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Cityfibre Turnover Grows to £15.4m as FTTP Serves 3962 UK Customer Premises

Tuesday, April 25th, 2017 (8:22 am) - Score 971

Alternative fibre optic network builder Cityfibre has posted their final results to the end of 2016, which reveals that their “completed” cable duct and fibre optic network (FTTP) footprint has increased to 3,383km (up from 743km in 2015) and they now serve 3,962 customer premises (up from 1,200).

Much of the growth has occurred as a direct result of the operator’s on-going effort to re-purpose and extend KCOM’s UK network assets (excluding Hull, East Yorkshire), which they acquired for £90.6 million at the end of 2015 and have since been working to commercialise under their own model (here). We should point out that most of Cityfibre’s customers tend to be higher value public sector organisations/sites or businesses.

As a result of that the last year has seen their turnover rocket by 140% to £15.4 million (2015: £6.4m) and gross profit jumped by a related margin to £13.5 million. Similarly an Initial Contract Value (ICV) of £75.5m was added in the period (up 225% from £23.2m in 2015), although the extra costs meant their loss after tax was £12.6m (2015: £6.4m) and that includes financing costs of £7.3m (2015: £0.3m).

Furthermore they’ve also grown to have 143 full-time equivalent staff (up from 105 in 2015).

Operating Highlights:
· New connections sold and acquired totalled 5,063, up from 1,100 in 2015
· Direct fibre connected customer premises up to 3,962, from 1,200 in 2015
· Completed route kilometres of ducted fibre increased to 3,383km, from 743km in 2015
· Service provider relationships numbered 54 at period end, up from 41 in 2015
· 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 for £90.0m (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 from the equity placing, alongside £100.0m in committed debt facilities
· Closing of acquisition of metro fibre network assets of Redcentric plc on 23 September 2016

The latest results state that Cityfibre has major metro duct and fibre footprints in 42 cities across the UK and a national long distance network that connects these cities to major data-centres across the UK and to key peering points in London.

The company further claims that their network can now “address 28,000 public sites, 7,800 mobile masts, 280,000 businesses and 4 million homes” (note: they aim for 5 million UK homes in 50 cities), although as usual this should be taken with a huge bag of salt. The operator’s definition of “addressable market” reach is a very hypothetical measure and should NOT be confused with practical network coverage, such as the more traditional “premises passed“.

For example, if you were to apply a similar measure to Openreach’s (BT) fibre optic network then it would be a bit like saying that most of the UK could get an ultrafast broadband FTTP/H line today, even though related cables currently reach only 435,000+ premises passed. Similarly Cityfibre’s actual premises passed figures (see here) will be tiny (e.g. 14,000 homes via FTTP in York with 26.1% take-up and 20,000 in Bournemouth).

Never the less Cityfibre’s focus is less on homes and more on the lucrative business and public sector market. The network they build around that might in the future help to act as a springboard for other ISPs to reach residential properties (like the joint deployment in York with Sky Broadband and TalkTalk), although so far the demand for connecting homes via Cityfibre’s approach has been very limited; partly because urban markets are already competitive with Virgin Media and BT in play.

Greg Mesch, CEO of CityFibre, said:

“2016 was truly a transformational year for CityFibre. Alongside delivering on our stated growth strategy, the acquired network footprint has accelerated our original business plan by up to seven years. Over the last twelve months we have more than doubled our contracted revenue base, added twenty nine new cities and increased our service provider partner base to 54.

CityFibre now has significant presence in 42 cities across the UK and the rapid commercialisation of the Group’s assets underlines the strong demand for an alternative to BT Openreach at a national level. We continue to see significant levels of demand from both business and public services sectors alongside increasing interest from mobile operators and residential broadband providers.

With the regulatory and political landscapes now both favouring alternative fibre investment, CityFibre has never been better placed to capitalise on expanding its existing footprint and a growing number of near term strategic opportunities. Current trading continues in line with management’s expectations.”

The good news for Cityfibre is that Ofcom’s recent move to legally separate Openreach from BT, as well as their related decision to make BT’s cable ducts more accessible to rival operators, could present some new opportunities for future network expansion. However it’s still too early to know how much of an impact this will actually have in the future.

As an example, Cityfibre’s recent 10-year and £3.2m deal to provide 120 connections to key council sites over a “newly-built” 50km fibre network in Southend-on-Sea was largely based on Openreach’s related Passive Infrastructure Access (PIA) solution. So clearly the revised PIA2 solution that was recently proposed (here) may be a boost for Cityfibre.

Leave a Comment
1 Response
  1. Avatar Fred the Red says:

    Great progress, but buying KCOM’s assets for £90m to drive a small EBITDA return seems such a long drawn out play.

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