Trading Performance

The Board now believes that the Group's trading performance for the current financial year ending 31 March 2019, on a pre-IFRS 15 basis, will be weaker than originally expected.  This is principally the result of flat revenue (driven by lower than expected order intake) in the Group's Enterprise segment and continued customer churn in the Group's National Network Services segment ("NNS"). It is the Board's view that these trends will continue into the following financial year.

The performance of the Group's NNS segment has resulted in the Board's decision to impair the carrying value of goodwill in NNS. A non-cash exceptional item of £32.2 million will be recognised in the Group's upcoming interim results.

The Group's Hull and East Yorkshire segment, which is the largest contributor to Group EBITDA, continues to perform well and in line with market expectations.  This good performance is expected to continue during the second half of the financial year, supported in part by the anticipated December launch of a new unlimited fibre broadband portfolio for consumer customers.

As a result, the Board now expects EBITDA (pre-IFRS 15) for the current financial year ending 31 March 2019 to be c.5% below current market expectations.  However, as a result of the factors outlined above, it is also the Board's expectation that EBITDA (pre-IFRS 15) for the financial year ending 31 March 2020 will be significantly below current market expectations.

Cashflow, Balance Sheet and Dividend

The Group's net debt at 30 September 2018 is £108.5 million (30 September 2017: £67.8 million, 31 March 2018: £62.6 million). This includes a material permanent one-off working capital outflow, which is principally the cash impact of the decision, in order to drive down costs, to insource a managed service arrangement with a key partner, alongside the unwind of certain deferred revenue balances in the Group's Enterprise segment. The Board expects the Group's net debt at 31 March 2019 to be c.10% higher than current market expectations.

Taking these changes to the Group's medium-term trading performance, cash flow and balance sheet into account, the Board now considers it inappropriate to commit to continuing to pay an uncovered dividend. As such, the Board has decided to review the Group's ongoing dividend policy, resolving to pay a dividend of not less than 3 pence per share for the current financial year ending 31 March 2019, rather than the previously stated commitment to pay 6 pence per share.


The Group will announce interim results for the six months ending 30 September 2018 on Tuesday, 27 November 2018.