AdEPT Tech.Group PLC - Trading and Coronavirus update
("AdEPT" or the "Company" together with its subsidiaries the "
Trading and Coronavirus update
AdEPT (AIM: ADT), one of the
The Government has named all AdEPT employees as key workers
The Government has declared our employees as key workers. In effect, IT and Telecommunications support has become a '4th Utility Service' in our nationwide attempt to keep Government, education and the economy going in this time of Coronavirus national crisis.
All our employees have moved seamlessly to working remotely using our Office 365, Microsoft Teams and Avaya IX technologies, a benefit of 'Project Fusion'.
As expected, call volumes to our support teams increased by 85% over the last few weeks as people get used to working at home with technology that is new to many of them, whilst doctors and schools have been required to work in very different ways. We anticipate this will quickly fall over the next few weeks. We are pleased to report that we are receiving numerous plaudits from customers large and small and would like to thank the AdEPT team for their adaptability, hard work and long hours.
Transitioning customers to a new world of remote working and schooling
Our turnover is roughly 45% public sector - across the
In respect of education, AdEPT are working closely with London Grid for Learning (LGfL), other Education Authorities, academies and independent schools. We are proud to have played a key role in the transition of approximately 3,300 schools and over 100 universities and colleges to remote schooling.
In respect of the health sector, our new
Central and Local Government are working effectively together, and we are supplying voice and data services to key central Government departments and over 100 local Councils.
In respect of our commercial customers many have transitioned effectively to homeworking, we have seen a surge in demand for laptops to provide technology in the home, a need to set up networks and a requirement to change permissions so that people can access systems remotely. However, with all of this change we are warning companies about the potential cyber security threats from homeworking as anecdotally we are seeing an increase in phishing attacks.
Working closely with partners
During these testing times it has only re-enforced our long-held view that strong partnerships are instrumental to the success of AdEPT. We have been working closely with all our key partners to address the challenges presented to us. As examples:
· LGfL we have accelerated Freedom2 Roam that enables Schools to work remotely, a service used by over 200,000 teachers and 900,000 pupils, which has been praised by one School as "probably been the biggest single godsend".
· Avaya we have been able to provide free licences to help customers work remotely.
· Microsoft Teams we have seen a substantial uptake, to facilitate video conferencing.
· Gamma has rapidly increased Internet Protocol (IP) internet-based call volume capabilities for our customers.
Trading Update, cash, net debt and liquidity
The Group has seen another strong year with further geographic expansion into
We anticipate that:
· Sales and EBITDA* will be in line with market expectations of a 19% and 13% rise year-on-year respectively
· Our cash position at year end was
· Net debt of
· The Board has in the interests of prudence resolved to cancel the
· Given the current economic uncertainty due to Covid-19, it is possible that we may not pay a final dividend in respect of the year ending
* Earnings before interest, tax, depreciation, amortisation and excluding one off acquisition and restructuring costs and share based payments
Stress Testing our Financial Model
Immediately following the escalation of the Coronavirus crisis, we have conducted several stress test scenarios to understand the potential impact on our sales revenue, profitability and cash position over the coming year. Our stress tests assume that the next six months will see the most significant impact after which the Covid-19 outbreak will start to be under control.
Of course, these are early days, so we will constantly monitor the realism of this assumption. Our general approach is one of prudence and caution.
We have identified the following key variables and have modelled the following variances:
New order volumes
it is unlikely companies will order major contracts until such time stability returns and reduced order volumes are anticipated in the next 9 months
increase as people are not on-site to commission and accept equipment
Credit collection periods
are extended in the next 6 months
increases as some customers shrink and others sadly go out of business
Under the stress test scenario the business remains profitable and cash generative. This demonstrates the strength of our business model with approximately 75% recurring revenues, a mix of public and private sector business, and minimal capital expenditure.
We will use all the tools available to us to reduce cost and cash outflows where appropriate. These include, but are not limited to:
· Cancellation of the interim dividend payment
· Pausing any acquisition activity
· A pay and recruitment freeze
· Replacement of overtime payments with time in lieu to be taken when activity quietens down
These stress tests do not assume any direct Government support, but we will seek to use any schemes that are available. For example, the Government has announced that there will be no VAT payments in the next quarter, but this must be caught up by the end of the 2020/21 tax year. The impact of this is to move approximately
Given the ongoing uncertainty regarding the duration of the Covid-19 outbreak, the Board is unable to provide guidance for the year ending
Revolving Credit Facility Covenants
We have an excellent relationship with both of our senior lending providers and have had positive discussions with them about the current economic challenges resulting from Covid-19. Our discussions have been encouraging and early indications suggest they would agree to a covenant waiver or extension, if required.
We are pleased to announce that our Chief Operating Officer,
Andy joined AdEPT as COO in
The following details in relation to the appointment of
Past directorships held within the last five years
Andy has 100,000 options over ordinary shares in the Company at an exercise price of
There are no other disclosures in accordance with Schedule 2(g) of the AIM Rules.
Life after the virus
We are convinced that we are well-positioned to survive the economic challenges of the Coronavirus.
This crisis has revealed the critical nature of communications, technology and the reliance on high performance and reliable networks. In the near term (post Covid-19) we hope to show that our IT and unified communications managed services are critical to the survival of any organisation and need to be up-to-date and performant.
We doubt that the world of work will return completely to 'as it was before', indeed we anticipate a 'new normal' where remote working is more prevalent - increasing the dependence on effective, unified communication, highly resilient networks and cloud technology. This is what we do, it's our mission "uniting technology, inspiring people". In conclusion, we expect to be well placed to address the changed demands that arise.
We will give another trading update with the final results for the year ended
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AdEPT is listed on the
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Quick facts: AdEPT Technology Group PLC
Market Cap: £61.82 m
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