There's been real progress recently for satellite broadband and airtime reseller Satellite Solutions Worldwide (SAT:AIM), but investors do need to retain plenty of caution. This is a highly acquisitive, business growth fund (BGF)-backed business and interims to 31 May 2016 show revenues up 78%, or 17% from the underlying business on an organic recurring basis, to £5.7 million.

Gross margins improved (6.5 percentage points to 23%) and there is an 11% rise in ARPU to £40.06, or average revenue per user.

Yet earnings before interest, tax, depreciation and amortisation (EBITDA) losses doubled to £0.5 million and it continues to consume cash, a little more than £1.06 million, although with extra working capital needed, nearly £2 million of cash was consumed. That's one of its chief challenges going forward, improving cash generation.

Communication Satellite Orbiting Planet Earth. 3D Scene.

But Since May the company has moved beyond EBITDA breakeven on 74,500 customers, and the company says it is on track for 100,000 customers by November 2017. It will help that Satellite Solutions Worldwide more than doubled in size since early August through three acquisitions (Avonline, Breiband and SkyMesh – the latter alongside a £12 million cash call).

Outside of building out profits and upping its cash flow Satellite Solutions Worldwide faces stiff pricing competition and customer churn currently running at 19%. So the shares rally 3.8% today to 6.88p for a rough £36.9 million market cap. That implies a £31.4 million enterprise value (EV), or a 31-times EV/EBITDA multiple based on full year to 30 November forecasts of adj EBITDA of £1.1 million. That is expected to jump to £5.5 million in 2017 with the three acquisitions weighing for a full 12 months. If it can pull that growth off it would slash the EV/EBITDA multiple to 5.7-times, a valuation that investors will likely find far more interesting.


(This article was amended on 31 Aug to add additional information and clarity)

Issue Date: 30 Aug 2016