TIDMADT
RNS Number : 5309W
AdEPT Telecom plc
11 November 2014
AdEPT Telecom plc
("AdEPT" or the "Company")
Interim results for the 6 months ended 30 September 2014
AdEPT, one of the UK's leading independent providers of
award-winning landline voice and data connectivity
telecommunications services, VoIP and mobile networks, announces
its results for the 6 months ended 30 September 2014.
Highlights
-- Total revenue increased by 11.3% to GBP11.3 million (2013: GBP10.2 million)
-- EBITDA increased by 12.7% to GBP2.36 million (2013: GBP2.09 million)
-- EBITDA margin increased to 20.8% (2013: 20.6%)
-- Adjusted profit before tax increased by 13.9% to GBP2.2 million (2013: GBP1.9 million)
-- Adjusted EPS increased by 12.2% to 8.38p (2013: 7.47p)
-- Interim dividend increased by 50% to 2.25p per share (2013: 1.50p)
-- Free cash flow increased by 29.1% to GBP2.2 million (2013: GBP1.7 million)
-- Gearing down to 29% (2013: 38%)
-- Net debt, after GBP2.1m acquisition payments, reduced by
GBP0.7 million in the last 12 months to GBP3.2 million (2013:
GBP3.9 million)
-- Next generation services revenue increased by 29.0% to GBP3.0
million (2013: GBP2.4 million)
Business review
Total revenue increased by 11.3% through a combination of
organic new contract wins, particularly in the public sector, and
acquisitions. AdEPT is continuing to successfully make the
transition from a traditional fixed line service provider to a
complete communications integrator offering best of breed products
from all major UK networks. Revenue from next generation services,
including data connectivity, network solutions and cloud-based
contact centre solutions increased by 29.0% to 26.8% of total
revenue for the six months ended 30 September 2014 (September 2013:
23.2%). The demand for faster data connectivity speeds has
continued and this is being achieved through a wider data
connectivity service offering, including 10Gb, 40Gb and 100Gb
Optical Spectrum Services (OSEA) data connectivity solutions under
the Ja.Net framework for universities and colleges.
AdEPT has had continued success in the public sector space
during the period winning a number of new contracts with councils
within the public sector. Over the last 18 months AdEPT has been
successful in gaining new contracts with more than 20 councils as a
result of its various public sector framework agreements. In July
2014, the Company renewed the Ja.net framework agreement under
which AdEPT is one of only a small number of companies approved to
sell data connectivity and networks to UK universities and
colleges. Shortly after the period end, in October 2014, the
Eastern Shires Purchasing Organisation awarded AdEPT a two year
extension to its sole supplier Telecom Framework to local
government for calls, lines, broadband, super-fast broadband
(fibre), data connectivity and SIP trunks. AdEPT is also an
approved supplier under the Telephony Services Framework by Crown
Commercial Service, the purchasing arm of the Cabinet Office.
Approved supplier status under these framework agreements gives the
Company authority to provide services to both local and central
government bodies.
Financing
Free cash flow (cash generated from operations after interest)
amounted to GBP2.2 million, representing an increase of 29.1%
(September 2013: GBP1.7 million). GBP1.8 million of available funds
was used to fund the initial cash consideration for the acquisition
the issued share capital of Bluecherry Telecom Limited on 8 April
2014. These interim results include a full 6 month contribution
from the acquisition of the entire issued share capital of
Bluecherry Telecom Limited (further details are included in Note
6). In addition, a further GBP0.3 million was used to fund part of
the deferred consideration in relation to the acquisition of
certain trade and assets from Bluebell Telecom Limited which was
announced on 6 August 2013.
Net debt and gearing
Net borrowings have been reduced by GBP0.7 million during the
last 12 months, despite GBP2.1 million acquisition payments. Net
borrowings at 30 September 2014 were GBP3.2 million (September
2013: GBP3.9 million).
This resulted in a reduction in gearing to 29% (September 2013:
38%).
Profit before and after tax
Adjusted profit before tax (adding back non-cash amortisation)
increased by 13.9% to GBP2.2 million (September 2013: GBP1.9
million) arising entirely from the improved operating profit.
Reported profit after tax increased by 11.9% to GBP0.8 million
(2013: GBP0.7 million).
Earnings per share
Adjusted (basic) earnings per share has increased 12.2% to 8.38p
for the six months ended 30 September 2014 (September 2013: 7.47p)
as a result of the GBP0.27 million increase to EBITDA.
Dividends
The Directors have declared an interim dividend of 2.25p per
Ordinary Share in respect of the year ending 31 March 2015, an
increase of 50% over interim dividend for the comparative period
(September 2013: 1.50p). This will absorb approximately GBP0.50
million of shareholders' funds (September 2013: GBP0.32 million).
It is proposed by the Directors that this dividend will be paid on
10 April 2015 to shareholders who are on the register of members on
the record date of 20 March 2015. Subject to the audited results
for the year ending 31 March 2015, it is the intention of the Board
to look to propose a final dividend with the March 2015 final
results.
Strong free cash flow generation has continued since the end of
the period, so there continues to be considerable scope for the
Board to continue its progressive future dividend policy.
Outlook
This has been an excellent 6 months with improved results in all
key areas. We continue to be highly cash generative and there is
considerable scope for a progressive dividend policy whilst
continuing to identify and integrate earnings-enhancing
acquisitions.
Roger Wilson
Chairman
11 November 2014
Enquiries:
AdEPT Telecom
Roger Wilson, Chairman 07786 111535
Ian Fishwick, Chief Executive 01892 550225
John Swaite, Finance Director 01892 550243
Northland Capital Partners Limited 020 7382 1100
Nominated Adviser
Edward Hutton/Lauren Kettle
Broking
John Howes/Alice Lane
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 September 30 September
2014 2013
Note GBP'000 GBP'000
------------------------------------------- ----- ------------- -------------
REVENUE 11,323 10,169
Cost of sales (7,115) (6,316)
------------------------------------------- ----- ------------- -------------
GROSS PROFIT 4,208 3,853
Administrative expenses (2,960) (2,692)
------------------------------------------- ----- ------------- -------------
OPERATING PROFIT 1,248 1,161
Total operating profit - analysed:
Operating profit before depreciation and
amortisation 2,356 2,091
Share based payments 3 (4)
Depreciation of tangible fixed assets (23) (16)
Amortisation of intangible fixed assets (1,088) (910)
------------------------------------------- ----- ------------- -------------
Total operating profit 1,248 1,161
------------------------------------------- ----- ------------- -------------
Finance costs (126) (130)
Finance income - -
------------------------------------------- ----- ------------- -------------
PROFIT BEFORE INCOME TAX 1,122 1,030
Income tax expense (360) (350)
------------------------------------------- ----- ------------- -------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 762 680
------------------------------------------- ----- ------------- -------------
Attributable to:
Equity holders 762 680
Earnings per share
Basic earnings per share (pence) 3 3.45p 3.20p
Diluted earnings per share (pence) 3 3.19p 2.85p
Adjusted earnings per share, after
adding back amortisation
Basic earnings per share (pence) 3 8.38p 7.47p
Diluted earnings per share (pence) 3 7.75p 6.66p
UNAUDITED STATEMENT OF FINANCIAL POSITION
30 September 30 September 31 March
2014 2013 2014
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Intangible assets 16,012 16,024 15,018
Property, plant and equipment 101 56 79
Deferred income tax 118 121 115
----------------------------------------- ------------- ------------- ---------
16,231 16,201 15,212
Current assets
Inventories 4 4 4
Trade and other receivables 2,497 2,416 2,332
Cash and cash equivalents 1,942 1,525 3,777
----------------------------------------- ------------- ------------- ---------
4,443 3,945 6,113
Total assets 20,674 20,146 21,325
LIABILITIES
Current liabilities
Trade and other payables 4,118 3,506 3,854
Income tax 393 1,024 29
Short term borrowings 1,189 1,210 1,206
----------------------------------------- ------------- ------------- ---------
5,700 5,740 5,089
Non-current liabilities
Long term borrowings 3,953 4,207 5,533
Provisions for liabilities and charges - 16 -
---------------------------------------- ------------- ------------- ---------
Total liabilities 9,653 9,963 10,622
-----------------------------------------
Net assets 11,021 10,183 10,703
SHAREHOLDERS' EQUITY
Share capital 2,207 2,128 2,194
Share premium 231 50 189
Retained earnings 8,583 8,005 8,320
----------------------------------------- ------------- ------------- ---------
Total equity 11,021 10,183 10,703
----------------------------------------- ------------- ------------- ---------
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of
parent
Share
Share Share capital Retained Total
capital premium to be earnings equity
issued
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Equity at 1 April 2013 2,107 - 150 7,490 9,747
Profit for six months ended 30
September 2013 - - - 680 680
Issue of new equity 21 50 - - 71
Transfer of reserves - - (70) 70 -
Share based payments - - 4 - 4
Dividend - - - (319) (319)
Balance at 30 September 2013 2,128 50 84 7,921 10,183
Profit for six months ended 31
March 2014 - - - 650 650
Issue of new equity 66 139 - - 205
Deferred tax asset adjustment - - - 5 5
Transfer of reserves - - 70 (70) -
Share based payments - - (82) 85 3
Dividend - - - (343) (343)
Balance at 31 March 2014 2,194 189 72 8,248 10,703
Profit for six months ended 30
September 2014 - - - 762 762
Issue of new equity 13 42 - - 55
Transfer of reserves - - - - -
Share based payments - - (2) - (2)
Dividend - - - (497) (497)
Balance at 30 September 2014 2,207 231 70 8,513 11,021
UNAUDITED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 September 30 September 31 March
2014 2013 2014
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Profit before income tax 1,122 1,030 1,845
Depreciation and amortisation 1,111 926 1,934
Share based payments (3) 4 7
Net finance costs 126 130 257
Decrease in inventories - - -
Increase in trade and other receivables (194) (319) (269)
Increase in trade and other payables 129 64 201
-------------------------------------------------- ------------- ------------- -----------
Cash generated from operations 2,291 1,836 3,976
Income taxes paid - - (1,149)
-------------------------------------------------- ------------- ------------- -----------
Net cash from operating activities 2,291 1,836 2,827
-------------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Interest paid (97) (136) (244)
Acquisition of trade and assets (2,058) (2,175) (2,176)
Purchase of intangible assets (27) (5) (14)
Purchase of property, plant and equipment (45) (21) (63)
-------------------------------------------------- ------------- ------------- -----------
Net cash used in investing activities (2,227) (2,337) (2,497)
Cash flows from financing activities
Dividends paid (329) (158) (318)
Issue of shares 55 71 276
Repayment of borrowings (1,625) (625) (1,250)
Increase of bank loan - 1,100 3,100
Net cash (used in)/from financing activities (1,899) 388 1,808
-------------------------------------------------- ------------- ------------- -----------
Net increase/(decrease) in cash and cash
equivalents (1,834) (114) 2,138
Cash and cash equivalents at beginning
of period/year 3,776 1,639 1,639
Cash and cash equivalents at end of period/year 1,942 1,525 3,777
-------------------------------------------------- ------------- ------------- -----------
Cash at bank and in hand 1,942 1,525 3,777
Bank overdrafts - - -
------------------------------------------------- ------------- ------------- -----------
Cash and cash equivalents 1,942 1,525 3,777
-------------------------------------------------- ------------- ------------- -----------
ACCOUNTING POLICIES
1 Basis of preparation
The financial information set out in this interim report which
has not been audited, does not constitute statutory accounts within
the meaning of section 434 of the Companies Act 2006. The Company's
statutory financial statements for the year ended 31 March 2014,
prepared under International Financial Reporting Standards, were
approved by the board of directors on 7 July 2014 and have been
filed with the Registrar of Companies. The auditor's report on
those financial statements was unqualified, did not contain any
emphasis of matter paragraph and did not contain any statement
under Section 498 of the Companies Act 2006.
The interim financial statements have been prepared in
accordance with IAS 34 "Interim Financial Reporting", as adopted by
the EU. Comparatives for the year ended 31 March 2014 have been
extracted from the audited statutory accounts.
2 Accounting policies
The same accounting policies, presentation and methods of
computation are followed in this interim report as were applied in
the preparation of the Company's annual financial statements for
the year ended 31 March 2014.
3 Earnings per share
Six months ended Year ended
30 September 30 September 31 March
2014 2013 2014
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------- ------------- -----------
Earnings for the purposes of basic
and diluted
earnings per share
Profit/(loss) for the period attributable
to equity holders
of the parent 761 680 1,330
Amortisation 1,088 910 1,900
Gain on bargain purchase - - -
Adjusted profit attributable to equity
holders of the
parent, adding back amortisation and
non-recurring costs 1,849 1,590 2,676
Number of shares
Weighted average number of shares used
for earnings
per share 22,069,603 21,279,603 21,551,563
Dilutive effect of share plans 1,797,191 2,615,668 2,380,668
------------------------------------------- ------------- ------------- -----------
Diluted weighted average number of
shares used to
calculate fully diluted earnings per
share 23,866,794 23,895,271 23,932,231
Earnings per share
Basic earnings per share (pence) 3.45p 3.20p 6.17p
Fully diluted earnings per share (pence) 3.19p 2.85p 5.56p
Adjusted earnings per share, after
adding back
amortisation and non-recurring costs
Adjusted basic earnings per share (pence) 8.38p 7.47p 14.99p
Adjusted fully diluted earnings per
share (pence) 7.75p 6.66p 13.50p
Earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue.
Adjusted earnings per share is calculated by dividing the profit
attributable to equity holders of the Company (after adding back
amortisation) by the weighted average number of ordinary shares in
issue.
Fully diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares by existing share
options, assuming dilution through conversion of all existing
options.
4 Segmental information
The chief operating decision maker has been identified as the
Board. The Board reviews the Company's internal reporting in order
to assess performance and allocate resources. The operating
segments are fixed line services and next generation services,
which incorporates cloud-based contact centre solutions, data
connectivity, mobile and VoIP services, these are reported in a
manner consistent with the internal reporting to the Board. The
Board assesses the performance of the operating segments based on
revenue, gross profit and EBITDA.
Unaudited Unaudited
6 months ended 30 September 6 months ended 30 September
2014 2013
------------------------------------------ -----------------------------------------
Fixed Next Fixed Next
line generation Central line generation Central
services services costs Total services services costs Total
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Revenue 8,285 3,038 - 11,323 7,813 2,355 - 10,169
Gross profit 3,217 991 - 4,208 3,152 701 - 3,853
Gross margin
% 38.8% 32.6% - 37.2% 40.3% 29.7% - 37.9%
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
EBITDA 1,811 546 - 2,356 1,724 367 - 2,091
EBITDA % 21.9% 18.0% - 20.8% 22.1% 15.6% - 20.6%
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Amortisation (1,088) - - (1,088) (910) - - (910)
Depreciation - - (23) (23) - - (16) (16)
Share-based payments - - 2 2 - - (4) (4)
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Operating profit/(loss) 723 546 (20) 1,248 814 367 (20) 1,161
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Finance costs (126) (126) (130) (130)
Income tax (361) (361) (350) (350)
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Profit after
tax 723 546 (507) 762 814 367 (500) 680
------------------------- --------- ----------- -------- -------- --------- ----------- -------- -------
Audited
Year ended 31 March 2014
------------------------------------------
Fixed Next
line generation Central
services services costs Total
------------------------- --------- ----------- -------- --------
Revenue 15,705 5,147 - 20,852
Gross profit 6,016 1,568 - 7,584
Gross margin % 38.3% 30.5% - 36.4%
------------------------- --------- ----------- -------- --------
EBITDA 3,318 725 - 4,043
EBITDA % 21.1% 14.1% - 19.4%
------------------------- --------- ----------- -------- --------
Amortisation (1,898) - - (1,898)
Impairment charge (2) - - (2)
Depreciation - - (34) (34)
Share-based payments - - (7) (7)
------------------------- --------- ----------- -------- --------
Operating profit/(loss) 1,418 725 (41) 2,102
------------------------- --------- ----------- -------- --------
Finance costs - - (257) (257)
Income tax - - (515) (515)
------------------------- --------- ----------- -------- --------
Profit after tax 1,418 725 (813) 1,330
------------------------- --------- ----------- -------- --------
The assets and liabilities relating to the above segments have
not been disclosed as they are not separately identifiable and are
not used by the chief operating decision maker to allocate
resources. All segments are in the UK and all revenue relates to
the UK. Transactions with the largest customer of the Company
comprise less than 10% of total turnover and do not require
disclosure for either 2014 or 2015.
5 Share options
Details of the share options outstanding during the period are
as follows:
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2014
2014 2013
--------------------- --------------------- ---------------------
Number Weighted Number Weighted Number Weighted
of shares average of shares average of shares average
under exercise under exercise under exercise
option price option price option price
--------------------------- ---------- --------- ---------- --------- ---------- ---------
Outstanding at start
of period 1,955,668 42p 3,271,353 42p 3,271,353 42p
Granted during the period 32,143 140p - - - -
Forfeited during the
period (60,620) 50p (443,525) 134p (443,525) 134p
Exercised during the
period (130,000) 42p (212,160) 33p (872,160) 32p
--------------------------- ---------- --------- ---------- --------- ---------- ---------
Outstanding at end of
period 1,797,191 24p 2,615,668 28p 1,955,668 27p
--------------------------- ---------- --------- ---------- --------- ---------- ---------
The weighted average fair values have been determined using the
Black-Scholes-Merton Pricing Model with the following assumptions
and inputs:
30 September 30 September 31 March
2014 2013 2014
--------------------------------- ------------- ------------- -----------
Risk free interest rate 1.95-4.13% 1.95-4.13% 1.95-4.13%
Expected volatility 3-83% 3-83% 3-83%
Expected option life (years) 1.0-5.7 1.0-5.7 1.0-5.7
Expected dividend yield 2.0% 2.0% 2.0%
Weighted average share price 43p 42p 42p
Weighted average exercise price 45p 44p 44p
Weighted average fair value of
options granted 4p 5p 5p
--------------------------------- ------------- ------------- -----------
The expected average volatility was determined by reviewing the
last 65 historical fluctuations in the share price prior to the
grant date of each share instrument. An expected take up of 100%
has been applied to each share instrument. Expected dividend yield
is estimated at 2.0% which is based upon the actual dividend yield
for the period ended 30 September 2014. It does not bear any
relation to the future dividend policy of AdEPT Telecom plc.
The mid-market price of the ordinary shares on 30 September 2014
was 119p and the range during the period was 35p.
The share option expense recognised during the period in the
statement of comprehensive income was (GBP2,462) (September 2013:
GBP4,494).
6 Business combinations
On 8 April 2014 the Company acquired the entire issued share
capital of Bluecherry Telecom Limited for an initial cash
consideration of GBP1.8m plus the value of the net assets at
completion (GBP0.25m and being represented by cash). Further
consideration of between GBP0.2m and GBP0.75m will be payable, also
in cash, dependent upon performance of the contracts acquired
during the year ending 30 April 2015. Bluecherry Telecom Limited,
based in Milton Keynes, was a supplier of fixed line calls, line
rental and data connectivity products to small and medium-sized
businesses. The acquisition forms part of the Company's strategy as
the acquired customer base complements that of AdEPT and provides
cross-selling opportunities.
Management of the customer contracts was transferred to AdEPT's
office in Tunbridge Wells, Kent during April 2014. Acquisition
related costs of GBP21,228 have been recognised as an expense in
the statement of comprehensive income for the period ended 30
September 2014. Bluecherry Telecom Limited contributed revenue and
profit (after acquisition and financing costs) of GBP0.6 million
and GBP0.15 million respectively in the statement of comprehensive
income for the period ended 30 September 2014. A fair value of
GBP2.1 million in relation to the customer contracts for the
acquired business has been recognised as intangible asset additions
in the period ended 30 September 2014. No other assets or
liabilities were acquired.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DKLFBZFFEFBX
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