The directors present the strategic report for the year ended 31 December 2023.
As shown in the Group profit and loss account set out on page 10, the Group incurred a loss after tax of £30,465,820 (2022: £21,278,701) driven by the overhead costs to grow the customer base and expand the full fibre network.
The Group balance sheet on page 12 shows its net liabilities of £59,905,122 (2022: £29,439,302) and net current assets of £776,161 (2022: £19,684,400).
The network build continued to scale during 2023 with £73.9m invested in the network build as at 31 December 2023 (£57.4m as at 31 December 2022). The investment is broadly in line with the Board’s roll-out plans.
Strategic overview and outlook
Lightspeed is a rapidly growing Full Fibre network operator, building and providing FTTH (fibre to the home) to digitally underserved communities across the Midlands and East of England.
Lightspeed’s brand is synonymous with quality, reliability and superior customer service. This is evidenced by Lightspeed’s market-leading Trustpilot score of 4.7.
Lightspeed is on a mission to bring ultra-fast, full fibre broadband into over 1 million homes in the Midlands and East of England, empowering our customers to play more, see more and do more.
During 2023 Lightspeed invested funding provided by shareholders to continue developing the ISP and rapidly scale the network build program which as of July 2024 has enabled more than 300,000 properties in 36 towns.
The company re-assessed the towns in which it would build phase 3 of its network in the north-west of England and cancelled several areas, impairing the network that had been built in those areas.
Markets and customers
UK households’ data consumption is increasing at the rate of 35% year-on-year driven by gaming, online streaming, smart properties and a higher number of devices per household, and the Openreach copper network cannot provide the increased speeds required to the 20+ million homes, businesses and schools that do not have access to fibre connections.
Lightspeed’s ultra-efficient, robust and rapidly expanding fibre network provides speeds 23x faster than the average copper based broadband connection in the Midlands and East of England.
As of July 2024, Lightspeed has more than 190,000 homes Ready for Service and circa 9,000 customers under contract.
Outlook
Lightspeed is in it’s 4th year of network expansion and having completed phases one and two in early 2024, has already planned and commenced the phase 3 network build.
There was a slowdown in customer acquisitions during the first half of 2023 as the group embarked on a project to restructure the overall business and operations with the aim of cutting costs to ensure that the Lightspeed projects remains competitive for the future.
In July 2023 Kompass Global Ventures, LLC (“Kompass Kapital”) acquired a controlling stake in Lightspeed. As part of this transaction Kompass Kapital committed new capital to the business, which is being utilised to develop & expand the company's high speed full fibre network while also enhancing the company’s internet service provider (“ISP”) platform.
With a renewed focus on customer acquisitions in the second half of the year, the growth in customer connections and subscription revenue grew rapidly and this trend has continued into the first half of 2024. The demand for Full Fibre across the regions served by Lightspeed remains strong and revenues continue to grow rapidly, bolstered by the launch of value-added services during the first half of 2024.
The principal risks and uncertainties are summarised below. These do not necessarily comprise all of the risks that are potentially faced by the Group and are not intended to be presented in any assumed order of priority. The Directors believe that in particular, readers of this report should be aware of these risks and uncertainties, and that the Directors take reasonable steps to mitigate and minimise the impact of the risks on the Group. However, these risks cannot be eliminated entirely without incurring costs that the Board considers to be excessive. If any of these risks and uncertainties, together with possible additional risks and uncertainties of which the Directors are currently unaware or which they consider not to be material in relation to the Group business actually occur, financial position or operating results could be materially and adversely affected.
Our relatively small size and length of operation in comparison to some competitors may be considered negatively by prospective customers who may wish to remain with an inferior service with an established brand name.
Our competitors may be able to offer products bundled with internet access such as on-demand, television style services or fixed/mobile telecoms that are more attractive to the consumer.
A key risk to any Company in the Full Fibre industry will stem from any Full Fibre overbuild that could arise from competitors. The Group has assessed overbuild risk based on consideration of Full Fibre operator build rates in the UK, likely investment strategies and known movements of market players, and likely broadband penetration levels. We conclude that the risk of overbuild is low but finite and is a key risk that must be considered.
Funding
The business activity of the Group requires significant capital investment. In the event that the Group will not be able to raise the financing required for the planned investment then the Group will have to reduce its planned investment or reduce the scale of its operations.
Inflation
In 2023 we have seen a marked increase in cost inflation arising from several supply side issues and the impact of the Cost-of-Living crisis. This resulted in supplier price increases across the board. Whole we note a marked reduction in the pace of inflation during the first half of 2024, although costs remain high.
Equipment Supply
The on-going events in Ukraine in 2023 and into 2024 continue to impact on the European electronics marketplace and a strained trading relationship between Europe and China is likely to continue to disrupt component supply chains. At the time of this document the impact of these has been felt in terms of longer order lead times.
The Group maintains a careful watching brief to ensure that any shortfall is identified in time for an alternative source to be obtained.
Staffing
The Group attempts to proactively avoid staff shortages by focusing on staff development and retention. The Group maintains a constant recruitment process to fill gaps caused by any churn in the labour force.
Currency Risk
There is minimal exposure to currency risk, the Group operations are entirely in the United Kingdom and tries to ensure that significant purchases from outside of the UK have been negotiated in Pounds Sterling to avoid currency risk. Therefore, no sensitivity analysis of currency risk has been shown.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. As part of its overall prudent liquidity risk management, the Group actively manages its operating cash flows and does not commit to expenditure that it does not have immediate access to settle.
Market Risk
Market risk is that risk that the fair value or cash flows of financial instruments will fluctuate as a result of market forces outside the control of the Group, including interest rate risk arising from the effect of changes in market interest rates on cash at bank, overdrafts, investments in debt instruments, borrowings and obligations under finance leases.
The Group has a number of key performance indicators that are used to track the performance of its business and operations to include:
Cost Per Premises Passed: The cost of building past each available premises in the network.
Customer Acquisitions Cost: The cost of marketing and acquiring a customer to connect the network.
Cost per Premises Connected: The cost of connecting a premises to the network.
Number of properties Ready for Service: properties covered by the network where a customer can be connected and provided with an operational service in that property within 24 hours.
Penetration: Number of customers acquired as a proportion of the properties ready for service.
Environmental, social and governance
Lightspeed has implemented policies, systems, processes and contracts with build partners that foster the Group objective to minimise the impact of our operations on the environment and to support our communities and employees. The board continues to focus on all aspects of the health and safety of our employees.
Lightspeed is committed to offering market leading customer service and superb product reliability and broadband service quality. Lightspeed is committed to ensure that prospects and customers have access to the best value offers and service propositions in the market.
Lightspeed will continue to prioritise the network build program in areas that are digitally underserved so that everyone can actively participate in an increasingly digital society.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The auditor, KLSA LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
We have audited the financial statements of Lightspeed Fibre Holdings Ltd (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows, the company 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. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group’s ability to continue as going concern.
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 strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where 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.
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 group and 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 group 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.
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 group and parent company through discussions with directors and other management, from our commercial knowledge and experience of the sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the operations of the group, financial statements or the operations of the group, including the UK Companies Act 2006, taxation legislation and data protection, anti-bribery, employment, environmental and health and safety legislation.
We assessed the susceptibility of the group's and the parent 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;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
To address the risk of non-compliance with laws and regulations, we communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. The potential effect of these laws and regulations on the financial statements varies considerably.
The group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation) and taxation legislation (including payroll taxes) and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statements items.
The group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the group’s license to operate. We identified the following areas as those most likely to have such an effect: UK Company law that regulates corporations formed under the Companies Act 2006 and HMRC laws and regulations relating to submissions of applicable taxes and documents. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
We communicated identified fraud risks and non-compliance with laws and regulations with those charged with governance, throughout the audit team and remained alert to any indications throughout the audit.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through 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 group 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 group 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 group and the group 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 loss for the year was £3,590,032 (2022 - £3,260,933 loss).
Lightspeed Fibre Holdings Ltd (“the company”) is a private limited company domiciled and incorporated in England and Wales on 12 November 2020. The registered office is Fulney Hall, Holbeach Road, Spalding, Lincolnshire, PE12 6ER.
The group consists of Lightspeed Fibre Holdings Ltd and all of its subsidiaries.
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 group and the parent 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 financial instruments not measured at fair value; 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 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements.
The consolidated group financial statements consist of the financial statements of the parent company Lightspeed Fibre Holdings Ltd 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.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
During the year, the group incurred a net loss of £30.5m (2022: £21.3m). At the reporting date, the group was in a net liability position of £59.9m (2022: £29.4m) and a net current assets of £766K (2022: £19.7m). During the year the group raised £50.0m from an entity affiliated to its shareholders to support the network build and operations. As at the signing date of these financial statements, the total loans to the group by its shareholders for the network build costs and operations amounted to £54.0m, with a further £66.7m from an entity affiliated to its shareholders (together, the “Kompass Kapital entities”).
The group is dependent on continued financial support from its shareholders to fund the completion of the existing network build program, initiate new build programs and acquire new customers.
As of the signing date of these financial statements, the Kompass Kapital entities have committed funding of £162m to the Lightspeed Fibre Holdings Group for the period 2024-2026.
The Group has a letter of comfort from from the Kompass Kapital entities, confirming the ongoing financial support for the group and confirming that repayment of their existing shareholder loans will not be required for at least 12 months from the date of signing of the financial statements. The directors are therefore confident that Kompass Global Ventures, LLC will continue to provide financial support to the group for the foreseeable future, defined as at least 12 months from the date of signing the financial statements for the year ended 31 December 2023
In accordance with their responsibilities, the directors have considered the appropriateness of the going concern basis for the preparation of the financial statements. For this basis they have reviewed the financial and cash flow projections for the next 12 months from the date of the approval of the financial statements.
At the time of approving these financial statements, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
Turnover represents the value of services and goods provided in the course of business and stated net of VAT and discounts and is attributable to continuing activities being provision of fixed connectivity services to customers.
Revenue recognition
Revenue is recognised to the extent that it is realised or realised and earned. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and VAT. The following criteria must also be met before revenue is recognised:
persuasive evidence of an arrangement exists between the company and the company's customer.
delivery has occurred or the service has been rendered.
the price for the service is fixed or determinable and
recoverability is reasonably assured.
Revenue earned from contracts is recognised in line with performance obligations based on a five step model.
On inception of the contract we identify a 'performance obligation' for each of the distinct goods or services we have promised to provide to the customers. The consideration specified in the contract is allocated to each performance obligation based on their relative standalone selling prices and is recognised in revenue as they are satisfied.
Below we summarise the revenue recognition policy for each of our major revenue line and provides information on the time of when they are satisfied.
Services revenue
We recognise revenue from the provision of fixed connectivity services to customers on a straight line basis over the contract term as the services are provided, reflecting the customer simultaneously receiving and consuming the service. The services are billed and paid for on a monthly basis.
Installation fees related to services provided over our fixed line network. These fees are recognised as revenue when installation is completed.
Hardware revenue
Revenue from equipment sales is recognised at a point in time when control of the hardware is passed to the customer. This usually occurs when a customer signs a new contract, the connectivity service is due to commence and the hardware is sent to the customer.
There are no material obligations in respect of returns, refunds or warranties.
Promotion discount
For subscriber promotions, such as discounts or free services during an introductory period, revenue is recognised uniformly over the contractual period if the contract has substantive termination penalties. If a contract does not have substantive termination penalties, revenue is recognised only to the extent of the discounted monthly fee charged to the subscriber, if any.
Subscriber advance payments
Payments received in advance for the services we provide are deferred and recognised as revenue when the associated services are provided.
Contract life/timing of recognition
The Group's revenues are earned from the provision of fixed connectivity services to customers based on standard term contracts, usually 12-24 months. A fixed monthly fee is charged for the duration of the customer contract period. The monthly transaction price is fixed at the outset of the contract period and is deemed to be the transaction price.
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 recognised in the profit and loss account.
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.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
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 carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
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 balance sheet 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.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
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 tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
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.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Comparatives
There were no changes in comparative figures during the year.
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 recognition for deferred tax assets may be uncertain as the extent to which tax losses can be utilised depends on future taxable profits and on the tax legislation then in force.
Recovery of the deferred tax asset relating to tax losses is estimated using an extrapolation of the Group's five-year plan. Sensitivities have been applied to these forecasts. Accordingly, an increase or decrease in future profitability would increase or decrease the asset recognised.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
The directors makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are disclosed below.
Management reviews the useful lives, depreciation methods and residual values of the items of property, plant and equipment and intangible assets and on a regular basis. During the financial year, the directors determined no significant changes in the useful lives and residual values. The carrying amounts of property, plant and equipment and intangible assets are disclosed in notes 12 and 11 respectively.
Investments are held at cost less any necessary provision for impairment. Where the impairment assessment did not provide any indication of impairment, no provision is required. If any such indications exist, the carrying value of an investment is written down to its recoverable amount.
Intercompany receivables are stated at their recoverable amount less any necessary provision. Recoverability of intercompany receivables is assessed annually and a provision is recognised if any indications exist that the receivables are not considered recoverable.
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/(credit) 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:
Network Build
This category is costs related to the construction of the superfast broadband infrastructure, where the assets so constructed are live and can be used to provide internet services to customers. The costs of construction include the labour and materials from civil and cabling efforts, electronics that facilitate the delivery of the broadband service to the point of the connected residence or business, and internal resources that are assessed as directly related to the network build.
Assets Under Construction
This category is costs related to the construction of the superfast broadband infrastructure, where the assets so constructed are not yet live and cannot be used to provide internet services to customers. The costs of construction include the labour and materials from civil and cabling efforts, electronics that facilitate the delivery of the broadband service to the point of the connected residence or business, and internal resources that are assessed as directly related to the network build.
Summary of progress
As at 31 December 2023, Lightspeed Networks Ltd had spent £73.9m on the construction of its superfast broadband infrastructure, with 237k premises passed (“PP” – meaning the number of properties for which the broadband infrastructure was constructed, but not yet available for a live internet connection). Of this spend, £69.3m related to the 187k premises that were ready for service (“RFS” – meaning the infrastructure was both constructed and available for live internet connection). The immediate goal for the business is to achieve 277k PP by the end of December 2024, with 243k RFS. It is anticipated that this will result in a total build cost of £99m.
The group utilises the services of several contractors (build partners) for various phases of the network build and its commitment to any party is limited to the agreed scope of works for that phase. The group is entitled to cancel or withdraw the contract from the build partners by giving written notice at any time during the term of the contract.
Write-off
A business decision to revise the planned expansion and operations for towns in northwest England was made. As a result, plans to construct the network in several towns was halted and any related assets that could not be redeployed in other areas were written off.
Details of the company's subsidiaries at 31 December 2023 are as follows:
As at the year-end, the company had accrued interest on borrowings of £8,565,361 (2022: £3,605,617) which was not repayable within the next 12 months.
The company's borrowings relate to loans received from Kompass Kapital Holdings LLC and the shareholders of the company, Kompass Global Ventures LLC , Kompass Kapital Global and Clubhouse Capital III, LLC.
The loans are unsecured and subject to interest of 8% and 14% per annum. The capital and interest are repayable on 12 February 2031.
The group borrowings include loans received from Sequoia Capital amounting to £32.5m. The loan is secured by a fixed charge over the company's properties and interest charged at margin plus compounded reference for that day. The loan expires in 30 November 2033.
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.
The rights of each class of shares are:
- Ordinary Voting shares - Full voting rights, no dividends rights, no rights to participate in a capital distribution (including on a winding up), not redeemable or liable to be redeemed and right to appoint or remove directors of company.
- Ordinary Founder shares - No voting rights, dividends rights in accordance with the company's article of association, rights to participate in a capital distribution (including on a winding up) in accordance with the company's articles of association, not redeemable or liable to be redeemed and no right to appoint or remove directors of company.
- Ordinary Investor shares - No voting rights, dividends rights in accordance with the company's article of association, rights to participate in a capital distribution (including on a winding up) in accordance with the company's articles of association, not redeemable or liable to be redeemed and no right to appoint or remove directors of company.
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:
The remuneration of key management personnel is as follows.
The company has taken advantage of the exemption available in FRS 102 (s33 "Related Party Disclosure"), whereby it has not disclosed transactions with the parent company or any wholly owned subsidiary undertakings of the group.
Included within borrowings, are loans from:
- MGMT Infrastructure Limited amounting to £Nil (2022: £15,323,000) on which interest of £Nil (2022: £818,103) was charged for the year which make a total of accrued interest of £Nil as at year end. The company was a shareholder in Lightspeed Fibre Holdings Limited until 6 July 2023.
- Kompass Kapital Global LLC amounting to £23,836,940 (2022: £20,614,500) on which interest of £1,649,160 (2022: £1,038,588) was charged for the year which make a total of accrued interest of £3,222,440 as at year end. The company is a shareholder in Lightspeed Fibre Holdings Limited.
- Clubhouse Capital III, LLC amounting to £7,970,676 (2022: £6,891,500) on which interest of £551,320 (2022: £349,626) was paid during the year which make a total of accrued interest of £1,079,176 as at year end. The company is a shareholder in Lightspeed Fibre Holdings Limited.
- Thesaurium Limited, B.V.I, amounting to £2,574,699 (2022: £2,175,000) on which interest of £174,000 (2022:£121,479) was paid during the year which make a total of accrued interest of £399,699 as at year end. The company is a shareholder in Lightspeed Fibre Holdings Limited.
- Kompass Kapital Global Venture, amounting to £17,827,623 (2022: £Nil) on which interest of £617,958 (2022:£Nil) was paid during the year which make a total of accrued interest of £2,504,623 (including interest transferred from MGMT Infrastructure Ltd) as at year end. The company is a shareholder in Lightspeed Fibre Holdings Limited.
Included within creditors is a balance due to a company under common control, Atmosclear Investments Ltd, of £Nil (2022: £83,779). The company provided professional services amounting to £311,082 (2022: £580,872) in the period to 6 July 2023 when it ceased to be a related party.
Included within creditors is a balance due to a company under common control, MGMT SA, of £Nil (2022: £Nil). The company provided professional services amounting to £Nil (2022: £1,160,879) in the period to 6 July 2023 when it ceased to be a related party.
Included within creditors is a balance due to a company under common control, Oryx Management Ltd, of £Nil (2022: £500,000). The company provided professional services amounting to £76,843 (2022: £832,800) in the period to 6 July 2023 when it ceased to be a related party.
Included within creditors is an amount due to a related party, Utilitas Renewable Solutions Ltd (formerly MGMT Construction Ltd) of £Nil (2022: £422,957) and included within debtors is an amount of £Nil (2022: £91,790). The company provided construction services for the network build for amounting to £13,348,100 (2022: £18,851,083) in the period to 6 July 2023 when it ceased to be a related party.