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ST1 - SPIRIT TECHNOLOGY SOLUTIONS LTD


nipper
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Spirit Technology Solutions Ltd (ST1), formerly Spirit Telecom Limited, is a telecommunications company which provides Internet, cloud solutions, telephony services and Phone Names in Sydney, Melbourne and Brisbane and the Gold Coast.

 

In the modern shift away from pure telco service provider to a more integrated tech model, the company changed name. At least the code doesn't change, as it is a shift of emphasis, rather than a totally new direction (and the underlying assumption that previous attempt had failed). It is all about Voice, Data and Cloud (not necessarily in that order), and sectioning the market: Domestic, Small to Medium Business, Corporate, and Government.

 

It is a small player, growing like many by acquisition, buying up/ out even smaller resellers and local outfits (ITC Managed Services providers)

May '19 : Link One Group

May '19 : Building Connect

July '19 : Arinda IT

July '19 : Phoenix Austec Group

The in Sept, there were management changes.

Feb '20 : Cloud Business Technology

Feb '20 : Trident & Neptune Group

Sept 20 : Reliance IT

Sept 20 : Beachhead Group

Sept 20 : Altitude IT

Dec 20 : Intalock

 

Of course with this growth and geographical expansion, there is a thirst for capital, with Raisings and SPPs along the way. You would hope the balance sheet is reflecting the expanding business, and the update today shows impressive growth, turning the corner to throw off cash rather than absorb it.

 

Record growth in Q2 21 & H1 21 across all key financial indicators (unaudited):

• Total revenue for the half was $42.7M, up 243% year on year (YoY).

• Total revenue for the quarter was $27.1M, up 338% year on year (YoY) and 73% on Q1 21.

• Q2 21 recurring revenue up 116% YoY to $11.5M and S&P** revenue up 1,768% YoY to $15.6M.

• H1 21 Underlying EBITDA* in the range of $4.1M $4.4M (H1 20 was $1.6M).

• Positive Operating Cashflow for H1 FY21 of $4.3M.

• Healthy balance sheet with $23.3M of cash and available debt as of 31 December 2020.

• Acquisition integrations ahead of schedule.

 

Market has rewarded ST1 with a 10% lift, to a new high

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  • 1 month later...

Record growth in H1 21 across all key financial indicators:

• Total revenue and other income for the half was $44.0M, up 253% year on year

• Total Recurring & S&P revenue for the half was $43.1M, up 246% YoY

• Recurring revenue up 99% YoY to $21.1M and S&P revenue up 1,089% YoY to $22.1M

• H1 21 Underlying EBITDA to $4.4M, up 176% YoY

• NPAT to $0.5M, up 169% YoY

• Positive Operating Cashflow for H1 FY21 of $4.3M.

• Healthy balance sheet with $23.3M of cash and available debt as of 31 December 2020

• Acquisition integrations ahead of schedule

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  • 4 weeks later...

This week, the company announced its intention to divest its consumer infrastructure assets.

 

Spirit’s consumer division provides high-speed internet to thousands of residential customers, primarily in large apartment buildings across Melbourne, Brisbane and Gold Coast. The consumer network and infrastructure assets are in 97 buildings, with access to over ~18,300 possible connections. Spirit has built a dedicated switched ethernet network in these buildings to deliver end-user speeds of up to 1 gigabit, providing a robust connection that any mixed copper model is unable to compete with - at highly competitive pricing. High profile buildings include Eureka Tower, Freshwater Place, Yarra’s Edge complex, Central Equities cluster , Southbank Melbourne and Queensland’s largest residential building Southport Central. The divestment is in line with Spirit’s shift to focus on the business market, from SME to large enterprise. The Consumer assets now account for a small amount of Spirit’s revenue compared to its B2B portfolio of assets.

As Spirit has evolved to a large integrated IT and telecommunications provider, it is in line with our strategy to divest the consumer assets, which are no longer core to our strategy. Proceeds from the divestment will be used to continue to acquire high growth assets across cyber security, cloud and IT services, which are in high demand within our B2B customer base,†“These assets are unique, given the limited competitors servicing these types of residential buildings nationally. We see this divestment returning a material sum of capital to our balance sheet. Additionally, we’ve already had strong interest with several parties enquiring about acquiring these infrastructure and customer assets. said Sol Lukatsky, Managing Director.

another twist on the consolidation likely to occur in the Tier 2 telco/ ICT space.... Look for a capital raising happening?

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  • 2 weeks later...

and in a trading halt

 

Spirit Technology Solutions is readying a $24 million capital raise to buy telecommunications equipment outfit Nexgen.Nexgen includes two businesses, one called Nexgen and the other name Business Telecom, and sells a range of data, security and voice products, like phone systems and conferencing units.

 

The company was forecast to generate between $7.2 million and $7.6 million earnings before interest, tax, depreciation and amortisation in fiscal 2021, and the purchase price implied a 6.5 times earnings multiple.

 

It is understood the purchase would double Spirit’s customer base to more than 10,500 small and medium enterprises.

 

Spirit would fund the deals using a mix of 70 per cent cash, from the capital raising and debt facility from CBA, and 30 per cent scrip, which would come with a vendor performance earn out.

 

.

 

 

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the rationale for the Nexgen acquisition

The acquisition brings over five thousand new clients, and one hundred new sales people to Spirit to drive organic growth, complementary products, scale and will generate an additional $36.0M in revenue with 80% of this as recurring revenue

The synergies look to come from Nexgen success in their systems, of gaining AND retaining clients successfully, with cross selling an attraction, of

Nexgen now able to introduce a number of additional complementary products from Spirit including;

 

Microsoft Teams calling products, Sell Internet/ Data products from Spirit X Platform, IT services, including Microsoft suite and cloud storage solutions, and IT peripherals

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  • 1 month later...

Eighteen months ago, Spirit Telecom (ASX: ST1) offered only high-speed fixed wireless internet, which transpired to be a hiding to nothing as it competed against the monolithic National Broadband Network (NBN).

 

Now known as Spirit Technology Solutions the company has undergone an acquisition and organic sales-fuelled metamorphosis, selling an array of I.T. and telco add-on services to small to mid-sized business, enterprise and not-for-profit clients.

 

https://www.sharecafe.com.au/2021/05/28/acq...ech-incumbents/

 

These days Spirit's client base includes more than 10,000 small businesses and several hundred larger enterprises, essential service providers and many of Sydney and Melbourne's top private schools.

 

The company sells via a combination of direct and wholesale channels as well as resellers and 'white label' arrangements (by which the client sells Spirit products under its own name).

 

 

..... as the company beds down Nexgen it's also put its legacy consumer infrastructure business on the market.

 

Accounting firm BDO is carrying out a formal sales process for the business, which provides high-speed internet for thousands of residential customers in apartment buildings in Melbourne, Brisbane and the Gold Coast.

 

A result is expected by the end of August.

 

CEO Sol Lukatsky says the market will determine the sales price, but notes that at least 20 parties have expressed interest in the difficult-to-replicate assets.

 

The market for those consumer infrastructure plays is really hot, he says. The market will dictate the best price and we will take the best price.
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Lukatsky says as many of Spirit's and Nexgen's customers have only one service, there's a big opportunity to increase this to two to three offerings.

 

Cross selling efforts will be bolstered when Nexgen starts selling Spirit's IT and cyber security products later this year.

 

Lukatsky says Spirit "would have gone backwards" if it had remained an internet only business, given the tumbling cost of data and the difficulty of competing with the government subsidised NBN.

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  • 4 months later...

Spirit Q1 FY 22 – Resilient Revenues of $30.9M  & Balance Sheet Strength

• Q1 FY22 revenues of $30.9M up 98% YoY 

• Positive Underlying EBITDA2 of $2.0M achieved during lockdowns and seasonally slower quarter. In addition to the $2.0M, Spirit received $0.7M in NSW JobSaver payments due to lockdowns, which has been excluded from this market update

• As at 20 October 2021, Spirit had cash of $12.3M and $7.0M available in its CBA debt facility ($19.3M in available capital to access).

• Additionally, $5.1M of capital is being returned from the consumer asset divestment to be used to fund acquisitions, drive organic growth or to meet deferred acquisition payments.

• Structural changes impacting businesses and employee experience accelerating out of COVID driving demand for digital workplace solutions:  Cloud, MSP, Data and Cyber services.

• In October, Spirit is already seeing the SMB market recover, with pent up sales demand expected to come through Q2 and across FY22 H2.

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