The directors present the strategic report for the period ended 31 December 2024.
The revenue of the Company is generated through the sale of services including telephone, broadband/fibre and ethernet, within the telecommunications B2B market. The costs incurred by the Company are primarily network access costs, directly incurred in generating its revenue and people costs.
Revenue amounted to £67,717k in the 10 months to 31 December 2024, compared with £84,603k in the year to 29 February 2024, representing a marginal decrease on a like-for-like basis. Fibre products continue to grow however, in line with the rest of the industry, there is a reduction in demand for voice products. This, in conjunction with a competition in the market leading to some reduction in revenue between those customers churning and those customers joining or re-contracting.
Gross profit margin has increased a result of higher revenues from higher margin, faster Ethernet products. The Company made a loss before taxation of £12,882k in the period (Feb 2024: £44,071k). The loss in in the prior year was largely due to a £25.5m impairment to Goodwill recognised.
During December 2024, a loan note of £64,424k owed to TalkTalk Communications Limited was converted into Share Premium following the expiry of a conditional clause in the loan agreement that determined the loan was only repayable should TTBD be sold before 30 November 2024.
The Company’s Directors believe that there are no non-financial key performance indicators (in addition to the business review above).
The main financial risks the Directors consider relevant to this Company are credit risk, liquidity risk and interest rate risk. Credit risk is mitigated by the Company’s credit control policies and the Company regularly monitors interest rate risk. Liquidity risk is monitored through regularly assessing the Company’s short-term working capital and long-term funding requirements. The Company does not trade or speculate in any derivative financial instruments.
The Company’s interest rate risk arises primarily from cash, cash equivalents and borrowings, all of which are at either fixed or fixed plus floating rates of interest which expose the Company to cash flow interest rate risk. These floating rates are linked to SONIA. Future cash flows arising from these financial instruments depend on interest rates and periods for each loan or rollover. Interest rates are monitored closely throughout the year.
High inflation and cost of living pressures may result in financial risks to revenue and an increasing cost base. In addition to financial risk, there are other risks and uncertainties affecting the entity which are managed by the Company. The key risks have been outlined as follows:
Risk and impact | Mitigation |
Regulatory compliance Failure to comply with regulatory obligations may result in negative customer impact and/or significant regulatory fines. |
The Board has continued to convene throughout the year to monitor the mitigation of operational risks which could give rise to customer complaints and regulatory breaches.
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Data and cyber security Security of customer, commercial and colleague data poses increasing reputational and financial risk to all businesses and the gross risk remains high. |
The Company has continued to focus on actively implementing a programme to build its security capability, including to address the increasing risks around vulnerabilities and third-party vendors.
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Resilience and business continuity The Company is reliant on key third party suppliers and partners in order to deliver quality products and services to its customers. Network, system or third-party failure could result in significant disruption to services or business processes, which may have a negative impact on customers and therefore damage customer loyalty or result in complaints. |
The Company’s network provider has Business Continuity, Crisis Management and Disaster Recovery Plans in place for key sites. Network resilience is assessed and monitored on a regular basis. Continuous monitoring of network availability is also in place to ensure any issues are identified in a timely manner and resilience testing takes place. Where an incident does occur, a robust incident response process is in place and exercised to ensure effective response, followed by a problem management review that is linked to service improvement. |
The telecommunications industry is undergoing a once in a generation shift as its infrastructure and its customers transition to Full Fibre. The Company is focused on positioning itself to take full advantage of the opportunities this creates and to provide the best outcomes for its customers. The Directors will continue to monitor both the Company’s key performance indicators, principal risks and uncertainties and develop the Company as opportunities arise.
The revenue of the Company is generated through the sale of services including telephone, broadband/fibre and ethernet, within the telecommunications B2B market. The costs incurred by the Company are primarily network access costs, directly incurred in generating its revenue and people costs.
The Company’s Directors believe that the financial key performance indicators of the business are outlined below:
| 10 months ended 31 December 2024 | Year ended 29 February 2024 |
Revenue (£’000) | 67,717 | 84,603 |
Gross profit (%) | 39 | 36 |
Profit/(Loss) before taxation (£’000) | (12,882) | (44,071) |
The success of our business is dependent on the support of all our stakeholders. As part of the Board’s decision-making process, in line with their duties under Section 172 (‘s172’) of the Companies Act 2006, the Board considers the potential impact of decisions on relevant stakeholders and the likely consequences of these decisions in the long term.
Illustrations of how a number of s172 factors have been considered and applied by the Board can be found below.
Shareholders and investors
We operate as a private business and our ongoing intention is to behave responsibly towards all shareholders and investors and treat them fairly and equally, so that they too may benefit from the successful delivery of strategic objectives. The Company’s ultimate parent undertaking and controlling party are disclosed in 32.
How the Board engages
Executive Director meetings with Investors to discuss the Company’s strategy.
The Board members are shareholder appointed nominees.
Annual Report and investor relations mailbox.
Customers
The demand for faster, more reliable connectivity has never been greater so it is vital that we engage with our customers to ensure we continue to provide great products and services that meet their changing needs.
How the Board engages
Reviews strategy and monitors performance during the year with the aim of meeting customers’ needs more effectively;
Receives regular competitor updates to understand the Company’s competitive performance and its strengths and weaknesses as regards meeting customer needs;
The Executive Chairman sits in monthly review meetings covering the commercial and connectivity performance of the business and is highly engaged with customer metrics;
Benchmarks the company’s performance in relation to customers using research including CSAT and NPS scores; and
Executive Chairman and CEO meet regularly with key B2B customers to help maintain good relations and to understand and address their views, needs and concerns.
Suppliers
Our suppliers are fundamental to the quality of our products and services. Engagement with suppliers and maintaining good relationships is therefore critical to ensuring that as a business we meet the high standards we set ourselves;
How the Board engages
Board approval of Modern Slavery Statement;
CEO and Executive Chairman meet with biggest suppliers regularly;
Certain key suppliers are regularly discussed at Board meetings.
Communities
The Company values its communities and is committed to doing business the right way. Our success depends on strong, active and confident communities, who want to engage with our products and services and trust the Company to respond to their needs and concerns. We are proud to be based in Salford and are committed to supporting the local community in our city to prosper.
How the Board engages
The Board actively supports our major charity partnerships;
The Board receives regular updates on internet safety and regulation landscape; and
The Board has endorsed a culture of Volunteering and giving back.
Government
Government bodies have a key role in setting our operating environment and it is imperative that we listen, understand and respond to relevant Government actions. As a broadband provider, the Government’s ambitions for gigabit-capable coverage, engaged consumers and a safer online experience have shaped our business strategy and operations.
How the Board engages
The Board receives regular updates on the political and Government environment and engages with policy makers as appropriate.
Regulators
Ofcom has a high degree of influence over the Company’s commercial and operational environment. It determines many of the prices which we pay, the quality of their wholesale products and requirements around customer service. Regulation is therefore the single most important driver of our cost to serve customers.
The ICO (Information Commissioner’s Office) regulates compliance with the Data Protection Act, UK GDPR, the Privacy and Electronic Communications Regulations and the Investigatory Powers Act. Other relevant regulators include:
The FCA (Financial Conduct Authority) regulates some aspects of our billing processes; and
The CMA (Competition & Markets Authority) monitors firms’ compliance with competition law and considers the consumer interest. TalkTalk complies with all relevant regulations.
How the Board engages
The primary Board engagement with Ofcom is via the Company’s CEO and on some issues the Executive Chairman. Other than that, members of the Board are informed of developments at Board meetings, whilst having no systematic contacts with Ofcom.
Primary Board engagement with the ICO is via the Company’s General Counsel and Company Secretary. In addition to this, the Board is regularly updated on any developments.
Employees
The directors acknowledge that the long-term success of the company is intrinsically linked to our ability to attract, develop, and retain talented individuals. We understand that our employees are the cornerstone of our business, and their interests are paramount in our decision-making processes. Whether it involves the workforce as a whole or individual team members, promoting and safeguarding their well-being is a primary consideration. We are committed to fostering a supportive and inclusive work environment that encourages growth, innovation, and collaboration.
On behalf of the board
The directors present their annual report and financial statements for the period ended 31 December 2024.
The results for the period are set out on page 12.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the period and up to the date of signature of the financial statements were as follows:
The directors are working with an environmental consultancy to advise on the company’s environmental impact reporting in accordance with the 2019 HM Government Environment Reporting Guidelines, the 2020 HM Government’s conversion factors for company reporting and the Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard.
Our SECR disclosure presents our carbon footprint across scopes 1 and 2, together with appropriate intensity metrics.
The general methodology used is the Greenhouse Gas Protocol – Corporate Accounting and Reporting Standard (GHG Protocol, 2011).
Specifically:
Carbon Emissions conversions factors – Using the DESNZ 2023 GHG conversion factors found here: https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2024
Fuel combustion: stationary (Natural Gas) – Gas usage is devised based on overall gas usage in the building and divided by square foot floor space which TalkTalk Business Direct occupy. The conversion factor is Gaseous Fuels > Natural Gas > kwh (Gross CV).
Fuel combustion: mobile – TalkTalk Business Direct do not lease or own any fleet; all data is from expensed car mileage using GHG Conversion factors.
Purchased electricity - Electricity is devised based on overall electricity usage in the building and divided by square floor space which TalkTalk Business Direct occupy. This figure includes both electricity consumption (captured in table 3 scope 2) and upstream electricity usage (T&D electricity, captured in table 3 scope 3).
Energy efficiency measures – TalkTalk Business Direct have taken steps to reduce energy usage through behavioural campaigns – encouraging employees to conserve energy in the office. The TalkTalk Business Direct office building also is powered by renewable energy and is installing more electric vehicle charging points.
The intensity target is to reduce scope 1 and 2 emissions per square foot in the building by 4.2% per annum.
We have audited the financial statements of TalkTalk Business Direct Limited (the 'company') for the period ended 31 December 2024 which comprise the income statement, the statement of financial position, the statement of changes in equity, the 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 UK adopted international accounting standards.
Basis for 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 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 strategic report and the directors' report for the financial period 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
As part of our planning process:
We enquired of management the systems and controls the company has in place, the areas of the financial statements that are most susceptible to the risk of irregularities and fraud, and whether there was any known, suspected or alleged fraud.
The company did not inform us of any known, suspected or alleged fraud;
We obtained an understanding of the legal and regulatory frameworks applicable to the company. We determined that the following were most relevant: IFRS, Companies Act 2006, along with those referred to in the strategic report;
We considered the incentives and opportunities that exist in the company, including the extent of management bias, which presents a potential for irregularities and fraud to be perpetuated, and tailored our risk assessment accordingly.
Using our knowledge of the company, together with the discussions held with the company at the planning stage, we formed a conclusion on the risk of misstatement due to irregularities including fraud and tailored our procedures according to this risk assessment.
The key procedures we undertook to detect irregularities including fraud during the course of the audit included:
Identifying and testing journal entries and the overall accounting records, in particular those that were significant and unusual;
Reviewing the financial statement disclosures and determining whether accounting policies have been appropriately applied;
Reviewing and challenging the assumptions and judgements used by management in their significant accounting estimates in particular in relation to the consideration of impairment of intangible assets, including goodwill, the recognition of incremental cost of obtaining a contract inline with IFRS 15 and the subsequent basis for amortisation, and the timing of recognition of revenue inline with the satisfaction of performance obligations;
Assessing the extent of compliance, or lack of, with the relevant laws and regulations;
Testing key revenue lines, in particular cut-off, for evidence of management bias;
Obtaining third-party confirmation of material bank and loan balances;
Documenting and verifying all significant related party balances and transactions.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements even though we have properly planned and performed our audit in accordance with auditing standards. The primary responsibility for the prevention and detection of irregularities and fraud rests with the directors.
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.
The accompanying notes on pages 17 to 46 form an integral part of the financial statements.
The accompanying notes on pages 17 to 46 form an integral part of the financial statements.
The accompanying notes on pages 17 to 46 form an integral part of the financial statements.
The accompanying notes on pages 17 to 46 form an integral part of the financial statements.
TalkTalk Business Direct Limited is a private company limited by shares incorporated in England and Wales. The registered office is Soapworks, Ordsall Lane, Salford, United Kingdom, M5 3TT. The company's principal activities and nature of its operations are disclosed in the directors' report.
The financial statements of TalkTalk Business Direct Limited (“the Company”) for the period ended 31 December 2024 were authorised for issue by the Board of Directors on 7 July 2025 and the balance sheet was signed on the Board’s behalf by Ruth Kennedy.
These financial statements have been prepared in accordance with international financial reporting standards(“IFRS”), as issued by the International Accounting Standards Board (“IASB”), and UK-adopted international accounting standards. The financial statements comply with the Companies Act 2006.
During the period, the reporting period was shortened to 31 December 2024. The reporting period is the period from 1 March 2024 to 31 December 2024 and therefore the comparatives for the year ended 28 February 2024 are not entirely comparable.
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 £'000.
On this basis, the Directors have a reasonable expectation that the Company has sufficient resources to continue its operations for the foreseeable future, being a period of not less than twelve months from the date of this report, and accordingly they continue to adopt the going concern basis in preparing these financial statements.
The probability of collectability is assessed across the Company and where collectability is identified not to be probable, revenue is recognised only when the cash is received from the customer.
The recognition of revenue results in the recognition of contract assets (e.g., where more revenue has been recognised upfront in relation to hardware compared to actual cash consideration received for the hardware).
Contract assets is unwound over the related contract term.
Accrued income is recognised when revenue has been earned but not yet received or invoiced by the end of the accounting period. This typically includes services rendered, such as phone calls take, for which invoice will be raised in future months. Accrued income is assessed for impairment based on lifetime expected credit losses (ECL), in accordance with IFRS 9.
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 income statement.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, and whenever there is an indication that the asset may be impaired.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership to another entity.
Amounts receivable from suppliers (included within trade and other receivables)
Occasionally, the Company enters into agreements with certain suppliers for rebates on the cost of goods purchased. Rebates are recognised in the appropriate financial year to which they relate.
Financial liabilities at amortised cost
Financial liabilities, including borrowings trade payables and other short-term monetary liabilities are initially measured at fair value net of transaction costs directly attributable to the issuance of the financial liabilities. They are subsequently measured at amortised cost.
Financial liabilities are derecognised when, and only when, the Company’s contractual obligations are extinguished.
Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
At inception, the company assesses whether a contract is, or contains, a lease within the scope of IFRS 16. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Where a tangible asset is acquired through a lease, the company recognises a right-of-use asset and a lease liability at the lease commencement date. Right-of-use assets are included within property, plant and equipment, apart from those that meet the definition of investment property.
The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date plus any initial direct costs and an estimate of the cost of obligations to dismantle, remove, refurbish or restore the underlying asset and the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of other property, plant and equipment. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are unpaid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise fixed payments, variable lease payments that depend on an index or a rate, amounts expected to be payable under a residual value guarantee, and the cost of any options that the company is reasonably certain to exercise, such as the exercise price under a purchase option, lease payments in an optional renewal period, or penalties for early termination of a lease.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in: future lease payments arising from a change in an index or rate; the company's estimate of the amount expected to be payable under a residual value guarantee; or the company's assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The company has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease term of 12 months or less, or for leases of low-value assets including IT equipment. The payments associated with these leases are recognised in profit or loss on a straight-line basis over the lease term.
Contract costs
Contract costs eligible for capitalisation as incremental costs of obtaining a contract comprise sales commissions paid to retail partners and to sales agents which can be directly attributed to an acquired or retained contract,. In all other cases subscriber acquisition and retention costs are expensed when incurred. Contract costs are capitalised in the month of service activation if the Company expects to recover those costs.
Costs directly incurred in fulfilling a contract with a customer, which largely comprise the cost of connecting a customer to the Company’s network so that the connectivity services can be provided are recognised as an asset.
Capitalised commission and connection costs are amortised on a systematic basis that is consistent with the transfer to the customer of the services when the related revenues are recognised, being the anticipated customer tenure. The Company has determined that average customer tenure (50–88 months for broadband and up to 120 months for Ethernet) is an appropriate period to amortise cost to obtain and fulfil a contract. This reflects the fact that incremental commissions are typically not paid on customer renewals or extensions. Likewise, connection costs support a customer over their tenure and are not required again because a customer renews or goes beyond their minimum contract term. These costs are accounted for on a portfolio basis, and are reviewed for impairment, taking into account the Company’s customer life-time value analysis.
Contract liabilities
Contract liabilities are recognised where connection revenues received from the customer upfront are deferred over the contract term.
In the current year a number of amendments to IFRS issued by the International Accounting Standards Board ("IASB") and endorsed by the UK Endorsement Board became mandatorily effective for an accounting period that begins on or after 1 January 2024, there are no amendments that have a material effect on the financial statements of the Company.
The following UK-adopted IFRSs have been issued but have not been applied by the Group in these consolidated financial statements. Their adoption is not expected to have a material effect on the financial statements unless otherwise indicated: |
The Group does not yet expect to early adopt any of the above standards, amendments or interpretations. The Group has not yet completed its evaluation of the effect of adopting these standards. |
The preparation of financial statements requires management to exercise judgement in applying the Company’s accounting policies. Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary. Whilst every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain, and as such changes in estimates and assumptions may have a material impact.
The application of IFRS 15 requires the Company to make certain estimates that affect the determination of the amount and timing of revenue and costs from contracts with customers. These include:
Contract costs and customer life-time value analysis
Contract costs are amortised on a systematic basis, consistent with the pattern of transfer of service to which the assets relates. The Company has determined this to be over the expected duration of the customer tenure. The estimate of the expected average duration of customer tenure is based on customer churn relative to the size of the customer base and is currently determined to be 50–120 months depending on the product and channel. However, such rates are subject to fluctuation and may be impacted by future events such as new product launches, an increase in competition in the market or wider macroeconomic factors. A lower average customer tenure would mean that deferred costs are amortised over a shorter period of time and could result in an impairment of the asset in lower profitability channels. A six-month reduction in customer tenure which is considered a reasonably possible movement would not result in an impairment charge, but deferred costs associated with one channel would then have limited headroom and therefore could be subject to impairment at tenures below this. If there were to be a six month reduction in customer tenure, an impairment would be recognised of £9k.
Judgement has been applied to determine that the best estimate for the anticipated contract length is based on customer tenure based on churn relative to the size of the customer base, rather than initial contracted term. Initial contracts tend to be between 12-36 months, however, with renewals and contract extensions actual anticipated contract duration is c. 50-120 months. If the costs were to be amortised over the average initial term, the carrying value of the contract costs as at 31 December 2024 would be £2,490k (Feb-2024: £1,776k) compared to £4,559k (Feb-2024: £3,653k) reported in the Statement of financial position. The directors do not consider the initial term to be indicative of the period of time over which the Company would be generating future cashflows, and rather the best estimate for the period these costs are expected to be recovered by generating or enhancing the resources of the entity is over the average customer tenure.
The intangible asset relating to customer relationships arising on the acquisition of the trade and assets of the B2B Direct business from TalkTalk Communications Limited is held on the balance sheet and amortised over its useful economic life of 8 years. Indicators of impairment may result in the performance of impairment testing, where the recoverable amount of the customer relationships will be compared to the value in use of the customers. Value in use is based on projected estimated future cash flows, prepared based on budgets and a terminal value. Key assumptions used to determine value in use represent management’s assessment of future trends and are based on a discounted cash flow approach. The recoverable amount is sensitive to the discount rate used for the discounted cash flow (“DCF”) model as well as the expected future cash inflows and the growth rate used for extrapolation purposes. Where a reduction in estimated future economic benefits occurs, or the expected useful economic life falls below 8 years, both of which require a degree of subjectivity on the part of management, or the WACC increases, it could result in a material impairment charge.
The impairment of goodwill is evaluated annually using a detailed estimation process. The basis for these consideration estimates includes:
1. Value in Use Calculation: This involves projecting future cash flows from the business, derived from profit and loss (P&L) forecasts. These projections are discounted to their present value using an appropriate discount rate.
2. Scenario Analysis: To ensure a robust assessment, multiple scenarios are considered:
- Base Case: Reflects the most likely outcome based on current business conditions and forecasts.
- Worst Case: Assumes adverse conditions that could negatively impact the business.
- Best Case: Considers favourable conditions that could enhance business performance.
3. Review of transactions data: The present value calculations were reviewed against the demerger value for a reasonableness check. The transaction price point adopted as the Fair Value which aligns to the Value in Use.
4. Comparison with Carrying Amount: The calculated value in use is compared with the carrying amount of goodwill on the balance sheet. If the carrying amount exceeds the value in use, an impairment loss is recognised.
5. Assumptions and Judgments: Key assumptions and judgments used in the estimation process, such as growth rates, discount rates, and economic conditions, are documented and reviewed to ensure they are reasonable and supportable.
This policy ensures that the carrying amount of goodwill is not overstated and provides a comprehensive view of the business’s financial health. Following applying the judgements and estimates as discussed above, an impairment has been recognised in the period of £nil (Feb 2024: £25,542k). For further detail please see Notes 9 and 21.
In preparing these financial statements, management has made significant judgments in recognising and measuring assets under construction. These judgments include determining the point at which an asset is considered to be in the location and condition necessary for it to be capable of operating as intended. Costs directly attributable to the construction, such as materials, labour, and overheads, have been capitalised. Management has also exercised judgment in identifying and excluding costs that do not contribute to bringing the asset to its intended use. Furthermore, impairment assessments are conducted regularly to ensure that the carrying amount of assets under construction does not exceed their recoverable amount.
All revenue generated by the Company relates to services provided to customers.
Revenue streams are analysed as follows
All revenue arises within the UK.
The average monthly number of persons (including directors) employed by the company during the period was:
Their aggregate remuneration comprised:
Redundancy payments in the period amount to £246k (Feb 2024: £39k).
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 1 (February 2024 - 1).
The directors include all key management personnel. There are no key management personnel that are not directors.
The principal differences between the tax charge and the amount calculated by applying a blended rate of UK corporation tax of 25% (February 2024: 24.5%) to the profit/(loss) before taxation are as follows:
The charge for the period can be reconciled to the loss per the income statement as follows:
The blended rate of UK corporation tax in the prior period of 24.5% is comprised of the standard rate of UK corporation tax of 19% up until 31 March 2023 and the standard rate of UK corporation tax of 25% from 1 April 2023.
As at 31 December 2024, the Company had unrecognised deferred tax assets of £4,168k in respect of losses (Feb 2024: £3,867k). These have not been recognised as there is insufficient evidence that there will be suitable taxable profits against which these can be recovered.
Impairment tests have been carried out where appropriate and the following impairment losses have been recognised in profit or loss:
Impairment losses have been recognised within the statement of comprehensive income against goodwill. Goodwill is held in the accounts at cost and reviewed annually for impairment. Following a review of the cash flow forecasts, a thorough analysis of the Weighted Average Cost of Capital (WACC) calculations, including the cost of debt, and an assessment of market trends, it was determined that there is an impairment to goodwill. Impairment has been recognised against goodwill of £nil (Feb 2024: £25,542k).
More information on impairment movements in the period is given in note 12.
Revenue has been recognised in the statement of comprehensive income for the period which was included within contract liabilities at the beginning of the period of £49k (Feb 2024: £599k).
The directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
The directors consider that the carrying amounts of financial liabilities carried at amortised cost in the financial statements approximate to their fair values.
Loans from related parties relates to a loan note. No interest is payable on the Loan Note save to the extent agreed from time to time between the Company and the Lender. The Loan Note is repayable and redeemable (in whole or any part) on demand, save as agreed between the Company and the Lender. On 10 December 2024, the Lender released the loan note and issued a single ordinary share fully paid of £1 in the capital of the Company therefore this value was converted to Share Premium. The Lender transferred that share to TFP Telecoms Limited, the entity who purchased the Company during the year.
On 9 August 2024, the Company entered into a loan agreement with Kartesia with available facilities of £72,500k. The company have drawndown on one of the available facilities as at 31 December 2024, for £51,000k. Interest is charged on the loan at 5.5% plus the compound reference rate for that day. PIK interest is also payable at 3.5%. The termination date of the loan is 6 years from the date of the agreement, being 8 August 2030. The amount payable at the year end is £49,227k. There are fixed and floating charges over the Company's current and future land and intellectual property owned by the Company in favour of the lenders.
On 9 August 2024, the Company entered into a loan agreement with their parent undertakings, TFP Telecoms Limited. The agreement confirmed that all existing intercompany loans and balances outstanding would, with effect from the date of the agreement, be treated as an advance under the facility. Interest shall accrue on the facility as may be agreed in writing between the Company and their parent undertakings. The balance is repayable on demand.
Lease liabilities are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:
The Company entered into lease agreements in the year in relation to office space.
For details of the Company's right of use assets arising under the lease agreements in place, please see note 14.
Please also see note 34 for summary of the total cash outflows for the leases.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The Company’s market risk arises from open positions in interest bearing liabilities, to the extend they are exposed to general and specific market movements. Management sets limits on the exposure to interest rate risk that may be acceptable, however, the use of this approach does not prevent losses outside of these limits in the event of more significant market movements.
Sensitivities to market risks included below are based on a change in one factor while holding all other factors constant. In practice, this is unlikely to occur, and changes in some of the factors may be correlated.
The Company’s exposure to market price risk is comprised mainly of impairment against the Company’s intangible asset, including goodwill, which is inherently difficult to value due to the individual nature of the assets. As a result, judgements are subject to uncertainty. There are no assurances that estimates resulting from the valuation process will reflect any actual sales price.
The Company’s activities expose it to market risk (such as currency risk and interest rate risk). The Company does not trade or speculate in any financial instruments.
Sensitivities in relation to IFRS 13
Goodwill has been reviewed for impairment through review of discounted cash flow forecasts "DCF". The following sensitivities have been reviewed, comparing headroom on the DCF, or possible impairment:
| Percentage increase/ (decrease) |
| Headroom/ (decrease) in goodwill £’000 |
|
|
|
|
Increase in WACC (percentage points) | 1.3 |
| (£8,000) |
Long term growth rate nil | n/a |
| £9,000 |
No growth in EBITDA in each of the next 3 years | n/a |
| £3,000 |
The fair value measurement is classified as Level 3 (Feb 2024: Level 3), derived from valuation techniques that include inputs for the liability that are not based on observable market data.
TTBD has only a single supplier who bills in foreign currency. These bills are sensitive to movements in foreign exchange rates; this sensitivity can be analysed in comparison to year-end rates. There would be no material impact of a 10% movement in the UK Sterling/Euro or UK Sterling/USD exchange rate on either the income statement or other equity.
The Company’s interest rate risk arises primarily from cash, cash equivalents and borrowings, all of which are at either fixed or fixed plus floating rates of interest which expose the Company to cash flow interest rate risk. These floating rates are linked to SONIA. Future cash flows arising from these financial instruments depend on interest rates and periods for each loan or rollover.
Interest rates on borrowings directly impact the cost of debt for a company. When interest rates rise, the cost of borrowing increases, leading to higher interest expenses. This relationship is crucial because the cost of debt is a significant component of a company’s overall cost of capital.
Impact on Weighted Average Cost of Capital (WACC) - When interest rates increase, the cost of debt rises, which in turn increases the WACC. A higher WACC indicates that the company faces higher costs to finance its operations, which can affect investment decisions and overall financial strategy.
Goodwill and Other Intangible Asset Impairment - Goodwill and other intangible assets are subject to impairment testing, which involves comparing the carrying value of these assets to their fair value. If the carrying value exceeds the fair value, an impairment loss is recognized.
Higher interest rates can affect impairment considerations in several ways:
- Discount Rates: Higher interest rates typically lead to higher discount rates used in impairment testing. This can reduce the present value of future cash flows, increasing the likelihood of impairment.
- Cost of Capital: As WACC increases due to higher interest rates, the hurdle rate for investments also rises. This can lead to lower valuations for cash-generating units, potentially triggering impairments.
- Economic Conditions: Rising interest rates can signal tighter economic conditions, which might reduce expected future cash flows from intangible assets, further increasing impairment risk.
The interest rate profile of the Company’s interest bearing financial instruments is as follows:
Fair value hierarchy
The fair value hierarchy levels are as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 - Inputs for the assets or liability that are not based on observable market data (unobservable inputs).
There have been no transfers between Levels 1, 2 and 3 during the year.
The following table details the remaining contractual maturity for the company's financial liabilities with agreed repayment periods. The contractual maturity is based on the earliest date on which the company may be required to pay.
The Company manages its exposure to liquidity risk by regularly reviewing the long and short term cash flow projections for the business against facilities and other resources available to it. Headroom is assessed based on historical experience as well as by assessing current business risks, availability and renewal of future facilities.
As of the year-end, the Company had outstanding liabilities of £53,911k (Feb 2024: £99,586k) to its parent company, TFP Telecoms.
During the year, the company entered into a new loan with Kartesia, in order to repay a portion of the Ares bridging loan, which carries an interest rate that is 3% lower than the loans held in the parent company. The balance outstanding at the year end being £49,227k.
During the year, an amendment and restatement deed was signed between the Company and the shareholders in respect of loans outstanding, and the interest that had been accumulating on shareholder loans has been reduced by 7% (to a margin rate of 10%), with this reduction backdated to the inception of the loan.
The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Company's maximum exposure to credit risk. Credit risk is the possibility that the Company may suffer a loss from the failure of one of its counterparties to meet their contractual obligations. The Company's exposure to credit risk is regularly monitored against a reasonable approximation of future changes. Debt is spread amongst banks and shareholder loans, all of which have short- or long-term credit ratings appropriate to TTBD's exposures.
Trade receivables primarily comprise balances due from fixed line customers and expected credit losses are made under IFRS 9 for any receivables that are considered irrecoverable. At 31 December 2024, the TTBD's maximum exposure to credit risk arises from the carrying amount of the trade receivables as stated in the statement of financial position. TTBD has no externally imposed capital requirements. Working capital is managed through careful monitoring of short-term cash flow.
Except as detailed below, the carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the company's maximum exposure to credit risk.
Impairment losses
The movement in the allowance for impairment losses in respect of trade receivables during the year was as follows:
The capital structure of the Company consists of debt, which includes bank facilities and shareholder loans. The Company continues to review its funding and capital structure with the objectives of diversifying sources and managing both the average tenor and interest cost. The Company also assesses the risk profile of its trade receivables based upon past experience and an analysis of the receivables, current financial position, adjusted for specific factors, general economic conditions of the industry in which the receivables operate and assessment of both the current and the forecast direction of conditions at the reporting date. The Company has performed the calculation of expected credit loss and rebutted the assumption under IFRS 9 that all debts over 90 days should have a credit allowance.
The company had commitments related to short-term leases at the year end of £402,998 (Feb'24: £686,080).
As at 31 December 2024 the Company also have short term commitments relating to use of live connection lines on short-term lease. There are no fixed payments but these are based on type of quantity of usage. The expenses in the period relating to this lease was £54,548,186 (Feb'24: £41,828,076).
On 10 December 2024, TalkTalk Communications Limited irrevocably released the retained debt loan note of £64,423,448 and issued one fully paid ordinary share of £1 in the Company. Immediately following the issue of the share, the share was transferred to TFP Telecoms Limited, with the retained debt loan note converted to share premium in the Company.
The remuneration of key management personnel, including directors, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.
The Company procures network services and transitional services from TalkTalk Communications Limited (which is a related party of the Company as they are ultimately owned by the major shareholders of the ultimate parent company of the Company).
During the period the company entered into the following transactions with related parties:
There are additional related parties for which transactions have entered into in the year. Please see summary below:
The Company made repayment of amounts owed to its parent company of £55,525k (Feb 2024: £4,659k), including interest, relating to principal and interest repayment of the loan the parent company holds with Ares and ultimate shareholders. The Company received advances from its parent company for amounts of £2,216k (Feb 2024: £95,000k) in the period. Interest was accrued on the loans of £7,634k (Feb 2024: £7,069k) and arrangement fees of £nil (Feb 2024: £2,176k). At the year end, the Company owed amounts of £53,911k (Feb 2024: £99,586k) to its parent company.