arqiva broadcast parent limited and arqiva group …...the group’s core towers business...

Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited

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Arqiva Broadcast Parent Limited and

Arqiva Group Parent Limited

Financial Report Six month period ended 31 December 2015

Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited

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CONTENTS

Page

FORWARD LOOKING STATEMENTS ................................................................................................... 3

INDUSTRY AND MARKET INFORMATION ........................................................................................... 4

DESCRIPTION OF BUSINESS .............................................................................................................. 5

FINANCIAL RESULTS AND RECENT DEVELOPMENTS .................................................................... 6

EXECUTIVE SUMMARY ........................................................................................................................ 7

Financial Overview ............................................................................................................................. 7

Recent Developments since 30 September 2015 ............................................................................. 8

Financial Results for the six month period ended 31 December 2015 ............................................ 12

Profit and Loss ................................................................................................................................. 12

Capital expenditure .......................................................................................................................... 20

Net cash flows .................................................................................................................................. 21

Contractual Obligations and Commitments ..................................................................................... 25

Appendix ............................................................................................................................................... 28

Note EBITDA definition .................................................................................................................... 28

Summary Corporate and Financing Structure ................................................................................. 29

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 OF ABPL AND AGPL ........................................................................................ 30

Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited Financial Report – Six month period ended 31 December 2015

Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited 3

THIS FINANCIAL REPORT IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR INFORMATION PURPOSES ONLY. THIS FINANCIAL REPORT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO A PROSPECTIVE INVESTOR.

This document is not a prospectus for any securities or transaction. Investors should only subscribe for any securities on the basis of information in a relevant prospectus and not on the basis of any information provided herein. This document does not disclose all the risks and other significant issues related to an investment in any securities/transaction. Prior to transacting, potential investors should ensure that they fully understand the terms of any securities/transaction and any applicable risks.

This Financial Report has been prepared pursuant to Condition 4.5 of the Junior Notes (£600m of notes issued by Arqiva Broadcast Finance plc) and pursuant to Paragraph 5.1 and Paragraph 5.4 of Schedule 2 of the CTA and certain information reporting covenants of the Notes. The date of this Financial Report is 15 February 2016. Unless otherwise defined herein, capitalised terms have the meanings given in the final offering prospectus for the multicurrency programme for the issuance of Senior Notes dated 21 February 2013. This Financial Report has been prepared by the Group (Arqiva Broadcast Parent Limited, Arqiva Group Parent Limited and their subsidiaries) and may be amended and supplemented and may not be relied upon for the purposes of entering into any transaction. Although the Group has taken all reasonable care to ensure that the information herein is accurate and correct, neither of the Group, nor any of its respective directors, officers, employees, shareholders, affiliates, agents, advisers, other representatives (collectively, Representatives) makes any additional representation, warranty or undertaking, express or implied, as to the fairness, accuracy, completeness or correctness of the information or the opinions contained herein or any other material discussed in the Financial Report.

The financial information set forth in this Financial Report has been subjected to rounding adjustments for ease of presentation. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables may not conform exactly to the total figure given for that column or row. Percentage figures included in this Financial Report have not been calculated on the basis of rounded figures but have been calculated on the basis of such amounts prior to rounding.

The views reflected herein are solely those of the Group and are subject to change without notice. All estimates, projections, valuations and statistical analyses are provided to assist the recipient in the evaluation of the matters described herein and may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results and to the extent that they are based on historical information, they should not be relied upon as an accurate prediction of future performance. Certain analysis is presented herein and is intended solely for purposes of indicating a range of outcomes that may result from changes in market parameters. It is not intended to suggest that any outcome is more likely than another, and it does not include all possible outcomes or the range of possible outcomes, one of which may be that the investment value declines to zero. FORWARD LOOKING STATEMENTS

This Financial Report contains various forward-looking statements regarding events and trends that are subject to risks and uncertainties that could cause the actual results and financial position of the Group to differ materially from the information presented herein. When used in this Financial Report, the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to the Group, are intended to identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Save as otherwise required by any rules or regulations, the Group does not undertake any obligations publicly to release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The risks and uncertainties referred to above include:

actions or decisions by governmental and regulatory bodies, or changes in the regulatory framework in which the Group operates, which may impact the ability of the Group to carry on its businesses;

changes or advances in technology, and availability of resources such as spectrum, necessary to use new or existing technology, or customer and consumer preferences regarding technology;



the performance of the markets in the UK, the EU and the wider region in which the Group operates;

the ability of the Group to realise the benefits it expects from existing and future projects and investments it is undertaking or plans to or may undertake;

the ability of the Group to develop, expand and maintain its broadcast and telecommunications infrastructure;

the ability of the Group to obtain external financing or maintain sufficient capital to fund its existing and future investments and projects;

the Group’s dependency on only a limited number of key customers for a large percentage of its revenue; and

expectations as to revenues not under contract.

INDUSTRY AND MARKET INFORMATION

This Financial Report may include market share and industry data which the Group obtained from industry publications and surveys, industry reports prepared by consultants, internal data and customer feedback. None of the third party sources has made any representation, express or implied, and has not accepted any responsibility, with respect to the accuracy or completeness of any of the information contained in this Financial Report.

These third party sources generally state that the information they contain has been obtained from sources believed to be reliable. However, these third party sources also state that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on significant assumptions. As the Group does not have access to all of the facts and assumptions underlying such market data, statistical information and economic indicators contained in these third party sources, the Group is unable to verify such information and cannot guarantee its accuracy, fairness or completeness. Similarly, internal surveys, industry forecasts and market research have not been independently verified.

In addition, certain information in this Financial Report may not be based on published data obtained from independent third parties or extrapolations thereof but on information and statements reflecting the Group’s best estimates based upon information obtained from trade and business organisations and associations, consultants, and other contacts within the industries in which the Group operates, as well as information published by the Group’s competitors. Such information is based on the following: (i) in respect of the Group’s market position, information obtained from trade and business organisations and associations and other contacts within the industries in which the Group operates, and (ii) in respect of industry trends, the Group’s senior management team’s business experience and experience in the industry and the markets in which the Group operates. The Group cannot assure you that any of the assumptions that it has made in compiling this data are accurate or correctly reflect the Group’s position in its markets.



DESCRIPTION OF BUSINESS

The Group is the UK’s national provider of essential terrestrial television and radio broadcast infrastructure as well as a key provider of communications services to major distributors of satellite content, media, wireless voice and data services in the UK, including machine-to-machine (‘M2M’) connectivity. The Group’s core towers business (comprising terrestrial broadcast and wireless site share infrastructure) generates predictable operating profits (which management estimates constituted circa two-thirds of the Group’s gross profits for the year ended 30 June 2015), supported by strong market positions, diverse revenue streams, long-life assets and a significant proportion of revenues coming from long term contracts. The Group has the following key competitive positions: regulated position as the sole UK national provider of network access (‘NA’) and managed

transmission services (‘MTS’) for terrestrial television broadcasting, the most popular television broadcast platform in the UK. The Group owns and operates all the television transmission towers used for digital terrestrial television (‘DTT’) broadcasting in the UK and has long-term contracts with public service broadcaster (‘PSB’) customers (who depend on the Group to meet the obligations under their licences to provide coverage to 98.5% of the UK population) as well as with commercial broadcasters;

regulated position as the leading UK national provider of network access (‘NA’) and managed

transmission services (‘MTS’) for radio broadcasting and provider of MTS for over 90% of the analogue and DAB digital radio transmission market in the UK. Arqiva is also the operator of both national commercial digital radio multiplexes and holds 25 out of the 55 local radio licences as at 31 December 2015;

largest independent provider of wireless tower sites in the UK with prominence in rural and

suburban areas, which are licensed to Mobile Network Operators (‘MNOs’) and other wireless network operators, operating approximately 25% of the total active licensed macrocell site market as at 31 December 2015. Also a provider of installation services and 4G upgrade and rollout. Arqiva’s active site portfolio are central for MNOs to meet their national coverage obligations;

a leading provider of In-Building Solutions. In addition, the Group has access to over 300,000

street municipal furniture sites for the provision of Small Cells in London and key major UK cities;

a leading provider of smart metering and machine-to-machine (M2M) communications.

Contracts include: smart metering communication services in Northern England and Scotland for electricity and gas to approximately 9.3 million premises, a partnership deal with SIGFOX for the rollout of an Internet of Things (‘IoT’) network covering ten of the UK’s largest cities and smart water metering for Thames Water that is expected to cover 3 million homes once fully deployed;

largest owner of independent satellite uplink infrastructure and satellite distribution services in

the UK. The Group has over 40% market share in terms of the number of transponders accessed from its uplink infrastructure as at 31 December 2015 and it serves as an alternative to Sky’s own uplinking services;

one of the largest providers of WiFi in the UK with circa 31,000 deployed access points,

providing WiFi services in 35 airports and 11 London boroughs; market leader for commercial spectrum used for the transmission of digital terrestrial

television (‘DTT’), owning two of the main national commercial Multiplexes out of a total of six national Multiplexes (there are three Public Service Broadcaster and three commercial DTT Multiplexes in the UK). The Group owns a further two High Definition (‘HD’) capable DTT (DVB-T2) Multiplexes for additional services on Freeview and DTT related platforms in the DVB-T2 format (for viewing on Freeview HD compatible sets and other DTT related platforms e.g. Youview) which have a minimum licence duration until the end of December 2018. DTT video streams in the UK are more valuable to broadcasters than either satellite or cable video



streams, due to DTT’s extensive viewer coverage, uptake and the more limited supply of commercial channels; and

a significant proportion of revenue from long-term contracts have automatic RPI-linked

increases.

FINANCIAL RESULTS AND RECENT DEVELOPMENTS

The following discussion of the Group’s financial condition and results of operations should be read in conjunction with the Group’s audited consolidated financial statements for the year ended 30 June 2015 and the Group’s unaudited condensed consolidated financial statements for the six months ended 31 December 2015 and the related notes to those consolidated financial statements.

Some of the statements contained below, including those concerning future revenues, costs, capital expenditures, acquisitions and financial conditions, may contain forward-looking statements. As such statements involve inherent uncertainties, actual results may differ materially from the results expressed in or implied by such forward-looking statements. A discussion of such uncertainties is provided under “Forward Looking Statements.”

Where the financial results for both Arqiva Broadcast Parent Limited and Arqiva Group Parent Limited are identical, the financial tables and commentaries have been presented in this report only once and should be viewed as referring to both groups. Where the financial results are different, the financial tables include a break to separate the results and separate commentaries have been provided under the appropriate sub-headings.

Results of operations for the prior year or the recent period are not necessarily indicative of the result to be expected for any future period. Some of the performance indicators and ratios reported herein, such as EBITDA, are not financial measures defined in accordance with IFRS, or UK GAAP and, as such, may be calculated by other companies using different methodologies and having different results. Therefore, these performance indicators and ratios are not directly comparable to similar figures and ratios reported by other companies.



EXECUTIVE SUMMARY

The Financial Overview and Recent Developments discussed in this section relate to both Arqiva Broadcast Parent Limited (‘ABPL’) and Arqiva Group Parent Limited (‘AGPL’), together the ‘Group’. The trading results of the two consolidation groups are identical but with different financing structures. Commentary relates to both ABPL (including senior and junior debt) and AGPL (senior debt only) unless specified otherwise. Items discussed in the Financial Results section from page 12 onwards which relate to both ABPL and AGPL have been shaded for ease of reference. Financial Overview

For the six months ended 31 December 2015 turnover for the Group was £424.4m, an increase of 0.9% from £420.8m in the prior year period. The increase was primarily as a result of higher revenues from DTT founder contract renewals where channel prices were uplifted to market prices, and greater utilisation of DTT channel capacity (now part of our Terrestrial Broadcast business unit). This increase was partially offset by a decrease in milestone revenues recorded in relation to the DCC Smart Metering contract that have not been repeated in the current period due to the phasing of the project milestones. Within Telecoms & M2M there was a reduction in one-off Site Share project revenues which was offset by growth in Installation Services, WiFi and our Smart water-metering contract. Gross profit was £252.4m, representing a 3.9% decrease from £262.6m in the prior year period. Cost of sales increased at a higher rate than turnover principally owing to an increase in the level of third party costs and internal resource employed, primarily in our Telecoms business. This was due to a shift in the sales mix with milestone based project revenues in the prior period being replaced by an increase in Installation Services revenues which carry a lower gross margin. Operating expenses excluding exceptional items, were £45.1m, a 20.2% decrease from the prior year period figure of £56.5m. The reduction was achieved by savings derived from the Transformation Program; an increase in the level of internal resource employed on cost of sales activities, and higher labour capitalisation. EBITDA for the Group pre-exceptional items was £207.3m, representing a 0.5% increase from £206.3m in the prior year, with the reduction in operating expenses more than offsetting the reduction in gross profit described above. EBITDA for the Group post-exceptional items was £202.2m, a decrease of 1.8% compared with the prior year result of £206.0m. Exceptional costs of £5.1m (2014: £0.3m) in the current period predominantly relate to reorganisation costs resulting from the Transformation Program. Profit on ordinary activities before taxation and interest for the Group was £75.4m (2014: £70.4m). This increase was principally due to the £15.4m profit on disposal of NWP Street limited, a subsidiary undertaking, which was largely offset by an increase in the depreciation charge due to an increase in the underlying asset base of the Group and accelerated depreciation of certain contract and site specific assets. Net cash inflow from operating activities was £149.4m, an increase from the prior year of £146.7m, primarily due to lower investment in working capital compared to the prior period. The working capital outflow of £52.3m was £7.1m less than that of the same period in the prior year, primarily due to a change in the timing of receipts from certain large customers and business rates recoveries. Net capital expenditure and financial investment was £77.2m compared with £111.8m in the prior year period. The current period included £5.1m receipts from the sale of fixed assets. The prior year period included a £20.0m payment for Smart Metering capital expenditure which had been accrued at 30 June 2014.



Recent Developments since 30 September 2015

Transformation Programme and continuous improvement

Further to the organisational structure changes reported previously Arqiva continues to deliver operating cost savings. As at 31 December 2015, the Group had achieved a run rate saving of circa £25m p.a in operating expenses. From May to November 2015, the Group was supported by Alvarez and Marsal for an operating model review and to help identify cost reduction opportunities. The Group is now ensuring that there is a timely and continuing implementation of initiatives arising from this review. In January 2016, a Chief Procurement and Continuous Improvement Officer, Frédéric Sebban was appointed to continue the focus on cost efficiency. Frédéric joins Arqiva with significant experience gained from both Business to Business (B2B) and Business to Consumer (B2C) environments. He has held senior procurement and supply chain management roles across Europe with organisations including General Electric, Renault (Matra), Alstom and Campofrio. Frédéric is also a Lean Six Sigma Master Black Belt having led a number of performance excellence programmes that have delivered considerable benefits in terms of operational efficiency/effectiveness improvements and cost savings. 4G rollout

The four main Mobile Network Operators (‘MNOs’) continue to increase their 4G network capability. Arqiva in turn is being contracted to carry out a large volume of antenna and feeder upgrade projects for its customers, resulting in a significant increase in Installation Services revenues in 2015 and 2016 financial years. The Group completed circa 2,000 4G upgrades across Arqiva managed sites up to 31 December 2015 and have a further circa 6,000 upgrades to Arqiva managed sites requested from the MNOs over the next 2-3 years. Small cells opportunities and in-building systems

Arqiva has been developing its outdoor Small Cells proposition which is a technology that uses low power base stations to provide street level network capacity to MNOs, particularly in dense urban areas. The Group is currently undertaking trials with two MNOs in Hammersmith & Fulham with commercial discussions underway to secure further orders for Small Cells. Arqiva is in a strong position to pursue new opportunities in this sector during 2016 also by utilising its licensed municipal street furniture in 11 London Boroughs. In January 2016, the Group deployed in-building systems for Canary Wharf Group’s retail centres at Canada Place, Crossrail Place, and Jubilee Place in Canary Wharf, London. The in-building systems provide 4G coverage that complement the existing 2G and 3G coverage at those locations. Arqiva deployed a future-proof solution which is designed to ensure a mobile signal is available when underground, in large buildings, or where there is heavy footfall. Commuters and shoppers will be able to receive 4G in the retail centres via their service providers. The technology will allow all MNOs to provide their mobile services through one set of transmission equipment.

Sale of Secure Solutions and payphone business

In October 2015, the Group signed a contract for the sale to telent of its Secure Solutions assets and contracts which had been identified as non-core business. The sale was completed successfully in December 2015. In December 2015, the Group also sold the payphone business acquired in 2012 as part of the Spectrum Interactive business, disposing of its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking to Clear Channel. Total consideration for these disposals was circa £20m. Smart metering rollout Arqiva is building a smart metering communication network as part of a 15-year contract signed in September 2013 with the Data and Communications Company (the ‘DCC’, a body licensed by statute).



The Group has successfully achieved a key milestone in the programme ahead of schedule by completing the first Pre-Integration Testing phase and has entered into the Systems Integration Testing phase, where the Arqiva solution is integrated and tested as part of the wider DCC solution, together with meter emulators, electricity and gas meters. As a result of the completion of the first Pre-Integration Testing, the Group has started to earn recurring revenues under the contract relating to network availability charges. Arqiva has also delivered the next release of software required for Systems Integration Testing on time. Furthermore, Arqiva expects to earn additional revenues from new change requests (and existing ones) once the scope and contract is agreed during the quarter to March 2016. Arqiva has achieved all contractual milestones required to date. The rollout of the network currently exceeds 70% coverage across the contracted region and is on track to achieve 80% by the time the DCC service is operationally live later this year. Smart water metering rollout

In March 2015, Arqiva signed a smart water metering contract with Thames Water following a competitive bidding process. The contract is for the provision of smart metering fixed network infrastructure and associated water meters that enables the collection, management and transfer of metering data. The contract is for an initial six year term that is extendable up to a total of sixteen years. The service is expected to cover 3 million homes once fully deployed.

The Group is currently working on two key programme phases, including the build of 23 network coverage sites and interfaces to the customer’s systems. The first phase went live in November 2015 and the second phase is on schedule for completion in March 2016. Following the receipt of initial purchase orders from Thames Water, the Group is currently contracted to deliver 17 milestones by the end of the second phase of which it has delivered 8 to date. Additional phases are expected to be contracted with Thames Water as the network coverage expands. Internet of Things (IoT)

In October 2015, Arqiva agreed to partner with Advanced Digital Institute to support the development of its Meds Companion technology product and be a part of a two year project to trial the product. The project will help patients to record their medication regime within their homes and allow healthcare professionals to track the medication status remotely using the SIGFOX network. Meds Companion is being trialled in Bradford and the surrounding areas with a view to launching the solution in other NHS areas in the future. In January 2016, Arqiva and Vision360 were jointly selected as providers to one of two NHS England IoT Innovation Test Beds. The two companies will work with other partners within the Technology Integrated Health Management (TIHM) Test Bed, a collaboration led by Surrey and Borders Partnership NHS Foundation Trust. The TIHM Test Bed will help people living with dementia or frailty remain in their own homes for longer with the aid of network-enabled sensors, wearable technology, monitors and other devices to monitor their health at home. Arqiva and Vision360 are working to deliver a national standards-based assistive care IoT platform, which combines Vision360's health and assistive care technology and Arqiva's SIGFOX IoT network. These deals give Arqiva the opportunity to showcase how its SIGFOX network can complement other technologies and give access to technology to those currently excluded. The Group continues to run proof of concept trials with a number of other potential customers. Mobile Infrastructure Project update

The Mobile Infrastructure Project (‘MIP’) is a strategic programme funded by the Government with the ultimate goal of providing a service to areas without any mobile coverage services (‘not-spots’). Arqiva was awarded the contract in May 2013 by the Department of Culture and Media and Sport (‘DCMS’) to provide mobile network planning and to build mobile mast infrastructure with cellular and backhaul transmission capability for the MNOs to be able to deliver mobile services to rural communities.



The project is due to end in March 2016 with the aim of completing as many sites as possible by then. The Culture Secretary has publicly stated that the project will deliver over 50 masts, bringing 4G coverage to premises that previously had no mobile coverage. Launch of Freeview Play

In October 2015, the Freeview brand launched its connected TV service, Freeview Play. Freeview Play combines DTT channels with catch-up TV from the BBC, ITV, Channel 4 and Channel 5, on-demand services and live television, making a wide range of content available to a mass market and giving viewers even more choice in how they access TV programmes on a free-to-air platform. The service is free from subscription and works with all existing broadband services. Freeview Play is available on new set-top boxes currently manufactured by Humax and on Panasonic’s new TVs. LG has recently announced it will launch a Freeview Play range in the first half of 2016 and other TV manufacturers are expected to follow. Freeview’s DTT service is the biggest TV platform in the UK and is present in over 19 million homes. Arqiva has been fully committed to developing and modernising the platform and was responsible for building part of the technical solution for Freeview Play. 700 MHz clearance and DTT spectrum

The DTT platform currently uses spectrum in the 470-790 MHz bands. Plans are being developed by Ofcom and industry stakeholders to clear 700MHz (694 MHz to 790 MHz) so that the spectrum can be auctioned for use by the mobile sector. This is a change that will be adopted across Europe. A wide range of activities are underway to plan for the move in frequencies, including determining changes to the frequencies used, planning for infrastructure changes and work requirements and agreeing a rollout plan. Arqiva continues to work on the capability studies which is expected to complete in March 2016 and is currently gearing up for programme delivery. The Group has now entered into contract with the major broadcasters and Ofcom and has agreed the commercial terms relating to delivering the programme. The UK Government has budgeted up to £600m for the total cost of the clearance programme which includes the cost of infrastructure changes, support to consumers where appropriate, and retuning broadcast transmitters to enable broadcasters to move into a lower frequency. Arqiva expects to receive significant funding to cover all of the cost of infrastructure changes and will earn revenues from 2016 to 2022. In November 2015, the World Radio Conference (WRC) took place which is a global event held every 4 years to discuss radio regulations, the international treaty governing the use of the radio-frequency spectrum and other related matters. It was agreed at the WRC that there is no regulatory change expected over the medium term to the spectrum that will be used by DTT following the 700 MHz Clearance and the position would not be reviewed again until 2023 at the earliest. This underpins the Group’s DTT business and the decision was also supported by Europe, Africa, Russia and relevant Arab nations.

Digital radio (DAB) rollout

The Group has been progressing with the delivery of the DAB rollout programme under the BBC New Radio Agreement (‘NRA’), and has now completed the upgrades to the analogue radio network. The build out of the Phase 4 BBC National DAB network continues and as at 31 December 2015, Arqiva had put 127 new transmitters on air increasing the BBC’s UK DAB network coverage beyond 95% of the population. On completion of the rollout the BBC national DAB network will reach 97% of the population via a total of 392 transmitters. The Group has also been progressing with the delivery of Commercial local DAB. The programme is part of an initiative to meet the local DAB coverage criteria of 90% as set by the UK Government in 2010. The 90% criteria was part of three overall criteria to judge when a process to set a date for a full national digital radio switchover can be established. The project requires new transmitters or upgrades at 231 sites and as at 31 December 2015, work had been completed at 53 sites with the project due to be completed on schedule by October 2016.

Following award of the second national DAB licence in March 2015 to Sound Digital (a consortium which includes Arqiva (40%)), construction by the Group of the transmission network is nearing



completion. Contracts have been agreed with 18 radio stations wishing to launch further radio services on the new national DAB multiplex utilising 98% of the available capacity. Transmitter installation and commissioning is being completed ready for a launch on 29 February 2016.

Satellite and Media contract wins

Since June 2015, the Satellite and Media business secured new business wins with a total contract value of circa £62 million with major international customers including Al Jazeera, BT ESPN, AMC Networks and others, providing satellite services from its UK based facilities that include playout and satellite distribution. Closure of defined benefit pension scheme

Following an extensive consultation period and further discussions with BECTU an agreement was reached in January 2016 to close the defined benefit pension scheme to future accruals on the 31 January 2016 and to transfer members to the existing defined contribution scheme going forward.



Financial Results for the six month period ended 31 December 2015

Profit and Loss

The following table shows certain of the Groups’ profit and loss data for the periods indicated:

Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Turnover from continuing operations (including share of joint venture)

429.2 426.7 868.7

Less share of joint venture turnover (4.8) (5.9) (12.0)

Group turnover 424.4 420.8 856.7

Cost of sales (172.0) (158.2) (327.7)

Gross profit 252.4 262.6 529.0

Depreciation (65.1) (57.9) (119.0)

Amortisation (77.9) (78.8) (159.0)

Operating expenses (45.1) (56.5) (109.4)

Exceptional administrative expenses (5.1) (0.3) (11.0)

Exceptional impairment - - (33.7)

Group operating profit 59.2 69.1 96.9

Share of operating profit in joint ventures and associates

0.8 1.3 3.6

Total operating profit: Group and share of joint ventures and associates

60.0 70.4 100.5

Income from investments - - 0.2

Profit on disposal of subsidiary 15.4 - -

Profit on ordinary activities before taxation and interest*

75.4 70.4 100.7

*The line items in the table are discussed below. At this point the profit and loss account diverges between ABPL and AGPL. For the line items below profit on ordinary activities before taxation and interest for each consolidation level, please see the table and commentary on page 16 onwards.

Turnover

For the six months ended 31 December 2015 turnover for the Group was £424.4m, an increase of 0.9% from £420.8m in the prior year period. The increase was primarily as a result of higher revenues from DTT founder contract renewals where channel prices were uplifted to market prices, and greater utilisation of DTT channel capacity (now part of our Terrestrial Broadcast business unit). This increase was partially offset by a decrease in milestone revenues recorded in relation to the DCC Smart Metering contract that have not been repeated in the current period due to the phasing of the project milestones.



Within Telecoms & M2M there was also a reduction in one-off Site Share project revenues which was offset by growth in Installation Services, WiFi and our Smart water-metering contract. For the avoidance of doubt, the Smart Metering (M2M) financials included in this report refer solely to the ABPL and AGPL financials. They do not include any revenue earned outside of these junior and senior financing groups.

The following table shows the Group’s turnover by division for the periods indicated:

Turnover by Division Six Months Ended

31 December

2015 2014 % Change

(Unaudited)

£ millions

Terrestrial Broadcast 206.9 192.7 7.4

Telecoms & M2M 146.0 149.7 (2.5)

Satellite and Media 71.5 78.4 (8.8)

Total Group Turnover 424.4 420.8 0.9

Terrestrial Broadcast

Turnover for the Group’s Terrestrial Broadcast business during the six month period ended 31 December 2015 was £206.9m, representing a 7.4% increase from £192.7m in the prior year period. This increase is principally from the Arqiva owned DTT multiplexes (2015: £82.0m; 2014: £69.0m) as a result of founder contract renewals uplifted to market prices, together with new channel launches resulting in higher capacity utilisation, together with higher revenues resulting from the DAB radio rollout. Telecoms & M2M

Turnover for the Group’s Telecoms & M2M division during the six month period ended 31 December 2015 was £146.0m, a 2.5% decrease from the prior year period figure of £149.7m. The decrease was due to M2M (2015: £7.3m; 2014: £13.9m) as milestone revenues* recorded in the prior year period in relation to the DCC Smart Metering contract have not been repeated in the current period due to the phasing of project milestones. This was partially offset by smart water-metering contract revenues and an uplift from new recurring revenues that were triggered during the period in relation to network availability for the DCC Smart Metering contract. There was a decrease of £3.4m (2015: £6.2m; 2014: £9.6m) in relation to revenues from ‘Secure Solutions’ contracts, of which were sold to telent in December. Within the site share business a reduction in one-off project revenues was offset by growth in lower margin Installation Services activity relating to the MNOs’ current 4G network rollout and site upgrades (2015: £117.9m; 2014: £114.5m), and WiFi growth including service fee revenues (2015: £10.9m; 2014: £8.2m). Satellite and Media

Turnover for the Satellite and Media business during the six month period ended 31 December 2015 was £71.5m which was an 8.8% decrease from £78.4m in the prior year period. The year on year decrease was due to service terminations of non-credit worthy customers in Distribution Platforms together with Wholesale Space segment terminations within a number of Managed Networks contracts. Whilst the comparison to the prior year period shows a decline, revenue has stabilised over the last three quarters and additional focus on capacity utilisation and management of the cost base has limited the impact on EBITDA. * Milestone revenues primarily represent project management services provided by Arqiva Limited, (within the WBS financing group), to ASML (not within the WBS financing group) including revenues in relation to progress towards completion of the DCC design and development milestone, as part of the construction of the network infrastructure.



Cost of Sales

For the six month period ended 31 December 2015, cost of sales for the Group was £172.0m, an increase of 8.7% from £158.2m in the prior year period. The increase in cost of sales was principally due to an increase in the level of third party costs and internal resource employed, primarily in our Telecoms businesses as a result of the higher level of Installation Services activity across site share and WiFi. These increases were partially offset by cost management to align our satellite capacity cost base to the associated revenues.

Gross profit

For the six month period ended 31 December 2015, gross profit for the Group was £252.4m, representing a 3.9% decrease from £262.6m in the prior year period. Cost of sales has increased at a higher rate than turnover for the reasons set out above.

Depreciation

Depreciation for the Group during the six month period ended 31 December 2015 was £65.1m, 12.4% higher than the prior year period figure of £57.9m. This was primarily due to an increase in the underlying asset base of the Group and the timing of accelerated depreciation on certain contract and site specific assets.

Amortisation

Amortisation for the Group during the six month period ended 31 December 2015 was £77.9m, in line with the prior year period figure of £78.8m.

Operating expenses

Operating expenses for the Group during the six month period ended 31 December 2015 excluding exceptional items were £45.1m, a 20.2% decrease from the prior year period figure of £56.5m. The reduction was achieved by savings derived from the Transformation Program; an increase in the level of internal resource employed on cost of sales activities where more of the Group’s headcount costs were booked to cost of sales and higher labour capitalisation.

Exceptional administrative expenses

Exceptional administrative expenses for the Group during the six month period ended 31 December 2015 were £5.1m versus £0.3m during the prior year period. Exceptional items in the current period predominantly relate to reorganisation costs arising from the Transformation Program, partially offset by a profit on disposal of assets.

Exceptional impairment

Exceptional impairment charges for the Group during the year ended 30 June 2015 were due to the impairment of non-current assets relating to non-core business areas. There were no such charges in the six months to 31 December 2015.

Group operating profit

For the six month period ended 31 December 2015, operating profit for the Group was £59.2m, a 14.3% reduction from £69.1m in the prior year period. This reduction is largely due to a higher depreciation charge and exceptional costs relating to the Transformation Programme.

EBITDA

For the six month period ended 31 December 2015, EBITDA pre-exceptional costs for the Group was £207.3m, representing a 0.5% increase from £206.3m in the prior year period, explained by the increase in turnover and lower operating costs as discussed above; partially offset by a change in sales mix impacting gross profit. EBITDA for the Group post-exceptional items was £202.2m for the six month period ended 31 December 2015, a decrease of 1.8% compared with the prior year period result of £206.0m.



For a table showing EBITDA and a reconciliation of Group operating profit to EBITDA, see “EBITDA definition” in the Appendix.


Share of operating profit in joint ventures and associates for the Group for the six month period ended 31 December 2015 was a £0.8m profit versus a profit of £1.3m in the prior year period. Income from investments

Income from investments for the Group during the year ended 30 June 2015 related to dividend payments received from investments in companies over which the Group does not have control or dominant influence, and are therefore excluded from the consolidation in accordance with accounting standards until the point a dividend is declared.

Profit on disposal of subsidiary

On 11 December 2015 the Group sold its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking, which had generated a profit before tax in the period of £0.1m. £1.0m of net assets were disposed of and the related sales proceeds (net of accrued disposal costs) were £16.4m, resulting in a profit on disposal of £15.4m.



Note: The P&L line items for ABPL and AGPL diverge at this point and are therefore discussed separately below for the two consolidation levels.

ABPL

Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Profit on ordinary activities before taxation and interest

75.4 70.4 100.7

Interest receivable and similar income 0.5 1.1 2.4

Exceptional financing income - 1.0 1.0

Net bank and other loan interest (118.6) (118.9) (215.8)

Other interest (21.3) (25.7) (47.3)

Share of joint venture interest payable (0.5) (0.6) (1.2)

Exceptional financing expenses - (100.5) (100.5)

Net third party interest payable and similar charges

(139.9) (243.6) (361.4)

Interest payable to group undertakings (41.5) (184.3) (375.0)

Loss on ordinary activities before taxation (106.0) (357.5) (635.7)

Tax on loss on ordinary activities (0.3) (0.6) (57.6)

Loss on ordinary activities after taxation (106.3) (358.1) (693.3)

Equity minority interests (0.1) (0.1) (0.1)

Loss for the financial period (106.4) (358.2) (693.4)

Interest receivable and similar income

Interest receivable and similar income during the six month period ended 31 December 2015 was £0.5m, compared to £1.1m in the same period in the prior year period due to lower net financing income on the accounting for the defined benefit pension scheme and lower impact of foreign exchange movements.

Exceptional financing income

No exceptional financing income was received in the six month period ended 31 December 2015. In the six month period ended 31 December 2014, the Group received £1.0m proceeds on disposal of part of a Swap Option. Swap Options are discussed further in the interest rate swaps (‘IRS’) section of this report on page 27.

Net bank and other loan interest

Net bank and other loan interest for the Group during the six month period ended 31 December 2015 was £118.6m compared to £118.9m in the prior year period, a reduction of £0.3m.

The reduction is due to lower principal accretion on the inflation-linked swaps (2015: £16.2m; 2014: £18.2m) stemming from lower RPI inflation in the period and an increase of capitalised interest (2015: £1.6m; 2014: £0.5m) in relation to major capital programmes (reducing the total interest expense recorded in the profit and loss account). This was partially offset by the interest payable on the



additional amounts drawn on the working capital and capital expenditure facilities in the six months to 31 December 2015 (2015: amount drawn £145.0m; 2014: amount drawn £90.0m).

Other interest Other interest payable for the Group during the six month period ended 31 December 2015 was £21.3m, compared to £25.7m in the prior year period. Other interest payable is primarily non-cash. Included within the non-cash charges is the amortisation of certain debt issue costs and derivative close-out costs. These charges were £11.3m for the six month period ended 31 December 2015 compared to £14.5m for the six month period ended 31 December 2014. This was due to an acceleration of the amortisation of debt issue costs during the prior year period in line with the refinancing of the underlying debt. The remainder of the charges mainly relate to imputed interest on advance receipts from customers on some long-term contracts and debt commitment fee expenses.

Share of joint venture interest payable

Share of joint venture interest payable for the six month period ended 31 December 2015 was £0.5m (2014: £0.6m). Exceptional financing costs

There were no exceptional financing costs in the six month period ended 31 December 2015. During the six month period ended 31 December 2014, the Group restructured certain interest rate swaps (‘IRS’), when £300.0m of the 5 year term debt was refinanced by a US Private Placement floating rate debt issue. An exceptional cost of £100.5m was incurred in relation to the breaking of IRS agreements. The termination payments were fully funded by a £100.5m premium received for entering into the replacement IRS.

Interest payable to group undertakings

Interest payable to group undertakings for the Group during the six month period ended 31 December 2015 was £41.5m, compared to £184.3m in the prior year period. On 30 June 2015, ABPL was released from £3,301.6m of intercompany loans previously due to its immediate parent, Arqiva Financing No 3 Plc. This was achieved by way of a Deed Poll Release by the lender, irrevocably waiving the right to the released amount. The reduction in the principal amount of loans to its immediate parent (£850.0m remaining at 30 June 2015) has resulted in the reduction in interest payable to parent undertakings.

Tax on loss on ordinary activities

Tax on loss on ordinary activities during the six month period ended 31 December 2015 was a £0.3m charge, compared to a £0.6m charge in the prior year period.

Equity minority interests

For the six month period ended 31 December 2015, the equity minority interest not attributable to the Group was £0.1m (2014: £0.1m). This relates to the share of Now Digital (East Midlands) Limited and South West Digital Radio Limited that is not owned by the Group.

Loss for the financial period

The loss for the six month period ended 31 December 2015 was £106.4m, compared to a £358.2m loss in the prior year period. The reduction in the loss is primarily due to the exceptional financing expense in the prior year, profit on disposal of a subsidiary and a decrease in interest payable to group undertakings. The loss for the period of £106.4m was after non-cash charges of £205.0m comprising: £41.5m interest payable to group undertakings; £65.1m depreciation; £77.9m amortisation; and £20.5m other non-cash interest payable and similar charges.



AGPL

Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Profit on ordinary activities before taxation and interest

75.4 70.4 100.7

Interest receivable and similar income 0.5 1.1 2.3

Exceptional financing income - 1.0 1.0

Net bank and other loan interest (90.2) (90.5) (158.8)

Other interest (19.5) (23.8) (43.7)

Share of joint venture interest payable (0.5) (0.6) (1.2)

Exceptional financing expenses - (100.5) (100.5)

Net third party interest payable and similar charges

(109.7) (213.3) (300.9)

Interest payable to group undertakings (64.0) (215.8) (437.8)

Loss on ordinary activities before taxation (98.3) (358.7) (638.0)

Tax on loss on ordinary activities (0.3) (0.6) (57.6)

Loss on ordinary activities after taxation (98.6) (359.3) (695.6)



Interest receivable and similar income

Interest receivable and similar income during the six month period ended 31 December 2015 was £0.5m, compared to £1.1m in the same period in the prior year due to lower pension interest and lower impact of foreign exchange movements.

Exceptional financing income

No exceptional financing income was received in the six month period ended 31 December 2015. In the six month period ended 31 December 2014, the Group received £1.0m proceeds on disposal of part of a Swap Option. Swap Options are discussed further in the interest rate swaps (‘IRS’) section of this report on page 27.

Net bank and other loan interest Net bank and other loan interest for the Group during the six month period ended 31 December 2015 was £90.2m compared to £90.5m in the prior year, a decrease of £0.3m.

The reduction is due to lower principal accretion on the inflation-linked swaps (2015: £16.2m; 2014: £18.2m) stemming from lower RPI inflation in the period and an increase of capitalised interest (2015: £1.6m; 2014: £0.5m) in relation to major capital programmes (reducing the total interest expense recorded in the profit and loss account). This was partially offset by the interest payable on the additional amounts drawn on the working capital and the capital expenditure facilities in the six months to 31 December 2015 (2015: amount drawn £145.0m; 2014: amount drawn £90.0m).



Other interest Other interest payable for the Group during the six month period ended 31 December 2015 was £19.5m, compared to £23.8m in the prior year period. Other interest payable is primarily non-cash. Included within the non-cash charges is the amortisation of certain debt issue costs and derivative close-out costs. These charges were £9.6m for the six month period ended 31 December 2015 compared to £12.7m for the six month period ended 31 December 2014. This was due to an acceleration of the amortisation of debt issue costs during the prior year period in line with the refinancing of the underlying debt. The remainder of the charges mainly relate to imputed interest on advance receipts from customers on some long-term contracts and debt commitment fee expenses.

Share of joint venture interest payable

Share of joint venture interest payable for the six month period ended 31 December 2015 was £0.5m (2014: £0.6m).

Exceptional financing costs

There were no exceptional financing costs in the six month period ended 31 December 2015. During the six month period ended 31 December 2014, the Group restructured certain interest rate swaps (‘IRS’), when £300.0m of the 5 year term debt was refinanced by a US Private Placement floating rate debt issue. An exceptional cost of £100.5m was incurred in relation to the breaking of IRS agreements. The termination payments were fully funded by a £100.5m premium received for entering into the replacement IRS.

Interest payable to group undertakings

Interest payable to group undertakings for the Group during the six month period ended 31 December 2015 was £64.0m, compared to £215.8m in the prior year period. On 30 June 2015, AGPL was released from £3,493.2m of intercompany loans previously due to its immediate parent, Arqiva Broadcast Intermediate Limited. This was achieved by way of a Deed Poll Release by the lender, irrevocably waiving the right to the released amount. The reduction in the principal amount of loans to its immediate parent (£1,329.0m remaining at 30 June 2015) has resulted in the reduction in interest payable to parent undertakings.

Tax on loss on ordinary activities

Tax on loss on ordinary activities during the six month period ended 31 December 2015 was a £0.3m charge, compared to a £0.6m charge in the prior year period.

Equity minority interests

For the six month period ended 31 December 2015, the equity minority interest not attributable to the Group was £0.1m (2014: £0.1m). This relates to the share of Now Digital (East Midlands) Limited and South West Digital Radio Limited that is not owned by the Group.

Loss for the financial period

The loss for the six month period ended 31 December 2015 was £98.7m, compared to a £359.4m loss in the prior year period. The reduction in the loss is primarily due to the exceptional financing expense in the prior year, profit on disposal of a subsidiary and a decrease in interest payable to group undertakings. This loss for the year of £98.7m was after non-cash charges of £207.0m comprising: £64.0m interest payable to group undertakings; £65.1m depreciation; £77.9m amortisation; and £18.9m other non-cash interest payable and similar charges.



Capital expenditure

The capital expenditure discussed in this section relates to both ABPL and AGPL. The Group’s operations are capital intensive and the Group requires maintenance capital expenditure as well as growth capital expenditure to support its current business and future development. Maintenance capital expenditure is expenditure that is incurred to deliver cost-savings, productivity enhancements, to extend the useful life of existing fixed assets, or replace worn out and obsolete fixed assets with new ones in order to support existing contracts; ‘Growth – contracted’ is capital expenditure that is incurred to deliver new or renewal revenues and which is supported by a signed customer contract; ‘Growth - non-contracted’ is capital expenditure that is incurred to deliver revenues and which is supported by a business case but on which there is no signed customer contract at the time at which it is incurred and reported. Capital creditors/accruals reflect the timing difference (between accruing the expenditure and the cash outflow) to arrive at ‘net capital expenditure and financial investment’. The table below sets out the Group’s capital expenditures for the periods stated:

Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Maintenance 9.0 8.6 20.7

Growth - contracted 69.4 64.6 124.8

Growth - non-contracted 3.7 3.4 15.3

Subtotal capital expenditure 82.1 76.6 160.8

Sale of fixed assets(1) (5.1) (0.2) (0.5)

Capital creditors/accruals 0.2 35.4 34.0

Net capital expenditure and financial investment 77.2 111.8 194.6

(1) Sale of fixed assets for the six months ended 31 December 2015 principally relating to the disposal of assets in non-core business areas.

For the six month period ended 31 December 2015, net cash capital expenditure and financial investment was £77.2m, compared to £111.8m in the prior year period.

The overall decrease in net capital expenditure and financial investment compared with the same period in the prior year was principally as a result of the change in capital creditors/accruals, which itself was primarily due to cashflow timing differences. A £20.0m payment for Smart Metering capital expenditure was accrued at 30 June 2014 and was subsequently cash settled in the six months ended 31 December 2014. Additionally there was circa £5.0m of goods received not invoiced and circa £10.0m other capital expenditure which was accrued at 30 June 2014 and settled in the six months ended 31 December 2014 when they became due for payment. The majority of the increase in growth capex related to the smart metering contract with DCC and DAB rollout.



Net cash flows

The following tables show information regarding the ABPL and AGPL statement of cash flows:

ABPL Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Consolidated cash flow data

Net cash inflow from operating activities 149.4 146.7 371.8

Returns on investment and servicing of finance

(107.9) (111.0) (213.7)

Dividends from investments - - 0.2

Dividends paid to minority interests - (0.2) (0.3)

Tax paid (0.1) (0.4) (0.5)

Net capital expenditure and financial investment

(77.2) (111.8) (194.6)

Acquisitions and disposals 16.5 - -

Financing 16.5 83.1 30.1

(Decrease) / increase in cash (2.8) 6.4 (7.0)

AGPL Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Consolidated cash flow data



(79.5) (82.5) (156.6)



Tax paid (0.1) (0.4) (0.5)

Net capital expenditure and financial investment

(77.2) (111.8) (194.6)

Acquisitions and disposals 16.5 - -

Financing (12.0) 54.6 (27.0)

(Decrease) / increase in cash (2.9) 6.4 (7.0)



For the six month period ended 31 December 2015, ABPL and AGPL’s net cash outflows were £2.8m and £2.9m respectively consisting of cash from operating activities, less capital expenditure, financing costs and other movements explained below.

Six month period ended 31 December

2015 2014

(Unaudited) £ millions

206.

EBITDA .............................................................................. 207.3 206.3

Exceptional costs (excluding profit on disposal of fixed assets) .......................................................................... (5.6) (0.3)

Working capital ................................................................. (52.3) (59.4)

Other (including operational bank charges) ...................... - 0.1

Net cash inflow from operating activities ...................... 149.4 146.7

For a definition of EBITDA, see “EBITDA definition” in the Appendix.

Working capital

Working capital is part of “Net cash inflow from operating activities” in the Group’s summary consolidated cash flow statement. The Group defines working capital movement as the movement in current assets, current liabilities and certain long term liabilities including deferred income and provisions greater than one year that form part of the Group’s net cash inflow from operating activities (but excluding non-working capital movements that are included in the balance sheet movements for these areas such as capital creditors, imputed interest and movements on intercompany loan and interest balances). Whilst the Group’s business is not seasonal in nature, its working capital movement is seasonal. The Group has historically invoiced and collected a proportion of its revenues in advance, particularly in the second half of the financial year.

The table below sets out the Group’s working capital position as at the dates shown:

Six Months Ended

31 December

Year Ended

30 June

2015 2014 2015

(Unaudited)

£ millions

(Audited)

£ millions

Net decrease / (increase) in debtors 8.0 (1.6) (12.6)

Net (decrease) / increase in creditors (55.8) (55.1) (29.9)

Net (decrease) / increase in provisions (4.5) (2.7) 5.4

Total working capital movement (52.3) (59.4) (37.1) The components of the Group’s working capital are:

• Net movement in debtors comprising trade debtors, prepayments and accrued income;

• Net movement in creditors including trade creditors, sundry creditors, VAT creditors, accruals, and deferred income less than and greater than one year; and

• Net movement in provisions includes provisions less than and greater than one year.

The working capital movement for the six month period ended 31 December 2015 was an outflow £52.3m, compared to an outflow of £59.4m in the prior year period.

The six month period ended 31 December 2015 working capital outflow of £52.3m consisted of:



a decrease in debtors of £8.0m, which is primarily due to a reduction in debtors in relation to business rates recoveries;

a decrease in creditors of £55.8m, primarily due to: o the utilisation of deferred income relating to contracts for which payment was

received prior to the start of this financial year, in connection with large Terrestrial Broadcast and Telecoms customers;

o the unwinding of the accrual for the annual bonus and long-term incentive plan payment made in September 2015;

o an annual deficit recovery payment made in respect of the defined benefit pension scheme; and

o other smaller timing differences, including changes to the frequency and timing of supplier payments.

a decrease in provisions of £4.5m primarily due to exceptional expenditure in relation to reorganisation and severance costs.

The movement in working capital versus the prior year period is a favourable movement of £7.1m. This is primarily due to a change in the timing of receipts from certain large customers and rates recoveries (impacting debtors), and other smaller timing differences. Dividends from investments

During the six month period ended 31 December 2015 the Group received £nil dividends from investments. Tax paid

For the six month period ended 31 December 2015 the Group’s corporation tax paid was £0.1m (2014: £0.4m). Acquisitions and disposals

For the six month period ended 31 December 2015, the Group received £16.5m consideration for its interest in NWP Street Limited, a subsidiary undertaking, which was sold on 11 December 2015. Sales of fixed assets are discussed within the Capital Expenditure section. Dividends paid to minority interests

For the six month period ended 31 December 2015, the Group did not pay any equity dividends to minority interests.

Note: The Consolidated cash flow line items diverge at some points and therefore are discussed separately below for the two consolidation levels.

ABPL line items:


For the six month period ended 31 December 2015, the Group’s returns on investment and servicing of finance was an outflow of £107.9m (2014: outflow of £111.0m), consisting of £0.1m in interest received, less £107.5m in interest paid to external sources, and less £0.5m from the interest element of finance lease rentals. The outflow was £3.1m lower than the prior year period which contained £3.3m relating to debt issue costs and facility arrangement fees partially offset by smaller differences in the timing of receipts.

Returns on investment and servicing of finance differs to the interest and financing expenses within the profit and loss account due primarily to non-cash charges in the profit and loss account in respect of the amortisation of debt issue costs, imputed interest, accretion liabilities and movements in the amount of accrued interest balances.



Financing

For the six month period ended 31 December 2015, the Group’s net financing inflow was £16.5m (2014: inflow of £83.1m). The net inflow was primarily due to the drawings of £25.0m on the working capital facility since the previous year end, partially offset by an £8.3m repayment of the premium on swap issuance.

The net inflow in the prior year was primarily as a result of £90.0m drawings on the working capital facility, partially offset by a £7.5m repayment of premium on swap issuance.

Decrease in cash

For the six month period ended 31 December 2015 the ABPL Group’s decrease in net cash was £2.8m (2014: increase of £6.4m) due to the above factors.

AGPL line items:


For the six month period ended 31 December 2015, the Group’s returns on investment and servicing of finance was an outflow of £79.5m (2014: outflow of £82.5m), consisting of £0.1m in interest received, less £79.1m in interest paid to external sources, less £0.5m from the interest element of finance lease rentals. The outflow was £3.0m lower than the prior year period which contained £3.3m relating to debt issue costs and facility arrangement fees partially offset by smaller differences in the timing of receipts.

Returns on investment and servicing of finance differs to the interest and financing expenses within the profit and loss account due primarily to non-cash charges in the profit and loss account in respect of the amortisation of debt issue costs, imputed interest, accretion liabilities and movements in the amount of accrued interest balances.

Financing

For the six month period ended 31 December 2015, the Group’s net financing outflow was £12.0m (2014: inflow of £54.6m). The net outflow was primarily due to a £28.5m payment to parent undertakings, paid to the ABPL group (a permitted payment under the terms of the senior financing and used to settle interest due on the £600.0m junior notes) and an £8.3m repayment of premium on swap issuance. This was partially offset by the drawings of £25.0m on the working capital facility since the previous year end.

The net inflow in the prior year was primarily as a result of £90.0m drawings on the working capital facility, partially offset by permitted payments to parent undertakings of £28.5m and £7.5m repayment of premium on swap issuance.

Decrease in cash

For the six month period ended 31 December 2015 the Group’s decrease in net cash was £2.9m (2014: increase of £6.4m) due to the above factors.



Contractual Obligations and Commitments

The following table sets out the payments due by period under the contractual obligations as at 31 December 2015 for ABPL and AGPL: ABPL

Payments due by Period

Total

Less than1 Year

1 to 3 Years

3 to 5 Years

More than5 Years

(Unaudited)

£ millions Bank loans - Capital expenditure facility…………......... 120.0 - 120.0 - -

Bank loans – Working capital facility…………………… 25.0 25.0 - - -

Senior debt – 2018 term loan facility .............................. 353.5 - 353.5 - -

Senior debt – Institutional Term Loan ............................ 180.0 - - - 180.0Senior debt – European Investment Bank……………... 190.0 - - - 190.0Senior bonds and US Private Placement ....................... 1,612.5 - 40.5 477.1 1,094.9Junior bonds………………………………………………. 600.0 - - 600.0 -

Principal accretion on ILS………………………………… 16.2 - 16.2 - -

Finance lease obligations .............................................. 13.6 0.4 0.8 1.2 11.2

Sub total 3,110.8 25.4 531.0 1,078.3 1,476.1

Premium on Swap Issuance…………………………….. 180.2 16.8 35.5 38.0 89.9Trade creditors .............................................................. 46.2 46.2 - - -

Capital commitments ..................................................... 29.5 29.0 0.5 - -Operating lease commitments ....................................... 238.9 28.1 47.7 36.8 126.3Other creditors (incl. accruals and deferred income) ..... 386.5 269.1 42.6 29.6 45.2

Total non-Group ........................................................... 3,992.1 414.6 657.3 1,182.7 1,737.5

Amounts owed to Group undertakings ........................... 894.8 849.6 - - 45.2

Total .............................................................................. 4,886.9 1,264.2 657.3 1,182.7 1,782.7



AGPL

Payments due by Period

Total

Less than1 Year

1 to 3 Years

3 to 5 Years

More than5 Years

(Unaudited)

£ millions Bank loans - Capital expenditure facility…………......... 120.0 - 120.0 - -

Bank loans – Working capital facility…………………… 25.0 25.0 - - -

Senior debt – 2018 term loan facility .............................. 353.5 - 353.5 - -

Senior debt – Institutional Term Loan ............................ 180.0 - - - 180.0

Senior debt – European Investment Bank……………... 190.0 - - - 190.0Senior bonds and US Private Placement ....................... 1,612.5 - 40.5 477.1 1,094.9Principal accretion on ILS………………………………… 16.2 - 16.2 - -Finance lease obligations .............................................. 13.6 0.4 0.8 1.2 11.2

Sub total 2,510.8 25.4 531.0 478.3 1,476.1

Premium on Swap Issuance…………………………….. 180.2 16.8 35.5 38.0 89.9Trade creditors .............................................................. 46.2 46.2 - - -

Capital commitments ..................................................... 29.5 29.0 0.5 - -

Operating lease commitments ....................................... 238.9 28.1 47.7 36.8 126.3Other creditors (inc. accruals and deferred income) ...... 371.8 254.4 42.6 29.6 45.2

Total non-Group ........................................................... 3,377.4 399.9 657.3 582.7 1,737.5

Amounts owed to Group undertakings ........................... 1,366.4 869.6 - - 496.8

Total .............................................................................. 4,743.8 1,269.5 657.3 582.7 2,234.3

As part of the Group’s refinancing, the majority of the balances within amounts owed to group undertakings were formalised under a single subordinated loan agreement with the direct parent company which has a long term maturity date of 2033. Under the terms of the subordinated loan agreement, these loans cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow. The Group continues to defer these amounts in accordance with the terms of the loans, and this deferred amount is presented as being due within one year.

On 30 June 2015, ABPL and AGPL were released from £3,301.6m and £3,493.2m (respectively) of intercompany loans previously due to their immediate parents, Arqiva Financing No 3 Plc and Arqiva Broadcast Intermediate Limited (respectively). This was achieved by way of a Deed Poll Release by the lender, irrevocably waiving the right to the released amount. The reduction in the principal amount of loans to immediate parents (ABPL: £850.0m remaining at 30 June 2015; AGPL: £1,329.0m remaining at 30 June 2015) has seen a reduction in interest payable to parent undertakings.

Contingent Liabilities

Under the terms of the Group’s external debt facilities, it has provided security over substantially all of its fixed and other assets by way of a Whole Business Securitisation structure.

Off-Balance Sheet Arrangements

The Group does not, and has not used off-balance sheet special purpose vehicles or similar financing arrangements on an historical basis. In addition, the Group has not had and does not have off-balance sheet arrangements with any of its affiliates.

The Group uses interest rate swaps (‘IRS’), Inflation Linked Swaps (‘ILS’) and cross-currency swaps to reduce its exposure to fluctuations in variable interest rates on its debt and currency movements on its US dollar debt. Receipts, payments and accreting liabilities on interest rate and inflation swaps are recognised on an accruals basis, over the life of the instrument. Changes in the fair value of such derivatives are not required to be recognised under UK GAAP, but are instead disclosed in the notes. Amounts received and paid under the swaps are shown at net value under financing costs, where they are part of the same legal agreement and settled at net value in practice. Accreting liabilities



on ILS are recognised on an accruals basis. The Group also utilises forward contracts to hedge certain trade-related foreign currency transactions. The changes in the fair value of such derivatives are not recognised, and the gain or loss on settlement is taken to the profit and loss account. Inflation linked swaps

£1,312.5m of fixed rate debt is hedged via three classes of ILS which either directly or via overlay swaps, fix interest and cause it to be indexed with RPI. In addition, the principal amount of these swaps increases with RPI. One class of these swaps with a nominal value of £235.0m has a mandatory break clause in 2023, whilst the remaining two classes are break-free.

The maturity date for all three classes of ILS is April 2027.

Interest rate swaps

£1,023.2m of variable rate debt is now hedged via four tranches of IRS contracted by ASF and AF1. The ASF IRS (nominal value £353.2m) have mandatory break clauses in 2018 co-terminus with the ASF variable rate bank debt. The IRS held by AF1 (combined notional principal of £670.0m) have maturity dates co-terminus with the Institutional Term Loan (‘ITL’), European Investment Bank (‘EIB’) loan and US Private Placement £300.0m loans.

In July 2014, on raising of the £300.0m floating rate US Private Placement issue, a premium of £100.5m was received by AF1 for entering into replacement IRS and used to fund the whole mark-to-market payment of £100.5m due by ASF at termination of the equivalent IRS.

The restructure of the swaps and transfer from ASF to AF1 resulted in a charge to the profit and loss account, owing to the fact that the termination payment of the relevant ASF (‘Finco’) hedges was recognised immediately. The premium received for entering into the new IRS in AF1 has been recorded on the balance sheet and is being amortised over the 11.5 year weighted average life of the new IRS. As a result of these transactions a premium on swap issuance of £180.3m (31 December 2014: £196.6m) is recorded within creditors.

Also recorded in creditors is an amount of £16.2m (31 December 2014: £78.1m) reflecting the principal accretion on inflation linked swaps. This amount is calculated on an accruals basis.

The fair value of the interest rate, inflation and cross currency swaps at 31 December 2015 (excluding the principal accretion and the premium on swap issuance), is a liability of £1,073.6m which comprises £862.2m in relation to the RPI linked swaps, £212.3m in relation to the IRS, and a £0.9m asset in relation to the cross currency swaps (31 December 2014: total £1,215.8m). This fair value calculated on a Mark-to-Market basis is not recognised on the balance sheet in accordance with Group accounting policy and UK GAAP accounting standards.

The Group held Swap Options with a total notional principal amount of £410.7m at 31 December 2015 (£410.7m at 31 December 2014). The options are exercisable at maturity on 29 February 2016 and 28 February 2018, and hedge the Group’s exposure for the duration of the IRS to a decline in LIBOR below 1%.

Cross Currency Swaps

AF1 has entered into USD 358.0m of cross-currency swaps to fix the Sterling cost of future interest and capital repayment obligations relating to the USD tranche of the Private Placement at an exchange rate of 1.52.



APPENDIX

Note EBITDA definition

EBITDA is presented to aid understanding of the Group’s results of operations and financial condition. The Group defines EBITDA as Group operating profit (taken from the Group’s consolidated profit and loss data) before depreciation and amortisation, exceptional administrative expenses and one-off items where the earnings or charges are not considered to be indicative of the Group’s on-going operations.

EBITDA is a supplemental measure of financial performance that is not required by, nor presented in accordance with, UK GAAP. EBITDA is not a measure of performance under UK GAAP and investors should not consider EBITDA as an alternative to (a) operating profit or profit for the period (as determined in accordance with UK GAAP) as a measure of the Group’s operating performance, (b) cash flows from operating investing and financing activities as a measure to meet the Group’s cash needs or (c) any other measures of performance under generally accepted accounting principles. Investors should exercise caution in comparing EBITDA as reported by the Group to EBITDA of other companies.

EBITDA has been included in this Financial Report because it is a measure that the Group’s management uses to assess the Group’s operating performance.

The following table provides a reconciliation of profit on ordinary activities before interest to EBITDA for the periods indicated:

Six month period ended 31 December

2015 2014

(Unaudited) £ millions

Group operating profit 59.2 69.1

Exceptional administrative expenses ................................ 5.1 0.3

Depreciation ..................................................................... 65.1 57.9

Amortisation ...................................................................... 77.9 78.8

Other (including operational bank charges) ...................... - 0.2 206.

EBITDA ............................................................................ 207.3 206.3



Summary Corporate and Financing Structure



UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2015 OF ABPL AND AGPL

Arqiva Broadcast Parent Limited

Registered number 08085823

Condensed Consolidated Interim Financial Statements

For the six months ended 31 December 2015

Table of Contents Directors’ report .............................................................................................................................................. 1

Consolidated interim profit and loss account .............................................................................................. 6

Consolidated interim profit and loss account – continued from previous page ...................................... 7

Consolidated interim balance sheet .............................................................................................................. 8

Statement of group total recognised gains and losses .............................................................................. 9

Consolidated interim cash flow statement ................................................................................................. 10

Notes to the financial statements ................................................................................................................ 11

1 General information ............................................................................................................................................ 11 2 Directors’ responsibilities .................................................................................................................................... 11 3 Basis of preparation ............................................................................................................................................ 11 4 Estimates ............................................................................................................................................................ 11 5 Financial risk management ................................................................................................................................. 12 6 Turnover and segmental reporting ...................................................................................................................... 13 7 Exceptional items ............................................................................................................................................... 14 8 Interest receivable and similar income ............................................................................................................... 14 9 Interest payable and similar charges .................................................................................................................. 15 10 Tax on loss on ordinary activities ........................................................................................................................ 15 11 Intangible assets ................................................................................................................................................. 16 12 Tangible assets .................................................................................................................................................. 16 13 Debtors ............................................................................................................................................................... 17 14 Cash at bank and in hand ................................................................................................................................... 17 15 Creditors: amounts falling due within one year ................................................................................................... 18 16 Creditors: amounts falling due after more than one year .................................................................................... 19 17 Provisions for liabilities and charges ................................................................................................................... 22 18 Reconciliation of movement in shareholders’ deficit ........................................................................................... 22 19 Cash flow from operating activities ..................................................................................................................... 22 20 Analysis of changes in net debt .......................................................................................................................... 23 21 Capital commitments .......................................................................................................................................... 23 22 Contingent liabilities ............................................................................................................................................ 23 23 Profit on disposal of subsidiary ........................................................................................................................... 23 24 Related party disclosures ................................................................................................................................... 23 25 Pension Commitments ....................................................................................................................................... 24 26 Controlling parties ............................................................................................................................................... 24

Arqiva Broadcast Parent Limited Condensed Consolidated Interim Financial Statements – six months ended 31 December 2015

Arqiva Broadcast Parent Limited 1

Directors’ report

The Directors of Arqiva Broadcast Parent Limited, registered company number 08085823, (‘the Company’) and its subsidiaries (‘the Group’) provide the following report and condensed consolidated interim financial statements (‘financial statements’), in respect of the six months ended 31 December 2015. Business overview The Group is the UK’s national provider of essential terrestrial television and radio broadcast infrastructure as well as a key provider of communications services to major distributors of satellite content, media, wireless voice and data services in the UK, including machine-to-machine (‘M2M’) connectivity. The Group’s core towers business (comprising terrestrial broadcast and wireless site share infrastructure) generates predictable operating profits (which management estimates constituted circa two-thirds of the Group’s gross profits for the year ended 30 June 2015), supported by strong market positions, diverse revenue streams, long-life assets and a significant proportion of revenues coming from long term contracts.



Further to the organisational structure changes reported previously Arqiva continues to deliver operating cost savings. As at 31 December 2015, the Group had achieved a run rate saving of circa £25m p.a in operating expenses. From May to November 2015, the Group was supported by Alvarez and Marsal for an operating model review and to help identify cost reduction opportunities. The Group is now ensuring that there is a timely and continuing implementation of initiatives arising from this review. In January 2016, a Chief Procurement and Continuous Improvement Officer, Fréderic Sebban was appointed to continue the focus on cost efficiency. Fréderic joins Arqiva with significant experience gained from both Business to Business (B2B) and Business to Consumer (B2C) environments. He has held senior procurement and supply chain management roles across Europe with organisations including General Electric, Renault (Matra), Alstom and Campofrio. Fréderic is also a Lean Six Sigma Master Black Belt having led a number of performance excellence programmes that have delivered considerable benefits in terms of operational efficiency/effectiveness improvements and cost savings. 4G rollout




In October 2015, the Group signed a contract for the sale to telent of its Secure Solutions assets and contracts which had been identified as non-core business. The sale was completed successfully in December 2015. In December 2015, the Group also sold the payphone business acquired in 2012 as part of the Spectrum Interactive business, disposing of its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking to Clear Channel. Total consideration for these disposals was circa £20m.



Smart metering rollout Arqiva is building a smart metering communication network as part of a 15-year contract signed in September 2013 with the Data and Communications Company (the ‘DCC’, a body licensed by statute). The Group has successfully achieved a key milestone in the programme ahead of schedule by completing the first Pre-Integration Testing phase and has entered into the Systems Integration Testing phase, where the Arqiva solution is integrated and tested as part of the wider DCC solution, together with meter emulators, electricity and gas meters. As a result of the completion of the first Pre-Integration Testing, the Group has started to earn recurring revenues under the contract relating to network availability charges. Arqiva has also delivered the next release of software required for Systems Integration Testing on time. Furthermore, Arqiva expects to earn additional revenues from new change requests (and existing ones) once the scope and contract is agreed during the quarter to March 2016. Arqiva has achieved all contractual milestones required to date. The rollout of the network currently exceeds 70% coverage across the contracted region and is on track to achieve 80% by the time the DCC service is operationally live later this year. Smart water metering rollout




The Mobile Infrastructure Project (‘MIP’) is a strategic programme funded by the Government with the ultimate goal of providing a service to areas without any mobile coverage services (‘not-spots’). Arqiva was awarded the contract in May 2013 by the Department of Culture and Media and Sport (‘DCMS’) to provide mobile network planning and to build mobile mast infrastructure with cellular and backhaul transmission capability for the MNOs to be able to deliver mobile services to rural communities. The project is due to end in March 2016 with the aim of completing as many sites as possible by then. The Culture Secretary has publicly stated that the project will deliver over 50 masts, bringing 4G coverage to premises that previously had no mobile coverage. Launch of Freeview Play

In October 2015, the Freeview brand launched its connected TV service, Freeview Play. Freeview Play combines DTT channels with catch-up TV from the BBC, ITV, Channel 4 and Channel 5, on-demand services and live television, making a wide range of content available to a mass market and giving viewers even more choice in how they access TV programmes on a free-to-air platform. The service is free from subscription and works with all existing broadband services. Freeview Play is available on new set-top boxes currently manufactured by Humax and on Panasonic’s new



TVs. LG has recently announced it will launch a Freeview Play range in the first half of 2016 and other TV manufacturers are expected to follow. Freeview’s DTT service is the biggest TV platform in the UK and is present in over 19 million homes. Arqiva has been fully committed to developing and modernising the platform and was responsible for building part of the technical solution for Freeview Play. 700 MHz clearance and DTT spectrum




Following award of the second national DAB licence in March 2015 to Sound Digital (a consortium which includes Arqiva (40%)), construction by the Group of the transmission network is nearing completion. Contracts have been agreed with 18 radio stations wishing to launch further radio services on the new national DAB multiplex utilising 98% of the available capacity. Transmitter installation and commissioning is being completed ready for a launch on 29 February 2016.






Financial results

For the six months ended 31 December 2015 turnover for the Group was £424.4m, an increase of 0.9% from £420.8m in the prior year period. The increase was primarily as a result of higher revenues from DTT founder contract renewals where channel prices were uplifted to market prices, and greater utilisation of DTT channel capacity (now part of our Terrestrial Broadcast business unit). This increase was partially offset by a decrease in milestone revenues recorded in relation to the DCC Smart Metering contract that have not been repeated in the current period due to the phasing of the project milestones. Within Telecoms & M2M there was a reduction in one-off Site Share project revenues which was offset by growth in Installation Services, WiFi and our Smart water-metering contract. Gross profit was £252.4m, representing a 3.9% decrease from £262.6m in the prior year period. Cost of sales increased at a higher rate than turnover principally owing to an increase in the level of third party costs and internal resource employed, primarily in our Telecoms business. This was due to a shift in the sales mix with milestone based project revenues in the prior period being replaced by an increase in Installation Services revenues which carry a lower gross margin. Operating expenses excluding exceptional items, were £45.1m, a 20.2% decrease from the prior year period figure of £56.5m. The reduction was achieved by savings derived from the Transformation Program; an increase in the level of internal resource employed on cost of sales activities, and higher labour capitalisation. The key measure of the Group’s financial performance used by management is EBITDA. EBITDA is defined as operating profit, before share of profit from joint ventures and associates, profit or losses on the disposal of fixed assets, depreciation, amortisation, interest and exceptional items but after operational bank charges. A reconciliation of the reported EBITDA to the financial statements is provided below:

Six months ended

31 December 2015

£’m

Six months ended

31 December 2014

£’m

Year ended

30 June 2015

£’m

Operating profit before exceptional items 64.3 69.4 141.6

Depreciation of fixed assets 65.1 57.9 119.0

Amortisation 77.9 78.8 159.0

Other (including operational bank charges) - 0.2 0.3

EBITDA 207.3 206.3 419.9

EBITDA for the Group pre-exceptional items was £207.3m, representing a 0.5% increase from £206.3m in the prior year, with the reduction in operating expenses more than offsetting the reduction in gross profit described above. EBITDA for the Group post-exceptional items was £202.2m, a decrease of 1.8% compared with the prior year result of £206.0m. Exceptional costs of £5.1m (2014: £0.3m) in the current period predominantly relate to reorganisation costs resulting from the Transformation Program. Profit on ordinary activities before taxation and interest for the Group was £75.4m (2014: £70.4m). This increase was principally due to the £15.4m profit on disposal of NWP Street limited, a subsidiary undertaking, which was largely offset by an increase in the depreciation charge due to an increase in the underlying asset base of the Group and accelerated depreciation of certain contract and site specific assets. Net cash inflow from operating activities was £149.4m, an increase from the prior year of £146.7m, primarily due to lower investment in working capital compared to the prior period. The working capital outflow of £52.3m was £7.1m less than that of the same period in the prior year, primarily due to a change in the timing of receipts from certain large customers and business rates recoveries. Net capital expenditure and financial investment was £77.2m compared with £111.8m in the prior year period. The current period included £5.1m receipts from the sale of fixed assets. The prior year period included a £20.0m payment for Smart Metering capital expenditure which had been accrued at 30 June 2014. Whilst the Group’s business is not seasonal in nature, its working capital movement is seasonal. The Group historically invoices and collects a proportion of its revenues in advance, particularly in the second half of the financial year.



Consolidated interim profit and loss account

Six months to 31 December 2015

Unaudited


Unaudited

Year ended 30 June 2015

Audited

Note Pre exceptional

items

Exceptional

items

Total

Pre exceptional

items

Exceptional

items

Total

Pre exceptional

items

Exceptional

items

Total

£’m £’m £’m £’m £’m £’m £’m £’m £’m

Continuing operations

Turnover (including share of joint ventures)

429.2 - 429.2 426.7 - 426.7

868.7 - 868.7

Less: share of joint ventures’ turnover (4.8) - (4.8) (5.9) - (5.9) (12.0) - (12.0)

Group turnover 6 424.4 - 424.4 420.8 - 420.8 856.7 - 856.7

Cost of sales (172.0) - (172.0) (158.2) - (158.2) (327.7) - (327.7)

Gross profit 252.4 - 252.4 262.6 - 262.6 529.0 - 529.0

Depreciation (65.1) - (65.1) (57.9) - (57.9) (119.0) - (119.0)

Amortisation (77.9) - (77.9) (78.8) - (78.8) (159.0) - (159.0)

Impairment 7 - - - - - - - (33.7) (33.7)

Other administrative expenses 7 (45.1) (5.1) (50.2) (56.5) (0.3) (56.8) (109.4) (11.0) (120.4)

Total administrative expenses (188.1) (5.1) (193.2) (193.2) (0.3) (193.5) (387.4) (44.7) (432.1)

Group operating profit 64.3 (5.1) 59.2 69.4 (0.3) 69.1 141.6 (44.7) 96.9

Share of operating profit in joint ventures and associates 0.8 - 0.8 1.3 - 1.3

3.6 - 3.6

Total operating profit : Group and

share of joint ventures and associates 65.1 (5.1) 60.0 70.7 (0.3) 70.4

145.2 (44.7) 100.5

Income from investments - - - - - - 0.2 - 0.2

Profit on disposal of subsidiary 7,23 - 15.4 15.4 - - - - - -

Profit on ordinary activities before interest and taxation

65.1 10.3 75.4 70.7 (0.3) 70.4

145.4 (44.7) 100.7

The profit and loss account is continued on the following page.



Consolidated interim profit and loss account – continued from previous page


Unaudited


Unaudited


Audited


items

Exceptional

items

Total

Pre exceptional

items

Exceptional

items

Total

Pre exceptional

items

Exceptional

items

Total

£’m £’m £’m £’m £’m £’m £’m £’m £’m

Profit on ordinary activities before interest and taxation 65.1 10.3 75.4 70.7 (0.3) 70.4

145.4 (44.7) 100.7

Interest receivable and similar income 7,8 0.5 - 0.5 1.1 1.0 2.1 2.4 1.0 3.4

Interest payable and similar charges 7,9 (181.4) - (181.4) (328.9) (100.5) (429.4) (638.1) (100.5) (738.6)

Share of joint venture interest payable (0.5) - (0.5) (0.6) - (0.6) (1.2) - (1.2)

Loss on ordinary activities before taxation

(116.3) 10.3 (106.0) (257.7) (99.8) (357.5)

(491.5) (144.2) (635.7)

Tax on loss on ordinary activities 10 (0.3) (0.6) (57.6)

Loss on ordinary activities after taxation

(106.3) (358.1)

(693.3)


Loss for the financial period 18 (106.4) (358.2) (693.4)



Statement of group total recognised gains and losses

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

(Loss) / profit for the financial period:

- Group (106.7) (358.9) (695.8)

- Joint ventures 0.3 0.7 2.4


Actuarial loss on pension scheme (4.0) (4.1) (6.9)

Movement on deferred tax relating to pension scheme - 0.8 1.4

Exchange adjustment offset in reserves (translation of foreign investments)

(0.7) (0.9) (0.6)

Total recognised losses for the period (111.1) (362.4) (699.5)

Total recognised (losses) / gains for the period:

- Group (111.4) (363.1) (701.9)





Consolidated interim cash flow statement

Note

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Net cash inflow from operating activities 19 149.4 146.7 371.8


Interest received 0.1 0.2 0.6

Interest paid (107.5) (107.4) (209.9)

Interest element of finance lease rentals (0.5) (0.5) (1.1)

Debt issue costs and facility arrangement fees - (3.3) (3.3)



(107.9) (111.2) (213.8)

Tax paid (0.1) (0.4) (0.5)

Capital expenditure and financial investment

Purchase of tangible fixed assets (81.7) (111.4) (194.5)

Purchase of intangible fixed assets (0.6) (0.6) (0.6)

Sale of fixed assets 5.1 0.2 0.5

(77.2) (111.8) (194.6)

Acquisitions and disposals

Sale of subsidiary undertakings 16.5 - -

16.5 - -

Financing

Finance lease capital (0.2) (0.2) (0.2)

Loans to joint ventures - (0.2) (0.2)

Repayment of external borrowings - (300.0) (374.9)

Raising of external borrowings 25.0 390.0 420.0

Repayment of premium on swap issuance (8.3) (7.5) (15.6)

Premium on swap issuance - 100.5 100.5

Cash outflow on close out of swaps - (100.5) (100.5)

Proceeds on disposal of swap options - 1.0 1.0

16.5 83.1 30.1

Decrease in cash 20 (2.8) 6.4 (7.0)



Notes to the financial statements

1 General information

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2015 were approved by the board of directors on 11 September 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. A copy of the audited financial statements for the year ended 30 June 2015 can be obtained from the Company Secretary at Crawley Court, Winchester, Hampshire, SO21 2QA.

2 Directors’ responsibilities

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

3 Basis of preparation

The financial reporting framework which now applies to entities preparing financial statements in accordance with legislation, regulation or accounting standards applicable in the UK and the Republic of Ireland is FRS 100, Application of Financial Reporting Requirements, which was issued in November 2012. These standards are mandatory for statutory financial statements for accounting periods beginning on or after 1 January 2015. Pursuant to the introduction of these new standards, we will be obliged to adopt either IFRS or UK GAAP FRS 102 for our 30 June 2016 financial statements. The financial information presented in these condensed consolidated interim financial statements does not reflect this new reporting framework. We expect to change our reporting framework to IFRS for our 30 June 2016 annual financial statements, including comparative information as at and for the year ended 30 June 2015. These changes may therefore affect how we report our results and the comparability of our future results to prior periods (including the comparability of future results to results presented in these condensed consolidated interim financial statements). These changes will primarily be seen in relation to the accounting treatment of intangible assets as well as the recognition of our financial instruments at fair value. The condensed consolidated interim financial statements should be read in conjunction with the statutory accounts for the year ended 30 June 2015, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The accounting policies adopted are consistent with the statutory accounts for the year ended 30 June 2015.

4 Estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and costs. Actual results may differ from these estimates. In preparing these financial statements, the Group’s accounting policies and the significant judgements made by management in applying key estimations were the same as those that applied to the statutory accounts for the year ended 30 June 2015. The business is not subject to any significant seasonal trends affecting revenue, however the working capital movement is seasonal in nature due to the timing of invoicing and receipts from a number of large customers.



5 Financial risk management

The Group’s operations expose it and the Company to a variety of financial risks that include price risk, credit risk, liquidity risk, cash flow interest risk and foreign exchange risk. The Group’s risk management programme seeks to minimise potential adverse effects. A selection of the key business risks affecting the Group are set out below together with a summary of the Group’s mitigating actions. Price risk Energy is a major component of the Group’s cost base. A large proportion of this is managed via pass-through arrangements to customers. The Group’s residual exposure to fluctuations in the electricity price is managed by forward purchasing the majority of power requirements up to circa 12 months in advance. Key revenue and cost milestones are set on larger projects to ensure the financial risks of volatile market pricing are mitigated. Credit risk The Group is exposed to credit risk on customer receivables which is managed through appropriate credit checking procedures prior to taking on new customers; and higher risk customers paying in advance of services being provided. Performance is closely monitored to ensure agreed service levels are maintained reducing the level of queried payments and mitigating the risk of uncollectable debts. The Group carefully manages the credit risk on liquid funds and derivative financial instruments with balances currently spread across a range of major financial institutions which have satisfactory credit ratings assigned by international credit rating agencies. The levels of credit risk are monitored through the Group’s on-going risk management processes, which include a regular review of the credit ratings. Risk in this area is limited further by setting a maximum level and term for deposits with any single counterparty. Liquidity risk To ensure it has sufficient available funds for working capital requirements and planned growth, the Group maintains cash reserves and access to undrawn committed facilities to cover forecast requirements. As at 31 December 2015 the Group had £100.0m working capital facilities against which it had drawn £25.0m, and £41.6m cash available to cover short term cash flow timing differences if required, together with a £400.0m capital expenditure facility against which it had drawn £120.0m. In addition, the Group has £200.0m of liquidity facilities available to cover senior interest payments and a £28.5m cash reserve to cover junior interest if required, both of which remain undrawn. Details of the debt maturity profile are provided in note 16. Financing risk The Group will need to refinance at least part of its debt as it matures and may need additional financing to cover capital expenditure and certain other expenses to support its growth plans. The Group cannot be certain that such financing will be readily available on attractive or historically comparable terms. The Group mitigates this risk by the strength of the stable long term investment grade capital structure in place, our BBB ratings (from Standard & Poors and Fitch) which reflect our strong ability to raise cash and repay debt from our cash flows over a reasonable period of time, maintaining an active dialogue with lenders and investors, maintaining debt with a variety of medium and long term maturities so that over time we do not have a significant concentration of debt due for refinancing in any given year, and aiming to refinance debt well in advance of the maturity date. Breach of debt covenants and/or a downgrade in our rating could impact the availability of finance or the comparability of terms. In order to mitigate this, the Group maintains financial covenant monitoring and modelling, both retrospectively and prospectively and maintains regular dialogue with its banks and credit ratings agencies. Interest rate risk The Group has variable rate bank debt and uses interest rate swaps to hedge its exposure to rising interest rates. The Group maintains a hedging policy to manage interest rate risk and to ensure the certainty of future interest cash flows. It currently has fixed rate hedging, split between interest rate swaps and inflation swaps. Interest rate swaps convert variable rate interest costs to fixed rate interest costs while inflation swaps convert fixed rate interest costs to RPI-linked costs, which fluctuate in line with the RPI index as do a proportion of the Group's revenue contracts. Details of the interest rate profile of the Group’s liabilities are provided in note 16. Foreign exchange risk The Group operates from UK sites and predominantly in the UK market, but has some transactions denominated in foreign currency. While some customer and supplier contracts are denominated in other currencies (mainly US Dollars and Euros), the majority of the Group’s revenues and costs are sterling based, and accordingly exposure to foreign exchange risk is limited. Management regularly monitor the impact of foreign exchange risks and assess the need to put any mitigating financial instruments in place. From time to time, forward foreign exchange contracts are used to fix the exchange rate for certain overseas revenue contracts. Cross currency swaps are used to fix the exchange rate in relation to US Dollar denominated senior bonds. Details of the cross currency swaps are provided in note 16.



6 Turnover and segmental reporting

The geographical split of turnover by destination is shown below: Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

UK 385.6 360.9 770.5

Continental Europe (including Republic of Ireland) 19.8 33.9 44.5

Rest of World 19.0 26.0 41.7


Segmental reporting The Group has organised its business into three customer facing business units, supported by central corporate functions. This structure is used to provide the following segmental reporting in relation to Group turnover. This is stated net of intra-divisional trading.

Terrestrial Broadcast Telecoms & M2M Satellite and Media Total

£’m £’m £’m £’m

Turnover for the three month period / year ended:

31 December 2015 (6 months) 206.9 146.0 71.5 424.4

31 December 2014 (6 months) restated* 192.7 149.7 78.4 420.8

30 June 2015 (12 months) restated* 404.0 297.7 155.0 856.7

* Prior period comparatives have been restated to reflect the structure as at the signing date of the financial statements. The majority of assets employed and underlying costs are derived from a shared infrastructure network common to all operating business units. An allocation of such assets to the business units is not performed as part of the normal reporting process within the business. Whilst management do review directly attributable costs by each revenue generating business unit, the Directors are of the opinion that further disclosure would be seriously prejudicial to the Group.



7 Exceptional items

Loss on ordinary activities before taxation is stated after (charging) / crediting: Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Administrative expenses

- Reorganisation and severance (5.4) - (11.0)

- Other one off activities (0.2) (0.3) -

- Profit on disposal of tangible fixed assets 0.5 - -

- Impairment - - (33.7)

(5.1) (0.3) (44.7)

Profit on disposal of subsidiary (see note 23) 15.4 - -

Financing income

- Gain on disposal of swap options - 1.0 1.0

- 1.0 1.0

Financing expenses

- Close out of swaps - (100.5) (100.5)

Total exceptional items 10.3 (99.8) (144.2)

Reorganisation and severance expenses include costs relating to the recent review of the Group’s operating model. Profit on disposal of tangible fixed assets relates to the divestment of a non-core portfolio of assets. Prior period / year financing expenses comprise a £100.5m cash outflow in relation to the breaking of interest rate swap agreements (see note 16). These termination payments were fully funded by a £100.5m premium received for entering into the replacement interest rate swaps. Prior period impairment related to the write down of the carrying value of non-core business areas and investments. With the exception of the profit on the disposal of subsidiary which is not subject to UK Corporation Tax as a result of the Substantial Shareholding Exemption, the amounts included within exceptional items above are deductible or taxable for the purpose of taxation.

8 Interest receivable and similar income

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Bank interest 0.2 0.1 0.3

Finance lease interest receivable - - 0.3

Other interest 0.3 1.0 1.8

Total interest receivable 0.5 1.1 2.4

Exceptional financing income (see note 7) - 1.0 1.0

Total interest receivable including exceptional items 0.5 2.1 3.4



9 Interest payable and similar charges

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Bank loan interest 57.7 57.2 93.3

Other loan interest – senior and junior bonds and notes 62.5 62.2 124.2

Less: Capitalised interest (1.6) (0.5) (1.7)

Net bank and other loan interest 118.6 118.9 215.8

Amortisation of debt issue costs 6.5 9.7 16.0

Release of deferred derivative close out costs 4.9 4.8 9.6

Interest payable to parent undertakings 41.5 184.3 375.0

Finance lease interest payable 0.5 0.5 1.1


Total interest payable 181.4 328.9 638.1

Exceptional financing expenses (see note 7) - 100.5 100.5

Total interest payable including exceptional items 181.4 429.4 738.6

Included within bank loan interest is the principal accretion on inflation linked swaps of £16.2m (31 December 2014: £18.2m). See note 16 for further details. Excluding the principal accretion, the net bank and other loan interest was £102.4m (31 December 2014: £100.7m). The reduction in interest payable to parent undertakings is due to the release of loans due to the Company’s immediate parent on 30 June 2015 (see note 16).

10 Tax on loss on ordinary activities

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Analysis of tax charge for the period / year

Current tax

UK corporation tax - - 0.1

Overseas tax 0.3 0.4 0.4

Total current tax 0.3 0.4 0.5

Deferred tax

De-recognition of deferred tax assets - - 56.6

Deferred tax on pension liability charged to profit and loss account - 0.2 0.5

Total deferred tax - 0.2 57.1

Tax on loss on ordinary activities 0.3 0.6 57.6

The tax on loss on ordinary activities is recognised based on management’s estimate of the weighted average annual corporate income tax rate expected for the full financial year. The estimated average annual tax charge for the year to 30 June 2016 is 0.1% (the estimated tax rate used at 31 December 2014 was 0.1%) This rate is different to the statutory tax rate mainly due to current year tax losses being surrendered to other group companies for nil consideration and certain timing differences not being recognised as deferred tax assets.



11 Intangible assets

Licences Development costs Access rights Goodwill Total

£’m £’m £’m £’m £’m

Cost

At 1 July 2015 7.5 2.6 22.9 3,069.2 3,102.2

Additions - 1.8 - - 1.8

Disposals - (0.3) - (27.7) (28.0)

At 31 December 2015 7.5 4.1 22.9 3,041.5 3,076.0

Accumulated amortisation

At 1 July 2015 3.8 1.3 18.1 1,391.0 1,414.2

Charge for the period 0.3 0.2 0.2 77.2 77.9

Disposals - - - (26.7) (26.7)

At 31 December 2015 4.1 1.5 18.3 1,441.5 1,465.4

Net book value

At 31 December 2015 3.4 2.6 4.6 1,600.0 1,610.6

At 30 June 2015 3.7 1.3 4.8 1,678.2 1,688.0

At 31 December 2014 4.0 1.1 5.3 1,779.3 1,789.7

12 Tangible assets

Freehold land and buildings

Leasehold buildings Plant and equipment

Assets under the course of

construction

(AUC)

Total

£’m £’m £’m £’m £’m

Cost At 1 July 2015 326.6 139.6 1,778.6 181.8 2,426.6

Additions - - 1.2 80.9 82.1

Completion of AUC 3.1 (0.4) 120.1 (122.8) -

Reclassifications (1.8) 1.8 - - -

Disposals (0.9) (0.5) (22.0) - (23.4)

At 31 December 2015 327.0 140.5 1,877.9 139.9 2,485.3

Accumulated depreciation

At 1 July 2015 22.8 43.0 594.6 - 660.4

Charge for the period 2.6 3.6 58.9 - 65.1


Disposals (0.9) (0.3) (18.7) - (19.9)

At 31 December 2015 24.4 46.4 634.8 - 705.6

Net book value

At 31 December 2015 302.6 94.1 1,243.1 139.9 1,779.7

At 30 June 2015 303.8 96.6 1,184.0 181.8 1,766.2

At 31 December 2014 299.2 97.0 1,170.4 175.4 1,742.0



13 Debtors

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Trade debtors 69.6 65.2 70.9

Amounts owed by Group undertakings 31.4 25.4 30.9

Amounts owed by joint ventures 0.5 0.5 0.5

Other debtors 1.8 14.4 7.0

Prepayments and accrued income 124.5 118.0 128.5

Deferred tax asset - 56.6 -

Total debtors 227.8 280.1 237.8

Analysed as:

Amounts owed by third parties 196.4 254.7 206.9


Total debtors 227.8 280.1 237.8

Included within prepayments is £5.3m (December 2014: £9.9m, June 2015: £7.6m) relating to arrangement fees on undrawn facilities.

14 Cash at bank and in hand

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Cash at bank 6.4 5.9 3.6

Short term deposits 35.2 51.9 40.8

Cash at bank and in hand 41.6 57.8 44.4

Restricted cash 28.5 28.5 28.5

Total cash at bank and in hand 70.1 86.3 72.9

The restricted cash balance relates to a reserve account required to cover one semi-annual interest payment on the £600.0m of junior bonds which mature in 2020.



15 Creditors: amounts falling due within one year

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Bank loans – working capital facility 25.0 90.0 -

Trade creditors 46.2 54.2 44.4

Amounts owed to Group undertakings 849.6 618.1 808.6

Other taxes and social security costs 22.5 8.3 24.0

Other creditors 11.3 10.4 6.5

Premium on swap issuance 16.8 16.3 16.6

Accruals and deferred income 235.1 250.4 291.4

Principal accretion on inflation linked swaps - 78.1 -

Finance lease obligations 0.4 0.4 0.4

Total creditors: amounts falling due within one year 1,206.9 1,126.2 1,191.9

Analysed as:

Amounts owed to third parties 357.3 508.1 383.3


Total creditors: amounts falling due within one year 1,206.9 1,126.2 1,191.9

The majority of the balances with group undertakings have been formalised under a single subordinated loan agreement with the direct parent company. Under the terms of the subordinated loan agreement, these facilities have maturity dates of 20 years, cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow. Where interest is deferred this is included in creditors: amounts falling due within one year. The premium on swap issuance is also discussed in note 16.



16 Creditors: amounts falling due after more than one year

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Bank Loans

Capital expenditure facility 120.0 - 120.0

Senior debt 723.5 723.5 723.5


Principal accretion on inflation linked swap 16.2 - -

Less: issue costs (6.1) (9.5) (7.8)

1,017.1 894.3 1,007.7

Other Loans

Senior bonds 1,612.5 1,612.5 1,612.5

Junior bonds 600.0 600.0 600.0

Less: issue costs (22.7) (27.7) (25.3)

Deferred derivative close out costs (71.0) (80.7) (75.9)

2,118.8 2,104.1 2,111.3

Other creditors - 0.1 -

Amounts owed to Group undertakings 45.2 3,346.8 45.2



Total creditors: amounts falling due after more than one year

3,311.7 6,468.3 3,288.6

Analysed as:

Amounts owed to third parties 3,266.5 3,121.5 3,243.4



3,311.7 6,468.3 3,288.6

Accruals and deferred income principally comprise amounts outstanding for on-going costs and amounts received from customers in advance respectively. Amounts owed to Group undertakings are unsecured. Interest has been charged on amounts owed to group undertakings of £45.2m at 9.50% (2014: £3,346.8m at 9.5%). On 30 June 2015, ABPL was released from £3,301.5m of intercompany loans previously due to its immediate parent, Arqiva Financing No 3 Plc. This was achieved by way of a Deed Poll Release by the lender, irrevocably waiving the right to the released amount. The reduction in the principal amount of loans to its immediate parent (£850.0m remaining at 30 June 2015) has seen a reduction in interest payable to parent undertakings. This was accounted for as a receipt of a capital contribution and therefore a capital contribution reserve was recognised (see note 18). The majority of the balances with group undertakings have been formalised under a single subordinated loan agreement with the direct parent company. Under the terms of the subordinated loan agreement, these facilities have maturity dates of 20 years, cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow.



Maturity of loans The total loans analysed below represent total creditors: amounts falling due after more than one year excluding issue costs, deferred derivative close out costs, accruals and deferred income, amounts owed to group undertakings, and other creditors. Also included are finance lease obligations, premium on swap issuance, working capital facility and principal accretion on inflation linked swaps all falling due within one year (see note 15).

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Maturity of loans

Within one year 42.2 184.8 17.0

In more than one year, but not more than five years 1,683.0 468.1 1,606.1

In more than five years 1,566.0 2,661.8 1,635.3

Total loans 3,291.2 3,314.7 3,258.4

Bank loans and other loans Senior debt includes 5-year term bank debt of £353.5m, due in 2018 borrowed by ASF under a Senior Facility Agreement (£353.5m at 30 June 2015). The loan has a floating interest rate which ranges between LIBOR + 2.50% to LIBOR + 4.00% by the end of the agreement. AF1 has further undrawn facilities of £555.0m available. In January 2014, the Group completed a £180.0m term loan from institutional investors, the proceeds of which were used to make a £180.0m part repayment of the original 3-year term bank facilities. This loan has an expected term of 10 years and is held by AF1. In June 2014, the Group completed a loan of £190.0m from the European Investment Bank (‘EIB’) borrowed by AF1, with an expected term of 10 years. The proceeds of this loan were utilised to settle the remaining £57.5m of the original 3-year term bank facility and £132.5m to make a part repayment of the 5-year term bank facilities. In July 2014, the Group further paid down the remaining 5-year facility by £300.0m to a balance of £353.5m. Senior bonds include the issuance of £750.0m Notes raised in February 2013 and £164.0m Notes raised in February 2014 by Arqiva Financing Plc ('AF'). These are rated BBB by Standard & Poors and Fitch. These Notes have fixed interest rates which range between 4.04% and 5.34% and are repayable between June 2018 and December 2032. These Notes are listed on the London Stock Exchange. In February 2014, the Group closed a £164.0m fixed rate public bond issue, with an expected maturity of 2030. Net proceeds (£162.5m) from the issuance were again used to repay a portion of the original 3-year term bank facility borrowed by ASF. Of the remaining senior bonds, £300.0m were raised in July 2014 at a coupon rate of LIBOR + 2.1% through a new 15-year amortising US Private Placement debt issue and £398.5m were raised in June 2013 by Arqiva PP Financing Plc (‘APPF’) through a US Private Placement transaction in a combined sterling and US dollar denominated offering. These Notes have fixed interest rates which range between 4.101% and 4.420% and have amortising repayment profiles commencing December 2018 with an end maturity date of June 2025. All of the above financing instruments have covenants attached, principally an interest cover ratio and a debt leverage ratio, and benefit from security over substantially all of the Group’s assets under a Whole Business Securitisation structure. The Group continues to comply with all covenant requirements. Junior bonds of £600.0m represent amounts raised from the issuance of Notes by Arqiva Broadcast Finance Plc ('ABF'). These Notes have a fixed interest rate of 9.5% and are repayable in March 2020. These Notes are listed on the Luxembourg Market and have interest cover and debt leverage covenants attached. The Group continues to comply with all covenant requirements. The deferred derivative close out costs relate to costs incurred in February 2013 on the termination of interest rate swap instruments pursuant to the Group's refinancing and are deferred to reflect the economic substance of the Group’s original hedging strategy. The premium on swap issuance arose on a restructuring of certain derivative financial instruments whereby the Group terminated existing interest rate swaps crystallising a loss and established new interest rate swaps with a nominal value, maturity and terms to match the new financing arrangements established. The termination payment was primarily funded by the premium received from entering into the replacement swaps.



Derivative financial instruments At refinancing in February 2013, the Group restructured its £2,335.7m of interest rate and inflation swaps. Since that date there has been some further restructuring as a result of the above changes to the bank and other loans held by the Group. In July 2014 the Group restructured a further £300.0m notional value of interest rate swaps so that they are contracted by AF1 rather than ASF with maturity and terms to match the new 15-year amortising US Private Placement debt issue. The associated premium was £100.5m which fully offset the loss crystallised leaving a zero net cash settlement, matching the breakage costs incurred on the ASF swaps that were replaced. £1,023.2m of variable rate debt is now hedged via three classes of interest rate swaps contracted by Arqiva Senior Finance Limited (‘ASF’) and AF1. The ASF interest rate swaps (nominal value £353.2m) have 5 year mandatory break clauses co-terminus with the ASF variable rate bank debt which is due in 2018. The interest rate swaps held by AF1 (combined nominal values of £670.0m) have maturity dates of between 10 and 15 years, co-terminus with the Institutional Term Loan (‘ITL’), EIB loans and the amortising US Private Placement debt issue in July 2014. £1,312.5m of fixed and variable rate debt is hedged via three classes of inflation linked swaps which fix interest and cause it to be indexed with RPI. In addition, the principal amount of these swaps increases with RPI. Two classes of these swaps are break free. One class of these swaps, with a nominal value of £235.0m, has a 10 year mandatory break clause. In 2023 the termination payment falls due which reflects the fair value of the remaining payments otherwise due until maturity. The maturity date for all three classes of inflation swaps is April 2027. AF1 has entered into £1,312.5m of floating / fixed interest rate swaps to overlay the above RPI swaps, amending the cash flow characteristics to align to the fixed coupon payable on the senior bonds and USPP debt. In addition, AF1 entered into USD 358.0m of cross-currency swaps to fix the Sterling cost of future interest and capital repayment obligations relating to the USD tranche of the Private Placement at an exchange rate of 1.52. Included within creditors falling due after more than one year (2015: creditors falling due within one year) is an amount of £16.2m (31 December 2014: £78.1m) reflecting the principal accretion on inflation linked swaps. This amount is calculated on an accruals basis. The remaining fair value of the interest rate, inflation and cross currency swaps at 31 December 2015 (excluding the inflation swap principal accretion and the premium on swap issuance), is a liability of £1,073.6m (31 December 2014: £1,215.8m) which comprises £862.2m (31 December 2014: £954.1m) in relation to the RPI linked swaps, £212.3m (31 December 2014: £243.9m) in relation to the interest rate swaps, and a £0.9m asset (31 December 2014: £17.8m liability) in relation to the cross currency swap. This fair value is not recognised on the balance sheet in accordance with Group accounting policy and UK GAAP accounting standards and is calculated on a mark-to-market basis. The Group holds Swap Options with a total notional principal amount of £410.7m (31 December 2014: £410.7m). The options are exercisable at maturity on 29 February 2016 and 28 February 2018, and hedge the Group’s exposure for the duration of the interest rate swaps to a decline in LIBOR below 1%.



17 Provisions for liabilities and charges

Onerous contracts

Decommissioning

Restructuring Remediation and maintenance

Other Total

£’m £’m £’m £’m £’m £’m

At 1 July 2015 5.2 39.8 5.8 3.9 0.5 55.2

Charged to profit and loss account

0.1 - 2.9 0.1 - 3.1

Changes relating to movements in the discounted amount

- 0.9 - - - 0.9

Utilised (0.7) - (6.8) - - (7.5)

At 31 December 2015 4.6 40.7 1.9 4.0 0.5 51.7

At 31 December 2014 1.6 39.3 1.2 3.5 0.5 46.1

18 Reconciliation of movement in shareholders’ deficit

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m


Capital contribution - - 3,301.5

Other recognised gains and losses relating to the period (4.7) (4.2) (6.1)

Net change in shareholders’ deficit (111.1) (362.4) 2,602.0

Opening shareholders’ deficit (766.5) (3,368.5) (3,368.5)

Closing shareholders’ deficit (877.6) (3,730.9) (766.5)

19 Cash flow from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Operating profit 59.2 69.1 96.9

Depreciation charge 65.1 57.9 119.0

Amortisation charge 77.9 78.8 159.0

Impairment of goodwill - - 30.2

Impairment of tangible fixed assets - - 3.5

(Profit) / Loss on disposal of tangible fixed assets (0.5) 0.3 0.3

Decrease / (increase) in debtors 8.0 (1.6) (12.6)

(Decrease) / increase in creditors (55.8) (55.1) (29.9)

(Decrease) / increase in provisions (4.5) (2.7) 5.4




20 Analysis of changes in net debt

Note At 30 June 2015

£’m

Cash flows

£’m

Non-cash changes

£’m

At 31 December 2015

£’m

Cash at bank and in hand 14* 44.4 (2.8) - 41.6

Amounts owed by joint ventures 13 0.5 - - 0.5

Amounts owed by Group undertakings

13 30.9 - 0.5 31.4

Debt due within one year 15 (825.2) (25.0) (41.3) (891.5)

Debt due after one year 16 (3,164.1) 8.3 (25.2) (3,181.0)

Finance leases 15,16 (13.8) 0.2 - (13.6)

Total (3,927.3) (19.3) (66.0) (4,012.6)

* This excludes the restricted cash balance of £28.5m relating to a reserve account (see note 14). Major non-cash changes include movements in intercompany balances representing interest charges rolled-up into loan capital, a movement in the principal accretion on inflation linked swaps and a movement in unamortised debt issue costs.

21 Capital commitments

Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as a liability are payable as follows:

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m


Within two to five years 0.5 3.7 0.2

Total capital commitments 29.5 37.7 33.7

Commitments due within one year include £11.7m in relation to smart metering contracts (six months to 31 December 2014: £21.8m). Commitments due within two to five years include £0.2m in relation to smart metering contracts (six months to 31 December 2014: £3.7m).

22 Contingent liabilities

Under the terms of the Group’s external debt facilities, the Group has provided security over substantially all of its tangible, intangible and other assets by way of a Whole Business Securitisation (‘WBS’) structure.

23 Profit on disposal of subsidiary

On 11 December 2015 the Group sold its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking. The profit before tax of NWP Street Limited in the period up to the date of disposal was £0.1m.

The net assets disposed of were £1.0m, and the related sales proceeds (net of disposal costs) were £16.4m, resulting in a profit on disposal of £15.4m.

24 Related party disclosures

On a consolidated basis transactions and balances between Group entities have been eliminated in full and are therefore not disclosed in accordance with the guidance of FRS 8 ‘Related party disclosures’. Related party transactions: The Group paid marketing costs of £0.7m (six months to 31 December 2014: £0.6m) to DUK Limited, a joint venture. The Group paid subscriptions of £3.0m (six months to 31 December 2014: £3.0m) to DTV Services Limited, an associate undertaking, and £0.4m (six months to 31 December 2014: £0.5m) to YouView TV Limited, a joint venture.



25 Pension Commitments

Defined benefit scheme In the period to 31 December 2015, the Group operated one defined benefit scheme, sponsored by Arqiva Limited. The assets of the scheme are held separately from those of Arqiva Limited in trustee administered funds. The statutory triennial funding valuation has now been agreed with the Trustee of the Plan, after negotiation with Arqiva management, resulting in a deficit of £16.6 million as at 30 June 2014. £4.6m of the deficit has been funded to date during 2015, and the balance will be settled in five annual instalments starting in July 2016. Arqiva Limited has announced that the Defined Benefit Pension scheme will be closed to future accrual for active employees on the 31 January 2016, to be replaced with Defined Contribution arrangements for those affected. At 31 December 2014 and 2015 an update was performed (by an independent firm of qualified actuaries, Lane Clark and Peacock LLP) to the FRS17 actuarial valuations performed as at 30 June 2014 and 2015. The following amounts have been included within operating profit: Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Current service cost (employer only) 2.5 2.4 4.7

Past service costs (employer only) - - 0.4

Total operating charge 2.5 2.4 5.1

The amounts recognised in the balance sheet were as follows: 31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Total fair value of assets 200.4 192.6 196.5

Present value of scheme liabilities (192.7) (191.2) (189.9)

Gross pension asset 7.7 1.4 6.6

Irrecoverable pension scheme surplus (7.7) - (6.6)

Deferred tax liability - (0.2) -

Net pension asset - 1.2 -

26 Controlling parties

The Company’s immediate parent company is Arqiva Financing No 3 Plc (‘AF3’). ABHL is the ultimate UK parent undertaking. ABHL is owned by a consortium of shareholders comprising Canada Pension Plan Investment Board, Macquarie European Infrastructure Fund II plus other Macquarie managed funds, Health Super Investments, IFM Investors and the Motor Trades Association of Australia. There is no ultimate controlling party of the Company, as defined by FRS 8.


Registered number 08085794

Condensed Consolidated Interim Financial Statements

For the six months ended 31 December 2015

Arqiva Group Parent Limited Condensed Consolidated Interim Financial Statements – six months ended 31 December 2015


Table of Contents Directors’ report .............................................................................................................................................. 1

Consolidated interim profit and loss account .............................................................................................. 6

Consolidated interim profit and loss account – continued from previous page ...................................... 7

Consolidated interim balance sheet .............................................................................................................. 8

Statement of group total recognised gains and losses .............................................................................. 9

Consolidated interim cash flow statement ................................................................................................. 10

Notes to the financial statements ................................................................................................................ 11

1 General information ............................................................................................................................................ 11 2 Directors’ responsibilities .................................................................................................................................... 11 3 Basis of preparation ............................................................................................................................................ 11 4 Estimates ............................................................................................................................................................ 11 5 Financial risk management ................................................................................................................................. 12 6 Turnover and segmental reporting ...................................................................................................................... 13 7 Exceptional items ............................................................................................................................................... 14 8 Interest receivable and similar income ............................................................................................................... 14 9 Interest payable and similar charges .................................................................................................................. 15 10 Tax on loss on ordinary activities ........................................................................................................................ 15 11 Intangible assets ................................................................................................................................................. 16 12 Tangible assets .................................................................................................................................................. 16 13 Debtors ............................................................................................................................................................... 17 14 Cash at bank and in hand ................................................................................................................................... 17 15 Creditors: amounts falling due within one year ................................................................................................... 18 16 Creditors: amounts falling due after more than one year .................................................................................... 19 17 Provisions for liabilities and charges ................................................................................................................... 22 18 Reconciliation of movement in shareholders’ deficit ........................................................................................... 22 19 Cash flow from operating activities ..................................................................................................................... 22 20 Analysis of changes in net debt .......................................................................................................................... 23 21 Capital commitments .......................................................................................................................................... 23 22 Contingent liabilities ............................................................................................................................................ 23 23 Profit on disposal of subsidiary ........................................................................................................................... 23 24 Related party disclosures ................................................................................................................................... 23 25 Pension Commitments ....................................................................................................................................... 24 26 Controlling parties ............................................................................................................................................... 24


Arqiva Group Parent Limited 1

Directors’ report

The Directors of Arqiva Group Parent Limited, registered company number 08085794, (‘the Company’) and its subsidiaries (‘the Group’) provide the following report and condensed consolidated interim financial statements (‘financial statements’), in respect of the six months ended 31 December 2015. Business overview The Group is the UK’s national provider of essential terrestrial television and radio broadcast infrastructure as well as a key provider of communications services to major distributors of satellite content, media, wireless voice and data services in the UK, including machine-to-machine (‘M2M’) connectivity. The Group’s core towers business (comprising terrestrial broadcast and wireless site share infrastructure) generates predictable operating profits (which management estimates constituted circa two-thirds of the Group’s gross profits for the year ended 30 June 2015), supported by strong market positions, diverse revenue streams, long-life assets and a significant proportion of revenues coming from long term contracts.



Further to the organisational structure changes reported previously Arqiva continues to deliver operating cost savings. As at 31 December 2015, the Group had achieved a run rate saving of circa £25m p.a in operating expenses. From May to November 2015, the Group was supported by Alvarez and Marsal for an operating model review and to help identify cost reduction opportunities. The Group is now ensuring that there is a timely and continuing implementation of initiatives arising from this review. In January 2016, a Chief Procurement and Continuous Improvement Officer, Fréderic Sebban was appointed to continue the focus on cost efficiency. Fréderic joins Arqiva with significant experience gained from both Business to Business (B2B) and Business to Consumer (B2C) environments. He has held senior procurement and supply chain management roles across Europe with organisations including General Electric, Renault (Matra), Alstom and Campofrio. Fréderic is also a Lean Six Sigma Master Black Belt having led a number of performance excellence programmes that have delivered considerable benefits in terms of operational efficiency/effectiveness improvements and cost savings. 4G rollout




In October 2015, the Group signed a contract for the sale to telent of its Secure Solutions assets and contracts which had been identified as non-core business. The sale was completed successfully in December 2015. In December 2015, the Group also sold the payphone business acquired in 2012 as part of the Spectrum Interactive business, disposing of its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking to Clear Channel. Total consideration for these disposals was circa £20m.



Smart metering rollout Arqiva is building a smart metering communication network as part of a 15-year contract signed in September 2013 with the Data and Communications Company (the ‘DCC’, a body licensed by statute). The Group has successfully achieved a key milestone in the programme ahead of schedule by completing the first Pre-Integration Testing phase and has entered into the Systems Integration Testing phase, where the Arqiva solution is integrated and tested as part of the wider DCC solution, together with meter emulators, electricity and gas meters. As a result of the completion of the first Pre-Integration Testing, the Group has started to earn recurring revenues under the contract relating to network availability charges. Arqiva has also delivered the next release of software required for Systems Integration Testing on time. Furthermore, Arqiva expects to earn additional revenues from new change requests (and existing ones) once the scope and contract is agreed during the quarter to March 2016. Arqiva has achieved all contractual milestones required to date. The rollout of the network currently exceeds 70% coverage across the contracted region and is on track to achieve 80% by the time the DCC service is operationally live later this year. Smart water metering rollout




The Mobile Infrastructure Project (‘MIP’) is a strategic programme funded by the Government with the ultimate goal of providing a service to areas without any mobile coverage services (‘not-spots’). Arqiva was awarded the contract in May 2013 by the Department of Culture and Media and Sport (‘DCMS’) to provide mobile network planning and to build mobile mast infrastructure with cellular and backhaul transmission capability for the MNOs to be able to deliver mobile services to rural communities. The project is due to end in March 2016 with the aim of completing as many sites as possible by then. The Culture Secretary has publicly stated that the project will deliver over 50 masts, bringing 4G coverage to premises that previously had no mobile coverage.



Launch of Freeview Play

In October 2015, the Freeview brand launched its connected TV service, Freeview Play. Freeview Play combines DTT channels with catch-up TV from the BBC, ITV, Channel 4 and Channel 5, on-demand services and live television, making a wide range of content available to a mass market and giving viewers even more choice in how they access TV programmes on a free-to-air platform. The service is free from subscription and works with all existing broadband services. Freeview Play is available on new set-top boxes currently manufactured by Humax and on Panasonic’s new TVs. LG has recently announced it will launch a Freeview Play range in the first half of 2016 and other TV manufacturers are expected to follow. Freeview’s DTT service is the biggest TV platform in the UK and is present in over 19 million homes. Arqiva has been fully committed to developing and modernising the platform and was responsible for building part of the technical solution for Freeview Play. 700 MHz clearance and DTT spectrum




Following award of the second national DAB licence in March 2015 to Sound Digital (a consortium which includes Arqiva (40%)), construction by the Group of the transmission network is nearing completion. Contracts have been agreed with 18 radio stations wishing to launch further radio services on the new national DAB multiplex utilising 98% of the available capacity. Transmitter installation and commissioning is being completed ready for a launch on 29 February 2016.






Financial results For the six months ended 31 December 2015 turnover for the Group was £424.4m, an increase of 0.9% from £420.8m in the prior year period. The increase was primarily as a result of higher revenues from DTT founder contract renewals where channel prices were uplifted to market prices, and greater utilisation of DTT channel capacity (now part of our Terrestrial Broadcast business unit). This increase was partially offset by a decrease in milestone revenues recorded in relation to the DCC Smart Metering contract that have not been repeated in the current period due to the phasing of the project milestones. Within Telecoms & M2M there was a reduction in one-off Site Share project revenues which was offset by growth in Installation Services, WiFi and our Smart water-metering contract. Gross profit was £252.4m, representing a 3.9% decrease from £262.6m in the prior year period. Cost of sales increased at a higher rate than turnover principally owing to an increase in the level of third party costs and internal resource employed, primarily in our Telecoms business. This was due to a shift in the sales mix with milestone based project revenues in the prior period being replaced by an increase in Installation Services revenues which carry a lower gross margin. Operating expenses excluding exceptional items, were £45.1m, a 20.2% decrease from the prior year period figure of £56.5m. The reduction was achieved by savings derived from the Transformation Program; an increase in the level of internal resource employed on cost of sales activities, and higher labour capitalisation. The key measure of the Group’s financial performance used by management is EBITDA. EBITDA is defined as operating profit, before share of profit from joint ventures and associates, profit or losses on the disposal of fixed assets, depreciation, amortisation, interest and exceptional items but after operational bank charges. A reconciliation of the reported EBITDA to the financial statements is provided below:

Six months ended

31 December 2015

£’m

Six months ended

31 December 2014

£’m

Year ended

30 June 2015

£’m

Operating profit before exceptional items 64.3 69.4 141.6

Depreciation of fixed assets 65.1 57.9 119.0

Amortisation 77.9 78.8 159.0

Other (including operational bank charges) - 0.2 0.3

EBITDA 207.3 206.3 419.9

EBITDA for the Group pre-exceptional items was £207.3m, representing a 0.5% increase from £206.3m in the prior year, with the reduction in operating expenses more than offsetting the reduction in gross profit described above. EBITDA for the Group post-exceptional items was £202.2m, a decrease of 1.8% compared with the prior year result of £206.0m. Exceptional costs of £5.1m (2014: £0.3m) in the current period predominantly relate to reorganisation costs resulting from the Transformation Program. Profit on ordinary activities before taxation and interest for the Group was £75.4m (2014: £70.4m). This increase was principally due to the £15.4m profit on disposal of NWP Street limited, a subsidiary undertaking, which was largely offset by an increase in the depreciation charge due to an increase in the underlying asset base of the Group and accelerated depreciation of certain contract and site specific assets. Net cash inflow from operating activities was £149.4m, an increase from the prior year of £146.7m, primarily due to lower investment in working capital compared to the prior period. The working capital outflow of £52.3m was £7.1m less than that of the same period in the prior year, primarily due to a change in the timing of receipts from certain large customers and business rates recoveries. Net capital expenditure and financial investment was £77.2m compared with £111.8m in the prior year period. The current period included £5.1m receipts from the sale of fixed assets. The prior year period included a £20.0m payment for Smart Metering capital expenditure which had been accrued at 30 June 2014. Whilst the Group’s business is not seasonal in nature, its working capital movement is seasonal. The Group historically invoices and collects a proportion of its revenues in advance, particularly in the second half of the financial year.



Consolidated interim profit and loss account


Unaudited


Unaudited


Audited


items

Exceptional

items

Total Pre exceptional

items

Exceptional

items


items

Exceptional

items

Total

£’m £’m £’m £’m £’m £’m £’m £’m £’m

Continuing operations

Turnover (including share of joint ventures)

429.2 - 429.2 426.7 - 426.7

868.7 - 868.7

Less: share of joint ventures’ turnover (4.8) - (4.8) (5.9) - (5.9) (12.0) - (12.0)

Group turnover 6 424.4 - 424.4 420.8 - 420.8 856.7 - 856.7

Cost of sales (172.0) - (172.0) (158.2) - (158.2) (327.7) - (327.7)

Gross profit 252.4 - 252.4 262.6 - 262.6 529.0 - 529.0

Depreciation (65.1) - (65.1) (57.9) - (57.9) (119.0) - (119.0)

Amortisation (77.9) - (77.9) (78.8) - (78.8) (159.0) - (159.0)

Impairment 7 - - - - - - - (33.7) (33.7)

Other administrative expenses 7 (45.1) (5.1) (50.2) (56.5) (0.3) (56.8) (109.4) (11.0) (120.4)

Total administrative expenses (188.1) (5.1) (193.2) (193.2) (0.3) (193.5) (387.4) (44.7) (432.1)

Group operating profit 64.3 (5.1) 59.2 69.4 (0.3) 69.1 141.6 (44.7) 96.9


0.8 - 0.8 1.3 - 1.3

3.6 - 3.6

Total operating profit : Group and

share of joint ventures and associates 65.1 (5.1) 60.0 70.7 (0.3) 70.4

145.2 (44.7) 100.5

Income from investments - - - - - - 0.2 - 0.2

Profit on disposal of subsidiary 7,23 - 15.4 15.4 - - - - - -

Profit on ordinary activities before interest and taxation

65.1 10.3 75.4 70.7 (0.3) 70.4

145.4 (44.7) 100.7

The profit and loss account is continued on the following page.



Consolidated interim profit and loss account – continued from previous page


Unaudited


Unaudited


Audited


items

Exceptional

items

Total

Pre exceptional

items

Exceptional

items


items

Exceptional

items

Total

£’m £’m £’m £’m £’m £’m £’m £’m £’m

Profit on ordinary activities before interest and taxation 65.1 10.3 75.4 70.7 (0.3) 70.4

145.4 (44.7) 100.7

Interest receivable and similar income 7,8 0.5 - 0.5 1.1 1.0 2.1 2.3 1.0 3.3

Interest payable and similar charges 7,9 (173.7) - (173.7) (330.1) (100.5) (430.6) (640.3) (100.5) (740.8)

Share of joint venture interest payable (0.5) - (0.5) (0.6) - (0.6) (1.2) - (1.2)

Loss on ordinary activities before taxation

(108.6) 10.3 (98.3) (258.9) (99.8) (358.7)

(493.8) (144.2) (638.0)

Tax on loss on ordinary activities 10 (0.3) (0.6) (57.6)

Loss on ordinary activities after taxation

(98.6) (359.3)

(695.6)


Loss for the financial period 18 (98.7) (359.4) (695.7)



Statement of group total recognised gains and losses

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

(Loss) / profit for the financial period :

- Group (99.0) (360.1) (698.1)



Actuarial loss on pension scheme (4.0) (4.1) (6.9)

Movement on deferred tax relating to pension scheme - 0.8 1.9

Exchange adjustment offset in reserves (translation of foreign investments)

(0.7) (0.9) (0.6)


Total recognised (losses) / gains for the period

- Group (103.7) (364.3) (704.2)





Consolidated interim cash flow statement

Note

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Net cash inflow from operating activities 19 149.4 146.7 371.8


Interest received 0.1 0.1 0.6

Interest paid (79.1) (78.8) (152.8)

Interest element of finance lease rentals (0.5) (0.5) (1.1)

Debt issue costs and facility arrangement fees - (3.3) (3.3)



(79.5) (82.7) (156.7)

Tax paid (0.1) (0.4) (0.5)

Capital expenditure and financial investment

Purchase of tangible fixed assets (81.7) (111.4) (194.5)

Purchase of intangible fixed assets (0.6) (0.6) (0.6)

Sale of fixed assets 5.1 0.2 0.5

(77.2) (111.8) (194.6)

Acquisitions and disposals

Sale of subsidiary undertakings 16.5 - -

16.5 - -

Financing

Finance lease capital (0.2) (0.2) (0.2)

Loans to joint ventures - (0.2) (0.2)

Borrowings from parent undertakings (28.5) (28.5) (57.1)

Repayment of external borrowings - (300.0) (374.9)

Raising of external borrowings 25.0 390.0 420.0

Repayment of premium on swap issuance (8.3) (7.5) (15.6)

Premium on swap issuance - 100.5 100.5

Cash outflow on close out of swaps - (100.5) (100.5)

Proceeds on disposal of swap options - 1.0 1.0

(12.0) 54.6 (27.0)

Decrease in cash 20 (2.9) 6.4 (7.0)



Notes to the financial statements

1 General information

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 June 2015 were approved by the board of directors on 11 September 2015 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. A copy of the audited financial statements for the year ended 30 June 2015 can be obtained from the Company Secretary at Crawley Court, Winchester, Hampshire, SO21 2QA.

2 Directors’ responsibilities

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

3 Basis of preparation

The financial reporting framework which now applies to entities preparing financial statements in accordance with legislation, regulation or accounting standards applicable in the UK and the Republic of Ireland is FRS 100, Application of Financial Reporting Requirements, which was issued in November 2012. These standards are mandatory for statutory financial statements for accounting periods beginning on or after 1 January 2015. Pursuant to the introduction of these new standards, we will be obliged to adopt either IFRS or UK GAAP FRS 102 for our 30 June 2016 financial statements. The financial information presented in these condensed consolidated interim financial statements does not reflect this new reporting framework. We expect to change our reporting framework to IFRS for our 30 June 2016 annual financial statements, including comparative information as at and for the year ended 30 June 2015. These changes may therefore affect how we report our results and the comparability of our future results to prior periods (including the comparability of future results to results presented in these condensed consolidated interim financial statements). These changes will primarily be seen in relation to the accounting treatment of intangible assets as well as the recognition of our financial instruments at fair value. The condensed consolidated interim financial statements should be read in conjunction with the statutory accounts for the year ended 30 June 2015, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The accounting policies adopted are consistent with the statutory accounts for the year ended 30 June 2015.

4 Estimates

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and costs. Actual results may differ from these estimates. In preparing these financial statements, the Group’s accounting policies and the significant judgements made by management in applying key estimations were the same as those that applied to the statutory accounts for the year ended 30 June 2015. The business is not subject to any significant seasonal trends affecting revenue, however the working capital movement is seasonal in nature due to the timing of invoicing and receipts from a number of large customers.



5 Financial risk management

The Group’s operations expose it and the Company to a variety of financial risks that include price risk, credit risk, liquidity risk, cash flow interest risk and foreign exchange risk. The Group’s risk management programme seeks to minimise potential adverse effects. A selection of the key business risks affecting the Group are set out below together with a summary of the Group’s mitigating actions. Price risk Energy is a major component of the Group’s cost base. A large proportion of this is managed via pass-through arrangements to customers. The Group’s residual exposure to fluctuations in the electricity price is managed by forward purchasing the majority of power requirements up to circa 12 months in advance. Key revenue and cost milestones are set on larger projects to ensure the financial risks of volatile market pricing are mitigated. Credit risk The Group is exposed to credit risk on customer receivables which is managed through appropriate credit checking procedures prior to taking on new customers; and higher risk customers paying in advance of services being provided. Performance is closely monitored to ensure agreed service levels are maintained reducing the level of queried payments and mitigating the risk of uncollectable debts. The Group carefully manages the credit risk on liquid funds and derivative financial instruments with balances currently spread across a range of major financial institutions which have satisfactory credit ratings assigned by international credit rating agencies. The levels of credit risk are monitored through the Group’s on-going risk management processes, which include a regular review of the credit ratings. Risk in this area is limited further by setting a maximum level and term for deposits with any single counterparty. Liquidity risk To ensure it has sufficient available funds for working capital requirements and planned growth, the Group maintains cash reserves and access to undrawn committed facilities to cover forecast requirements. As at 31 December 2015 the Group had £100.0m working capital facilities against which it had drawn £25.0m, and £41.3m cash available to cover short term cash flow timing differences if required, together with a £400.0m capital expenditure facility against which it had drawn £120.0m. In addition, the Group has £200.0m of liquidity facilities available to cover senior interest payments if required, which remain undrawn. Details of the debt maturity profile are provided in note 16. Financing risk The Group will need to refinance at least part of its debt as it matures and may need additional financing to cover capital expenditure and certain other expenses to support its growth plans. The Group cannot be certain that such financing will be readily available on attractive or historically comparable terms. The Group mitigates this risk by the strength of the stable long term investment grade capital structure in place, our BBB ratings (from Standard & Poors and Fitch) which reflect our strong ability to raise cash and repay debt from our cash flows over a reasonable period of time, maintaining an active dialogue with lenders and investors, maintaining debt with a variety of medium and long term maturities so that over time we do not have a significant concentration of debt due for refinancing in any given year, and aiming to refinance debt well in advance of the maturity date. Breach of debt covenants and/or a downgrade in our rating could impact the availability of finance or the comparability of terms. In order to mitigate this, the Group maintains financial covenant monitoring and modelling, both retrospectively and prospectively and maintains regular dialogue with its banks and credit ratings agencies. Interest rate risk The Group has variable rate bank debt and uses interest rate swaps to hedge its exposure to rising interest rates. The Group maintains a hedging policy to manage interest rate risk and to ensure the certainty of future interest cash flows. It currently has fixed rate hedging, split between interest rate swaps and inflation swaps. Interest rate swaps convert variable rate interest costs to fixed rate interest costs while inflation swaps convert fixed rate interest costs to RPI-linked costs, which fluctuate in line with the RPI index as do a proportion of the Group's revenue contracts. Details of the interest rate profile of the Group’s liabilities are provided in note 16. Foreign exchange risk The Group operates from UK sites and predominantly in the UK market, but has some transactions denominated in foreign currency. While some customer and supplier contracts are denominated in other currencies (mainly US Dollars and Euros), the majority of the Group’s revenues and costs are sterling based, and accordingly exposure to foreign exchange risk is limited. Management regularly monitor the impact of foreign exchange risks and assess the need to put any mitigating financial instruments in place. From time to time, forward foreign exchange contracts are used to fix the exchange rate for certain overseas revenue contracts. Cross currency swaps are used to fix the exchange rate in relation to US Dollar denominated senior bonds. Details of the cross currency swaps are provided in note 16.



6 Turnover and segmental reporting

The geographical split of turnover by destination is shown below:

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

UK 385.6 360.9 770.5

Continental Europe (including Republic of Ireland) 19.8 33.9 44.5

Rest of World 19.0 26.0 41.7


Segmental reporting The Group has organised its business into three customer facing business units, supported by central corporate functions. This structure is used to provide the following segmental reporting in relation to Group turnover. This is stated net of intra-divisional trading.

Terrestrial Broadcast Telecoms & M2M Satellite and Media Total

£’m £’m £’m £’m

Turnover for the three month period / year ended:

31 December 2015 (6 months) 206.9 146.0 71.5 424.4

31 December 2014 (6 months) restated* 192.7 149.7 78.4 420.8

30 June 2015 (12 months) restated* 404.0 297.7 155.0 856.7

* Prior period comparatives have been restated to reflect the structure as at the signing date of the financial statements. The majority of assets employed and underlying costs are derived from a shared infrastructure network common to all operating business units. An allocation of such assets to the business units is not performed as part of the normal reporting process within the business.

Whilst management do review directly attributable costs by each revenue generating business unit, the Directors are of the opinion that further disclosure would be seriously prejudicial to the Group.



7 Exceptional items

Loss on ordinary activities before taxation is stated after (charging) / crediting: Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Administrative expenses

- Reorganisation and severance (5.4) - (11.0)

- Other one off activities (0.2) (0.3) -

- Profit on disposal of tangible fixed assets 0.5 - -

- Impairment - - (33.7)

(5.1) (0.3) (44.7)

Profit on disposal of subsidiary (see note 23) 15.4 - -

Financing income

- Gain on disposal of swap options - 1.0 1.0

- 1.0 1.0

Financing expenses

- Close out of swaps - (100.5) (100.5)

Total exceptional items 10.3 (99.8) (144.2)

Reorganisation and severance expenses include costs relating to the recent review of the Group’s operating model. Profit on disposal of tangible fixed assets relates to the divestment of a non-core portfolio of assets. Prior period / year financing expenses comprise a £100.5m cash outflow in relation to the breaking of interest rate swap agreements (see note 16). These termination payments were fully funded by a £100.5m premium received for entering into the replacement interest rate swaps. Prior period impairment related to the write down of the carrying value of non-core business areas and investments. With the exception of the profit on the disposal of subsidiary which is not subject to UK Corporation Tax as a result of the Substantial Shareholding Exemption, the amounts included within exceptional items above are deductible or taxable for the purpose of taxation.

8 Interest receivable and similar income

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Bank interest 0.1 0.1 0.2

Finance lease interest receivable - - 0.3


Total interest receivable 0.5 1.1 2.3

Exceptional financing income (see note 7) - 1.0 1.0

Total interest receivable including exceptional items 0.5 2.1 3.3



9 Interest payable and similar charges

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Bank loan interest 57.7 57.2 93.3

Other loan interest – senior bonds and notes 34.1 33.8 67.1

Less: Capitalised interest (1.6) (0.5) (1.6)

Net bank and other loan interest 90.2 90.5 158.8

Amortisation of debt issue costs 4.7 7.9 12.5

Release of deferred derivative close out costs 4.9 4.8 9.6

Interest payable to parent undertakings 64.0 215.8 437.8

Finance lease interest payable 0.5 0.5 1.0


Total interest payable 173.7 330.1 640.3

Exceptional financing expenses (see note 7) - 100.5 100.5

Total interest payable including exceptional items 173.7 430.6 740.8

Included within bank loan interest is the principal accretion on inflation linked swaps of £16.2m (31 December 2014: £18.2m). See note 16 for further details. Excluding the principal accretion, the net bank and other loan interest was £74.0m (31 December 2014: £72.3). The reduction in interest payable to parent undertakings is due to the release of loans due to the Company’s immediate parent on 30 June 2015 (see note 16).

10 Tax on loss on ordinary activities

Six months to

31 December 2015

Unaudited

Six months to

31 December 2014

Unaudited

Year ended

30 June 2015

Audited

£’m £’m £’m

Analysis of tax charge for the period / year

Current tax

UK corporation tax - - 0.1

Overseas tax 0.3 0.4 0.4

Total current tax 0.3 0.4 0.5

Deferred tax

De-recognition of deferred tax assets - - 56.6

Deferred tax on pension liability charged to profit and loss account - 0.2 0.5

Total deferred tax - 0.2 57.1

Tax on loss on ordinary activities 0.3 0.6 57.6

The tax on loss on ordinary activities is recognised based on management’s estimate of the weighted average annual corporate income tax rate expected for the full financial year. The estimated average annual tax charge for the year to 30 June 2016 is 0.1% (the estimated tax rate used at 31 December 2014 was 0.1%) This rate is different to the statutory tax rate mainly due to current year tax losses being surrendered to other group companies for nil consideration and certain timing differences not being recognised as deferred tax assets.



11 Intangible assets

Licences Development costs Access rights Goodwill Total

£’m £’m £’m £’m £’m

Cost

At 1 July 2015 7.5 2.6 22.9 3,069.2 3,102.2

Additions - 1.8 - - 1.8

Disposals - (0.3) - (27.7) (28.0)

At 31 December 2015 7.5 4.1 22.9 3,041.5 3,076.0

Accumulated amortisation

At 1 July 2015 3.8 1.3 18.1 1,391.0 1,414.2

Charge for the period 0.3 0.2 0.2 77.2 77.9

Disposals - - - (26.7) (26.7)

At 31 December 2015 4.1 1.5 18.3 1,441.5 1,465.4

Net book value

At 31 December 2015 3.4 2.6 4.6 1,600.0 1,610.6

At 30 June 2015 3.7 1.3 4.8 1,678.2 1,688.0

At 31 December 2014 4.0 1.1 5.3 1,779.3 1,789.7

12 Tangible assets

Freehold land and buildings

Leasehold buildings Plant and equipment

Assets under the course of

construction

(AUC)

Total

£’m £’m £’m £’m £’m

Cost At 1 July 2015 326.6 139.6 1,778.6 181.8 2,426.6

Additions - - 1.2 80.9 82.1

Completion of AUC 3.1 (0.4) 120.1 (122.8) -


Disposals (0.9) (0.5) (22.0) - (23.4)

At 31 December 2015 327.0 140.5 1,877.9 139.9 2,485.3

Accumulated depreciation

At 1 July 2015 22.8 43.0 594.6 - 660.4

Charge for the period 2.6 3.6 58.9 - 65.1


Disposals (0.9) (0.3) (18.7) - (19.9)

At 31 December 2015 24.4 46.4 634.8 - 705.6

Net book value

At 31 December 2015 302.6 94.1 1,243.1 139.9 1,779.7

At 30 June 2015 303.8 96.6 1,184.0 181.8 1,766.2

At 31 December 2014 299.2 97.0 1,170.4 175.4 1,742.0



13 Debtors

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Trade debtors 69.6 65.2 70.9


Amounts owed by joint ventures 0.5 0.5 0.5

Other debtors 1.8 14.4 7.0

Prepayments and accrued income 124.5 118.0 128.5

Deferred tax asset - 56.6 -

Total debtors 226.4 280.1 237.8

Analysed as:

Amounts owed by third parties 196.3 254.7 206.9


Total debtors 226.4 280.1 237.8

Included within prepayments is £5.3m (December 2014: £9.9m, June 2015: £7.6m) relating to arrangement fees on undrawn facilities.

14 Cash at bank and in hand

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Cash at bank 6.1 5.7 3.4

Short term deposits 35.2 51.9 40.8

Total cash at bank and in hand 41.3 57.6 44.2



15 Creditors: amounts falling due within one year

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Bank loans – working capital facility 25.0 90.0 -

Trade creditors 46.2 54.2 44.4


Other taxes and social security costs 22.5 8.3 24.0

Other creditors 11.3 10.4 6.5



Principal accretion on inflation linked swaps - 78.1 -


Total creditors: amounts falling due within one year

1,212.3 1,136.5 1,204.7

Analysed as:

Amounts owed to third parties 342.8 493.7 368.9


Total creditors: amounts falling due within one year

1,212.3 1,136.5 1,204.7

The majority of the balances with group undertakings have been formalised under a single subordinated loan agreement with the direct parent company. Under the terms of the subordinated loan agreement, these facilities have maturity dates of 20 years, cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow. Where interest is deferred this is included in creditors: amounts falling due within one year. The premium on swap issuance is also discussed in note 16.



16 Creditors: amounts falling due after more than one year

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Bank Loans

Capital expenditure facility 120.0 - 120.0

Senior debt 723.5 723.5 723.5


Principal accretion on inflation linked swap 16.2 - -

Less: issue costs (6.1) (9.5) (7.8)

1,017.1 894.3 1,007.7

Other Loans

Senior bonds 1,612.5 1,612.5 1,612.5

Less: issue costs (10.7) (12.2) (11.5)

Deferred derivative close out costs (71.0) (80.7) (75.9)

1,530.8 1,519.6 1,525.1

Other creditors - 0.1 -





3,175.3 6,527.0 3,154.0

Analysed as:

Amounts owed to third parties 2,678.5 2,357.0 2,657.2



3,175.3 6,527.0 3,154.0

Accruals and deferred income principally comprise amounts outstanding for on-going costs and amounts received from customers in advance respectively. Amounts owed to Group undertakings are unsecured. Interest has been charged on amounts owed to group undertakings of £45.2m at 9.50% (2014: £3,346.8m at 9.5%). On 30 June 2015, AGPL was released from £3,493.4m of intercompany loans previously due to its immediate parent, Arqiva Broadcast Intermediate Limited. This was achieved by way of a Deed Poll Release by the lender, irrevocably waiving the right to the released amount. The reduction in the principal amount of loans to its immediate parent (£1,329.0m remaining at 30 June 2015) has seen a reduction in interest payable to parent undertakings. This was accounted for as a receipt of a capital contribution and therefore a capital contribution reserve was recognised (see note 18). The majority of the balances with group undertakings have been formalised under a single subordinated loan agreement with the direct parent company. Under the terms of the subordinated loan agreement, these facilities have maturity dates of 20 years, cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow.



Maturity of loans The total loans analysed below represent total creditors: amounts falling due after more than one year excluding issue costs, deferred derivative close out costs, accruals and deferred income, amounts owed to group undertakings, and other creditors. Also included are finance lease obligations, premium on swap issuance, working capital facility and principal accretion on inflation linked swaps all falling due within one year (see note 15).

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Maturity of loans


In more than one year, but not more than five years 1,083.0 468.1 1,006.1

In more than five years 1,566.0 2,661.8 1,635.3

Total loans 2,691.2 3,314.7 2,658.4

Bank loans and other loans Senior debt includes 5-year term bank debt of £353.5m, due in 2018 borrowed by ASF under a Senior Facility Agreement (£353.5m at 30 June 2015). The loan has a floating interest rate which ranges between LIBOR + 2.50% to LIBOR + 4.00% by the end of the agreement. AF1 has further undrawn facilities of £555.0m available. In January 2014, the Group completed a £180.0m term loan from institutional investors, the proceeds of which were used to make a £180.0m part repayment of the original 3-year term bank facilities. This loan has an expected term of 10 years and is held by AF1. In June 2014, the Group completed a loan of £190.0m from the European Investment Bank (‘EIB’) borrowed by AF1, with an expected term of 10 years. The proceeds of this loan were utilised to settle the remaining £57.5m of the original 3-year term bank facility and £132.5m to make a part repayment of the 5-year term bank facilities. In July 2014, the Group further paid down the remaining 5-year facility by £300.0m to a balance of £353.5m. Senior bonds include the issuance of £750.0m Notes raised in February 2013 and £164.0m Notes raised in February 2014 by Arqiva Financing Plc ('AF'). These are rated BBB by Standard & Poors and Fitch. These Notes have fixed interest rates which range between 4.04% and 5.34% and are repayable between June 2018 and December 2032. These Notes are listed on the London Stock Exchange. In February 2014, the Group closed a £164.0m fixed rate public bond issue, with an expected maturity of 2030. Net proceeds (£162.5m) from the issuance were again used to repay a portion of the original 3-year term bank facility borrowed by ASF. Of the remaining senior bonds, £300.0m were raised in July 2014 at a coupon rate of LIBOR + 2.1% through a new 15-year amortising US Private Placement debt issue and £398.5m were raised in June 2013 by Arqiva PP Financing Plc (‘APPF’) through a US Private Placement transaction in a combined sterling and US dollar denominated offering. These Notes have fixed interest rates which range between 4.101% and 4.420% and have amortising repayment profiles commencing December 2018 with an end maturity date of June 2025. All of the above financing instruments have covenants attached, principally an interest cover ratio and a debt leverage ratio, and benefit from security over substantially all of the Group’s assets under a Whole Business Securitisation structure. The Group continues to comply with all covenant requirements. The deferred derivative close out costs relate to costs incurred in February 2013 on the termination of interest rate swap instruments pursuant to the Group's refinancing and are deferred to reflect the economic substance of the Group’s original hedging strategy. The premium on swap issuance arose on a restructuring of certain derivative financial instruments whereby the Group terminated existing interest rate swaps crystallising a loss and established new interest rate swaps with a nominal value, maturity and terms to match the new financing arrangements established. The termination payment was primarily funded by the premium received from entering into the replacement swaps.



Derivative financial instruments At refinancing in February 2013, the Group restructured its £2,335.7m of interest rate and inflation swaps. Since that date there has been some further restructuring as a result of the above changes to the bank and other loans held by the Group. In July 2014 the Group restructured a further £300.0m notional value of interest rate swaps so that they are contracted by AF1 rather than ASF with maturity and terms to match the new 15-year amortising US Private Placement debt issue. The associated premium was £100.5m which fully offset the loss crystallised leaving a zero net cash settlement, matching the breakage costs incurred on the ASF swaps that were replaced. £1,023.2m of variable rate debt is now hedged via three classes of interest rate swaps contracted by Arqiva Senior Finance Limited (‘ASF’) and AF1. The ASF interest rate swaps (nominal value £353.2m) have 5 year mandatory break clauses co-terminus with the ASF variable rate bank debt which is due in 2018. The interest rate swaps held by AF1 (combined nominal values of £670.0m) have maturity dates of between 10 and 15 years, co-terminus with the Institutional Term Loan (‘ITL’), EIB loans and the amortising US Private Placement debt issue in July 2014. £1,312.5m of fixed and variable rate debt is hedged via three classes of inflation linked swaps which fix interest and cause it to be indexed with RPI. In addition, the principal amount of these swaps increases with RPI. Two classes of these swaps are break free. One class of these swaps, with a nominal value of £235.0m, has a 10 year mandatory break clause. In 2023 the termination payment falls due which reflects the fair value of the remaining payments otherwise due until maturity. The maturity date for all three classes of inflation swaps is April 2027. AF1 has entered into £1,312.5m of floating / fixed interest rate swaps to overlay the above RPI swaps, amending the cash flow characteristics to align to the fixed coupon payable on the senior bonds and USPP debt. In addition, AF1 entered into USD 358.0m of cross-currency swaps to fix the Sterling cost of future interest and capital repayment obligations relating to the USD tranche of the Private Placement at an exchange rate of 1.52. Included within creditors falling due after more than one year (2015: creditors falling due within one year) is an amount of £16.2m (31 December 2014: £78.1m) reflecting the principal accretion on inflation linked swaps. This amount is calculated on an accruals basis. The remaining fair value of the interest rate, inflation and cross currency swaps at 31 December 2015 (excluding the inflation swap principal accretion and the premium on swap issuance), is a liability of £1,073.6m (31 December 2014: £1,215.8m) which comprises £862.2m (31 December 2014: £954.1m) in relation to the RPI linked swaps, £212.3m (31 December 2014: £243.9m) in relation to the interest rate swaps, and a £0.9m asset (31 December 2014: £17.8m liability) in relation to the cross currency swap. This fair value is not recognised on the balance sheet in accordance with Group accounting policy and UK GAAP accounting standards and is calculated on a mark-to-market basis. The Group holds Swap Options with a total notional principal amount of £410.7m (31 December 2014: £410.7m). The options are exercisable at maturity on 29 February 2016 and 28 February 2018, and hedge the Group’s exposure for the duration of the interest rate swaps to a decline in LIBOR below 1%.



17 Provisions for liabilities and charges

Onerous contracts

Decommissioning

Restructuring Remediation and maintenance

Other Total

£’m £’m £’m £’m £’m £’m

At 1 July 2015 5.2 39.8 5.8 3.9 0.5 55.2

Charged to profit and loss account

0.1 - 2.9 0.1 - 3.1

Changes relating to movements in the discounted amount

- 0.9 - - - 0.9

Utilised (0.7) - (6.8) - - (7.5)

At 31 December 2015 4.6 40.7 1.9 4.0 0.5 51.7

At 31 December 2014 1.6 39.3 1.2 3.5 0.5 46.1

18 Reconciliation of movement in shareholders’ deficit

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m


Capital contribution - - 3,493.4

Other recognised gains and losses relating to the period (4.7) (4.2) (6.1)

Net change in shareholders’ deficit (103.4) (363.6) 2,791.6

Opening shareholders’ deficit (673.4) (3,465.0) (3,465.0)

Closing shareholders’ deficit (776.8) (3,828.6) (673.4)

19 Cash flow from operating activities

Reconciliation of operating profit to net cash inflow from operating activities:

Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Operating profit 59.2 69.1 96.9

Depreciation charge 65.1 57.9 119.0

Amortisation charge 77.9 78.8 159.0

Impairment of goodwill - - 30.2

Impairment of tangible fixed assets - - 3.5

(Profit) / Loss on disposal of tangible fixed assets (0.5) 0.3 0.3

Decrease / (increase) in debtors 8.0 (1.6) (12.6)

(Decrease) / increase in creditors (55.8) (55.1) (29.9)

(Decrease) / increase in provisions (4.5) (2.7) 5.4




20 Analysis of changes in net debt

Note At 30 June 2015

£’m

Cash flows

£’m

Non-cash changes

£’m

At 31 December 2015

£’m

Cash at bank and in hand 14 44.2 (2.9) - 41.3

Amounts owed by joint ventures 13 0.5 - - 0.5

Amounts owed by Group undertakings 13 30.9 - (0.9) 30.0

Debt due within one year 15 (852.5) 3.5 (62.3) (911.3)

Debt due after one year 16 (3,029.5) 8.3 (23.4) (3,044.6)

Finance leases 15,16 (13.8) 0.2 - (13.6)

Total (3,820.2) 9.1 (86.6) (3,897.7)

Major non-cash changes include movements in intercompany balances representing interest charges rolled-up into loan capital, a movement in the principal accretion on inflation linked swaps and a movement in unamortised debt issue costs.

21 Capital commitments

Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as a liability are payable as follows:

31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m


Within two to five years 0.5 3.7 0.2

Total capital commitments 29.5 37.7 33.7

Commitments due within one year include £11.7m in relation to smart metering contracts (six months to 31 December 2014: £21.8m). Commitments due within two to five years include £0.2m in relation to smart metering contracts (six months to 31 December 2014: £3.7m).

22 Contingent liabilities

Under the terms of the Group’s external debt facilities, the Group has provided security over substantially all of its tangible, intangible and other assets by way of a Whole Business Securitisation (‘WBS’) structure.

23 Profit on disposal of subsidiary

On 11 December 2015 the Group sold its 100% interest in the ordinary share capital of NWP Street Limited, a subsidiary undertaking. The profit before tax of NWP Street Limited in the period up to the date of disposal was £0.1m.

The net assets disposed of were £1.0m, and the related sales proceeds (net of disposal costs) were £16.4m, resulting in a profit on disposal of £15.4m.

24 Related party disclosures

On a consolidated basis transactions and balances between Group entities have been eliminated in full and are therefore not disclosed in accordance with the guidance of FRS 8 ‘Related party disclosures’. Related party transactions: The Group paid marketing costs of £0.7m (six months to 31 December 2014: £0.6m) to DUK Limited, a joint venture. The Group paid subscriptions of £3.0m (six months to 31 December 2014: £3.0m) to DTV Services Limited, an associate undertaking, and £0.4m (six months to 31 December 2014: £0.5m) to YouView TV Limited, a joint venture.



25 Pension Commitments

Defined benefit scheme In the period to 31 December 2015, the Group operated one defined benefit scheme, sponsored by Arqiva Limited. The assets of the scheme are held separately from those of Arqiva Limited in trustee administered funds. The statutory triennial funding valuation has now been agreed with the Trustee of the Plan, after negotiation with Arqiva management, resulting in a deficit of £16.6 million as at 30 June 2014. £4.6m of the deficit has been funded to date during 2015, and the balance will be settled in five annual instalments starting in July 2016. Arqiva Limited has announced that the Defined Benefit Pension scheme will be closed to future accrual for active employees on the 31 January 2016, to be replaced with Defined Contribution arrangements for those affected. At 31 December 2014 and 2015 an update was performed (by an independent firm of qualified actuaries, Lane Clark and Peacock LLP) to the FRS17 actuarial valuations performed as at 30 June 2014 and 2015. The following amounts have been included within operating profit: Six months to

31 December 2015

Unaudited

£’m

Six months to

31 December 2014

Unaudited

£’m

Year ended

30 June 2015

Audited

£’m

Current service cost (employer only) 2.5 2.4 4.7

Past service costs (employer only) - - 0.4

Total operating charge 2.5 2.4 5.1

The amounts recognised in the balance sheet were as follows: 31 December 2015

Unaudited

£’m

31 December 2014

Unaudited

£’m

30 June 2015

Audited

£’m

Total fair value of assets 200.4 192.6 196.5

Present value of scheme liabilities (192.7) (191.2) (189.9)

Gross pension asset 7.7 1.4 6.6

Irrecoverable pension scheme surplus (7.7) - (6.6)

Deferred tax liability - (0.2) -

Net pension asset - 1.2 -

26 Controlling parties

The Company’s immediate parent company is Arqiva Broadcast Intermediate Limited (‘ABIL’). ABHL is the ultimate UK parent undertaking. ABHL is owned by a consortium of shareholders comprising Canada Pension Plan Investment Board, Macquarie European Infrastructure Fund II plus other Macquarie managed funds, Health Super Investments, IFM Investors and the Motor Trades Association of Australia. There is no ultimate controlling party of the Company, as defined by FRS 8.

arqiva broadcast parent limited and arqiva group …...the group’s core towers business...

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