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Adept4 slides on wider full year loss as legal action drags on earnings

The group said that during the year, efforts to improve its service and delivery levels had been hampered by “disappointing” progress with new business sales as well as a significant legal claim it was forced to bring against the vendors of one of its acquired businesses, Adept4 MIT Limited

Computers
Adept said the dispute had incurred legal costs as well as putting M&A activity on hold

Adept4 PLC (LON:AD4) shares dropped in early deals Friday after the IT services firm reported a wider loss for the full year as legal settlement costs bit into its earnings.

The AIM-listed group said that during the year, efforts to improve its service and delivery levels had been hampered by “disappointing” progress with new business sales as well as a significant legal claim it was forced to bring against the vendors of one of its acquired businesses, Adept4 MIT Limited.

Brexit uncertainty​

Adept said this had been an “expensive and distracting exercise” as it had incurred legal costs as well as putting various mergers and acquisitions activity on hold while the dispute was resolved.

The proceedings had been settled in September in the company’s favour for a £1.6mln settlement, while Adept4 itself had had to pay £400,000 to Microsoft in relation to the dispute in December.

Issues looked set to continue into the new year, with non-executive chairman Simon Duckworth saying that investments made in a new sales team had “not yet delivered the results we had hoped for”, with progress being hindered by a “general level of caution” in the market due to Brexit uncertainty.

He added that the firm did not see the situation improving in the short term and had made the decision to “focus on our existing customer base with less emphasis on new business acquisition” to protect its cash reserves, which in turn would lead to “reduced revenue and gross profit but requires a significantly lower operating cost base, which should enable the Group to return to profitability and positive cash generation”.

For the year ended 30 September 2018, the company’s pre-tax loss stood at around £4mln, wider than the £831,000 loss a year ago, while revenues dipped to £10.1mln from £10.3mln.

Shares were down 4.8% at 1p.

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