Grain’s Results See Expanded UK FTTP Broadband Cover and Financial Positives

Alternative network operator and ISP Grain (Grain Connect), which has already built their gigabit-capable Fibre-to-the-Premises (FTTP) broadband network to cover 220,000 UK premises RFS and 30,000 customers (21st May 2024), recently published their annual results and made some positive financial predictions. A further £18m of equity funding was also secured.

The operator’s full fibre network can currently be found in parts of 59 UK locations (plus over 150 new build housing developments), which includes a lot of small-to-modest sized patches of various urban cities and towns like Leicester, Liverpool, Accrington, Grimsby, Cleethorpes, Scarborough, Carlisle, Barrow-in-Furness, Hartlepool, Hull, Newport, Sunderland, Blackburn and so forth.

As part of this, Grain recently published their annual accounts for the year ended 31st March 2024 (here), which among other things revealed that “the business passed the point of peak EBITDA investment [in May 2023], and finished the year with a monthly profitability on a trajectory to EBITDA positive” – this is forecast to be achieved in the “second half of the next financial year” (ended 31st March 2025).

The ability to achieve a positive EBITDA (i.e. earnings before interest, taxes, depreciation, and amortization) usually indicates that a company’s core operations are profitable and likely generating positive cash flow. The same results also revealed that, in September 2024, Grain had secured a further £18m of equity funding from existing shareholders to help continue its network expansion (we’ve not previously seen that being mentioned).

Summary of Key Points from Grain’s Results (31st March 2024)

➤ 237,000 homes passed (204,000 Ready for Service / RFS)

➤ £435 spent of capital expenditure per home passed (covers end-to-end build, including everything required to deliver a live connection – from the boundary of every premises)

➤ Grain has full ownership of its end-to-end access network (the majority of many other altnets don’t own their access network, but rather rent access via Openreach’s PIA)

➤ Grain says they had low net debt per home passed, relative to others, at £147 by the end of the year

➤ Revenue up by 191% to £4.5m (2023: £1.55m)

➤ EBITDA of (£7.583m) vs 2023: (£7.401m)

➤ Gross profit of £2.063m (2023: £133k)

➤ Operating loss of £15.04m (2023: £10.61m)

➤ Customer base of over 27,000 (May 2023: c.14,000)

➤ Average operating cost per customer per month of £54.24, which is down 72% from £198 in the previous year and should continue to fall.

➤ Loss for the year, after tax, of £19.31m (2023: £5.21m)

As usual, network operators that are still in their build phase often have to spend huge sums of money on the deployment of a new network, which may then need 10–15 years before full payback is achieved. Keeping costs down is thus very important, but so too is the ability to generate a strong and durable level of take-up for payback, which normally takes a few years to mature after the completion of a new network.