Arqiva FY18 financial results

Another strong year of operational delivery and financial performance. Arqiva continues to play a key role in shaping the future of UK broadcast and telecoms services.

London, UK, 10 September 2018: 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 financial year ended 30 June 2018. These results reflect a year of significant growth in revenue, profit and cash generation which underscore Arqiva’s vital role in enabling the UK’s success in the digital economy. 

Highlights 

  • Continued strong growth in our core business augmented by successful delivery of significant programmes including 700MHz clearance, DAB rollout and continued delivery of smart-metering networks
  • Ongoing improvement in our operational base with a focus on high-margin business and building strong customer relationships
  • Strong performance resulted in material improvement in EBITDA during the year
  • Following these continued strong financial and operational results, the Group today announces its decision to launch a series of meetings with investors with the aim of refinancing the existing junior notes 

Full Year Financial Results 

Revenue in the year was up 2.2% to £962.4m from £941.3m last year. Organic revenue growth from continuing operations, excluding the revenue of the WiFi business sold last year, was 3.0%. 

  • Revenue in our Terrestrial Broadcast business grew 8.6% to £487.5m from £449.0m last year. This performance was driven by increased 700MHz clearance activity as well as the ramp-up in our DAB rollout programme. 
  • Revenue in our Telecoms & M2M business grew 0.9% year-on-year to £341.4m from £338.2m last year (excluding the revenue of the WiFi business sold last year). This growth was driven by a strong performance from our telecoms towers business where new site assignments and upgrades grew revenue by £8m, and by the continued delivery of our smart-metering energy network which grew revenue by £14.4m during the year. This was partially offset by a reduction in lower margin revenues such as Installation Services. 
  • Revenue in our Satellite and Media business decreased 9.1% year-on-year to £133.5m from £146.9m in the same period last year. This was a result of our ongoing rationalisation of these services and the ongoing transition away from low margin contracts in the division.  

EBITDA, a key measure of the Group’s financial performance, increased 9.3% to £517.5m during the year (2017: £473.5m). This strong performance was mainly caused by completion of our DAB radio rollout, increased 700 MHz Clearance activities and growth in Telecoms & M2M EBITDA, coupled with the effects of our transformation programme and our increasingly efficient cost base. 

Net Cash inflow from operating activities during the period was £572.1m, up 16.8% from £489.7m in the same period last year, owing to the strong EBITDA performance and to working capital inflows. 

Net capital expenditure during the period was £164.8m, up 2.2% from £161.3m in the same period last year, predominantly driven by significant projects like the 700MHz clearance programme, which added materially to the year’s profitability. 

“These financial results demonstrate both the ongoing strength of our core business and the ability of our people to deliver complex projects that make a real impact on the UK’s competitiveness in the digital economy. 

“Whether through spectrum clearance, smart-metering, DAB radio or digital television, Arqiva continues to underpin the country’s most popular digital services. Yet we are not merely a participant. We are also helping to shape the future of our industry by introducing new technology that ensures reliable, high-quality service provision across the whole country. The response of our customers to these efforts has been extremely positive during the year and gives me great confidence in the strategy we are pursuing”. 

Key developments by business area 

Terrestrial Broadcast 

700MHz clearance 

Arqiva continues to deliver the 700MHz clearance programme on time and to plan. The programme is designed to release the key 700MHz spectrum band for auction to MNOs for 5G use. During the summer of 2018, a 310m tall temporary steel mast was erected alongside the existing tower at Emley Moor to ensure uninterrupted service during the works which will continue until early 2020. 

Transitioning to hybrid digital TV with Freeview 

Arqiva signed a five-year agreement with BBC, ITV and Channel 4 to accelerate Freeview’s transition to a fully hybrid platform. This will see it provide the best in free-to-view live and on-demand TV, while also enabling viewers to access their favourite over-the-top subscription services at the same time. This cost-effective method will ensure viewers have terrestrial access to the live programming best delivered through that medium, while simultaneously providing access to the on-demand services they want most. 

DAB rollout 

Arqiva continues to make strides in supporting the take-up of DAB digital radio in the UK, having completed the latest phase of network rollout for the BBC and commercial local radio. The UK’s official radio listening data source confirmed during the period that more than six in 10 consumers now have a digital radio, and showed that digital listening has exceeded 50% of the UK’s total for the first time. 

Telecoms & M2M 

Helping MNOs meet UK coverage obligations 

During the 2018 financial year Arqiva played a key role in helping the UK’s MNOs meet their obligation to provide the UK landmass with 90% voice coverage. Arqiva also supported Telefonica UK (O2) in meeting is obligation to provide a minimum 95% level of indoor data coverage to all UK premises by 31 December 2017. 

As of 30 June 2018, Arqiva has completed 8,245 4G equipment upgrades as part of this effort, along with a significant number of antenna and feeder upgrades across our sites.  

Smart Metering rollout 

Arqiva continues to make progress in its rollout of smart-metering networks for energy and water providers across the UK. Our smart energy network now covers 97.75% of premises in the North of England and Scotland, whilst our agreement with Thames Water sees us delivering 6 million meter readings per day in the region. As at 30 June 2018, 17,200 out of the anticipated full complement of 19,500 meters have been installed under our contracts with Anglian Water. 

Satellite & Media 

UK Direct To Home (DTH) HD channel growth 

In the UK DTH product line, Arqiva continued to see HD channel growth during the financial year. In the financial year to 30 June 2018 Arqiva launched four new HD channels. This further reinforces the Group’s position as a leading provider of UKDTH services. 

Virtualisation and OTT 

During the financial year, the Group secured its first virtualised services contract with a US broadcaster who has launched a new consumer OTT service to provide core managed teleport and fibre services, along with a highly scalable IP streaming service for hundreds of live sports events each year. With our new virtualised capabilities, we are able to provide a flexible cost model along with a highly-automated delivery 

Furthermore, Arqiva also secured two new customers on its new cloud based service. These new services will be delivered as part of an overall ‘hybrid’ solution that include core services from existing portfolio. The use of public cloud services allows Arqiva to provide high levels of service automation and commercial flexibility. 

Junior refinancing 

Arqiva has today announced its intention to refinance its existing 9.5% junior notes issued in 2013 in order to extend its debt maturities and lower its financing costs. The refinancing is contingent upon the completion of a marketing process wherein the Group will assess market conditions and decide whether or not to proceed. Since the original issuance in 2013, Arqiva has demonstrated strong financial and operational performance which have contributed to a substantial following in the debt capital markets and a stable credit rating. 

Outlook 

The reliability of our services, strong financial performance and proven delivery of critical programmes give us the platform to be a trusted partner for our customers. Arqiva’s strategy, alongside increased engagement and a focus on continuous improvement and efficiency, will ensure we continue to deliver on our objectives and are able to benefit from opportunities our markets and our customers present in future. 

Figures quoted within this release are for the Arqiva Broadcast Parent Limited Consolidated Group 

 

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