Shares in Satellite Solutions Worldwide (LON:SAT) have been in something of a holding pattern since their listing at 4.5p in May.
Yet in the five months since the firm’s AIM debut, management, led by Andrew Walwyn, has made some pretty significant progress.
SSW is an Internet service provider – but one with a twist as 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 40,000 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 providers – around 50 here and on the Continent.
Some are loss-making, while others are unwanted appendages of larger organisations.
For the satellite owners – firms such as Eutelsat, SES and Avanti – there are too many of these intermediaries to deal with.
So, it makes the sector a classic consolidation play.
Walwyn and his team want to be one of the handful of players left in five or six years and have already begun acquiring rivals.
It has set out plans to have 100,000 customers by the end of 2017 and it has around a fifth of that total currently.
Since listing it has made three acquisitions – all of them strategically important.
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 grant system that subsidises services such as Sat2Way. This sort of state support is expected in the UK soon.
The IPO brought in £2.5mln, which meant at the last results (for the six months to May 31); the firm had around £5.5mln on the balance sheet. This will help fund its ambitions.
“With pressure from the networks to consolidate this is what we are doing,” Walwyn told Proactive Investors.
“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.”
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.
That said, SSW was, before the addition of the costs of listing, a profitable business.
And it expects to return to the black by the year-end.
The broker Arden Partners is predicting SSW’s sales will be £7.5mln this year (up from £5.5ml), rising to £13.2mln in 2016, which should yield an £800,000 pre-tax profit.
The marketing for its services are niche, while the systems are either self-installed or fitted by a contractor.
Customer service and technical support are key and are run from a call centre in Bicester, in Oxfordshire.
Satellite operators in the US are offering 100 megabit download speed – and this, according to Walwyn will be a game-changer when the service is rolled out this side of the Atlantic. SSW’s top service is around a quarter of that speed.
“Whether the business grows four-fold because of this remains to be seen,” said the SSW chief executive.
“But 100meg will be a game changer, particular if we can offer unlimited packages.”
Finally, let’s finish where we started – the share price, which is bobbing around the 4.3p mark.
According to market makers the stock is being held back by sellers who were involved in the listed cash shell into which SSW’s assets were reversed.
One shrewd cash shell investor, the billionaire property developer Nick Candy, has chosen to maintain his 10.9% holding.
You suspect he gets the longer-term picture.