TIDM20CA
Arqiva Financing PLC
26 September 2019
Arqiva FY19 financial results
Revenue and EBITDA growth in year of strong programme
delivery
London, UK, 26 September 2019: Arqiva, one of the UK's leading
communications infrastructure and media services providers with
significant investments in essential communications infrastructure,
announces its results for the year ended 30 June 2019. Robust
results reflect a strong performance delivered across Arqiva's core
business in a year of major project delivery.
Highlights
-- Revenue growth for the year of 2.7%, including organic growth of 2.8%(1)
-- 1.5% increase in EBITDA including EBITDA growth in the
Telecoms & M2M (6.1%) and Terrestrial Broadcast (0.2%) business
units
-- Peak activity in the delivery of the 700MHz Clearance
programme in accordance with key programme milestones, with work
completed on 613 sites thus far
-- Continuing the delivery phase of the smart energy metering
contracts, and implementing incremental contract change requests,
finishing the year in line with milestones and network coverage of
circa 99%
-- Refinancing of the Group's GBP600m 9.5% coupon junior bonds,
due in 2020, raising GBP625m of new bonds, maturing in 2023 with a
coupon of 6.75%
Financial Results
Revenue grew 2.7% to GBP990.4m (2018: 964.2). Revenue includes
GBP0.6m (2018: GBP1.6m) from the Group's former Inbuilding
Solutions business disposed of during the year. Excluding the
effect on financial performance of this disposal, organic revenue
growth from the continuing business was 2.8%. The trend of reported
revenue growth has continued. Over the 3 years to June 2019
compound annual revenue growth was 3.8%. All revenue figures below
are from continuing operations.
-- Terrestrial Broadcast revenues increased by 0.4% to GBP491.3m
(2018: GBP489.4m). Revenue on contracts has increased through the
year, resulting from increased DAB activity as well as RPI linked
increases on broadcast contracts. These increases have been
partially offset by a reduction in other engineering projects due
to phasing of projects.
-- Telecoms & M2M revenues increased by 10.1% to GBP375.9m
(2018: GBP341.3m). Excluding the effect of the Group's Inbuilding
Solutions business disposed in the year which contributed GBP1.6m
to revenue in 2018 and GBP0.6m in 2019, the Telecoms & M2M
business experienced revenue growth of 9.5%.
-- Satellite and Media continues to operate in a competitive
market with revenue reductions in 2019 of 7.7% to GBP123.2m (2018:
GBP133.5m). Revenues were impacted largely due to the strategic
decision to exit a low margin managed service contract, reduced
focus on Playout and Occasional Use products (from which the Group
expects to be fully exited from over the next couple of years), as
well as the transfer of the reporting of revenues from the
Connected Solutions into Terrestrial Broadcast (GBP2.5m).
EBITDA, a key measure of the Group's financial performance, grew
1.5% to GBP527.3m (2018: GBP519.3m) due to the increase in revenues
resulting from strong programme delivery, and operating cost
savings partially offset by lower gross margins due to changes in
sales mix. This performance reflects another year of EBITDA growth
benefitting from peak levels of project activity with an annualised
growth rate over the past 4 years of 7.1%.
Net cash inflow from operating activities was GBP486.7m (2018:
GBP572.1m), representing a decrease of 14.9%. This decrease is
owing to a working capital outflow driven by the utilisation of
cash received in advance during prior years (decreasing contract
liabilities) and timing of payments, typical with historical trends
of the business. In the prior year the operating cash inflow was
higher due to working capital inflows arising from one off
additional contract liabilities recognised from Telecoms & M2M
and Terrestrial Broadcast customers.
Net capital expenditure and financial investment fell 27.4% to
GBP115.3m (2018: GBP159.0m). The net financial investment of the
Group includes consideration received in respect of the assets and
contracts of the Group's Inbuilding business.
(1) Organic growth refers to the underlying performance of the
business excluding the impact of non-core business areas which were
disposed in the current or comparative period (e.g. the Group's
Inbuilding business within the Telecoms and M2M business unit).
Simon Beresford-Wylie, Chief Executive of Arqiva, commented:
"In 2019 Arqiva completed multiple major projects and delivered
both revenue and EBITDA growth, led by an outstanding performance
in our Telecoms & M2M business with 10.1% growth. The last four
years have been a period of growth and operational improvement for
Arqiva through peak levels of project activity, delivering 7.1% of
compound EBITDA growth.
"Arqiva is strongly positioned, with our infrastructure helping
to underpin the UK's digital services, including driving sector
innovation for 5G services for MNOs and delivering an engaging
digital radio experience for listeners. Arqiva continues to work on
a number of substantial projects across the UK including 700 MHz
Clearance, DAB radio and smart metering in the energy and water
sectors.
"Looking ahead to 2020, we continue to transform and optimise
our business to be FutureFit, proactively developing new solutions
and ways of working for our customers to address the opportunities
and challenges ahead of us."
Key developments by business area
Media Networks (formerly Terrestrial Broadcast and Satellite and
Media)
Consolidation of Terrestrial Broadcast and Satellite and
Media
On 01 July 2019, the Group combined the former Terrestrial
Broadcast and Satellite and Media Business units, as well as the
corporate network teams into a newly merged business unit, Media
Networks. This was part of a strategy to ensure high levels of
service quality for customers, enabling us to serve customers
seamlessly and irrespective of which distribution platform the
customer is using. This has enabled the rationalisation of teams
where duplication existed, whilst aligning the priorities of the
networks team with customers' plans. The Company expects the skills
and expertise of the networks team to become ever more important as
customers explore the opportunities that internet delivered
services offer.
New multi-year agreement with UKPower Networks
In May 2019, Arqiva announced that it had been selected by
Britain's biggest electricity distributor, UK Power Networks, to
provide a new state-of-the-art Broadband Global Area Network (BGAN)
solution for their secondary Supervisory Control and Data
Acquisition (SCADA) network. The solution will enable UK Power
Networks' engineers to operate equipment remotely to restore
customers' power supplies quickly in the event of a power cut and
also to monitor and receive regular status updates from the
field.
700 MHz Clearance and DTT spectrum
The 700 MHz Clearance project remains on track. The scope of the
project is to clear the 700MHz spectrum band (694 MHz to 790 MHz)
of DTT use, so that it can be auctioned by Ofcom and used for
mobile data. The overall programme is expected to complete by late
2021 and the Group continues to earn revenues and cash flows as
delivery milestones are successfully completed. At 30 June 2019,
66% of Clearance events had been successfully completed including
the conclusion of Clearance events in Wales. Over 350 relay
antennas have been completed out of 415 across the whole
country.
Digital Platforms channel utilisation
As at 30 June 2019, the Group had capacity of 32 video streams
on its main (DVB-T) multiplexes. In the short term, the Company
expects that utilisation may reduce as a small number of customers
review their channel portfolios. The Group continues actively
reviewing all opportunities and remains confident in optimising the
medium- and long-term value of its DTT multiplexes. Contracts in
this business area are still typically 3-6years in duration.
Digital radio (DAB)
Since the start of this year, the Sound Digital multiplex (a
Joint Venture with Bauer and Wireless Group) has operated at 100%
utilisation following the launch of two Virgin Radio stations.
Arqiva's Digital One national multiplex also remains fully
utilised. The Company continues to market capacity on the 23 local
multiplex licences which the Group owns and occupancy has increased
year on year.
Reduced focus on Playout and closure of Occasional Use
Arqiva plans to reduce focus on Playout and traditional
Occasional Use satellite distribution and uplinking are progressing
well. The Company continues to support Playout customers in the
interim period as the Company runs down activities in this area and
expect to exit the business by the end of calendar year 2020.
Arqiva's traditional Occasional Use satellite distribution business
closed, as planned, at the end of June 2019. These relatively
subscale areas provided minimal contribution to the Group's overall
earnings and cashflow. The Company successfully completed its
repositioning to focus on providing managed services for live
events focusing on the growth areas of content acquisition,
contribution and IP and fibre delivery.
Telecoms & M2M developments
4G roll-out
The Group is approaching the completion of 4G roll-out. 8,694 4G
equipment upgrades were completed across Arqiva sites as at 30 June
2019 since roll-out began in 2014.
Small cells and pilot network
Whilst the UK small cells market remains in its early stages,
demand continues to grow. Arqiva has hundreds of small cells
deployed and operational across London and three out of the four UK
mobile network operators (MNOs) have deployed small cells on Arqiva
managed street assets. The service is equally suitable for 5G as it
is for 4G.
The Group continues to progress plans for a 5G small cells pilot
trial (the UK's largest) in the London Borough of Hammersmith &
Fulham, which will also involve the creation of a 15km high density
fibre network. Live services will run from the second half of the
2019 calendar year.
Major customer contract
The Group has a major MNO customer contract maturing in late
2019. Negotiations to define the commercial relationship past this
date are ongoing.
Smart energy metering rollout
The Group's smart metering communication network in the North of
England and Scotland has been live since November 2016. The Arqiva
network currently covers 99.25% of premises and is expected to
reach final coverage of 99.5% by summer 2020. DCC continue to
submit change requests that reflect new industry requirements
planned to be delivered in November 2019 and June 2020. The Group
expects change requests to continue into the new financial year,
but at a reduced volume reflecting the advanced stage of the build
out of this network.
Smart water metering rollout - Thames Water
Since April 2015, Arqiva has delivered a smart metering network
that enables the collection, management and transfer of metering
data for Thames Water. At 30 June 2019, there were over 407,000
meters installed and with over 8 million meter readings being
delivered per day it is the largest smart water metering network in
the UK.
Smart water metering trial contracts - Anglian Water
Since June 2016, Arqiva has been operating smart water metering
trials for Anglian Water in two of their regions. These trials are
part of Anglian Water's strategy for a long-term smart metering
programme and the delivery of Arqiva's service has enabled Anglian
to realise the significant benefits of improved leakage detection,
and consumer engagement, whilst also informing their business
plans.
Other business developments
Transformation update
The Group's company-wide transformation programme, 'FutureFit'
is progressing strongly as it moves into its next phase of
delivery. Through this transformation programme, Arqiva continues
to streamline and standardise its processes, rationalise and
modernise IT systems, achieve significant efficiencies and improve
customer service.
The Company continues to invest in new technologies to secure
Arqiva's infrastructure further and improve ways of working with
the deployment of an enhanced digital workplace. The Group has
completed a full migration to a mobile enabled workforce and
continue to enhance collaboration tools and capabilities with the
deployment of new applications to all laptops and smartphones. The
Company expects to make further investment as planning is well
underway for the complete overhaul of Service, Asset Management,
Network Management and ERP systems. This will transform the core
operational delivery model across the full range of products and
services.
CFO change
Sean West was appointed to the role of Chief Financial Officer
on a permanent basis on 04 September 2019, he has also been
appointed to the Board of Directors.
Outlook
Having successfully delivered significant revenue and EBITDA
growth through a period of major project deliveries, the Company
enters 2020 in a strong financial position, with a high-quality
customer base and exposure to growth technologies such as 5G. The
year ahead will not be without challenges, notably as a result of
changes in some of our end-markets and major projects completing.
To address the opportunities and challenges ahead, Arqiva continues
to make transformative investment to be FutureFit; proactively
meeting customer needs through innovative new products and
improvements to existing services.
Figures quoted within this release are for the Arqiva Broadcast
Parent Limited Consolidated Group
- Ends -
About Arqiva:
Arqiva is a leading UK communications infrastructure and media
services provider dedicated to connecting people and devices
wherever they are through the delivery of TV, radio, mobile and
machine-to-machine data services. We are an independent provider of
telecom towers, with circa 8,000 active sites across Great Britain,
and are also the only supplier of national terrestrial television
and radio broadcasting services in the UK. Our advanced networks
support the exponential growth of connected devices and the
ever-increasing demand for data from smartphones to tablets through
to connected TVs and smart meters.
Customers include major UK and international broadcasters such
as the BBC, ITV, Sky Plc., Turner Broadcasting, the independent
radio groups, major telco providers - including the UK's four
mobile network operators - and energy and water companies.
For further information please contact:
FTI Consulting
James Melville-Ross / Adam Davidson
/ Chris Birt 0203 727 1000
Arqiva
Tony Johnson / Amy Knights-Whittome 07773 045480
press.office@arqiva.com
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END
NRAEALNSAFPNEFF
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September 26, 2019 02:02 ET (06:02 GMT)
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