The AdEPT Telecom PLC (LON:ADT) machine just keeps on rolling and a series of strategic acquisitions and its own contract wins have helped to boost pre-tax profit by nearly 29% in the year to end March.
The purchase of communications provider Centrix Limited last summer represented a significant boost to turnover, while post period end, this May, the purchase of internet focused Comms Group was earnings enhancing from day one.
The group provides telecoms and communication services to SMEs and other groups.
Underlying earnings continue to impress
The firm posted increased underlying earnings and strong free cash flow for the year, which will fund yet more acquisitions in the future.
It was the 13th consecutive year of increased underlying earnings (EBITDA), which was up 34% to £6.15mln compared to £4.59mln for the 2015 year, while revenues were lifted 30.8% to £28.9mln compared to £22.1mln.
Pre-tax profit was up 28.7% to £2.8mln (2015: £2.1mln), while basic EPS was lifted 27% to 8.78p. There was a 36.8% increase to dividends declared to 6.50p.
The group said it continued to transition towards a complete managed service provider, with revenue from managed services accounting for more than 44% of the total in the year. 85% of its revenue is also recurring.
It has gained further traction in the public sector space, currently supplying telecoms services and communications at 38 councils, compared to 25 in 2015.
It is also happy with its cash position having secured a £15mln revolving credit facility last year with Barclays, and £4.4mln of free cash flow after interest generated this year.
Centrix purchase accelerates journey towards managed services
Centrix is a well-established UK-based specialist provider of complex unified communications, Avaya IP telephony, hosted IP solutions and managed services.
Combined with organic sales, the acquisition has increased the rate of transition of the group towards managed services, which accounted for 44.3% of total revenue in the year ended 31 March 2016.
AdEPT is now telecoms partner for 20 private hospitals and specialist clinics across London and Manchester and has a strong presence in business centres, supplying telecoms for eight out of 15 London-based business centres which have opened in the last 24 months
The group's largest customer, which was a long-standing Centrix customer, has extended its contract for unified communications to the end of December 2019.
What's next?
"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," the company said.
Chief executive Ian Fishwick said investors could expect more of the same growth in the coming year, both organically and inorganically.
"We're pushing hard now in the public sector. There's tenders coming at us from all directions, which is great. We will continue to look for acquisitions. The last one we did was the 21st."
What the broker said..
House broker Northland repeated a 'buy' recommendation along with its estimates of revenue of £32.6mln and EBITDA of £7mln for full year 2017.
The full year results show a clear strategy matched by progress in both contract frequency and quality, said analyst Mike Jeremy.
However, he added: "Our FY18 outlook takes a prudent stance at this point, mindful of the impact of medium-term economic uncertainty on potential for additional growth through new contract demand."
For 2018, the broker forecasts revenues of £32.9mln and adjusted EBITDA of £7.1mln.
The broker has a target price of 310p a share, against a current price of 232.5p, down 5.10% on the day.