Released: 19/01/2009
com:20090119:RnsS8232L
.
RNS Number : 8232L
Spiritel PLC
19 January 2009
19 January 2009
SPIRITEL PLC
("SpiriTel", "the Company" or "the Group")
Interim Results for the six months ended 31 October 2008
SpiriTel (AIM: STP), the business communications service provider, today
announces interim results for the six months to 31 October 2008.
Highlights
Financial
* Turnover up 62% to £11.1 million (2007: £6.8 million)
* Gross profit up 64% to £4.2 million (2007: £2.5 million)
* Underlying EBITDA* up 270% to £0.87 million (2007: £0.23 million)
* Pre tax loss £1.7 million (2007: £2.3 million), after non-cash finance
costs** of £2.1m
* Balance sheet restructured and strengthenedPenta Capital debt restructured
saving £0.8 million of annual interest chargesPenta Capital converted £3.2m of
debt into ordinary shares
* Increased bank facility for acquisitions but bank debt remains low at £2.6m,
repayable over five years
Operational
* Two earnings enhancing acquisitions were integrated, expanding product set
and customer numbers WN1, a mobile reseller (acquired April 2008),ED
Communications, a network services provider (acquired August 2008)
* Customer base increased to 2,200 business customers (2007: 920)
* Organic sales growth of 30% excluding acquisitions
* Cross sales contracts of £1.4m won during the period
* Three year managed services contract awarded by Young and Co.'s Brewery
* Significant progress in development of converged mobile products, mobile
applications and hosted VoIP and WiFi services
* Awards won during the period include Converged Solution of the Year (National
Comms Business Awards); VoIP Solution of the Year (Federations of Communication
Service Providers Awards); Best Newcomer (International Directories Awards) for
the 118 918 service managed on behalf of Virgin Mobile.
* Before restructuring and acquisition costs and charge for share based
payments
** Non-cash finance costs comprise charges required under IFRS on the
modification of the terms of the Penta loans and preference shares
Commenting on the results, Alastair Mills, Chief Executive Officer of SpiriTel,
said:
"I am pleased to announce a strong set of results for the Group. The progress
that we have made operationally and financially demonstrates a successful
execution of the Group's stated strategy of acquiring and rapidly integrating
complementary businesses and driving organic growth from the cross-selling
opportunities that are presented by a growing customer base. We have now
delivered four consecutive periods of growth in underlying EBITDA"
Copies of these results are available on the Company's website:
www.spiritelplc.com
For further information please contact:
SpiriTel plc Tavistock Communications FinnCap
Alastair Mills Simon Hudson Geoff Nash
Chief Executive Duncan McCormick
Tel: 020 7160 0100 Tel: 020 7920 3150 Tel: 020 7600 1658
Review by the Chief Executive Officer, Alastair Mills
Introduction
I am pleased to announce another encouraging set of results, achieved in an
increasingly challenging economic environment. We have continued the successful
execution of our Acquire, Integrate and Grow strategy which has resulted in
considerable improvement in both revenue and earnings. During the period we
completed the rapid integration of two earnings-enhancing acquisitions and
generated higher than expected organic sales growth of 30%. We have now
delivered four successive half-year periods of growth in underlying EBITDA.
Our focus on the cross-selling of our integrated range of voice and data
services to existing customers is bearing fruit with several significant wins
during the period and since the half year end. The opportunity to increase
revenues further from existing customers is substantial. We offer a full range
of traditional and converged communications services to business customers who
are increasingly looking for opportunities to reduce costs and improve
efficiencies. Following the successful integration of six acquisitions in less
than two years, we have a significant opportunity to increase revenues from our
growing customer base, many of whom currently take only one or two products from
SpiriTel.
Results
During the period we have delivered improvements to all of our key trading
indicators as well as strengthening our balance sheet. Highlights include:
* Turnover up 62% to £11.1 million (2007: £6.8 million)
* Gross profit up 64% to £4.2 million (2007: £2.5 million)
* Underlying EBITDA* up 270% to £0.87 million (2007: £0.23 million)
* £3.2m of debt converted into ordinary shares
* Balance sheet strengthened with Penta Capital debt restructure, saving £0.8
million annual interest charge
* Increased banking facility agreed
The 62% growth in revenue was delivered by a combination of acquisitions and
organic growth within both Divisions. This growth, and our successful execution
of a change in product mix towards the higher margin value added services of
SpiriTel Business, led to the 64% growth in gross profit to £4.2m and an
increase in gross profit as a percentage of revenue from 37% to 38%.
Consequently we are able to report a 270% increase in underlying EBITDA to
£0.87m and a significant improvement in underlying EBITDA margins to 7.9% from
3.4% in the first half of 2007. The improvement in the underlying EBITDA margin
is a result of our successful acquisition and integration model and leveraging
our operational gearing.
Performance of both acquisitions (WN1 and ED Communications) has, to date,
exceeded management expectations. The results for the first half reflect only a
partial contribution from ED Communications, which was acquired in August 2008.
In May 2008, we completed the restructuring of the Penta Capital debt. This
resulted in a waiver of £0.5m of accrued finance costs and is now saving the
Company annual interest charges of £0.8m. During the period Penta converted
£3.2m of debt into ordinary shares, of which £0.6m was at a 50% premium to the
share price at the date of conversion. This represented a significant vote of
confidence by Penta in the performance of and prospects for the Group. As at 31
October 2008, the Group had £7.85 million of convertible debt from Penta with a
zero interest coupon and conversion rights at no less than 1.5p.
During August, we received further support from Clydesdale Bank who provided a
£1.9m facility for the acquisition of ED Communications. As at 31 October 2008,
bank debt was £2.6m, repayable over five years. Our policy is to maintain bank
debt at conservative levels.
The Group's net cash outflow from operations decreased from £1.6m to £0.6m.
During the twelve month period to 31 October 2008 the Group generated EBITDA of
£0.9m and net cash inflow from operating activities of £1.8m.
SpiriTel Business
During the period under review, Business Division revenues grew by 75% to £5.0m
(2007: £2.9m). This rapid improvement was delivered by a combination of
acquisitions and organic growth. The results for the period include
contributions from two earnings enhancing acquisitions that were completed since
the announcement of last year's interim results. The first of these
acquisitions, during April 2008, was WN1 which added mobile voice and data to
our product portfolio, followed by ED Communications, a network services
provider, in August 2008. Both were integrated into our existing Wigan
operations, and rebranded as SpiriTel Mobile and SpiriTel Networks (London)
respectively, within eight weeks of acquisition. The extended range of services
is now available to all SpiriTel customers.
Organic growth is being delivered by successful execution of our strategic focus
on cross-selling which resulted in the winning of contracts worth £1.4m during
the first half of the year. Since the period end we have had further
cross-selling successes, including the recently announced £0.6m contract with
one of our global hotel customers. The majority of the contracts were won
towards the end of the period and as a result, less than £80,000 of the revenue
was booked during the first half. The cross-selling successes were achieved from
less than 1% of our customer base and our recent assessment that the total
telecommunications spend of our customers exceeds £80m indicates the significant
upside opportunity for SpiriTel from existing customers. Many of these customers
are increasingly looking to deliver savings by deploying converged services and
consolidating their supplier base. Successful penetration of this total customer
spend is a key target of the management team.
The Group's most significant cross-selling success during the period was the
three year contract with Young's. This managed services contract, won in
October, is set to exceed £1million in value and demonstrates our ability to
capture significant contract wins in the fast growing area of hosted VoIP
telephony and WiFi. A key attraction of our proposition to Young's is that they
were able to avoid significant investment in their ICT infrastructure by
choosing a managed service solution with cost being spread over the contract
life. Our experience is that this "capex light" model is becoming extremely
attractive to end users.
In our Mobile product line, SpiriTel has collaborated with Blackberry
manufacturer Research in Motion (RIM) to promote software that interfaces with
IP-PBX's and Blackberry Enterprise Servers, allowing PBX functionality to be
extended to a mobile handset. More than 30% of our mobile revenues are now
generated from converged devices such as Blackberrys. The importance of mobile
applications as a revenue stream is also increasing and an eightfold growth
means that mobile applications now represent almost 10% of revenues from our
Mobile product line.
SpiriTel Technologies
SpiriTel Technologies continues to provide the infrastructure and support to
enable the Business Division to offer its range of converged, IP based managed
services to corporate customers. Our capabilities in hosted voice and data
services differentiate us from many of our competitors who continue to limit
their activity to reselling legacy systems and services. During the period, the
Technologies Division generated strong earnings from wholesale voice services
and, encouragingly, we have added additional major international carrier
customers.
Whilst continually evaluating the commercial viability of our product road map
and drawing heavily on the R&D spend of our major global partners, including
Mitel, O2 and RIM, we have enhanced our converged product set. During October we
successfully trialled our hosted VoIP service over wide range wireless internet
connectivity (WIMAX). Research indicates that hosted VoIP services continue to
be one of the fastest growing revenue streams in telecoms. Our ability to
provide hosted VoIP over WIMAX allows SpiriTel Business to offer its customers
higher levels of bandwidth using a fully resilient connection.
Awards
We are delighted that SpiriTel continues to be recognised for its achievements
and for the quality and pioneering nature of the integrated communications
services it delivers to a broad range of business customers. Awards received
during the period include:
* Converged Solution of the Year - Winner, National Comms Business Awards
* VoIP Solution of the Year - Winner, Federations of Communication Service
Providers Awards
* Best Newcomer - Winner, International Directories Awards
In addition, CEO Alastair Mills was a finalist at the Ernst & Young Entrepreneur
of the Year Awards and CFO Ronnie Smith was a finalist for FD of a Growing
Company at the Accountancy Age Awards.
Outlook
Management will continue to execute its Acquire, Integrate and Grow strategy to
build upon its track record of adding earnings enhancing acquisitions. This will
be complemented by organic growth from cross-selling activity, where we made
significant progress during the period under review. The Group's increased
banking facility, provided in turbulent economic times, serves as a strong
endorsement of our strategy and financial results. Our consistent growth in
earnings continues to improve the Group's financial stability and we operate
with a relatively low level of senior debt relative to earnings. We will also
continue to improve earnings visability with a migration from one off capital
sales towards managed services and longer term contracts.
Our increasing level of contracted revenues and the growth of our order pipeline
underpin our expectations for the year and we look forward to continuing the
delivery of value to shareholders.
The economic outlook for 2009 remains volatile and challenging for all
businesses. However, following a significant restructuring of the business over
the last two years, we have established a strong platform for sustained future
growth by selling an expanded product portfolio into a growing customer base.
SpiriTel provides business critical services to its customers and our converged
product offering, often including an element of network rationalisation, offers
customers an opportunity to increase efficiency and reduce costs. Therefore, we
are confident that we are well placed to meet the economic challenges ahead and
the management team is hopeful that our recent trend of growth will continue.
Alastair Mills
Chief Executive
19 January 2009
SPIRITEL PLC
Condensed Consolidated Interim Financial Information for the six months ended
31 October 2008
CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT
Six months Six months ended Year
ended 31 October 2007 ended
31 October 30 April
2008 2008
Note Unaudited Unaudited Audited
£'000 £'000 £'000
Continuing operations
Revenue 11,059 6,842 16,674
Cost of sales (6,901) (4,302) (10,259)
Gross profit 4,158 2,540 6,415
Administrative expenses (4,044) (3,051) (7,261)
Underlying EBITDA 870 235 938
Depreciation (79) (115) (180)
Share based payments (25) (101) (190)
Exceptional costs (133) (64) (556)
Amortisation of intangible fixed assets (519) (402) (794)
Impairment of tangible fixed assets - (64) (64)
Operating profit / (loss ) 114 (511) (846)
Operating profit /(loss) 114 (511) (846)
Net finance costs (1,838) (1,828) (3,201)
Loss before taxation (1,724) (2,339) (4,047)
Income tax expense 145 - 289
Loss for the financial period (1,579) (2,339) (3,758)
Loss per ordinary share in pence 3 (0.30) (0.74) (1.19)
There were no recognised gains or losses other than the loss for the financial
period.
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
Share capital Additional paid in capital Reverse acquisition reserve Other Reserves Profit and loss account Total
equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 May 2008 3,162 4,550 (5,763) 565 (9,810) (7,296)
Loss for period - - - - (1,579) (1,579)
Credit for equity settled share based payments
- - - 25 - 25
Issue of share capital 3,114 411 - - - 3,525
Credit arising on modification of preference shares
- - - - 1,555 1,555
Loss arising on modification of Penta loans
- - - - (2,120) (2,120)
Transfer between reserves - - - (333) 333 -
Balance at 31 October 2008 6,276 4,961 (5,763) 257 (11,621) (5,890)
CONDENSED CONSOLIDATED INTERIM BALANCE SHEET
31 October 2008 31 October 2007 30 April 2008
Unaudited Unaudited Audited
£'000 £'000 £'000
ASSETS
Non-current assets
Goodwill 6,198 816 5,292
Other intangible assets 5,162 4,249 4,392
Property, plant and equipment 500 303 438
11,860 5,368 10,122
Current assets
Inventories 227 446 353
Trade and other receivables 2,402 3,817 2,151
Cash and cash equivalents 292 - 1,058
2,921 4,263 3,562
Total assets 14,781 9,631 13,684
LIABILITIES
Current liabilities
Trade and other payables (5,019) (3,606) (4,595)
Borrowings (968) (191) (457)
Obligations under finance leases (60) (111) (84)
Current tax payable (250) (207) (442)
(6,297) (4,115) (5,578)
Non-current liabilities
Trade and other payables (127) - (432)
Borrowings (12,680) (5,244) (13,603)
Obligations under finance leases (39) (36) (55)
Deferred tax liabilities (1,528) (17) (1,312)
(14,374) (5,297) (15,402)
Total liabilities (20,671) (9,412) (20,980)
Net assets / (liabilities) (5,890) 219 (7,296)
EQUITY
Capital and reserves
Share capital 6,276 3,162 3,162
Additional paid in capital 4,961 4,550 4,550
Reverse acquisition reserve (5,763) (5,763) (5,763)
Other reserves 257 6,829 565
Profit and loss account (11,621) (8,559) (9,810)
Total equity (5,890) 219 (7,296)
CONSOLIDATED INTERIM CASH FLOW STATEMENT
Six months ended Six months Year
31 October 2008 ended ended
31 October 2007 30 April 2008
Unaudited Unaudited Audited
£'000 £'000 £'000
Cash flows from operating activities
Loss before taxation (1,724) (2,339) (4,047)
Adjustments for:
Net finance costs 1,838 1,828 3,201
Depreciation and amortisation 598 517 974
Impairment of tangible fixed assets - 64 64
Decrease / (increase) in inventory 126 (54) 63
Increase in receivables (55) (651) (17)
(Decrease) / increase in payables (1,150) (994) 617
Equity settled share based payments 25 101 190
Interest paid (110) (62) (135)
Income taxes paid (192) - -
Net cash (used in) / from operating activities (644) (1,590) 910
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired (906) (109) (998)
Deferred and contingent consideration - - (1,227)
Purchase of property, plant and equipment (141) (74) (229)
Net cash used in investing activities (1,047) (183) (2,454)
Cash flows from financing activities
Net proceeds from issue of share capital 3,525 - -
Proceeds from borrowings 900 1,280 2,347
Borrowings repaid (3,460) - -
Payment of finance lease liabilities (40) (20) (67)
Net cash from financing activities 925 1,260 2,280
Net (decrease) / increase in cash and equivalents (766) (513) 736
Cash and equivalents at beginning of period 1,058 322 322
Cash and equivalents at end of period 292 (191) 1,058
SPIRITEL PLC
Condensed Consolidated Interim Financial Information for the six months ended
31 October 2008
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL INFORMATION
1.Nature of operations and general information
SpiriTel Plc and its subsidiaries' ("the Group") principal activity is the
provision of telecommunications services.
SpiriTel Business supplies a range of products and services that includes
design, supply and maintenance of traditional business telephone systems as well
as IP-based voice and data services. SpiriTel Technologies is a supplier of
wholesale voice services to leading telecommunications providers.
SpiriTel Plc is the Group's ultimate parent company. It is incorporated and
domiciled in Great Britain. The address of SpiriTel Plc's registered office,
which is also its principal place of business, is 18 King William Street,
London, EC4N 7BP. SpiriTel Plc's ordinary shares are listed on the Alternative
Investment Market of the London Stock Exchange.
SpiriTel Plc's consolidated interim financial statements are prepared in Pounds
Sterling ("£"), which is also the functional currency of the parent company.
The consolidated condensed interim financial information has been approved for
issue by the Board of Directors on 16 January 2009.
The financial information set out in this interim report does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
Group's statutory financial statements for the year ended 30 April 2008,
prepared under IFRS, have been filed with the Registrar of Companies. The
auditor's report was unqualified and did not contain a statement under Section
237(2) or Section 237(3) of the Companies Act 1985.
2.Basis of preparation
The condensed consolidated interim financial information (the interim financial
information) has been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted for use in the European Union. This
financial information has been prepared on the same basis and using the same
accounting policies as used in the financial statements for the year ended 30
April 2008.
3. Loss per share
The calculation of the basic loss per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in issue
during the period. The share options are not dilutive and therefore a diluted
earnings per share calculation has not been presented.
The losses and weighted average number of shares used in the calculation are set
out below:
Loss Weighted Per share amount
£'000 average number of shares Pence
Continuing and total operations
6 months to 31 October 2008
Loss after tax (1,579)
Loss attributable to ordinary shareholders (1,579)
Weighted average number of shares 530,482,447 (0.30)
Loss per share (pence)
6 months to 31 October 2007
Loss after tax (2,339)
Loss attributable to ordinary shareholders (2,339)
Weighted average number of shares 316,233,646
Loss per share (pence) (0.74)
Year ended 30 April 2008
Loss after tax (3,758)
Loss attributable to ordinary shareholders (3,758)
Weighted average number of shares 316,233,646
Loss per share (pence) (1.19)
4.Net finance costs
Six months ended Six months Year
31 October 2008 ended ended
31 October 2007 30 April 2008
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank interest received - - (5)
Interest payable on bank loans and overdrafts* 124 60 125
Interest on finance leases 7 2 7
Interest paid on Director's loan - - 8
Unwinding of discount in liabilities** 90 - -
Interest on Penta loans** 67 1,766 1,204
Interest waived on Penta loans** (512) - -
Loss arising on modification of Penta preference shares** 1,679 - 2,521
Loss arising on modification of Penta debt** 620 - -
Change in fair value of embedded derivatives** (237) - (659)
1,838 1,828 3,201
* Includes non-cash finance costs comprising charges required under IFRS on the
amortisation of costs incurred on raising the loans and overdraft
** Non-cash finance costs comprising charges required under IFRS on the
modification of the terms of the Penta loans and preference shares
5.Business combination
On 2 August 2008, SpiriTel Plc acquired 100% of the issued share capital of ED
Communications Limited, a company based in the UK. The total cost includes the
components stated below. The purchase price was settled in cash.
£'000
Purchase price 832
Contingent consideration under earn out agreement payable 458
in cash (discounted)
Deferred consideration payable in cash (discounted) 458
Due diligence and other professional fees 118
1,866
Up to a further £1,700,000 of consideration may become payable under an earn out
agreement depending on the level of gross profit achieved by the business in
July 2009. In the opinion of the directors the likely amount payable is
£500,000.
The allocation of the purchase price to the assets and liabilities of ED
Communications Limited was only provisionally completed at 31 October 2008. The
amounts provisionally recognised for each class of the acquiree's assets and
liabilities recognised at the acquisition date are as follows:
Provisional
Carrying amount under IFRS Fair value fair value to the Group
adjustments
£'000 £'000 £'000
Intangible fixed assets identified - 1,289 1,289
Tangible fixed assets 97 (97) -
Trade and other receivables 196 - 196
Cash and cash equivalents 44 - 44
Total assets 337 1,192 1,529
Trade payables (53) - (53)
Other taxes (39) - (39)
Other payables (116) - (116)
Deferred tax - (361) (361)
Total liabilities (208) (361) (569)
Net assets acquired 129 831 960
Provisional goodwill arising on the acquisition 906
Consideration 1,866
Satisfied by:
Cash 950
Deferred consideration to be settled in cash (discounted) 458
Contingent consideration to be settled in cash (discounted) 458
1,866
6.Borrowings
31 October 2008 31 October 2007 30 April 2008
Unaudited Unaudited Audited
£'000 £'000 £'000
Bank loans 2,618 750 1,913
Issue costs (221) (120) (166)
Loan notes 268 - 248
Other loans - 458 100
Loan notes - Penta Capital 1,078 770 770
Other loans - Penta Capital 7,163 2,869 5,566
Debt component of redeemable preference shares - Penta
Capital 2,742 708 5,629
13,648 5,435 14,060
Current 968 191 457
Non current 12,680 5,244 13,603
13,648 5,435 14,060
Repayable as follows:
Within one year 1,018 191 490
In the second year 8,600 11,526 12,099
After two years 1,118 489 1,133
10,736 12,206 13,722
Issue costs (221) (120) (166)
Loan notes - fair value of embedded derivative 308 - -
Other loans - fair value of embedded derivative 2,041 - -
Preference shares - fair value of embedded derivative 784 - 504
Equity component of loans and preference shares - (6,651) -
13,648 5,435 14,060
Proceeds
1 May Non-cash movement from borrowings Borrowings repaid 31 October 2008
2008
Audited Unaudited Unaudited Unaudited Unaudited
£'000 £'000 £'000 £'000 £'000
Bank loans 1,913 - 900 (195) 2,618
Issue costs (166) (55) - - (221)
Other loans 100 - - (100) -
Loan notes 248 20 - - 268
Loan notes - Penta Capital 770 308 - - 1,078
Other loans - Penta Capital 5,566 1,597 - - 7,163
Debt component of redeemable preference shares - Penta
Capital 5,629 278 - (3,165) 2,742
Total borrowings 14,060 2,148 900 (3,460) 13,648
Non-cash movements comprise the loss on modification of the terms of the
preference shares, loans and loan notes of £2,865,000 plus (a) issue costs on
debt of £55,000; less (b) the change in the fair value of embedded derivative
within preference shares, loans and loan notes of £237,000; (c) interest waived
of £445,000; and (d) unwinding of discounts of £20,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BFMRTMMJBBRL