AdEPT Telecom Plc (LON:ADT), 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 £13.9 million (2014: £11.3 million)
· EBITDA increased by 24.8% to £2.9 million (2014: £2.4 million)
· EBITDA margin increased to 21.1% (2014: 20.8%)
· Adjusted profit before tax increased by 19.7% to £2.6 million (2014: £2.2 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 £2.5 million (2014: £2.3 million)
· New £15 million Revolving Credit Facility with Barclays completed in April 2015
· Acquisition of Centrix Limited completed on 1 May 2015
· Net debt, after £7.2 million acquisition payments, of £7.6 million (2014: £3.2 million)
· Managed services revenue increased by 88.7% to £5.7 million (2014: £3.0 million)
AdEPT Telecom Plc CEO Ian Fishwick presents the Interim Results & Corporate Update 6 months ended 30 Sept 2015
Business review
Total revenue increased by 22.8% to £13.9 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 £2.5 million (September 2014: £2.3 million), which equates to 99.2% reported EBITDA conversion (after £0.39m one-off acquisition fees). £0.6 million corporation tax instalments were paid during the period ended 30 September 2015 compared to £nil 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 £0.5 million of funds (September 2014: £0.3 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, £0.2 million has been spent on essential upgrades during the period ended 30 September 2015.
£7.0 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. £0.2 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 £15 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 £7.6 million at 30 September 2015 largely as a result of £7.2 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 £2.6 million (September 2014: £2.2 million) arising entirely from the improved underlying operating profit. Reported profit before tax increased by 4.1% to £1.2 million (2014: £1.1 million) and reported profit after tax increased by 8.1% to £0.8 million (2014: £0.8 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 £0.45 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 £0.67 million of shareholders’ funds (September 2014: £0.50 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
