News blog
Spiritel
- BY: Andrew Hore |
- POSTED: 22/03/2008 |
Business telecoms services provider Spiritel is on course to move into profit next year and venture capital backer Penta’s debt conversion will improve its balance sheet.
Spiritel started out offering wholesale voice services but it has moved into offering voice and data services to small and medium sized businesses. It also has some larger businesses as customers. Spiritel signed the biggest ever VoIP agreement in the UK with Regent Inns.
Spiritel is in a similar business to Redstone, Alternative Networks and AT Communications. This is a consolidating market. Spiritel has strong market positions in the hospitality and legal sectors.
Venture capital company and original backer Penta has lent Spiritel £11m. It has agreed to convert this debt to equity subject to its shareholding not going above 49.99%. It will convert £2.6m at 1.1p a share and when there are subsequent share placings it will convert more at 1.5p a share or the latest placing price.
The initial debt conversion will leave Penta’s debt at £8.4m. Spiritel also has a £1m debt facility with Clydesdale Bank. Spiritel won’t have to pay the £800,000 per annum interest charge on the Penta borrowings from now on. If the share price isn’t 1.5p in two year’s time then the interest charge on the remaining borrowings will be 8%.
Share placings are likely to finance acquisitions. Spiritel has talked with potential investors and there appears to be interest in financing these purchases.
Spiritel wants to buy businesses with a good customer list, low customer churn, an average revenue per user of at least £100 and scope to cross-sell other services. There should also be scope for cost savings. Chief executive Alastair Mills won’t buy businesses for more than six times operating profit.
Spiritel is particularly interested in acquiring a mobile telecoms related business in order to offer in-house a wider spread of services.
Daniel Stewart expects Spiritel to report underlying profits of £1.47m on revenues of £16m in the year to April 2008. It forecasts profits of £1.29m on revenues of £18.8m in 2008-09. That improvement is due to a combination of higher profits and the absence of interest charge next year.
At 0.73p a share, the company is worth £2.29m. After the debt conversion the market capitalisation will be £4m.
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