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 26 265204 Bigblu_pp025_pp053.indd 26 25/04/2023 10:54 25/04/2023 10:54 Details of the options that have been granted to Directors under the EMI and unapproved schemes and which were outstanding during the year to 30 November 2022, are as follows: Scheme Date of grant EMI EMI 21/12/16 21/12/16 Unapproved 21/12/16 Unapproved 30/03/16 Unapproved 21/12/16 No. of shares under option at 30 November 2021 Exercised during the year No. of shares under option at 30 November 2022 51,942 217 86,450 66,667 66,666 271,942 - - - - - - 51,942 217 86,450 66,667 66,666 271,942 Exercise price (pence) per share at 30 November 2022 (or date of exercise if earlier)2 69.45 69.45 69.45 33.75 69.45 Normal expiry date 21/12/26 21/12/26 21/12/26 30/03/26 21/12/26 Director Andrew Walwyn Frank Waters Frank Waters Paul Howard1 Paul Howard Total 1 In December 2022 Paul Howard exercised 66,666 shares. Following the exercise, he has a beneficial interest in 216,243 Ordinary Shares, representing 0.37% of the Company’s issued share capital. Notes: (1) (2) All options included in the above table were capable of being exercised in full throughout the year to 30 November 2022 and will normally remain so until the tenth anniversary of their original date of grant. As explained above, a 45 pence per share reduction was applied to the exercise price of all options that were outstanding at the time the 2021 return of value became effective. Following consultation with a number of shareholders and as highlighted in previous reports, the Group has established a Long-Term Incentive Plan (“LTIP”) and more recently a Management Incentive Plan, pursuant to which the CEO and other members of staff have been or may be granted awards. There were no awards made under the existing LTIP arrangements in FY22. However, as also explained in the Company’s 6 September 2021 circular to shareholders, appropriate mechanisms have been put in place to provide cash compensation to LTIP participants who exercise their awards after the time the return of value detailed in that document became effective. In particular, these arrangements involve the payment to the relevant individual of an additional 45 pence per share in cash on any such exercise. 265204 Bigblu_pp025_pp053.indd 27 265204 Bigblu_pp025_pp053.indd 27 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 27 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWDIRECTORS’ REPORT (CONTINUED) Details of the options that have been granted to Directors and other staff members under the LTIP and which were outstanding during the year to 30 November 2022, are as follows: Director Andrew Walwyn Andrew Walwyn Frank Waters Frank Waters Scheme LTIP LTIP LTIP LTIP Date of grant 30/05/18 28/10/19 30/05/18 28/10/19 Other staff members Other staff members LTIP LTIP 30/05/18 28/10/19 Total Notes: No. of shares under option at 30 November 2021 99,359 199,489 79,826 160,273 538,947 Exercise price (pence) per share at 30 November 2022 (or date of exercise if earlier) No. of shares under option at 30 November 2022 Normal expiry date Exercised during the year Lapsed during the year1 - - - - - - 134,975 - 108,441 243,416 99,359 64,514 79,826 51,832 295,531 15.00 30/05/28 15.00 28/10/29 15.00 30/05/28 15.00 28/10/29 95,952 95,9522 - - 15.00 N/A 629,155 - 543,271 725,107 95,952 543,271 85,884 85,884 1,264,054 95,952 786,687 381,415 15.00 28/10/23 (1) (2) The ability to exercise awards under the LTIP is conditional on, amongst other things, the continued employment of the individual within the Group and the satisfaction of specified performance conditions (which are regularly reviewed by the Remuneration Committee). The lapses that occurred during the 12 months to 30 November 2022 were largely attributable to the fact that the performance conditions applicable to the May 2018 awards were formally assessed during the period and were only satisfied in part. Following the vesting of an LTIP award, it will normally remain capable of exercise until the 10th anniversary of its original date of grant. These exercises of LTIP awards occurred before the 2021 return of value became effective with the result that the relevant participants were not eligible to receive the additional 45 pence per share compensation payment described above. The Directors’ beneficial interests in share options shown in the tables on the previous pages comprise options issued under the EMI option scheme, the “unapproved” option scheme and the LTIP. All such schemes, together with other Management Incentive Plans, are reviewed at least annually to ensure they are in line with shareholders’ expectations. There are a number of performance conditions as well as time restrictions relating to the financial year ended 30 November 2022 attached to these share schemes and are reviewed by the Remuneration Committee. 28 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 28 265204 Bigblu_pp025_pp053.indd 28 25/04/2023 10:54 25/04/2023 10:54 DIRECTORS’ REMUNERATION The following table shows emoluments paid and accrued to Directors during the financial year: Year ended 30 November 2022 Salary/fees £000 Bonus £000 BIK £000 Pension £000 58 - 235 215 39 35 39 163 191 - - - - 5 6 - - - - 11 9 - - - Year ended 30 November 2021 Total emoluments £000 Total emoluments £000 58 86 414 421 39 35 39 853 845 124 45 48 Current Directors: Michael Tobin (Non-Executive Director and Chairman) Andrew Walwyn (Chief Executive Officer) Frank Waters (Chief Financial Officer)1 Paul Howard (Non-Executive Director) Christopher Mills (Non-Executive Director) Philip Moses (Non-Executive Director) 621 354 11 20 1,006 2,001 1 Frank Waters received an additional bonus relating to the final settlement from Eutelsat of £50k during the year (£175k in FY21), which was charged to the discontinued business. Prior year and included in the total emoluments above, following the disposal of Quickline to Northleaf during the period, and the subsequent Return of Capital to shareholders of £26.1m, are payments for the executive directors under the Management Incentive Plan to Andrew Walwyn (FY21: £252k) and Frank Waters (FY21: £212k) which were treated as continuing business costs but analysed on a non-GAAP basis as exceptional, as attached to the Disposal. SERVICE CONTRACTS The Chief Executive Officer, and Chief Financial Officer have service contracts with the Company that are terminable by either party on not less than 12 months prior notice. The non-executive Directors have service contracts with the Company 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 and Chief Financial Officer as well as central team members as agreed with individuals. 265204 Bigblu_pp025_pp053.indd 29 265204 Bigblu_pp025_pp053.indd 29 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 29 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWDIRECTORS’ REPORT (CONTINUED) SUBSTANTIAL SHAREHOLDINGS As at 30 November 2022 the Group was aware of the following interests in 3% or more of its issued voting share capital: Shareholder Harwood Capital LLP Richard Griffiths Gresham House Asset Management Liontrust Asset Management BGF Investment Management Limited Mr Andrew Walwyn Hargreaves Lansdown Nominees Limited Interactive Investor Services Nominees Limited EMPLOYEE INVOLVEMENT % Holding No. of shares 24.8 11.1 8.9 8.8 7.8 5.6 5.6 5.1 14,500,000 6,458,278 5,203,644 5,112,604 4,544,444 3,294,004 3,242,665 3,003,663 The Group’s policy is to encourage involvement at all levels, as it believes this is essential for the success of the business. Employees are encouraged to present their views and suggestions in respect of the Group’s performance and policies. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s financial instruments comprise cash, liquid 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. 30 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 30 265204 Bigblu_pp025_pp053.indd 30 25/04/2023 10:54 25/04/2023 10:54 Board of Directors FOR THE YEAR ENDED 30 NOVEMBER 2022 MICHAEL TOBIN OBE Non-Exec Chairman Appointment Michael joined September 2015 the Board and became Chairman in Committee Membership Michael chairs the Board’s Remuneration and Nomination Committees and is a member of the Audit and Risk Committee. Independence The Board consider Michael to be an independent Director. Background and Experience 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 Telecity Group 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 Telecity Group 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 recognised as Britain’s Most admired Tech Company in 2012. Prior to joining Telecity Group, 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 Data centre 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 Industry’ 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. External appointments Michael holds a number of non-executive and Chairmanship roles including EdgeConneX, Audioboom, Ultraleap, Pulsant, NorthC Datacenters, Everarc PLC, Sungard Availability Services, DC Byte, Instrumental, ScaleUp Group UK. LeaseWeb, The Lewis Moody Foundation where he is Ambassador 265204 Bigblu_pp025_pp053.indd 31 265204 Bigblu_pp025_pp053.indd 31 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 31 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWBOARD OF DIRECTORS (CONTINUED) PAUL HOWARD Non-Executive Director CHRISTOPHER MILLS Non-Executive Director PHILIP MOSES Non-Executive Director Appointment Appointment Appointment Paul joined the Board in September 2015. Christopher joined the Board in May 2018. Phil joined the Board in May 2020 Committee Membership Committee Membership None Committee Membership Phil chairs the Board’s Audit and Risk Committee. serves Paul the Board’s on remuneration and Audit and Risk Committees. Independence The Board consider Paul to be an independent Director. Background and Experience 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 companies. 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. External appointments Paul holds a number of executives roles, including Chairman of Quickline Communications Ltd Independence Independence The Board consider Christopher to be a non-independent Director. The Board consider Phil to be an independent Director. Background and Experience Background and Experience 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 Companies 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. External appointments Christopher holds a number of non- executive roles. Phil has held CFO level roles in both telco and infrastructure companies in the UK and internationally for the last 20 years. He held several divisional CFO positions at BT as well as that of IR director and Group Controller. Subsequently, he was Group CFO at p/e owned Arqiva, the UK’s largest communications tower company; at London City Airport and at pan- African fibre and data centre provider Liquid Telecom. Phil has a mathematics BSc from Warwick university and is an FCCA. External appointments Phil was appointed CFO of Osborne Infrastructure Ltd in January 2022, which was rebranded as Octavius Infrastructure Ltd in 2022. 32 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 32 265204 Bigblu_pp025_pp053.indd 32 25/04/2023 10:55 25/04/2023 10:55 ANDREW WALWYN Chief Executive Officer FRANK WATERS Chief Financial Officer Appointment Appointment Andrew joined the Board as CEO on the completion of the reverse acquisition in May 2015. Frank joined the Board as CFO on the completion of the reverse acquisition in May 2015. Committee Membership Committee Membership Andrew serves on nomination committee. the Board’s None Independence Executive – non-independent Background and Experience 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. External appointments None Independence Executive – non-independent Background and Experience 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 the mobile, consumer electronics and technology sectors. in Frank was instrumental in the sale of DX Communications alongside Andrew Walwyn to what is now Telefonica. Frank joined Bigblu Broadband in the summer of 2013 and, as Chief Financial Officer, is responsible for all Group finance, commercial, legal, regulatory, HR, IT and M&A matters. External appointments Frank holds a number of non-executive directorships in sports clubs and businesses. In addition, Frank is a NED for Quickline Communications Ltd 265204 Bigblu_pp025_pp053.indd 33 265204 Bigblu_pp025_pp053.indd 33 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 33 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWStatement of Directors’ Responsibilities FOR THE YEAR ENDED 30 NOVEMBER 2022 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 20 March 2023 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 consistently; 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. 34 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 34 265204 Bigblu_pp025_pp053.indd 34 25/04/2023 10:55 25/04/2023 10:55 Corporate Governance Statement FOR THE YEAR ENDED 30 NOVEMBER 2022 important DEAR SHAREHOLDER, At Bigblu Broadband plc all our stakeholders are 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 approving 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 20 March 2023 QUOTED COMPANIES ALLIANCE CODE FOR SMALL & MID-SIZED QUOTED COMPANIES 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 (the “QCA Code”) in September 2018. This statement sets out how the Group complies with the 10 principles of the QCA Code. 1 STRATEGY & BUSINESS MODEL The Group is an alternative broadband provider who markets and delivers broadband services to homes and businesses mainly located in areas of poor or underserved telecoms infrastructure. The Group’s target customers are residential and businesses who are typically not served by fibre to the premise’s broadband. The Group 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) and fibre. The Group has customers in Australia and the Nordics with 59.4k customers as at 30 November 2022. The Group is extremely focussed on growing the Continuing Group and works closely with network partners to ensure we get the best customer offers in each jurisdiction. Together with local bespoke systems the Group’s cloud-based global billing and customers service (ERP) platform, Pathfinder, enables it to support customers around the world in any language the customer chooses, with the system supporting multiple currencies and VAT jurisdictions. The Group 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 EBI and NBNCo. The Group 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 Group to continue to improve its broadband offerings and keep pace with the growth in internet demand. Since the Group’s inception in 2008, headline consumer satellite broadband speeds in Australasia and the Nordics have increased from 4 Mbps to 50 Mbps and the Group, working with its satellite owner partners, believes that speeds and data allowances will continue to increase exponentially over the next 3 – 5 years. Bigblu Broadband plc / Annual Report and Accounts 2022 35 265204 Bigblu_pp025_pp053.indd 35 265204 Bigblu_pp025_pp053.indd 35 25/04/2023 10:55 25/04/2023 10:55 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) Our Australian business SkyMesh, went from strength to strength with year-on-year overall customer growth of c.4% and of equal importance, strong customer engagement with c40% of new customers coming from word of mouth. During the year SkyMesh was also awarded the Whistleout 2022 Best Satellite NBN Co provider for the third year running. We further reinforced our close working relationship with NBN Co as it pro-actively extended the use of satellite in regional and remote Australia. 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 Group’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 are published on all the Group’s RNS releases and on the Group’s investor website. After a period of satellite investment and focus, the Board continue to evaluate the opportunity to refine and enhance the Group’s service proposition in the Nordic market. Initiatives considered and acted upon included adding a Sales and Marketing director for the Nordics, now appointed and started February 2023, with a strategic objective to, among other things, expand the geographic focus of the operation into Sweden and Finland. In addition to the launch of new product satellite offerings across the region offering speeds of 50Mbps and unlimited capacity, the Group –continues to invest in the upgrade of its fixed wireless network. The Directors consider that the Group’s ability to offer FWA (Fixed Wireless) and satellite solutions in the Nordics means that there is potentially significant scope to expand its presence and reach in this region. The suite of competitive offerings and growing demand for working from home solutions means that the target market continues to increase in size. Market growth, alongside the operational investment outlined above, provide the Directors with confidence of stronger demand for its FWA solutions in Norway whilst, historically capital-light satellite solutions are expected to be successfully deployed across the wider Nordic region. The Directors believe there is a significant opportunity to continue to grow the Group’s subscriber base organically and also through bolt on acquisitions in the markets we operate in. 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 clear days before the meeting. The chairs of the Board and all committees, together with all other Directors, routinely attend the AGM and are available to answer questions raised by shareholders. Feedback from investors is also obtained through direct interaction between the CEO and CFO at meetings following the publication of its full-year and half-year results. The Group 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 Group’s corporate broker (finnCap). 36 Bigblu Broadband plc / Annual Report and Accounts 2022 TAKING INTO ACCOUNT 3 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 Group’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 Group’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 Group’s strategy. Integrating CSR into strategy will help create long-term value and reduce risk to shareholders and other stakeholders. The Group see CSR as a very important area for consideration and are currently in the process of finalising a CSR Policy. In the coming year we will be looking at setting carbon reduction targets following the TCFD recommendations (The Task Force on Climate-related Financial Disclosures). 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 – exceeding customers’ expectations Industry leading product design always 265204 Bigblu_pp025_pp053.indd 36 265204 Bigblu_pp025_pp053.indd 36 25/04/2023 10:55 25/04/2023 10:55 • Quality – Excellence in operations, processes and systems • Environment – Engaging with and supporting the communities in which we work 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. • Teamwork – Support and engage with our people Board processes 4 EMBEDDING EFFECTIVE RISK MANAGEMENT The board of the Group 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 22 to 24 of this Annual Report identifies these risks and how the Board and the business mitigate these risks. The board of the Group 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 Company ensures a balanced board membership to reflect the skills and attributes needed. The board consists of two executive directors and four non-executive directors. 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 to 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. ROLE OF THE BOARD AND MANAGEMENT Role of Chairman and Chief Executive Officer There is a clear division of responsibilities between the running of the Board and the executive responsible for the Group’s business. 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 The full Group Board met ten times in the financial year under report and is scheduled to meet ten 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 prepares 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 and Risk 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. This includes financial, operational and compliance controls and risk- management systems. The Board has reviewed the 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 particular needs and the risks to which it is exposed. 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. 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 responsible for the overall management and corporate governance of the consolidated Group including its strategic direction, establishing goals for management and monitoring the achievement of these goals. 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. The Board have in place a Delegation of Board authority which establishes those matters which it is considered Bigblu Broadband plc / Annual Report and Accounts 2022 37 265204 Bigblu_pp025_pp053.indd 37 265204 Bigblu_pp025_pp053.indd 37 25/04/2023 10:55 25/04/2023 10:55 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) 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 the Group’s strategy and its budgetary and business plans The Board also reviewed relationships with the Group’s main partners and suppliers. Together with our Partners over the past five years, the Group successfully executed its strategy of becoming a leading provider of last mile rural broadband solutions through a combined offering of both satellite and fixed wireless products. • Financials: During FY22, 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. • Governance: The Board continues to review 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 Financial and systems resources. • Approval of significant expenditure investments, M&A and capital • Business performance: • 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 and Risk Committee) In FY22, 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. Ensuring adequate succession planning for the Board and Executive management (taking into consideration the recommendations of the Nomination Committee) Board committees The Board has established committees as follows: 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 and Funding: During FY22, 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. • • • Audit and Risk Committee (chaired by Phil Moses) to oversee financial reporting, internal control and the management of the risks the Group faces. 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 43 to 53 and each committee’s full terms of reference are available on our website. • • • 38 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 38 265204 Bigblu_pp025_pp053.indd 38 25/04/2023 10:55 25/04/2023 10:55 Table of Attendance The table below summarises the attendance of the Directors and committee members at the scheduled Board and committee meetings held during the year: Michael Tobin OBE* Andrew Walwyn Frank Waters Paul Howard Christopher Mills Philip Moses** Board Audit and Risk Committee Remuneration Committee Nomination Committee Held Attended Held Attended Held Attended Held Attended 10 10 10 10 10 10 10 10 10 10 6 9 3 - - 3 - 3 3 - - 3 - 3 3 - - 3 - - 3 - - 3 - - 1 1 - 1 - - 1 1 - 1 - - 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. ** Philip Moses is Chairman of the Audit and Risk Committee. 6 HAVING APPROPRIATE EXPERIENCE, SKILLS AND CAPABILITIES ON THE BOARD BOARD COMPOSITION, QUALIFICATION AND EXPERIENCE The Board currently comprises six (2022: six) 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 and remains independent), three Non-Executive Directors, two of whom are considered by the Board to be independent for the purpose of the QCA Code. There are two 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 industry and leading a group listed on the London Stock Exchange are crucial to the Board’s ability to lead the Group successfully. 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 2 executive Directors. • the role of Chairman is to be filled by a non-executive Director, • • 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 responsibilities, 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 rotation each year. The Company Secretarial service is provided by a professional services company in order to conform to requirements. 265204 Bigblu_pp025_pp053.indd 39 265204 Bigblu_pp025_pp053.indd 39 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 39 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) KEY BOARD ROLES Chairman Leads the Board Promotes highest standard of corporate governance Challenges strategic matters Chief Executive Officer Non-Executive Directors Leads the management team Supports to ensure the Chairman appropriate governance standards spread through the Group initiatives aimed at Raises strategic improving shareholder returns in line with the strategic direction of the Group Acts as intermediary between Directors when required Challenges strategic initiatives presented by Executive Directors as well as assists in the development of Group Strategies Available to stakeholders to address any concerns or issues that they feel have not adequately been addressed through usual channels of communication. Integral role in succession planning Promotes a culture of openness and debate Oversees implementation of all Board- approved actions Encourages constructive relations between Executive and Non-Executive Directors Facilitates effective contributions by the Non-Executive Directors Ensures that the Board is made aware of the employees' views on relevant issues Develops proposals for the Board to consider fellow Executive Directors in conjunction with NON-EXECUTIVE DIRECTOR INDEPENDENCE The Board considers and reviews the independence of Non- Executive Directors regularly 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 48, Michael Tobin OBE, and Paul Howard both participate in the Group’s share option plan. Notwithstanding this, both Michael Tobin and Paul Howard are considered independent 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 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 re-election at the Group’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 48. 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 joining the Board designed 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 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 the Directors’ skills and knowledge are refreshed and 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 40 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 40 265204 Bigblu_pp025_pp053.indd 40 25/04/2023 10:55 25/04/2023 10:55 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 2023 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 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. 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. 7 EVALUATING BOARD PERFORMANCE The Board and its committees were formed upon listing in May 2015 and are reviewed from time to time. A Board Effectiveness Review was last carried out during 2021 with the results being analysed by the Nomination Committee and presented to the Board. A small number of proposed recommendations were made and implemented by the Board. Given the composition of the Board and the strategy to exit the remaining businesses it was decided that a Board Effectiveness Review was not required during 2022 and that Board Effectiveness Review be scheduled for early 2023. 8 ETHICAL VALUES & BEHAVIOURS The Company operates a corporate culture that is based on ethical values and behaviours. The Executive Directors (comprising Andrew Walwyn and Frank Waters) 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. 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 Chief Financial Officer. 265204 Bigblu_pp025_pp053.indd 41 265204 Bigblu_pp025_pp053.indd 41 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 41 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) 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. For the roles and responsibilities of the Board please see section 6 on page 39. COMMUNICATING WITH 10 SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS 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. ANNUAL GENERAL MEETING The Company’s Annual General Meeting (“AGM”) will be held on 23 May 2023, and such notice of the AGM will be circulated to shareholders shortly. 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 and Risk 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 46. 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. Haysmacintyre LLP have expressed their willingness to continue as the Group’s auditor. As outlined in the Audit and Risk Committee report on page 47, resolutions proposing their reappointment and to authorise the Audit and Risk Committee to determine their remuneration will be proposed at the next AGM. On behalf of the Board Ben Harber Company Secretary 20 March 2023 42 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 42 265204 Bigblu_pp025_pp053.indd 42 25/04/2023 10:55 25/04/2023 10:55 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 members are Andrew Walwyn and Paul Howard. ROLE AND RESPONSIBILITIES the Board in discharging its The Committee assists 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 its corporate 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. • 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 Executive Directors as appropriate. If the Chairman wishes to proceed 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. 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. MEETINGS DURING THE YEAR A meeting of 27th September 2022. the Nomination Committee was held on PROCESS FOR BOARD APPOINTMENTS When the Company decides to appoint a Non-Executive Director: • The Committee Chairman, or search consultants where engaged, will typically 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 unless the Committee has been made aware of the availability of very suitable candidates. Michael Tobin OBE Nomination Committee Chairman 20 March 2023 265204 Bigblu_pp025_pp053.indd 43 265204 Bigblu_pp025_pp053.indd 43 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 43 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) AUDIT AND RISK COMMITTEE REPORT The role of the Audit and Risk Committee is documented in its terms of reference which were reviewed and adopted by the Board in May 2016 and updated in December 2020 and the remit was extended to cover risk reviews as well and renamed the Audit and Risk Committee. The annual report on the role and activities of the Audit and Risk Committee are as follows: MEMBERSHIP OF THE COMMITTEE The Committee meetings were chaired by Philip Moses 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 2022, the Committee formally met three times. The table on page 39 summarises the attendance of members at formal committee meetings. In addition, the Audit Committee Chair had a number of informal meetings both with the external Auditors and with the Chief Financial Officer throughout the year to monitor progress and discuss any matters of note. Only members of the Committee have the right to attend meetings, 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 Chief Executive Officer and members of the finance function may also be invited to Audit and Risk 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. 44 Bigblu Broadband plc / Annual Report and Accounts 2022 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 external auditors by providing channels of communication between them and the 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 financial reports 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 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. 265204 Bigblu_pp025_pp053.indd 44 265204 Bigblu_pp025_pp053.indd 44 25/04/2023 10:55 25/04/2023 10:55 SIGNIFICANT ISSUES The issues considered by the Committee that are deemed to be significant to the Group are set out below. 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. Goodwill and intangibles carrying value A detailed revenue recognition policy is in place, and follows IFRS 15, and includes processes and procedures for recognition dependent upon the individual nature of the goods or services sold. The Group’s external auditors as part of the annual statutory audit have reviewed the revenue recognition policy and performed testing of revenue recognition and found revenue to be appropriately accounted for in accordance with IFRS15. At 30 November 2022, the Group had on its balance sheet goodwill of £5.6m (2021: £5.5m) and other intangibles of £1.8m (2021: £0.1m) that has primarily arisen as a consequence of past acquisitions. This increased during the year by £1.7m following the acquisition of customers and assets of Clear Networks (Pty) in Australia. Management performs impairment reviews annually, or more frequently if there is an indication of impairment, based on the Group’s operations. The cash flow forecasts used for each business unit are based on the latest Board approved budgets. Management prepares 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 long-term growth rate of 2% pa. Having considered the impairment reviews performed, the Committee is satisfied that the carrying value of goodwill and intangibles at 30 November 2022 is appropriate, therefore no impairment required. Valuation of carrying value of interest in UK Fixed Wireless Operations The accounting and disclosure for the transaction and the ongoing continuing businesses were reviewed and agreed with the Auditors previously including splitting disclosure for Continuing and Discontinued Operations. The transaction having occurred more than 12 months ago resulted in a review of the carrying value of the shares and loan notes received as consideration to ensure not materially misstated in the Group and single entity accounts. 265204 Bigblu_pp025_pp053.indd 45 265204 Bigblu_pp025_pp053.indd 45 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 45 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWCORPORATE GOVERNANCE STATEMENT (CONTINUED) 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, the Group operations team including finance personnel have taken a lead role in looking at controls in the various jurisdictions this is supplemented with External Advisors from time to time. 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 provide additional assurance to an established Audit and Risk Committee who 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 in the absence of a dedicated internal audit function will from time to time engage with External consultants to review aspects of the business as appropriate. Such findings will be discussed at the Audit and Risk Committee. 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 findings are regularly reported to the Audit and Risk Committee and the Board. 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 formally at Board level as well as at an Operational Level within the Continuing businesses. 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 balance sheet accounts. clearly defined organisational structure and authorisation lines including Cash Control 46 Bigblu Broadband plc / Annual Report and Accounts 2022 an operations team reviews key business processes, controls and their effectiveness, as well as identifying, assessing and managing significant control issues; and • the Audit and Risk Committee, which assesses the overall appropriateness 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 and has formal weekly one to one meetings and informal as required. This is especially important following any new acquisitions. Each legal entity has a Finance Director allocated who has responsibility and accountability for providing information which is in accordance with agreed policies and procedures as well as ensuring compliance with local regulations and tax compliance 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 and Risk 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 Company or relevant statutory entity office as well as in the cloud within our accounting systems. HOW WE MANAGE RISK To enhance effective governance and risk management oversight in the future, it is intended that the Group will, as appropriate, extend the internal audit program as approved by the Audit and Risk Committee with the deployment of central resources into the business units to review processes and controls. This programme will be authorised by the Board to provide an additional level of assurance to the Audit and Risk 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 and Risk Committee will review the status on risk exposures and risk management throughout the 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. 265204 Bigblu_pp025_pp053.indd 46 265204 Bigblu_pp025_pp053.indd 46 25/04/2023 10:55 25/04/2023 10:55 The Group will adopt a two-pronged approach to identifying risks: 1) 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 2) 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. The non-audit services, including tax compliance activities and internal audit are provided by an independent accounting firm. Haysmacintyre LLP continue to review the half year reporting. 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 auditor’s 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. WHISTLE-BLOWING AND ANTI-BRIBERY • considered their length of tenure. 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. • • 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. Philip Moses Chairman of the Audit and Risk Committee 20 March 2023 EXTERNAL AUDITOR regard The Audit and Risk Committee reviews and makes the appointment and to recommendations with 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 and Risk 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 limited non-audit services for the Group. Providing such services are permissible in line with the requirements of the FRC’s 2019 Ethical Standard. Any such non-audit services require pre-approval by the Audit and Risk Committee and are only permitted to the extent allowed by relevant laws and regulations. 265204 Bigblu_pp025_pp053.indd 47 265204 Bigblu_pp025_pp053.indd 47 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 47 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWAnnual Statement of the Remuneration Committee Chairman As Chairman of Bigblu Broadband Remuneration Committee, I am pleased to present the Board of Directors’ Remuneration Report for the year ended 30 November 2022, 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 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 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 FY23 and beyond. 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 which are also reviewed from time to time to ensure up to date. 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, performance bonuses and share options / Long Term Incentive Plans / Management Incentive Plans with set performance criteria. Remuneration for non- executive Directors consists of an annual fee with options granted in certain circumstances. There were additional fees awarded for serving on Board committees and non-executive Directors are not entitled to annual bonuses. 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 FY22 AND FUTURE YEARS Bigblu Broadband plc was listed on the Alternative Investments Market (AIM) in May 2015. During the period the Remuneration Committee reviewed the Group’s remuneration structure to ensure it aligned with the forward-looking strategy of the Group, is able to motivate and retain the executive team over the next key phase in the Group’s development post the two successful disposals, and to ensure it takes into account market and best practice for a listed Group. The remuneration structure for Executive Directors applied throughout the financial year is carried forward as appropriate into the new financial year commencing 1 December 2022, is set out in the Remuneration Policy below. Following the disposals during the last two years the Committee undertook to review the Long-Term Incentive Plan and Management Incentive Plans for senior executives to ensure their interests are aligned with that of the shareholders both in the short and medium term. No changes were proposed. 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 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. 48 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 48 265204 Bigblu_pp025_pp053.indd 48 25/04/2023 10:55 25/04/2023 10:55 REMUNERATION DECISIONS IN FY22 The activities of the Committee and key decisions in FY22 are set out below: • • • • Executive salaries were reviewed. Salaries were reduced by 10% in FY22. The basis and awards under the bonus schemes were updated and linked intrinsically to delivering Revenue, Adjusted EBITDA and Cash targets. Non-Executive Director salaries were reduced by 20% with effect from December 2021. No changes to the existing Management Incentive Plan which was implemented to maximise shareholder value post the disposal of the UK fixed wireless operation, in July 2021. The Group delivered strong results for the Continuing Operations with revenue at £31.2m (FY21: £27.1m) and adjusted EBITDA at £5.1m (FY21: £4.6m). Additional uplift bonuses can be earned when performance materially exceeds targets, however none were awarded during the period. LONG-TERM INCENTIVE PLAN Following consultation with External Advisors, the Company’s Nominated Advisor and a Panel of Shareholders in 2018 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 No award was made in the current year to Senior Executives instead the Committee, as outlined last year revisited all incentive plans post last year’s Disposal to ensure Senior Executives short, medium and long term Management Incentive Plans are intrinsically linked to growing shareholder value. During the course of the year there were no awards under the current LTIP to the Executive Directors (FY21: no awards). 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 telecommunications remuneration arrangements at UK 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 265204 Bigblu_pp025_pp053.indd 49 265204 Bigblu_pp025_pp053.indd 49 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 49 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWANNUAL STATEMENT OF THE REMUNERATION COMMITTEE CHAIRMAN (CONTINUED) FUTURE POLICY TABLE The key components of Executive Directors’ remuneration are as follows: Fixed Pay Type Base salary Purpose and link to strategy Operation Maximum opportunity Performance metrics retain To attract and talent of the right calibre and with the ability to contribute to strategy, by ensuring base salaries are competitive in the relevant talent market. reviewed Base salaries are usually annually, with reference to individual performance, performance, Group market salary competitiveness, decreases / increases across the Group and the position holder’s experience, competence and criticality the business. to Director / salary Executive decreases increases will normally be in line with those for the wider executive employee population. However, higher salary decreases / increases may be made where there is a change in role or responsibilities. performance Group market against is expectations considered when determining appropriate salary levels. Pension Provide post-retirement benefits for participants in a cost-efficient and equitable manner. Benefits To provide competitive benefits for each role. Any decreases / 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 the Executive Directors and from the Group, with a choice of funding vehicles through either the Group Plan or by contributions being made to a personal SIPP chosen and set up by the Executive Director. Benefits currently include the provision insurance, life of private medical, disability and permanent insurance and car allowance. health relocation package Reasonable including visitation allowance, legal fees allowance and health insurance. annual family Travel and subsistence allowances in line with the Group Expenses Policy and other benefits may be provided based on individual circumstances. None None The CEO and CFO receive a matching contribution of 4.5 percent of salary under the opt-in to the Group Workplace Pension Scheme. Subject to the applicable maximum contribution. The Committee does not anticipate pension benefits as being at a cost to the Group that would exceed 10 percent of base salary, notwithstanding to pension future changes legislation. There is no overall maximum value set out for benefits. They are set at a level that is comparable to market practice and appropriate for individual and Group circumstances. retains The Committee the discretion to amend benefits in exceptional circumstances or in circumstances where factors outside of the Group’s control changed have materially (e.g. insurance premiums). increases in 50 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 50 265204 Bigblu_pp025_pp053.indd 50 25/04/2023 10:55 25/04/2023 10:55 Variable Pay Type Bonus arrangements Purpose and link to strategy Aims focus to executives on achieving financial targets relevant to the business priorities for the financial period and where appropriate to outperform Non-Executive Directors Fees Operation Maximum opportunity Performance metrics base The bonus opportunity for Executive Directors will be up to 75 percent of base salary. to 75 percent of Up maximum will vest for target performance. Performance above base performance can result in additional bonuses being paid linked to improved performance - i.e. paying for themselves. The annual bonus will be based on achievement of financial targets (e.g., revenue growth, EBITDA improvements and cash metrics. The Committee has discretion to adjust the formulaic bonus outcome downwards within the limits of the plan, to ensure alignment of pay with the underlying performance of the business. Typically, 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. Additional bonuses can be earned at the sole discretion of the Remuneration Committee if exceptional circumstances arise. Type Non- Executive Directors’ Fees Purpose and link to strategy Operation Maximum opportunity Performance metrics for the reflect time To in commitment preparing and attending meetings, and duties the of responsibilities the the role and contribution expected from Non- the Executive Directors. fees for Non-Executive Monthly Directors are paid via Payroll and were reduced by 20% from the start of December 2021. 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 not in any annual bonus participate incentive schemes, nor do they receive any pension or benefits (other than nominal travel expenses). Non- Executive Directors will participate in the Company’s share option schemes. None Any decreases / increases 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, inflation. e.g. There is no prescribed individual maximum fee. Further details are set out below. 265204 Bigblu_pp025_pp053.indd 51 265204 Bigblu_pp025_pp053.indd 51 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 51 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWANNUAL STATEMENT OF THE REMUNERATION COMMITTEE CHAIRMAN (CONTINUED) Notes to the policy table • • • • Revenue growth, adjusted EBITDA and free cash flow metrics 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 post the Disposal where great attention is paid to the creation of shareholder value. Annual 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 structure and pay-out arrangement, although the mix between performance-based and time-based awards, and the maximum award, varies by seniority and role. 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 Executive 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 and Management Incentive Plans. 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 Paul Howard Chairman September 2015 Non-Executive Director September 2015 Christopher Mills Non-Executive Director May 2019 Philip Moses Non-Executive Director May 2020 May 2019 May 2019 May 2019 May 2021 3 years 3 years 3 years 3 years Executive Directors Each of the Executive Directors entered into a service agreement with the Company as follows. Executive Director Role Contract date Re-appointment date Notice period Andrew Walwyn Chief Executive Officer May 2015 Frank Waters Chief Financial Officer May 2015 May 2018 May 2021 12 months 12 months 52 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp025_pp053.indd 52 265204 Bigblu_pp025_pp053.indd 52 25/04/2023 10:55 25/04/2023 10:55 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, (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 and (iii) the cost that would have been incurred in providing the Executive Director LTIP/ MIP payments (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 representing their cost. The Payment in Lieu can be paid typically in one lump sum or alternatively monthly instalments over the notice 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 developments over the next year in order to assess ongoing relevance for the Company’s remuneration practices. The Committee welcomes 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 20 March 2023 265204 Bigblu_pp025_pp053.indd 53 265204 Bigblu_pp025_pp053.indd 53 25/04/2023 10:55 25/04/2023 10:55 Bigblu Broadband plc / Annual Report and Accounts 2022 53 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWIndependent Auditor’s Report TO THE MEMBERS OF BIGBLU BROADBAND PLC FOR THE YEAR ENDED 30 NOVEMBER 2022 OPINION We have audited the financial statements of Bigblu Broadband Plc (the ‘parent company’) and its subsidiaries (together, the ‘group’) for the year ended 30 November 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements 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 UK adopted international accounting standards. 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 2022 and of the group’s loss for the year then ended; have been properly prepared in accordance with UK adopted international accounting standards; 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 accordance 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. AN OVERVIEW OF THE SCOPE OF OUR AUDIT Our audit scope included all significant components which were performed to component materiality. Our audit work therefore covered 100% of group revenue, group profit and total group assets and liabilities. It was performed to the materiality levels set out below. The audits of Brdy AS and SkyMesh Pty Ltd (and its directly held subsidiaries) were performed by component auditors in accordance with our group audit instructions. BBB Ausco Limited and BBB Norco Limited are dormant entities and were audited in accordance with group materiality as set out below. We communicated with both the directors and the Audit Committee our planned audit work via our audit planning report and relevant discussion. We communicated audit progress with the Audit Committee through interim audit progress meetings. We have communicated any issues to the Audit Committee and the directors in our final audit findings report. 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. 54 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 54 265204 Bigblu_pp054_pp072.indd 54 25/04/2023 10:54 25/04/2023 10:54 Audit risk Impairment of goodwill How we responded to the risk The group recognised goodwill of £5,661,000 as at 30 November 2022 (2021: £5,523,000). There is a risk that goodwill is impaired and therefore materially overstated. For the year ended 30 November 2022, management performed an impairment review for each of the cash-generating units (CGUs) to which goodwill relates. The assessment was based on the expected future cash flows of each CGU using either a discounted cash flow model or fair value assessment. • • • Significant management judgement and estimation uncertainty is involved in this area, where the primary inputs are: • • • • Estimating future cash flows; Selecting an appropriate discount rate and variables with the cash flow model; and Selecting appropriate valuation methodologies and relevant market based valuation multiples. Impairment of parent company investment valuation The parent company holds material investments in two wholly owned trading subsidiaries, Skymesh Pty Ltd (“Skymesh”) and Brdy AS (“Brdy”). There is a risk that these investments are impaired and therefore materially overstated. For the year ended 30 November 2022, management considered whether indicators of impairment existed for each cash-generating unit (CGU). relevant, valuation assessments were performed by Where management to determine the recoverable value of these entities. Significant management judgement and estimation uncertainty is involved in this area, where the primary inputs are: Estimating future cash flows; Comparable market-based valuation metrics; • • • Selecting an appropriate discount rate and variables within discounted cash flow models; and • • Selection of appropriate valuation methodologies. Our audit work included, but was not restricted to, the following: We assessed management’s impairment review process and performed analysis which formed the basis of our challenge of management’s assumptions. We verified the arithmetical accuracy and integrity of the impairment model. We reviewed management’s forecasted cash flows that fed into discounted cash flow models and challenged assumptions around these 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 considered the basis from which fair value calculations were derived and considered whether they were reasonable. Our audit work included, but was not restricted to, the following: • • • • • We assessed management’s impairment review process and reviewed their analysis and performed our own analysis to challenge management’s assumptions. We verified the arithmetical accuracy and integrity of the impairment models. We reviewed management’s discounted cash flow valuation model and challenged assumptions around these 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 management’s fair value assessment methodologies and assessed and challenged the appropriateness of the assumptions used within them. We challenged management’s assumptions by making reference to contradictory evidence obtained, including alternative valuation techniques and metrics. 265204 Bigblu_pp054_pp072.indd 55 265204 Bigblu_pp054_pp072.indd 55 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 55 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWINDEPENDENT AUDITOR’S REPORT (CONTINUED) OUR APPLICATION OF MATERIALITY CONCLUSIONS RELATING TO GOING CONCERN We apply the concept of materiality both in planning and performing our audit, in evaluating the effect of misstatements and in forming an option. 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 need, to reduce to an appropriately low level the risk that the aggregate of uncorrected and undetected misstatement exceeds materiality for the financial statements as a whole. The materiality for the group financial statements as a whole was set at £415,000 (30 November 2021: £300,000). This was determined with reference to 1.3% of continuing group revenue (2021: 1.1% of continuing group revenue). On the basis of our risk assessment and review of the Group’s control environment, performance materiality was set at 75% of materiality, being £311,250 (30 November 2021 – 75% of materiality being £225,000). The reporting threshold to the Audit and Risk Committee was set as 5% of materiality, being £20,750 (30 November 2021 – £15,000). If, in our opinion, differences below this level warranted reporting on qualitative grounds, these were also reported. The materiality for the Parent Company financial statements was set at £400,000 (30 November 2021: £300,000). Our materiality was set at £400,000 so as to ensure component materiality did not exceed group materiality. On the basis of our risk assessment, review of the Parent Company’s control environment, and consideration of other relevant factors, its performance materiality was set at 75% of materiality, being £300,000 (30 November 2021 – 75% of materiality being £225,000). The reporting threshold to the Audit and Risk Committee in respect of the Parent Company was set as 5% of materiality, being £20,000 (30 November 2021 – £15,000). If, in our opinion, differences below this level warranted reporting on qualitative grounds, these were also reported. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the director’s assessment of the entity’s ability to continue to adopt the going concern basis of accounting included • • • Discussing management’s assessment of the group’s ability to remain as a going concern Reviewing and understanding the cash flow forecasts for the period to March 2024 which are the central element of management’s going concern assessment; Assessing and challenging the inputs in and judgements made in the preparation of the cash flow forecasts for the period to March 2024 • Verifying the terms, period covered and headroom provided by the Group’s debt facilities. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. OTHER INFORMATION The directors are responsible for the other information. The other information comprises the information included in the annual report, 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 responsibility is to read the other information and, in doing so, consider 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 conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 56 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 56 265204 Bigblu_pp054_pp072.indd 56 25/04/2023 10:54 25/04/2023 10:54 OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006 AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS 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; 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 error. In preparing the financial statements, the directors are responsible 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 accounting 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. 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD. Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income tax, payroll tax and sales tax. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries and management bias in accounting estimates. Audit procedures performed by the engagement team included: • Inspecting correspondence with tax authorities; • Discussions with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud; 265204 Bigblu_pp054_pp072.indd 57 265204 Bigblu_pp054_pp072.indd 57 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 57 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWINDEPENDENT AUDITOR’S REPORT (CONTINUED) • • • Evaluating management’s controls designed to prevent and detect irregularities; Identifying and testing journals, in particular journal entries which shared key risk characteristics; and Challenging assumptions and judgements made by management in their critical accounting estimates, particularly relating to impairment of intangible assets and investment valuation. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non- compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. 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 responsibility 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. Christopher Cork (Senior Statutory Auditor) For and on behalf of Haysmacintyre LLP Statutory Auditors 20 March 2023 10 Queen Street Place London EC4R 1AG 58 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 58 265204 Bigblu_pp054_pp072.indd 58 25/04/2023 10:54 25/04/2023 10:54 Consolidated Statement of Comprehensive Income FOR THE YEAR ENDED 30 NOVEMBER 2022 Registered Number 09223439 Continuing Operations Revenue from contracts with customers Cost of sales Gross profit Distribution expenses Administrative expenses Operating loss Finance costs Loss before tax Taxation (charge) / credit on operations Loss from continuing operations (Loss) / Profit from discontinued operations (Loss) / Profit for the year Other comprehensive expense Foreign currency translation difference Total comprehensive (loss) / income for the year Total comprehensive (loss) / income for the year is attributable to: Owners of Bigblu Broadband Plc Non-controlling interests Earnings per share from profit attributable to the ordinary equity holders of the company Total - Basic EPS Total - Diluted EPS Continuing operations – Basic EPS Continuing operations – Diluted EPS Discontinued operations – Basic EPS Discontinued operations – Diluted EPS Adjusted earnings per share from continuing operations attributable to the ordinary equity holders of the company Continuing operations - Adjusted Basic EPS Continuing operations - Adjusted Diluted EPS Notes 2 3 7 8 13 9 9 9 9 The notes on pages 66 to 95 form an integral part of these financial statements. 2022 £’000 31,220 (18,121) 13,099 (7,480) (7,278) (1,659) (124) (1,783) (1,031) (2,814) (120) (2,934) 206 (2,728) (2,728) - (5.0p) (5.0p) (4.8p) (4.8p) (0.2p) (0.2p) 4.4p 4.4p 2021 £’000 27,067 (14,899) 12,168 (8,734) (4,332) (898) (798) (1,696) 76 (1,620) 28,373 26,753 (355) 26,398 26,682 (284) 46.9p 45.6p (2.8p) (2.7p) 49.7p 48.3p 4.3p 4.2p 265204 Bigblu_pp054_pp072.indd 59 265204 Bigblu_pp054_pp072.indd 59 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 59 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW Consolidated Statement of Financial Position FOR THE YEAR ENDED 30 NOVEMBER 2022 Registered Number 09223439 Assets Non-current assets Property, plant and equipment Intangible assets Investments Deferred tax asset Total non-current assets Current assets Cash and cash equivalents Inventory Trade and other receivables Total current assets Total assets Current liabilities Trade and other payables Provisions for liabilities and charges Total current liabilities Non-current liabilities Other payables Deferred tax liability Total non-current liabilities Total liabilities Net assets Equity Share capital Share premium Share option reserve Capital redemption reserve Other equity reserve Foreign exchange translation reserve Reverse acquisition reserve Listing cost reserve Retained losses Capital and reserves attributable to owners of Bigblu Broadband Plc Total equity Notes 10 11 12 19 14 15 16 17 17 18 19 20 20 21 21 21 21 21 21 2022 £’000 2,881 7,433 5,830 303 16,447 4,195 1,142 2,335 7,672 24,119 (8,839) (685) (9,524) (559) (646) (1,205) (10,729) 13,390 8,763 8,589 309 26,120 - (2,546) (3,317) (219) (24,309) 13,390 13,390 2021 £’000 4,090 5,576 5,672 709 16,047 5,201 699 4,917 10,817 26,864 (9,420) (685) (10,105) (835) (13) (848) (10,953) 15,911 8,749 8,589 - 26,120 - (2,430) (3,317) (219) (21,581) 15,911 15,911 Approved by the Board on 20 March 2023 and signed on its behalf by: Andrew Walwyn Chief Executive Officer The notes on pages 66 to 95 form an integral part of these financial statements. 60 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 60 265204 Bigblu_pp054_pp072.indd 60 25/04/2023 10:54 25/04/2023 10:54 Company Statement of Financial Position FOR THE YEAR ENDED 30 NOVEMBER 2022 Registered Number 09223439 Assets Non-current assets Property, plant and equipment Intangible assets Investments Total non-current assets Current assets Cash and cash equivalents Trade and other receivables Total current assets Liabilities Current liabilities Trade and other payables Provisions for liabilities and charges Total current liabilities Non-current liabilities Other payables Net assets Equity Share capital Share premium Share option reserve Capital redemption reserve Other equity reserve Listing cost reserve Merger relief reserve Retained (losses) / profits Total equity Notes 10 11 12 14 16 17 17 20 20 21 21 21 21 21 2022 £’000 113 35 32,913 33,061 768 954 1,722 (1,441) (685) (2,126) (13) 32,644 8,763 8,589 309 26,120 - (219) - (10,918) 32,644 2021 £’000 4 53 44,201 44,258 1,550 3,924 5,474 (3,127) (685) (3,812) - 45,920 8,749 8,589 - 26,120 - (219) - 2,681 45,920 In accordance with section 408 of the Companies Act 2006 the parent company has not presented its own Income Statement, which resulted in a loss after tax of £13.6m (2021: profit £18.8m). Approved by the Board on 20 March 2023 and signed on its behalf by: Andrew Walwyn Chief Executive Officer The notes on pages 66 to 95 form an integral part of these financial statements. 265204 Bigblu_pp054_pp072.indd 61 265204 Bigblu_pp054_pp072.indd 61 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 61 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWConsolidated Statement of Cash Flows FOR THE YEAR ENDED 30 NOVEMBER 2022 Notes 7 13 11 2 10 10 8 24 10 11 11 13 Loss after tax from Continuing operations (Loss) / Profit after tax from Discontinued operations (Loss) / Profit for the year including discontinued operations Adjustments for: Interest charge Gain on disposal of subsidiaries Amortisation of intangible assets Release of grant payables Depreciation of property, plant and equipment - owned assets Depreciation of property, plant and equipment - ROU assets Tax charge / (credit) Share based payments Foreign exchange variance and other non-cash items (Increase) / Decrease in inventories Increase in trade and other receivables Decrease in trade and other payables Gain on disposals of fixed assets Cash generated from / (used in) operations Interest paid Tax paid Net cash outflow from operating activities Investing activities Purchase of property, plant and equipment Purchase of business Purchase of other intangibles Cash transferred out of group in disposed of subsidiaries Proceeds from sale of property, plant and equipment Proceeds from sale of subsidiary Net cash generated from investing activities Financing activities Proceeds from issue of ordinary share capital Return of capital to shareholders Proceeds from bank revolving credit facility Loans (paid) Investment by non-controlling interest Principal elements of lease payments Net cash outflow generated from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 2022 £’000 (2,814) (120) (2,934) 124 - 702 - 2,281 761 1,031 309 (102) (440) (212) (1,353) (16) 151 (124) (539) (512) (1,191) (1,211) (241) - - 2,843 200 14 - - - - (708) (694) (1,006) 5,201 4,195 2021 £’000 (1,620) 28,373 26,753 852 (28,942) 21 (285) 1,834 836 (76) 163 (332) 39 (2,418) 829 (8) (734) (411) (495) (1,640) (6,009) - (53) (2,533) 92 31,094 22,591 435 (26,120) 2,000 (8,400) 2,000 (971) (31,056) (10,105) 15,306 5,201 Note that the presentation of the cashflow takes into consideration the combined Continuing and Discontinued movements in cash. See also the reconciliation of the movement in net debt on page 19 of the Strategic Report. The notes on pages 66 to 95 form an integral part of these financial statements. 62 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 62 265204 Bigblu_pp054_pp072.indd 62 25/04/2023 10:54 25/04/2023 10:54 Company Statement of Cash Flows FOR THE YEAR ENDED 30 NOVEMBER 2022 (Loss) / Profit for the year Adjustments for: Interest charge Gain on disposal of investments Impairment charges Amortisation of intangible assets Depreciation Share based payments Decrease / (Increase) in trade and other receivables Decrease in trade and other payables Cash (used in) / generated from operations Interest paid Net cash outflow from operating activities Investing activities Proceeds from sale of subsidiary Purchase of property, plant and equipment Purchase of intangibles Net cash (used) / generated in investing activities Financing activities Proceeds from issue of ordinary share capital Return of capital to shareholders Repayment of loans Principal elements of lease payments Net cash outflow from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The notes on pages 66 to 95 form an integral part of these financial statements. 2022 £’000 (13,599) 121 - 11,446 18 28 309 127 (1,715) (3,265) (279) (3,544) 2,843 (81) - 2,762 14 - - (14) - (782) 1,550 768 2021 £’000 18,818 710 (24,301) 1,471 - 1 163 (2,749) (27) (5,914) (187) (6,101) 31,094 (5) (53) 31,036 435 (26,120) (8,400) - (34,085) (9,150) 10,700 1,550 265204 Bigblu_pp054_pp072.indd 63 265204 Bigblu_pp054_pp072.indd 63 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 63 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWConsolidated Statement of Changes in Equity FOR THE YEAR ENDED 30 NOVEMBER 2022 l a t o T y t i u q e 0 0 0 ’ £ 0 0 0 ’ £ t s e r e t n I - n o N g n i l l o r t n o c l a t o T 0 0 0 ’ £ f e i l e r r e g r e M 0 0 0 ’ £ e v r e s e r t s o c g n i t s L i 0 0 0 ’ £ e v r e s e r 1 6 7 , 8 1 1 7 5 , 4 0 9 1 , 4 1 2 7 9 , 5 ) 9 1 2 ( 0 0 0 £ ’ e v r e s e r ) 7 1 3 3 ( , 0 0 0 £ ’ e v r e s e r ) 9 6 5 2 ( , e s r e v e R i n g e r o F n o i t i s u q c a i e g n a h c x e r e h t O y t i u q e 0 0 0 £ ’ e v r e s e r 0 0 0 £ ’ s e s s o l i d e n a t e R e r a h S n o i t p o 0 0 0 £ ’ e v r e s e r 4 9 2 1 , ) 3 0 4 2 3 ( , 4 1 6 2 , 3 6 1 ) 6 1 2 ( ) 0 2 1 , 6 2 ( 1 1 9 , 5 1 ) 4 3 9 , 2 ( 4 1 9 0 3 0 9 0 9 3 , 3 1 - - - - - - - - - ) 5 6 8 , 5 ( ) 5 6 8 , 5 ( - 5 3 4 - 0 0 0 , 2 8 7 5 , 1 5 3 4 2 2 4 3 5 7 , 6 2 ) 4 8 2 ( 7 3 0 , 7 2 - - - - - - 3 6 1 ) 6 1 2 ( 4 1 9 0 3 0 9 1 1 9 , 5 1 4 3 9 , 2 0 9 3 , 3 1 - - - - - - ) 0 2 1 , 6 2 ( ) 2 7 9 , 5 ( - - - - - - - - - - - - - - - - - - - - 9 3 1 - - - - - - - 2 2 4 - - 7 3 0 7 2 , - - - - 3 6 1 ) 5 5 3 ( - - - - - - - - 0 0 0 £ ’ e v r e s e r l a t i p a C n o i t p m e d e r e r a h S e r a h S - 4 2 3 0 0 0 ’ £ 0 8 1 , 4 3 0 0 0 ’ £ 8 3 6 , 8 - 1 1 1 i m u m e r p l a t i p a c - - - - - - - - - e t o N 2 1 3 1 4 2 r a e y e h t r o f ) s s o L ( / t fi o r P 0 2 0 2 r e b m e c e D 1 t A s e r a h s f o e u s s I s e r a h s f o n o i t i s u q c A i - n o n i y b y r a d s b u s i n i t s e r e t n i g n i l l o r t n o c i i y r a d s b u s f o l a s o p s D i d e s a b - e r a h s d e l t t e s y t i u q E i e v s n e h e r p m o c r e h t O e s n e p x e l a t i p a c f o n r u t e R s t n e m y a p ) 4 9 2 1 , ( ) 2 8 2 6 1 , ( ) 7 7 7 2 , ( 0 2 1 6 2 , ) 5 1 9 , 5 2 ( - - - - - - - - - - - ) 6 1 1 ( ) 9 1 2 ( ) 7 1 3 3 ( , ) 0 3 4 2 ( , ) 9 1 2 ( ) 7 1 3 3 ( , ) 6 4 5 2 ( , - - - - - - - - ) 4 3 9 2 , ( ) 1 8 5 1 2 ( , - - - 9 0 3 6 0 2 - 0 2 1 6 2 , 9 8 5 , 8 9 4 7 , 8 1 2 0 2 r e b m e v o N 0 3 t A - - - - - - - - - 4 1 - - 0 2 4 2 d e s a b - e r a h s d e l t t e s y t i u q E i e v s n e h e r p m o c r e h t O e s n e p x e s t n e m y a p s e r a h s f o e u s s I r a e y e h t r o f ) s s o L ( / t fi o r P ) 9 0 3 4 2 ( , 9 0 3 0 2 1 6 2 , 9 8 5 , 8 3 6 7 , 8 2 2 0 2 r e b m e v o N 0 3 t A . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 5 9 o t 6 6 s e g a p n o s e t o n e h T 64 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 64 265204 Bigblu_pp054_pp072.indd 64 25/04/2023 10:54 25/04/2023 10:54 Company Statement of Changes in Equity FOR THE YEAR ENDED 30 NOVEMBER 2022 l a t o T y t i u q e 0 0 0 £ ’ / s t fi o r p ) s e s s o l ( 0 0 0 ’ £ i d e n a t e R 5 3 4 3 6 1 - - 4 2 6 2 5 , 5 4 1 8 1 8 8 1 , 8 1 8 , 8 1 - - - - - - f e i l e r r e g r e M 0 0 0 ’ £ e v r e s e r 2 7 9 , 5 r e h t O y t i u q e 0 0 0 £ ’ e v r e s e r 4 9 2 1 , ) 0 2 1 6 2 , ( ) 2 8 2 , 6 1 ( ) 2 7 9 , 5 ( ) 4 9 2 1 , ( 4 1 9 0 3 - - 0 2 9 , 5 4 1 8 6 2 , ) 9 9 5 3 1 , ( ) 9 9 5 , 3 1 ( 4 4 6 2 3 , ) 8 1 9 , 0 1 ( - - - - - - - - - - t s o c g n i t s L i 0 0 0 ’ £ e v r e s e r ) 9 1 2 ( - - - - - - - ) 9 1 2 ( ) 9 1 2 ( - - e r a h S n o i t p o 0 0 0 ’ £ e v r e s e r 4 1 6 , 2 3 6 1 ) 7 7 7 , 2 ( - - - 9 0 3 9 0 3 l a t i p a C n o i t p m e d e r e r a h S - - - - 0 0 0 ’ £ e v r e s e r - - 4 2 3 0 0 0 ’ £ i m u m e r p 0 8 1 , 4 3 0 2 1 , 6 2 0 2 1 , 6 2 9 8 5 , 8 ) 5 1 9 , 5 2 ( - - - - - - e r a h S l a t i p a c 0 0 0 ’ £ 8 3 6 , 8 - 1 1 1 - - - 4 1 - 9 4 7 , 8 0 2 1 , 6 2 9 8 5 , 8 3 6 7 , 8 e t o N 0 2 4 2 0 2 4 2 d e s a b - e r a h s d e l t t e s - y t i u q E 0 2 0 2 r e b m e v o N 0 3 t A r a e y e h t r o f t fi o r P s e r a h s f o e u s s I l a t i p a c f o n r u t e R s t n e m y a p d e s a b - e r a h s d e l t t e s - y t i u q E 2 2 0 2 r e b m e v o N 0 3 t A s t n e m y a p 1 2 0 2 r e b m e v o N 0 3 t A r a e y e h t r o f s s o L s e r a h s f o e u s s I . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 5 9 o t 6 6 s e g a p n o s e t o n e h T 265204 Bigblu_pp054_pp072.indd 65 265204 Bigblu_pp054_pp072.indd 65 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 65 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW Notes to the Financial Statements FOR THE YEAR ENDED 30 NOVEMBER 2022 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 6th Floor, 60  Gracechurch Street, London, EC3V 0HR. 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 2022 were authorised for issue by the Board on 20 March 2023 and the balance sheets signed on the Board’s behalf by Andrew Walwyn. The nature of the Group’s operations and its principal activities is 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 and International Accounting Standards as issued by the International Accounting Standards Board Interpretations (collectively IFRSs). The financial statements have been prepared on the historical cost basis. (IASB) and The consolidated financial statements are for the 12 months to 30 November 2022. 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. At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Accounting Standards that have been issued but are not yet effective, and in some cases have not yet been adopted by the Group: • • Amendments to IAS 1: Classification of Liabilities as Current or Non-current Amendments to IAS 1 and IFRS Practice Statement 2: Disclosure of Accounting Policies • Amendments to IAS 8: Definition of Accounting Estimates • Amendments to IAS 12: Deferred Tax related to Assets and Liabilities arising from a Single Transaction 66 Bigblu Broadband plc / Annual Report and Accounts 2022 The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods. 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 4 to 25. The financial position of the Group, its cash flows and liquidity position are described in the Finance Review on pages 11 to 21. In addition note 25 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. During the year the Group generated an adjusted EBITDA from continuing operations before a number of non-cash and start-up costs expenses as shown on page 15, of £5.1m (2021: £4.6m), and with cash inflow from operations before interest, tax and capital expenditure, of £5.8m (2021: inflow of £5.2m). Net cash at 30 November 2022 was £4.2m (FY21: £5.2m) after the payment of £1.2m following the acquisition of the customers and assets of Clear Networks (Pty) in January 2022. The Group also has a undrawn RCF with Santander that was increased in the year from £5m to £10m. 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, 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. 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. 265204 Bigblu_pp054_pp072.indd 66 265204 Bigblu_pp054_pp072.indd 66 25/04/2023 10:54 25/04/2023 10:54 REVENUE that reflects is recognised at an amount Revenue the consideration 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 providing the following telecommunications services: airtime usage, rental of equipment and other service charges, connection fees and equipment sales. Customers can acquire either single or multiple products and services, with the principal service being the provision of airtime. Airtime usage represents the monthly or other periodic subscription charge for use of the Satellite or Fixed Wireless broadband solution that we provide. These are incremental amounts selected by the customer independent of their decision whether to purchase or rent equipment. The performance obligation is discharged by ensuring that the service contracted for is available throughout the invoiced period and revenue is recognised on an even basis over the period during which the airtime is provided. We describe this as recurring revenue, by which we mean that it is contracted for a period of time and can be renewed. Service charges include rental of equipment where the customer has not purchased it outright. The performance obligation is fulfilled by ongoing availability of the equipment in a working condition and is accounted for over the contracted period during which the customer has the right of use. Usually, rental charges are made monthly in advance. Where the period charged for includes a number of days after the end of the accounting period, we treat the revenue for those days as being deferred, calculated on a prorated daily basis. Other service charges also include sundry fees, such as charges for non-return of rental equipment, all of which are accounted for at a point in time when the relevant performance obligation is satisfied by an identified action (see below in this section for further detail). these despatches as revenue at the point in time when delivery to the customer is performed and the performance obligation is complete. However, note that in the majority of the group’s contracts equipment is supplied to customers in exchange for a periodic rental, which is subject to a different performance obligation as described above. FOREIGN CURRENCY For the purpose of the consolidated financial statements, the results and financial position of each Group company are expressed 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 currency (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 foreign currencies are retranslated at the rates prevailing on the balance 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. Connection fees refer to the installation of Satellite or Fixed Wireless receiving equipment charged to our customer, plus revenue received from our third-party satellite providers in the form of an activation rebate for every new connection. Distinct performance obligations apply to each of these charges, and we account for the revenue at a point in time when the relevant action to satisfy these obligations is performed. The primary driver of this revenue is the activation of the services on our suppliers’ networks. PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment are stated at cost accumulated depreciation and impairment losses, if any. less 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. Equipment sales primarily refer to the purchase of all hardware purchased by the customer and typically includes such items as satellite dishes, modems, transmit and receive integrated assemblies (“TRIA’s”), poles and routers or other similar equipment. The performance obligation is to deliver the product or products to the customer as distinct from activating a customer to the broadband service. Such products are typically despatched same day or within 24 hours and so we account for Land Building improvements Fixtures, fittings & infrastructure IT hardware and software Motor vehicles Rental Stock 0% on cost 20% on cost 10% - 25% on cost 25% on cost 25% on cost 25% on cost Bigblu Broadband plc / Annual Report and Accounts 2022 67 265204 Bigblu_pp054_pp072.indd 67 265204 Bigblu_pp054_pp072.indd 67 25/04/2023 10:54 25/04/2023 10:54 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The depreciation method, useful lives and residual values are reviewed, and adjusted if appropriate, at the end of each reporting year to ensure that the amounts, method and years of depreciation are consistent with previous estimates and the expected pattern 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. 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 impairment 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 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 • Intellectual Property – 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. In relation to our Quickline investment the loan notes are debt and held at amortised cost whilst shares are investment in equity and held at fair value with movements recognised in other comprehensive income under IFRS 9. 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. 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 TRADE AND OTHER PAYABLES Trade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payables are classified as current liabilities 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. 68 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 68 265204 Bigblu_pp054_pp072.indd 68 25/04/2023 10:54 25/04/2023 10:54 IMPAIRMENT OF NON-FINANCIAL ASSETS FINANCIAL INSTRUMENTS The Group assesses annually whether there is any indication that any of its assets have been impaired. If such an indication exists, the asset’s recoverable amount is estimated and compared to its carrying value. Where it is impossible to estimate the recoverable 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. SHARE BASED PAYMENTS The Group operates share option schemes in which certain employees of the Group can be awarded share options in return for services provided to the Group. The fair value of the employee services received in exchange for the grant of share options is recognised as an expense over the vesting period. 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. LEASES As a lessee Where share options and warrants are issued to providers of other services or financing, the fair value ascribed to such services or financing is attributed to the options and recognised over the provision of the relevant obligation. leases various offices, warehouses, The Group items of equipment and vehicles. Bigblu Norge also lease space for locating equipment for their fixed wireless network infrastructures and fibre comprising part of their backbone networks. PROVISIONS Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Where it is considered possible, rather than probable, that the Group will be required to settle an obligation arising from a past event, or the amount required to make settlement cannot be reliably estimated, a contingent liability is disclosed but no associated amount is recognised in the Balance sheet. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the Balance Sheet date, taking into account the risks and uncertainties surrounding the obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). As indicated above the Group 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 22). 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 current 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. 265204 Bigblu_pp054_pp072.indd 69 265204 Bigblu_pp054_pp072.indd 69 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 69 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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 Fixed payments), less any lease incentives. (including in-substance fixed 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 residual value guarantees the exercise price of a purchase option if the Group is reasonably certain 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 • 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. 70 Bigblu Broadband plc / Annual Report and Accounts 2022 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 2022 the amount accounted for as low value assets was £25k (2021: £57k) primarily as a result of excluding leases for space to locate repeater equipment owned by Brdy AS with an individual annual cost of less than £500. 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 22) 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. 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 recognised as other comprehensive income or to an item recognised 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 recognised 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. 265204 Bigblu_pp054_pp072.indd 70 265204 Bigblu_pp054_pp072.indd 70 25/04/2023 10:54 25/04/2023 10:54 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 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 DISCONTINUED OPERATIONS Discontinued operations are a component of the Group that has been disposed of and that represents a separate major line of business or geographical area of operations. The gain on disposal reported in the current financial year takes into consideration the proceeds less the carrying value of the net assets position at the date of disposal for discontinued operations, and all associated costs considered incremental and directly attributable to the disposal transaction. The results of discontinued operations are presented separately in the Consolidated Statement of Comprehensive Income. Cash flows associated with discontinued operations are presented within the Consolidated Statement of Cash flows, with analysis of the elements related to discontinued operations presented separately in note 13. 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 The Group operates a defined contribution scheme, the pension cost charge represents the contributions payable. (a) Property, plant and equipment 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. 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. (b) Share based compensation The Group issues equity settled share based payments to certain Directors and employees, which have included grants of shares 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. 265204 Bigblu_pp054_pp072.indd 71 265204 Bigblu_pp054_pp072.indd 71 25/04/2023 10:54 25/04/2023 10:54 Bigblu Broadband plc / Annual Report and Accounts 2022 71 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) (c) Forecasting (g) Recoverable value of investments in subsidiaries Judgement is required in assessing whether there are any indicators that the carrying amounts of investments may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate and long-term growth rate in order to calculate the present value of those cash flows. (h) Recoverable value of deferred tax assets Judgement is required to assess how probable it is that taxable profits will be available against which historic tax losses can be utilised. (i) Fair value measurement A number of assets and liabilities included in the Group’s financial statements require measurement at, and/or disclosure of, fair value. The fair value measurement of the Group’s financial and non-financial assets and liabilities utilises market observation inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the ‘fair value hierarchy’): • • • Level 1: Quoted prices in active markets for identical items (unadjusted) Level 2: Observable direct or indirect inputs other than Level 1 inputs Level 3: Unobservable inputs (i.e. not derived from market data The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. 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 tax assets and for the Group’s going concern assessment. (d) 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: • 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. • Intellectual property based on estimated fair value • Capitalisation of internal staff for development of systems and major projects is calculated on a time basis and charged to intangible assets and amortised over the agreed policy in place for such assets. (e) 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. (f) Contingent Liabilities/Provisions Judgement is required in ascertaining the carrying value of any provisions or contingent liabilities where there is support is available, but uncertainty as to the amount that will ultimately be settled. Any provisions are estimated based on facts relevant at the reporting date and reported in the relevant sections of the notes to the accounts. Such estimates are considered inherently uncertain and outcomes may ultimately differ materially from the provision made. Where no provision has been made but an outflow of economic benefit remains possible, a contingent liability is disclosed. The distinction between probable and possible is a matter of the Directors’ judgement. 72 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp054_pp072.indd 72 265204 Bigblu_pp054_pp072.indd 72 25/04/2023 10:54 25/04/2023 10:54 2. CONTINUING OPERATIONS REVENUE Recurring revenue - airtime Recurring revenue - other Other non recurring revenue 2022 £’000 29,528 101 1,591 31,220 2021 £’000 24,972 624 1,471 27,067 SEGMENTAL SPLIT OF CONTINUING OPERATIONS REVENUE: The Group’s operations are located in Australia, Norway and the UK 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: United Kingdom Europe Rest of World External revenue by location of customer Non-current assets by location of assets 2022 £’000 681 4,027 26,512 31,220 2021 £’000 747 4,544 21,776 27,067 2022 £’000 8,691 2,684 5,300 2021 £’000 9,342 2,975 3,441 16,675 15,758 3. PROFIT FROM GROUP OPERATIONS Continuing operations Discontinued operations The profit has been arrived at after charging/(crediting) the following: Depreciation of property plant & equipment - owned assets (Note 10) Depreciation of property plant & equipment - ROU assets (Note 10) Amortisation of intangible assets (Note 11) Gain on sale of discontinued operation (note 13) Share based payments (Note 24) Wages & salaries and social security costs (Note 5) Profit on disposal of Fixed Assets Impairment of Fixed Assets Pension costs (Note 5) 2022 £’000 1,315 761 702 - 309 5,631 - 966 269 2021 £’000 804 586 - - 163 6,515 - - 236 2022 £’000 - - - - - - - - - 2021 £’000 1,027 253 21 (25,925) - 2,649 (8) - 20 265204 Bigblu_pp073_end.indd 73 265204 Bigblu_pp073_end.indd 73 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 73 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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: Other services 2022 £’000 2021 £’000 77 7 84 74 7 81 5. STAFF COSTS The aggregate remuneration of all employees (including directors), for both the continuing and discontinued operations comprised: Wages and salaries Social security costs Pension costs Continuing operations Discontinued operations 2022 £’000 5,158 473 269 5,900 2021 £’000 5,930 585 236 6,751 2022 £’000 - - - - 2021 £’000 2,371 278 20 2,669 The average monthly number of people (Including the Executive Directors) employed during the year by category of employment were as follows, including the staff employed by the discontinued operations: Continuing operations Discontinued operations 2022 2021 2022 Operating staff Sales Staff Management and administrative staff 53 13 24 90 56 14 26 96 6. DIRECTORS’ REMUNERATION Salaries Fees Benefits Pension costs - - - - 2022 £’000 975 - 11 20 2021 37 2 8 47 2021 £’000 1,840 136 5 20 The highest paid director’s aggregate remuneration was £421k (2021: £853k) including pension contributions of £9k (2021: £11k). Details of directors’ remuneration, including pension contributions, are set out in the Directors’ Report on page 29. The salaries include bonuses of £50k (FY21: £175k) charged to discontinued operations. 1,006 2,001 74 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 74 265204 Bigblu_pp073_end.indd 74 25/04/2023 10:53 25/04/2023 10:53 7. FINANCE COSTS Bank interest payable Other interest Lease interest expense Total interest payable Other finance costs Total finance costs Finance costs include the following amounts charged to the discontinued operations: Bank loan interest payable Lease interest expense Total interest payable Split as follows: Continuing operations Discontinued operations Total finance costs 2022 £’000 38 6 78 122 2 124 - - - 124 - 124 2021 £’000 747 - 105 852 - 852 38 16 54 798 54 852 Interest payable on the Revolving Credit Facility is 3.40% (FY21: 2.95%) + SONIA (Sterling Overnight Index Average) (FY21: LIBOR). Interest paid in the year amounts to £0.04m (FY21: £0.7m). 8. TAXATION A) TAX (CREDIT) / CHARGE FOR THE YEAR UK Corporation tax Overseas corporation tax Deferred tax charge / (credit) Current tax charge / (credit) 2022 £’000 - 554 477 1,031 2021 £’000 - 123 (199) (76) 265204 Bigblu_pp073_end.indd 75 265204 Bigblu_pp073_end.indd 75 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 75 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) B) TAX RECONCILIATION The taxation credit on the loss for the year differs from the amount computed by applying the corporation tax rate to the loss before tax for the following reasons: Loss on ordinary activities before tax Tax at UK corporation tax rate of 19% (2021: 19%) Tax effect of expenses that are not deductible in determining taxable profit Adjustment for prior periods Deferred tax not recognised1 Foreign tax rate differences Changes in deferred tax rate Tax (credit) / charge at effective tax rate for the year 2022 £’000 (1,783) (339) 194 - 1,185 (9) - 1,031 1 Note that deferred tax assets on losses have only been recognised to the extent they are considered recoverable in the foreseeable future. C) DEFERRED TAX The deferred tax included in the balance sheet as per note 19, is as follows: Deferred tax asset Deferred tax liability 2022 £’000 303 (646) (343) 2021 £’000 (1,696) (322) 60 (70) 1,170 15 (929) (76) 2021 £’000 709 (13) 696 76 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 76 265204 Bigblu_pp073_end.indd 76 25/04/2023 10:53 25/04/2023 10:53 9. PROFIT / (LOSS) PER SHARE Basic earnings per share is calculated by dividing the profit / (loss) attributable to shareholders by the weighted average number of ordinary shares in issue during the year. Basic and diluted EPS Basic EPS – Loss attributable to shareholders1 Loss attributable to shareholders Add back exceptional costs Add back share based payments Add back loss on discontinued operations Adjusted Profit attributable to shareholders from continuing operations Add back impairment of Fixed Assets Add back amortisation Add back deferred taxation adjustment in Norway Adjusted EPS – Adjusted Profit attributable to shareholders from continuing operations2 Basic Diluted EPS – Loss attributable to shareholders Adjusted Diluted EPS – Adjusted Profit attributable to shareholders from continuing operations as above2 Basic and diluted EPS Profit for the financial year1 Add: adjustment for non-controlling interest share of losses Basic EPS – Profit attributable to shareholders Profit attributable to shareholders Add back exceptional costs Add back share based payments Less profit on discontinued operations 30 November 2022 Weighted Average Number of Shares Profit/(Loss) £’000 Per Share Amount Pence 58,376,211 (5.0) (2,934) (2,934) 2,707 309 120 202 966 702 714 2,584 58,376,211 (2,934) 58,828,959 2,584 58,828,959 4.4 (5.0) 4.4 30 November 2021 Weighted Average Number of Shares Per Share Amount Pence 57,697,017 46.9 Profit/(Loss) £’000 26,753 (284) 27,037 26,753 3,922 163 (28,373) Adjusted EPS – Adjusted Profit attributable to shareholders from continuing operations2 Basic Diluted EPS – Profit attributable to shareholders Adjusted Diluted EPS – Adjusted Profit attributable to shareholders from continuing operations as above2 2,465 57,697,017 27,037 2,465 59,251,343 59,251,343 4.3 45.6 4.2 1 2 The loss attributable to shareholders of £2.9m (2021: £27.0m profit) is the loss for the financial year of £2.9m (2021: £26.8m profit) after adjusting for the add back of the loss attributable to non-controlling interests of £Nil (2021: £0.3m loss). Non-GAAP measure, the profit attributable to shareholders from continuing operations is £2.6m (2021: £2.5m profit) after adjusting for the loss related to the sale of the discontinued operations in FY21 and adding back exceptional costs, share based payments, impairment of Fixed Assets, amortisation and the deferred tax adjustment in Norway. Bigblu Broadband plc / Annual Report and Accounts 2022 77 265204 Bigblu_pp073_end.indd 77 265204 Bigblu_pp073_end.indd 77 25/04/2023 10:53 25/04/2023 10:53 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 10. PROPERTY, PLANT & EQUIPMENT - GROUP Land & Buildings £’000 Fixtures, Fittings & Infrastructure £’000 IT Hardware & Software £’000 Motor Vehicles £’000 Rental Stock £’000 Cost At 1 December 2020 Exchange Differences Additions Disposals At 30 November 2021 Exchange Differences Additions Disposals Reclassification as intangible assets At 30 November 2022 Accumulated Depreciation At 1 December 2020 Exchange Differences Depreciation charge Disposals At 30 November 2021 Exchange Differences Depreciation charge Asset impairment Disposals Reclassification as intangible amortisation At 30 November 2022 Net book value At 30 November 2022 At 30 November 2021 1,726 (38) 17 (566) 1,139 61 275 (614) - 861 818 (22) 201 (252) 745 43 224 - (545) - 467 394 394 25,487 (600) 5,403 (17,040) 13,250 321 1,157 (436) - 1,007 (34) 582 (474) 1,081 36 490 (59) (368) 14,292 1,180 16,331 (526) 2,211 (7,610) 10,406 270 1,527 966 (433) - 12,736 1,556 2,844 649 (14) 205 (387) 453 13 295 - (58) (71) 632 548 628 364 - 24 (376) 12 - 34 - - 46 93 - 53 (141) 5 - 21 - - - 26 20 7 Total £’000 28,767 (678) 6,066 (18,456) 15,699 421 2,108 (1,109) (368) 183 (6) 40 - 217 3 152 - - 372 16,751 - - - - - - 9 - - - 9 363 217 17,891 (562) 2,670 (8,390) 11,609 326 2,076 966 (1,036) (71) 13,870 2,881 4,090 78 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 78 265204 Bigblu_pp073_end.indd 78 25/04/2023 10:53 25/04/2023 10:53 RIGHT OF USE ASSETS Group Property, Plant & Equipment includes the following values for Right of Use assets Land & Buildings £’000 Fixtures, Fittings & Infrastructure £’000 IT Hardware & Software £’000 Motor Vehicles £’000 Cost At 1 December 2020 Exchange Differences Additions Disposals At 30 November 2021 Exchange Differences Additions Disposals At 30 November 2022 Accumulated Depreciation At 1 December 2020 Exchange Differences Depreciation charge Disposals At 30 November 2021 Exchange Differences Depreciation charge Disposals At 30 November 2022 Net book value At 30 November 2022 At 30 November 2021 1,383 (23) 6 (283) 1,083 58 267 (614) 794 7,072 (103) 28 (3,083) 3,914 58 355 (435) 3,892 633 4,814 (21) 195 (93) 714 42 212 (546) 422 372 369 (81) 582 (2,270) 3,045 44 487 (432) 3,144 748 869 45 (1) 23 (10) 57 - 149 (58) 148 26 (1) 34 (17) 42 - 62 (58) 46 102 15 Total £’000 8,719 (127) 57 (3,595) 5,054 116 771 (1,107) 4,834 219 - - (219) - - - - - 134 5,607 - 25 (159) - - - - - - - (103) 836 (2,539) 3,801 86 761 (1,036) 3,612 1,222 1,253 265204 Bigblu_pp073_end.indd 79 265204 Bigblu_pp073_end.indd 79 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 79 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 11. INTANGIBLE ASSETS - GROUP Goodwill £’000 Customer Contracts £’000 Software £’000 Intellectual Property £’000 Cost At 1 December 2020 Additions Disposals of assets of discontinued operations Exchange Difference At 30 November 2021 Additions Acquired through business combination Reclassification of PPE Exchange Difference At 30 November 2022 Accumulated Amortisation At 1 December 2020 Amortisation Accumulated amortisation of assets of discontinued operations Exchange Differences At 30 November 2021 Amortisation Reclassification of PPE Exchange Differences At 30 November 2022 Net book value At 30 November 2022 At 30 November 2021 12,049 - (6,414) (112) 5,523 - - - 138 5,661 4,180 - (96) (149) 3,935 - 907 - 177 5,019 212 4,176 - (212) - - - - - - 5,661 5,523 4 (96) (149) 3,935 378 - 182 4,495 524 - 127 53 (127) - 53 241 - 368 (7) 655 - 17 (17) - - 294 71 (3) 362 293 53 Total £’000 16,371 53 (6,652) (261) 9,511 241 1,892 368 308 15 - (15) - - - 985 - - 985 12,320 15 - (15) - - 30 - - 30 955 - 4,403 21 (340) (149) 3,935 702 71 179 4,887 7,433 5,576 80 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 80 265204 Bigblu_pp073_end.indd 80 25/04/2023 10:53 25/04/2023 10:53 ACQUISITION OF BUSINESS The Company completed the acquisition of customers and certain business assets from Clear Networks (Pty) Ltd in January 2022. The book value at acquisition, which is equivalent to fair value of the assets, was as follows: Property, plant and equipment Inventory Other current assets Liabilities Intellectual Property Customer Contracts Deferred Tax arising on fair valued intangible assets Gain on bargain purchase Total consideration Satisfied by: Cash Deferred consideration Fair Value £’000 146 13 49 (67) 985 907 (562) (21) 1,450 1,154 296 1,450 Post-acquisition trading contributed £1.6m of revenue in the year and EBITDA of £0.3m. Revenue was included in revenue from contracts and all costs were included either in cost of sales, administrative or distribution expenses. Legal costs associated with the acquisition were considered exceptional in nature and included within administrative costs. ANNUAL TEST FOR IMPAIRMENT Under IAS 36, Goodwill is tested annually for impairment, irrespective of there being any impairment indicators. For the purpose of impairment testing, goodwill and other intangibles are allocated to business units which represent the lowest level at which those assets are monitored for internal management purposes. The recoverable amount of each cash-generating unit (‘GCU’) is determined from value-in-use calculations. The calculations use pre-tax cash flow projections based on financial budgets and forecasts approved by the Directors indicated that no impairment was required to the carrying value if Goodwill. The year-end model utilises forecasts based upon the Group’s budget, Strategy Plans and cashflows for FY22 and FY23. Over the 2-year forecast, the Group has applied compound average growth rates, pre IFRS16, for EBITDA of 2%. In accordance with IAS 36, the growth rates for beyond the initially forecast years do not exceed the long-term average growth rate for the industry. The forecasts have been discounted at a pre-tax rate of 8.3% (FY21: 6.7%). This discount rate was calculated using a pre-tax rate based on the weighted average cost of capital for the Group. As at 30 November the carrying amount of goodwill is its recoverable amount, being £2.1m (FY21: £2.2m) in respect of Brdy AS and £3.6m (FY21: £3.3m) in respect of SkyMesh. Recognition of impairment losses was £nil (FY21: £nil). Impairment charges are included in Administrative Expenses in the Statement of comprehensive income. In FY21 the carrying amount of goodwill was reduced by £6.2m and the carrying value of software by £0.1m as a result of the disposal of the controlling interest in QCL Holdings Ltd detailed in note 13. Based on the results of the impairment review, the Directors have not identified any reasonably possible changes that would result in an impairment. 265204 Bigblu_pp073_end.indd 81 265204 Bigblu_pp073_end.indd 81 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 81 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 12. INVESTMENTS Subsidiaries Other equity investments Loan notes Opening balance Movements during the year: Unlisted shares acquired as consideration for sale of subsidiary Loan notes acquired as consideration Loan note interest Disposal of subsidiary Impairment charge Group Company 2022 £’000 - 2,240 3,590 5,830 5,672 - - 158 - - 5,830 2021 £’000 - 2,240 3,432 5,672 2022 £’000 27,083 2,240 3,590 32,913 2021 £’000 38,529 2,240 3,432 44,201 - 44,201 52,393 2,240 3,360 72 - - 5,672 - - 158 - (11,446) 32,913 2,240 3,360 72 (12,393) (1,471) 44,201 The carrying value of the investment in Brdy AS held by the Company at 30 November 2022 was reduced by an impairment charge of £11.4m. There were no additions or disposals in the year. The following table set out the valuation techniques used in determination of fair values, including the key inputs used: Item Valuation approach and inputs used Investment in loan notes due from QCL Midco Limited Investment in the equity of QCL Topco Limited The loan notes constitute an investment in debt not held for trade purposes and has been recognised and measured under the amortised cost method with interest income accrued aggregated to the investment balance Other equity investment represents the Company’s interest in the equity of QCL Topco Limited, which is measured at the transaction cost on disposal during the year ended 30 November 2021. Having considered the prospects of the business, its financial results and position, further fundraises and the corresponding impact of dilution, no material change in the fair value of the investment has been identified. 82 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 82 265204 Bigblu_pp073_end.indd 82 25/04/2023 10:53 25/04/2023 10:53 Subsidiary Undertakings Address & Country of Incorporation Class of Share Parent Company No of Shares Brdy AS (formerly Bigblu Norge AS) Rosenholmveien 25, 1414 Trollåsen, Norway Ordinary Bigblu Broadband plc 1,700,412 of 1.40 Nok each SkyMesh Pty Ltd 51 Alfred Street, Fortitude Valley QLD 4006, Australia Ordinary Bigblu Broadband plc 20,898,680 of £0.196 each % held by parent 100% 100% BorderNET Internet Pty Ltd 51 Alfred Street, Fortitude Valley Ordinary SkyMesh Pty Ltd 2,863,105 of 100% Bigblu Broadband Limited BBB Ausco Limited* BBB Norco Limited* * Dormant companies QLD 4006, Australia Tompkins Wake, Level 11, 41 Shortland Street, Auckland, 1140, New Zealand Ordinary SkyMesh Pty Ltd 100 of NZ$1 100% each £0.09 each 6th Floor 60 Gracechurch Street London EC3V 0HR 6th Floor 60 Gracechurch Street London EC3V 0HR Ordinary Bigblu Broadband plc 1 of £0.01 100% Ordinary Bigblu Broadband plc 1 of £0.01 100% 13. DISCONTINUED OPERATIONS DESCRIPTION On 10 June 2021 QCL Holdings Ltd together with its subsidiary was sold to funds managed by Northleaf Capital Partners and is reported in the current year as a discontinued operation. Financial information relating to the discontinued operation for the period to the date of disposal is set out below. The consideration due to the Company following the Disposal was total cash consideration of up to £41.2m of which £31.1m was paid on completion, with a further £10.1m as deferred contingent consideration that remained subject to certain performance conditions being met by 31 March 2022, or in certain circumstances, 31 May 2022; and £5.6m being satisfied in shares (£2.2m) and Loan Notes (£3.4m at an interest rate of 4.5% pa) that were issued to the Company on completion and an additional award of Loan Notes (with an option to convert partially into equity) of up to £1.8m subject to the conditions of the deferred contingent consideration also being met. None of the potentially receivable deferred contingent consideration of up to £11.8m has been recognised in 2021. On 30 September 2020 Bigblu Operations Ltd together with all its subsidiaries was sold to Eutelsat SA and was reported in the prior year as a discontinued operation. On 19 January 2022 additional consideration of £2.8m cash was received as part of the final settlement with Eutelsat which had not been recognised in 2020. Accordingly, an adjustment to the value of deferred consideration is recognised in 2021 being a gain of £3.3m after expenses and release of provisions as set out below. This represents a revision of an estimate so no adjustment to comparative financial information has been made. Group financial information for 2021 set out below is thus a combination of these two discontinued operations. 2021 comparative information throughout the Financial Statements has been adjusted to reflect the revised split of activities between continuing and discontinued operations. 265204 Bigblu_pp073_end.indd 83 265204 Bigblu_pp073_end.indd 83 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 83 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL PERFORMANCE AND CASH FLOW INFORMATION Revenue Expenses Loss before tax Taxation on operations Loss after tax of discontinued operations (Loss) / Gain on sale of the subsidiary after tax (see below) Adjustment to fair value of deferred consideration (see below) (Loss) / Profit from discontinued operations Net cash (outflow) / inflow from operating activities Net cash inflow from investing activities Net cash inflow from financing activities Net (decrease) / increase in cash generated by the subsidiaries Details of sale of subsidiary Consideration received or receivable: Cash Investments (note 12) Fair value of contingent consideration Total disposal consideration Carrying amount of net assets sold Elimination of non-controlling interest Expenses of sale Gain on sale before tax Corporation tax expense on gain (Loss) / Gain on sale after tax Group 2022 £’000 - - - - - (120) - (120) (120) - - (120) - - - - - - (120) (120) - (120) 2021 £’000 3,091 (3,896) (805) (53) (858) 25,925 3,306 28,373 (3,133) 25,531 1,666 24,064 31,094 5,600 - 36,694 (13,660) 5,865 (2,974) 25,925 - 25,925 The investments forming part of the consideration comprise loan notes of which 40% were convertible into shares in the business of QCL. The option to convert was exercised resulting in the Company owning unlisted shares valued at £2.2m and loan notes valued at £3.6m at November 2022. 84 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 84 265204 Bigblu_pp073_end.indd 84 25/04/2023 10:53 25/04/2023 10:53 The carrying amount of assets and liabilities as at the date of sale (10 June 2021) were: 10 June 2021 £’000 Property, plant and equipment Intangible assets Cash and cash equivalents Inventory Trade and other receivables Total assets Trade and other payables Loans Total liabilities Net assets The adjustment to deferred consideration for the disposal in 2020 to Eutelsat comprises: Additional cash consideration receivable Release of provision and accrued income Expenses of sale During the year the additional cash consideration of £2.8m due at the start of the year was received by the Company in full. 14. CASH AND CASH EQUIVALENTS Group Company Cash and bank accounts Total cash and cash equivalents 15. INVENTORY Finished goods 2022 £’000 4,195 4,195 2021 £’000 5,201 5,201 2022 £’000 768 768 Group 2022 £’000 1,142 9,597 6,312 2,533 236 1,292 19,970 4,310 2,000 6,310 13,660 2021 £’000 2,843 1,206 (743) 3,306 2021 £’000 1,550 1,550 2021 £’000 699 There is no material difference between the amounts stated above and replacement cost. Write down of inventories to net realisable value amounted to £43k (2021: £25k) all related to continuing operations. £18k (FY21: £Nil) was recognised as an expense during the year. 265204 Bigblu_pp073_end.indd 85 265204 Bigblu_pp073_end.indd 85 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 85 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 16. TRADE AND OTHER RECEIVABLES Group Company Trade receivables Other receivables Deferred consideration Prepayments and accrued income Amounts due from group undertakings 2022 £’000 773 506 - 1,056 - 2,335 2021 £’000 802 318 2,843 954 - 4,917 MOVEMENT IN PROVISION FOR IMPAIRMENT OF RECEIVABLES Individually impaired As at 1 December 2021 Charged to Income statement Provision transferred on sale of subsidiaries Utilised As at 30 November 2022 2022 £’000 52 - - 80 822 954 2022 £’000 28 238 - (142) 124 2021 £’000 146 34 2,843 59 842 3,924 2021 £’000 188 88 (13) (235) 28 The average credit days taken on sales of goods and services is 9 days (2021: 7 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 £378k (2021: £330k) which are past due at the reporting date. The directors consider that the carrying amount of trade receivables approximates to their fair value. Accounts receivable ageing: Current 30-60 days 60-90 days 90-120 days As at 30 November 2022 2022 £’000 2021 £’000 395 123 70 185 773 475 67 21 239 802 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 2022 or 1 December 2022 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. 86 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 86 265204 Bigblu_pp073_end.indd 86 25/04/2023 10:53 25/04/2023 10:53 17. TRADE AND OTHER PAYABLES Current Trade payables Other taxes and social security Other payables Accruals and deferred income Lease liabilities Provisions for liabilities and charges Group Company 2022 £’000 4,223 924 534 2,363 795 685 9,524 2021 £’000 4,496 966 82 3,253 623 685 2022 £’000 124 370 - 918 29 685 10,105 2,126 2021 £’000 642 528 48 1,977 - 685 3,880 Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average creditors days taken for trade purchases is 77 days (2021: 81 days). The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame. The directors consider that the carrying amount of trade and other payables approximates to their fair value. The Group recognises provisions in the relevant year’s balance sheet based on estimates relating to certain outcomes. Discussion’s around specific claims are still ongoing. As in 2021, the provisions as at 30 November 2022 are expected to be utilised within the next 12 months following the end of the financial year, to cover any such costs. The breakdown of the provisions carrying value is as follows: Other provisions Total provisions Movements in the provision during the year were as follows: Carrying amount at start of year Utilised during the year Charged to discontinued operations Total provisions Group and Company 2022 £’000 685 685 Group and Company 2022 £’000 685 - - 685 2021 £’000 685 685 2021 £’000 1,468 (1,468) 685 685 265204 Bigblu_pp073_end.indd 87 265204 Bigblu_pp073_end.indd 87 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 87 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEW NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 18. NON-CURRENT LIABILITIES Lease liabilities Total Group Company 2022 £’000 559 559 2021 £’000 835 835 2022 £’000 13 13 2021 £’000 - - During the year the unsecured Revolving Credit Facility (RCF) was increased from £5m to £10m, which was fully undrawn as at 30  November 2022. The revolving credit facility is subject to a fixed charge over the company’s assets, as registered at Companies House. Leases attract interest at a rate of between 3.25% and 6%. MATURITY OF LEASE LIABILITIES Due 1 – 2 years Due 2 – 5 years Total 19. DEFERRED TAXATION At 1 December Deferred tax arising on acquisition Movement in relation to discontinued operations Charged/(Credited) to the Statement of Comprehensive Income At 30 November Deferred tax is provided as follows: Accelerated capital allowances Arising on business combinations Tax losses Geographical split of deferred tax asset/(liability): Rest of the World deferred tax asset Europe deferred tax asset Rest of the World deferred tax liability Europe deferred tax liability Group 2022 £’000 377 182 559 2022 £’000 (696) 562 - 477 2021 £’000 393 442 835 2021 £’000 (397) - (92) (207) 343 (696) 225 (568) - (343) 303 - (646) - (343) 408 - 288 696 - 709 (13) 696 88 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 88 265204 Bigblu_pp073_end.indd 88 25/04/2023 10:53 25/04/2023 10:53 20. SHARE CAPITAL At 30 November 2021 Shares issued in the year Shares issued at 15p each At 30 November 2022 No. of Shares No. Share Capital £ Share Premium £ 58,326,120 8,748,918 8,589,117 95,952 14,391 - 58,422,072 8,763,309 8,589,117 All shares issued during the year were as a result of share option exercises generating a total value of £14k. All issued share capital is fully paid up. All ordinary shares have a par value of £0.15. 21. 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. Costs of £Nil (2021: £Nil) were offset against the merger relief reserve during 2022. REVERSE ACQUISITION RESERVE The reverse acquisition reserve relates to the reverse acquisition of Bigblu Operations Limited (Formerly Satellite Solutions Worldwide Limited) by Bigblu plc (Formerly Satellite Solutions Worldwide Group plc) on 12 May 2015. OTHER EQUITY RESERVE Other Equity relates to the equity element of the financing arrangements entered into with BGF, including the equity elements of compound financials instruments. SHARE PREMIUM Share premium represents the excess consideration over nominal value net of issue costs and amounts to £8.6m (2021: £8.6m). Costs of £Nil (2021: £0.3m) were offset against the share premium account during 2022 in relation to the return of capital and the transfer of c£26m to the capital redemption reserve. CAPITAL REDEMPTION RESERVE The capital redemption reserve relates to the cash redemption of the bonus B shares issued in order to return c.£26m to ordinary shareholders. 265204 Bigblu_pp073_end.indd 89 265204 Bigblu_pp073_end.indd 89 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 89 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 22. LEASE ARRANGEMENTS THE GROUP AS LESSEE The statement of profit or loss shows the following amounts relating to leases: Depreciation of ROU assets Land & buildings Fixtures, fittings & infrastructure IT hardware and software Motor vehicles Interest expense (included in finance cost) Expense relating to leases of low-value assets (included in administrative expenses) Continuing operations Discontinued operations 2022 £’000 2021 £’000 2022 £’000 2021 £’000 212 487 62 - 761 78 25 167 384 34 - 585 90 57 - - - - - - - 28 198 - 25 251 16 - The total cash outflow for leases was £774k (2021: £1,137k). The Company had no leases other than those accounted for under IFRS16. 23. 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 2022 £’000 986 20 309 1,315 2021 £’000 1,981 20 337 2,338 90 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 90 265204 Bigblu_pp073_end.indd 90 25/04/2023 10:53 25/04/2023 10:53 24. SHARE-BASED PAYMENTS EMPLOYEE SHARE OPTIONS The Group has in place 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 (10 years for Executives) 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 outstanding during the year are as follows: Outstanding at beginning of year Exercised during the year Cancelled during the year Outstanding at end of year 2022 2021 Number of Share Options 1,567,659 (95,922) (786,687) 685,050 Weighted Average Exercise price Number of Share Options Weighted Average Exercise price 24.06p 15.00p 15.00p 35.74p 4,187,226 (736,263) (1,883,304) 1,567,659 43.68p 59.14p 20.49p 24.06p Exercisable at end of year 685,050 35.74p 578,742 65.18p The options outstanding at 30 November 2022 had a weighted average exercise price of 35.74p (2021: 24.06p), and a weighted average remaining contractual life of 4.7 years (2021: 4 years). No new options were granted during the year (2021: Nil). 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. It was agreed that awards would be considered annually by the Remuneration committee and post the Disposal all such schemes including Management Incentive Plans would be reviewed for appropriateness. Awards are 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). The maximum term of options granted under the LTIP is 10 years from grant date. Expiry dates range from October 2023 to August 2029. At 30 November 2022 there were a total of 381,415 options outstanding, with an exercise price of 15p, of which 381,415 have vested. Options are settled by issue of equity in exchange for cash. DETAILED PLAN RULES The Plan was issued for the first time in 2018 and the remuneration 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. Expected volatility was determined by assessing the movements of the share price since the readmission to AIM in May 2015. 265204 Bigblu_pp073_end.indd 91 265204 Bigblu_pp073_end.indd 91 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 91 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) OTHER EMPLOYEE OPTIONS The maximum term of options granted under other schemes is 10 years from date of grant, with the average term remaining 4 years. This term applies to all of the 303,605 options vested as at 30 November 2022 with anticipated lapse dates ranging between March 2026 and March 2027. Options are settled by issue of equity in return for cash. The Group recognised total expenses of £309k (2021: £163k), related to equity-settled share-based payment transactions as follows: Share option charge (all related to LTIP) Adjustment for cancellation of options before vesting Total share option expense NON-EMPLOYEE OPTIONS 2022 £’000 309 - 309 2021 £’000 337 (174) 163 As at 30 November 2022, BGF own c.4.5m shares in BBB, as well as options c.4.9m shares at an exercise price of 68.5p, expiring in May 2024. In addition, during the year ended 30 November 2020, BBB granted BGF an additional 1.8m options at an exercise price of 90p expiring May 2024. 25. FINANCIAL RISK MANAGEMENT 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. 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 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 20 to 21. 92 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 92 265204 Bigblu_pp073_end.indd 92 25/04/2023 10:53 25/04/2023 10:53 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 16 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 18. 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 Santander Facility is reported quarterly to the bank in the form of convenant compliance 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 17. 265204 Bigblu_pp073_end.indd 93 265204 Bigblu_pp073_end.indd 93 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 93 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWNOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 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. 26. 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 Other creditors Lease liabilities Total Group Company 2022 £’000 4,195 773 - 506 5,474 4,223 540 1,354 6,117 2021 £’000 5,201 802 - 318 6,321 4,496 82 1,458 6,036 2022 £’000 768 52 822 34 1,676 124 - 42 166 2021 £’000 1,550 146 3,171 34 4,901 642 48 - 690 The carrying value of financial instruments is a reasonable approximation of fair value due to the short-term maturities of these instruments. 94 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 94 265204 Bigblu_pp073_end.indd 94 25/04/2023 10:53 25/04/2023 10:53 27. CONTRACT BALANCES The consolidated statement of financial position includes the following amounts relating to contracts with customers all related to the continuing operations. Deferred income – included in Accruals and deferred income Total contract liabilities 2022 £’000 (787) (787) 2021 £’000 (838) (838) Revenue recognised during 2022 that was included in the contract liability balance at the beginning of the year amounted to £0.8m (2021: £0.8m). There was no revenue recognised in the year from performance obligations satisfied in previous periods. The satisfaction of the group’s performance obligations typically occurs before invoicing and payment for activation fees and other charges for services that are satisfied at a point in time, giving rise to accrued income. For airtime charges, which are satisfied over a period of time, payment will typically occur during the period being invoiced, which is usually done at the start of a calendar month or a quarter, giving rise to deferred income. 28. POST BALANCE SHEET EVENTS SkyMesh, AUSTRALIA The Company announced that its fully owned Australian business, SkyMesh PTY LTD had completed the acquisition of the satellite operations of Harbour ISP PTY LTD, a subsidiary of Uniti Group LTD in Australia (the “Acquisition”). The total cash consideration paid on completion was AUD$4.72m (£2.7m) with a retention of AUD$0.2m (£0.1m), to be paid in March 2023 post reconciliation of customer numbers. The cash consideration paid on completion was satisfied from existing cash resources including our revolving credit facilities with Santander. The satellite operations acquired consisted of c.6k customers. The customer base is being transferred to SkyMesh who will provide full ongoing support services from its Australian Customer Engagement Centre. Pursuant to the terms of the acquisition agreement, Uniti will continue to provide services for up to three months post completion to ensure a smooth transition of the customer base. As previously announced, the Directors anticipate that the acquired operations are expected to generate annualised revenues of c.£2.5m and EBITDA of c.£0.7m with positive cash generation, enabling the Group to continue to reinvest and grow the business in the Australian market. The Directors believe that the profitability of operations acquired should improve under Bigblu Broadband’s ownership due to the Group’s better operational gearing, economies of scale and SkyMesh’s dedicated focus on customers in this sector. REORGANISATION OF BUSINESS Since the year end the Group has gone through a reorganisation in our Norwegian business and recognising a reduced UK scale, this has resulted in redundancies in our Norway business and UK head office. This has resulted in making approximately 30% of the workforce in our Nordic business redundant in the first quarter of 2023, with an annualised cost saving of c.£0.4m. Due to the size of the Group, after the recent disposals in FY20 and FY21, the Group has sought to reduce head office costs to a level sustainable for the current continuing operations. This will result in approximately 75% of the central team being made redundant, with annualised savings in the region of £0.5m. The internal process has commenced with all planned redundancies expected to be complete by May 2023. No provision or costs related to these processes was recognised in the year ended 30 November 2022 as they commenced after this date. 265204 Bigblu_pp073_end.indd 95 265204 Bigblu_pp073_end.indd 95 25/04/2023 10:53 25/04/2023 10:53 Bigblu Broadband plc / Annual Report and Accounts 2022 95 FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORTOVERVIEWDesigned and printed by: perivan.com 96 Bigblu Broadband plc / Annual Report and Accounts 2022 265204 Bigblu_pp073_end.indd 96 265204 Bigblu_pp073_end.indd 96 25/04/2023 10:54 25/04/2023 10:54 Company Information SOLICITORS Burness Paull LLP 50 Lothian Road Festival Square Edinburgh, EH3 9WJ REGISTRARS Share Registrars Limited The Courtyard 17 West Street Farnham Surrey GU9 7DR AUDITORS Haysmacintyre LLP 10 Queen Street Place London EC4R 1AG DIRECTORS M Tobin OBE A Walwyn F Waters P Howard C Mills P Moses COMPANY REGISTRATION NUMBER 09223439 COMPANY SECRETARY B Harber REGISTERED OFFICE 6th Floor 60 Gracechurch Street London EC3V 0HR BROKER & NOMINATED ADVISER finnCap Ltd 60 New Broad St London EC2M 1JJ 2022 CONTINUING BUSINESS HIGHLIGHTS TOTAL REVENUE £31.2m – up 15.1% 2022 2021 £31.2m £27.1m Adjusted EBITDA £5.1m – up 11.4% 2022 2021 £5.1m £4.6m Net Cash £4.2m 2022 2021 EPS £4.2m £5.2m Loss 5.0p Loss 5.0p Profit 46.9p Basic 2022 2021 Adjusted 2022 4.4p 2021 4.3p Contents OVERVIEW 1........Company Overview 2........Company Snapshot STRATEGIC REPORT 4........Chairman’s Statement 6........Chief Executive Report 11......Financial Review 22......Principal Risks and Uncertainties 25......Section 172 (1) Statement GOVERNANCE 26......Directors’ Report 31......Board of Directors 34......Statement of Directors’ Responsibilities 35......Corporate Governance Statement 48......Annual Statement of the Remuneration Committee Chairman FINANCIAL STATEMENTS 54......Independent Auditor’s Report 59...... Consolidated Statement of Comprehensive Income 60......Consolidated Statement of Financial Position 61......Company Statement of Financial Position 62......Consolidated Statement of Cash Flows 63......Company Statement of Cash Flows 64......Consolidated Statement of Changes in Equity 65......Company Statement of Changes in Equity 66......Notes to the Financial Statements IBC.....Company Information 265204 Bigblu_Cover with Spine.indd 5-6 265204 Bigblu_Cover with Spine.indd 5-6 25/04/2023 10:53 25/04/2023 10:53 i l B g b u B r o a d b a n d p c l | A n n u a l R e p o r t i & F n a n c a i l S t a t e m e n t s 2 0 2 2 Bigblu Broadband plc Bigblu Broadband plc Annual Report & Financial Statements for the year ended 30 November 2022 A Company Registered in England & Wales No. 09223439 265204 Bigblu_Cover with Spine.indd 2-3 265204 Bigblu_Cover with Spine.indd 2-3 25/04/2023 10:53 25/04/2023 10:53 

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