ITG paying up to £10m for British payphone firm

ITG, the independent telecom company, has announced the acquisition of Telecentral, a British payphone company, for up to £10 million sterling, and a placing and open offer to raise £12 million. It has also announced somewhat better-than-expected results with a 34 per cent rise in pre-tax profit to £670,000 in the year to April 30th 1998.

Telecentral will complement the company's existing payphone business in Ireland. This acquisition follows the purchase, earlier this month, of the payphone division of Trexco Communication, for £1.6 million. ITG said it is negotiating to buy a further business in the UK but this is in the credit card services sector. Because of the size of the Telecentral transaction, ITG has had trading in its shares suspended on London's Alternative Investment Market, and on Dublin's Developing Companies Market, pending sanction at an egm on July 23rd. ITG said the acquisition is in line with its strategy to expand into the UK communications market and in particular the payphone and ancillary services sector. The initial consideration will be satisfied by £4.5 million sterling cash and £0.5 million in ordinary ITG shares at 307.5p per share. Around £1.2 million of the cash payment will be held back until the repayment of a debt, of the same amount, from the Telephone Company of Ireland, to Telecentral, has been paid. The other payments are conditional on the renewal of contracts, on profit targets and on Telecentral's success in penetrating new overseas markets for its range of payphone products. The net assets being acquired amounted to £1.5 million last September when profits of some £608,000 were generated. The deal involves the appointment of Mr Grant Wilkinson (from Telecentral), as executive director of ITG. He will receive an annual salary of £73,500 plus bonuses.

The acquisition will be funded by the placing of 4,769,138 new shares at 270p sterling (323p) per share. Part of the proceeds will be used to repay bank borrowings on the Trexco acquisition. In a claw-back arrangement, shareholders can subscribe on the basis of 17 new ordinary shares for every 16 held at 270p sterling (323p) per share. Two ITG directors, Mr Maurice Healy (group managing director) and Mr John Nagle (group chief executive), will not be taking up their entitlement and will be selling 750,000 of their shares to raise £2 million sterling (£2.4 million). Mr Nagle said they had sold very little when the company went public last year and they would still own between 27 and 28 per cent of the group between them.

The latest results show a 33 per cent rise in sales to £7.3 million. Reflecting the strong cash flow, the net assets per share grew from 13.7p to 57.7p. However, reflecting the heavy capital investment programme, the return on average capital fell from 69.9 per cent to 23.8 per cent. Earnings per share were unchanged at 10.3p.

No dividends are being paid. Chairman, Mr Pascal Taggart, said it would be " prudent to wait before undertaking this important commitment". Mr Nagle noted that the company is "very cash positive" and a dividend might be paid this year but at the latest next year. Reflecting the proceeds from the flotation of the company, the gearing has been reduced from 350 per cent to 34.1 per cent.

Following the installation of 42 ITG public payphones in Dublin, the company has submitted planning applications for sites in Galway, Cork, Clare and Kerry. Further growth is expected. The rate of credit card terminal installations increased last year including the installation of software on 300 point-of-sale terminals for a supermarket chain. ITG said its objective is to maintain and build market share and to profitably grow its business.