Spectrum Interactive

Payphone and internet terminal operator Spectrum Interactive reported strong maiden finals to June, and chief executive Mark Lewarne sees huge growth on the internet kiosk side of the business.

Chaired by Lord Young of Graffham, Spectrum floated on AIM in April, pulling in £5.5m at 93p a share. Last year’s figures were strong, with pre-tax profits improving from £371,000 to £1.7m, as turnover jumped from £15.9m to £17m. In a year of ‘tremendous’ progress both the UK and German businesses expanded their payphone estates and February acquisition UK Explorer turned Spectrum Interactive into one of the biggest independent European internet terminal operators. This side of the business, which operates terminals at 80% of the UK’s airports, as well as in 2- and 3-star hotels and youth hostels, moved strongly into profit last year, and is the real growth driver going forward.

Lewarne says the payphones business will fund growth at the internet terminals arm, which will serve as a platform to introduce further exciting services like music downloads and games. He is also examining internet terminal opportunities at military bases, and talks are afoot on deals within the retail sector. Elsewhere, the company has made a push into ATMs and Digital Photo Printing.

Spectrum boasts good cash flow, and margins should rise as the internet business moves from 10% to 20% of group sales. Lewarne believes ‘Spectrum can be a key consolidator in the internet area.’

For 2006, Seymour Pierce forecasts a surge in profits to £4m on £22.1m sales, earnings of 10.7p and a 4.3p dividend. On a multiple of 8.7, with a fantastic yield, the shares are a buy.