Contract win
The Company’s Business Division has secured a 30 month contract with a major international hotel chain for the provision of network services across the whole of their UK estate. This agreement is expected to be worth in excess of £4 million over its term and is SpiriTel’s largest customer contract to date. It is representative of SpiriTel's successful strategy of driving organic growth by cross-selling the Company's expanded product range covering fixed, mobile, data and networking services. An important part of the strategy is to increase future earnings visibility and the extended term of the new contract win further contributes to this goal.
Trading update
Due to declining profitability in SpiriTel's Technologies Division during the second half of the year, as competitive pressure in wholesale markets has intensified, the Board now expects the Company’s results for the year ended 30 April 2009 to be marginally below Board expectations. The Technologies Division provides the Company's other division - Business – with the infrastructure support for its direct B2B sales. It also services other third party carrier customers and it is this revenue stream that has come under pressure. The Business Division has performed strongly during the year and has secured a number of notable contract wins, demonstrating the value of the Company’s fully integrated product offering.
Outlook
As the signing of the contract announced today shows, SpiriTel is benefiting from the breadth of its product offering and the ability to successfully cross sell its products. As a result, the Business Division continues to deliver ongoing organic growth. However, competitive pressures experienced by the Technologies Division are continuing to negatively impact the Company’s overall trading performance.
Alastair Mills, CEO of SpiriTel commented: “This contract win provides further evidence of the Company’s record of driving organic growth by cross-selling an expanded product range. In the last year this strategic focus on cross-selling has resulted in total contract wins of over £7 million. The margin pressure in wholesale markets illustrates the rationale behind our strategy to reduce exposure to these volatile markets by growing our Business Division."