(MENAFN- ProactiveInvestors - UK) Satellite Solutions Worldwide PLC's (LON:SAT) plan to be a consolidator at the smaller end of the broadband supply business is starting to gain traction.
Revenues rose 36% rise in fifteen months to November 2015 though organic growth was impressive with an 18% jump to 6.5mln.
After the period-end SSW also signed a contract with BT to supply a subsidised service to people whose current connection speed is below 2Mb.
This is in addition to a UK government-funded scheme BDUK which aims to increase broadband coverageto95% oftheUKby2017.
Up to 300000 broadband users across the UK are estimated to be in need of the service according to the government though SSW conceded the BDUK take up so far had been slower than expected due to the complex application process something it its trying to address.
New satellite scheme
Under the BT satellite scheme the government will pay for the cost of the dish andmodemequipmentconnectionfeesandprofessionalinstallationforthose who qualify.
A similar service also operates in Wales in conjunction with the Welsh government while SSW is also part of the French intervention scheme. Both of these are going well it said.
Acquisition and organic-led growth
SSW has made six acquisitions over the past 18 months in Ireland France Poland and Denmark and the strategy will remain one of organic growth coupled with acquisition-led growth said chief executive Andrew Walwyn.
Totalrevenue for the 15 months to 30 November was 7.47mln of which organic growth contributed 6.5mln.
The bottom line reflected costs of May's reverse takeover and AIM listing with losses of 6mln after almost 5mln of one-offs. Operating losses were 1mln.
Walwyn said 2015 was a pivotal year for the company.
'The admission to AIM in May 2015 gave the funding and profile necessary to accelerate our roll up plans as we drive to become Europe's largest satellite broadband provider.
"I am especially pleased that in addition to organic year-on-year sales growth of 18% we are firmly on target with our acquisition strategy allowing us to grow at a record pace.
'If we are successful in the execution of our strategy the company seeks to become the largest satellite ISP in Europe by the end of 2017 with over 100000 customers.
Subscriber numbers in the trading period rose to 25000 from 11000.
Broadband access the growth driver
SSW is an Internet service provider but the twist is it delivers the connection via satellite.
It provides its services to businesses as a back-up to the traditional line or cable based service; the construction sector also uses SSW as do broadcasters.
However its stock in trade the part that generates most of the sales is connecting remote communities across Europe to a workable reliable and reasonably fast Internet services.
These are the areas where it is just not cost effective to introduce traditional broadband.
In Wales for instance there are 40000 rural households that don't have what nowadays would be considered bog standard Internet access.
In all anywhere from 5-15% of the population of Europe requires a service such as SSW's.
There are plenty of providersaround 50 here and on the Continent.
Some are loss-making while others are unwanted appendages of larger organisations.
For the satellite ownersfirms such as Eutelsat SES and Avantithere are too many of these intermediaries to deal with.
So it makes the sector a classic consolidation play.
Broadband consolidation important
'With pressure from the networks to consolidate this is what we are doing' Walwyn toldProactiveInvestors.
'We are bringing businesses together - it is very much a roll-up strategy.
'We are taking different businesses taking customers and introducing a far lower overhead.'
Last firms standing
Walwyn reckons the current 50 operators could be whittled down to just five big players over the next five years so the opportunity to increase scale (and create the economies that come with size) are there.
It has acquired SkiFi in Denmark which gives the company a 'beach head' into the Scandinavian market; Onewave in Ireland and most recently Sat2Way one of the largest firms of its kind in France.
The last acquisition benefits from the grantsystemthat subsidises services such as Sat2Way.
Float bolsters balance sheet but speed is king
The IPO brought in 2.5mln which was down to around 1.7mln at the year-end.
Broker Arden Partnersis predicting SSW's sales will rise to 13.2mln in 2016 which should yield an 800000 pre-tax profit but the real potential may lie a little further out.
100mb a game changer
Satellite operators in the US are offering 100 megabit download speedand this according to Walwyn will be a revelation when the service is rolled out this side of the Atlantic.
SSW's top service is around a quarter of that speed.
For example through the satellite initiative with BT SSW offersanumberof packagesrangingfromabasicserviceofupto 10Mbdownload and 2Mbuploadwith ausageallowanceof10GBto 'super-fast'satellitebroadband servicesofupto30Mbdownloadand2Mbuploadconnections.
'100meg will be a game changer particular if we can offer unlimited packages'said Walwyn.
At 5.33p currently SSW is valued at 17mln.
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