Bigblu Broadb. Regulatory News (BBB)

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Bigblu Broadband plc

('BBB' or the 'Company')

Interim Results

Proposed Return of Capital

Solid performance & transformational transaction realising value for shareholders

Bigblu Broadband plc (AIM: BBB.L), a leading provider of alternative super-fast and ultra-fast broadband services, is pleased to provide its interim results for the six-month period ending 31 May 2021 (the "Period").

There was progress across all of the Company's geographies and business units in the Period, with growth in Australia remaining strong and acceleration of the upgrade program in the Nordics. During the Period the Company also announced the sale of its majority interest in QCL Holdings Ltd ("Quickline") (the "Disposal") to global private markets investment firm Northleaf Capital Partners ("Northleaf"). The Disposal was completed post-Period end, valuing BBB's shareholding in Quickline at up to £48.6m, equivalent to approximately 84 pence per BBB ordinary share*. The Company received £31.1m gross cash as part of the completion terms in June 2021, significantly strengthening its balance sheet post Period end.

Proposed Return of Capital

Following completion of the Disposal, and receipt of the initial cash consideration the Company's net cash position at 31 July 2021 was approximately £33m.

After giving due consideration to the ongoing working capital, CAPEX and investment opportunities within the Group, the Board is also pleased to propose a return of approximately £26m to Shareholders through a bonus issue of a new class of B shares, which the Company will redeem for cash to return 45 pence per Ordinary Share to Shareholders.

Financial Highlights - The Group (including Quickline)

Financial Highlights - Continuing Operations (excluding Quickline)

Operational Highlights - Continuing Operations

The Disposal

Proposed return of capital and debt repayment

1Like for like 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 and changes in the commercials of the PPP contract and accounting treatment for Grants, and business disposed of in the period are excluded from the calculation.

2Adjusted EBITDA is stated before interest, taxation, depreciation, amortisation, share based payments and exceptional items. It also excludes property lease costs which, under IFRS 16, are replaced by depreciation and interest charges.

3 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 and servicing debt. Both excludes exceptional items.

4 Cash / Net debt excludes lease-related liabilities of £1.9m under IFRS 16 (1H20 £5.1m).

* Based on the total maximum consideration that could be received by Bigblu Broadband plc (including the full deferred contingent consideration) of £48.6m and a total issued share capital of 57,589,857 ordinary shares

Andrew Walwyn, Chief Executive Officer of Bigblu Broadband plc, commented:

"We are delighted with the progress shown by the Group in the Period and also with the part-disposal of our shareholding in Quickline for what we believe was a very attractive valuation.

"Following completion of the Disposal, BBB is on a strong financial footing. The Board is delighted to propose today the return of surplus cash to shareholders and its near term focus will be on continuing to ensure it can maximise shareholder value from its continuing operations.

"Overall, with extensive experience in the sector and a proven track record of building attractive businesses to deliver shareholder value, the Board is confident in its ability to ensure it can continue to deliver attractive returns for Shareholders from its operations in Australasia and the Nordics."

For further information:

About Bigblu Broadband plc

Bigblu Broadband plc (AIM: BBB.L), is a leading provider of alternative super-fast broadband solutions throughout Australasia and the Nordics. BBB delivers a portfolio of super-fast wireless broadband products for consumers and businesses 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 super-fast broadband services increases around the world.

BBB's range of solutions includes satellite, next generation fixed wireless and 4G/5G delivering between 30 Mbps and 150 Mbps for consumers, and up to 1 Gbps for businesses. BBB provides customers ongoing services including hardware supply, installation, pre- and post-sale support, billings and collections, whilst offering appropriate tariffs depending on each end user'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 'video-on-demand'. Its alternative broadband offerings present a customer experience that is similar to that offered by wired broadband and the connection can be shared in the normal way with PCs, tablets and smart phones via a normal wired or wireless router.

CHIEF EXECUTIVE'S REPORT

Overview

The first half of this financial year has been a continued period where we have had to, like all businesses, contend with the challenges created by the ongoing impact of COVID-19. Whilst the period was a challenging one, we were delighted by the resilient performance of the Company and our ability to ensure all of our staff across all jurisdictions advanced to 95% home working to support our customers. In the context of the near-term global challenges created by COVID-19, our long-term relationships with our satellite partners were vital as we worked together to ensure we could deliver against the growing demand for rural broadband services.

We were delighted to announce that on 10 June 2021 Northleaf completed the takeover of Quickline. I firmly believe that this offers both an excellent return on investment for shareholders whilst also retaining an exposure to one of the UK's leading rural broadband infrastructure providers with access to significant additional capital.

The Disposal provides BBB with an excellent return, transforms our balance sheet, and allows management to concentrate on its retained businesses with strong market opportunities to therefore provide further returns to shareholders, as well as retaining an investment in Quickline going forward.

Key Financials for the continuing operations

Total revenue including recurring airtime, equipment, installation sales and network support was £13.1m (1H20: £10.6m), This increase in revenue was a reflection of a higher number of customers, ARPU progression and favourable FX rates in the period. Recurring airtime revenue, defined as revenue generated from the Company's broadband airtime, which is typically linked to contracts, was £12.2m representing 93% of total revenue (1H20: 92%). 

Total like for like (LFL) revenue growth for the Continuing Group in the period was 15.6% (1H20: 7.1%).

Adjusted EBITDA for the period was £2.0m representing an adjusted EBITDA margin of 15.2% compared to £1.9m in 1H20 and an adjusted EBITDA margin of 18.1%.

Total customers increased by c.2.2k to c.58.3k over the 12-month period (FY20: c.56.1k) with particular strength in our Australian business.

Net organic customer growth in the first half of 2021 showed a year-on-year increase of 3.9% to 58.3k (1H20: 5.6%).

Australasia

Our Australian business SkyMesh, is the leading Australian satellite broadband service provider having been named Best Satellite NBN Provider for the third year in succession (2019-2021), SkyMesh commands a 50 per cent market share of net new adds under the NBN scheme in the 12 months to 30 June 2021.

SkyMesh performed strongly during H1, with customers numbers ahead of expectations at 48.7k - up 12.9% on prior year (H120: 43.1k). This resulted in increased revenues of £10.5m, up 42% on prior year (H120: £7.4m). Adjusted EBITDA was £1.8m, up 50% on prior year (H120: £1.2m), supporting both a positive adjusted operating cash (Inflow £0.8m) and adjusted free cash flow (Inflow £0.5m).

During the Period SkyMesh signed an important Partner Agreement with leading next-generation Asia Pacific broadband satellite operator Kacific Broadband Satellites Group to provide a high-speed broadband internet service initially across New Zealand. Since the agreement was signed, the Company has been investing in in-country field operations in New Zealand and increased marketing in the region to attract new customers and sales.

The Board believes that it can complement organic growth opportunities by acquisitions and partnerships that could accelerate the Company's presence into the wider Australasia region.

Nordics

In Norway we continue to attract new fixed wireless clients with targeted investment in new towers and whilst the fixed wireless product comes under some pressure from the accelerated roll out of fibre in Norway, the business continues to investigate ways to diversify and find new routes to market. In this respect, it is worth highlighting the Norwegian incumbent's decision to turn-off its copper network in certain geographic areas, leaving several hundred thousand premises reliant, at least initially, on wireless solutions.

Our Norwegian business, BB Norge, ended H1 with customer numbers in line with plan at 9.6k albeit down both on previous year and since 30 November 2020 as the business continued to experience higher churn within the region as a result of, in the Board's opinion, low broadband speeds as well as a conscious program of demounting loss-making masts. Consequently, revenues for BB Norge were £2.4m, down 26.5% on prior year (H120: £3.2m). Adjusted EBITDA was £0.8m, down 53.4% on prior year (H120: £1.3m) due to the reduced revenues, the reduced Fixed Wireless customer base against a historic network cost base that is fixed, plus the investment made by the Company in sales and marketing following the upgrade process. Adjusted operating cash was an Inflow of £1.3m and adjusted free cash flow remained positive (inflow £0.3m), both ahead of plan.

During the Period, the Group also invested NOK 4m (£0.3m) in its fixed wireless network upgrade program to improve the performance of the business which is starting to stabilise the churn and win new customers. 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 Fixed Wireless Access and satellite solutions in the Nordics means that there is potentially significant scope to expand its presence and reach in this region and create shareholder value.

H2 has started with continued investment in the network which is already showing encouraging results with lower churn and signs of customer growth in our fixed wireless network due to the current completed upgrades.

Quickline

In December 2020, Quickline won the competitive tender to provide significantly improved broadband speeds to premises across North Yorkshire. This was the fourth tender that Quickline had won under the BDUK Superfast Programme since August 2020 with the four broadband grants being valued at over £27m.

The Period saw Quickline focus on commencing the investment required to deliver the grants and culminated in the agreement being entered into with Northleaf for the sale of the Company's holding in Quickline. Northleaf will undertake the significant further investment required to install the infrastructure required for roll out. The consideration due to the Company following the Disposal was:

Proposed Return of Capital

At the time of the announcement of the Disposal of Quickline, the Board of the Company made it clear that it would explore means of returning any surplus cash to shareholders within Bigblu Broadband's current financial year. Following completion of the Disposal, and receipt of the initial cash consideration, as at 31 July 2021 the Company had outstanding gross debt of £8.4m and gross cash of approximately £41m.

After giving due consideration to the investment opportunities of the Group, the Board is pleased to propose the return of approximately £26m in aggregate to Shareholders through a bonus issue of a new class of B shares, which the Company will redeem for cash in order to return 45 pence per Ordinary Share to Shareholders.

In addition, the Company will also repay all of its outstanding bank debt and will retain a reduced facility with its bank Santander of £5m to be used as and when required.

Strategy

The opportunity in the super-fast broadband market remains extremely exciting across the continuing operations 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 north of 50Mbps and our satellite and fixed wireless solutions will ensure that all customers can be served and not left in the digital divide.

The Directors consider that, given their respective strengths, each of the remaining business units in Australia and the Nordics has potential opportunities to enhance shareholder value and therefore the Board will be focused on ensuring that it can fully capitalise on this opportunity.

For the SkyMesh business in Australia, the Board believes that it could also complement organic growth opportunities by acquisitions that could accelerate the Company's presence into the wider Australasia region. As noted previously, the Board believes the business has the potential to achieve 80,000 customers in the Australasia region over the next three years through organic and acquisitive growth, with New Zealand a current area of focus for potential expansion.

To date, the Nordics have incurred relatively high levels of customer churn due, in part, in the view of the Directors, to relatively low broadband speeds. However, the recent launch of the Preferred Partner Program satellite operations in late 2020 in this region has been a success, with new customers being attracted to the packages on offer and churn showing early signs of stabilising.

Following the recent disposal of Quickline and the proposed return of capital to Shareholders, the Board intends to evaluate the opportunity to invest in refining and enhancing the Company's service proposition in the Nordic market. Initiatives considered will include expanding the geographic focus of the operation into Sweden and Finland. In addition, the Company has been investing in upgrading its fixed wireless network, whilst also entering a 'White Label' agreement with Telenor to provide satellite broadband.

The Directors consider that the Company's ability to offer improved 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, provides the Directors with confidence of stronger demand for its FWA solutions in Norway, whilst satellite solutions are expected to be successfully deployed across the wider Nordic region.

Marketing

We use a digital-first strategy to both acquire and retain new and existing customers. 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 video. Most important of all is word of mouth or customer referral hence the importance of looking after our existing customers as clearly demonstrated in our Australasian business.

Current Trading and Outlook

The Company has continued its successful positioning at the forefront of the alternative super-fast broadband industry. During the trading period to 31 May 2021, the Company continued to grow its customer base while still benefiting from the strong visibility afforded by the high percentage of recurring revenues. Our robust model and infrastructure continued to underpin growth in customers and revenues per user. This will prove to be key to the Continuing Group as we seek to maximise shareholder value from our Nordic and Australasian businesses.

With the sale of its UK fixed wireless business Quickline Holdings to Northleaf, BBB enters a new chapter in its history.

With regard to the Company's continuing businesses, the Board remains very convinced that there is plenty of scope for the Company to take advantage of growth opportunities. These include, but are not limited to, capitalising on organic growth opportunities in Australasia to further solidify our hold in the region and reigniting our Nordics operation with a smaller, more profitable footprint, reduced churn and new product offerings to our customers. In addition, the Board will look at all opportunities to maximise the return to shareholders.

In the current environment, whilst we are clearly dealing with unprecedented events, we have carefully monitored the impacts on the business that the COVID-19 pandemic has brought. Part of our continued growth, and improvement year on year, is satisfying the increased demand for high-speed broadband in rural areas as more and more employees work from home. We have also closely monitored a number of business KPIs to ensure that the economic pressures faced by our customers and suppliers have not materially impacted our operations and financial performance. These KPIs include customer debt profiles, customer discounting, lead times for activations, and movement flexibility of stock.

Whilst the Board recognises that it is difficult to predict with absolute certainty the impact COVID-19 will have on the future business and indeed our customers, the Board recognises the robust nature of the business, including but not limited to, delivering a product that existing and potential customers urgently need, strong underlying recurring revenue, a materially improved balance sheet and focusing on the growth opportunities that are available.

Following typical seasonal trends, we expect a strong second half and are comfortable with existing market expectations for the current financial year.

Andrew Walwyn

CEO

FINANCIAL REVIEW

The first half of FY21 was characterised by an underlying solid trading performance across the Company's key indicators especially in light of the continued challenges associated with COVID-19 on the business and our customers. This financial review describes the performance of the continued Company during the Period of 1H21.

Where appropriate, recognising the significance of the post balance sheet announcement on 10 June 2021 that the Company has completed the sale of Quickline to Northleaf, we have provided extracts of the performance of the business split between proposed Continuing and Discontinuing businesses to aid further analysis. Under IFRS 5, assets held for sale (including disposal groups) are classified as discontinued operations and should be presented separately in the income statement. The sale agreement completion is a post balance sheet event, however as the disposal was considered highly probable as at 31 May 2021, the assets and liabilities of Quickline are presented as held for sale as mandated by IFRS 5.

Financial Review - Continuing Operations

Total revenue increased 23.6% to £13.1m (1H20: £10.6m). This reflects the higher like for like customer numbers and increased ARPU year on year of 11.7%, from £34.09 to £38.07, and includes a positive forex impact of £0.8m, or 7% of the year on year increase. For the businesses that will continue to remain part of the Company post the Disposal, like for like revenue in the period was up a healthy 15.6% to £12.3m (1H20: £10.6m).

Total customers at the period end for the Continuing Group were c.58k (1H20: c.56k). During the half year the Company had gross adds of 10.9k (1H20: 10.8k) and churn of 6.5k (1H20: 5.8k) giving c.4.4k net organic adds (1H20: c.5.0k). The exceptional churn (c.3.3k) results in the main from demounting equipment on masts and on homes that supported customers in the Nordics where the ARPU was insufficient to support the fixed leased line costs. This is summarised as follows:

The sales revenue mix across the Company at the end of the period was c.75% Satellite and c.25% Fixed Wireless (1H20: c.65% Satellite and c.35% Fixed Wireless).

Underlying ARPU, calculated by dividing total revenues from all sources by the average customer base, increased in the first half to £38.07 per month (1H20: £34.09) as we sought to offer better packages to customers with increased revenue from services and installations.

Churn rates (defined as the number of subscribers who discontinue their service as a percentage of the average total number of subscribers within the period, excluding the rationalisation of customers), increased to an average annualised churn rate of 26.6% in 1H21 (1H20: 20.1%). The main area of increased churn was in fixed wireless in Norway.

Gross profit margins reduced to 43.8% in 1H21 (1H20: 50.3%) because of the churn increase in Norway and fixed costs associated with the mast leases in Norway as we rebalance the Nordics Operations. 

Distribution and Administrative expenses, before items identified as exceptional in nature, increased to £3.7m (1H20: £3.4m) representing 28.6% of revenue (1H20: 32.2%) due in the main to increased marketing costs in the period to £0.6m from £0.4m, representing 4.2% of revenue (1H20: 3.7%).

Depreciation decreased to £0.6m in the first half of the year from £0.7m in 1H20 due to lower IFRS 16 operating leases, offset by increased base depreciation due to investment in Norway on upgrading their estate of towers. No amortisation or impairment of intangible assets was charged during the period since all intangible assets had been fully amortised as at November 2020.

The Company incurred charges identified as exceptional in nature during the period, including costs related to internal restructuring (£0.1m), legal and related costs associated with disposal activities (£0.7m) and other costs deemed exceptional to ordinary activities (£0.3m).

Interest costs reduced during the period to £0.3m (1H20: £1.2m) as a result of the £21m part repayment of the unsecured loan to Santander in September 2020, utilising the proceeds of the sale of satellite businesses to Eutelsat.

Continuing Operations Statutory Results and EBITDA Reconciliation

Adjusted EBITDA for Continuing Operations (before share based payments and specific items relating to M&A) for the half year increased 4% to £2.0m (1H20: £1.9m). A reconciliation of the adjusted EBITDA to statutory operating profit of £0.2m (1H20: £0.7m profit) and to adjusted PAT of £0.9m (1H20: £0.3m loss) is shown below:

Company

1) Adjusted EBITDA (before share based payments, depreciation, intangible amortisation, impairment of goodwill, acquisition, employee related costs, deal related costs, and start-up costs) was £2.0m (1H20: £1.9m).

2) Depreciation decreased to £0.6m in 1H20 from £0.7m in 1H20. This included a charge for 'Return of Use' assets accounted for under IFRS16 of £0.3m (IH20: £0.4m).

3) No amortisation or impairment of intangible assets was charged during the period since all intangible assets had been fully amortised as at November 2020.

4) The Company incurred a number of expenses in the period, that are considered exceptional in nature and appropriate to identify. These comprise:

Total Revenue and Adjusted EBITDA in 1H21 and the comparative period is categorised as follows:

1 Central costs include finance, IT, marketing and plc costs

2 Adjusted EBITDA includes the impact of adoption of IFRS16

The Company's total customer base of c.58k as at 31 May 2021 (1H20: c.56k) was split as follows: Australia: 83% (1H20: 80%), Norway: 17% (1H20: 20%).

The year on year analysis from both a revenue and EBITDA perspective is explained as follows:

Nordics

Australia

An analysis of continuing and discontinued activities on a like for like basis (like for like revenue and adjusted EBITDA treat acquired/disposed businesses as if they were owned for the same period across both the current and prior year and adjusts for constant currency and changes in the commercials of the PPP contract and accounting treatment for Grants), is provided as follows: 

Continuing Operations

- The growth in customers, revenue and adjusted EBITDA, remained strong throughout the period in Continuing Operations, underpinned by a strong Australian attainment with a slight reduction in fixed wireless performance, in the main, due to churn and installation delays.

- Underlying average revenue per user across continuing operations ("ARPU") increased by 11.6% to £38.07 per month in 1H21 (1H20: £34.09). Customer average annualised churn was 26.6% (1H20: 20.1%) in the period.

Discontinued Operations

- Revenue: 1H21 revenue increased by 51.7% (£1.6m) vs 1H20 LFL following increased sales in relation to the Superfast contracts and ARPU improvements

- Adjusted EBITDA: increased by £0.3m due in the main to timing of grant income released on the new Superfast contracts.

Balance Sheet

Non-current assets have decreased in the last 12 months by £38.8m to £9.6m (1H20: £48.4m) primarily as a result of the disposal to Eutelsat in September 2020 (£26.8m) and the reclassification of QCL assets as Current Assets Held for Sale as at 31 May 2021 (£20.1m).

Actual capital expenditure in the Continuing business in 1H21 was £0.7m (1H20: £0.5m), primarily in the Nordic infrastructure.

Intangible Assets of £5.6m comprises the Goodwill relating to the continuing businesses (FY20: £12.0m). The reduction during the current period is due to the reclassification of the carrying value of QCL of £6.3m to current assets held for sale.

Working Capital

Inventory days decreased to 18 days (1H20: 28 days) due to increased sales.

Debtor days decreased to 12 days (1H20: 22 days) following strengthening of the recovery team and implementation of auto suspend in several regions.

Creditor days decreased to 113 days (1H20: 138 days) due to the use of proceeds from the Eutelsat sale to improve our credit position with our suppliers.

Total net cash, excluding lease liabilities, decreased in the year by £3.3m to £4.1m (FY20: £7.4m) and is explained further in the Cash Flow Analysis section. The movement is due to £3.3m cash held by Quickline classified as an asset held for sale, there being £nil net movement for the continuing businesses during the period.

As at 31 May 2021, the Company had a cash balance of £12.1m and £3.6m of headroom remaining of the Santander facility of which £8.4m had been drawn. Post completion of the Disposal, as at 31 July 2021 the Company had a net cash balance of approximately £33m. As announced today, the Company is also proposing a return of capital to shareholders of approximately £26m through a B share issue and redemption. This return of capital will equate to 45p per ordinary share. The Company will also repay in full its drawn down debt with Santander of £8.4m and will put in place a new undrawn facility of £5m.

Cash Flow Analysis:

Underlying Cashflow performance of continuing group

The underlying cash flow performance analysis seeks to clearly identify underlying cash generation within the Company and separately identify the cash impact of M&A activities, identified exceptional items and the treatment of IFRS 16 and is presented as follows:

1) Underlying movement in working capital was an outflow of £0.7m (1H20: outflow £2.1m) which supports the working capital payments associated with the demounting (£0.2m) and upgrading projects (£0.4m) in the Nordics, and a slight increase in Trade Receivables (£0.1m)

2) Forex and non-cash outflow of £0.0m (1H20: outflow £0.7m) relate to the exchange movement in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Financial Position, as well as costs/income where there is no impact on operating cashflow.

3) This resulted in an underlying operating cash flow before Interest, Tax, Capital expenditure and Exceptional items of £1.3m (1H20: £0.9m outflow) and an underlying operating cash flow to EBITDA conversion of 66.4% (1H20: -48.7%).

4) Tax and interest paid was £0.3m (1H20: £0.9m). The difference of £3.8m last year to the condensed consolidated statement of comprehensive income was accrued interest including BGF redemption premium and loan interest.

5) Purchases of assets were £0.7m (1H20 £0.5m). These purchases were primarily improvements to the Nordic fixed wireless infrastructure.

6) Cash Exceptional items of £1.0m (1H20: £0.2m) excludes non-cash exceptional items including provisions made in accordance with IAS 37 which are expected to be incurred throughout 2H21.

This resulted in an underlying Free Cash outflow after exceptional items in the period of £0.7m (1H20: outflow £2.6m).

7) There were no purchases of intangibles during the period or in 1H20.

8) The movement in cash from discontinued operations represents the increase of £1.1m accounted for by increase in cash balances recognised in the accounts of Quickline.

9) In 1H21 the financing activities related to the principal element of lease payments of £0.3m (1H20: drawdown of cash on the RCF of £3.5m less the BGF penalty interest £1.1m).

Statutory Cash flow Analysis

Underlying operating cash flow improved to £1.3m in 1H21 (1H20: Outflow of £0.9m), showing an improvement in working capital movements. This results in an operating cash flow to adjusted EBITDA (pre IFRS 16 adjustment) conversion of 66.4% (1H20: -48.7%).

Tax and interest paid reduced to £0.3m in 1H21 from £0.9m in 1H20 following annualised benefit of the refinancing of our RCF facility with Santander at a lower interest rate and a repayment of £21m in September 2020.

The net summary of the above is an equity free cash inflow of £0.3m as at 1H21 from a £2.3m outflow in 1H20 and is summarised as follows:

1Underlying Operating Cash flows is before interest, tax and exceptional items relating to M&A, integration costs and investment in network partnerships

Net Cash / (debt) comprises:

In the last twelve months (LTM) period, comparing 1H21 with 1H20, cash increased by c£6.2m and debt decreased by £18.1m, resulting in an increase in net cash of £24.2m to £4.1m from net debt of £20.1m, excluding IFRS 16 liabilities.

In the LTM period, we generated operating cash outflows of £6.2m and received proceeds from the sale of subsidiaries of £37.2m less £1.0m cash retained by those businesses, plus new investment by non-controlling interests of £4.0m and this was utilised as follows; investment in fixed assets of £8.6m, purchase of intangibles £0.2m, repayment of debt net of new loans of £14.3m, capital element of lease payments £1.5m, resulting in an increase in cash of £9.4m. Of the resulting balance of £15.4m, £3.3m is included in assets held for sale, leaving a cash balance for the continuing business of £12.1m.

Since the start of the year, cash balances excluding Quickline have decreased by £1.0m while debt increased by £0.1m.

The table above excludes the lease liabilities of £1.9m recognised for the first time in 2019 after the adoption of IFRS 16 (1H20: £5.1m). Including this amount would give a total net cash of £2.2m (1H20: net debt £25.2m).

Statutory EPS and Adjusted EPS for total company including discontinued operations

Statutory EPS loss per share decreased to 1.3p from 12.1p.

Statutory basic EPS from continuing and discontinued operations shows a loss of 1.3p (1H20: Loss 12.1p). Statutory basic EPS from continuing operations reduced to a loss of 0.5p (1H20: Loss 7.0p).

Frank Waters

CFO 

Bigblu Broadband plc

Consolidated statement of comprehensive income

6 months ended 31 May 2021

Bigblu Broadband plc

Consolidated statement of financial position

As at 31 May 2021

Bigblu Broadband plc

Consolidated Cash Flow Statement

6 months ended 31 May 2021

Bigblu Broadband plc

Condensed consolidated Reserves Movement

6 months ended 31 May 2021

Non-Controlling Interest

The loss attributable to shareholders is £0.7m, which represents the loss for the half year of £1.0m (2020: £7.0m) less the loss attributable to non-controlling interests of £0.2m (2020: £0.1). The £5.9m represents the carrying value of the non-controlling interest.

Bigblu Broadband plc

Notes to the financial statements

For the period ended 31 May 2021

1. Presentation of financial information and accounting policies

Basis of preparation

The condensed consolidated financial statements are for the half year ending 31 May 2021.

The nature of the Company's operations and its principal activities is the provision of last mile (incorporating Satellite and Wireless) broadband telecommunications and associated / related services and products.

The Company prepares its consolidated financial statements in accordance with International Accounting Standards ("IAS") and International Financial Reporting Standards ("IFRS") as adopted by the EU. The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments.

Under IFRS 5, assets held for sale (including disposal groups) are classified as discontinued operations and should be presented separately in the income statement. Even though the sale of Quickline was a post-balance sheet event the Company has opted to show this as discontinued operations as laid out by IFRS 5 as at 31 May.

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 periods presented in these financial statements, except as stated below.

Prior year adjustment

The prior year adjustment relates to the treatment of share capital issued in connection with previous acquisitions made during the year ended 30 November 2018. From a review of the Company's distributable reserves, it was identified that the Merger Relief did not apply to the allotment of shares where consideration was settled in cash. As a result, the premium arising on these allotments of £10.3m (stated net of the relevant apportionment of attributable issue costs) should have been credited to the Share Premium account at the time.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive Report. The financial position of the Company, its cash flows and liquidity position are described in the Finance Review.

As at 31 May 2021 the Company generated an adjusted EBITDA before a number of non-cash and start-up costs expenses in the Condensed consolidated statement of financial position, of £2.0m (FY20: £1.9m), and with cash inflow from operations of £0.3m (FY20: outflow of £0.9m) and a net increase in cash and cash equivalents of £0.1m in the year (FY20: decrease £0.1m). The Company balance sheet showed net cash at 31 May 2021 of £4.1m (FY20: net debt £20.1m). Having reviewed the Company's budgets, projections and funding requirements, and taking account of reasonable possible changes in trading performance over the next twelve months, particularly in light of the continued COVID-19 risks and counter measures, the Directors believe they have reasonable grounds for stating that the Company has adequate resources to continue in operational existence for the foreseeable future.

The Board has concluded that no matters have come to its attention which suggest that the Company 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 and ARPU, are in fact showing a positive position compared to prior year and budget. The forecasts for the combined Company projections, taking account of reasonably possible changes in trading performance, indicate that the Company 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.

Furthermore, the announced post balance sheet event of the proposed disposal of part of the business to Northleaf, together with continuing arrangements with key banking partners gives the Board further comfort on the going concern concept.

As a consequence, the Board believes that the Company is well placed to manage its business risks, and longer-term strategic objectives, successfully.

Estimates and judgments

The preparation of a condensed set of financial statements requires management to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities at each period end. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.

In preparing this set of consolidated financial statements, the significant judgments made by management in applying the Company's accounting policies and the key sources of estimating uncertainty were principally the same as those applied to the Company's and Individual company's financial statements for the year ended 30 November 2020.

Basis of consolidation

The condensed consolidated financial statements comprise the financial statements of Bigblu Broadband plc and its controlled entities. The financial statements of controlled entities are included in the consolidated financial statements from the date control commences until the date control ceases. The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All inter-company balances and transactions have been eliminated in full.

2. Distribution and Administration Expenditure

Distribution and administration costs are analysed as follows:

3. Earnings per share

Basic (loss)/profit per share is calculated by dividing the loss or profit attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share or increase the loss per share. For a loss-making company with outstanding share options, net loss per share would be decreased by the exercise of options. Therefore, as per IAS33:36, the antidilutive potential ordinary shares are disregarded in the calculation of diluted EPS.

Reconciliation of the (loss)/profit and weighted average number of shares used in the calculation are set out below:

1Basic and diluted EPS from continuing operations is the loss for the period divided by the weighted average shares and weighted average diluted shares respectively. None of these losses are attributable to non-controlling interests

2Basic and diluted EPS from discontinued operations is the (loss)/profit for the period less the amounts attributable to non-controlling interests divided by the weighted average shares and weighted average diluted shares respectively.

3Total basic and diluted EPS attributable to ordinary shareholders is the sum of (losses)/profits from continuing and discontinued operations less the amounts attributable to non-controlling interests, divided by the weighted average shares and weighted average diluted shares respectively.

4Adjusted basic and diluted EPS is the loss for the period from continuing operations before exceptional expenses, exceptional interest and share based payments, divided by the weighted average shares and weighted average diluted shares respectively. None of these losses are attributable to non-controlling interests. This is a non-statutory measure.

4. Other capital reserves

5. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed within the financial statements or related notes.

6. Availability of the Half Year Report

A copy of these results will be made available for inspection at the Company's registered office during normal business hours on any weekday. The Company's registered office is at Broadband House, The Old Bakery, Victoria Road, Bicester, OX26 6PB. The Company is registered in England No. 9223439.

A copy can also be downloaded from the Company's website at https://www.bigblu-plc.com