Archived article
Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
magazineSatellite Solutions heads for the stars
Everybody needs fast broadband. The UK government demands 95% of the population enjoy a minimum of 24mbps (mega bits per second) by the end of this year. What about the other 5%, located in the relative backwoods of Britain? Satellite Solutions Worldwide (SAT:AIM) is part of a solution, not just here but across Europe, Scandinavia, Australia and elsewhere. The company reckons 15% of homes in Europe can’t plug into copper or fibre networks.
Getting online
The Bicester-based company buys satellite broadband and airtime and supplies homes, businesses, broadcasters, construction sites, even parts of the military, under its Europasat brand. It had roughly 75,000 customers across 32 countries at the last count in November 2016. That makes it the world’s fourth largest operator in this market. The company hopes it will beat its own 100,000 subscriber target by November 2017.
Deals start at £9.99 a month and go up to £69.99 depending on your download allowance, all at 20mbps speeds.
Customers are acquired through direct channels, such as telesales and via its website, and through resellers which share part of the profit. But Satellite Solutions is also pulling off acquisitive growth by buying distributors whose customers can be migrated onto its own platform.
Viveole is the latest acquisition but it was last summer’s triple-header (Avonline, Breiband and SkyMesh – the latter alongside a £12m cash call), that really ignited the company’s potential.
Falling wholesale costs, a nightmare for operators, is great for Satellite Solutions. It provides flexibility to pass on lower costs during a marketing push, or keep prices firm to bolster profit margins. It should also help drag churn under control, which was running pretty high at 19% at the half year stage in 2016.
As the company scales up it can strengthen its position as a industry consolidator and with it gain leverage to get even better terms from satellite cluster operators, as has recently done through a new deal with a leading name in this space, SES.
Maiden profit
The company is expected to unveil a maiden pre-tax profit when it reports full year results in March. Broker Arden Partners estimates pre-tax profit of £500,000 on £19.8 million of revenue.
The equivalent figures for 2017 come in at £3.4 million pre-tax profit on £38.1 million revenue, implying EPS (earnings per share) of 0.63p, or a price to earnings (PE) multiple of 14.3.
Management have decent stakes while star small cap tech fund manager Katie Potts is on board, as is property mogul Nick Candy. (SF)
Satellite Solutions Worldwide (SAT:AIM) 8.78p
Stop loss: 6.15p
Market value: £47m
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
