Arqiva Strong Q1 Results

Another set of strong results for first quarter to 30 September 2017.

UK, London, 29 November 2017: Arqiva one of the UK’s leading communications infrastructure and media services providers with significant investments in essential communications infrastructure announces another set of strong results for its first quarter to 30 September 2017.

Revenue was up 3.3% at £237.8m. Excluding disposals in the prior year, revenue from continuing operations grew by 6.0%.

  • Revenue for the Group’s Terrestrial Broadcast business was £119.1m, representing an 8.8% increase from £109.5m in the prior year period. This increase flows from radio, as a result of the DAB rollout, RPI linked increases on TV broadcast contracts and from increased activities in relation to the 700MHz Clearance Programme.
    • Telecoms & M2M revenues increased 0.6% from £83.5m in the prior year period to £84.0m, and were up 8.2% on a continuing operations basis (taking into account the disposal of the Wi-Fi business in November 2016). The growth reflects an increase in telecoms towers upgrades and site assignments, and from set up charges and change requests following Go-Live of the smart energy metering contract.

    • Satellite and Media revenues decreased by 6.7% from £37.2m to £34.7m, due to management continuing to exit low margin contracts and from negative foreign exchange movements. The decreases were partially offset by the rollout of new HD channel sales.

    EBITDA for the Group pre-exceptional items was £127.4m, up 12.8% from £112.9m

    Net cash inflow from operating activities at £88.4m compared to £84.7m, represents a 4.4% increase.

    Net capital expenditure and financial investment was £39.8m compared with £43.5m in the prior year.

    “This is another set of record results and highlights the strength of the business and its ability to produce cash. Arqiva is working with the government, the regulator and our commercial partners to ensure that the UK has the right infrastructure for a successful digital communications future.”

    Developments in Q1 by business area

    Terrestrial Broadcast

    700 MHz Clearance and DTT spectrum

    The DTT platform currently uses spectrum in the 470-790 MHz bands. Ofcom and industry stakeholders are implementing plans to clear the 700MHz band of DTT use so that it can be auctioned for use by the mobile network providers. This change will be adopted across Europe, Africa, the Middle East and central Asia.

    Arqiva is responsible for spectrum planning, network design, programme management, infrastructure changes, service continuity, asset replacement and retuning of broadcast transmitters to enable broadcasters to move into a lower frequency. In October, Ofcom published a review stating the programme is on track to meet their target for completion in Q2 2020.

    DAB

    On 18 September, the final DAB site of the current programme was brought in to service for the BBC, completing the rollout of 164 new transmitters. The UK national DAB network now covers more than 97% of the population.

    In commercial local DAB, Arqiva is delivering new transmitters or upgrades at 221 sites and at 30 September had completed 215. The final sites will be ready during the autumn, taking local DAB coverage to over 91%.

    Arqiva’s DAB Multiplexes continue to show high utilisation levels. Digital listening across all platforms reached 49% during 2017. DAB continues to grow and is the biggest digital platform, accounting for 71% of all digital listening. Adults owning a DAB set in the home increased from 39% in 2011 to 60% in 2017.

    Telecoms & M2M

    5G and small cells opportunities

    In July, Arqiva acquired an additional 28GHz spectrum licence from Luminet. The licence for 2x 112MHz covers Central and Greater London and enhances Arqiva’s existing nationwide spectrum band ownership. 28GHz spectrum is the standard used for 5G connectivity trials in the USA, Japan and South Korea focused on Fixed Wireless Access (FWA).

    In July, in central London, Arqiva and Samsung Electronics launched the first field trial of 5G FWA 28GHz technology in the UK and Europe. Powered by Samsung’s 5G network and customer premises equipment, and using 28GHz millimetre wave spectrum, the trial demonstrates the stability of the FWA service, and its potential as a fast-to-market, cost-effective complement to fibre to the premise connectivity to homes and SME businesses.

    Arqiva is developing outdoor small cells by hosting Mobile Network Operators (MNO) owned small cells on street infrastructure, such as lampposts, to provide network capacity in urban locations. The Group has received its first commercial order and is close to securing a further commercial contract.  

    Smart energy metering rollout

    Arqiva has built a smart metering communication network in the North of England and Scotland as part of a 15-year contract signed in September 2013 with the Data and Communications Company (the ‘DCC’, a body licensed by statute and backed by the utility companies).

    The DCC service has been operational since November 2016. Arqiva’s network is successfully transmitting and receiving messages between DCC users (the energy companies), and consumer electricity and gas meters. The rollout of Arqiva’s network continues and covers 93% of premises in line with contractual commitments.

    Smart water metering rollout – Thames Water

    In March 2015, Arqiva signed a contract for the provision of smart metering fixed network infrastructure and associated water meters enabling the collection, management and transfer of data. The contract, for an initial six-year term, is extendable up to 16 years. The service is expected to cover 3 million homes once fully deployed.

    The live service is delivering in excess of 4 million meter readings per day and there are over 230,000 meters installed, an increase of circa 35,000 since the previous financial report, Thames Water is accelerating the smart metering network to realise the benefits of extended coverage several years earlier than originally planned. Arqiva is now targeting full network coverage across London by the end of 2018. 

    Smart water metering trial contract wins – Anglian Water

    In July 2016, Arqiva won a four-year contract for the delivery and monitoring of a smart water metering fixed network trial for the deployment and operation of 7,500 water meters in Newmarket, Suffolk. The trial went live in December 2016 with over 5,600 smart water meters so far installed.

    In August 2017, Arqiva won a second contract for another region following a competitive tender. The three-year contract will support 12,000 water meters. 

    4G rollout

    The four MNOs’ continue to increase their 4G network coverage. Arqiva is undertaking large volumes of antenna and feeder upgrade projects. At 30 September, the Group had completed 7,161 4G equipment upgrades since rollout began in 2014.   

    Bluewater Distributed Antenna System (DAS)

    In July, Arqiva announced a 15-year partnership with LandSec to deliver 4G connectivity to Bluewater, one of Europe’s leading retail and leisure destinations. Existing 2G and 3G mobile systems will be replaced, ensuring improved and extended mobile coverage and capacity on-site. 

    Transformation programme – FutureFit

    FutureFit continues to progress and deliver savings. In the three-month period to September 2017, the Group’s year on year EBITDA growth of 13% was greater than the revenue growth of 3%. Through this transformation programme Arqiva will streamline and standardise its processes, modernise IT systems and achieve significant cost efficiencies and savings.

    The Group is reviewing all areas of spend and progressing with a number of actions; consolidating demand across the Group to ensure best prices, re-negotiating supplier contracts, eliminating excess satellite transponder capacity, reducing leased line costs as well as generating cost reductions in a number of other operating areas. 

    Shareholder strategic review

    Since early 2017, Arqiva’s shareholders have been jointly undertaking a strategic review of their investment in Arqiva. On 23 October 2017, Arqiva announced its intention to proceed with an initial public offering (“IPO”), however the Board and shareholders subsequently announced on 03 November that it would postpone this due to uncertain IPO market conditions as pursuing such a listing in this period was not in the interests of the Company nor its stakeholders, and they will revisit this once IPO market conditions improve.

    Figures quoted within this release are for the Arqiva Broadcast Parent Limited consolidated group

    - ENDS -

    For further information please contact:

    Liz Morley - 07990 003 314 / email press.office@arqiva.com

    About Arqiva
    Arqiva is one of the UK’s leading communications infrastructure and media services providers. With significant investments in essential communications infrastructure, the Group is the leading independent telecom towers operator and the sole terrestrial broadcast network provider in the UK. The Group’s core towers business (comprising terrestrial broadcast and wireless site-share infrastructure) generates predictable operating profits (constituting circa three-quarters of the Group’s gross profits for the year ended 30 June 2017), supported by strong market positions, diverse revenue streams and long-life assets.  A significant proportion of the Group’s revenues come from long-term inflation-linked contracts. The Group had a contracted order book of £5.5bn as at 30 June 2017.

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