The directors present their strategic report for the year ended 31 January 2026.

Highland Broadband Networks Limited (the 'Company') is a trading company within the Highland Broadband Networks Group (the 'Group'). The Company has enjoyed another successful year, having completed a funding round and demonstrated continued growth across all Key Performance Indicators (KPI), reflecting material progress on its path to profitability.

In July 2025, the Company executed a £40 million secured debt facility with Alpha Real Capital to support further network expansion. As part of this process, Lothian Broadband Networks Limited was re-named as Highland Broadband Networks Limited, with Highland Broadband Networks Midco Limited and Highland Broadband Networks Holdco Limited added as intermediate and ultimate parent companies, respectively. The Company's existing loan notes were consolidated, including partial conversion to equity, repayment and issuance of new interest-bearing loan notes (see Note 17). These new loan notes were transferred to Highland Broadband Networks Holdco Limited via Highland Broadband Networks Midco Limited. This had no impact on business activities.

Sustained commercial performance has resulted in turnover of £3,344k (90% growth YoY) and gross profit of £2,114k (140% growth YoY). EBITDA was flat year-on-year due to an increase in sales and general administrative expenses. This investment across customer acquisition and business operations enables the Company's next phase of growth, which will deliver a material improvement in EBITDA in the year ahead.

The Company's network build continued at pace, including expansion into new areas of the Highlands. The Company has invested £25,561k in fibre network assets in the year. The Company's gross and net build costs are performing in line with its business plan.

The key financial indicators for the year are set out below:

The principal risks and uncertainties facing the Company are set out below:

The Company's facility agreement with Alpha Real Capital and the continued support of its parent and ultimate parent company mean that the Company is funded and well placed to continue to deliver against its business plan.

The Company plans to continue its network rollout across underserved communities in rural Scotland and is actively engaged in identifying further opportunities to enhance its network footprint. The Company also expects to continue its commercialisation, with penetration and revenue growth driving improved profitability.

The directors present their report and the audited financial statements for the year ended 31 January 2026.

The principal activity of the Company is the build and operation of full fibre networks in rural Scotland.

The results for the year are set out on page 10.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who served during the year and to the date of this report are as follows:

The directors have considered the Company's financial position, committed facilities and cash flow projections for at least 12 months from the date of approval of these financial statements. Having reviewed detailed projections for the group, the directors have a reasonable expectation that the Company will have adequate resources to continue in operational existence for the foreseeable future. The financial statements have accordingly been prepared on a going-concern basis.

select suitable accounting policies and then apply them consistently;

state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

make judgements and estimates that are reasonable and prudent; and

prepare the financial statements on a going-concern basis unless it is inappropriate to presume that the Company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company, and for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In the case of each director in office at the date the Directors' Report is approved:

so far as the director is aware, there is no relevant audit information of which the Company's auditor is unaware; and

they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This report was approved by the board of directors on 8 July 2026 and signed on its behalf by:

We have audited the financial statements of Highland Broadband Networks Limited (the 'company') which comprise the statement of financial position as at 31 January 2026, and the statement of comprehensive income, the statement of changes in equity for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

give a true and fair view of the state of the company's affairs as at 31 January 2026 and of its loss for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been properly prepared in accordance with the requirements of the Companies Act 2006.

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 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.

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 entity'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.

The other information comprises the Annual Report, other than the financial statements and our auditor's report thereon. 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. In connection with our audit of the financial statements, 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 audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. 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.

In our opinion, based on the work undertaken in the course of the audit:

the information given in the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

the directors' report has been prepared in accordance with applicable legal requirements.

In the light of our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

the 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.

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.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and 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:

We gained an understanding of the legal and regulatory framework applicable to the entity and the industry in which it operates and considered the risk of acts by the entity which were contrary to applicable laws and regulations, including fraud. This included gaining an understanding of the control environment for monitoring compliance with laws and regulations.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that 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.

We focussed on laws and regulations that could give rise to a material misstatement in the company's financial statements. Our tests included, but were not limited to:

Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud;

Reviewing minutes of meetings of those charged with governance;

Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection;

Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias;

Performing analytical procedures to identify any unexpected movements which may indicate irregularities and substantiated the explanations given for these movements;

Reviewing the accounting policies and the application of these policies to ensure compliance with the standard and consistency of application; and

Specific consideration was given to transactions with related parties.

There are inherent limitations in an audit of financial statements and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would be to become aware of it. We also addressed the risk of management override of internal controls, including reviewing journals and evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

This report is made solely to the company's shareholder, 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 shareholder 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 shareholder as a body, for our audit work, for this report, or for the opinions we have formed.

These financial statements were approved by the board of directors and authorised for issue on 8 July 2026 and signed on its behalf by:

Highland Broadband Networks Limited is a private company limited by shares incorporated in Scotland. The address of the registered office and registration number is given in the company information on page 2 of these financial statements. The principal activity of the Company during the year was the provision of broadband services through the build and operation of full-fibre and fixed wireless networks in rural Scotland.

The financial statements have been prepared in accordance with applicable United Kingdom accounting standards including Financial Reporting Standard 102 - The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102), and the Companies Act 2006.

The financial statements are prepared in sterling (£) which is the functional currency of the Company and rounded to the nearest £.

The significant accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented unless otherwise stated.

The financial statements have been prepared on a going concern basis. The directors have assessed the Company's ability to continue as a going concern and have a reasonable expectation that the Company's resources and the support of its parent company are sufficient for it 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.

• No cash flow statement has been presented for the Company.

• Disclosures in respect of financial instruments have not been presented.

The Company has taken advantage of the exemption from preparing consolidated financial statements contained in Section 400 of the Companies Act 2006 on the basis that it is a subsidiary undertaking and its immediate parent undertaking is established under the law of the United Kingdom.

In the application of the Company'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 directors estimate the useful lives and residual values of property, plant & equipment in order to calculate the depreciation charges. Changes in these estimates could result in changes being required to the annual depreciation charges in the statement of comprehensive income and the carrying values of fixed assets in the statement of financial position. Fibre network assets in our networks represent underground fibre, cabling and contracted civil engineering works. The annual depreciation is sensitive to the estimated service lives allocated to each type of asset. Asset lives are assessed annually and change when necessary to reflect management's current estimates of remaining useful lives in light of technological change and condition of assets.

Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account credits and incentives.

Capital grants received for the construction of fibre broadband networks are recognised in line with the treatment of government grants as set out in section 24 of FRS 102. Amounts received are included in deferred income and income is released over the expected useful life of the asset to which it relates.

Taxation for the year comprises current and deferred tax. Tax is recognised in the Profit and Loss Account, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

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 lease assets are consumed.

Intangible assets acquired separately from a business are recognised at cost and are subsequently measured at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets acquired on business combinations are recognised separately from goodwill at the acquisition date where it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and the fair value of the asset can be measured reliably; the intangible asset arises from contractual or other legal rights; and the intangible asset is separable from the entity.

Intangible assets are each amortised on a systematic basis over the expected useful life as follows:

If there is an indication that there has been a significant change in amortisation rate, useful life or residual value of an intangible asset, the amortisation is revised prospectively to reflect the new estimates.

Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.

Depreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value, of each asset on a systematic basis over its expected useful life as follows:

Interests in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses. The investments are assessed for impairment at each reporting date and any impairment losses or reversals of impairment losses are recognised immediately in profit or loss.

A subsidiary is an entity controlled by the parent company. 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 Company 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 Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

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 Company 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 Company's balance sheet when the Group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with 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 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 company after deducting all of its liabilities.

Basic financial liabilities, including creditors 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.

Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. They are items that the directors have deemed are material either because of their size or nature and are considered non-recurring. These items are presented within the line items to which they best relate and reported separately as exceptional items.

Contributions to defined contribution plans are recognised as an expense in the period in which the related service is provided.

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.

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.

Equity-settled share-based payment transactions are measured at fair value at the date of grant. The fair value is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity. This is based upon the Company's estimate of the shares or share options that will eventually vest which takes into account all vesting conditions and non-market performance conditions, with adjustments being made where new information indicates the number of shares or share options expected to vest differs from previous estimates.

Fair value is determined using an appropriate pricing model. All market conditions and non-vesting conditions are taken into account when estimating the fair value of the shares or share options. As long as all other vesting conditions are satisfied, no adjustment is made irrespective of whether market or non-vesting conditions are met.

Where the terms of an equity-settled transaction are modified, an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the fair value of the transaction, as measured at the date of modification.

Where an equity-settled transaction is cancelled or settled, it is treated as if it had vested on the date of cancellation or settlement, and any expense not yet recognised in profit or loss is expensed immediately.

Highland Broadband Networks Limited and Highland Wireless & IT Solutions Ltd are registered in Scotland. Their registered office address is Suite 2, Ground Floor, Orchard Brae House, 30 Queensferry Road, Edinburgh, EH4 2HS.

During the year, the Company executed a senior loan facility with Alpha Real Capital. At the year-end, loan notes with a value of £15,800,000 are outstanding, that accrue interest at a rate of 12.25% per annum. The facility has a 5-year term and the loan is secured by a bond and floating charge over the Company's assets.

As part of this transaction, the Company reorganised its existing loan notes.

The convertible loan notes had a value of £27,808,020, of which £21,551,188 was converted into equity, £8,705,119 was moved into a new loan note, and £1,774,187 was repaid in cash. In line with the instrument's terms, the conversion was undertaken at a 12.5% discount which resulted in an expense of £4,222,475. This discount has been treated as an exceptional item.

The existing secured loan notes had an accrued value of £45,366,498, which was combined with the £8,705,119 from the convertible loan note and moved into a new secured loan note with a value of £54,071,617 and a 5-year term. The loan notes accrue interest at a rate of 13% per annum.

Total future minimum lease payments under non-cancellable operating leases are as follows:

The Company has an unrecognised deferred tax asset of £11,434,416 as at 31 January 2026 (2025: £6,340,898) which has arisen from fixed asset timing differences and losses carried forward. Its recoverability is dependent upon future taxable profits arising, the likelihood of which cannot at this stage be determined with reasonable certainty.

As at 31 January, the company had the following capital commitments:

During the year, the Company issued 25,872 ordinary shares of £0.10 each on conversion of loan notes for a total consideration of £21,551,188. A share premium of £21,548,601 was recognised in connection with this issue. The ordinary shares carry full voting rights.

This reserve records retained earnings and accumulated losses.

This reserve records the amount above the nominal value received for shares issued, less transaction costs.

The capital contribution reserve reflects parent company share-based payments recognised directly in equity.

The Company takes advantage of the exemption in FRS 102 from disclosing transactions entered into between members of the Group comprising Highland Broadband Networks Holdco Limited and its subsidiaries.

Key management personnel are considered to be the directors of the company. The highest paid director received remuneration of £341,280 (2025: £369,729).

Certain employees were granted options to subscribe for shares in Highland Broadband Networks Limited.

During the year, new parent companies were introduced above Highland Broadband Networks Limited. As part of this process, a share-for-share exchange was carried out, with the options previously granted by Highland Broadband Networks Limited replaced on a like-for-like basis with options in Highland Broadband Networks Midco Limited, which were in turn replaced on a like-for-like basis with options in Highland Broadband Networks Holdco Limited. There were no changes to the economic terms of the awards.

Cumulative amounts of £41,886 previously recognised within retained earnings of Highland Broadband Networks Limited have been reallocated to the capital contribution reserve. The options outstanding during the year are shown in the table below.

The total expense recognised in profit and loss for the year is as follows:

The estimated fair values were calculated by applying the Black-Scholes option pricing model. The model inputs were:

Share price at grant date

Exercise price

Expected volatility

Expected life

Risk free interest rate

Dividend yield

The fair value of equity-settled share-based payments at date of grant was estimated using the Black Scholes valuation model, taking into account the terms and conditions of the share options granted.

Fitzrovia Finance Security Ltd, in its capacity as security trustee, holds fixed and floating charges over the assets and undertakings of the Company, together with share pledges, granted on 18 July 2025. This relates to the senior loan facility with the Company.

Scottish National Investment Bank plc holds a floating charge over the assets and undertakings of the Company, granted on 18 July 2025. This relates to the secured loan notes with Highland Broadband Networks Holdco Limited.

The immediate parent of the Company is Highland Broadband Networks Midco Limited, whose registered office is Suite 2, Ground Floor Orchard Brae House, 30 Queensferry Road, Edinburgh, United Kingdom, EH4 2HS.

The ultimate parent and the largest and smallest group financial statements that consolidate this company is Highland Broadband Networks Holdco Limited, whose registered office is Suite 2, Ground Floor Orchard Brae House, 30 Queensferry Road, Edinburgh, United Kingdom, EH4 2HS.

In the opinion of the directors there is no single controlling party.