CityFibre swallows Redcentric network, reports stellar first half

Fibre optic infrastructure designer, builder, owner, and operator CityFibre announced the acquisition of the entire metropolitan local access duct and fibre network assets of Redcentric on Monday.

The AIM-traded firm said the acquired assets comprise 137 kilometres of duct and fibre networks serving 188 Redcentric customer connections, with principal footprints covering Cambridge, Portsmouth and Southampton, along with complementary incremental coverage in the existing CityFibre footprints of Nottingham, Derby and Northampton.

“With this agreement, CityFibre expands its metro fibre presence to 40 cities, including 25 of the top 30 cities outside Greater London,” the company’s board said in a statement.

The transaction structure follows CityFibre's standard anchor formula, with the group paying a cash consideration of £5.0m in return for a commitment from the vendor to a minimum revenue guarantee of £4.5m under a 10-year lease-back agreement for continued use of the network to serve its existing customer base.

“The expanded CityFibre footprint now addresses an estimated 28,000 public sector sites, 280,000 businesses, 7,800 cell sites and 4 million homes.”

At the same time, CityFibre posted its interim results for the six months to 30 June, with turnover up 147% year-on-year to £6.6m and a stable gross margin at 86%.

Adjusted EBITDA turned positive during the period, at £0.4m, compared with a £1.8m loss in the first half of 2015.

New contracts with initial contract value of £53.8m were added during the period, against £23.2m for the full 2015 financial year and £8.1m in the first half of last year.

At the period end cash, cash equivalents and short term deposits totalled £18.1m, with net debt of £26.7m.

“We have had a very strong six months underpinned by an excellent performance by our commercial and operations teams, in which we have amassed a significant new business pipeline,” said CityFibre CEO Greg Mesch.

“In less than three years we have created a highly competitive business underpinned by a dense fibre network across 40 UK cities.”

Mesch pointed out the company had completed two transformational projects that he said demonstrated the future potential direction of the UK fibre market, a dark fibre mobile project with Three and EE and the completion of the trial of gigabit speed fibre-to-the-home with Sky and TalkTalk.

“Our business now sits at the forefront of transforming the UK's digital infrastructure and remains well placed to capitalise on a number of significant near term commercial opportunities.”