WH Ireland Analyst Brendan D’Souza said this morning: “AdEPT Telecom (LON:ADT) has published its FY16 interim results (Period ending 30 September 2015). Headline adjusted basic EPS at 10.32p came in 13% higher than WHI’s 9.16p forecast and a solid 23% ahead of YoY levels. The higher than expected earnings resulted from (i) higher than expected revenues (+1% vs. WHI estimates) and (ii) higher gross margins which came in at 40.1% (vs. WHI’s 35.6% estimate), benefitting from higher margin managed services revenues. AdEPT has announced an interim dividend of 3p/share which is 9% higher than WHI’s forecasts and an impressive 33% higher versus YoY levels.
Revenues growth of 23% YoY to £13.9m was largely down to a robust 139% increase in managed services revenue (previously referred to as next generation services), which benefitted from the Centrix acquisition at the start of May, contributing 5 months of revenue in the interim results. Gross margins also benefitted from higher managed services revenue, which contributed more than expected to the group sales mix at 41% of revenue in 1H16. Gross margin for the period at 40.1% was strongly ahead of WHI’s 35.6% forecast and 3% ahead vs. YoY levels. Adjusted net profit of £2.3m was 13% ahead of WHI’s £2m forecast. AdEPT ended the 1H16 period with a net debt of £7.6m, resulting largely from the £7.2m cash outlay related to the Centrix acquisition. A key trend that continued during the period was public sector client wins and an increase of public sector revenue as a percentage of the group revenue mix. AdEPT increased its customer base of councils to 28 in 1H16 versus 18 in 1H15. The acquisition of Centrix provided AdEPT with a foothold in the healthcare sector. Combined public and healthcare customer accounted for 24% of revenue in1H16 up strongly versus 1H15 levels of 13%. Additionally we were pleased to note that management’s strategy of focusing its direct sales channel on larger customers has seen group revenue from its Premier Customer division increase from 55% of the sales mix in 1H15 to 70% in 1H16. We are highly encouraged by today’s forecast beating results. “
