Disposal of Norwegian Operations/Related Party

Bigblu Broadband PLC

20 May 2024

 

Bigblu Broadband plc

('BBB', the 'Company' or the 'Group')

Disposal of Norwegian Operations

And

Related Party Transactions

Bigblu Broadband plc (AIM: BBB.L), a leading provider of alternative super-fast and ultra-fast broadband services, announces the disposal of the Norwegian Operations comprising Brdy AS and Brdy Nordics AS (the "Brdy Group") to Brdy Holding AS (under construction), a company owned by the Norwegian Management Team and Andrew Walwyn (the "Buyer") who has today also announced that he has stepped down from his position as Chief Executive Officer of the Company (the "Disposal"). Frank Waters, currently Chief Financial Officer, will take over as Chief Executive Officer of the Company.

Headquartered in Oslo, Norway and established over 15 years ago, Brdy Group provides a range of Broadband services to both consumers and businesses across the Nordic region. The Enterprise Value of the business units being sold is £1.3m and the company will write off intercompany balances as a consequence of the Buyer assuming certain existing net working capital creditors and contingent liabilities within the Brdy Group amounting to approximately £1.3 million. As a result, the Equity value of the business units being disposed is £1, being the Initial Consideration. In addition, BBB will be entitled to a Contingent Consideration as follows: If the Brdy Group,

·    in the period between 17th May 2024 and 16th May 2025, achieves an Adjusted EBITDA of five hundred thousand pounds (£500,000) or more, BBB will receive twenty (20) percent of the Adjusted EBITDA for that period, within six months of the period.

·    in the period between 17th May 2025 and 16th May 2026, achieves an Adjusted EBITDA of one million pounds (£1,000,000) or more, BBB will receive twenty (20) percent of the Adjusted EBITDA for that period, within six months of the period.

A Deferred Consideration is also payable of up to NOK 2.3m (c£0.2m) on the return, or release of the deposit held with networks, or a Trigger Event.

In addition, on the occurrence of a Trigger Event, including a listing, an additional Consideration shall be payable of 20% of the proceeds less costs.

The disposal is in line with BBB's strategy of divesting of its assets and reducing risk attached to the potential future cash flows of the Group. The Norwegian operations have for several years encountered significant headwinds with higher than anticipated customer churn as the Company sought to tackle low broadband speeds in the region as well as faster offerings from fibre competitors. The Company has sought to address these challenges by taking steps to enhance its service proposition but also by reducing the cost base in the region. Most recently in the past financial year, the Company pro-actively undertook a reorganisation of the Norwegian business into two legal entities, recognising the different attributes of each, being the satellite and 5G technology business with typically lower capex, and the infrastructure business with typically higher capex. This resulted in reducing the workforce by approximately 30%, with an annualised cost saving of c.£0.4m. However, customers have continued to decline with customers numbers falling from c.9.6k as at 31 May 2022 to c.6k as at 30 April 2024. 

For the financial year ended 30 November 2023 the Brdy Group delivered revenue of NOK 52.8m (c.£4.1m) and generated an audited loss before tax of NOK 42.6m (c.£3.3m). Net Liabilities excluding goodwill were NOK 1.4m (c.£0.1m). Since the period end, trading in the region has remained challenging and the Company is expected to incur further potentially significant demounting costs as it continues to transition to an asset light business.

The Board recognised the challenges it has faced in trying to turnaround the Norwegian business as well as the potential need for further cash investment in the region. The Board has undertaken a full market exercise by independent advisors over the last year to try and find acquirers for the Brdy Group as it believed that either we were able to sell the Norwegian assets, or we would have to consider closing it down with significant potential cost implications. Following this exercise, the Board believes that the proposed management buyout of the business by local management, supported by Andrew Walwyn, provided the greatest certainty of being able to dispose of its Norwegian assets and remove potential ongoing liabilities associated with these operations. The Board believes that the Disposal is in the best interests of shareholders. Following the Disposal, the Board believes that it will be able to reduce annual central costs further by c.£0.4m including executive costs and that it will be able to focus exclusively on its efforts to realise value from the Australian Operations and the retained stake in Quickline.  

Bigblu Operations Limited Contracts

As part of the reductions in the headcount within the plc during the course of the year the Company entered into certain service contracts with Bigblu Operations Limited ("BBO"), a company of which Andrew Walwyn is a director (the "BBO Contracts"). The BBO Contracts are summarised below:

Licence Agreement

The Company has agreed to grant a licence over certain trademarks to BBO in relation to the Brdy brand. In consideration for the rights granted by the Company to BBO, BBO has agreed to pay the Company a notional annual license fee for each period of usage. 

Service Agreement - Company to BBO

The Company has entered into a service agreement with BBO. The services provided by the Company to BBO include legal and corporate finance support, IT, marketing, and certain Executive support services (the "Services"). Costs and expenses are charged on a time and material basis based on the time spend by individuals performing the Services. This equated to £118k in the last financial year.

Service Agreement - BBO to Company

In addition, the Company has entered into a further service agreement with BBO. The services provided by BBO to the Company primarily include finance, IT and tech support (the "BBO Services"). Costs and expenses are charged on a time and material basis for the time spend by individuals performing the BBO Services. This equated to £73k in the last financial year.

Post the transaction and Andrew Walwyn's resignation we have entered into a consultancy contract with Andrew Walwyn to support the value realisation in Australia.

Products

In the normal course of events the Company has entered into reseller agreements with BBO for certain broadband products sold by the Company (the "Products"). This equated to £10k in the last financial year.

Post the disposal of the Norwegian operations we anticipate these services to reduce alongside further BBB rationalisations.

Related Party Transactions

The acquisition of the Brdy Group by the Buyer together with each of the BBO contracts set out above constitute a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Company's independent Directors (being Frank Waters, Christopher Mills, Paul Howard, Michael Tobin and Philip Moses) consider, having consulted with the Company's nominated adviser, Cavendish, that the terms of the Disposal and the BBO Contracts are fair and reasonable insofar as the Company's shareholders are concerned.

Michael Tobin OBE, Chairman of BBB plc, commented:

"Post the previous business unit disposals we examined alternatives for the remaining business units. After a full market exercise, we feel that the decision to exit the Norwegian operations via a Management Buy Out supported by Andrew Walwyn is in line with our stated strategy. To prevent any conflicts arising perceived or otherwise for good governance and after discussion with Andrew the board accepted his resignation with immediate effect.   As Chairman on behalf of the Board I would like to express our gratitude for years of hard work and diligence taking the business from a private company, through the listing in 2015 to supporting the realisation of value for all BBB shareholders. We wish Andrew every success in the future."

Frank Waters, Chief Executive Officer of BBB plc, commented:

"This is an important strategic disposal for the Group as it allows the Company to exit from its Norwegian operations without incurring the costs associated from potentially closing it down and also allowing us to reduce cash outflows and reduce central plc costs. It also enables the Board to focus on realising value from its remaining assets, being Skymesh in Australia and its minority shareholding in Quickline.

The information contained within this announcement is deemed to constitute inside information as stipulated under the retained EU law version of the Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK law by virtue of the European Union (Withdrawal) Act 2018. The information is disclosed in accordance with the Company's obligations under Article 17 of the UK MAR. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information:

Bigblu Broadband Group PLC	www.bbb-plc.com
Frank Waters, Chief Executive Officer	Tel: [phone]
Cavendish Capital Markets Limited (Nomad and Broker) Marc Milmo / Simon Hicks / Charlie Beeson (Corporate Finance) Tim Redfern / Harriet Ward (ECM)	Tel: [phone]

​About Bigblu Broadband plc

Bigblu Broadband plc (AIM: BBB.L), is an in market leading provider of alternative superfast and ultrafast broadband solutions throughout Australia. BBB delivers a portfolio of superfast and ultrafast wireless broadband products for consumers and businesses.

High levels of recurring revenue, increasing economies of scale and Government stimulation of the alternative broadband market in many countries provide a solid foundation for significant organic growth as demand for alternative ultrafast broadband services increases around the world.

BBB's range of solutions includes satellite, GEO and LEO, next generation fixed wireless and 4G/5G FWA delivering between 30 Mbps and 500Mbps for consumers, and up to 1 Gbps for businesses. BBB provides customers with a full range of services including hardware supply, installation, pre-and post-sale support, billings, and collections, whilst offering appropriate tariffs depending on each end user's requirements.

Importantly, as its core technologies evolve, and more affordable capacity is made available, BBB continues to offer ever-increasing speeds and higher data throughputs to satisfy market demands for broadband services. BBB's alternative broadband offerings present a customer experience that is broadly similar to that offered by wired broadband and the connection can be shared in the normal way with PCs, tablets and smart phones.

 

END