B4RN have now traded for six years and have made a trading loss every year. It would be only fair to forget the first year as it was a very short period with no income from their activities; therefore a loss was to be anticipated. However, since then the results for each year were as follows:
2013 – A loss of £61,714
2014 – A loss of £75,089
2015 – A loss of £122,106
2016 – A loss of £225,563
2017 – A loss of £399,531
The total loss since formation is £904,278, against a turnover (total Income) of £1,194,032.
Overheads are running at £786,093, materials at £173,135 with other charges exceeding an additional £87,000 per year. The enterprise currently needs an income of £1,046,618 each year in order to break even. That is only slightly less than the total income they have received since 2012.
Last year Monica Lee, Company Secretary very kindly told me that up to March 2016 they had 1690 connections, and that in the year to November 2016 they had connected a further 605 with an additional 705 expected in the remainder of the financial year. This would have provided an income of £157,200. The income from connections has in fact fallen massively short of this figure so either the connections weren’t made, or their value was discounted in some way.
The monthly charge for the Broadband Service is £25 (Ex VAT) with something less for holiday lets and significantly more for businesses. This gives a broad-brush estimate of just under 1,800 people paying, this year, for a Broadband service. B4RN had 1,619 members (Investors) at the end of the year, having increased by 609 during the course of the year.
The question therefore arises. How have B4RN managed to survive such massive losses and still be trading, employing 14 people, including two working Directors.
The short answer is Shareholder Funds. The Share Capital at the beginning of the year was just over £2.1m. Share subscriptions, less withdrawals added a further £1.2m leaving Shareholders with an investment of just less than £3.4m. Of course nearly £1m of this disappeared in the trading losses for the year. The average shareholder stake is £2,075. In addition to the Share Capital the enterprise has a total of slightly more than £2.1m in current and long term loans.
As I mentioned three years ago B4RN changed their depreciation policy to write off its network over 25 years, rather than the 10 years in prior accounts. My practical experience in engineering industries tells me it will not last this length of time without spending increasing amounts of Shareholders funds in repairs and maintenance.
Let’s just hope that they can afford to do so as, if not, those people who were persuaded, quite foolishly in my view, that B4RN HS Broadband would add value to their property are going to be severely disappointed.
Finally. On the 11 November 2016 Monica Lee, in an email, advised me that: “our projection for the company’s income for 2016/17 is £720,000. 2016/17 is expected to be the first year in which the company will record an operating profit”. As the income was £647,000 and the trading loss £400,000 the business wasn’t within a country mile of recording an operating profit.
You can examine a Management Report format version of the Accounts from this link: 2012-2017 Accounts, Management Format.
C’est la guerre.