Market volatility presents no challenges to Spirit Telecom

By Trevor Hoey. Published at May 14, 2020, in Technology

Spirit Telecom (ASX:ST1) has delivered an impressive revenue and sales trading result for both the month of April and for the January to April 2020 period on a year-on-year basis.

Of particular note were the total revenues of $14.3 million, up 146% on the previous corresponding period.

Providing substantial income predictability is the company’s level of recurring revenue which is up 60% to $8.6 million, with business to business recurring revenue growing by 92% to $7 million on a year-on-year basis.

To provide further context, the company has already generated significantly more group revenue in the course of four months than it did in the six months to December 31, 2019 when revenues were $12.3 million.

As the table below shows, Spirit is establishing itself as a company that consistently delivers robust growth, and this is likely to continue as the benefits of recent acquisitions are realised.

The company has cash and debt of $14.8 million, providing it with the scope to make further acquisitions.

Acquisition of Trident paying dividends

From an operational perspective, Spirit continues to demonstrate successful execution of its strategy of bundling its high-speed Internet, Cloud and IT/MSP services.

The portfolio of products continues to show resilience and growth against the background of a volatile macro-environment.

With the recent acquisition of Trident Technology Solutions, Spirit has been able to tap into Essential Providers serviced by Trident with Schools and Aged Care providers taking up the Spirit Internet services as a cross-sell.

The group result is particularly impressive as Trident’s business mix has seasonal flows in the June quarter, which is typically the slowest quarter for Trident, only generating 15% of its revenue for the financial year.

With the company’s balance sheet in a very healthy position, expansion initiatives could see a broadening of the group’s Spirit X Digital Sales Platform.

NBN launch to reach more than 500,000 business locations

The Spirit X platform will launch the NBN Enterprise Ethernet range to its partners and direct customers in late May 2020.

The NBN product can reach more than 500,000 business locations nationally.

Commenting on these developments, managing director Sol Lukatsky said, “We are simply executing to strategy for our customers, who are demanding bundled High-Speed Internet links & IT services in one offering and it is working.

‘’The launch of the NBN EE product will add more than 500,000 locations we can sell into with our Internet and IT services bundles.

‘’This is a game-changer in terms of organic opportunity for Spirit."

Acquisition target opportunities continue to grow with revised valuation expectations of vendors becoming more realistic over the last period.

Our balance sheet position of $14.8 million in cash and debt puts us in a very unique position to acquire quality telco and IT/MSP assets at reduced prices.”

Where to invest $1,000 right now

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

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