AdEPT Telecom plc (LON:ADT), a leading UK independent provider of award-winning unified communications and IT services, announced today its results for the year ended 31 March 2017.
Financial highlights
· 14th consecutive year of increased underlying EBITDA up 27.2% to £7.83m (2016: £6.15m)
· Revenue increased by 19.2% to £34.4m (2016: £28.9m)
· Gross margin % increased by 2.0% to 42.3% (2016: 40.3%)
· Underlying EBITDA margin % increased by 1.4% to 22.7% (2016: 21.3%)
· 20.3% increase to adjusted earnings per share to 23.09p (2016: 19.19p)
· 19.2% increase to dividends declared to 7.75p (Interim 3.75p, Final 4.00p) (2016: 6.50p)
· Year-end net debt* of £15.5m (2016: £6.0m)
· New 5 year £30m revolving credit facility in place with Barclays and RBS
Operational highlights
· Managed services accounted for 55.4% of total revenue (2016: 44.3%)
· Acquisition of entire issued share capital of Comms Group UK Limited completed in May 2016
· Acquisition of entire issued share capital of CAT Communications Limited and Progressive Communications Limited in November 2016
· Acquisition of entire issued share capital of OurIT Department Limited in February 2017
* Net debt is defined as cash and cash equivalents less short-term and long-term borrowings and prepaid bank fees
Commenting upon these results AdEPT Telecom plc Chairman Roger Wilson said: “AdEPT has delivered a 27% increase to underlying EBITDA for the year ended 31 March 2017 and the Group continues to deliver consistently high levels of free cash flow generation. The continued strong cash generation has funded a 19% increase to dividends declared during the year and the Board is confident that continued focus on underlying profitability and cash generation will support a progressive dividend policy.
Free cash flow generated combined with the new larger debt facility put in place in February 2017 was used by the Company to complete three earnings enhancing acquisitions during the current period. Following these acquisitions, the Group is able to offer its existing and targeted customer base a fully converged unified communications and IT service. The acquisitions completed during the year combined with organic sales have increased the rate of transition of the Group towards a complete managed service provider, with revenue from managed services accounting for more than 55% of the total in the year ended 31 March 2017.”
Chairman’s statement
Review of operations
The Group has continued to increase underlying EBITDA and maintain strong free cash flow generation, which has been used to fund the progressive dividend policy and earnings-enhancing acquisitions.
The Group’s continued strong cash generation resulted in £5.8m of operating cash flow before tax and interest. AdEPT has used its free cash flow and debt facilities to fund three acquisitions during the year, Comms Group UK Limited (Comms Group), CAT Communications Limited (CAT) and OurIT Department Limited (OurIT), the latter of which has extended the AdEPT product set by adding the delivery of outsourced IT services and managed IT solutions. The convergence of telecommunications and IT is an increasing requirement for AdEPT’s existing and targeted enterprise and public sector customer base. The highly skilled IT team and product set acquired will complement and enhance AdEPT’s existing services, allowing AdEPT to provide a full managed service to customers, incorporating unified communications and IT. In addition to the numerous telecom and managed service related accreditations and experience, AdEPT now offers a directly employed team of highly skilled certified professionals with qualifications including Microsoft Gold Partner and Business Specialist, Apple Specialist, Cisco Certified Partner, Dell Preferred Partner, AVAYA Partner in Customer Excellence and is focused on providing truly managed unified communications and IT service to customers with a focus across London and the South East.
The acquisitions of Comms Group, CAT and OurIT, combined with organic sales, has increased the rate of transition of the Group towards managed services, which accounted for 55.4% of total revenue in the year ended 31 March 2017. The teams at Comms Group and OurIT have proved to be an excellent fit with AdEPT and have been successful in jointly working on unified IT and voice communication contracts. The post-acquisition performance of Comms Group and OurIT has delivered growth and therefore we anticipate the contingent deferred consideration for both to be towards the top end of the range.
The issue of new equity during the year resulted in a cash inflow of £0.2m largely arising from the exercise of the Barclays warrant in March 2017. The Company repurchased 19,136 of its own shares during the year ended 31 March 2017 at an average price of 318.0p, pursuant to the stock exchange announcement issued on 18 December 2014. The Board believes that share repurchases can improve stock liquidity and increase value to shareholders and therefore the directors will continue to determine if further repurchases remain in shareholders’ best interests.
In line with its progressive policy, AdEPT has increased the dividend proposed year-on-year by 19.2%, proposing a final dividend of 4.00p per ordinary share (2016: 3.50p), making total dividends proposed in respect of the year ended 31 March 2017 of 7.75p per ordinary share (2016: 6.50p).
Employees
As a result of the acquisitions completed in the year ended 31 March 2017, the Group now has more than 100 full-time employees. The improved profitability and free cash flow generation this year was made possible by the continued hard work and focus of all employees at AdEPT. As a Group we are immensely proud of the track record we have created over the last 14 years and, on behalf of the Board, I would like to take this opportunity to thank all of our employees for their continued hard work.
Director changes
In the March 2016 accounts the Group announced that after more than 13 years with AdEPT, its Chief Operating Officer, Amanda Woodruffe, had decided to retire. After a handover period, Amanda left the Group during August 2016. The Board would again like to take this opportunity to thank Amanda for her valuable contribution to AdEPT. Also in the March 2016 accounts, the Group announced that Richard Burbage, former director of Centrix, had been appointed to the Board as Unified Communications director. Richard continues to be responsible for overseeing the AdEPT Fleet operation and developing the Group’s unified communications strategy.
Outlook
The excellent result for this year was delivered through a combination of strategic acquisition and organic contract wins, improving margins on customer contracts and maintaining high levels of operational efficiency. The Board is confident that continued strong cash conversion of operating profit will support its intention of a progressive dividend policy.
The focus for the coming year remains on developing organic sales through leveraging AdEPT’s approved supplier status on the various public sector telecom frameworks, maintaining profitability and cash flow conversion, which will be used to reduce net borrowings and/or fund suitable earnings-enhancing acquisitions.
Roger Wilson
Non-executive Chairman
