iTouch announces £47.8m losses ahead of Movilisto acquisition

LOSSES of £47.8m at iTouch outstripped turnover of £33.6m as a result of a £30m write-down of the value of acquisitions.

The losses will hit earnings at the company’s 50% shareholder Independent News and Media by between 3.7 cents to 9.4 cents according to NCB Stockbrokers.

However, on the good news front from iTouch, a mobile phone services provider, has been the announcement of the conditional acquisition of Movilisto, a private Spanish data services company, which awaits shareholder approval in May.

iTouch’s house stockbroker Davy says the acquisition of Movilisto, with approximately 30% of the Spanish market for premium rate SMS, will be earnings enhancing from day one. Analyst Bernie Lardner explained: “Movilisto which had revenues of €30.8m in 2002, is profitable with EBIT (earnings before interest and tax) of €12.8m. It is being acquired for €20m in shares, based on an 18p iTouch share price, €5m in cash and €10m of working capital, a total initial consideration of €35m.

“Based on fairly aggressive performance benchmarks, an additional earn out payment of up to €25m will be made over the next 24 months to bring the total to a maximum of €60m.

“Depending on earnout being achieved, this puts it on a multiple of 1.1x to 1.9x historical revenues and 2.7x to 4.7x historical EBITDA.

“The acquisition is expected to be earnings enhancing from the outset.”

Commenting on iTouch’s results NCB’s Shane Matthews said at an operational level the results are in line with market forecasts with revenues up 124% to £33.6m and pre-exceptional and pre-tax losses down 13% to £8.8m.

The massive increase in losses is attributed to £30m relates to the write down of goodwill on pre-IPO acquisitions.

“On the positive side the company remains cash rich with net cash of £24.5m albeit that it has announced major acquisition which will see the cash fall slightly upon competition.” he added.

iTouch chairman, Ivan Fallon, said yesterday: “The acquisition of Movilisto is a transformative deal which will sharply accelerate iTouch on the road to profitability.

“It also establishes the Group’s position as one of Europe’s leading value-added service providers and a key consolidator in the industry.

“The acquisitions of Telescope and m4 in the second half of 2002 have already reinforced our market position in Britain, and this acquisition will further strengthen our offering in the European premium SMS market.”