Proposed sale of UK network infrastructure
KCOM Group today announces the sale of its national network infrastructure1 (outside of Hull and East Yorkshire) to CityFibre for an all cash consideration of £90.0 million (‘the Transaction’), subject to approval by CityFibre shareholders.
- Sale of ‘national’ network assets1 for £90.0 million all cash consideration (subject to CityFibre shareholder approval)
- Parallel arrangement with CityFibre for continuing access to the assets post disposal
- Proceeds to be used to reduce net debt
- Results in KCOM Group pro-forma net debt of £13.0 million as at 30 September 2015
The Board has announced its intention to dispose of the physical infrastructure of the Group’s national network to CityFibre, for a cash consideration of £90.0 million, subject to approval by CityFibre shareholders. The General Meeting to approve the Transaction by CityFibre shareholders is anticipated by 12 January 2016, with contract completion shortly thereafter. Under the arrangement, ownership of all KCOM Group’s national physical network infrastructure (excluding that in Hull and East Yorkshire) will transfer to CityFibre.
In parallel with the Transaction, the Group has entered into an arrangement with CityFibre for certain services to support existing commitments and customer arrangements. The cost of this arrangement, over a five year term, is £5 million per annum. Furthermore, under this arrangement certain operational costs of approximately £1 million per annum will transfer to CityFibre, resulting in a net cost to the Group of approximately £4 million per annum. The Group has the option to extend the term of this arrangement up to 15 years.
As at 30 September 2015, these assets had a Net Book Value of £41.8 million. There was no ongoing associated depreciation charge in the six month period to September 2015 (2014: £NIL million).
Outlook
As detailed in the Group’s interim results on 30 November, performance across the business during the first half of the financial year has been encouraging, reflecting our focus on growing areas of strategic importance, where we believe longer term returns can best be maximised. The proceeds from the Transaction strengthen significantly the Group’s financial position and increase its ability to invest further and continue to transform the Group, while at the same time as providing shareholders with a clear medium term dividend commitment.
Commenting on the announcement, Bill Halbert, Chief Executive, said:
Today’s announcement unlocks considerable value in relation to an under-utilised asset, built more than ten years ago and which is no longer core to our strategy. Over the first half of the financial year, there were encouraging signs that our business transformation is starting to deliver results and the proceeds from this transaction offer us the opportunity to accelerate investment in those plans, without the need for any material increase in our indebtedness.
1Network assets sold are the ducts, sub-ducts, chambers, cables and cable joints, ODFs and patch cords. KCOM Group retains ownership of network switching, transmission, control and application elements.
Enquiries:
Bill Halbert, Chief Executive Officer
Paul Simpson, Chief Financial Officer
Cathy Phillips, Investor Relations
KCOM Group PLC
01482 602595
Tavistock Communications
Matt Ridsdale/Lulu Bridges/Mike Bartlett
020 7920 3150