Tuesday, December 11, 2018

News: Origin Broadband needs support of creditors and investors

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Origin Broadband has been hit by high costs and bad debts as it tries to press ahead with ambitious growth plans.

Reports claim that a Company Voluntary Arrangement (CVA) is being arranged with its creditors in order to keep the company trading, but redundancies are expected.

Launching in 2011, Origin has developed its own infrastructure and now host the sixth largest broadband network in the UK. Supplying phone and internet services to businesses and homes across the UK, Origin aims to reach 250,000 customers by 2020.

As part of the growth plans, earlier this year the firm moved from Doncaster to the 53,665 sq ft Unit 7 at Callflex Business Park, Manvers which the firm said offers an even bigger opportunity for growth.

Financial statements filed with Companies House show that the company posted a full year loss to March 31 2018 of £7m but funding of £6.75m was secured from investors during and after the financial year to return the business "to a positive net asset position combined with increased cash funds."

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) specialist, Calculus, first invested £3m in December 2016 and has gone on to invest a total of £6.5m into Origin Broadband.

Trade website, ISP Review, is reporting that Origin have appointed business recovery professionals, Chamberlain & Co, and that creditors have been informed over a proposed CVA. It added that Origin is also proposing to cut their staff count by approximately 42%.

Struggling companies can use a CVA to pay creditors over a fixed period. 75% approval from unsecured creditors is needed to complete a CVA which enables the company to continue trading.

Trade creditors were owed £4.8m at the end of the year to March 31 2018.

The company continues to undergo work to secure further funding to support "significant potential growth plans."

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The financial results state: "Origin Broadband saw significant growth in 2017/18, with 117% growth in revenue combined with 192% growth in customer numbers. Having established a residential customer base, the company spent the second half of 17/18 focused on system and process improvement to support future growth in the following financial year.

"The high growth experienced by the company has seen significant up-front costs combined with overhead costs and prudent bad debt assumptions leading to a full year loss to 31 March 2018 of £7.0m. During 2017/18 the company raised £3.5m investment from our institutional EIS investor, combined with a £3.25m raise in May 2018 that return us to a positive net asset position combined with increased cash funds. This final investment tranche was a combined investment between our incumbent EIS investor with a new VC based investor.

"The company is currently working with this new VC investor to provide significant capital funding against subscriber targets which will give the business headroom to operate in the longterm."

Directors have drawn up financial forecasts based on the new investment being delivered and scaled back plans based on no new investment. Signed off in September, the directors state that "they have a reasonable expectation that the company will have adequate resources to continue to operate for the foreseeable future."

But company auditors warn that: "On the basis that major suppliers and investors continue to support the company it can be considered a going concern and we have not seen anything to suggest that this is not the case.

"However should support from creditors end or continued support from investors fail to materialise, the company does not have the cash generative ability to continue trading in its current form."

Origin Broadband website

Images: Origin Broadband

1 comments:

Anonymous,  December 17, 2018 at 8:42 AM  

He sacked staff, but kept his family and friends on high wages.

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