Espresso Broadband – the parent company of Espresso Education, Channel 4 Learning and Netmedia – recorded a 58% increase in revenues to £11.9m for the year ending 31 July 2007 in accounts recently filed at Companies House. However, the group recorded a loss before tax, albeit smaller than the previous year, of £600k. The loss would have been larger but for a change in accounting policy which saw product development capitalised, leading to a benefit of £425k in the P&L. The group now carries just over £2m R&D costs on its balance sheet.

In the current year to 31 July the group must repay £2.486m of loan notes which were deferred last financial year. £96k has been repaid so far, with most of the balance due at the end of May (£1.236m) and July (£1.086m). Although the group had a cash balance of £2.4m at 31 July 2007, Espresso’s current trading performance is unknown to the Assignment Report. However, media reports suggesting that Espresso is for sale may imply that the group’s largest shareholders – which include ProVen (27.1%), ITN (16.8%) and 4 Ventures (11.5% following the Channel 4 Learning transaction) – have lost patience after years of significant losses. And with the funding of e-learning credits ceasing at the end of this August, now may be an opportune time for the investors to exit.

So who might buy Espresso? A year or so ago, Pearson would have been an obvious candidate but we suspect that Pearson now has other priorities. The private equity group Veronis Suhler Stevenson, who paid ITV an initial £35m for Granada Learning before selling off David Fulton and Letts to create an ICT-based business, could be another suitor. The reported appointment of New York-based investment bank Jefferies to review the options might suggest a potential acquirer from North America.

www.espresso.co.uk

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