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AdEPT Technology continues its evolution into a managed services provider

"The results for the period demonstrate the strength of our capex light model and our organic and acquisitive growth strategy," said AdEPT's chairman, Roger Wilson
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AdEPT is placing less emphasis on providing fixed line services

Communications and information technology (IT) services provider AdEPT Technology Group PLC (LON:ADT) is trading in line with expectations, with the board “delighted” by progress.

Total revenue in the six months to the end of September rose by 9.5% to £24.4mln from £22.3mln in the corresponding period of 2017.

WATCH: AdEPT Technology Group heading for a decade of consecutive EPS growth

Revenue from managed services continues to provide the lion’s share of the group’s turnover, increasing by 19.2% in the period to £18.0mln from £15.1mln the year before. Managed services revenue now contributes 74% of revenue, up from 67% the year before.

Fixed line revenues reduced by 11.5% from the comparative period, which is a reflection of the organic sales focus of the group on managed services and IT combined with the substitution impact of existing customers making the transition to new technologies.

Underlying earnings (EBITDA) rose 10.7% to £5.2mln from £4.7mln the year before while the EBITDA margin edged up to 21.2% from 20.9%.

Reported profit before tax eased to £1.7mln from £2.0mln the year before, reflecting a £400,000 increase in amortisation – a non-cash adjustment – and a £200,000 increase in interest charges.

Cash generated from operating activities before tax remained consistent at £3.8 million (2017: £3.9 million), which equates to an 81.9% conversion of reported earning before interest, tax and amortidation, or EBITA, (after £0.3 million acquisition fees) (2017: 90.7%).

Total senior debt had increased to £25.1mln at the end of the reporting period from £20.8mln the year before, with the increase arising from the acquisition consideration paid in the period for Shift F7 Group Limited. On November 7, the Company signed a £5mln extension to its existing £30mln five-year revolving credit facility agreement, enlarging the total debt facility to £35mln.

READ AdEPT Telecom acquires IT services provider Shift F7 for up to £7.9mln

As previously announced, the board has recommended a 15.3% increase in the interim dividend to 4.9p, up from 4.25p the year before.

The group has developed a network, known as AdEPT Nebula, connecting three data centres, that allows the company to provide its own cloud hosting capability.

AdEPT Nebula is now live and already delivering benefits to customers by providing Avaya IP [internet protocol] cloud telephony services, hosted IT services and a range of data connectivity services, AdEPT said.

“The investment in AdEPT Nebula, our own network and IT services infrastructure, is already providing benefits across the group - an initiative that has capitalised on the capability and expertise acquired with Atomwide in 2017,” said Roger Wilson, the chairman of AdEPT.

“The board is delighted with the continued progress being made by the group and trading continues to be in line with management's expectations. We continue to be highly cash generative with a fully supportive investor base and funding partners to enable the board to continue to identify earnings-enhancing acquisitions whilst retaining scope for a progressive dividend policy,” he added.

 

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December 14 2018
“Alongside the pivot to faster growth managed services as a key feature of the investment case, we believe AdEPT will continue to add significant value via M&A,” Cantor Fitzgerald said

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