CEO’s statement

This year’s results reflect the progress we have made in key areas across the Group

We are now moving into the next stage of the Group’s development

Bill Halbert

Bill Halbert

Chief Executive

This year’s results reflect the progress we have made in key focus areas across the Group, underpinned by the highly cash-generative nature of the business.

The vision for our Group is to passionately pursue better ways to connect people and this underpins all our activity. In today’s world, connecting people is more than just providing simple network connections; it’s about collaboration and value-adding interactions, whether that is direct communication between people, or interactions that occur through the vast array of applications and systems we use at home and at work. As a business, we focus on helping our customers harness the power of those technologies that enable such connections to take place.

In our consumer market, there continues to be growing demand for our fibre-based services, with the take-up rate of 27 per cent being ahead of our initial expectations and above UK averages. Over 29,000 premises now have access to superfast fibre broadband and we remain on target to pass 45,000 by March 2015. The investment we are making in this infrastructure today, which takes fibre directly to the premise, provides us with a future-proof network capable of satisfying both current and any future demand for high bandwidth services.

Alongside the deployment of fibre across our network, we are looking at opportunities to provide innovative ‘over the top’ services. We recently launched a high definition, cloud-based CCTV service and are talking to a number of other potential partners that provide a range of business and consumer services. The range of services available is evolving rapidly as more people gain access to fibre services.

The success that we have achieved to date with our superfast fibre deployment has helped shape our thinking as we begin to scope the next phase. We expect to outline our future plans when we announce our half year results in November 2014.

Across the other areas of the Group, we continue to build our reputation in the design, delivery and management of value-added services in the wider enterprise market. There have been a number of notable contract wins and renewals. New customers include HM Revenue & Customs, RNLI and National Farmers Union Mutual, all of whom are taking a range of services that we will manage on their behalf. This ability to attract, and importantly, retain customers is a reflection of our growing reputation in the market.

There is continued growth in both Smart421 and Eclipse. Both brands are establishing strong reputations in the provision of cloud-based services. Eclipse has launched a range of hosted services aimed at small to medium businesses who typically need a technology and communications partner to support them.

There is also an increasing interest in the use of cloud technology in the enterprise market and we have successfully positioned ourselves, alongside our partner, Amazon Web Services, as a leading integrator and consultant for organisations looking to embrace cloud-based solutions. For example, in May, we successfully migrated all the UK’s rail ticketing systems on behalf of the Association of Train Operating Companies.

As the economy begins to recover, we expect to see further opportunities across both the public and enterprise sectors, as many organisations begin to make IT investments to underpin their renewed ambitions.

Internally, we have started to invest in strengthening our Group capability, introducing new ways of working and increasing our ability to leverage the wide range of skills and capability of our people across the business. As part of this, we are undertaking substantial investment in our core IT systems in support of some of these new ways of operating.

Outlook

We are now moving into the next stage of the Group’s development as we continue to grow our capabilities and help our customers to harness the power of communications.

The Group is well positioned to continue exploiting the opportunities that exist in its key markets. We will continue to invest in expanding the reach of, and building customer demand for, our fibre-based broadband services and similarly in growing our share of the wider enterprise market we serve. While, as we do so, we expect to see a continued decline in some traditional carrier revenue, we are confident of achieving successful growth in our value-added services.

With the strong underlying cash flow of the Group, refinancing finalised and the positive indicators within the Group, we will consider also opportunities for investment in these focus areas going forward.

I would like to take this opportunity to thank everyone across the Group for helping make this year one of further progress on our transformation journey. I look forward to continued achievement and success, as we progress our plans.

Bill Halbert

Chief Executive
18 June 2014