Wed 03/17/2021 11:06 AM
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Relevant Document:
Fiscal 2020 Results

U.K. telecoms firm Southern Communications is working with Oakley Advisory to launch a sale in the next few months, sources told Reorg. Continue reading for our EMEA Middle Market team's update on Southern Communications' sale process, and request a trial for access to our analysis and reporting on hundreds of other stressed, distressed and performing credits.

The Livingbridge-owned company is expected to be marketed off an EBITDA of about £25 million and will include a debt package, sources said.

At March 31, 2020, the group’s financing arrangements consisted of a £190.7 million facility from incumbent lenders Ares and Santander, of which £18 million remains undrawn, according to the group’s results for the year ended March 31, 2020. The facility is due to expire on Aug. 22, 2025. The lenders provided the debt package in 2019 which included an acquisition facility, term loan and PIK facility to support the group’s buy and build strategy.

Southern Communications has reported consistent revenue growth in recent years and generated revenue of £86.9 million in fiscal 2020, up from £70.2 million a year earlier. EBITDA rose 37% year over year to £21.8 million with a 25% EBITDA margin, according to its fiscal 2020 report.

The group said its post year-end recurring revenue has continued at similar levels prior to Covid-19, with the exception of fixed line and mobile call traffic. Management added the global Covid-19 pandemic has not resulted in a significant impact on its trading operations given its diverse customer base, the critical nature of its services and necessity of expenditure on communication.

As of March 31, 2020, net cash generated from operating activities rose 55% year over year to £19.9 million. Net cash used in investing activities totaled £37.3 million compared with £56 million a year earlier.

The group said it expects to meet financial covenants in the foreseeable future. Lenders agreed to deferring the company’s quarterly interest payment due June 2020 and was subsequently paid in September 2020 along with the normal quarterly payment.

In 2016, Livingbridge acquired a minority stake in the company. The acquisition was supported by a £36 million loan facility from Santander and HSBC, according to a statement at the time.

After Livingbridge’s investment, Southern Communications acquired telecoms business Commsplus in 2019 and purchased hosted communications groups MyPhones and 3Circles Communication in 2018.

Southern Communications was founded in 1965 and provides SMEs across the U.K. with a range of services including fixed-line, data, mobile and cloud-based services alongside sale, installation and maintenance of telephone systems.

Ares and Livingbridge declined to comment, Oakley Advisory did not respond to Reorg’s request for comment.

--Lucía Camblor, Lara Gibson
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