AdEPT Technology making good progress on three strategic pillars

AdEPT Technology Group plc (LON:ADT), one of the UK’s leading independent providers of managed services for IT, unified communications, connectivity, voice and cloud services, has announced its unaudited results for the six months ended 30 September 2022.

The H1 FY23 results demonstrate the Group’s resilience, with organic growth in Managed Services continuing to replace Traditional Telephony, strong cash generation enabling net debt and earnout liability reduction of 16% in the last 12 months, and a return of the interim dividend, alongside 115 new contract wins.

Financial highlights:

Revenue and EBITDA

·Group revenue of £34.2 million (H1 FY22: £34.3 million), impacted by global supply chain issues
·Organic growth of 3% in Cloud Centric Strategic Services with revenue increasing by £0.5 million to £15.1 million
·Managed Services revenue grew organically by 3% increasing to 89% of Group revenue (H1 FY22: 87%), offsetting the structural decline in revenue from legacy Traditional Telephony, from which the Group continues to move away
·Underlying EBITDA1 of £5.4 million (H1 FY22: £5.7 million)
·Underlying EBITDA1 margin of 15.9% (H1 FY22: 16.7%)

Adjusted PAT and EPS

·Adjusted profit after tax2 of £3.0 million (H1 FY22: £3.1 million)
·Adjusted fully diluted EPS of 12.1p (H1 FY22: 12.5p)

Cash flow and debt

·Deferred consideration for Datrix of £4.3 million paid in July 2022, with no further amounts due
·Strong cashflows with strategy to reduce gearing progressing to plan: net senior debt, post H1 FY23 £4.3 million earnout payment, of £30.7 million at 30 September 2022 (H1 FY22: £31.2 million)
·Decrease to senior debt and acquisition liabilities of £5.9 million (16%) in the last 12 months
·Reported EBITDA conversion to post-tax cash from operating activities at 91% (H1 FY22: 82%)
·Low capital expenditure maintained at 1.6% of revenue (H1 FY22: 1.6%)


·Interim dividend of 2.5p (H1 FY22: Nil) – up 150% on final dividend of 1.0p in FY22
·Dividend cover of 4.8x
1Earnings before interest, tax, depreciation, amortisation and excluding one off furlough grants, acquisition and restructuring costs and share based payments
2Profit after tax adding back one-off acquisition and restructuring costs, amortisation and share based payments, excluding revaluation of deferred consideration

Operational highlights:

·Strategy in action: winner of ‘Managed Service Provider of the Year’ for the second year running at the Comms Business Awards 2022
·Success of Project Fusion, which integrates all the Group’s businesses on the One AdEPT platform, recognised at The Billing People Awards – AdEPT won “Billing Return on Investment Award”
·Focus on Cloud market gaining momentum:i.   A 9% organic increase in Voice over IP (“VoIP”) revenues to £2.1 million (H1 FY22: £1.9 million), demonstrating the success of the Group’s ability to help customers transition from Traditional Telephony, which now comprises only 11% of total revenue; andii.   A 17% increase in AdEPT Cloud Services (Nebula) consumed by customers: up from 654 to 764
·Revenue generated from public sector and healthcare customers in H1 FY23 increased to 50% (H1 FY22: 48%)


·Secured project revenue backlog of £1.1m, resulting from global equipment supply shortages which began to ease in Q2, deferred to H2 FY23 and FY24
·Future growth prospects of the business remain strong, supported by:i.   New strategic alliance with Canon (UK) Ltd launched in October 2022: dedicated sales team at Canon selling AdEPT IT Services;ii.   The ability to capture a greater wallet-share with AdEPT now accredited as a Sage Intacct Partner, joining only a handful of companies in the UK delivering Sage’s latest and most intuitive cloud-based accounting software solution; andiii.   Success utilising the Department for Education (DfE) £150 million fund, as the first of many potential projects have been secured by AdEPT under the Connect the Classroom initiativeiv.   Strong pipeline of opportunities, driven by macro technology market trends
·Short-term outlook remains challenging but the Board considers the long-term prospects of the Group to be as strong as ever

Commenting on the results and outlook for the Group, Chairman, Ian Fishwick, said:

“With many of the challenges affecting the Group being outside of our control, we have focused on the areas which we are able to influence, making good progress on our three strategic pillars:

Organic Growth

The Group’s strategic focus on growth in Cloud Centric Services is progressing. Having achieved 3% organic growth in the Period, these services now represent 44% of Group revenue (H1 FY22: 42%).  Managed Services (recurring revenue) grew organically by 3% in the Period, with total Managed Services revenue now representing 89% of Group revenue, up from 87% in H1 FY22.  Traditional Telephony continued to decline as anticipated, and this segment of the business has reduced to 11% of Group revenue (H1 FY22: 13%).

Reduce Gearing

In July 2022, the Group’s strong operating cash flows were used to fund the final deferred consideration payment for the acquisition of Datrix Limited, amounting to £4.3 million, with no further amounts outstanding. Senior net debt (excluding IFRS 16 liabilities) at 30 September 2022 was £30.7 million, compared to £29.4 million at 31 March 2022.  The Group continues to operate well within its Bank Covenants and whilst there have been significant increases to interest rates in the period the £0.1 million increase in interest charges this is offset by a reduction in the absolute value of borrowings.

The Board regularly monitors expected future interest rate predictions and the potential impact on the interest charges for the Group.  The Group’s £7.3 million convertible loan note is at a fixed interest and senior net debt is anticipated to reduce significantly over the coming 12 months.  Based on the current base rate forecast (source: through to December 2024 of an increase to 4.5%, the interest cost variance against previous management expectation is £0.2 million, which is less than two-weeks operating cash flow.

There has been £0.1 million increase in interest charges in the income statement to £1.5 million (£1.1 million cash interest), with the significant increases to the base rate over the last six months being offset by a reduction in the absolute value of borrowings.

Structure for Success

One AdEPT, which lies at the heart of the Group’s growth strategy, providing high levels of operational visibility and a scalable platform for cross-selling, is now used by 100% of our staff members, with its tooling enabling the Group to balance work force skills, share knowledge and distribute tasks across unified teams. 


Whilst headwinds remain, constraining organic growth, the Group has made good strategic progress and there remains a strong pipeline of opportunities across the public and private sectors, driven by macro technology market trends, and helped by specific government initiatives relating to education.  The long-term prospects for AdEPT remain as strong as ever.”

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