1 Oct 2009 07:00
1 October 2009
SPIRITEL PLC
("SpiriTel" or "The Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2009
SpiriTel plc (AIM: STP), the business communications group, is pleased to announce preliminary results for the year ended 30 April 2009.
Commenting on the results, Chairman, Lord St. John of Bletso said: "I am pleased to report on a further year of growth and development for SpiriTel plc. The Company has made significant progress despite an increasingly tough operating environment which has seen several competitors fall by the wayside. As a fully integrated business communications provider delivering fixed, mobile, data and networking services to a substantial customer base the Group is very well placed to progress its chosen strategy of 'acquire, integrate, grow' to deliver increased shareholder value."
Highlights:
- Underlying EBITDA* 61% ahead of prior year at £1.5 million (2008: £0.9 million)
- Revenue up 18% to £19.7 million (2008: £16.7 million)
- Gross profit up 19% to £7.6 million (2008: £6.4 million)
- Pre tax loss £1.7 million (2008: £4.0 million), after non-cash finance costs** of £0.8 million (2008: £3.1 million)
- Post year end new 5 year debt and overdraft facility of £4.5m agreed with Clydesdale Bank
- Earnings enhancing acquisition of ED Communications completed
- Cross selling contracts signed worth £7 million over their term
- Customer base increased to 2,337 at year end (2008: 1,525)
- Post year end balance sheet restructure - conversion terms agreed over up to £6.85 million of Penta debt and waiver of up to £550,000 of annual interest costs
* Operating profit after adding back charges for depreciation, amortisation, share-based payments and exceptional costs
** Non-cash finance costs comprise loss arising on modification and conversion of preference shares and change in fair value of embedded derivatives.
Chief Executive, Alastair Mills added: "We operate in a dynamic sector and the Board believes that we now stand at a particularly exciting point in the Company's development. We have demonstrated our ability to enhance earnings through acquisitions, followed up by significant cross-selling successes from our range of converged products and services into both new and existing customer bases. The foundations are in place to deliver ongoing value to shareholders and I look forward to the coming year with confidence."
For further information please visit www.SpiriTelplc.com or contact:
| SpiriTel plc | Tavistock Communications | finnCap |
| Alastair Mills | Simon Hudson | Geoff Nash |
| Chief Executive | Duncan McCormick | Marc Young |
| Tel: 020 7160 0100 | Tel: 020 7920 3150 | Tel: 020 7600 1658 |
CHAIRMAN'S STATEMENT
Lord St John of Bletso, Chairman
I am pleased to report on a further year of growth and development at SpiriTel. The Company has made significant progress despite an increasingly tough operating environment which has seen several competitors fall by the wayside.
SpiriTel made its sixth acquisition during the year to 30 April 2009, acquiring and fully integrating ED Communications ("EDC") into the SpiriTel Business Division. The Group is now a well established, fully integrated business communications provider. During the year the Company has proven the value of its integrated offering to the enlarged customer base by successfully cross-selling its expanded range of products and services. These results include full year contributions from all six acquisitions with the exception of EDC, which is included for the eight months since acquisition.
Results
As a result of both acquisitive and organic growth - including initial sales from over £7 million of cross-selling contract wins signed during the year - revenues are up markedly, by 18% to £19.7 million (2008: £16.7 million). Most significantly, underlying EBITDA (defined as operating profit after adding back charges for depreciation, amortisation, share-based payments and exceptional costs) increased by 61% to £1.5 million (2008: £0.9 million). The results, and in particular the impressive growth in earnings, demonstrate ongoing success in the execution of the Company's "Acquire, Integrate, Grow" strategy. The economies of selectively bolting on acquired assets are now evident.
The previously reported decline in profitability from the Technologies Division continues to adversely impact Group profits. However, this decline, combined with rapid growth in the Business Division, has reduced our exposure to riskier and more volatile wholesale markets. 52% of overall Group revenues in 2009 result from the Business Division's higher quality, contracted B2B revenues, compared to 40% in 2008. This trend has continued since the year end.
Dividend
SpiriTel is still pursuing its acquisition, integration and growth strategy and is continuing to invest funds into the business. The Directors are therefore not recommending the payment of a dividend for the year to 30 April 2009.
Proposed debt conversion
Since the year end, we have agreed a further planned restructuring of the indebtedness to Penta Capital Partners ("Penta") in our balance sheet, the terms of which will be communicated to shareholders in a circular that also convenes a shareholder meeting to approve the transaction. The proposals include Penta converting up to £6.9 million of debt into equity at a price of 0.6p per ordinary share. The Directors consider that the proposals will significantly strengthen the balance sheet and better position the Company to raise capital for acquisitions. This is an important step for the Group and we value Penta's support through their proposed debt for equity conversion.
Outlook
Whilst the Business Division has continued to perform in line with expectations, trading remains challenging for the Technologies Division and we do not foresee a significant turnaround in its core wholesale markets. However, the Technologies Division continues to add significant value through managing our IP-based infrastructure, on which several of the Business Division's product solutions are based.
The Group now benefits from much higher levels of earnings visibility, due to the Business Division's emphasis on contracted and recurring revenues from SMEs and larger corporate customers. This, combined with a wide range of business-critical products and services, means SpiriTel is well positioned to weather the ongoing economic storm. Through a combination of further earnings enhancing acquisitions for the Business Division and organic growth, driven by the cross-selling of an integrated product portfolio, we expect to continue to increase revenue and earnings for the benefit of all shareholders.
Lord St John of Bletso
Chairman
30 September 2009
CHIEF EXECUTIVE'S REVIEW
Alastair Mills, Chief Executive
SpiriTel has matured considerably in the year under review. Our sixth acquisition further enhances our reputation as a leading consolidator of the telecoms reseller sector and together with our success in cross-sales demonstrates our ability to deliver organic and acquisitive growth. As a management team, we are constantly reviewing acquisition opportunities that can grow earnings, enhance the product set and provide more cross-selling opportunities. We operate in a dynamic sector and the Board believes that we now stand at a particularly exciting point in the Company's development. The accelerating migration to converged communications is a driving force behind increased levels of corporate activity in the sector. Convergence is also changing customer behaviour with more businesses insisting that their supplier offers the full range of fixed, mobile, voice and data services. For those companies that have capital to deploy for acquisitions and an integrated product range to sell to business customers, these are exciting times.
Financial highlights
The year to 30 April 2009 represents a full year's contribution from all of SpiriTel's acquisitions to date, apart from EDC. This is reflected in significantly improved financial results despite one of the most challenging trading environments seen for many years, particularly in the Technologies Division's wholesale markets. Performance was improved in each of the following key financial metrics:
- Revenue up 18% to £19.7 million (2008: £16.7 million).
- Gross profit up 19% to £7.6 million (2008: £6.4 million).
- Underlying EBITDA* up 61% to £1.5 million (2008: £0.9 million).
The 18% increase in Group revenue is pleasing given the difficult economic conditions, but even more so is the 53% growth in Business Division revenues largely offsetting a 5% decline in the lower margin, wholesale services from the Technologies Division. The increasing contribution from our Business Division represents a significant change in the Group's earnings profile. The majority of the Business Division's revenues are generated from long-term contracts, of up to seven years, providing a greater level of earnings visibility to the Group as a whole.
The 61% increase in underlying EBITDA* demonstrates the success of our "Acquire, Integrate, Grow" model.
In particular, we are able to convert significant elements of gross profit directly into EBITDA by bolting acquisitions quickly and efficiently onto our already established operations and existing cost base. By effective profiling of newly-acquired customers, we then identify and pursue cross-sale opportunities.
The loss before taxation for the year was £1.7 million (2008: £4.0 million loss), after deducting non-cash finance charges of £0.8 million (2008: £3.1 million). The non-cash finance charges relate to IFRS costs on modification and conversion of indebtedness to Penta.
Since the year end we have agreed a proposed balance sheet restructuring with Penta converting up to £6.9 million of debt into equity at a price of 0.6p per ordinary share. This follows on from a similar £2.6 million debt to equity conversion by Penta in May 2008.
The Directors believe that the proposed conversion of Penta debt will benefit SpiriTel in a number of ways. The Company will have a much stronger balance sheet, unencumbered by £6.9 million of Penta indebtedness and, at the conversion price, the proposed conversion will significantly increase the market capitalisation of the Company. In addition, the Company will not be liable for the £550,000 annual interest cost which is due to accrue from May 2010. With a stronger balance sheet SpiriTel will be better positioned to raise capital and continue its recent successful acquisitive strategy, focusing on earnings enhancing transactions. Penta's support for SpiriTel is invaluable and we thank them for their continued faith in our business model and management team.
We also continue to benefit from the support of Clydesdale Bank. During the year under review we secured an extension to our loan facility to fund the acquisition of ED Communications and at the year end we had a total facility of £3.4million with the bank. In May 2009 the Group's facilities were increased to £4.5million, repayable over five years.
Strategy
Despite the ongoing consolidation in our sector, the UK telecommunications market remains highly fragmented. This, alongside the accelerating demand from customers for converged, IP-based services, provides the opportunity for us to further execute the Group's "Acquire, Integrate, Grow" strategy. Our strategy is to grow shareholder value through selective, earnings enhancing acquisitions, followed by consistent organic growth being driven by cross-selling our integrated product portfolio.
SpiriTel continues to pursue selective acquisitions as we look to build a business with the operational scale and the broad product offering that business and corporate consumers increasingly demand. Having completed six acquisitions, led by the same management team, not only are we clear on the type of businesses that we are looking for in terms of quickly adding value to the Group, but we are also experienced in the critical phase of integration, which commences well in advance of completion of the deal. All acquisitions now follow the same integration framework which was developed internally to meet our corporate objectives. The process is led by a senior member of the management team and helps ensure that we maximise both cost and revenue synergy opportunities, whilst minimising disruption to the Group and the newly-acquired business.
We expect to continue to target growth through earnings enhancing acquisitions and following the proposed restructure of our balance sheet, we expect to be well positioned to raise new capital to deploy in the acquisition of new customers and products in order to enhance earnings.
In recent months we have been particularly encouraged by our successes in cross-sales of our growing product range to existing customers. During the 12 month period to April 2009, we secured cross-sales contracts valued at more than £7 million. This is contracted and recurring revenue and delivers a new level of earnings visibility to the Group. During the year we profiled our expanded customer base and estimated that our existing customers are spending a total of over £80 million on telecoms services that SpiriTel could potentially provide from our current product portfolio. Although rapidly growing, our penetration of this spend is currently less than 15% which illustrates the upside opportunity which we intend to exploit by deploying our successful cross-selling strategy.
Acquisitions
SpiriTel continued its recent series of acquisitions this year with the purchase of ED Communications, which added approximately 700 business customers who were rapidly integrated into our Networks line of business. This acquisition provides a typical example of how the Group is now able to bolt on a customer base efficiently and then enhance its contribution through cost synergies and cross-selling. The total consideration for this company will total £1.4 million, including earn out.
The full year contribution from mobile business WN1, acquired in April 2008, proved even more successful than we had hoped and this line of business continues to deliver strong organic growth. WN1 is highly profitable and, by adding a range of mobile voice and data services, the transaction completed our integrated product portfolio. Since the year end, converged voice and data mobile solutions have grown to over one third of our total mobile sales. Not only are we delighted with the earnings contribution from WN1, now integrated as SpiriTel Mobile, but the mobility offering is a differentiator in comparison to many competitors who are limited to a fixed line offering.
During the year we looked closely at a number of acquisition opportunities, including several larger companies. We believe we have demonstrated our ability to grow shareholder value from the selective addition of bolt on acquisitions and we continue to actively pursue opportunities which deliver short-term earnings enhancement benefits and cross-sell opportunities.
Operations
SpiriTel's customer base now numbers some 2,300 separate accounts for business and public sector companies and organisations. Greater customer numbers result in increased cross-selling opportunities and although we focus on larger customers more than many of our competitors, the size of the base is an obvious, yet important key performance indicator for the Business Division. The current customer base is 53% larger than at April 2008 and 227% above 2007 levels.
Our customers are served by our two complementary Divisions: SpiriTel Business and SpiriTel Technologies - working alongside and supporting each other. The Business Division has three lines of business: IP Communications, Networks and Mobile. SpiriTel IP Communications provides an advanced range of IP networking services to business customers alongside traditional structured cabling, equipment and maintenance services. SpiriTel Networks offers fixed line services including calls, lines and broadband. SpiriTel Mobile provides mobile voice and data services, including BlackBerry and other converged voice and data services.
Whilst ensuring our team delivers an exceptional level of customer service, during the year we have focused on cost control and despite the EDC acquisition and the associated addition of 700 new customers staff numbers have only risen to 109 at the year end. (2008: 104). We continue to offer nationwide engineering coverage to our customers along with 24/7/365 support. We have also been able to reduce our cost base through the utilisation of our own technological expertise in the remote management of customer sites. Over 70% of customer faults reported to our IP Communications service team are now fixed remotely from our operations centres in London and Wigan, with no employee visit to the customer's site being required.
A key aspect of our Business Division is its ability to act as a one stop shop for business customers by providing a fully integrated product offering. Whilst we remain cautious on heavy investment in the research and development of new technology, our strategic partnerships with leading vendors such as O2 and Mitel enable us to remain well positioned to capitalise on the rapidly changing telecoms market.
Of particular note is the continued growth of our hosted VoIP offering, where extensions sold and supported grew by 86% over the year. Major contract wins included hosted VoIP, as part of a managed services contract, across Young & Co Brewery's estate and SpiriTel's success was recognised when we won the VoIP Solution of the Year award in October 2008 at the National Comms Business Awards. SpiriTel also won a number of other industry awards over the past year and continues to build on the excellent relationships that we have forged with industry leading partners including 02, BlackBerry and Mitel. Our newly acquired Mobile business also achieved 02 Centre of Excellence status in August 2008.
To support integration of acquisitions and ensure we maximise the cross-sell opportunity for all acquired customer bases, we implemented a Group-wide CRM facility during the year. Following several notable cross-selling wins in early 2009, we achieved our largest cross-sale to date in May 2009, a 30 month network services deal with a global hotel group that is expected to generate up to £4 million in revenue over the contract term. The deal involved SpiriTel replacing BT, that still has an estimated 50% total market share, as supplier. The contract win provides evidence of our ability to service major corporates as well as our 2,300 SME customers and also illustrates clearly the steps we are taking to maximise the significant cross-sell opportunities we are identifying.
Summary and outlook
The year to 30 April 2009 was a year of significant progress for SpiriTel. We delivered strong revenue growth and an even greater uplift in underlying EBITDA*. We also continued to gain widespread recognition for the quality of our IP-based services and the innovation we have demonstrated in the delivery of converged communications services.
Our strategy of targeted acquisitions which bring immediate earnings enhancement, and ongoing cross-sell opportunities, has seen revenue and profits rise substantially in the past year, as we start to benefit from full contributions from acquisitions. We have a highly scalable model where we can bolt on new, earnings enhancing assets whilst maintaining the delivery of consistent organic growth.
Whilst we have felt the challenges of a severe economic downturn and more specifically an ongoing, declining profitability in the wholesale markets, the contribution from our rapidly growing Business Division is very encouraging. We have demonstrated our ability to enhance earnings through acquisitions, followed up by significant cross-selling successes from our range of converged products and services into both new and existing customer bases. Although we are not immune to the impact of a recessionary economic environment, our product set is naturally defensive and our downside exposure is mitigated. We are witnessing a renewed and growing interest in cost savings that are prompting new sales opportunities. Our ability to add value to our customers through innovative and cost effective solutions, gives us confidence about our prospects through the economic downturn.
SpiriTel has an experienced and energised management team, and a highly skilled and committed staff who have together proved their ability to execute strategy. The foundations are in place to deliver ongoing value to shareholders and I look forward to the coming year with confidence.
Alastair Mills
Chief Executive
30 September 2009
* Operating profit after adding back charges for depreciation, amortisation, share-based payments and exceptional costs.
CONSOLIDATED INCOME STATEMENT
Year ended 30 April 2009
| 2009£000 | 2008£000 | ||
| Continuing operations | |||
| Revenue | 19,718 | 16,674 | |
| Cost of sales | (12,087) | (10,259) | |
| Gross profit | 7,631 | 6,415 | |
| Administrative expenses | (8,280) | (7,261) | |
| Underlying EBITDA | 1,514 | 938 | |
| Depreciation | (212) | (180) | |
| Share-based payments | (204) | (190) | |
| Exceptional costs | (663) | (620) | |
| Amortisation of other intangible assets | (1,084) | (794) | |
| Operating loss | (649) | (846) | |
| Operating loss | (649) | (846) | |
| Finance income | - | 5 | |
| Finance costs | (1,059) | (3,206) | |
| Loss before taxation | (1,708) | (4,047) | |
| Tax credit | 774 | 289 | |
| Loss for the financial year | (934) | (3,758) | |
| Loss per share in pence | |||
| Basic and diluted | (0.16) | (1.19) |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
| Share capital£000 | Share premium£000 | Reverse acquisition reserve £000 | Otherreserves£000 | Retained losses£000 | Total£000 | |
| Balance at 1 May 2007 | 3,162 | 4,550 | (5,763) | 97 | (6,107) | (4,061) |
| Loss and total recognised loss for the financial year | - | - | - | - | (3,758) | (3,758) |
| Credit for equity-settled share-based payments | - | - | - | 190 | - | 190 |
| Equity component of compound financial instruments | - | - | - | 333 | - | 333 |
| Transfer between reserves | - | - | - | (55) | 55 | - |
| Balance at 30 April 2008 | 3,162 | 4,550 | (5,763) | 565 | (9,810) | (7,296) |
| Loss and total recognised loss for the financial year | - | - | - | - | (934) | (934) |
| Credit for equity-settled share-based payments | - | - | - | 204 | - | 204 |
| Issue of share capital (net of expenses) | 3,114 | 385 | - | - | - | 3,499 |
| Modification and conversion of financial instruments - equity component | - | - | - | 1,545 | - | 1,545 |
| Transfer between reserves | - | - | - | (349) | 349 | - |
| Balance at 30 April 2009 | 6,276 | 4,935 | (5,763) | 1,965 | (10,395) | (2,982) |
CONSOLIDATED BALANCE SHEET
As at 30 April 2009
| 2009£000 | 2008£000 | ||
| Assets | |||
| Non-current assets | |||
| Goodwill | 5,695 | 5,292 | |
| Other intangible assets | 4,484 | 4,392 | |
| Property, plant and equipment | 696 | 438 | |
| 10,875 | 10,122 | ||
| Current assets | |||
| Inventories | 384 | 353 | |
| Trade and other receivables | 2,493 | 2,151 | |
| Cash and cash equivalents | - | 1,058 | |
| 2,877 | 3,562 | ||
| Total assets | 13,752 | 13,684 | |
| Current liabilities | |||
| Trade and other payables | (4,471) | (4,595) | |
| Borrowings | (1,536) | (457) | |
| Obligations under finance leases | (61) | (84) | |
| Current tax payable | (36) | (442) | |
| (6,104) | (5,578) | ||
| Non-current liabilities | |||
| Trade and other payables | (116) | (432) | |
| Borrowings | (9,468) | (13,603) | |
| Obligations under finance leases | - | (55) | |
| Deferred tax liabilities | (1,046) | (1,312) | |
| (10,630) | (15,402) | ||
| Total liabilities | (16,734) | (20,980) | |
| Net liabilities | (2,982) | (7,296) | |
| Equity attributable to equity holders of the parent | |||
| Capital and reserves | |||
| Share capital | 6,276 | 3,162 | |
| Share premium | 4,935 | 4,550 | |
| Reverse acquisition reserve | (5,763) | (5,763) | |
| Other reserves | 1,965 | 565 | |
| Retained losses | (10,395) | (9,810) | |
| Total equity | (2,982) | (7,296) |
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 30 April 2009
| Note | 2009£000 | 2008 £000 | |
| Cash flows from operating activities | |||
| Loss before taxation | (1,708) | (4,047) | |
| Adjustments for: | |||
| Net finance costs | 1,059 | 3,201 | |
| Depreciation and amortisation | 1,296 | 974 | |
| Impairment of tangible fixed assets | - | 64 | |
| Impairment of intangible fixed assets | 113 | - | |
| Impairment of goodwill | 199 | - | |
| (Increase)/decrease in inventory | (31) | 63 | |
| Increase in receivables | (146) | (17) | |
| (Decrease)/increase in payables | (1,168) | 617 | |
| Equity-settled share-based payments | 204 | 190 | |
| Interest paid | (230) | (135) | |
| Cash (used in)/from operating activities | (412) | 910 | |
| Income taxes paid | (259) | - | |
| Net cash (used in)/from operating activities | (671) | 910 | |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries net of cash acquired | 2 | (797) | (998) |
| Payment of deferred and contingent consideration | (382) | (1,227) | |
| Purchase of property, plant and equipment | (470) | (229) | |
| Net cash used in investing activities | (1,649) | (2,454) | |
| Cash flows from financing activities | |||
| Net proceeds from issue of share capital | 333 | - | |
| Proceeds from borrowings (net) | 480 | 2,347 | |
| Payment of finance lease liabilities | (78) | (67) | |
| Net cash from financing activities | 735 | 2,280 | |
| Net (decrease)/increase in cash and equivalents | (1,585) | 736 | |
| Cash and equivalents at beginning of year | 1,058 | 322 | |
| Cash and equivalents at end of year | (527) | 1,058 |
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The financial information in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU) under the accounting policies set out in the financial statements of Spiritel plc for the year ended 30 April 2008. These accounting policies have remained unchanged for the financial year ended 30 April 2009.
This financial information has been prepared under the historical cost convention, except for the revaluation of certain financial instruments. The financial information set out in this announcement does not constitute the Group's statutory accounts for the years ended 30 April 2009 or 30 April 2008, but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts and their reports were unqualified.
2. Business combinations
On 4 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 | 800 |
| Contingent consideration under earn out agreement payable in cash (discounted) | 90 |
| Deferred consideration payable in cash (discounted) | 426 |
| Due diligence fees | 36 |
| Other professional fees | 54 |
| 1,406 |
A maximum of £1,700,000 of consideration may become payable depending on the level of gross profit achieved by the business during July 2009. In the opinion of the Directors, the likely amount of contingent consideration payable is £100,000.
The assessment of the fair values of the assets and liabilities of ED Communications Limited for each class of the acquiree's assets and liabilities recognised at the acquisition date are as follows:
| Book value £000 | Fair value adjustments£000 | Fair value to the Group£000 | |
| Intangible fixed assets identified | - | 1,289 | 1,289 |
| Property, plant and equipment | 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 | (40) | - | (40) |
| Other payables | (175) | - | (175) |
| Deferred tax | - | (361) | (361) |
| Total liabilities | (268) | (361) | (629) |
| Net assets acquired | 69 | 831 | 900 |
| Goodwill arising on the acquisition | 506 | ||
| Consideration | 1,406 | ||
| Satisfied by: | |||
| Cash | 890 | ||
| Deferred and contingent consideration to be settled in cash (discounted) | 516 | ||
| 1,406 |
Goodwill on the acquisition of ED Communications Limited is largely attributable to the cross-selling opportunities.
During the period from the date of acquisition to 30 April 2009, ED Communications Limited generated revenue of £1,121,000 and an operating profit of £287,000. Due to the lack of IFRS specific data for ED Communications Limited prior to its acquisition, the pro-forma revenue and profit of the Group, had this acquisition taken place on 1 May 2008, have not been disclosed as they cannot be reliably determined.
Reconciliation to the consolidated statement of cash flows:
| Cash consideration | 890 |
| Cash and cash equivalents acquired | (44) |
| Refund of WN1 Limited consideration - completion accounts adjustments | (49) |
| Net cash flow arising on acquisitions | 797 |
3. Post balance sheet events
During September 2009, the Company entered into an agreement with Penta Capital LLP, the manager of the Penta Funds, for the modification of the conversion terms attaching to the Penta loans, loan notes and redeemable preference shares. The agreement is conditional upon the following:
the granting of a waiver by the Panel on Takeovers and Mergers of the requirement under Rule 9 of the City Code on Takeovers and Mergers, that would otherwise arise on Penta Fund 1 Limited Partnership and Penta Fund 1 SP Limited Partnership (the "Penta Funds"), to make a general offer to shareholders of the Company as a result of the allotment of new ordinary shares to the Penta Funds which would take the aggregate holding of the Penta Funds to greater than 50% of the issued ordinary share capital.
a review of the conversion terms by the Company's nominated adviser and confirmation that the directors consider the terms of conversion are fair and reasonable so far as the SpiriTel shareholders are concerned
approval of the waiver and modification of the conversion terms by the ordinary shareholders at an Extraordinary General Meeting.
Subject to shareholder approval at an Extraordinary General Meeting:
all of the current rights to convert the Company's indebtedness to the Penta Funds into ordinary shares will lapse immediately
all of the current rights to interest on the Company's indebtedness to the Penta Funds will lapse immediately
the Penta Funds will immediately convert up to £6.85 million of the Company's indebtedness into ordinary shares of the Company at the price of 0.6p per ordinary share so that, following this conversion, the Penta Funds aggregate holding will represent up to 82.3% of the Company's issued ordinary share capital.
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. It will also be possible to download the Annual Report and Accounts from the Group's website www.spiritel.com