Released: 20/10/2006
RNS Number:8190K
Spiritel PLC
20 October 2006
For immediate release 20 October 2006
SPIRITEL PLC
("Spiritel" or "the Company")
Preliminary results for the year ended 30 April 2006
Spiritel plc (AIM: STP), the telecommunications company, is pleased to announce
its preliminary results for the year ended 30 April 2006. The comparative period
for these results is the 18 months to 30 April 2005.
Highlights
-Significant progress in delivery of strategy to broaden routes to market
to achieve direct relationship with end users
-Pre-tax loss of £736,000, compared with a pre-tax loss of £2.4m for the
18 months ended 30 April 2005
-MyPhone service, to allow unlimited calls to India from the UK for a set
monthly fee, launched in March 2006
-Two earnings-enhancing acquisitions - CallPlan Ltd and Networks Direct
(UK) Ltd - completed since the year end
Commenting on the results, Lord St John of Bletso, Spiritel's Chairman, said:
"Spiritel is now particularly well placed to benefit from the migration from
traditional to VoIP telephony. Our strategy of broadening our routes to market
through acquisition, combined with our continuing innovation in products,
services and corporate relationships, give me confidence in the future."
For further information:
Spiritel plc 020 7160 0100
Alastair Mills, Chief Executive
Teather & Greenwood 020 7426 9000
Jeff Keating
Buchanan Communications 020 7466 5000
Mark Court/Mary-Jane Johnson
Notes for Editors:
About Spiritel plc
Spiritel plc (AIM: STP) is a telecommunications group that joined the AIM market
of the London Stock Exchange in July 2004. We have multiple routes to market for
our products and services, which include a range of both traditional and
emerging telecoms technologies. Spiritel's client base includes corporate,
wholesale and retail customers served directly through our value added reseller
division Spiritel Retail, via web portals and through independent resellers.
For further information please visit www.spiritelplc.com
CHAIRMAN'S STATEMENT
I am pleased to report on another year of progress in the development of the
Company. It was a year during which the pace of change in the telecommunications
industry was unprecedented and a year in which VoIP (voice over internet
protocol) telephony, for which we provide a high quality product suite,
attracted considerable attention. The acquisition of Skype by eBay for up to
$4.1 billion gave an insight into the potential value of VoIP and reinforced the
fact that incumbent operators of fixed line and mobile networks are increasingly
under pressure from new entrants.
The transformation of the telecoms industry continues apace, with incumbent
operators upgrading their core networks to next generation IP networks and end
users increasingly replacing legacy call management infrastructure with
IP-enabled equipment or even services hosted by a service provider off-site.
Mobile operator revenues are also now under threat from VoIP with the well
documented arrival this year of dual mode mobile handsets which, when within
range of a wireless broadband connection, can bypass the mobile operator's
network and make calls via a VoIP platform at little or no cost. This so-called
fixed-mobile convergence is just one example of the revolutionary changes that
are imminent in telecoms. There are now clear indications that the migration to
VoIP is beginning to gain traction, underpinned by the ongoing growth in fast,
secure IP connectivity.
We believe Spiritel is at the forefront of developing these VoIP services that
provide lower cost, highly scalable, converged voice and data services which
will reach the market via both independent resellers and by direct to consumer
relationships.
During the year, and since the year end, we have evolved our strategy, most
importantly by broadening our routes to market with the objective of gaining a
direct relationship with the end users of voice and data products and services.
Since the year end we have already made an important steps in this direction,
first with the earnings-enhancing acquisition of CallPlan Ltd, a sales agency
that markets products and services in the UK on behalf of Australia's Telstra,
the world's thirteenth largest telecommunications company. In addition, we
acquired the significantly profitable Networks Direct (UK) Ltd, which provides
voice and data services to more than 300 SMEs across the UK.
We anticipate that direct relationships with end users will be a key
differentiator for those seeking to migrate customers towards next generation
communication services as users will look first to existing service providers
for a road map towards convergence. Through acquisitions, we are positioning
ourselves to be the VoIP provider of choice for an existing customer base, who
will also act as a showcase for customers of other traditional resellers.
To facilitate the broadening of our routes to market we have reorganised our
operational structure into two divisions: Spiritel Wholesale and Spiritel
Retail. The Wholesale division includes our call termination business, Expo
Communications, the cash flows from which have helped us to build our VoIP
product suite. Our Retail division includes our recently acquired
direct-to-consumer companies and we expect this division to grow through further
earnings enhancing acquisitions during the year ahead.
In terms of business development, we continued to innovate throughout the year
with new products and new corporate relationships. For example, we formed the
joint venture MyPhone, a low-cost VoIP-based solution for people in the UK to
make unlimited calls to their families and friends in India for a fixed monthly
fee.
Financials
Turnover in the 12 months to 30 April 2006 was £15.6 million compared with £32.8
million in the 18 months to 30 April 2005, reflecting the difference in
accounting periods and the pressure on wholesale pricing, not least from the
OFCOM price controls that only took effect part way through the previous period.
The pre-tax loss to 30 April 2006 was £0.74 million, markedly down on the
pre-tax loss of £2.4 million in the 18 months to 30 April 2005. The basic loss
per share was 0.44p, compared with a loss of 1.94p in the 18 months to 30 April
2005.
People
I would like to thank all of Spiritel's staff for their commitment to the
Company throughout the year and since the year end in what has been, and
continues to be, an exciting phase in the Company's development.
Outlook
We believe that Spiritel is now particularly well placed to benefit from the
migration from traditional to VoIP telephony. Our strategy of broadening our
routes to market through acquisition, combined with our continuing innovation in
products, services and corporate relationships, give me confidence in the
future.
Lord St John of Bletso
Chairman
19 October 2006
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
I am pleased to report on progress in the year to 30 April 2006 and to review
progress since the year end. We are operating in a market in transition where
telephony users are increasingly migrating from traditional, legacy networks to
converged, IP-based solutions using voice over internet protocol (VoIP). This
transition is widely accepted as inevitable. As a company created to capitalise
on the opportunities created by this change, we are constantly reviewing our
market and evolving our business model and suite of products and services to
best position Spiritel for success.
Turnover in the 12 months to 30 April 2006 was £15.6 million, compared with
£32.8 million in the 18 months to 30 April 2005. Our turnover in the year came
almost entirely from our call termination business. Lower revenue reflects a
full year's impact of the 2004 OFCOM price controls and continued price pressure
on global wholesale voice services. We expect that this pressure on wholesale
voice pricing will continue but this is factored in to our business model, where
the cash flow from our call termination business has helped to contribute to the
development of our own VoIP products and services.
The Company has continued to invest in R&D during the year and now offers an
impressive suite of ready-for-market VoIP products. In addition, during the
migration to VoIP, our ability to offer both traditional voice services
alongside emerging VoIP products is of considerable benefit as the two are
complementary - for example, most calls originated via IP still require
termination to a fixed line or mobile phone via traditional networks.
The quality of our call termination is highlighted by the fact that our
customers include the majority of the top 10 fixed line telecommunications
companies in the UK, such as the recently merged ntl:Telewest. Achieving the
most appropriate routes to market has been one of my most important strategic
objectives over the past year. Initially, Spiritel chose indirect, non-exclusive
relationships with resellers as the primary route to market for our VoIP product
suite. However, we also see a real benefit in gaining a direct relationship with
the end users of voice and data products and to this end took the strategic
decision to embark on a series of acquisitions. We believe that a direct
relationship with customers will provide a competitive advantage in the future
sale of VoIP solutions whilst delivering strong cash flows to Spiritel from
existing products and services, until the migration of customers to VoIP
telephony takes place.
We announced our first such acquisition, of the profitable and rapidly growing
company CallPlan Ltd, on 12 September 2006. This acquisition, for a maximum
potential consideration of £505,000, after deducting cash balances acquired of
£127,000, was immediately earnings enhancing. CallPlan, which has a current run
rate of £150,000 net profit per annum, markets products and services for the UK
arm of Australia's Telstra. We quickly followed with our second
earnings-enhancing acquisition, Networks Direct (UK) Ltd, on 13 October 2006,
which has given us access to more than 300 SME customers across the UK. In the
year to 31 May 2006 Networks Direct generated £488,000 of operating profit
excluding management fees. This acquisition, for a consideration of £1.6 million
in cash and shares, presents an ideal platform from which to sell VoIP and other
voice and data services. We anticipate further acquisitions in due course.
To support the broadening of our routes to market we have reorganised into two
divisions: Spiritel Wholesale and Spiritel Retail. The Wholesale division
comprises Expo Communications, our call termination business and Spiritel
Technologies, which has developed the Company's VoIP products. The Retail
division comprises the direct-to-customer initiatives, including CallPlan and
Networks Direct. Shortly before the year end, we launched the MyPhone joint
venture in which Spiritel has a 50% stake and which is based on one of the
Company's VoIP platforms. MyPhone is a lower cost alternative to calling cards,
which are a widely used method for making low cost international calls. The
MyPhone service allows people in the UK to make unlimited phone calls to their
families and friends in India, for a fee of £13 per month. The service is
currently being promoted by a number of major Indian corporates to their UK
based staff.
Financial review
Net losses in the year were £628,000 after a positive tax contribution of
£82,000, reflecting ongoing investment in R&D and pressure on wholesale voice
prices. These results compare with a net loss in the 18 months to 30 April 2005
of £2.5 million after a tax charge of £108,000. Net cash inflow from operating
activities in the year was £31,000, which compares favourably with an operating
cash outflow of £289,000 in the 18 months to 30 April 2005. The basic loss per
share was 0.44p, compared with a loss of 1.94p in the 18 months to 30 April
2005.
During the year, and since the year end, we have strengthened our balance sheet
through a debt restructuring, a series of placings of ordinary shares and by the
issue of loan notes.
Summary
A key attraction of our business model is that the ongoing success of our call
termination business is allowing us to position ourselves to capitalise on the
migration to VoIP telephony as it provides us with strong relationships with
leading telecommunications companies and gives us a competitive cost base for
all voice services. We enter the current year with the clear strategic objective
of broadening our routes to market to gain a direct relationship with end users
of VoIP services. We are already on the path to achieving this through our
acquisitions of CallPlan and Networks Direct and intend to complete further
transactions to achieve our objective.
Alastair Mills
Chief Executive
19 October 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 April 2006
18 months ended
Year 30 April 2005
ended 30 Audited
April 2006
Audited
Note £000 £000
Turnover - continuing operations 2 15,564 32,791
Costs of sales (13,671) (28,740)
----------- ---------
Gross profit 1,893 4,051
Operating expenses
Administrative expenses (2,615) (3,811)
Exceptional operating expenses 3 - (2,557)
----------- ---------
Total operating expenses (2,615) (6,368)
Operating loss - continuing
operations (722) (2,317)
Share of operating loss of joint
venture (16) -
----------- ---------
(738) (2,317)
Net interest 2 (86)
----------- ---------
Loss on ordinary activities before
taxation (736) (2,403)
Tax on loss on ordinary activities 82 (108)
----------- ---------
Loss on ordinary activities after
taxation (654) (2,511)
Minority interest 26 -
----------- ---------
Loss for the financial year (628) (2,511)
=========== =========
Loss per share in pence
Basic 5 (0.44) (1.94)
=========== =========
There were no recognised gains or losses other than the loss for the financial
year.
CONSOLIDATED BALANCE SHEET AT 30 APRIL 2006
30 April Restated
2006 30 April 2005
Audited Audited
£000 £000
Fixed assets
Intangible assets 33 -
Tangible assets 864 639
----------- ---------
897 639
Current assets
Debtors 1,016 934
Cash at bank and in hand 98 430
----------- ---------
1,114 1,364
Creditors: amounts falling due within one year (1,919) (1,226)
Net current (liabilities)/assets (805) 138
----------- ---------
Total assets less current liabilities 92 777
=========== =========
Creditors: amounts falling due after more than one 4,694 6,694
year
Provisions for liabilities 18 73
----------- ---------
4,712 6,767
Capital and reserves
Called up share capital 1,654 1,378
Share premium account 2,850 1,128
Reverse acquisition reserve (5,763) (5,763)
Profit and loss account (3,361) (2,733)
----------- ---------
Shareholders' deficit (4,620) (5,990)
----------- ---------
92 777
=========== =========
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 April 2006
Year 18 months ended
ended 30 April 2005
30 April Audited
2006
Audited
Note £000 £000
Net cash inflow/(outflow) from
operating activities 6 31 (289)
Returns on investments and servicing of
finance
Interest received 5 14
Interest paid (3) (6)
---------- ----------
Net cash inflow from returns on
investments and servicing of finance 2 8
Taxation
Corporation tax paid (151) (18)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (655) (559)
---------- ----------
Net cash outflow from capital
expenditure and financial investment (655) (559)
Acquisitions
Costs relating to reverse
acquisition - (480)
Net cash acquired with subsidiary
undertaking - 243
Purchase of minority shares in
subsidiary undertaking (7) -
---------- ----------
Net cash outflow from acquisitions (7) (237)
---------- ----------
Cash outflow before financing (780) (1,095)
Financing
Receipts from borrowing 450 -
Issues of shares - 1,222
Expenses in connection with
conversion of loan notes (2) (199)
---------- ----------
Net cash inflow from financing 448 1,023
---------- ----------
Decrease in cash in the year 7 (332) (72)
========== ==========
OTHER PRIMARY STATEMENTS
For the year ended 30 April 2006
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' DEFICIT
Year Restated
ended 30 April 18 months ended
2006 30 April 2005
Audited Audited
£000 £000
Retained loss for the
financial year (628) (2,511)
Reverse acquisition
adjustment - (5,763)
Issue of share capital
(net of expenses) 1,998 2,506
---------- ----------
Net increase/(decrease)
in shareholders' deficit 1,370 (5,768)
Opening shareholders'
deficit (5,990) (222)
---------- ----------
Closing shareholders' deficit (4,620) (5,990)
========== ==========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 April 2006
1). PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION AND FINANCIAL INFORMATION
The financial information in this preliminary announcement has been prepared in
accordance with the accounting policies set out in the financial statements of
Spiritel plc for the period ended 30 April 2005. These accounting policies have
remained unchanged for the financial year ended 30 April 2006, with the
exception of the presentation of the Company's redeemable preference shares
following the mandatory adoption of FRS 25 "Financial Instruments : Disclosure
and Presentation" (presentation requirements only). The redeemable preference
shares are now disclosed as financial liabilities within the balance sheet,
whereas previously they were presented as equity.
The financial information in this document does not constitute the Company's
statutory accounts for the year ended 30 April 2006 or 2005, but is derived from
those accounts. Statutory accounts for 2005 have been delivered to the Registrar
of Companies and those for 2006 will be delivered following the company's Annual
General Meeting. The auditors have reported on these accounts and their reports
were unqualified and did not contain statements under sections 237(2) or (3) of
the Companies Act 1985.
2). SEGMENTAL INFORMATION
The turnover and loss on ordinary activities before taxation are attributable to
the principal activity of the Group.
TURNOVER BY DESTINATION
Year 18 months
ended ended
30 April 2006 30 April 2005
£000 £000
United Kingdom 15,449 32,741
Europe 109 49
United States 6 1
-------------- ---------------
Group turnover 15,564 32,791
============== ===============
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 April 2006
3). EXCEPTIONAL ITEMS
The following exceptional costs were charged in arriving at the operating loss
of the Group:
Year 18 months
ended ended
30 April 2006 30 April 2005
£000 £000
Amortisation of goodwill acquired in
reverse takeover - 2,557
=========== ==========
4). DIVIDENDS
The Directors do not recommend the payment of a dividend.
5). LOSS PER SHARE
The loss per share is based on the loss of £628,000 (2005: £2,511,000) and
142,278,943 (2005: 129,628,852) ordinary 1p shares, being the weighted average
number of shares in issue during the year. The weighted average number of
ordinary 1p shares for the period ended 30 April 2005 assumes that the
124,000,000 ordinary 1p shares issued in relation to the reverse acquisition of
Spiritel plc existed for the entire period. The share options are not dilutive
and therefore a diluted earnings per share calculation has not been presented.
6). NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
Year 18 months
ended ended
30 April 2006 30 April 2005
£000 £000
Operating loss (722) (2,317)
Depreciation 428 354
Loss on disposal of fixed assets 2 -
Amortisation of goodwill - 2,557
Increase in debtors (66) (240)
Increase/(decrease) in creditors 389 (643)
----------- ----------
Net cash inflow/(outflow) from operating 31 (289)
activities =========== ==========
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 April 2006
7). RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Year Restated
ended 18 months ended
30 April 2006 30 April 2005
£000 £000
Decrease in cash in the year (332) (72)
Loans received (450) -
---------- ----------
Change in net debt resulting from cash flows (782) (72)
Loan notes and preference shares issued in
connection with acquisition - (6,600)
Loan notes converted to ordinary shares 2,000 -
Other non-cash items - (94)
---------- ----------
Change in net debt in the year 1,218 (6,766)
Net (debt)/funds at 1 May 2005 (as restated) (6,264) 502
---------- ----------
Net debt at 30 April 2006 (5,046) (6,264)
========== ==========
Copies of the Annual Report and Accounts will be posted to shareholders shortly.
Copies are available from the Company's head office at 18 King William Street,
London EC4N 7BP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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