Final Results

Satellite Solutions Worldwide Group plc

('SSW' or the 'Company')

Audited final results for the year ended 30 November 2017

Satellite Solutions Worldwide Group plc (AIM: SAT), the global leader in delivery of alternative super-fast broadband, announces its audited results for the year ended 30 November 2017.

Financial Highlights

· Total revenue increased 104% to £43.9m (FY 2016: £21.5m)

· Recurring revenue1 increased 119% to £39.6m (FY 2016: £18.1m)

· Recurring revenue represented 90% of FY 2017 total revenue (FY 2016: 84%)

· Like for like revenue growth2 of 12.7% (FY 2016: 11.7%)

· Gross profit margin increased to 35.5% (FY 2016: 34.0%)

· Overheads as a percentage of revenue decreased to 24.8% (FY 2016: 28.3%)

· Adjusted EBITDA3 increased to £4.7m (FY 2016: £1.2m)

Operational Highlights

· Customers at the end of FY 2017 increased by 27% to 100,240 (FY 2016: 78,717)

· Completed seven acquisitions across three existing hubs:

· Growing international presence and enhancing fixed wireless capabilities

· Signed a Virtual Network Operating ('VNO') agreement with SES Telecom Services ("SES") to provide new satellite broadband capacity to support sales across European markets

· Commenced upgrading Enterprise Resource Planning 'ERP' solution:

· Enabling the Company to attract new customers with lower acquisition costs

· Agreed £5m revolving credit facility with HSBC and raised £8m via an equity placing

Post-Period Highlights

· Appointment of Mark Anderson as Group COO:

· To support operational activities and organic growth plans

· Signed a sales and marketing agreement with the JV between Viasat, Inc and Eutelsat Communications (the 'JV'):

· Partnership is expected to generate an increase in customer numbers, revenues and market share

· 5G and TV Whitespace Field Trials Funded by BDUK:

· Focused on improving and extending availability and coverage of superfast internet across existing wireless coverage

Andrew Walwyn, CEO of SSW, commented: "This was an extremely active period for the Company as both organic growth and acquisitions helped us to reach our targeted 100,000 customers ahead of schedule, with revenues and EBITDA growing significantly during the year.

"Importantly, the hard work during the period means that we have an extremely solid base for further growth with all of our geographic hubs performing well and benefitting from centralised cost bases, ensuring that we are set for another step change in profitability this year.

"Furthermore, the combination of technological advances, strong relationships with suppliers, government legislation and growing underlying demand for alternative broadband solutions ensures we are in a sustained growth phase.

"We have already made a good start to the current year, with strong like-for-like revenue growth for the three months to February 2018, and very much look forward to building on this momentum as we offer faster broadband speeds and more solutions to a growing customer base and we remain on track to reach our target of a 50% uplift in customers by 2020."

1  Recurring revenue refers to revenue generated from broadband airtime and data contracts

2 Like for like revenue growth compares current and prior period revenue, treating acquired businesses as if they had been owned for the relevant period in both years.

3  Adjusted EBITDA is before share based payments, depreciation, intangible amortisation, acquisition and deal related costs.

For further information:

About SSW

Established in 2008, SSW specialises in the provision of rural and last mile broadband services with customers across 31 countries. SSW's solutions target B2C and B2B users, including products developed specifically for the broadcasting, police and military markets. SSW operates a number of brands such as Europasat (Europe), Avonline (UK), Breiband (Nordics) and SkyMesh (Australia) and is now the fourth largest independent provider of satellite broadband internet services in the world.

The 2015 listing on the AIM market of the London Stock Exchange together with the support from Business Growth Fund and investors in 2016 and 2017 have put the Company in an excellent position to continue strong organic growth in its subscriber base and recurring revenues as well as execute on acquisitions. The Directors believe there is a major opportunity to continue this organic growth strategy and consider acquisitions throughout the fragmented European satellite and fixed wireless broadband markets and further afield.

Working closely with satellite owners and operators, the Company targets customers in the 'digital divide' with solutions that deliver super-fast satellite based broadband services or fixed wireless to almost any premises, whether residential, commercial or industrial across Europe and Australia, irrespective of location or local infrastructure.

CHIEF EXECUTIVE'S REPORT

2017 was a pivotal year for the Company, highlighting the strength of our organic and acquisitive growth strategy. Organic growth was primarily driven by growing customer numbers while our increased scale enabled us to both move up the value chain and establish new partnerships that further enhanced our growth proposition.

Importantly, 2017 was the first opportunity to demonstrate the benefits of the acquisitions completed in 2016 (including Avonline, Breiband and Skymesh) as their full 12-month contributions are included within the Company's financial performance for the full period.

During the period we continued our acquisition strategy with a view to further growing our global reach while also diversifying our technology base and revenue mix. We were delighted with the performance and integration of new acquisitions as we focused on enhancing the value of the acquired customer bases and creating hubs for further growth.

As such, the period under review emphasised the strengths of our business model and strategy with the Company recording record revenues and significant growth in EBITDA.

Revenue increased by 104% to £43.9m (FY 2016: £21.5m) and adjusted EBITDA in the period was £4.7m, compared to £1.2m in FY 2016, demonstrating the good progress made, the benefits of recent acquisitions and the Company's ambitious growth strategy. Customer numbers increased by 27% to 100,240 at the end of 2017 compared to the end of 2016. Customer churn was 14% for the year, reduced from 18% in the prior year.

Acquisition Strategy

We secured a £5m revolving credit facility with HSBC in March 2017 to fund smaller acquisitions and ongoing working capital and investment across the group.

As such, we acquired BorderNET Internet Pty Ltd ('BorderNET') in Australia and the customer bases of NextNet and AS Distriktsnett ('ASDN') in Norway for an aggregate consideration of £1.8m, whilst also repaying all debt with Nordea Bank, using the HSBC facility.

These three acquisitions contributed a total of approximately 5,500 new customers while demonstrating our ability to acquire and successfully integrate acquisitions to build scale in local markets. All three companies, which continue to perform in-line with expectations, saw our local management teams heavily involved in sourcing and the execution of these transactions.

Following a successful £8m equity fundraise, we acquired Quickline Communications Ltd ("Quickline") in August 2017 for an aggregate initial consideration of £5m. This acquisition contributed approximately 4,500 new customers and is performing in-line with expectations.

As a leading provider of fixed wireless broadband in the UK, the addition of Quickline secured a new revenue line for the Company while also establishing a new avenue for growth, with the Company now able offer tailored satellite and fixed broadband solutions in the UK. For the year ended 31 March 2017, Quickline generated revenue of £2.3 million and EBITDA of £0.2 million.

The remaining proceeds from the equity raise were used to fund the acquisitions of BeyonDSL, Clannet and Eidsiva for an aggregate consideration of £1.7m. The three acquisitions contributed approximately 4,000 new customers at an average ARPU similar to the existing SSW customer base and generated combined historical revenue of £1.67m and historical EBITDA of £0.27m. All three acquisitions were immediately earnings enhancing and the profitability of these businesses is expected to improve further under SSW ownership due to better operational gearing and economies of scale.

Organic Growth

The Company was able to win new contracts, scale distribution partnership opportunities and service agreements due to the critical mass achieved during the period as highlighted by the new commercial contract with SES on improved commercial terms along with improved broadband capacity to support growing sales in Europe.

In addition, the development of new and faster products helped further drive existing and new customer spend as the Company offered a broader range of packages with ever increasing speeds. Furthermore, government support via subsidies continued to help drive sales with the Company winning government-backed contracts in Norway and UK during the period.

We also benefited from the implementation of centralised systems across our operating hubs, which helped us to attract new customers with lower acquisition costs while our widened technology base provided a new avenue for customer growth and margin improvement.

Furthermore, we commenced upgrading and rolling out our Enterprise Resource Planning 'ERP' solution Pathfinder (including CRM, billing and finance systems) across our hubs, with Australia and Norway integration targeted for the end of Q3 2018.

Board Changes

In February 2017 Rodger Sargent resigned his position as a Non-Executive Director having helped the Company's transition from a private to public entity and been an integral part of the team that has successfully grown the business to date. We thank Rodger for all his support and guidance during this period. At the same time Stephen Morana joined the board as a Non-executive. Stephen has already made a considerable contribution to the board and has significant experience having been a director at publicly quoted companies including Betfair, Zoopla and boohoo.com.

Post Balance Sheet Events

The Company further enhanced its capabilities via a sales and marketing agreement with the European broadband joint venture company established between Viasat, Inc. and Eutelsat Communications. SSW is providing in-language/in-market sales, installation, billing, customer care and logistics services with the JV providing marketing support, satellite network capacity and customer premise equipment, among other ancillary requirements. 

Since announcing this agreement, the service has already gone live across Poland, Norway, Sweden, Finland and Spain, and the Company expects this agreement will accelerate customer and revenue growth.

In order to effectively manage the significant International growth opportunity, the Company has appointed Mark Anderson as Chief Operating Officer ("COO"). Prior to joining SSW, Mark worked for FOX Networks Group ("FOX"), part of the 21st Century Fox media company, and was directly responsible for managing activities across Europe and Africa with $300m of revenue and 11 TV channels. Prior to this Mark was a director of Sky Broadband and was responsible for growing their consumer broadband business to 750,000 customers in Ireland.

Earlier this month Quickline was awarded a grant to participate in 5G and TV Whitespace Field Trials funded by Broadband Delivery UK ("BDUK"), part of the Department for Digital, Culture, Media and Sport, responsible for delivering superfast broadband and local full fibre networks to the nation. In commercial terms, this will enable the Company to develop and utilise the 5G technology, increasing its ability to connect potential customers while increasing its network reach as a business as well as improving the ROI of marketing spend.

Outlook

This was an extremely active period for the Company as both organic growth and acquisitions helped us to reach our targeted 100,000 customers ahead of schedule, with revenues and EBITDA growing significantly during the year.

Importantly, the hard work during the period means that we have an extremely solid base for further growth with all of our geographic hubs performing well and benefitting from centralised cost bases, ensuring that we are set for another step change in profitability this year.

Furthermore, the combination of technological advances, strong relationships with suppliers, government legislation and growing underlying demand for alternative broadband solutions ensures we are in a sustained growth phase.

We have already made a good start to the current year, with strong like-for-like revenue growth for the three months to February 2018.

We very much look forward to building on this momentum as we offer faster broadband speeds and more solutions to a growing customer base, and we remain on track to reach our target of a 50% uplift in customers by 2020.

Andrew Walwyn

CEO

26 March 2018

FINANCIAL REVIEW

In the year ended 30 November 2017, total revenue increased by 104% to £43.9m (FY 2016: £21.5m), driven by an increase in organic revenue as well as the impact of acquisitions including those made in the summer of 2016. Gross profit increased to £15.6m (FY 2016: £7.3m) representing an improved gross profit margin of 35.5% (FY 2016: 34.0%).

Distribution and administrative expenses increased by 79.7% to £10.9m (FY 2016: £6.1m) primarily as a result of costs and investment made following the acquisitions in 2016 and 2017, combined with increased investment in overheads in relation to growing the business across its existing hubs (primarily in relation to Australia and Norway). Despite this investment, overheads as a percentage of revenue decreased from 28.3% in FY 2016 to 24.8% in FY 2017.

Company statutory results

Adjusted EBITDA (before share based payments, depreciation, intangible amortisation, acquisition, employee related costs and deal related costs) was £4.7m (FY 2016: £1.2m).

The Company incurred acquisition, deal, legal and employee costs relating to M&A activities of £1.6m in the period (FY 2016: £2.4m). These costs comprise mainly professional and legal fees.

A reconciliation of the statutory operating loss before taxation for FY 2017 of £8.0m (FY 2016: £5.4m loss) to adjusted EBITDA is shown below:

Revenue and adjusted EBITDA in FY 2017 and the comparative period is segmented by geography as follows:

*UK includes UK-based companies including SSWG PLC and all central costs

** Other comprises Ireland, Poland and various other territories in which the Company operates in.

The Company has continued to make good progress in expanding its customer base, driven by the impact of acquisitions and net additions to the core business. As a result, total customers increased from 78,717 at the start of the year to 100,240 as at 30 November 2017 with progress across all of the operating hubs in the period, with particularly strong customer growth in Australia. The acquisitions made in 2016 have contributed to the growth in revenue and the improvements in EBITDA during the 2017 period.

The Company is executing a roll-out growth strategy and since the start of 2015 and up to and including FY 2017, the Company has completed 18 acquisitions with a total customer base of approximately 75,000 (as at the time of acquisition) which as at 30 November 2017 had grown to over 100,000.

The Company's total customer base of 100,240 as at 30 November 2017 was split as follows: Australia: 39% (FY 2016: 37%), UK: 29% (FY 2016: 28%), Norway: 16% (FY 2016: 16%), France: 12% (FY 2016: 15%), Other: 4% (FY 2016: 4%).

Churn rates (defined as the number of subscribers who discontinue their service as a percentage of the total number of subscribers within the period) improved in the period to 14% (FY 2016: 18%) with increased focus on customer retention by strengthening the Customer Experience team across the group. Average revenue per user ("ARPU") has remained consistent between FY 2016 and FY 2017 at approximately £42 per month.

Like for like revenue growth remained strong at 12.7% (FY 2016 11.7%) as we continued to add net new customers during the year. LFL is calculated as comparing current and prior period revenue, treating acquired businesses as if they had been owned for the relevant period in both years equally.

Gross profit margin was 35.5% in the period (FY 2016: 34.0%) due to the improved revenue mix across the Group's hubs following the signed Virtual Network Operating ('VNO') agreement with SES Telecom Services and higher gross margins obtained in our Norwegian businesses and Quickline (predominantly fixed wireless services following capital investment during the period) offset by lower gross margin in the Australian business given the high level of government support in that region.

Interest costs increased during the year to £2.1m from £0.8m in 2016 as a result of a full year's charge on the BGF facilities provided to the Group in 2016 as well as interest charges on the RCF with HSBC during the period. The difference between the charge in the Condensed consolidated statement of comprehensive income and the interest paid in the Condensed consolidated Cash Flow Statement relates to the accrued redemption premium on the BGF debt.

The tax credit arises from the release of deferred tax on fully amortised customer base intangible assets.

Operating cash inflows (before capital expenditure and acquisitions) grew significantly from £0.6m in 2016 to £2.3m in 2017. This mainly reflects adjusted EBITDA of £4.7m less acquisition related costs and foreign currency movements; working capital was again positive but offset by the release of grant creditors associated with BDUK.

Capital expenditure of £2.8m in the current year compares to £1.5m in 2016 as the Group invested in tower and mast infrastructure following the acquisition of Breiband in 2016 and Quickline in 2017, in addition to providing customers with equipment for the services provided.

Net debt increased from £10.2m as at 30 November 2016 to £13.1m as at 30 November 2017. This was primarily a result of the receipt of the HSBC RCF, which was mainly used to fund the acquisitions of BorderNET, NextNet and ASDN. This debt also financed continued investment across the Group's hubs in addition to capital expenditure during the period. As at 30 November 2017 the Group had a cash balance of £3.5m and £0.5m of headroom under the HSBC facility.

Satellite Solutions Worldwide Group plc

Condensed consolidated statement of comprehensive income

12 months ended 30 November 2017

Satellite Solutions Worldwide Group plc

Condensed consolidated statement of financial position

As at 30 November 2017

Note: Prior year adjustment on the re-analysis of foreign exchange gains and losses on Intangibles.

Satellite Solutions Worldwide Group plc

Condensed consolidated Cash Flow Statement

12 Months Ended 30 November 2017

Satellite Solutions Worldwide Group plc

Condensed consolidated Reserves Movement

12 Months Ended 30 November 2017

Satellite Solutions Worldwide Group plc

Notes to the financial statements

For the period ended 30 November 2017

1. Presentation of financial information and accounting policies

Basis of preparation

The condensed consolidated financial statements are for the full year to 30 November 2017.

The nature of the Company's operations and its principal activities is the provision of last mile (incorporating Satellite and Wireless) broadband telecommunications and associated / related services and products.

The company prepares its consolidated financial statements in accordance with International Accounting Standards ("IAS") and International Financial Reporting Standards ("IFRS") as adopted by the EU. The financial statements have been prepared on the historical cost basis, except for the revaluation of financial instruments.

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts in the financial statements. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements are disclosed further. The principal accounting policies set out below have been consistently applied to all the periods presented in these financial statements, except as stated below.

Going concern

The Directors have prepared and reviewed projected cash flows for the Company reflecting its current level of activity and anticipated future plan for the next 12 months. The Company is currently loss-making mainly as a result of amortisation charges and will continue to be so for the foreseeable future, as the Company continues to invest in the business growth strategy of acquiring similar businesses. The business continues to grow the number of users in a number of key target markets and continues to review the short-term business model of the company by which the company becomes profitable and delivers a return on the investments.

The Board has concluded that no matters have come to their attention which suggest that the Company will not be able to maintain its current terms of trade with customers and suppliers. The Company's forecasts for the newly combined Company, including due consideration of the short term continued operating losses of the Company, taking account of possible changes in trading performance, indicate that the Company has sufficient cash available to continue in operational existence throughout the forecast period and beyond. As a consequence, the Board believes that the Company is well placed to manage its business risks and longer term strategic objectives, successfully. Accordingly, they continue to adopt the going concern basis in preparing these results.

Estimates and judgments

The preparation of a condensed set of financial statements requires management to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities at each period end. 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.

In preparing these condensed set of consolidated financial statements, the significant judgments made by management in applying the Company's accounting policies and the key sources of estimating uncertainty were principally the same as those applied to the Company's and Individual company's financial statements for the year ended 30 November 2017.

Basis of consolidation

The condensed consolidated financial statements comprise the financial statements of Satellite Solutions Worldwide Group plc and its controlled entities. The financial statements of controlled entities are included in the consolidated financial statements from the date control commences until the date control ceases.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

All inter-company balances and transactions have been eliminated in full.

2. Exceptional items

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 group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. In this regard, the items included in the condensed consolidated statement of comprehensive income relate primarily to the costs incurred in relation to fundraising and acquisitions undertaken.

3. Loss per share

Basic loss per share is calculated by dividing the loss attributable to shareholders by the weighted average number of ordinary shares in issue during the period.

IAS 33 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease earnings per share or increase the loss per share. For a loss-making company with outstanding share options, net loss per share would be decreased by the exercise of options. Therefore, as per IAS33:36, the antidilutive potential ordinary shares are disregarded in the calculation of diluted EPS.

Reconciliation of the profit and weighted average number of shares used in the calculation are set out below:

3. Loss per share continued

Adjusted EPS* FY 2017 0.41p and FY 2016 (0.09p)

* This is calculated by deducting exceptional costs, share based payment charges and Amortisation charges from Loss for the period divided by the weighted average number of shares in the relevant period

4. Other capital reserves

4. Other capital reserves continued

· Listing cost reserve

o The listing cost reserve arose from expenses incurred on AIM listing.

· Other equity reserve

o Other Equity related to the element of the BGF Convertible Loan which has been grossed up but may be shown net.

· Reverse acquisition reserve

o The reverse acquisition reserve relates to the reverse acquisition of Satellite Solutions Worldwide Limited by Satellite Solutions Worldwide Group plc on 12 May 2015.

· Foreign exchange translation reserve

o The foreign exchange translation reserve is used to record exchange difference arising from the translation of the financial statements of foreign operations.

· Share option reserve

o The share option reserve is used for the issue of share options during the year plus charges relating to previously issued options.

· Merger relief reserve

o The merger relief reserve relates to the share premium attributable to shares issued in relation to the acquisition of Satellite Solutions Worldwide Limited.

5. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed within the financial statements or related notes.

6. Availability of the Full Year Report

A copy of these results will be made available for inspection at the Company's registered office during normal business hours on any week day. The Company's registered office is at Satellite House, 108 Churchill Road, Bicester OX26 4XD. The Company is registered in England No. 9223439.

A copy can also be downloaded from the Company's website at https://www.satellitesolutionsworldwide.com.