To help finance the future growth of its fibre optic infrastructure, CityFibre decided to take the plunge and join the London Stock Exchange (LSE) in January 2014.
In doing so, the company raised £16.5 million and has subsequently seen its share price grow at a conservative but consistent rate.
Its initial float, and performance since then, was enough to scoop IPO of the Year at the GrowthBusiness M&A Awards 2014 – beating off competition from the likes of Applied Graphene Materials, MoPowered and JQW.
Shortly before picking up the accolade, the business also went back to the public markets to raise a further £30 million from new and existing shareholders.
Speaking then, CEO Greg Mesch said, ‘Since admission to AIM, we have already started to capitalise on a number significant projects. Our recently announced joint venture with BSkyB and TalkTalk illustrates the ground-breaking nature of our operating model.
‘In addition, the ongoing discussions with over 25 city councils across the UK and with leading mobile operators underpin our ongoing confidence in the group.’
To find out what becoming a public company has been like, and discover what is in the pipeline for a business operating in an ever-changing and demanding sector, we quizzed Mark Collins, director of strategy and policy at CityFibre.
(1) How is the internet empowering SMEs and entrepreneurs?
All the evidence shows that high-speed digital connectivity is essential to the success of small businesses. Around the country businesses are struggling to grow and compete, suffocated by a lack of bandwidth. Even those companies based in newly-built business parks can find themselves offered broadband speeds that would have residential customers on the phone to technical support.
Without access to pure fibre infrastructure, fit for the 21st century, the UK will continue to lag behind the rest of Europe. Small businesses will be restricted from accessing a new generation of online and cloud services that offer the functionality and flexibility to help them grow.
(2) How vital is the Internet to the future economy of the UK?
Poor digital connectivity is a hugely significant issue when we consider the role of the Internet in the overall UK economy. A 2012 study by the Boston Consulting Group found internet-related economic activity in the UK accounted for 8.3 per cent of the GDP. This is set to grow to 12.4 per cent of UK GDP by 2016.
While this in itself is positive, it is a real concern that the UK’s network infrastructure remains unfit-for-purpose and lags behind other nations. It is imperative that modern, future-proof pure fibre infrastructure is built that can carry the UK forward over the coming decades.
(3) How was CityFibre growth achieved in the years before the listing?
CityFibre was founded with a vision of upgrading the UK’s towns and cities from out-dated, Victorian copper networks to a modern, digital infrastructure. We knew the demand for better connectivity was strong from businesses up and down the country, but also that it was important to inform the public sector of how a city-wide shared fibre infrastructure could transform the way their cities communicate. It was this combination of strong industry knowledge and real demand for change that allowed us to grow.
We were also backed by a tremendous group of investors who believed in us and more importantly understood what we wanted to achieve. This got us to a position where we had tens of thousands of kilometres of fibre in over 57 towns and cities, as well as a strong balance sheet and a pipeline of future projects.
(4) Why did you ultimately decide that an IPO was the right route?
We were confident that we had a business model that addressed a very critical issue in the UK – the provision of high bandwidth connectivity is a vital everyday service, much like water or electricity.
As we continued to take on new city projects, it became clear that we would require access to a far larger amount of capital than could be provided privately. We also understood that thanks to the very public broadband debate that has escalated over the last few years, more people than ever understood and shared our belief in the need to upgrade the UK’s digital infrastructure. The combination of the two made us confident any move to go public would be successful.
(5) What were the challenges with getting the listing away?
As with any public offering there were many challenges, however we have a strong senior team with immense experience, which coupled with our attractive business plan, meant we were able to move forward and ultimately IPO very successfully.
(6) Did you meet all of your early expectations?
We are incredibly happy with where we are since our IPO. We recently signed off a £30 million secondary funding round, which was a major vote of confidence from our shareholders. It was almost double the amount raised during our first round early in the year and bought our total fund to over £45 million. We were also delighted to recently accept IPO of the Year at the 2014 M&A Awards.
(7) What has life been like as a public company?
As any company grows there will be inevitable changes that take place, everything from an increase in staff intake to a ramp up of new projects. There are also of course new responsibilities that come with going public, but we have a hugely experienced leadership team with a massive amount of knowledge in the area, which of course makes the transition much easier.
(8) What will it hopefully allow you to do growth wise?
The significant capital injection will support the deployment of networks in more than 20 new Gigabit Cities (in addition to our projects in Peterborough, York and Coventry). The expansion will ensure over one million homes, business and public sector sites throughout the country are able to access cutting edge gigabit connectivity by 2016.
(9) What trends are emerging in your market?
We are seeing a growing awareness and interest in pure fibre infrastructure at the moment. While it has, for the last few years at least, been supported by various governments around the world, fibre is becoming a more and more attractive option for investors.
Just last week Gigaclear attracted investment from a highly respected UK fund manager, and Zayo announced a long-awaited IPO. Also, if we look at the breakdown of companies like euNetworks and Zayo, dark fibre is typically their most profitable and fastest-growing segment, which we would see as further validation of our proposition. It’s clear fibre is very hot right now.
Another emerging trend is that of shared infrastructure. Pure fibre networks, if smartly planned, are capable of supporting the digital requirements of an entire city. From public sector, to enterprise and from small businesses right the way down to fibre to the home. This is the model behind our gigabit city approach and the vanguard of these projects are emerging around the world.