Northland Capital partners view on AdEPT Telecom: AdEPT’s management has a proven track record in acquiring and integrating businesses in the fragmented communications space and its high levels of automation have enabled it to post sector leading KPIs around revenue per employee and margins consistently. It has successfully expanded into larger customers as well as the Public Sector and Healthcare and there are good growth opportunities through its inclusion in a number of government frameworks. The Centrix acquisition was larger than previous purchases and also broadened AdEPT’s offering into system sales but the integration is proceeding to plan, the first combined sales have been secured and there are additional growth opportunities. We upgrade our P&L and DPS forecasts, maintain our BUY rating and set a new 285p price target.
| Interims: Centrix performing well; upgrades to FY16 & FY17 |
| n H1 performance: Good performance all round with another record adj. EBITDA margin achieved. Centrix has made a good initial contribution and the outlook for the group results in upgrades at the top and bottom line for FY16 and FY17. H1 DPS was also higher than expected and we upgrade FY16 and FY17. Management still has firepower for further acquisitions in the fragmented reseller space.
n Centrix performing: The integration of Centrix is going to plan. The acquisition increased the number and proportion of larger customers, expanded AdEPT’s Public Sector and Healthcare presence and increased the contribution from managed services. The acquisition has broadened AdEPT’s product offering in complex unified communications, Avaya IP telephony and hosted IP solutions and managed services and has brought the potential for larger system sales that would represent further upside to our current forecasts. Encouragingly, AdEPT has already been successful in winning new public sector customers using the enlarged portfolio. |
| Year end Mar | Revs (£m) | Adj. EBITDA (£m) | Adj. PBT (£m) | Tax (%) | Adj. EPS (p) | PER (x) | Div (p) | Net cash (£m) | Yield (%) |
| 2014A | 20.9 | 4.0 | 3.7 | 13.8 | 13.5 | 18.5 | 3.00 | (3.0) | 1.2 |
| 2015A | 22.1 | 4.6 | 4.3 | 14.0 | 15.7 | 16.0 | 4.75 | (1.5) | 1.9 |
| 2016E New | 28.7 | 5.9 | 5.2 | 16.4 | 18.6 | 13.5 | 6.00 | (7.0) | 2.4 |
| 2016E Old | 28.2 | 5.6 | 4.9 | 16.4 | 17.5 | 5.50 | (7.0) | ||
| 2017E New | 28.7 | 5.9 | 5.2 | 16.0 | 18.6 | 13.4 | 7.00 | (5.9) | 2.8% |
| 2017E Old | 28.2 | 5.6 | 4.9 | 16.0 | 17.6 | 6.50 | (6.7) |
| Source: Northland Capital Partners Limited. * Northland Capital Partners acts as Nomad and Broker
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