The directors present the strategic report for the year ended 31 December 2023.
County Broadband Holdings Limited (the “Company”) via its wholly owned subsidiary County Broadband Limited (“CBL”) continued the expansion of its full fibre networks to the premises in East Anglia. The Company continues to build additional homes passed, connecting fibre customers and growing the revenue stream. As expected, the Company has incurred budgeted losses arising from a substantial expansion of its staff and other overheads before generating income from new fibre customers. This was anticipated, and specific allowance was made for it in the substantial funding received from Aviva Investors.
The beginning of this major expansion is reflected in the accounts for the year. Turnover has increased from £4.69m to £4.73m, but following an increase in overheads referred to above, the loss before taxation increased from £17.3m to £27.7m. The directors expect this trend to continue while the fibre networks are being constructed. They also expect substantial long term revenue to flow from the completed networks in due course.
The main risk to the company continues to be the general condition of the economy but the directors are confident that the company is well placed to deal with any issues as they arise, given the increased value of the fibre build assets in the year.
The company's aim is to continue to achieve growth in terms of market share, homes passed for connections and profitability in future years.
Given the straightforward nature of the business, the company's directors are of the opinion that a more detailed analysis, using key performance indicators, is not necessary to understand the development, performance or position of the business.
The Company conducted a redundancy process during the year, reducing headcount from 286 to 134. By reducing costs the Company is now expected to reach positive EBITDA in Q1 2025, without the need for further funding.
The directors look forward to continued growth in customers and revenue in the current year.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
LB Group (Colchester) was appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that it be re-appointed will be put at a General Meeting.
We have audited the financial statements of County Broadband Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group income statement, the group statement of comprehensive income, the group statement of financial position, the company statement of financial position, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the directors' report has been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit; or
the directors were not entitled to prepare the financial statements in accordance with the small companies regime and take advantage of the small companies' exemption in preparing the directors' report and from the requirement to prepare a strategic report.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
We identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the telecommunications sector;
We focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, taxation legislation, data protection, anti-bribery, employment and health and safety legislation;
We assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
Identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
Making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
Considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we:
Performed analytical procedures to identify any unusual or unexpected relationships;
Tested journal entries to identify unusual transactions;
Reviewed the internal controls in place, specifically around sales, purchases, payroll and bank transactions; and
Assessed whether judgements and assumptions made in determining the accounting estimates were indicative of potential bias.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The Company’s result for the year was NIL (2022: NIL).
County Broadband Holdings Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is Old Bourchiers Hall, New Road, Aldham, Colchester, Essex, UK, CO6 3QU.
The group consists of County Broadband Holdings Limited and County Broadband Limited. The registered office address for both companies is Old Bourchiers Hall, New Road, Aldham, Colchester, Essex, UK, CO6 3QU.
All subsidiaries have been included within the consolidated financial statements.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements for parent company information presented within the consolidated financial statements:
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues’: Interest income/expense and net gains/losses for each category of financial instrument; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 33 ‘Related Party Disclosures’: Compensation for Directors.
The consolidated group financial statements consist of the financial statements of the parent company County Broadband Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
The group has net liabilities at the year end of £62.8m (2022: £35.1m) and net current liabilities of circa £1.9m (2022: £1.7m net assets) however the group holds a Development Finance Agreement with Aviva Investors Infrastructure Income No.6C1 Limited which provides significant funding for the ongoing development activities and operations of the business and the directors have received written confirmation from Aviva Investors Infrastructure Income No.6C1 Limited that said agreement provides for the group to meet its obligations for at least 12 months from the date these financial statements are signed. With this, the directors continue to adopt the going concern basis of accounting in preparing these financial statements.
Turnover from contracts for the provision of broadband services is recognised when it is earned. Subscription fees, consisting primarily of monthly charges for access to broadband and other internet access or voice services, are recognised as turnover over the associated subscription period.
Turnover from the sale of peripheral and other equipment are recognised when all of the significant risks and rewards of ownership are transferred to the buyer, which is normally the date the equipment is delivered and accepted by the customer or when installation takes place, if this is a different date.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's statement of financial position when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the company keeping the scheme open or the employee maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the statement of comprehensive income is charged with the fair value of goods and services received.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
All revenue had been received within the UK during the financial year.
Above turnover breakdown is presented gross of discounts given for installation & promotional purposes. Adjustments for promotional sales and installation sales are both within the services rendered turnover class.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements.
County Broadband Holdings Limited issued equity-settled share-based payments to certain employees of County Broadband Limited on their behalf. Equity settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight line basis over the vesting period, based on the company's estimate of shares that will eventually vest. Fair value is measured by the use of most recent external fundraising valuations based on appropriate assumptions with reference to market and non-market conditions.
The company reviews depreciation policies applied on a regular basis to ensure they are still consistent and a fair reflection of the assets useful life.
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
No impairment has been identified to date.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected credit for the year based on the profit or loss and the standard rate of tax as follows:
Assets under construction represents cost of components, materials and labour required for fibre build projects. These components, materials and labour will be utilised on future projects as part of the expansion of infrastructure.
The following are subsidiary undertakings of the company:
A fixed and floating charge created on 24 May 2019 in favour of Aviva Investors Infrastructure Income No.6 Limited exists over all the property and undertaking of the company.
A fixed charge created on 24 March 2022 in favour of Aviva Investors Infrastructure Income No.6 Limited exists over all the property and undertaking of the company.
A fixed and floating charge created on 24 May 2019 in favour of Aviva Investors Infrastructure Income No.6 Limited exists over all the property and undertaking of the company.
A fixed charge created on 24 March 2022 in favour of Aviva Investors Infrastructure Income No.6 Limited exists over all the property and undertaking of the company.
Other creditors includes loans from Aviva Investors Infrastructure Income No.6 Limited of £117,634,203 (2022: £76,400,245) which involve a monthly financial covenant that was not breached during the year.
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
During the year, the company provided £2,071 of previously held charges (2022: £2,229) which related to equity settled share based payment transactions.
The valuation of the share options price outstanding at the end of the year was £0.15 (2022: £0.15) and their weighted average contractual life was 10 years.
The following information is relevant in the determination of the fair value of options granted during the current and previous years under the equity-settled share based remuneration schemes operated by County Broadband Holdings Limited.
An external valuation was used to value the share-based payment awards as it was considered that this approach would result in materially accurate estimate of the fair value of options granted.
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last three years of comparable publicly quoted companies.
Contingent Asset
During the year the company made a claim against a former contractor in respect of liquidated damages for late delivery of projects, this figure has been calculated using the formula provided in the signed framework agreement put in place with the former contractor.
Should the company be successful, and having taken legal advice, the estimated claim would be in the region of £680 - £880k including estimated future legal fees.
Contingent Liability
During the year the company received a claim from a former contractor relating to claims for loss of earnings due to the level of work supplied not meeting expectations
The directors, having taken legal advice, have assessed that the likelihood that the former contractor's claim would succeed in court is less than probable but (acknowledging the inherent uncertainty in any legal dispute) is more than remote.
Should the claimant be successful the estimated liability would be in the region of £6.6 - £7.0 million, including estimated future legal fees.
At the reporting end date the group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
During the year the company entered into the following transactions with related parties:
At the year end County Broadband Limited owed £0 (2022: £1,214) to Letzrent Limited, a company of which Terfel Roberts is a Director and Shareholder.
During the year County Broadband Limited paid £10,800 (2022: £9,000) to Letzrent Limited, a company of which Terfel Roberts is a Director and Shareholder, for expenses in the year.
No guarantees have been given or received.