Bigblu Broadband plc (AIM: BBB.L), a leading provider of alternative fast broadband services, provides a trading update for the six-month period ended 31 May 2018.
Trading in the period was in line with expectations and saw continued improvement in the Company's key indicators, including growth in revenue, growth in the customer base and improving margins and cash flows. All of this occurred at the same time as a significant fundraise, underpinned by the support from existing and new shareholders, two successful acquisitions as part of the Group's growth strategy and the disposal of the non-core Australian fibre customer base.
The first half of the year was also about completing the European footprint, dedicating time and resources on the preparation phase for working with the EuroBroadband Joint Venture, going live in five countries in twelve weeks and rolling out the Company's systems to acquired companies.
- The total number of customers increased 22% to around 123k prior to the post-period disposal of the Australian Fibre customer base and associated business
- Total revenue increased c. 20% to c. £25m (H1 17: £21m)
o Recurring revenue* increased c. 20% to c. £23m, representing 91% of total revenue
o Like-for-like organic revenue growth on a constant currency basis** of 7%
- Gross margin grew by 40 basis points to 37.4% due to improved sales mix
- Underlying EBITDA*** continued to improve compared with H1 17
- Net debt decreased to c. £9.4m as at 31 May 2018 (FY17: £13.1m)
* Recurring revenue is defined as revenue generated from the Group's broadband airtime and data contracts which are typically two years or more in duration.
** Like-for-like organic revenue growth compares current and prior period revenue treating acquired businesses as if they had been owned for all of both periods on a constant currency basis.
*** Underlying EBITDA is before share based payments, depreciation, intangible amortisation, acquisition and deal related costs
- Strengthening of the Board of Directors
o Christopher Mills joined the Company as a Non-Executive Director on 29 May 2018 and has already made a positive impact to Board level discussions
- The Company also continues to strengthen its senior management team to support the growing business and in February recruited Mark Anderson, previously a director of Sky and Fox Networks, as Chief Operating Officer
- Successful placing of new Ordinary Shares with existing and new shareholders raising gross proceeds of approximately £12.0 million
- Continued support from HSBC via extension of RCF facility
- Acquisitions of Open Sky, a leading satellite broadband provider in Italy with c. 14.5k customers, and the acquisition of Sat Internet, a well-established provider of satellite broadband based in Germany, with c. 6.0k customers in Germany and Austria and a further c. 0.5k customers in Portugal. Both acquisitions represented new territories for the Company and form new hubs with a combined customer base of c. 21k whilst adding significantly to BBB's operational footprint and scale within Europe. These acquisitions are expected to be earnings enhancing with a positive free cash flow contribution
- Post-period end the company disposed of c. 11k non-core, lower margin fibre customers of the Australian business SkyMesh
- Broadband Delivery UK ("BDUK")
o Received £2.1m grant to develop and conduct field trials for the next generation of 5G fixed wireless broadband services over TV whitespace frequencies with the aim of delivering super-fast services over this spectrum for the first time
- Progress on the EuroBroadband Joint Venture
o ERP and customer management systems rolled out and now live in five JV countries
o First phase of coordinated marketing plan and spend has just commenced and is being rolled out over the next five months
The Company has continued to make good progress in expanding its customer base, driven by the impact of acquisitions and organic net additions to the core business. As a result, total customers have increased from just over 100k at the start of the financial year to approximately 123k prior to the disposal of the non-core Australian fibre customers. The Group's customer base currently stands at c. 112k post the Australian fibre customer disposal.
Group revenue increased by c. 20% to c. £25m over the same period in the prior year (H1 17: £21m) with recurring revenue* increasing by c. 20% to c. £23m (H1 17: £19m), representing approximately 91% of total revenue.
Like-for-like organic revenue growth** during the period was c. 7% on a constant currency basis compared to the same period in the prior year reflecting a solid performance from the core business. Furthermore, the contributions from recent acquisitions in Italy and Germany have significantly expanded the Company's operational footprint and scale across Europe.
Gross margin was 37.4% in the period (H1 17: 37.0%, FY17: 35.5%) due to an improved revenue mix across the Group's hubs, and underlying EBITDA*** continued to improve compared with H1 17 as the Company benefitted from scale.
Net debt decreased from £13.1m as at 31 December 2017 to c. £9.4m as at 31 May 2018 after acquisition related payments for Sat Internet Services and Open Sky and the additional equity raised to support working capital and further bolt-on acquisitions. As at 31 May 2018 the Group had cash of £7.4m (H1 17: £2.0m) and £3.6m of headroom in the HSBC facility (H1 17: £1.5m).
The Company took action in the period to strengthen and broaden the level of expertise on the Board. Christopher Mills was appointed to the board as Non-Executive Director on May 29. Christopher has been a long-term supporter and investor in the Company and has already made significant contributions to Board level discussions.
The Company is well placed as a strategic partner of BDUK and in March received a £2.1m BDUK grant to carry out field trials to develop and establish the operating standards of the next generation of 5G fixed wireless broadband services utilising unused TV whitespace spectrum to increase superfast wireless broadband penetration in very rural areas.
The Board is confident that the solid performance of the core business and the recently completed acquisitions will continue for the remainder of the current financial year and the outlook therefore remains encouraging. The Company continues to evaluate further complementary acquisition opportunities and technologies as part of its growth strategy and is confident of achieving its previously stated 2020 target of 150,000 customers.
Andrew Walwyn, CEO of BBB commented, "Trading in the period was strong due to continued customer sign up, improving retention rates and increased data demands of existing customers. I believe that we will see further growth in the second half of the year post the fibre disposal and the increased marketing spend in the JV as consumers continue to demand faster and more dynamic broadband services wherever they're located. The first half of the year has been mainly about consolidating our acquired customer bases and integrating systems across our networks. This momentum is expected to continue into the second half, and I look forward to updating shareholders in due course."