TIDMADT
RNS Number : 0278F
AdEPT Telecom plc
10 November 2015
AdEPT Telecom plc
("AdEPT" or the "Company")
Interim results for the 6 months ended 30 September 2015
AdEPT, one of the UK's leading independent communications
integrator and managed service providers, announces its results for
the 6 months ended 30 September 2015.
Highlights
-- Total revenue increased by 22.8% to GBP13.9 million (2014: GBP11.3 million)
-- EBITDA increased by 24.8% to GBP2.9 million (2014: GBP2.4 million)
-- EBITDA margin increased to 21.1% (2014: 20.8%)
-- Adjusted profit before tax increased by 19.7% to GBP2.6 million (2014: GBP2.2 million)
-- Adjusted EPS increased by 23.1% to 10.32p (2014: 8.38p)
-- Interim dividend increased by 33.3% to 3.00p per share (2014: 2.25p)
-- Operating cash flow before tax of GBP2.5 million (2014: GBP2.3 million)
-- New GBP15 million Revolving Credit Facility with Barclays completed in April 2015
-- Acquisition of Centrix Limited completed on 1 May 2015
-- Net debt, after GBP7.2 million acquisition payments, of
GBP7.6 million (2014: GBP3.2 million)
-- Managed services revenue increased by 88.7% to GBP5.7 million (2014: GBP3.0 million)
Business review
Total revenue increased by 22.8% to GBP13.9 million with the
increase being a reflection of the 5 month revenue contribution
from Centrix Limited ("Centrix") following the completion of the
acquisition on 1 May 2015. Centrix is a UK based specialist
provider of complex unified communications, Avaya IP telephony,
hosted IP solutions and managed services. With over 300 Avaya
solutions in the UK and across the world Centrix has one of the
largest customer bases backed by specialist knowledge of the Avaya
Aura solution in particular, which has extended the Group's ability
to provide a complete unified communications solution.
AdEPT has had continued success in the public sector and
healthcare space during the period winning a number of new
contracts with councils and other public sector bodies. Over the
last 24 months AdEPT has been successful in gaining new contracts
with public sector and healthcare organisations as a result of its
various framework agreements. This has seen an increase to 28
councils from 18 in the comparative period. The acquisition of
Centrix provided a complementary customer focus both in terms of
size and sector. The continued targeting of larger contracts has
seen the Premier Customer division now accounting for just over 70%
of total revenue at 30 September 2015 (2014: 55%). The public and
healthcare sector customer base has been extended and now accounts
for 24.3% of total revenue at 30 September 2015 (2014: 13.3%).
In July 2015 AdEPT was awarded approved supplier status under
the RM1045 Network Services Framework by the Crown Commercial
Service and AdEPT has already been successful in winning new public
sector customers under this framework by utilising its extended
product portfolio acquired with Centrix. The Company holds
additional framework agreements, including 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, the Eastern Shires Purchasing
Organisation sole supplier Telecom Framework to local government
and charities for calls, lines, broadband, super-fast broadband
(fibre), data connectivity and SIP trunks, and the G-Cloud 6
RM1557vi framework with Crown Commercial Service. Approved supplier
status under these framework agreements gives the Company authority
to provide services to both local and central government
bodies.
In September 2015 Centrix was recognised by being awarded Avaya
Partner in Customer Excellence based on independent customer
feedback. Subsequently, in October 2015 Centrix was awarded Avaya
Certified Gold Partner status, recognising the ability of the
Company to deliver leading-edge and world-class communications
solutions and support.
AdEPT continues 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 managed services, including data
connectivity, hardware and cloud-based contact centre solutions,
increased by 88.7% now accounting for 41.2% of total revenue for
the six months ended 30 September 2015 (September 2014: 26.8%). The
demand for faster data connectivity speeds continues, and this is
being met through a wider data connectivity service offering,
including up to 10Gb Optical Spectrum Services (OSA) data
connectivity being provided to customers solutions under the Ja.Net
framework for universities and colleges.
Financing and cash flow
Cash generated from operating activities before tax increased by
10.3% to GBP2.5 million (September 2014: GBP2.3 million), which
equates to 99.2% reported EBITDA conversion (after GBP0.39m one-off
acquisition fees). GBP0.6 million corporation tax instalments were
paid during the period ended 30 September 2015 compared to GBPnil
in the comparative period, due to a combination of share option
relief and the timing of the instalment payments in the prior
period.
Dividends paid in the period absorbed GBP0.5 million of funds
(September 2014: GBP0.3 million), which is a reflection of the
progressive dividend policy of the Company. The Company operates a
capex-light model but after 12 years of operation, to ensure that
the billing system remains fully supported, GBP0.2 million has been
spent on essential upgrades during the period ended 30 September
2015.
GBP7.0 million of available funds (net of cash acquired) was
used to fund the initial cash consideration for the acquisition of
the entire issued share capital of Centrix on 1 May 2015. The
interim results for the current period include a 5 month
contribution from Centrix, further details of which are included in
Note 6. GBP0.2 million was used to fund the deferred consideration
in relation to the acquisition of the entire issued share capital
of Bluecherry Telecom Limited on 1 April 2014.
Net debt and bank facilities
A new GBP15 million Revolving Credit Facility was agreed with
Barclays Bank plc on 22 April 2015, part of which was used to fund
the initial cash consideration for the acquisition of Centrix. The
flexible structure of the new agreement has resulted in a facility
which is larger, cheaper and of longer duration than the previous
arrangement. The remaining debt facility will be used by the
Company to fund the strategic acquisition of earnings-enhancing
businesses within the fragmented telecoms and managed services
market.
Net borrowings have been increased to GBP7.6 million at 30
September 2015 largely as a result of GBP7.2 million acquisition
payments. Increased net borrowings following the acquisition
resulted in increased gearing to 61% (September 2014: 29%). Net
Debt:EBITDA (annualised) ratio remains low at 1.3x at 30 September
2015.
Profit before and after tax
Adjusted profit before tax (adding back non-cash amortisation
and one-off acquisition related fees) increased by 19.7% to GBP2.6
million (September 2014: GBP2.2 million) arising entirely from the
improved underlying operating profit. Reported profit before tax
increased by 4.1% to GBP1.2 million (2014: GBP1.1 million) and
reported profit after tax increased by 8.1% to GBP0.8 million
(2014: GBP0.8 million).
Earnings per share
Adjusted (basic) earnings per share has increased 23.1% to
10.32p for the six months ended 30 September 2015 (September 2014:
8.38p) as a result of the GBP0.45 million increase to underlying
EBITDA.
Dividends
The Directors have declared an interim dividend of 3.00p per
Ordinary Share in respect of the period ended 30 September 2015, an
increase of 33.3% over the interim dividend for the comparative
period (September 2014: 2.25p). This will absorb approximately
GBP0.67 million of shareholders' funds (September 2014: GBP0.50
million). It is proposed by the Directors that this dividend will
be paid on 8 April 2016 to shareholders who are on the register of
members on the record date of 18 March 2016. Subject to the audited
results for the year ending 31 March 2016, it is the intention of
the Board to propose a final dividend with the March 2016 final
results.
Strong free cash flow generation has continued since the end of
the period, and there continues to be considerable scope for the
Board to continue its progressive future dividend policy.
Director change
The Company announces that after more than 10 years with AdEPT
its Sales Director, Joe Murphy, has decided to pursue other
opportunities. Joe was instrumental in the development of the
partner sales channel for the Company, and the Board would like to
take this opportunity to thank Joe for his valuable contribution to
AdEPT. Joe will leave the Company with effect from 20 November 2015
with our best wishes for the future.
Outlook
This has been an excellent 6 months with improved results in all
key areas and an extremely positive contribution from the Centrix
acquisition. We continue to be highly cash generative with adequate
debt facilities in place to enable to Board to continue to identify
earnings-enhancing acquisitions whilst retaining scope for a
progressive dividend policy.
Roger Wilson
Chairman
10 November 2015
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/Gerry Beaney
Broking
John Howes/Abigail Wayne
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UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 September 30 September
2015 2014
Note GBP'000 GBP'000
------------------------------------------- ----- ------------- -------------
REVENUE 13,908 11,323
Cost of sales (8,326) (7,115)
------------------------------------------- ----- ------------- -------------
GROSS PROFIT 5,582 4,208
Administrative expenses (4,185) (2,960)
------------------------------------------- ----- ------------- -------------
OPERATING PROFIT 1,397 1,248
Total operating profit - analysed:
Operating profit before depreciation and
amortisation 2,940 2,356
Share based payments - 3
Acquisition fees (390) -
Depreciation of tangible fixed assets (64) (23)
Amortisation of intangible fixed assets (1,089) (1,088)
------------------------------------------- ----- ------------- -------------
Total operating profit 1,397 1,248
------------------------------------------- ----- ------------- -------------
Finance costs (230) (126)
Finance income 1 -
------------------------------------------- ----- ------------- -------------
PROFIT BEFORE INCOME TAX 1,168 1,122
Income tax expense (345) (360)
------------------------------------------- ----- ------------- -------------
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 823 762
------------------------------------------- ----- ------------- -------------
Attributable to:
Equity holders 823 762
Earnings per share
Basic earnings per share (pence) 3 3.69p 3.45p
Diluted earnings per share (pence) 3 3.47p 3.19p
Adjusted earnings per share, after
adding back amortisation
Basic earnings per share (pence) 3 10.32p 8.38p
Diluted earnings per share (pence) 3 9.69p 7.75p
UNAUDITED STATEMENT OF FINANCIAL POSITION
Restated
30 September 30 September 31 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Intangible assets 23,599 16,012 14,874
Property, plant and equipment 212 101 82
Deferred income tax 107 118 145
-------------------------------- ------------- ------------- ---------
23,918 16,231 15,101
Current assets
Inventories 63 4 4
Trade and other receivables 4,034 2,497 2,198
Cash and cash equivalents 1,470 1,942 2,094
-------------------------------- ------------- ------------- ---------
5,567 4,443 4,296
Total assets 29,485 20,674 19,397
LIABILITIES
Current liabilities
Trade and other payables 7,799 3,621 3,165
Income tax 39 393 324
Short term borrowings 1,189 1,189 538
-------------------------------- ------------- ------------- ---------
9,027 5,203 4,027
Non-current liabilities
Long term borrowings 7,911 3,953 3,095
-------------------------------- ------------- ------------- ---------
Total liabilities 16,938 9,156 7,122
--------------------------------
Net assets 12,547 11,518 12,275
SHAREHOLDERS' EQUITY
Share capital 2,230 2,207 2,230
Share premium 335 231 335
Capital redemption reserve 12 - 12
Retained earnings 9,970 9,080 9,699
-------------------------------- ------------- ------------- ---------
Total equity 12,547 11,518 12,275
-------------------------------- ------------- ------------- ---------
UNAUDITED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of
parent
Share Capital
Share Share capital redemption Retained Total
to
capital premium be issued reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ---------- ----------- --------- --------
Equity at 1 April 2014 2,194 189 72 - 8,248 10,703
Profit for 6 months ended
30 September 2014 - - - - 762 762
Issue of new equity 13 42 - - - 55
Share based payments - - (2) - - (2)
Balance at 30 September
2014 (restated) 2,207 231 70 - 9,010 11,518
Profit for 6 months ended
31 March 2015 - - - - 772 772
Issue of new equity 35 104 - - - 139
Deferred tax asset adjustment - - - - 23 23
Share based payments - - (12) - 17 5
Shares repurchased and
cancelled (12) - - 12 (182) (182)
Balance at 31 March 2015 2,230 335 58 12 9,640 12,275
Profit for 6 months ended
30 September 2015 - - - - 823 823
Share based payments - - 1 - - 1
Dividend - - - - (552) (552)
Balance at 30 September
2015 2,230 335 59 12 9,911 12,547
------------------------------- -------- -------- ---------- ----------- --------- --------
UNAUDITED STATEMENT OF CASH FLOWS
Six months ended Year ended
30 September 30 September 31 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Profit before income tax 1,168 1,122 2,137
Depreciation and amortisation 1,153 1,111 2,218
Share based payments - (3) 3
Net finance costs 229 126 233
Decrease in inventories - - -
Decrease/(increase) in trade and other
receivables (485) (194) 76
Increase in trade and other payables 463 129 153
-------------------------------------------------- ------------- ------------- -----------
Cash generated from operations 2,528 2,291 4,820
Income taxes paid (602) - (315)
-------------------------------------------------- ------------- ------------- -----------
Net cash from operating activities 1,926 2,291 4,505
-------------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Interest paid (160) (97) (175)
Acquisition of trade and assets (7,229) (2,058) (2,152)
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Purchase of intangible assets (164) (27) (11)
Purchase of property, plant and equipment (85) (45) (52)
-------------------------------------------------- ------------- ------------- -----------
Net cash used in investing activities (7,638) (2,227) (2,390)
Cash flows from financing activities
Dividends paid (502) (329) (660)
Payments made for share repurchases - - (182)
Share capital issued - 55 194
Repayment of borrowings - (1,625) (5,399)
Increase in bank loan 5,589 - 2,250
Net cash (used in)/from financing activities 5,087 (1,899) (3,797)
-------------------------------------------------- ------------- ------------- -----------
Net increase/(decrease) in cash and cash
equivalents (625) (1,834) (1,682)
Cash and cash equivalents at beginning
of period/year 2,095 3,776 3,777
Cash and cash equivalents at end of period/year 1,470 1,942 2,095
-------------------------------------------------- ------------- ------------- -----------
Cash at bank and in hand 1,470 1,942 2,095
Bank overdrafts - - -
------------------------------------------------- ------------- ------------- -----------
Cash and cash equivalents 1,470 1,942 2,095
-------------------------------------------------- ------------- ------------- -----------
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 2015,
prepared under International Financial Reporting Standards, were
approved by the board of directors on 10 July 2015 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 2015 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 2015.
In order to comply with the requirements of IFRIC 17, as applied
in the audited financial statements for the year ended 31 March
2015, the statement of financial position as at 30 September 2014
has been restated to include the dividend charge only from the
actual payment date.
3 Earnings per share
Six months ended Year ended
30 September 30 September 31 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------- ------------- -----------
Earnings for the purposes of basic
and diluted
earnings per share
Profit for the period attributable
to equity holders of the parent 823 761 1,534
Amortisation 1,089 1,088 2,169
Acquisition fees 390 - -
Adjusted profit attributable to equity
holders of the
parent, adding back amortisation and
non-recurring costs 2,302 1,849 3,703
Number of shares
Weighted average number of shares used
for earnings per share 22,297,400 22,069,603 22,219,140
Dilutive effect of share plans 1,440,759 1,797,191 1,430,730
------------------------------------------- ------------- ------------- -----------
Diluted weighted average number of
shares used to
calculate fully diluted earnings per
share 23,738,159 23,866,794 23,649,870
Earnings per share
Basic earnings per share (pence) 3.69p 3.45p 6.90p
Fully diluted earnings per share (pence) 3.47p 3.19p 6.49p
Adjusted earnings per share, after
adding back
amortisation and non-recurring costs
Adjusted basic earnings per share (pence) 10.32p 8.38p 15.76p
Adjusted fully diluted earnings per
share (pence) 9.69p 7.75p 14.81p
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 managed services, which
incorporates cloud-based contact centre solutions, data
connectivity, mobile, hardware 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
2015 2014
---------------------------------------- ----------------------------------------
Fixed Fixed
line Managed Central line Managed Central
services services costs Total services services costs Total
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Revenue 8,174 5,734 - 13,908 8,285 3,038 - 11,323
Gross profit 3,211 2,371 - 5,582 3,217 991 - 4,208
Gross margin % 39.3% 41.3% - 40.2% 38.8% 32.6% - 37.2%
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
EBITDA 1,888 1,052 - 2,940 1,811 546 - 2,356
EBITDA % 23.1% 18.3% - 21.2% 21.9% 18.0% - 20.8%
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Amortisation (1,089) - - (1,089) (1,088) - - (1,088)
Depreciation - - (64) (64) - - (23) (23)
One-off costs - - (390) (390) - - - -
Share-based payments - - - - - - 2 2
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Operating profit/(loss) 799 1,052 (454) 1,397 723 546 (20) 1,248
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Finance costs (229) (229) (126) (126)
Income tax (345) (345) (361) (361)
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Profit after tax 799 1,052 (1,028) 823 723 546 (507) 762
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Audited
Year ended 31 March
2015
----------------------------------------
Fixed
line Managed Central
services services costs Total
------------------------- --------- --------- -------- --------
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