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', the 'Group' or the 'Company')

Interim Results

Trading in line with expectations, Operational Improvements

Bigblu Broadband plc (AIM: BBB.L), a leading provider of alternative super-fast and ultra-fast broadband services, announces its unaudited interim results for the six months period ending 31 May 2023 (the "Period"). The Company has operations in Australia, Norway and a residual stake in Quickline Communications ("Quickline").

There was progress across the Company's business units in the period, with the focus on the introduction of new products and systems improvements. The Company is therefore well positioned for the second half of the year.

Financial Highlights

Operational Highlights

1 Adjusted 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.

2 Like for like (LFL) revenue and EBITDA is adjusted for new or divested businesses in both the current and prior year and adjusts for constant currency.

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 and excludes items identified as exceptional in nature. 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.

4 Cash / Net debt excludes lease-related liabilities of £0.9m of under IFRS 16 (FY22 £1.4m).

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

"The overall performance of the Group is in line with the Board's expectations. We are carefully extending our product offerings with our partners in each region, thereby increasing our addressable markets, at the same time implementing new systems in each territory and cutting central headcount / other costs. 

We have reorganised our Norwegian business and our Australian business has completed another important bolt on acquisition. 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 large numbers of customers are likely to be working from home, whether full or part time.

Specifically, following the recent acquisitions by SkyMesh in Australia, the Board believes that its strategy of organic growth complemented by further bolt-on acquisitions should accelerate the Company's presence across Australia with the potential to achieve 80,000 customers over the next three years. Furthermore, the Board continues to assess all options to realise value for shareholders, including a potential spin out ASX listing, as previously announced.

The Board remains focused on maximising value and returns for shareholders. The combination of market dynamics and opportunities available to our business units provides a backdrop for delivering enhanced shareholder value." 

For further information:

About Bigblu Broadband plc

Bigblu Broadband plc (AIM: BBB.L), is a leading provider of alternative superfast and ultrafast broadband solutions throughout Australia and Norway. 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 services. BBB's alternative broadband offerings present a customer experience that is broadly similar to that offered by wired broadband and the connection can be shared in the normal way with PCs, tablets and smart phones.

CHIEF EXECUTIVE'S REPORT

Overview

The first half of this financial year has been a further period where we have had to contend with the challenges created by the global economy and inflationary issues.  In the context of these global challenges, our long-term relationships with our network partners were vital as we worked together to ensure we could deal with the growing demand for rural and remote broadband services.

In early 2023, our fully owned Australian business, SkyMesh PTY LTD, 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, including deferred payments, was AUD$4.72m (£2.7m). The cash consideration was satisfied from existing cash resources including our revolving credit facilities with Santander. The satellite operations acquired consisted of net 5.2k customers and in 1H23 contributed £0.9m of revenue, £0.3m of EBITDA and £0.3m of cash generation. Post this acquisition the Board continues to explore all options to realise value for BBB shareholders from SkyMesh, which could include an ASX listing of SkyMesh.

Key Financials for the continuing operations

Net customer growth after the Acquisition in the first half of 2023 was 3.6% to 62.6k (1H22: 2.6%). There was a big focus on driving new products, with Telenor 4G/5G FWA in Norway and fixed line in Australia together with continued marketing campaigns to migrate c.1k customers to more suitable products which the Board believe should help to reduce churn in the future.

Total revenue was £15.0m, up 0.5% (1H22: £14.9m). This increase in revenue reflected a net increase in customers, including the acquisition (£0.5m) and ARPU progression (£0.1m) but reduced by impact of negative FX rates (£0.5m) in the period. Recurring airtime revenue, defined as revenue generated from the Company's broadband airtime, which is typically linked to contracts, was £14.0m representing 93% of total revenue (1H22: 95%). Total like-for-like (LFL) revenue for the Continuing Group in the period was £14.6m representing 3.1% growth on a constant currency basis.

Gross profit margins reduced to 39.0% in 1H23 (1H22: 41.8%), due to planned product mix changes with the increase in 5G FWA customers being at slightly lower margins than existing recurring margins for fixed wireless, but which have a higher lifetime value, as well as plan switching in Australia.

Overheads, before items identified as exceptional in nature, reduced to £3.8m (1H22: £4.2m), representing 25.2% of revenue (1H22: 28.3%) due in the main to reduced headcount costs of c.9 FTE (£0.4m).

Consequently, adjusted EBITDA for the period increased 2.1% to £2.1m (1H22: £2.0m), alongside an adjusted EBITDA margin of 13.8% (1H22: 13.6%). Total like-for-like (LFL) adjusted EBITDA for the Continuing Group on a constant currency basis in the period was £1.8m (1H22: £1.5m) representing 21.4% growth.

Australia

SkyMesh remains the leading Australian satellite broadband service provider having been named Best Satellite NBN Provider for the fifth year in succession (2019-2023). SkyMesh commanded a 55 per cent market share of net new adds under the NBN scheme in the period to 31 May 2023.

SkyMesh ended the period with customer numbers at 55.1k - up 5.9% on the prior year (1H22: 52.0k), which includes the net customers acquired from Uniti (5.2k) and revenues of £12.8m. Gross margins were c.35% (down c.1% on 1H22) due to the slightly lower margin from the Harbour customer base acquisition (34%) and less data packs sold in the period. With new products being implemented in the second half of the year, as well as price increases, we expect gross margins to increase to around 36%.

Adjusted EBITDA was in line with prior year at £2.2m supporting both a positive adjusted operating cash inflow of £1.4m and generating a positive adjusted underlying free cash flow before group transfers of £1.2m.

The acquisition of customers from Harbour continues SkyMesh's strategy of expanding its presence across Australia.

The Board believes that it can continue to complement organic growth opportunities by accretive acquisitions and partnerships that could accelerate the Company's presence across Australia. 

The emergence of 5G and LEO satellite technologies has accelerated the uptake of non-fibre broadband internet services in Australia. Starlink has continued to target our market with strong promotional offers which continue to impact current churn rates, and we are monitoring such promotion and marketing activity. We believe we can counter such challenges to the business by expanding our product offerings to increase our addressable market. In this regard and working with our network partners, c.25% of the base has been transferred to new product offerings from NBN Co, and although early, we are seeing far higher customer satisfaction and reduced churn.

Norway

Our Norwegian business ended 1H23 with customer numbers of 7.5k (1H22: 8.4k) and underlying churn has reduced to 12.1% (1H22: 16.7%).

Revenues remained in line with prior year at £1.9m. Gross margin decreased in line with expectations to a blended 55.0% (1H22: 62.3%) with lower margins in our Satellite base of 46.2% (1H22: 47.5%), our 4G/5G FWA  base of 57.3% (1H22: 59.2%) and our fixed wireless base of 66.0% (1H22: 67.2%). The 4G/5G FWA revenue stream continues to strengthen and is now contributing in excess of 70% of net new customers and revenue on a monthly basis.

Adjusted EBITDA for Norway was £0.2m (1H22: £0.5m), Adjusted operating cash was an inflow of £0.4m (1H22: Outflow £0.6m) and adjusted underlying free cash flow was an inflow of £0.2m (1H22: Outflow £1.1m) following capital expenditure of £0.2m.

The Company has pro-actively undertaken a reorganisation and restructuring of our Norwegian business and consequently reduced the workforce by approximately 30%, with an annualised cost saving going forward of c.£0.5m

The Directors consider that each of the remaining business units in Australia and Norway are progressing in line with expectations; product offerings are being widened, increasing the addressable markets, and costs reduced. The Directors are carefully balancing new initiatives with the desire to realise shareholder value. Specifically

Strategy

The demand for our products has increased with an element of home working in the countries we operate being the norm, and the consequential need for faster broadband solutions to the home. Whilst recognising the pressure on individuals and companies' disposal income and profits, we believe that the solution set the Group offers its customers is important and a necessary utility cost.

The Directors consider that, each of the remaining business units in Australia and Norway are progressing in line with expectations in terms of, carefully widening product offerings and therefore addressable markets, reducing costs. The Directors are carefully balancing new initiatives with the desire to realise shareholder value. Specifically

·   For the SkyMesh business in Australia, the Board believes that it could complement organic growth opportunities by additional acquisitions that could accelerate the Company's presence across Australia's addressable market. As noted previously, the Board believes the business has the potential to achieve 80,000 customers in the region over the next three years through organic and acquisitive growth. Post the recent acquisition the Board continues to explore all options to realise value for BBB shareholders from SkyMesh including an ASX listing.

·     Norway is showing early signs of stabilising, but we recognise the importance of limiting further cash requirements.

Current Trading and Outlook

During the period to 31 May 2023, the Company continued to grow its customer base while still benefiting from the strong visibility afforded by the high percentage of recurring revenues. This will prove to be key to the Group as we seek to maximise shareholder value from our Australian and Norwegian businesses.

The Board will continue to consider such opportunities as they arise including, but not limited to, capitalising on organic growth and considering acquisition targets in Australia to further solidify our position in the region, create scale and at the same time reigniting our Norway operation with a smaller, more profitable footprint, reduced churn and new product offerings to our customers.

In the current environment, 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 closely monitor a number of KPIs daily that impact on the businesses, to ensure that the economic pressures faced by our customers and suppliers don't materially impact our operations and financial performance. These KPIs include customer sales, activations, churn, customers inflight, FOREX, cash and stock levels.

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

Andrew Walwyn

CEO

FINANCIAL REVIEW

This financial review describes the performance of the Company during the Period.

Total customers at the Period end for the Group were c.62.6k (1H22: c.60.4k). During the period the Company had gross adds of 7.5k, (1H22: 8.5k) and underlying churn of 8.2k (1H22: 7.5k) giving c.0.7k net organic churn (1H22: net organic adds c.1.0k). In addition, there were net 5.2k customers acquired with the acquisition of Harbour satellite customers. The exceptional churn c.1.3k (1H22: c.1.6k) resulted in the main from demounting equipment on Norwegian masts that are no longer profitable. This is summarised as follows:

¹Customers where orders have been received but not activated (0.5k) and Customers who have taken a contract out and commenced service (7.0k)

²Underlying churn is where customers have cancelled their contract

³Customers who have been specifically targeted to switch their contract and renew with a new product and contract

⁴Exceptional churn is where we or a customer cancels their contract due to uncontrollable circumstances impacting their service such as cyber event and demounting

Significant focus in 1H23 was on launching 4G/5G FWA services in Norway and "right sizing" the business across all territories. Total Churn (defined as the number of subscribers who discontinue their service as a percentage of the average total number of subscribers within the period, including the exceptional churn), increased slightly to an average annualised churn rate of 32.3% (Excluding exceptional churn 28.3%) in 1H23 from 30.7% in 1H22 (Excluding exceptional churn 25.3%). The main areas of exceptional churn were the continued demounting of loss making fixed wireless customers in Norway.

Total revenue increased 0.5% to £15.0m (1H22: £14.9m). This reflects the higher customer numbers (£0.5m) and increased underlying ARPU (£0.1m), reduced by currency movement (£0.5m). ARPU improved from £40.64 to £40.88 as we sought to offer better packages to customers, more appropriate to increasing demands for speed and data, with increased revenue from services and installations. Importantly Like for like revenue in the period increased 3.1% to £14.6m (1H22: £14.1m).

The sales revenue mix across the Company at the end of the period was c.75% Satellite, c.21% Fixed Wireless and 4% 4G / 5G FWA (1H22: c.76% Satellite, c.22% Fixed Wireless and 2% 4G / 5G FWA).

Gross margin was lower due to the product mix associated with the introduction of 5G FWA products in Norway and the gross margin from the Harbour acquisition slightly lower than the existing run rate in Australia. Overheads reduced £0.4m (10.4%) on 1H22, due to lower staff costs following the Group restructuring.

Depreciation reduced in the period to £0.7m (1H22: £1.0m) following the write down of fixed assets in Norway at last year end.

Amortisation of intangible assets increased to £0.8m (1H22: £0.2m), due to the customer contracts acquired with Clear (£0.3m) and Harbour (£0.5m), which are being amortised over 24 months.

The Company incurred charges identified as exceptional in nature during the period of £2.3m (1H22 £0.9m), including costs related to internal restructuring/redundancy (£1.3m), legal and related costs associated with acquisition and disposal activities (£0.4m), system costs (£0.5m) and other costs deemed exceptional to ordinary activities (£0.1m).

Interest costs increased during the period to £0.1m (1H22: £0.1m) as a result of a draw down of the revolving credit facility in 1H23 of £2.1m to support M&A activity, working capital and the restructuring costs.

Statutory Results and EBITDA Reconciliation

Adjusted EBITDA (before share based payments and exceptional items) for the half year increased 2.1% to £2.1m (1H22: £2.0m). A reconciliation of the adjusted EBITDA to statutory operating loss of £1.7m (1H22: £0.1m loss) and to adjusted PAT of £1.2m (1H22: £0.5m profit) is shown below:

Company

1)    Adjusted EBITDA (before share based payments, depreciation, intangible amortisation, acquisition, employee related costs, deal related costs, and start-up costs) was £2.1m (1H22: £2.0m).

2)    Depreciation reduced to £0.7m in 1H23 from £1.0m in 1H22, following the impairment of fixed assets in Norway at the year end.

3)    Amortisation of intangible assets increased to £0.8m (1H22: £0.2m), due to the customer contracts acquired with Clear (£0.3m) and Harbour (£0.5m) being amortised over 24 months.

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

Total Revenue and Adjusted EBITDA in 1H23 and the comparative period is analysed 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.62.6k as at 31 May 2023 (1H22: c.60.4k) was split as follows: Australia: 87% (1H22: 86%), Norway: 13% (1H22: 14%).

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

Australia

Norway

Central

Cash Flow Analysis:

Underlying Cashflow performance

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 £0.9m (1H22: outflow £1.3m), an improved working capital position of £0.4m due in the main to

o  an decrease in Trade & Other Receivables £0.6m

o  a reduction in Trade Payables (£1.1m)

o  lower inventory £0.6m

o  and improved working capital movements £0.3m

2)    Forex and non-cash outflow of £0.6m (1H22: inflow £0.6m) relate to the exchange movement in the Consolidated Statement of Comprehensive Income and the Consolidated Statement of Financial Position (£0.5m) where AUD and NOK values are translated to GBP for the Group reporting currency, as well as costs/income which have no impact on operating cashflow (£0.1m).

3)    This resulted in an underlying operating cash flow before Interest, Tax, Capital expenditure and Exceptional items of £0.6m (1H22: £1.3m inflow) and an underlying operating cash flow to EBITDA conversion of 30.9% (1H22: 64.4%).

4)    Tax and interest paid was £0.2m (1H22: £0.4m). Tax paid relates to the prepayment in Australia on the monthly revenue (£0.1m), with the interest element being the fee on the undrawn and drawn funds from the RCF

5)    Purchases of assets were £0.2m (1H22 £0.5m). These relate to Norwegian 5G FWA stock capitalised (£0.2m).

This resulted in an underlying Free Cash inflow before exceptional items, M&A activities and financing activities in the period of £0.2m (1H22: inflow £0.4m) and an underlying free cash flow to EBITDA conversion of 74.4% (1H22: (10.0%)). Excluding the currency translational impact this would have been an underlying operating cash flow to EBITDA conversion of 95.1% (1H22: 34.9%).

6)    Exceptional items of £1.5m (1H22: Inflow £0.4m) covers completion payments (£0.1m) in respect of earlier M&A activity, staff restructuring/redundancy costs in Norway (£0.4m) and central (£0.5m), disposals and acquisitions (£0.2m) and others (£0.3m).

7)    Investing activities included the purchase of Uniti of £2.7m (1H22: purchase of Clear Networks for £1.2m)

8)    There were no operations discontinued during 1H23 (1H22: £nil).

9)    Proceeds from the RCF facility with Santander.

10)  In 1H23 the financing activities related to the principal element of lease payments of £0.6m (1H22: £0.3m).

Statutory Cash flow Analysis

Underlying operating cash inflow was £0.6m in 1H23 (1H22: Inflow of £1.3m).

Tax and interest paid increased to £0.2m in 1H23 from £0.4m in 1H22, covering the monthly corporation tax payments on account in Australia as well as interest payments.

The net summary of the above is an equity free cash inflow of £0.2m in 1H23 (1H22: £0.4m inflow) which 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 1H23 with 1H22, cash decreased by c£2.8m to £1.8m, from £4.5m, excluding IFRS 16 liabilities. Along with the drawdown from the RCF this results in a net debt position of £0.3m (1H22: £nil).

In the LTM period, we generated cash inflows of £5.1m, and this was utilised as follows;

-      investment in fixed assets of £1.1m

-      purchase of intangibles £2.7m

-      interest and tax £0.5m

-      and other working capital elements £0.8m.

The table above excludes the lease liabilities of £0.9m relating to IFRS 16 (1H22: £1.4m). Including this amount would give a total net debt of £1.2m (1H22: net cash £3.1m).

Balance Sheet

Non-current assets have decreased in the last 12 months by £1.1m to £17.1m (1H22: £18.2m) and are analysed as follows

-      Increased due to the acquisition of customer contracts from Harbour (Uniti) £2.7m

-      Decreased by depreciation in the year (£2.7m)

-      Decreased by amortisation in the year (£1.3m)

-      Increased due to currency translation £0.2m

Capital expenditure in 1H23 was £0.2m (1H22: £0.5m) relate to Norwegian 5G FWA stock capitalised.

Intangible Assets of £8.7m comprise Goodwill and other intangibles (1H22: £7.9m). Of the increase of £0.8m,

-      £2.7m relates to the customer acquisition by SkyMesh of the Harbour customer base,

-      offset by a reduction in deferred consideration payments of £0.5m and

-      amortisation of £1.4m.

Working Capital

Inventory days decreased to 19 days (1H22: 31 days) due to stock sold to support the increasing 5G FWA sales in Norway.

Debtor days increased to 14 days (1H22: 10 days) due to delayed collections associated with the Harbour acquisition and transfer of base.

Creditor days decreased to 64 days (1H22: 87 days) due to cash being used to improve our credit position with our suppliers, specifically in our Norwegian business.

Total net debt, excluding lease liabilities, increased in the year to £0.3m (FY22: Net cash £4.5m) and is explained further in the Cash Flow Analysis section.

Statutory EPS and Adjusted EPS for total company including discontinued operations

Statutory EPS loss per share increased to 3.3p from 1.1p.

Statutory basic EPS shows a loss of 3.3p (1H22: Loss 1.1p). Diluted EPS increased to a loss of 3.3p (1H22: Loss 0.9p).

Frank Waters

CFO

Bigblu Broadband plc

Consolidated statement of comprehensive income

6 months ended 31 May 2023

Bigblu Broadband plc

Consolidated statement of financial position

As at 31 May 2023

Bigblu Broadband plc

Consolidated Cash Flow Statement

6 months ended 31 May 2023