Cityfibre Turnover Hits GBP6.4m as Fibre Serves 1200 Customer Premises

Fibre optic infrastructure developer Cityfibre has today reported their final results to the end of 2015, which reveals that their cable duct and fibre network footprint comprised 743km (2014: 543km) serving 1,200 customer premises (up from 885 in 2014) and turnover jumped by 67% to £6.4m.

Overall Cityfibre claims to have a combined footprint (including projects under construction) of 2,150 route kilometres of metro duct and fibre assets and 1,100 route kilometre national ducted backbone network, addressing 26,000 public sector sites, 7,400 cell sites, 260,000 businesses and 3.7 million homes in 37 towns and cities.

As usual it’s important to state that most of the coverage figures mentioned above (e.g. 3.7m homes) reflect the operators “addressable market” reach, which as we’ve discussed before (here) is a very hypothetical measure and should not be taken as practical network coverage. If we used a similar measure for BTOpenreach’s fibre optic network then it would be a bit like saying that most of the UK could get an FTTP/H line today, but the reality is always more complex (BT only has about 200,000+ actual FTTP premises passed).

For example, in practical terms the number of UK homes that can pick-up the phone today and order a consumer affordable FTTH service over Cityfibre’s network is much smaller than 3.7 million, with more than 20,000 “premises passed” in Bournemouth (Gigler) and the Phase 1 aim is to reach a similar number in York via Sky Broadband and TalkTalk’s UFO joint venture.

Greg Mesch, Chief Executive of CityFibre, said:

“I’m very pleased to report this set of results for 2015, a year which saw the Group fully deliver on its organic growth strategy, as well as making a truly transformational acquisition which advances our footprint expansion by five to seven years. We have more than doubled the contracted revenue on the books, added three new cities, and increased our service provider partner base to 41 relationships.

The addition of the former KCOM assets to the portfolio now gives us significant presence in 37 cities across the UK, and now opens up our wholesale model to 24 of the top 30 cities outside London. So far in 2016, we’ve demonstrated rapid commercialisation of the acquired assets, which further underlines the strong demand for an alternative to BT Openreach at a national level.”

It’s further noted that Cityfibre has a stated “medium term aspiration” to expand to 50 cities by 2020, comprising an “addressable market” of approximately 10,000 mobile cell site locations, 35,000 public sector sites, 350,000 businesses and 5 million homes (remember not to treat this as “premises passed“). Additionally, the Group aims to have relationships with approximately 100 service provider partners within three years, up from 46 today.

On the practical side the group reported that their direct fibre optic connected customer premises had increased to 1,200, which is up from 885 in the prior period. Finally, their “aspiration” is to successfully launch a maximum of 10 new Gigabit Cities during the course of 2016 across the acquired footprint, as well as continuing to “selectively pursue green-field organic opportunities“.

Finally, staff costs excluding share-based payments increased to £6.1m (2014: £4.7m). Apparently this included non-recurring costs of £0.6m in relation to the Acquisition and non-recoverable operational costs in respect to the York FTTH trial. Average headcount was 83 staff, up from 46 in 2014.

Now here are a few other highlights from their results, although sadly we don’t get any detail on the FTTH progress in York, which appears to be taking longer than originally hoped.

Financial Highlights:

· Turnover up 67%, to £6.4m (2014: £3.8m)
· Gross profit of £5.5m, up 68%
· Gross margin further expanded to 86% (2014: 85%)
· Adjusted EBITDA loss of £2.9m, down from £3.6m in 2014
· Total Contract Value (‘TCV’) of £23.2m added in the period, up 109% from £11.1m in 2014
· Net loss after tax of £6.4m, improving from £7.0m in 2014

Operating Highlights:

· Direct fibre connected customer premises up to 1,200, from 885 in the prior period
· Completed route kilometres of ducted fibre increased to 743km, from 543km in 2014
· Service provider relationships numbered 41 at period end, up from 25 in 2014
· Three new city-wide metro duct and fibre infrastructure construction projects won: Newport, Edinburgh and Glasgow
· Master Services Agreement signed with Vodafone allowing for delivery of dark fibre across its footprint
· Joint Venture with Sky and TalkTalk progressing with delivery of gigabit speed FTTH within target economics. Sky and TalkTalk’s Ultra Fibre Optic (UFO) brand launched to residential customers
· Acquisition of 24 city metro and national network assets (outside Hull and East Yorkshire) (the ‘Acquisition’) from KCOM Group plc (‘KCOM’), for a consideration of £90.0m in cash

Post Period End Highlights:

· Readmission to AIM on 14 January 2016 via £80.0m equity placing at 50p per share
· Closing of acquisition of metro and long distance duct and fibre assets from KCOM (the ‘Network Assets’) on 18 January 2016
· Total funding package of £180.0m secured to fund the acquisition and future development of the assets, comprising £80.0m via the placing, alongside £100.0m in committed debt facilities
· Combined footprint (including projects under construction) of 2,150 route kilometres of metro duct and fibre assets and 1,100 route kilometre national ducted backbone network, addressing 26,000 public sector sites, 7,400 cell sites, 260,000 businesses and 3.7m homes in 37 towns and cities
· Southend-on-Sea anchor contract secured, 50km network to serve 120 public sector sites
· First new business on the acquired national long haul Network Asset in deal with SSE Enterprise Telecoms
· Year-to-date 2016 showing strong momentum, with £37.5m in new TCV including revenue committed under the Acquisition, 101 new customer connections and 107 kilometres added on the legacy CityFibre footprint, and 450 connections sold on the acquired metro footprint within 90 days of the acquisition close
· First quarter 2016 moved into positive adjusted EBITDA