STP.L Regulatory News (STP)

18 Oct 2007 07:01

Spiritel PLC18 October 2007 Embargoed until 07.00, 18 October 2007 SPIRITEL PLC ("Spiritel" or "The Group") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 APRIL 2007 Spiritel plc (AIM: STP), the telecommunications services business todayannounces preliminary results for the year ended 30 April 2007. Commenting on the results, Lord St. John of Bletso said: "The year to 30 April2007 has been one of rationalisation, acquisition and integration for Spiritel.Our adopted strategy to acquire complementary and earnings enhancing businessesto deliver scale and profitability has been applied consistently. As a result,we have seen particular progress via acquisition in the Business division ofSpiritel supported by higher margins in our Technologies division." Summary: •Three transformational acquisitions made during the year €1,000 new business customers and expansion in the range of Group products and services •New management team •Proven delivery of outlined strategy, with platform for the next phase of growth •Post year end - •Return to cash generation and EBITDA profitability •Major hosted VoIP trial with Regent Inns •Senior debt facility arranged Chief Executive, Alastair Mills added: "This has been a transformational yearfor Spiritel. We have acquired and integrated three new businesses into theGroup and grown our customer base and product portfolio to record levels.Spiritel now has over 1,000 SME and corporate clients and we have built upon ourexisting expertise in IP based communications to launch a new range of convergeddata and hosted VoIP services alongside traditional voice and data products.Most significantly, since the year end, the Group has moved into EBITDAprofitability." For further information please visit www.spiritelplc.com or contact: Spiritel plc Tavistock Communications Landsbanki SecuritiesAlastair Mills Simon Hudson Sindre OttesenChief Executive Clemmie Carr Sebastian JonesTel: +44 20 7160 0100 Tel: +44 20 7920 3150 Tel: +44 20 7426 9000 Chairman's statement Introduction I am pleased to report on what has been a significant turnaround year forSpiritel. The Group has grown into its new dual Technologies and Businessstructure and made substantial progress towards turning losses of previous yearsinto EBITDA profitability and cash generation. We achieved positive EBITDAshortly after the year end and expect to report an operating profit for the yearto 30 April 2008. The year to 30 April 2007 has been one of rationalisation followed byacquisition and integration for Spiritel. Our adopted strategy to acquirecomplementary and earnings enhancing businesses to deliver scale andprofitability has been applied consistently. As a result, we have seenparticular progress via acquisition in the Business division of Spiritelsupported by higher margins in our Technologies division. Results Group turnover for the year was £13.6 million (2006: £15.6 million). Decreasesin wholesale voice revenues due to challenging market conditions and a focus onmore profitable revenue streams were offset by new turnover and profits from thenewly established Business division. The part year contribution from SpiritelBusiness, which recorded a 50% gross margin, resulted in overall gross marginimprovement from 12.2% to 14.9%. The restructuring of the Group into two complementary divisions resulted insignificant charges to operating profits, as detailed in the financialstatements. The reported operating loss of £2.396 million (2006: £0.737 million)includes goodwill amortisation and exceptional items of £1.168 million (2006:£nil). Adjusting for these costs produces an operating loss of £1.228 million(2006: £0.737 million). The loss before taxation was £3.010 million (2006:£0.751 million). The key metric used by the Board in assessing financialperformance is adjusted operating profit (operating profit adjusted fornon-trading items and depreciation). Adjusted operating profit for the currentyear was a £0.644 million loss (2006: £0.294 million loss). The reported figures for the year ended 30 April 2007 do not highlight theprogress that we have made as almost all of the loss was incurred during thefirst half when the contribution from Spiritel Business was negligible. Thesecond half saw significant progress towards profitability and we are confidentthat we will report an operating profit during the year to 30 April 2008. For a fuller explanation of results for the year ended 30 April 2007 please seethe Financial review from CEO Alastair Mills. Restructure The Group is progressing its business model of acquiring communications serviceproviders which leverage our existing business and allow us to move closer tothe end customer. Spiritel's operating activities have been restructured intotwo clear business areas: Spiritel Technologies (replacing Spiritel Wholesale)and Spiritel Business (replacing Spiritel Retail). Spiritel Technologies is now focused on building upon its experience andexpertise in IP technology, whilst continuing to provide voice terminationservices. It also manages and maintains the network infrastructure for its ownand Spiritel Business's growing operations. Spiritel Business provides abroadening range of communications products and services to business users andnow has over 1,000 corporate and SME clients. Acquisitions During the year, the Group progressed its acquisition strategy by acquiringthree businesses, now fully integrated into Spiritel Business. All have addednew customer relationships and complementary products and services. The first acquisition was CallPlan Limited in September 2006, which was followedwith Networks Direct (UK) Limited in October 2006. Our most significantacquisition to date came in March 2007 with Ashland Group Limited. Ashland haschanged the scale of the Group's infrastructure, with new technical support,nationwide engineering coverage, 24/7 customer care, retail billing,telemarketing and sales. Based in Wigan, Ashland has become the platform for theongoing growth of the Business division through further acquisitions and willenable us to extract savings through synergies from future transactions. All three acquisitions completed during the year have been earnings enhancingfrom completion and now offer organic growth opportunities through the crossselling of products and services throughout the enlarged customer base.Importantly, our acquisitions for Spiritel Business have increased our earningsvisibility, as we have gained strong customer relationships with contractedmaintenance and support revenues. Strategy Spiritel's goal is to deliver consistent and growing profitability. There arethree stages to our strategy to achieve this: the first is to acquire sub-scaleresellers, which will grow both our customer and product base. The second stageis to fully integrate those businesses into the Group so as to deliversynergistic savings and broaden our product offering. The third stage is tofocus on organic growth based on an expanded range of services and an enlargedcustomer base. By selling more products to each customer, we will increaseaverage revenue per user, reduce churn and enhance margins. Via this strategy ofacquisition, integration and growth we are evolving Spiritel into a completeprovider of converged voice and data services. It is in this way that we intend to deliver value to shareholders, including thegeneration of appropriate returns for our new and old investors alike. Board There have been a number of changes to the Board and senior management teamdesigned to support the Group's new business model and structure. Last year weappointed Steven Maine to the position of Deputy Chairman. Steven is a formerCEO of Kingston Communications plc and has been on our Board since April 2006.Following the acquisition of Ashland in March 2007, Anthony Vose joined theBoard and is now a Non-Executive Director. In May 2007, we appointed RonnieSmith to the Board as Group Finance Director. Ronnie, who joined us in July2006, has been a key member of the new management team and has contributedsignificantly to the Group's development in recent months. I would like to take this opportunity to thank the founders of the Company, MarkWillard and John Vergopoulos, for their contribution since listing. John steppeddown as a Director in October 2006 and Mark in March 2007 to pursue otherbusiness interests. Current trading and outlook During the year we gained a new range of products and services, relationshipswith over 1,000 business customers and have put in place a new Board andmanagement team capable of continuing the excellent progress we have made. Sincethe year end we have returned to EBITDA profitability; a significant achievementfor Spiritel and testament to the Group's successful implementation of ourstated business plan and strategy for growth. Our recent progress in the development and delivery of emerging IP basedservices, as evidenced by the VoIP/Wi-Fi trial for Regent Inns, gives usparticular cause for optimism. Whilst still offering the full range oftraditional voice and data services to business customers, our ability todemonstrate the IP product roadmap to customers is a differentiator for Spiriteland one that we expect to generate significant revenues in the near future. Whilst giving attention to the organic growth opportunities available fromhaving new products to sell to an enlarged customer base, we intend to continueour assertive acquisition policy and remain on the lookout for additionalearnings enhancing transactions, with a number presently under review. I believe that the skills and experience of our invigorated team combined withthe effectiveness of our business model and strategy for growth will enable usto make the most of the opportunities we see in the coming year. Lord St John of Bletso Chairman17 October 2007 Chief Executive's review Overview This has been a transformational year for Spiritel. We have acquired andintegrated three new businesses into the Group and grown our customer base andproduct portfolio to record levels. Spiritel now has over 1,000 SME andcorporate clients and we have built upon our existing expertise in IP basedcommunications to launch a new range of Wi-Fi and VoIP services alongsidetraditional voice and data products. We have successfully repositioned the Groupto focus on business end-users and we now offer a broader variety of services tomore customers. We have developed a robust business model that will deliver cashgeneration and earnings visibility. Ultimately we are building a business ofscale which is successfully competing with much larger rivals in the delivery ofcommunications products and servicesto UK businesses. We have now completed the restructure of the Group. Our Technologies division,apart from servicing its own blue chip customers, provides the competitive costbase and advanced engineering environment that has enabled the Business divisionto compete strongly on voice and data pricing and provide exceptional quality inthe delivery of IP based services. We are confident that together the twodivisions enhance the Spiritel product proposition. Spiritel Business During the year, Spiritel Business has established itself as one of the fewcompanies that can provide a full service offering covering fixed line andmobile services, telephone system installation and maintenance, and thedevelopment and delivery of emerging IP based voice and data products. Spiritel Business was established by combining the three acquired businesses,Ashland Group, CallPlan and Networks Direct (UK), to create a division that isstructured across three discrete but complementary product lines, namely,Networks (fixed line voice, broadband and line rental), IP Communications(telephone systems, Wi-Fi and VoIP) and Mobile. The acquisition and integration of three established businesses has broughtscale to the Group, including nationwide engineering coverage and a back officeinfrastructure capable of delivering the level of customer service and supportexpected by our SME and corporate customers. Establishing this level of scale isa significant achievement as we look to grow our product range and customerbase, organically and through acquisition. From its Wigan base, SpiritelBusiness has the infrastructure to integrate future acquisitions swiftly and sodeliver synergies and cross selling opportunities. In addition to creating a platform on which we can build the Business division,the acquisition of Ashland also brought a leading position in the delivery oftelephony and data services to the hospitality sector including, amongst others,Marriott, Whitbread, Spirit and Regent Inns. These blue chip customers take agrowing range of services from Spiritel Business such as structured cabling andtelephony systems and have provided recent contract successes to supply hostedVoIP and Wi-Fi solutions. We are confident that during the year ahead we canbuild upon our strength in the hospitality sector by broadening our productportfolio and cross selling new products into this well established customerbase. The acquisitions have also brought key vendor relationships that provideconfidence over quality of service and underpin our product development work.CallPlan achieved Telstra Platinum accreditation during the year (the firstreseller in Europe to gain such status) and Ashland continues to enjoy an awardwinning relationship with Mitel - whose latest products are being used for ourhosted VoIP trials currently in progress. Our objective is that customersrecognise Spiritel Business as a fully accredited centre of excellence. We planto develop more key partnerships and alliances as we continue to grow SpiritelBusiness. Spiritel Technologies Spiritel Technologies continues to play a key part in the Group's success bygenerating significant earnings from wholesale voice services and fulfilling acritical support role for Spiritel Business in terms of design and management ofnetwork infrastructure and product development. During the year we focused on higher margin routes from wholesale voiceservices, resulting in gross margins increasing from 7% in May 2006 to 15% byApril 2007. Post year end, gross margins have increased further to 17%. SpiritelTechnologies is increasingly focusing on IP technology where our experience andinfrastructure are enabling us to support Spiritel Business in the design andsupply of VoIP and related technology to end users. Our recent success withRegent Inns was achieved by close co-ordination between the Technologies andBusiness divisions. In addition to network management and product development, Spiritel Technologiesis also supporting Spiritel Business through voice and data quality monitoring,IT services and Group voice and data procurement. This is a critical componentof our "acquire, integrate and grow" strategy and has enabled us to rapidlyintegrate our acquisitions into the new Group structure and strengthen our crossselling proposition. Strategy and progress - acquire, integrate, grow The progress we have achieved this year stems from the implementation of ourbusiness model and the execution of our stated strategy for growth. Threesuccessful acquisitions, restructuring our business into two divisions and theresulting return to EBITDA profitability post year end are evidence of thesuccess of this strategy. In its simplest form our strategy is to acquire, integrate and grow. We havedemonstrated that we can execute attractively priced acquisitions and areconfident that we can continue to do so within an industry characterised by theconsolidation of sub-scale telecoms resellers in a fragmented marketplace. We have developed an integration framework that enables us to plan for anddeliver value from each transaction, in terms of synergies and cross selling.Our ability to promptly integrate acquisitions within Spiritel Business has andwill allow us to maximise the benefits in terms of customer value, productpropositions, earnings enhancement and strong cash flow. Our acquisition criteria include new customer bases into which we can deliverthe full range of Group products, bolt-on acquisitions that can deliver savingsthrough synergies and the addition of new products/services that we can crosssell into our existing customer base. We have recorded successes in all theseareas during the year and it is the cross selling of existing and new productsthat will deliver the organic growth in the year ahead. Management During the year we welcomed Jonny Shanmuganathan as Managing Director ofSpiritel Technologies. Jonny joined us from NASDAQ listed Arbinet, where he wasVice President for Sales in EMEA. Jonny has been instrumental in thetransformation of Spiritel Technologies and its focus on the IP based servicesthat are supporting the growth and development of Spiritel Business. We are also pleased to confirm the appointment of David Anahory as ManagingDirector of Spiritel Business. David, who was a commercial director withCarphone Warehouse, joins us on 1 November 2007. David brings considerableexperience from his senior roles with One Tel and Carphone Warehouse and we lookforward to his contribution as Spiritel Business continues to focus on bothacquisitive and organic growth. Further to this Ronnie Smith joined the Board as Group Finance Directorfollowing our year end. With the acquisition of three businesses during the year our Group now comprisesover 80 staff, up from 15 last year. This provides us with the scale andresource needed to support our customers and deliver our growth targets in theyear ahead. Financial review Group turnover decreased to £13.649 million (2006: £15.564 million) due to acombination of continuing tough conditions in Spiritel Technologies' traditionalwholesale voice markets and the implementation of a programme to eliminateunprofitable revenues. The latter delivered gross margins from continuingoperations of 11.1% during the second half of the year, compared to 9.2% duringthe first half. The three businesses acquired during the year to form Spiritel Business,contributed £1.627 million to turnover - seven months from CallPlan, six monthsfrom Networks Direct and two months from Ashland Group. The gross margin of 50%from Spiritel Business increased Group gross margin to 14.9% (2006: 12.2%). The restructuring and refocusing of the Group resulted in substantialexceptional costs being incurred during the year. Most of these costs werenon-cash items from writing down those investments in tangible and intangiblefixed assets where the carrying value was not commensurate with revenues andprofits. During the year the Group recorded an operating loss before goodwillamortisation and exceptional items of £1.228 million (2006: £0.737 million). Inassessing the progress in the Group's financial results, the Directors reviewAdjusted Operating Profit (after adding back non-trading items and depreciationof £0.584 million). Non-trading items for the year include launch costs for 118918 and the FRS 20 charge for share options. The adjusted loss of £0.644 million(2006: £0.294 million) is in line with management expectations. Almost all ofthe adjusted operating loss was incurred during the first half of the year withclose to break even performance during the second half. The profitability ofSpiritel Business was the main contributor to the significant performanceimprovement in the second half of the year. Since year end the Group has recorded positive EBITDA. This will be reported inthe results for the six months to 31 October 2007 which will be the first set ofpublished results to include full contributions from both divisions. We areconfident that as progress continues in the Business division and core revenuesand earnings stabilise within Spiritel Technologies we will report an operatingprofit for the year ending 30 April 2008. In June 2007 we obtained shareholder approval to amend the terms of PentaCapital's debt and preference shares to give conversion rights over ordinaryshares at a premium to the share price. This has substantially reduced ourongoing interest costs and provides potential to strengthen our balance sheet onexercise of the conversion rights. In July 2007 we secured a £1.375 million debtfacility from Clydesdale Bank to restructure debt and provide access to funds toexecute our strategy of acquisitive and organic growth. We also brought a majorinstitutional investor on board. Summary and outlook This year has been the most significant in the Group's history. We announced anew strategy and made great progress in its execution by acquiring threeearnings-enhancing businesses that significantly broaden our product portfolioand customer base. We are now trading at an EBITDA positive level and we aim tomaintain this progress as we remain on the acquisition trail and have a numberof attractively priced potential targets in our sights. The recent announcement of the hosted VoIP trials, won against two of thelargest companies in our sector, marked a breakthrough for the Group. The winconfirmed our position as a market leader in the provision of IP based servicesand we anticipate this area delivering significant growth in the year ahead. Wehope to make further announcements with regard to the roll out of advancedhosted VoIP services to some of our blue chip customers in the hospitalitysector. The outlook for the remainder of the current financial year is positive. We nowhave an EBITDA profitable Group with an impressive breadth of products andservices that we are selling to a growing SME and corporate customer base. Wehave put in place the groundwork from which to maintain the growth we havestarted to see across the whole Group. We have a new and energised managementteam operating within two clearly defined divisions, both of which have solidprospects for expansion. Our progress in terms of customer numbers, product set,earnings and cash generation is clear. We look forward to furthering thismomentum in this financial year and beyond. The progress could not have been delivered without the dedication and commitmentof the expanded Spiritel team. I would like to take this opportunity to thankthem for their hard work and achievements this year. I look forward to buildingupon what we have achieved so far and continuing our drive to return value toour shareholders through the consistent application of our proven strategy forgrowth in the coming year. Alastair Mills Chief Executive17 October 2007 Consolidated profit and loss accountFor the year ended 30 April 2007 Before goodwill Goodwill amortisation amortisation and and exceptional exceptional items items Total Restated 2007 2007 2007 2006 Audited Audited Audited Audited Note £'000 £'000 £'000 £'000--------------------------------------------------------------------------------Turnover - continuing operations 12,022 - 12,022 15,564 - acquisitions 1,627 - 1,627 --------------------------------------------------------------------------------- 2 13,649 - 13,649 15,564Cost of sales (11,613) - (11,613) (13,671)--------------------------------------------------------------------------------Gross profit 2,036 - 2,036 1,893 Administrative expenses--------------------------------------------------------------------------------Other administrative expenses (3,264) (219) (3,483) (2,630)Exceptional administrative expenses 3 - (949) (949) ---------------------------------------------------------------------------------Total administrative expenses (3,264) (1,168) (4,432) (2,630)Operating (loss)/profit - continuing operations (1,464) (1,168) (2,632) (737) - acquisitions 236 - 236 --------------------------------------------------------------------------------- (1,228) (1,168) (2,396) (737)Share of operating loss of joint venture (25) - (25) (16)-------------------------------------------------------------------------------- (1,253) (1,168) (2,421) (753)Net interest (589) 2--------------------------------------------------------------------------------Loss on ordinary activities before taxation 2 (3,010) (751)Tax on loss on ordinary activities 21 82--------------------------------------------------------------------------------Loss on ordinary activities after taxation (2,989) (669)Minority interest 134 26Loss for the financial year (2,855) (643)--------------------------------------------------------------------------------Loss per share in penceBasic and diluted 5 (1.31) (0.45)-------------------------------------------------------------------------------- Consolidated statement of total recognised gains and losses-------------------------------------------------------------------------------- 2007 Restated 2006 £'000 £'000--------------------------------------------------------------------------------Loss for the financial year (2,855) (643)Prior year adjustments (15) -------------Total gains and losses recognised since last financial statements (2,870)------------------------------------------------------------------- Consolidated balance sheetFor the year ended 30 April 2007-------------------------------------------------------------------------------- Restated 2007 2006 Audited Audited £'000 £'000--------------------------------------------------------------------------------Fixed assets Intangible assets 4,859 33Tangible assets 408 864-------------------------------------------------------------------------------- 5,267 897Current assets Stocks 392 -Debtors 3,007 1,016Cash at bank and in hand 322 98-------------------------------------------------------------------------------- 3,721 1,114Creditors: amounts falling due within one year (8,264) (1,919)--------------------------------------------------------------------------------Net current liabilities (4,543) (805)--------------------------------------------------------------------------------Total assets less current liabilities 724 92-------------------------------------------------------------------------------- Creditors: amounts falling due after more than one year 4,812 4,694 Provisions for liabilities 17 18-------------------------------------------------------------------------------- 4,829 4,712 Capital and reservesCalled up share capital 3,162 1,654Share premium account 4,550 2,850Reverse acquisition reserve (5,763) (5,763)Other reserves 97 15Profit and loss account (6,151) (3,376)--------------------------------------------------------------------------------Shareholders' deficit (4,105) (4,620)-------------------------------------------------------------------------------- 724 92-------------------------------------------------------------------------------- Consolidated cash flow statementFor the year ended 30 April 2007-------------------------------------------------------------------------------- 2007 2006 Audited Audited Note £'000 £'000--------------------------------------------------------------------------------Net cash (outflow)/inflow from operating activities 6 (1,177) 31 Returns on investments and servicing of financeInterest received 5 5Interest paid (6) (3)--------------------------------------------------------------------------------Net cash (outflow)/inflow from returns oninvestments and servicing of finance (1) 2TaxationCorporation tax paid (9) (151) Capital expenditure and financial investmentPurchase of tangible fixed assets (101) (655)Sales of tangible fixed assets 6 ---------------------------------------------------------------------------------Net cash outflow from capital expenditure and financial investment (95) (655)AcquisitionsConsideration and expenses (3,456) -Net cash acquired with subsidiary undertaking 646 -Purchase of minority shares in subsidiaryundertaking - (7)--------------------------------------------------------------------------------Net cash outflow from acquisitions (2,810) (7)--------------------------------------------------------------------------------Cash outflow before financing (4,092) (780)FinancingReceipts from borrowing 3,100 450Issues of shares (net of expenses) 1,223 -Hire purchase repayments (7) -Expenses in connection with conversion of loan notes - (2)--------------------------------------------------------------------------------Net cash inflow from financing 4,316 448--------------------------------------------------------------------------------Increase / (decrease) in cash in the year 7 224 (332)-------------------------------------------------------------------------------- Reconciliation of movements in shareholders' deficitFor the year ended 30 April 2007 ---------------------------------------------------------------------- Restated 2007 2006 Audited Audited £'000 £'000----------------------------------------------------------------------Retained loss for the financial year (2,855) (643)Credit for equity settled share based payments 62 15Equity component of compound financial instrument 100 -Issue of share capital (net of expenses) 3,208 1,998----------------------------------------------------------------------Net increase in shareholders' deficit 515 1,370Opening shareholders' deficit (4,620) (5,990)----------------------------------------------------------------------Closing shareholders' deficit (4,105) (4,620)---------------------------------------------------------------------- NOTES TO THE PRELIMINARY ANNOUNCEMENT For the year ended 30 April 2007 1. PRINCIPAL ACCOUNTING POLICIES BASIS OF PREPARATION AND FINANCIAL INFORMATION The financial information in this preliminary announcement has been prepared inaccordance with the accounting policies set out in the financial statements ofSpiritel plc for the period ended 30 April 2006. These accounting policies haveremained unchanged for the financial year ended 30 April 2007, with theexception of the treatment of the Company's share options following themandatory adoption of FRS 20 "Share based payments". The fair value of shareoptions, determined at the date of grant, is recognised as an expense over thevesting period of the options. The 2007 results have been prepared on this basisand the 2006 results have been restated to reflect this change in policy. The financial information in this document does not constitute the Company'sstatutory accounts for the year ended 30 April 2007 or 2006, but is derived fromthose accounts. Statutory accounts for 2006 have been delivered to the Registrarof Companies and those for 2007 will be delivered following the company's AnnualGeneral Meeting. The auditors have reported on these accounts and their reportswere unqualified and did not contain statements under sections 237(2) or (3) ofthe Companies Act 1985. 2. SEGMENTAL INFORMATION The turnover and loss on ordinary activities before taxation are attributable tothe principal activity of the Group. TURNOVER BY DESTINATION 2007 2006 £000 £000---------------------------------------------------------------------United Kingdom 13,424 15,449Europe 199 109United States 26 6 -------- --------Group turnover 13,649 15,564 ======== ======== 3. EXCEPTIONAL ITEMS The following exceptional costs were charged in arriving at the operating lossof the Group: 2007 2006 £000 £000----------------------------------------------------------------------Reorganisation and restructuring costs 151 -Impairment charges 712 -Bad debts written off 86 - -------- --------Total exceptional costs 949 - ======== ======== 4. DIVIDENDS The Directors do not recommend the payment of a dividend. (2006: £nil). 5. LOSS PER SHARE The loss per share is based on the loss of £2,855,000 (2006 restated: £643,000)and 217,231,927 (2006: 142,278,943) ordinary 1p shares, being the weightedaverage number of shares in issue during the year. The share options are notdilutive and therefore a diluted earnings per share calculation has not beenpresented. 6. NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES 2007 Restated 2006 £000 £000----------------------------------------------------------------------Operating loss (2,396) (737)Depreciation 322 428Loss on disposal of tangible fixed assets 12 2Impairment of tangible fixed assets 422 -Amortisation of goodwill 219 -Impairment of goodwill 227 -Decrease in stocks 2 -Decrease/(increase) in debtors 14 (66)(Decrease)/increase in creditors (44) 389Equity settled share based payments 45 15 -------- --------Net cash (outflow)/inflow from operating (1,177) 31activities ======== ======== 7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2007 2006 £000 £000----------------------------------------------------------------------Increase/(decrease) in cash in the year 224 (332)Cash inflow from financing (3,100) (450)Cash outflow from hire purchase agreements 7 - -------- --------Change in net debt resulting from cash flows (2,869) (782)Hire purchase agreements acquired with subsidiary undertakings (184) -Loan notes converted to ordinary shares - 2,000Other non-cash items (488) - -------- --------Change in net debt in the year (3,541) 1,218Net debt at 1 May 2006 (5,046) (6,264) -------- --------Net debt at 30 April 2007 (8,587) (5,046) ======== ======== 8. ACQUISITIONS During the year the Company acquired the whole of the issued ordinary sharecapital of CallPlan Limited, Networks Direct (UK) Limited and Ashland GroupLimited, on 11 September 2006, 13 October 2006 and 2 March 2007 respectively. The net assets acquired, consideration paid and goodwill arising on acquisitionare summarised below: Networks Direct Ashland CallPlan (UK) Group Limited Limited Limited £'000 £'000 £'000----------------------------------------------------------------------Tangible fixed assets - - 205Stocks - - 394Debtors 80 16 1,925Cash 87 - 559Trade and other creditors (34) - (1,220)Hire purchase agreements - - (184)Corporation tax (42) - (220)Deferred tax - - (19) -------- -------- --------Net assets acquired 91 16 1,440Acquisition costs (49) (119) (223)Goodwill 590 1,763 2,683 -------- -------- --------Consideration 632 1,660 3,900 ======== ======== ======== Satisfied by:Cash 405 1,010 1,650Deferred consideration to be settled in cash 227 - 1,000Issue of share capital - 650 1,250 -------- -------- -------- 632 1,660 3,900 ======== ======== ======== 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 from theGroup's website: www.spiritelplc.com This information is provided by RNS The company news service from the London Stock Exchange