RNS Number:9098O
SatCom Group Holdings plc
15 July 2005
Press Release 15 July 2005
SatCom Group Holdings plc
("SatCom" or "the Group")
First day of dealings on the AIM market
SatCom Group Holdings plc ("SatCom" or "the Group"), a mobile satellite
communications business, today announces the commencement of dealings of its
Ordinary Shares and Convertible Bonds on the AIM market of the London Stock
Exchange. Ernst & Young LLP is acting as Nominated Adviser to the Company and
Teather & Greenwood is acting as Broker to the Company. The stock market EPIC
for the Ordinary Shares will be SGH.L and the EPIC for the Convertible Bonds
will be SGHA.L.
Details of the placing
Placing Price 30p
Total number of new Ordinary Shares to be issued pursuant to the Placing 1,667,667
Number of Ordinary Shares in issue following Admission 50,116,667
Percentage of enlarged share capital being placed pursuant to the Placing 3.3 per cent
Issue price of convertible bonds #1,000 per #1,000
nominal of Placing
Bonds
Aggregate principal amount of Convertible Bonds being issued #3 million
Maximum number of Ordinary Shares in issue on the basis of the conversion of all 57,808,594
the Convertible Bonds
Proceeds of the Placing (net of estimated expenses) #2.88 million
Market capitalisation following the Placing at the Placing Price #15.04 million
The net proceeds received by the Company will be used to enable the Company to
make further acquisitions as part of its overall expansion strategy and to repay
US$1 million of Founders Loans.
Commenting on the move to AIM, Mark White, CEO of SatCom, said: "We are
delighted to announce SatCom's successful Admission to AIM. SatCom will benefit
from the AIM listing and we look forward to taking advantage of our position as
a listed company and seeking to make strategic acquisitions."
For further information:
SatCom Group Holdings plc
Mark White, Chief Executive Officer Tel: +44 (0) 1722 439 206
mark.white@satcomgroup.com www.SatComgroup.com
Martin Ward, Chief Financial Officer Tel: +44 (0) 1722 439 201
martin.ward@satcomgroup.com www.SatComgroup.com
Ernst & Young LLP
John Stephan, Tel: +44 (0) 207 951 2000
jstephan@uk.ey.com
Teather & Greenwood Limited
Stephen Austin, Corporate Finance Tel: +44 (0) 207 426 9000
stephen.austin@teathers.com www.teathers.com
Media enquiries:
Abchurch
Chris Lane / Dana Thomas Tel: +44 (0) 20 7398 7700
Chris.lane@abchurch-group.com www.abchurch-group.com
Introduction
SatCom is an established and fast growing mobile satellite communications
business. It supplies, either directly or through Dealers, the mobile handsets
and data devices (together referred to as terminals) and airtime of the three
largest Satellite Operators, Inmarsat, Thuraya and Iridium. Airtime services
typically comprise the provision of voice, data, fax, SMS and e-mail. Through a
recently acquired subsidiary, SatCom is also expanding its operations into high
frequency radio.
In the eight months ended 28 February 2005, approximately 85 per cent. of
SatCom's revenues were derived from the sale of airtime, with the sale of
equipment making up the remaining 15 per cent. Research estimates that the
market for mobile satellite services (MSS) is currently worth in excess of US$1
billion per annum and is expected to grow further.
SatCom has built a profitable business with growing revenues, free cash flow
generation and low ongoing capital expenditure requirements. The Directors
believe that the success of SatCom's commercial business model is based on its
established relationships with Satellite Operators, Land Earth Station
Operators, hardware manufacturers, Dealers, end users and customers.
History, background and Group structure
In 2001, SatCom Distribution Limited (SDL) and its US subsidiary SatCom
Distribution Inc. (SDI) were formed by the three founding shareholders, Mark
White, Alexandra Johnson and Adam Thompson.
In July 2002, SDI acquired O'Gara Satellite Systems Inc. (OSS), a satellite
communications company which contracts directly and through Dealers with the US
Government, in order to gain access to this market. Shortly after its
acquisition, OSS was integrated into the Group and its airtime billing was
transferred to the UK in line with SatCom's policy of centralising back office
operations.
In December 2003, SatCom established SatCom Distribution (Asia) Limited (SDA), a
joint venture company targeting the Asian market. In January 2005, SatCom took a
controlling interest in the joint venturing company and now owns 60 per cent. of
the issued ordinary share capital and 100 per cent. of the voting rights.
In March 2004, SatCom Group Holdings Limited (SGH) was formed as a new holding
company for the Group in order to realign the interests of the three founding
shareholders. In May 2004, Martin Ward joined as Chief Financial Officer and
became the fourth shareholder.
In November 2004, SDI acquired an 80 per cent. interest in NorthStar
Communications Inc. (NorthStar). Based in the Washington DC area of the US,
NorthStar designs, supplies and supports high frequency systems and radios for
US Government departments. The Directors believe that the acquisition of
NorthStar will enable SatCom to cross-sell satellite and radio solutions into
their respective client bases.
Markets
The market for MSS emerged from the provision of safety at sea mobile voice and
data communications to the maritime community. The market subsequently expanded
into land based operations and is serving areas of the World not covered by
either terrestrial or cellular communications systems. These include sparsely
inhabited areas of Africa, Asia, Australia and the Middle East. The market is
dominated by the three largest Satellite Operators, Inmarsat, Thuraya and
Iridium, who between them have a market share in excess of 85 per cent..
Research estimates that the MSS market is currently worth in excess of US$1
billion a year. The market has grown in the past few years, and according to
estimates is expected to continue growing, influenced by conflicts and natural
disasters. Further analysis indicates that growth will be driven by a migration
from traditional voice and data to next generation high-speed broadband data
services enabled by the introduction of new technologies such as Inmarsat's
Broadband Global Area Network (BGAN).
Such data delivery services are expected to be particularly important to the
government and military sectors. Today's military relies heavily on the use of
satellites as part of its communications strategy. The Directors believe that as
the technological innovations they develop become de-classified, increasingly
sophisticated mobile broadband applications will also become commercially
available, further fuelling sector growth.
Recent world events, including terrorist attacks, conflicts in Afghanistan and
Iraq and natural disasters such as the Asian tsunami have also renewed focus on
the satellite communications sector. Such events create both an initial demand
for products and services followed by secondary demand during reconstruction
phases. Global demand for satellite communications, particularly from
government, media, and aid agencies operating in these areas, is increasing and
is expected to remain high.
Satellite Operators and products
The satellite services industry comprises Satellite Operators, Land Earth
Station Operators and a number of independent Service Providers and Dealers.
Satellite signals are transmitted from Earth to the satellite which in turn
sends the signal onto a land based receiving station - known as a Land Earth
Station - before being routed onto the public telephone network or transmitted
back to the satellite for onward distribution to the receiver of the call or
information being sent.
There are a small number of Satellite Operators and SatCom focuses on reselling
the terminals and airtime of the three largest operators, Inmarsat, Thuraya and
Iridium. In the eight months ending 28 February 2005, approximately 42 per
cent., 51 per cent. and 5 per cent. of the Group's revenue was derived from
reselling the products and services of Inmarsat, Thuraya and Iridium
respectively. The remainder of the Group's revenue was derived from other
Satellite Operators. In recent years, the Group's involvement with Thuraya has
grown more rapidly than with other Satellite Operators and the Directors believe
this trend is likely to continue.
Inmarsat provides voice and high speed data services and Thuraya provides both
voice and low and high speed data services, both using Geostationary Orbit
satellites. These satellites orbit at very high altitude and effectively remain
in a static position over the Earth. Iridium provides voice and low speed data
services using Lower Earth Orbit satellites.
SatCom supplies a wide range of terminals specific to each of these major
Satellite Operators. The products range from small, handheld mobile phones to
portable high-speed data devices for specialised uses such as video streaming
and encryption. SatCom advises customers on the most appropriate service and
equipment based on customer usage needs. Upon signing a contract, a customer may
be required to pay a deposit to SatCom. This deposit is effectively held against
the customer's credit limit. SatCom sells both pre-pay and post-paid or contract
airtime. Pre-pay is a small but growing part of airtime sales.
Inmarsat
Inmarsat's products are portable units designed for multiple applications such
as Internet Protocol (IP) connectivity, maritime use and video links. The Mini-M
unit is a versatile portable terminal and is available in land, maritime and
vehicular versions. The Elite M4 is designed for use in harsh conditions and has
the ability to stream data. The Fleet range is designed for maritime usage and
provides packet and high-speed data, together with voice and fax capability.
Inmarsat regional broadband IP modems must be used with a Subscriber Identity
Module (SIM) card, which are both purchased separately from airtime. These SIM
cards must be registered with the relevant Land Earth Station Operator prior to
being activated for airtime access. To streamline the registration process,
SatCom provides its customers with a proprietary online registration service,
SIMREGTM.
Inmarsat's existing regional BGAN provides high-speed broadband services over a
footprint covering Europe, North Africa, the Middle East and parts of Asia. The
recent launch of the first Inmarsat I-4 satellite will provide enhanced BGAN
data services (at 432kbps, three times faster than existing services) for the
land portable terminal market. Further, the planned launch of a second I-4
satellite in the third quarter of 2005 will extend this service to the Americas.
SatCom resells both pre-paid and post-paid based airtime on an initial 12 month
contract. On expiry of an airtime contract the end user may move airtime
provider without changing hardware, but in practice for SatCom this rarely
occurs. Inmarsat airtime is typically sold into two different markets, the
general commercial sector and the US Government.
Thuraya and Iridium
Thuraya handsets are light handheld mobile phones capable of voice and data
delivery, SMS and global position determination. Base stations and external
antennae are available to transform these devices into indoor, maritime or
vehicular solutions. When satellite connectivity is not required the phones can
use the standard mobile Global System for Mobile Communications (GSM) network.
Thuraya's satellite footprint is regional, covering Europe, the Middle East,
Central and North Africa and parts of Asia.
Iridium supplies handheld mobile phones, but provides worldwide coverage. These
units deliver voice, data and SMS communications.
SatCom packages and resells Thuraya and Iridium airtime, both with and without
hardware. SatCom supplies hardware to Dealers and directly to larger customers.
When the products are supplied, the package includes a SIM card specific to each
Service Provider, such as SatCom. The SIM card must be activated by the end user
customer before use. In SatCom's case, this is done via the SIMREGTM internet
site where registration and a request for activation may be made prior to
activation, each customer must also enter into an initial twelve month contract
for airtime services with SatCom.
SIMREGTM
The SIMREGTM website (www.simreg.com) allows customers to request activation of
their SIM cards from anywhere in the world and control their accounts on-line.
This enables SatCom to provide a fast and efficient customer service whilst at
the same time minimising support and administrative staff costs.
Customers
SatCom's key customer market is the US, which in the eight months ended 28
February 2005 contributed 83 per cent. of total revenue. This was followed by
Europe from which SatCom generated 9 per cent. of its revenue. This geographical
split reflects the customer's billing address rather than the location of the
end user. The Group generated approximately 70 per cent. of its revenue from
four key customers all of which are based in the US and these include US
Government departments.
SatCom has established a large customer base, comprising Dealers and end users
who between them operate over 7,500 active terminals. Initially customers sign
up to a 12 month contract (or longer in the case of the US Government) with a 30
day notice period thereafter. SatCom's contract customers show churn rates that
are currently less than 2 per cent. per annum. Users typically fall within
sectors such as government and non-government organisations, reconstruction,
media, aid agencies, maritime, security, mining and the exploration of oil and
gas.
The Group is able to offer its customers a full range of communication solutions
including voice, fax, data, SMS and e-mail. SatCom currently sells through a
worldwide network consisting of over 100 Dealers. Dealers purchase terminals
from SatCom on a non-returnable basis. SatCom has built close relationships with
its Dealers who hold the necessary security clearances to deal with sensitive
government contracts.
Sales and marketing
SatCom uses a number of methods to generate new business and increase its
awareness in the market place including public relations exercises, direct
marketing and website advertising.
SatCom employs a public relations agency whose aim is to distribute on average
two press releases per month, circulating them to both the vertical market
press, such as maritime and telecom magazines and major national and
international news publications. Press releases are either new product specific,
or relate to interesting user stories. The Group sometimes takes the opportunity
to advertise alongside press releases to maximise their effectiveness.
SatCom provides sponsorship in the form of subsidised or donated equipment when
the use of a satellite unit may generate publicity. Examples of this include
sponsoring a yachtswoman in the single-handed transatlantic OSTAR race this year
and the donation of equipment to aid agencies for use in the region affected by
the recent tsunami.
The Group targets vertical markets by sending out specific mail shots and by
making calls. Generally, leads produced are sent to Dealers who process and
place orders with SatCom. In addition, SatCom receives leads from its suppliers,
which are either forwarded to Dealers or managed directly. SatCom also attend
international trade and vertical market specific exhibitions.
In order to support its existing customers and Dealers, SatCom provides
marketing and technical assistance through its Xtranet site, providing
downloadable brochures, pricelists, images, technical manuals and training
sheets. Regular mailings are also sent giving the latest news on new products
and airtime programmes. In addition, SatCom's sales team make regular contact
with Dealers to provide support and training.
For US Government business, SatCom has a dedicated sales person who manages the
accounts and promotes new business. The Group is also on the tender lists for
several large organisations that purchase via open contract for specific
requirements.
As a worldwide business, an important promotional avenue is through the use of
online advertising. SatCom's website is also carefully designed to optimise
prominence on search engine results pages when conducting 'key word' searches
when browsing the Internet for information regarding satellite communication
equipment.
Strategy
Organic growth is expected from SatCom's continued sales and marketing
initiatives. Hardware sales are of strategic importance to SatCom in that they
are a driver of future airtime sales as well as being profitable in their own
right. In addition, the launch of Inmarsat's I-4 satellites will provide
enhanced footprint coverage and high-speed broadband data services both of
which, the Directors believe, will provide significant opportunities for growth.
SatCom intends to build on its recent acquisition of NorthStar to allow further
penetration into the high frequency radio market and enable the cross-selling of
satellite and radio solutions into their respective client bases. The recent
establishment of SDA will also allow SatCom to leverage Thuraya's intended
expansion into the Asian market beyond 2006.
It is expected that SatCom's future organic growth will be augmented by further
acquisitions of other satellite airtime businesses. The Directors believe that
the MSS market is fragmented and contains a large number of small independent
Service Providers who they believe will be attracted by consolidation. SatCom
has already made a number of acquisitions. In addition SatCom has identified and
is in discussions with several potential targets. The Directors believe that the
commercial maritime sector provides particularly attractive acquisition
opportunities as it is a large and stable sector of the market.
SatCom has successfully integrated acquisitions in the past and the Directors
believe it has the management resources to manage integration and consolidation.
The Group intends to retain key personnel from acquired companies to maintain
customer relationships and will drive synergy cost benefits by migrating
customers onto a common UK based billing platform.
Management believe the anticipated acquired and organic growth will enhance
SatCom's position in the market, giving it the scale necessary to improve
margins and efficiency.
Operations
SatCom is headquartered in Salisbury, England and has a further two sales
offices in the US and one in Asia all of which are leased premises. Excluding
Directors and operational board directors there are currently 27 members of
staff of which 18 are based in the UK, 8 in the US and 1 in Asia.
The UK head office is located in a modern building housing the sales, accounts,
marketing, warehousing and airtime contracts administration staff. The US
operation is run from NorthStar's warehousing facilities in the Washington DC
area with additional premises in New York. The Asian operation is run out of
offices in Hong Kong.
Directors and senior management
The founding management team consisted of Mark White, Alexandra Johnson and Adam
Thompson. Each has over 10 years' experience in the satellite communications
industry. They were joined in 2004 by Martin Ward.
The Directors of SatCom are set out below:
David Hickey, age 49, Non-Executive Chairman
David qualified as a Chartered Accountant with KPMG in 1981 and subsequently
joined HSBC James Capel where he became a director in corporate finance,
specialising in international transactions. In 1992 he moved to the Guinness
Mahon Group and took over as head of corporate finance. In 1998 Investec
acquired the Guinness Mahon Group and he became head of corporate finance for
the enlarged group in the UK. Between 1998 and 2000 he also served as a member
of the corporate finance Committee of the London International Banking
Association. Currently he holds a number of directorships including that of
Executive Chairman of Lighthouse Group Plc and Chairman of Just Car Clinics
Group plc.
Mark White, age 44, Chief Executive Officer*
Mark is the CEO and founder of SatCom. He has been in the satellite
communications business since 1995 and has been involved in the distribution of
electronic equipment since 1990.
Mark joined Cetrek Limited, a maritime autopilot manufacturer as sales manager,
in 1984 and became sales director in 1988. In 1990 he left Cetrek to form Euro
Marine Group Limited, a European distributor of US electronic marine equipment,
including Garmin GPS products. In 1992, Mark was appointed Chief Executive of
Garmin (Europe) Limited, bringing with him Euro Marine's distribution business.
Having successfully established Garmin's distribution network, he then left
Garmin to form Next Destination Limited, the European distributor of Magellen
GPS and satellite communication products. In 1997 Mark sold Next Destination,
but continued to work in the satellite communications industry and in 2001
established SDL and SDI with Alexandra Johnson and Adam Thompson.
Martin Ward, age 47, Chief Financial Officer*
Martin qualified as a Chartered Accountant in 1983 before joining
PricewaterhouseCoopers where he progressed to audit manager. In 1987, he left
PwC to become a partner in Langdowns DFK a midsize professional firm based in
Southampton. In 1990 he started acting for Mark White, advising him in the areas
of business development and acquisition strategy. At Langdowns, Martin was
responsible for mergers and acquisitions and international work, including
successfully raising the profile of Langdowns within the DFK International
network. In 2004 Martin joined SatCom to oversee the financial aspects of
running a global business and to assist with acquisitions.
Richard Vos, age 59, Non-Executive Director
Richard has extensive knowledge of the satellite and international
telecommunications world with over 30 years experience of working in the
industry. Between 1999 and 2003, he was chairman of Inmarsat Ventures Plc.
Through this position, he has experience of preparing a company for flotation,
although Inmarsat eventually raised funds through a private equity sale. Current
positions include Director of the National Space Science Centre, member of the
Advisory Board for Technology, Communications & Entertainment for Ernst & Young,
and Advisor to Inmarsat Limited and previous positions include Chairman of
Inmedia Communications Limited and Chairman of the British National Space Centre
Telecommunications and Navigation Advisory Board.
Alexandra (Sandy) Johnson, age 50, Chief Operating Officer*
Prior to SatCom, Alexandra held various accounting and IT positions before
joining Mark White at Next Destination Limited, where she held the position of
finance and operations manager. Alexandra brings extensive experience in sales,
training and support and has contributed greatly to the development of the
Group. She is also responsible for the SIMREGTM website and the recently
developed online technical support system. She has also worked closely to
develop and integrate the SatCom's US operators.
Adam Thompson, age 42, President of SDI*
Before founding SDL with Mark White and Alexandra Johnson, Adam worked for
Teleflex Marine and O'Gara Satellite Networks Inc. Adam runs SDI's hardware
sales and OSS's US Government airtime business. His understanding of the
satellite communications industry combined with his previous sales and marketing
experience in the maritime sector have enabled him to build SatCom's US
Government and commercial business.
Jack Lemmerman, age 62 , US Government Airtime Manager
Jack joined the Group through OSS and now has an exclusive consultancy
arrangement with SatCom. He was heavily involved in winning the agreement with
the US Government Defense Information Agency which is administered by the
Defense Information Contracting Organisation (DITCO). He has a unique
understanding of the DITCO bidding process and a strong relationship with US
Land Earth Station Operators who provide the airtime.
Bill Perry, age 43, President of NorthStar
Bill joined SatCom when it acquired NorthStar. He has worked in the radio
industry for many years dealing with both government and specialist radio
applications. NorthStar's acquisition by SatCom will enable Bill to tender for
increasingly large radio projects with the US Government.
Pauline Truckle, age 36, Airtime Manager
Pauline has been with SatCom since its formation. With a background in accounts
and airtime management, she manages the SatCom's billing processes. Her team of
administrators respond to internet and telephone enquiries, deal with
activations, suspensions, deactivations, prepaid airtime sales and credit
control in addition to the production of contract airtime billings.
Definitions
''Admission'' Admission of the Ordinary Shares (including the
Placing Shares) and the Convertible Bonds to trading
on AIM becoming effective
''AIM'' AIM, a market owned and operated by the London Stock
Exchange
''Convertible Bonds'' The #3,000,000 8 per cent. convertible unsecured
bonds due 2009, convertible into Ordinary Shares.
''Directors'' or ''Board'' The directors of the Company at the date of this
document
''Founders Loans'' The US$3,000,000 of outstanding loans due to Mark
White, Alexandra (Sandy) Johnson and Adam Thompson.
''Inmarsat'' Inmarsat Limited, a leading satellite operator
''Iridium'' Iridium Satellite LLC, a leading satellite operator
''London Stock Exchange'' London Stock Exchange plc
''NorthStar'' NorthStar Communications Inc., a subsidiary of SDI
''Ordinary Shares'' Ordinary shares of US$0.10 each in the capital of the
Company
''OSS'' O'Gara Satellite Systems, Inc., a wholly owned
subsidiary of SDI
''Placing'' The conditional placing by Teather & Greenwood of the
Placing Shares and the Convertible Bonds pursuant to
the terms of the Placing Agreement
''Placing Bonds'' 3,000 Convertible Bonds which are the subject of the
Placing
''Placing Price'' 30p per Placing Share
''SatCom'' or ''Group'' SGH and its subsidiaries.
''SDA'' SatCom Distribution (Asia) Limited, a subsidiary of
SDL
''SDI'' SatCom Distribution, Inc., a wholly owned subsidiary
of SDL
''SDL'' SatCom Distribution Limited, a wholly owned
subsidiary of SGH
''SGH'' or ''Company'' SatCom Group Holdings plc
''Thuraya'' Thuraya Satellite Communications Company, a leading
satellite operator
''United Kingdom or UK'' The United Kingdom of Great Britain and Northern
Ireland
''US'' or ''United States'' The United States of America, its territories and
possessions, any state or political sub-division of
the US and the District of Columbia
Glossary
BGAN Broadband Global Area Network - Inmarsat's high speed
satellite communications network
Dealers Resellers of hardware and airtime that contract
directly with the customer on SatCom's behalf
Geostationary Orbit An orbit in which a satellite is always in the same
position with respect to the rotating earth. A single
satellite can cover up to 40 per cent. of the earth's
surface
GPS Global Positioning System - a worldwide satellite
radio-navigation system used to compute positions on
Earth
GSM Global System for Mobile Communications - digital
mobile telephone system
IP Internet Protocol - a standard that allows the
transmission of data across networks and the internet
Kbps Kilobits per second - a speed rating for computer
modems that measures the maximum of numbers of bits a
device can transfer in one second
Land Earth Station Terrestrial satellite receiving station
Land Earth Station Operator Operator of Land Earth Stations
Lower Earth Orbit Satellites that orbit at an altitude of less than
1,000 miles and circle the earth every 90 minutes.
Approximately 66 are required for global coverage
MSS Mobile Satellite Services
Satellite Operator Operator of satellites including Inmarsat, Iridium
and Thuraya
Service Provider Reseller of equipment, airtime and provider of
customer services
SIM Subscriber Identity Module - a smart card inside all
GSM phones that identifies the user account on a
network, handles authentication, and provides data
storage for basic user data and network information
SMS Short Messaging Service - short text messages that
can be sent from a mobile phone
Copies of the Admission Document will be available to the public, free of
charge, during normal business hours on any weekday (Saturdays and public
holidays excepted) at the offices of Shoosmiths, Russell House, 1550 Parkway,
Solent Business Park, Whiteley, Fareham, Hampshire, PO15 7AG from the date of
this document until at least one month after Admission.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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