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AdEPT Technology Group PLC: THE INVESTMENT CASE
INVESTMENT OVERVIEW

AdEPT surpasses recently raised expectations

"The excellent result for this year was delivered through a combination of strategic acquisition and organic contract wins, maintaining margins on customer contracts and maintaining high levels of operational efficiency."
Telecoms board
INVESTMENT OVERVIEW: ADT The Big Picture
AdEPT raised guidance in its April trading update

Communication and information technology services provider AdEPT Telecom plc (LON:ADT) enjoyed another period of strong growth in the year to the end of March.

The company racked up its 15th consecutive year of growth in underlying earnings (Ebitda), with Ebitda rising 24.8% to £9.8mln from £7.8mln the year before.

READ: AdEPT's results to be slightly ahead of market expectations

Profit before tax increased by just under a third to £4.5mln from £3.4mln the previous year on revenue that rose 34.8% to £46.4mln from £34.4mln the preceding year.

The gross margin rose 5.4 points to 47.7% from 42.3% the previous year.

Cash generation remained strong, with more than 80% of reported Ebitda turning into net cash from operating activities after tax.

The acquisitive company said senior net debt at the end of the reporting period stood at £17.6mln, compared to £15.5mln at the end of March 2017.

An interim dividend of 4.25p has been proposed, taking the full-year pay-out to 8.75p, up from 7.75p the year before. The board is confident that a continued focus on underlying profitability and cash generation will support a progressive dividend policy.

The emphasis this year will be on developing organic sales growth​

“Free cash flow generated combined with the drawdown of part of the accordion debt facility, put in place in February 2017, and the convertible loan from BGF, was used by the company to complete the earnings enhancing acquisition of Atomwide Limited during the current period. The acquisition 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 70% of the total in the year ended 31 March 2018," noted Roger Wilson, the chairman of AdEPT.

The focus for the coming year will remain 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.

"AdEPT has delivered results ahead of our outlook and in line with its positive trading update of 5th April 2018," said Northland Capital Partners.

"The company emphasised its focus on a combination of Managed Services provision, London and the South East region and both the public sector and SMEs. Of total revenue, 31% was generated by the public sector, with over 100 councils, 13 NHS Trusts and 30 hospitals, plus 12 universities and, via acquired Atomwide, over 3,000 schools. This amounts to a wide portfolio and platform for further growth, and as the results show, the basis for continued strong cash generation," the broker said, as it stuck with its 'buy' recommendation.

Shares in AdEPT, up 10% year-to-date, were trading at 345p, down 15p on the day.

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Telecoms board
July 10 2018
"The excellent result for this year was delivered through a combination of strategic acquisition and organic contract wins, maintaining margins on customer contracts and maintaining high levels of operational efficiency."

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