Northland Capital partners view on AdEPT Telecom (LON:ADT): AdEPT has maintained strong cashflow control during its strategic transition to managed services provision. We have raised our FY17 dividend outlook from 7.0p/share to 7.5p, indicative of a yield of 3.2%, and for FY18, 8.0p/share.
Strong interim performance; interim dividend raised by 25%YoY to 3.75p/share
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n Performance for the six months to 30th September was ahead of our outlook. Total revenue rose +18.9%YoY to £16.53m (NCP Estimate: £16.23m); EBITDA rose +20.2% to £3.53m (NCP E: £3.37m), 21.4% margin (H16: 21.1%). Managed Services revenue was £8.76m (NCPE: £8.75m); Fixed Line divisional revenue was £7.77m, -4.9% (NCPE: 7.48m). Gross profitability improved, from a 40.1% margin in H116 to 40.5% in H117.
n AdEPT increased its Interim dividend by 25% to 3.75p/share (NCPE: 3.50p). Operating cashflow generation was £3.24m, compared to £2.53m a year earlier. Net debt at 30th September was £10.79m, inclusive of £6.58m in payments for the acquisition of Comms Group UK Ltd., in May 2016, which contributed to growth in the Managed Services division. AdEPT noted that Comms Group contributed in line with expectations, adding 12% of revenue growth during the period.
n The company highlighted continued progress in public sector and healthcare sectors, rising from 24% of total in H116 to 29%, increasing its local government council contract base from 28 in H116 to 40, and also raising the proportion of revenue from (larger) Premier Customers, from 70% in H116 to 72%.
n AdEPT announced the acquisition, post period-end, of CAT Communications Ltd., a Wiltshire-based provider of unified communications, for £1.05m (less £0.07m of debt), with a further performance-based consideration between £0.20m and £0.95m. We have adjusted FY17 and FY18 outlook accordingly, adding respective additional revenue of £0.5m and £1.3m, EBITDA of £0.2m and £0.4m.
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Source: Northland Capital Partners Limited. *Northland Capital Partners Limited is the Nominated Advisor and Broker to AdEPT Telecom and therefore this information should be viewed as a Marketing Communication.
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