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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Adept Technology Group Plc | LSE:ADT | London | Ordinary Share | GB00B0WY3Y47 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 200.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMADT
RNS Number : 9225K
AdEPT Telecom plc
13 July 2017
AdEPT Telecom plc
("AdEPT", the "Company" or together with its subsidiaries the "Group")
Final results for the year ended 31 March 2017
AdEPT (AIM: ADT), a leading UK independent provider of award-winning unified communications and IT services, announces its results for the year ended 31 March 2017.
Financial highlights
-- 14th consecutive year of increased underlying EBITDA up 27.2% to GBP7.83m (2016: GBP6.15m) -- Revenue increased by 19.2% to GBP34.4m (2016: GBP28.9m) -- Gross margin % increased by 2.0% to 42.3% (2016: 40.3%) -- Underlying EBITDA margin % increased by 1.4% to 22.7% (2016: 21.3%) -- 20.3% increase to adjusted earnings per share to 23.09p (2016: 19.19p) -- 19.2% increase to dividends declared to 7.75p (Interim 3.75p, Final 4.00p) (2016: 6.50p) -- Year-end net debt* of GBP15.5m (2016: GBP6.0m) -- New 5 year GBP30m revolving credit facility in place with Barclays and RBS
Operational highlights
-- Managed services accounted for 55.4% of total revenue (2016: 44.3%) -- Acquisition of entire issued share capital of Comms Group UK Limited completed in May 2016
-- Acquisition of entire issued share capital of CAT Communications Limited and Progressive Communications Limited in November 2016
-- Acquisition of entire issued share capital of OurIT Department Limited in February 2017
* Net debt is defined as cash and cash equivalents less short-term and long-term borrowings and prepaid bank fees
Commenting upon these results Chairman Roger Wilson said:
"AdEPT has delivered a 27% increase to underlying EBITDA for the year ended 31 March 2017 and the Group continues to deliver consistently high levels of free cash flow generation. The continued strong cash generation has funded a 19% increase to dividends declared during the year and the Board is confident that continued focus on underlying profitability and cash generation will support a progressive dividend policy.
Free cash flow generated combined with the new larger debt facility put in place in February 2017 was used by the Company to complete three earnings enhancing acquisitions during the current period. Following these acquisitions, the Group is able to offer its existing and targeted customer base a fully converged unified communications and IT service. The acquisitions 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 more than 55% of the total in the year ended 31 March 2017."
This announcement contains inside information for the purposes of Article 7 of Regulation 596/2014.
For further information on AdEPT please visit www.adept-telecom.co.uk or contact:
AdEPT Telecom Plc Roger Wilson, Chairman 07786 111 535 Ian Fishwick, Chief Executive 01892 550 225 John Swaite, Finance Director 01892 550 243 Northland Capital Partners Limited Nominated Adviser Edward Hutton / Gerry Beaney Broking John Howes 020 3861 6625
Chairman's statement
Review of operations
The Group has continued to increase underlying EBITDA and maintain strong free cash flow generation, which has been used to fund the progressive dividend policy and earnings-enhancing acquisitions.
The Group's continued strong cash generation resulted in GBP5.8m of operating cash flow before tax and interest. AdEPT has used its free cash flow and debt facilities to fund three acquisitions during the year, Comms Group UK Limited (Comms Group), CAT Communications Limited (CAT) and OurIT Department Limited (OurIT), the latter of which has extended the AdEPT product set by adding the delivery of outsourced IT services and managed IT solutions. The convergence of telecommunications and IT is an increasing requirement for AdEPT's existing and targeted enterprise and public sector customer base. The highly skilled IT team and product set acquired will complement and enhance AdEPT's existing services, allowing AdEPT to provide a full managed service to customers, incorporating unified communications and IT. In addition to the numerous telecom and managed service related accreditations and experience, AdEPT now offers a directly employed team of highly skilled certified professionals with qualifications including Microsoft Gold Partner and Business Specialist, Apple Specialist, Cisco Certified Partner, Dell Preferred Partner, AVAYA Partner in Customer Excellence and is focused on providing truly managed unified communications and IT service to customers with a focus across London and the South East.
The acquisitions of Comms Group, CAT and OurIT, combined with organic sales, has increased the rate of transition of the Group towards managed services, which accounted for 55.4% of total revenue in the year ended 31 March 2017. The teams at Comms Group and OurIT have proved to be an excellent fit with AdEPT and have been successful in jointly working on unified IT and voice communication contracts. The post-acquisition performance of Comms Group and OurIT has delivered growth and therefore we anticipate the contingent deferred consideration for both to be towards the top end of the range.
The issue of new equity during the year resulted in a cash inflow of GBP0.2m largely arising from the exercise of the Barclays warrant in March 2017. The Company repurchased 19,136 of its own shares during the year ended 31 March 2017 at an average price of 318.0p, pursuant to the stock exchange announcement issued on 18 December 2014. The Board believes that share repurchases can improve stock liquidity and increase value to shareholders and therefore the directors will continue to determine if further repurchases remain in shareholders' best interests.
In line with its progressive policy, AdEPT has increased the dividend proposed year-on-year by 19.2%, proposing a final dividend of 4.00p per ordinary share (2016: 3.50p), making total dividends proposed in respect of the year ended 31 March 2017 of 7.75p per ordinary share (2016: 6.50p).
Employees
As a result of the acquisitions completed in the year ended 31 March 2017, the Group now has more than 100 full-time employees. The improved profitability and free cash flow generation this year was made possible by the continued hard work and focus of all employees at AdEPT. As a Group we are immensely proud of the track record we have created over the last 14 years and, on behalf of the Board, I would like to take this opportunity to thank all of our employees for their continued hard work.
Director changes
In the March 2016 accounts the Group announced that after more than 13 years with AdEPT, its Chief Operating Officer, Amanda Woodruffe, had decided to retire. After a handover period, Amanda left the Group during August 2016. The Board would again like to take this opportunity to thank Amanda for her valuable contribution to AdEPT. Also in the March 2016 accounts, the Group announced that Richard Burbage, former director of Centrix, had been appointed to the Board as Unified Communications director. Richard continues to be responsible for overseeing the AdEPT Fleet operation and developing the Group's unified communications strategy.
Outlook
The excellent result for this year was delivered through a combination of strategic acquisition and organic contract wins, improving margins on customer contracts and maintaining high levels of operational efficiency. The Board is confident that continued strong cash conversion of operating profit will support its intention of a progressive dividend policy.
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.
Roger Wilson
Non-executive Chairman
Strategic report
Principal activities and review of business
The principal activity of the Group is the provision of voice and data communication services to both domestic and business customers. A review of the business is contained in the Chairman's statement and the highlights are summarised in this strategic report.
Summary of three year financial performance:
Hot Features
Premium
Year ended March
2017 2016 2015
GBP'000 Year-on-Year GBP'000 Year-on-Year GBP'000
% %
-------------- --------- --------------- --------- --------------- ---------
Revenue 34,436 19.2% 28,881 30.9% 22,066
Gross margin 14,571 25.2% 11,634 40.2% 8,298
Underlying
EBITDA 7,827 27.2% 6,153 34.0% 4,591
Net debt 15,456 5,982 1,539
-------------- --------- --------------- --------- --------------- ---------
Revenue
During the year AdEPT has continued its transition from a traditional fixed line service provider towards a managed services provider. Total revenue generated from managed services represented 55.4% of total revenue in the year ended 31 March 2017 (2016: 44.3%) and the closing monthly run rate for managed services in March 2017 was more than 60% of total revenue.
Total revenue increased by 19.2% to GBP34.4m (2016: GBP28.9m):
-- Managed services product revenues increased by GBP6.3m to GBP19.1m (2016: GBP12.8m). This reflects the impact of the contribution from the acquisitions of Comms Group, CAT and OurIT combined with an increased level of organic contract wins and a lower relative churn rate. AdEPT has continued to make progress in expanding the number of circuits and connections from new customer additions and through cross-selling into the existing customer base. As the demand for faster data connectivity speeds continues AdEPT has seen further customer orders for 1-10Gb services.
-- Traditional fixed line revenues decreased to GBP15.4m (2016: GBP16.1m), 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 transitioning to new technologies. The Group's reliance on fluctuating call revenues continues to reduce, with call revenue providing only 15.4% of total revenue in the year ended 31 March 2017 (2016: 19.4%).
The proportion of AdEPT revenue being generated from recurring products and services (being all revenue excluding one-offs projects, hardware and software) remains high at 86.4% of total revenue. Both Comms Group and OurIT product sets include hardware supply and installation services, which, by their nature, are project based and not fixed recurring revenue streams; however, a high proportion of hardware supply and installations are further products and services being supplied to the existing customer base.
AdEPT continued to be highly successful in gaining further traction in the public sector space during the last year through leveraging its approved status on various frameworks. AdEPT is an approved supplier to the Crown Commercial Service under the RM1045 Network Services framework and the Company has been successful in winning new business through this framework. This is in addition to AdEPT's existing framework agreement with Ja.net, under which AdEPT is one of only a small number of companies approved to sell data connectivity to UK Colleges and Universities. The total revenue generated from public sector and healthcare customers has increased; however, following the OurIT acquisition, the proportion of Group revenue from public sector and healthcare customers has decreased to 20.5% in March 2017, as OurIT do not currently supply services into public sector or healthcare customers. We consider the acquisition of OurIT to be an opportunity for the Group to add IT products and services into the AdEPT public sector and healthcare offering.
The Group is continuing to focus its organic sales efforts on adding and retaining larger customers whilst complementing this with an acquisitive strategy. AdEPT's largest 1,700 customers (spending GBP5,000 per annum or more) account for approximately 72% of total revenue at March 2017 (2016: 1,400 customers, 63% of total revenue), with the top ten customers accounting for 24.3% of total revenue (2016: 26.1%).
Gross margin
Gross margin percentage has improved to 42.3% during the year (2016: 40.3%).
Gross margins for fixed line services have increased to 39.5% during the year through close monitoring of customer profitability and supply chain management of wholesale contracts.
Gross margins for managed services and IT, such as installations, support and maintenance, are higher than fixed line; this is a reflection of the headcount costs of supporting the project installations and maintenance being included within operating expenditure.
Underlying EBITDA
Underlying EBITDA is defined as operating profit after adding back depreciation, amortisation, acquisition fees and share-based payment charges. The Group uses underlying EBITDA as a measure of performance in line with the telecommunications sector's general approach to relative performance measurement. As the Group operates a capex-light model, the Board considers that underlying EBITDA is the best indication of the underlying cash generation of the business. Below is a reconciliation of underlying EBITDA to the reported profit after tax:
2017 2016
GBP'000 GBP'000
------------------------- --------- ---------
Underlying EBITDA 7,827 6,153
Acquisition fees (703) (389)
Share option charges (31) 2
Depreciation (279) (188)
Amortisation (restated) (2,482) (2,048)
Interest (928) (612)
Profit before tax 3,404 2,918
The Group has reviewed the intangible assets acquired during the year ended 31 March 2016 and in accordance with IFRS3 has reallocated some of the intangible assets acquired as part of business combination to goodwill. As a result of the revised intangible asset value, the corresponding amortisation charge has been adjusted, which has resulted in an increase to retained earnings of GBP0.17m for the year ended 31 March 2016. This is purely an accounting adjustment with no impact on underlying profitability or cash.
Underlying EBITDA has increased for the 14th consecutive year since AdEPT's inception in 2003. The Group has focused on the underlying profitability of customers and revenue streams combined with tight overhead control, industry leading debt collection and wholesale supply chain negotiation.
Finance costs
Total interest costs have increased to GBP0.93m (2016: GBP0.61m), arising largely from the increase in the average level of net borrowings which were used to fund the acquisitions of Comms Group, CAT and OurIT. Included within interest costs is a GBP0.32m charge, which is non-cash, in relation to the discounted cash flow impact of the contingent deferred consideration payable in relation to the Comms Group, CAT and OurIT acquisitions. Increases to interest costs have been partially mitigated through treasury management of surplus cash balances to minimise the amount of drawn funds.
Profit before tax
This year profit before tax has increased by GBP0.48m with a reported GBP3.40m (2016: GBP2.92m). The increase to profit before tax arises from the GBP1.67m underlying EBITDA improvement, which has been absorbed by the GBP0.31m increase in finance costs, the acquisition costs of GBP0.70m and the associated increase in depreciation and amortisation arising from the acquisitions undertaken during the year. The OurIT acquisition had a negative net contribution to reported profit before tax in the current year. OurIT contributed only two months to profit before tax in the current year, amounting to GBP0.2m, which was lower than the acquisitions fees of GBP0.3m, giving a net negative contribution to profit before tax of GBP0.1m.
Profit after tax and earnings per share
Profit after tax for the year amounted to GBP2.75m (2016: GBP2.39m). Basic earnings per share was 12.17p (2016: 10.72p). Adjusted earnings per share, based on the profit for the year attributable to equity holders adding back amortisation and acquisition costs (see Note 27), increased by 20.3% to 23.09p per share (2016: 19.19p).
The Group has applied the principles of IFRS3 and IAS12 and made full provision for the deferred tax liability on future amortisation charges in relation to the company acquisitions undertaken to date. The deferred tax liability is released as the amortisation is charged to the statement of comprehensive income. The prior year comparatives have been restated to apply this accounting principle as if it had been adopted throughout the periods covered by the financial statements. This is purely an accounting adjustment with no impact on underlying profitability, adjusted earnings per share or cash flow.
During the year ended 31 March 2017 the Company continued with a small share buyback of its own ordinary shares in order to improve stock liquidity and enhance earnings per share. The Company repurchased 19,136 shares (2016: 35,000 shares) at an average price of 318.0p (2016: 257.7p); the cost of these repurchases was met from the cash proceeds of share options and warrants exercised during the year. All shares repurchased by the Company were cancelled prior to the year end. The directors will continue to monitor the level of cash required for the business and determine if further repurchases remain in shareholders' best interests.
Dividends and dividend per share
On the back of strong cash flow generation AdEPT announced an interim dividend of 3.75p per share, which was paid to shareholders on 7 April 2017. On 30 March 2017 the directors proposed a final dividend, which was subsequently announced on 4 April 2017 that, subject to shareholder approval at the annual general meeting later in the year, it is proposing a final dividend of 4.00p per ordinary share (2016: 3.50p). This dividend is expected to be paid on or around 6 October 2017 to shareholders on the register at 22 September 2017.
Total dividends approved and proposed during the year ended 31 March 2017 of 7.75p per ordinary share represent a 19.2% increase year-on-year (2016: 6.50p). The Board constantly monitors shareholder value and is confident that the continued strong cash generation will support a progressive dividend policy.
Cash flow
The Group benefits from an excellent cash-generating operating model. Low capital expenditure results in a high proportion of underlying EBITDA turning into cash. The cash impact of transitioning the acquired subsidiaries to payment by income tax instalments in advance has resulted in a one-off increase of GBP0.5m to cash outflow. The proportion of underlying EBITDA less acquisition costs which turned into net cash from operating activities after income tax (excluding the GBP0.5m cost of transitioning the acquired subsidiaries to income tax instalments) was 82.2% (2016: 98.4%). The change from the prior period being a reflection of the timing of supplier payments at year end. In the prior year this measure was stated after cash interest, this calculation has been adjusted to operating cash flow before interest to reflect the cash conversion performance of the Group with regard to debt service. The Group continues to manage its credit risk and the collections of trade receivables have been reasonably stable during the year with customer collection periods of 35 days.
Cash interest paid has increased during the year to GBP0.40m (2016: GBP0.32m), which arises from the increase in net borrowings to fund the acquisitions of Comms Group, CAT and OurIT.
Cash outflows in the year ended 31 March 2017 in relation to acquisitions amounted to GBP12.7m (net of cash acquired). The contingent consideration in respect of the acquisition of Centrix Limited was paid in May 2016 with no further amounts due. The initial cash consideration for the acquisition of Comms Group of GBP3.6m (net of cash acquired) was paid in May 2016, GBP1.0m was paid in November 2016 in relation to the acquisition of CAT and GBP4.4m (net of the debt acquired) was paid in February 2017 in respect of the acquisition of OurIT.
Dividends paid during the year ended 31 March 2017 absorbed GBP1.5m of cash (2016: GBP1.1m). This increase over the prior period arises from the continued application of the progressive dividend policy.
Cash inflows of GBP0.2m were generated from the issue of new equity during the year largely arising from the exercise of the January 2009 share warrant by Barclays Bank plc.
Following the successful execution of the Company's acquisition strategy the Company had outgrown the previous GBP15m revolving credit facility, provided by Barclays, relative to the profitability of the Company. In February 2017 the Company signed a GBP30m 5 year revolving credit facility agreement. The new larger facility is provided by Barclays Bank plc and The Royal Bank of Scotland plc on an equal basis and was put in place to fund the strategic acquisition of businesses to leverage benefits from increased scale and a wider product set, and was first drawn down to fund the acquisition of OurIT in February 2017. The new syndicated debt facility provides increased scale and has a more flexible structure when compared to the Company's previous debt facility agreement.
There was a decrease to cash and cash equivalents during the year of GBP5.6m. This arises from a net increase in the drawn element of the revolving credit facility at the March 2016 year-end which was used to fund the initial consideration for the acquisition of Comms Group in May 2016. The Group will continue to apply its treasury management policies to minimise the cost of finance whilst retaining flexibility to meet its growth strategies.
Capital expenditure
The Group operates an asset light strategy and has low capital requirements; therefore, expenditure on fixed assets is low at 0.3% of revenue (2016: 1.0%).
Business combinations
The strategy of the Group is to concentrate organic sales efforts on attracting larger customers, particularly in the public and healthcare sector. Rather than operate a telesales operation aimed at acquiring smaller business customers organically, we instead use our free cash generation to acquire customer bases from other telecommunications suppliers in the industry.
On 1 May 2016 the Company acquired the entire issued share capital of Comms Group, a well-established UK-based provider of complex unified communications, Avaya IP telephony, hosted IP solutions, IT and managed services. Total consideration was an initial GBP3.6m plus the value of the cash balance of Comms Group at completion (approximately GBP1.1m) with contingent consideration of up to GBP3.5m dependent upon the performance of Comms Group post-acquisition. Acquisition related costs of GBP0.3m have been recognised as an expense in the statement of comprehensive income for the year ended 31 March 2017.
A fair value of GBP4.3m in relation to the customer contracts for the acquired business has been recognised as intangible asset additions in the year ended 31 March 2017. Further details on the acquisition during the year are described in Note 27 to the financial statements.
On 1 November 2016 the Company acquired the entire issued share capital of CAT, a well-established UK-based specialist provider of unified communications, Avaya Aura telephony, hosted IP solutions and managed services. Total consideration was an initial GBP1.0m less the value of the net debt of CAT at completion (approximately GBP0.07 m) with contingent consideration of up to GBP1.0m dependent upon the performance of CAT post-acquisition. Acquisition related costs of GBP0.1m have been recognised as an expense in the statement of comprehensive income for the period ended 31 March 2017.
A fair value of GBP1.5m in relation to the customer contracts for the acquired business has been recognised as intangible asset additions in the year ended 31 March 2017. Further details on the acquisition during the year are described in Note 27 to the financial statements.
On 1 February 2017 the Company acquired the entire issued share capital of OurIT. OurIT, founded in 1993, is is a highly accredited IT services provider with over 20 years' experience, offering award winning 24 hour IT support services and technology solutions. OurIT has a directly employed team of highly skilled certified professionals with qualifications including Microsoft Gold Partner and Business Specialist, Apple Specialist, Cisco Certified Partner and Dell Preferred Partner, and is focused on providing outsourced IT services to customers in London and the South East. The acquisition was for an initial consideration of GBP4.0m (calculated as GBP4.75m less the GBP1.20m net debt plus GBP0.46m working capital of OurIT at completion, payable in cash. Further contingent deferred consideration of up to GBP3.75m will be payable, also in cash, dependent upon the performance of OurIT post-acquisition.
A fair value of GBP2.0m in relation to the customer contracts for the acquired business has been recognised as intangible asset additions in the year ended 31 March 2017. Further details on the acquisition during the year are described in Note 27 of the financial statements.
Net debt and bank facilities
A key strength of AdEPT is its consistent, proven ability to generate strong free cash flow and therefore support net borrowings. As a result of the Group's focus on underlying profitability and cash conversion, free cash flow after taxes but before bank interest paid of GBP4.3m was generated during the year ended 31 March 2017 (2016: GBP4.8m). Income taxes paid during the year increased from GBP0.9m to GBP1.5m. The cash impact of transitioning the acquired subsidiaries to payment by income tax instalments in advance has increased the cash outflow by GBP0.5m, which is a one-off change.
Opening cash plus the free cash flow generated in the year and borrowing drawdowns of GBP4.0m have been used to fund GBP12.0m acquisition consideration, GBP1.5m dividends paid and GBP0.1m of capital expenditure on tangible and intangible assets. Net cash inflows of GBP0.2m have arisen from the issue of new equity largely from the exercise of the Barclays warrant, which has been used to fund the share repurchases during the year. Net debt, which comprises cash balances and bank borrowings, has increased to GBP15.5m at the year-end (2016: GBP6.0m) as a result of the acquisition consideration outflows.
On 2 February 2017 the Group signed a new five year GBP30m revolving credit facility agreement with Barclays Bank plc and The Royal Bank of Scotland plc. The new syndicated debt facility provides increased scale and has a more flexible structure when compared to the Company's previous debt facility agreement. The revolving credit facility bears interest at 1.85-2.30% over LIBOR on drawn funds, dependent upon the net debt:EBITDA ratchet, and is repayable in full on the final repayment date of 2 February 2023.
The Group's available banking facilities are described in Note 26 of the financial statements.
Segmental key performance indicators (KPIs)
The segmental KPIs outlined below are intended to provide useful information when interpreting the accounts.
Fixed
line Managed
services services Total
GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------
Year ended 31 March 2017
Revenue 15,365 19,071 34,436
Gross profit 6,074 8,497 14,571
Gross margin % 39.5% 44.6% 42.3%
Year ended 31 March 2016
Revenue 16,089 12,792 28,881
Gross profit 6,194 5,440 11,634
Gross margin % 38.5% 42.5% 40.3%
Principal risks and uncertainties
There are a number of potential risks and uncertainties which could have a material impact on the Group's long-term performance and could cause actual results to differ materially from expected results.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. External funding facilities are managed to ensure that both short-term and longer-term funding is available to provide short-term flexibility whilst providing sufficient funding to the Group's forecast working capital requirements.
Credit risk
The Group extends credit of various durations to customers depending on customer credit worthiness and industry custom and practice for the product or service. In the event that a customer proves unable to meet payments when they fall due, the Group will suffer adverse consequences. To manage this, the Group continually monitors credit terms to ensure that no single customer is granted credit inappropriate to its credit risk. Additionally, approximately 67% of our customer receipts are by monthly direct debit. The risk is further reduced by the customer base being spread across all industry and service sectors. The top ten customers account for approximately 24.3% of revenues.
Competitor risk
The Group operates in a highly competitive market with rapidly changing product and pricing innovations. We are subject to the threat of our competitors launching new products in our markets (including updating product lines) before we make corresponding updates and developments to our own product range. This could render our products and services out-of-date and could result in loss of market share. To reduce this risk, we undertake new product development and maintain strong supplier relationships to ensure that we have products at various stages of the life cycle.
Competitor risk also manifests itself in price pressures which are usually experienced in more mature markets. This results not only in downward pressure on our gross margins but also in the risk that our products are not considered to represent value for money. The Group therefore monitors market prices on an ongoing basis.
Acquisition integration execution
The Group has set out that its strategy includes the acquisition of businesses where they are earnings enhancing. The Board acknowledges that there is a risk of operational disturbance in the course of integrating the acquired businesses with existing operations. The Group mitigates this risk by careful planning and rigorous due diligence.
John Swaite
Finance director
Consolidated statement of comprehensive income
For the year ended 31 March 2017
Restated
2017 2016
Note GBP'000 GBP'000
----------------------------------- ---- -------- --------
Revenue 5 34,436 28,881
Cost of sales (19,865) (17,247)
----------------------------------- ---- -------- --------
Gross profit 14,571 11,634
Administrative expenses (10,239) (8,104)
----------------------------------- ---- -------- --------
Operating profit 4,332 3,530
----------------------------------- ---- -------- --------
Total operating profit - analysed:
Underlying EBITDA 7,827 6,153
Share-based payments (31) 2
Depreciation of tangible fixed
assets (279) (188)
Acquisition fees (703) (389)
Amortisation of intangible fixed
assets (2,482) (2,048)
Total operating profit 4,332 3,530
----------------------------------- ---- -------- ----------
Finance costs 8 (928) (612)
----------------------------------- ---- -------- --------
Profit before income tax 3,404 2,918
Income tax expense 10 (655) (528)
----------------------------------- ---- -------- --------
Profit for the year 2,749 2,390
Other comprehensive income - -
----------------------------------- ---- -------- --------
Total comprehensive income 2,749 2,390
----------------------------------- ---- -------- --------
Restated
Note 2017 2016
----------------------------------- ---- -------- --------
Earnings per share
Basic earnings 27 12.17p 10.72p
Diluted earnings 27 11.57p 10.15p
----------------------------------- ---- -------- --------
All amounts relate to continuing operations.
Consolidated statement of financial position
As at 31 March 2017
Restated Restated
31 March 31 March 1 April
2017 2016 2015
Note GBP'000 GBP'000 GBP'000
------------------------------ ---- -------- --------- --------
Assets
Non-current assets
Goodwill 12 11,217 3,614 -
Intangible assets 13 28,559 21,420 14,874
Property, plant and equipment 14 863 524 82
40,639 25,558 14,956
Current assets
Inventories 17 196 48 3
Trade and other receivables 18 5,514 4,360 2,198
Cash and cash equivalents 1,238 6,166 2,095
------------------------------ ---- -------- --------- --------
6,948 10,574 4,296
------------------------------ ---- -------- --------- --------
Total assets 47,587 36,132 19,252
Current liabilities
Trade and other payables 19 13,049 8,753 3,165
Income tax 664 430 324
Short-term borrowings 706 - 538
------------------------------ ---- -------- --------- --------
14,419 9,183 4,027
Non-current liabilities
Deferred income tax 16 4,057 3,041 1,702
Long-term borrowings 20 15,988 12,148 3,095
------------------------------ ---- -------- --------- --------
Total liabilities 34,464 24,372 8,824
------------------------------ ---- -------- --------- --------
Net assets 13,123 11,760 10,428
------------------------------ ---- -------- --------- --------
Equity attributable to equity
holders
Share capital 21 2,370 2,248 2,230
Share premium 479 429 335
Retained earnings 10,274 9,083 7,863
------------------------------ ---- -------- --------- --------
Total equity 13,123 11,760 10,428
------------------------------ ---- -------- --------- --------
Company statement of financial position
As at 31 March 2017
Restated
31 March 31 March
2017 2016
Note GBP'000 GBP'000
------------------------------ ---- -------- ---------
Assets
Non-current assets
Intangible assets 12 11,376 13,255
Investments 13 26,542 11,846
Property, plant and equipment 14 137 204
Deferred income tax 16 43 106
------------------------------ ---- -------- ---------
38,098 25,411
Current assets
Inventories 17 1 1
Trade and other receivables 18 1,688 1,885
Cash and cash equivalents - 5,489
------------------------------ ---- -------- ---------
1,689 7,375
------------------------------ ---- -------- ---------
Total assets 39,787 32,786
Current liabilities
Trade and other payables 19 10,655 6,195
Income tax 132 185
Short-term borrowings 706 -
------------------------------ ---- -------- ---------
11,493 6,380
Non-current liabilities
Long-term borrowings 20 15,988 12,148
------------------------------ ---- -------- ---------
Total liabilities 27,481 18,528
------------------------------ ---- -------- ---------
Net assets 12,306 14,258
------------------------------ ---- -------- ---------
Equity attributable to equity
holders
Share capital 21 2,370 2,248
Share premium 479 429
Retained earnings 9,457 11,581
------------------------------ ---- -------- ---------
Total equity 12,306 14,258
------------------------------ ---- -------- ---------
The loss for the financial year dealt with in the financial statements of the parent Company was GBP566,084 (2016: profit GBP643,099).
Consolidated statement of changes in equity
For the year ended 31 March 2017
Attributable to equity holders
-----------------------------------------------------------------
Share Capital (Restated) (Restated)
Share Share option redemption Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- ----------- ---------- ----------
Equity at 1 April 2015 2,230 335 58 12 9,640 12,275
Restatement - - - - (1,847) (1,847)
----------------------- -------- -------- -------- ----------- ---------- ----------
Equity at 1 April 2015
restated 2,230 335 58 12 7,793 10,428
Profit for the year - - - - 2,390 2,390
Other comprehensive
income - - - - - -
----------------------- -------- -------- -------- ----------- ---------- ----------
Total comprehensive
income - - - - 2,390 2,390
Deferred tax on share
options - - - - (23) (23)
Dividends - - - - (1,059) (1,059)
Share-based payments - - (2) - - (2)
Issue of share capital 22 94 - - - 116
Shares repurchased
and cancelled (4) - - 4 (90) (90)
----------------------- -------- -------- -------- ----------- ---------- ----------
Equity at 1 April 2016 2,248 429 56 16 9,011 11,760
----------------------- -------- -------- -------- ----------- ---------- ----------
Profit for the year - - - - 2,749 2,749
Other comprehensive
income - - - - - -
----------------------- -------- -------- -------- ----------- ---------- ----------
Total comprehensive
income - - - - 2,749 2,749
Deferred tax asset
adjustment - - - - (69) (69)
Exercise of warrants - - (53) - 53 -
Dividends - - - - (1,461) (1,461)
Share-based payments - - 31 - - 31
Issue of share capital 124 50 - - - 174
Shares repurchased
and cancelled (2) - - 2 (61) (61)
----------------------- -------- -------- -------- ----------- ---------- ----------
Equity at 31 March
2017 2,370 479 34 18 10,222 13,123
----------------------- -------- -------- -------- ----------- ---------- ----------
Company statement of changes in equity
For the year ended 31 March 2017
Attributable to equity holders
--------------------------------------------------------------------------------
Share Capital
Share Share option redemption Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Equity at 1 April 2015 2,230 335 58 12 9,640 12,275
Profit for the year - - - - 548 548
Dividends received
from subsidiary - - - - 2,493 2,493
Other comprehensive
income - - - - - -
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Total comprehensive
income - - - - 3,041 3,041
Deferred tax on share
options - - - - (23) (23)
Dividends - - - - (1,059) (1,059)
Share-based payments - - (2) - - (2)
Issue of share capital 22 94 - - - 116
Shares repurchased
and cancelled (4) - - 4 (90) (90)
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Equity at 1 April 2016 2,248 429 56 16 11,509 14,258
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Loss for the year - - - - (566) (566)
Dividends received
from subsidiary - - - - - -
Other comprehensive
income - - - - - -
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Total comprehensive
income - - - - (566) (566)
Deferred tax asset
adjustment - - - - (69) (69)
Exercise of warrants - - (53) - 53 -
Dividends - - - - (1,461) (1,461)
Share-based payments - - 31 - - 31
Issue of share capital 124 50 - - - 174
Shares repurchased
and cancelled (2) - - 2 (61) (61)
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Equity at 31 March
2017 2,370 479 34 18 9,405 12,306
------------------------ ------------------------ -------- -------- ----------- --------- ----------
Consolidated statement of cash flows
For the year ended 31 March 2017
Restated
2017 2016
GBP'000 GBP'000
------------------------------------------ -------- --------
Cash flows from operating activities
Profit before income tax 3,404 2,918
Depreciation and amortisation 2,761 2,235
Profit on sale of fixed asset - (2)
Share-based payments 31 (2)
Net finance costs 928 612
------------------------------------------ -------- --------
Operating cash flows before movements in
working capital 7,124 5,761
Decrease in inventories 33 14
Increase in trade and other receivables (123) (803)
(Decrease)/increase in trade and other
payables (1,202) 666
------------------------------------------ -------- --------
Cash generated from operations 5,832 5,638
Income taxes paid (1,504) (855)
------------------------------------------ -------- --------
Net cash from operating activities 4,328 4,783
------------------------------------------ -------- --------
Cash flows from investing activities
Interest paid (405) (318)
Acquisition of subsidiaries net of cash
acquired (11,987) (7,058)
Purchase of intangible assets (26) (194)
Sale of property, plant and equipment - 14
Purchase of property, plant and equipment (146) (532)
------------------------------------------ -------- --------
Net cash used in investing activities (12,564) (8,088)
------------------------------------------ -------- --------
Cash flows from financing activities
Dividends paid (1,461) (1,059)
Share capital issued 174 114
Payments made for share repurchases (61) (90)
Increase in bank loan 3,950 18,400
Repayment of borrowings - (9,988)
------------------------------------------ -------- --------
Net cash from financing activities 2,602 7,377
------------------------------------------ -------- -------- Net (decrease)/increase in cash and cash equivalents (5,634) 4,072 Cash and cash equivalents at beginning of year 6,166 2,094 ------------------------------------------ -------- -------- Cash and cash equivalents at end of year 532 6,166 ------------------------------------------ -------- -------- Cash and cash equivalents Cash at bank and in hand 1,238 6,166 Short-term borrowings (706) - ------------------------------------------ -------- -------- Cash and cash equivalents 532 6,166 ------------------------------------------ -------- --------
Company statement of cash flows
For the year ended 31 March 2017
2017 2016
GBP'000 GBP'000
------------------------------------------ -------- --------
Cash flows from operating activities
(Loss)/profit before income tax (111) 3,485
Depreciation and amortisation 1,984 1,872
Profit on sale of fixed asset - (2)
Share-based payments 31 (2)
Net finance costs 928 612
------------------------------------------ -------- --------
Operating cash flows before movements in
working capital 2,832 5,965
Decrease in inventories - 3
(Increase)/decrease in trade and other
receivables (326) 217
Increase in trade and other payables 2,372 208
------------------------------------------ -------- --------
Cash generated from operations 4,878 6,393
Income taxes paid (513) (566)
------------------------------------------ -------- --------
Net cash from operating activities 4,365 5,827
------------------------------------------ -------- --------
Cash flows from investing activities
Interest paid (407) (315)
Acquisition of subsidiaries net of cash
acquired (12,719) (9,121)
Purchase of intangible assets (26) (194)
Sale of property, plant and equipment - 14
Purchase of property, plant and equipment (11) (193)
------------------------------------------ -------- --------
Net cash used in investing activities (13,163) (9,809)
------------------------------------------ -------- --------
Cash flows from financing activities
Dividends paid (1,461) (1,059)
Share capital issued 174 114
Payments made for share repurchases (61) (90)
Increase in bank loan 3,950 18,400
Repayment of borrowings - (9,988)
------------------------------------------ -------- --------
Net cash from financing activities 2,602 7,377
------------------------------------------ -------- --------
Net (decrease)/increase in cash and cash
equivalents (6,196) 3,395
Cash and cash equivalents at beginning
of year 5,490 2,095
------------------------------------------ -------- --------
Cash and cash equivalents at end of year (706) 5,490
------------------------------------------ -------- --------
Cash and cash equivalents
Cash at bank and in hand - 5,490
Short-term borrowings (706) -
------------------------------------------ -------- --------
Cash and cash equivalents (706) 5,490
------------------------------------------ -------- --------
Notes to the financial statements
For the year ended 31 March 2017
1. Nature of operations and general information
AdEPT is one of the UK's leading independent providers of voice and data telecommunication services with award-winning customer service. The Group is focused on delivering a complete telecommunications service for small and medium-sized business customers with a targeted product range including landline calls, line rental, broadband, IT services, mobile and data connectivity services.
AdEPT is incorporated under the Companies Act, domiciled in the UK and the registered office is located at One London Wall, London EC2Y 5AB. The Company's shares are listed on AIM of the London Stock Exchange.
2. Accounting policies
Basis of preparation of financial statements
The financial statements have been prepared in accordance with applicable IFRS as adopted by the EU.
Accounting standards require the directors to consider the appropriateness of the going concern basis when preparing the financial statements. The directors confirm that they consider that the going concern basis remains appropriate. The Group's available banking facilities are described in Note [26] to the financial statements. The Group has adequate financing arrangements which can be utilised by the Group as required. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
At the date of authorisation of these financial statements, the directors have considered the standards and interpretations which have not been applied in these financial statements that were in issue but not yet effective (and in some cases had not yet been adopted by the EU) and IFRS 15 "Revenue from Contracts with Customers", IFRS 16 "Leases" and IFRS 9 "Financial Instruments" were considered to be relevant.
It is not clear whether the application of IFRS 16 and IFRS 9, once effective, will have a material impact on the results of the Group.
The Group has commenced a detailed assessment to determine the impact of adopting IFRS 15, which introduces for certain contracts significant changes to the timing of revenue, and associated profit, recognition. This assessment is ongoing and the Board will update the shareholders on the impact on transition, and on our ongoing accounting policy, during 2017 as appropriate.
Adoption of the other standards and interpretations are not expected to have a material impact on the results of the Group. Application of these standards may result in some changes in presentation of information within the Group's financial statements.
The financial statements are presented in sterling, which is the Group's functional and presentation currency. The figures shown in the financial statements are rounded to the nearest thousand pounds.
Segmental reporting
The directors have considered the requirements of IFRS 8 "Operating Segments" and have concluded that the Group has two segments. For further information see Note 4 of the financial statements.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and can be reliably measured.
Revenue from calls, which excludes value added tax and trade discounts, is recognised in the income statement at the time the call is made. Calls made in the year, but not billed by year end, are accrued within receivables as accrued income.
Revenue from line rental is recognised in the month that the charge relates to, commencing with a full month's charge in the month of connection. Revenue and related costs from the sales of mobile handsets are recognised at the date of supply or connection.
Revenue arising from the provision of internet and other services is recognised evenly over the periods in which the service is provided to the customer.
Revenue from the sale of goods is recognised when the goods have been fully installed. Income from maintenance services and equipment rentals is recognised over the term of the agreement.
Where customer contracts have multiple components to be delivered (e.g. equipment rental and internet services), the revenue attributable to each component is calculated based on the fair value of each component.
The whole of the revenue is attributable to the provision of voice and data telecommunication services to both residential and business customers. All revenue arose within the United Kingdom.
Goodwill
Goodwill is recognised separately as intangible assets and carried at cost less accumulated impairment losses. Goodwill is tested for impairment at least annually. Any impairment is recognised immediately in the income statement. Subsequent reversals of impairment losses for goodwill are not recognised.
Intangible fixed assets acquired as part of a business combination and amortisation
In accordance with IFRS 3 "Business Combinations", an intangible asset acquired in a business combination is recognised at fair value at the acquisition date.
After initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Impairment reviews are conducted annually from the first anniversary following acquisition.
The intangible asset 'customer base' is amortised to the income statement over its estimated useful economic life on a straight line basis.
Other intangible assets
Also included within intangible fixed assets are the development costs of the Company's billing and customer management system plus an individual licence. These other intangible assets are stated at cost, less amortisation and any provision for impairment. Amortisation is provided at rates calculated to write off the cost, less estimated residual value of each intangible asset, over its expected useful economic life on the following bases:
Customer management system - Three years straight line
Other licences - Contract licence period straight line
Computer software - Three years straight line
Investments
Shareholdings in subsidiaries are valued at cost less provision for permanent impairment.
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost, less depreciation and any provision for impairment. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value of each asset, over its expected useful life on the following bases:
Short-term leasehold improvements - The shorter of five years and the remaining period of the
lease straight line Fixtures and fittings - Three years straight line Office equipment - Three years straight line Motor vehicles - Four years straight line Rental equipment at customer premises - Contract agreement period straight line
Lease accounting
The Group leases equipment under operating leases to non-related parties. Leases of equipment where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. The underlying assets are recognised in tangible fixed assets. Rental income from operating leases (net of any incentives given to the lessees) is recognised in profit or loss on a straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to the carrying amount of the leased assets and recognised as an expense in profit or loss over the lease term on the same basis as the lease income.
Inventories
Inventories are valued at the lower of cost and net realisable value after making allowance for any obsolete or slow moving items. Full provision is made for any items older than 6 months. Net realisable value is reviewed regularly to ensure accurate carrying values. Cost is determined on a first-in, first-out basis and includes transportation and handling costs.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary to make the sale.
Pensions
The Group contributes to personal pension plans. The amount charged to the income statement in respect of pension costs is the contribution payable in the year.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank, cash in hand and overdrafts.
Income tax
Income tax is the tax currently payable based on taxable profit for the year.
Deferred income tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred income tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.
Deferred income tax liabilities are provided in full, with no discounting. Deferred income tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred income tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.
Changes in deferred income tax assets or liabilities are recognised as a component of income tax expense in the income statement, except where they relate to items that are charged or credited directly to equity, in which case the related deferred income tax is also charged or credited directly to equity.
Share-based payments
The cost of equity-settled transactions with employees is measured by reference to the fair value of the award at the date at which they are granted and is recognised as an expense over the vesting period, which ends on the date at which the relevant employees become fully entitled to the award. Fair value is appraised at the grant date using an appropriate pricing model for which the assumptions are approved by the directors.
At each balance sheet date, the cumulative expense is calculated representing the extent to which the vesting period has expired and management's best estimate of the number of equity instruments that will ultimately vest. The movement in the cumulative expense since the previous balance sheet date is recognised in the income statement, with a corresponding entry in equity.
Trade and other receivables
Trade receivables, which generally have 14 to 60 days terms, are initially recognised at fair value and subsequently held at amortised cost. A provision for impairment of trade receivables is established for any amount due in 90 or more days or when it is considered probable that the Group may not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The provision is the difference between the asset's carrying amount and the original invoice amount less bad debts written off. The carrying amount of the asset is reduced through the use of the provision and the amount of the loss is recognised in the income statement. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.
Subsequent recoveries of amounts previously written off are credited to the income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Trade payables
Trade payables are stated at their nominal value, recognised initially at fair value and subsequently valued at amortised cost.
Dividends
Dividend distributions to the Company's shareholders are recognised when payment has been made to shareholders.
Share buybacks
The Company has returned surplus cash to shareholders through a limited share buyback scheme pursuant to the authority given to it at the annual general meeting. Shares purchased for cancellation are deducted from retained earnings at the total consideration paid or payable. The Company will continue to monitor the level of cash required for the business and determine if further repurchases remain in the shareholders' best interests.
Financial instruments
Financial assets and liabilities are recognised on the Group's balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Capital
The capital structure of the Group consists of debt, which includes the borrowings disclosed in Notes 20 and 27, cash and cash equivalents, and equity attributable to equity holders, comprising issued capital, reserves and retained earnings.
Borrowings and borrowing costs
Borrowings are recorded initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any differences between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
Borrowing costs are expensed to the income statement as incurred, with the exception of arrangement fees which are deducted from the related liability and released over the term of the related liability in accordance with IAS 39.
3. Critical accounting estimates and judgements
The key assumptions concerning the future and other key sources of estimation and uncertainty at the balance sheet date, which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Key sources of estimation and uncertainty are:
Measuring the fair value of customer bases on acquisition
The main estimates used to measure the fair value of the customer bases on acquisition are:
-- the churn rate (turnover of customers); -- discount rate; and -- gross margins.
Estimating churn, discount rate and gross margins
Churn rates ranging between 2.4% and 15.4% are based upon actual historical churn rates of the revenue stream for each customer base.
The discount rate of 8.0% (2016: 8.0%) used to discount the cash flows is based upon the Group's weighted average cost of capital (WACC), which is the recommended discount rate suggested by IFRS and is a calculated figure using actual input variables where available and applying estimates for those which are not, such as the equity market premium.
Gross margins of 45.8% are based upon actual margins achieved by the customer bases in the current and previous years. The actual outcomes have been materially equivalent.
Estimating the useful life of customer bases
The main estimate used to conduct the impairment review is the churn rate (turnover of customers).
The average useful economic life of all the customer bases has been estimated at 15 years (2016: 14 years) with a range of ten to 30 years.
Measuring the fair value of contingent consideration
The fair value of contingent deferred consideration is determined by reference to the growth rate for the gross margin of the acquired business and applying the contingent deferred consideration matrix as specified in the asset or share purchase agreement and discounting the net present value of the future cash flows. The range of contingent consideration in the current period was GBP0 to GBP7.75m; further details are included in Note 27.
Subsequent impairment of customer bases
The Group determines whether intangible assets are impaired on at least an annual basis. This requires an estimation of the 'value in use' of the cash-generating units to which the intangible value is allocated. Estimating a value in use amount requires management to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.
The calculations are sensitive to any movement in the discount rate, margin or churn rate and would therefore result in an impairment charge to the income statement. A 1% change to the discount rate, gross margin and churn rate would result in additional impairment charges of GBP31,000, GBP31,000 and GBPNil respectively.
More details, including carrying values, are included in Note 13.
Allowance for impairment of receivables
Management reviews are performed to estimate the level of provision required for irrecoverable debt. Provisions are made specifically against invoices where recoverability is uncertain. Further information on the receivables allowance account is given in Note 18.
4. Segmental information
IFRS 8 "Operating Segments" requires identification on the basis of internal reporting about components of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board. The Board reviews the Group's internal reporting in order to assess performance and allocate resources. The operating segments are fixed line services (being calls and line rental services) and managed services (which are data connectivity, hardware, IP telephony, support and maintenance services), which are reported in a manner consistent with the internal reporting to the Board. The Board assesses the performance of the operating segments based on revenue, gross profit and underlying EBITDA.
Year ended 31 March Year ended 31 March
2017 2016 (Restated)
-------------------------------------- --------------------------------------
Fixed Fixed
line Managed Central line Managed Central
GBP'000 services services costs Total services services costs Total
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Revenue 15,365 19,071 - 34,436 16,089 12,792 - 28,881
Gross profit 6,074 8,497 - 14,571 6,194 5,440 - 11,634
Gross margin
% 39.5% 44.6% - 42.3% 38.5% 42.5% - 40.3%
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Administrative
expenses 2,687 4,057 - 6,744 2,682 2,799 - 5,481
Underlying
EBITDA 3,387 4,440 - 7,827 3,512 2,641 - 6,153
Underlying
EBITDA % 22.0% 23.3% - 22.7% 21.8% 20.6% - 21.3%
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Amortisation (1,907) (575) - (2,482) (1,814) (234) - (2,048)
Depreciation - - (279) (279) - - (188) (188)
Acquisition
costs - - (703) (703) - - (389) (389)
Share-based
payments - - (31) (31) - - 2 2
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Operating
profit/(loss) 1,480 3,865 (1,013) 4,332 1,698 2,407 (575) 3,530
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Finance costs - - (928) (928) - - (612) (612)
Income tax - - (655) (655) - - (528) (528)
--------------- --------- --------- ------- ------- --------- --------- ------- -------
Profit/(loss)
after tax 1,480 3,865 (2,596) 2,749 1,698 2,407 (1,715) 2,390
--------------- --------- --------- ------- ------- --------- --------- ------- -------
The assets and liabilities relating to the above segments have not been disclosed as they are not separately identifiable and are not used by the chief operating decision maker to allocate resources. All segments are in the UK and all revenue relates to the UK.
Transactions with the largest customer of the Group are less than 10% of total turnover and do not require disclosure for either 2016 or 2017.
5. Revenue
2017 2016
GBP'000 GBP'000
----------------------------- -------- --------
Sale of goods 4,698 2,390
Provision of services
* Calls and line rental 15,874 16,614
* Data networks 8,501 6,121
* Support services 2,046 1,628
- Other services 3,317 2,128
----------------------------- -------- --------
34,436 28,881
----------------------------- -------- --------
6. Operating profit
The operating profit is stated after charging:
Restated
2017 2016
GBP'000 GBP'000
--------------------------------------- -------- --------
Amortisation of customer base, billing
system and licence 2,482 2,048
Depreciation of tangible fixed assets:
- owned by the Group 279 188
Share option expense/(credit) 31 (2)
Minimum operating lease payments:
- land and buildings 575 537
- motor vehicles and other equipment 110 103
--------------------------------------- -------- --------
7. Auditors' remuneration
2017 2016
GBP'000 GBP'000
-------------------------------------- -------- --------
Fees payable to the Group's auditors
for the audit of the Group's annual
financial statements 35 33
Fees payable to the Group's auditors
and their associates in respect of:
- audit of subsidiaries 31 10
- other services relating to taxation 17 8
-------------------------------------- -------- --------
8. Finance costs
2017 2016
GBP'000 GBP'000
----------------------------------------- -------- --------
On bank loans and overdrafts 424 315
Bank fees 182 95
Finance cost on contingent consideration 322 202
----------------------------------------- -------- --------
928 612
----------------------------------------- -------- --------
The finance costs on contingent consideration arises from the release of the discounted contingent consideration liability evenly across the term of the deferred consideration period in relation to each acquisition. This is a non-cash item.
9. Employee costs
Staff costs, including directors' remuneration, were as follows:
2017 2016
GBP'000 GBP'000
---------------------- -------- --------
Wages and salaries 4,141 3,120
Social security costs 483 366
Share option expense 31 (2)
Other pension costs 51 251
---------------------- -------- --------
4,706 3,735
---------------------- -------- --------
The average monthly number of employees, including the directors, during the year was as follows:
2017 2016
Number Number
------------------------ ------- -------
Non-executive directors 2 2
Administrative staff 87 60
------------------------ ------- -------
89 62
------------------------ ------- -------
Key management personnel
The directors are considered to be the key management personnel of the Group, having authority and responsibility for planning, directing and controlling the activities of the Group.
10. Income tax expense
Restated
2017 2016
GBP'000 GBP'000
---------------------------------------- -------- --------
Current tax
UK corporation tax on profit for the
year 1,300 820
Adjustments in respect of prior periods 32 (5)
---------------------------------------- -------- --------
Total current tax 1,332 815
---------------------------------------- -------- --------
Deferred tax
Origination and reversal of timing
differences:
- Fixed assets (4) 39
- Provision for receivables - -
- Share options (10) 21
- Goodwill on business combinations (633) (350)
Adjustments in respect of prior periods (30) 3
---------------------------------------- -------- --------
Total deferred tax (see Note 16) (677) (287)
---------------------------------------- -------- --------
Total income tax expense 655 528
---------------------------------------- -------- --------
Factors affecting tax charge for the year
The relationship between expected tax expense based on the effective tax rate of AdEPT at 20% (2016: 20%) and the tax expense actually recognised in the income statement can be reconciled as follows:
Restated
2017 2016
GBP'000 GBP'000
-------------------------------------------- -------- --------
Profit before income tax 3,404 2,918
Tax rate 20% 20%
Expected tax charge 681 584
Expenses not deductible for tax purposes 254 164
Amortisation not deductible for tax
purposes - 289
Adjustments to tax charge in respect
of prior periods 2 (2)
Depreciation/amortisation on non-qualifying
assets (2) -
Difference due to deferred tax rate
being lower than the standard tax rate (272) (411)
Unprovided deferred tax movement 3 -
Share option relief (11) (96)
-------------------------------------------- -------- --------
Actual tax expense net 655 528
-------------------------------------------- -------- --------
The change in income tax rates will affect future tax charges.
11. Dividends
On 30 September 2016 the directors approved an interim dividend of 3.75p per ordinary share (2016: 3.00p), which was paid to shareholders on 3 April 2017. On 30 March 2017 the directors proposed a final dividend, subject to shareholder approval at the 2017 annual general meeting, of 4.00p per ordinary share (2016: 3.50p). Total dividends proposed in respect of the year ended 31 March 2017 will absorb GBP1,836,892 of shareholders' funds in future periods (2016: GBP1,461,467).
On 5 April 2016 the Company paid dividends of GBP674,523 in relation to the interim dividend declared in September 2015. On 4 October 2016 the Company paid dividends of GBP786,944 in relation to the final dividend declared in March 2016. Total dividends paid in the year ended 31 March 2017 absorbed GBP1,461,467 of cash (2016: GBP1,059,803).
12. Goodwill
Group
Total
GBP'000
------------------ --------
Cost
At 1 April 2015 2,085
Additions 3,614
--------------------- --------
At 1 April 2016 5,699
Additions 7,603
At 31 March 2017 13,302
--------------------- --------
Impairment
At 1 April 2015 2,085
Impairment charge -
------------------ --------
At 1 April 2016 2,085
Impairment charge -
At 31 March 2017 2,085
--------------------- --------
Net book value
At 31 March 2017 11,217
--------------------- --------
At 31 March 2016 3,614
--------------------- --------
The goodwill is split by cash generating units as follows:
March March
2017 2016
GBP'000 GBP'000
--------------------------- --------- ---------
Centrix Limited GBP3,614 GBP3,614
Comms Group UK Limited GBP2,672 GBPNil
CAT Communications Limited GBP248 GBPNil
OurIT Department Limited GBP4,683 GBPNil
The assumptions are set out in note 3. No reasonable change in these assumptions would lead to impairments.
13. Intangible fixed assets
Group
Computer Customer Website
Licence software base GBP'000 Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- --------- -------- --------- --------
Cost
At 1 April 2015 26 1,080 32,045 - 33,151
Additions - 194 8,399 - 8,593
------------------------- -------- --------- -------- --------- --------
At 1 April 2016 26 1,274 40,444 - 41,744
Additions - 26 6,111 1,744 7,881
Acquired with subsidiary - - 1,703 - 1,703
------------------------- -------- --------- -------- --------- --------
At 31 March 2017 26 1,300 48,295 1,744 51,365
------------------------- -------- --------- -------- --------- --------
Amortisation
At 1 April 2015 25 1,028 17,224 - 18,277
Charge for the year 1 84 1,918 - 2,003
Impairment charge - - 45 - 45
------------------------- -------- --------- -------- --------- --------
At 1 April 2016 26 1,112 19,186 - 20,324
Charge for the year - 88 2,208 - 2,296
Impairment charge - - 186 - 186
At 31 March 2017 26 1,200 21,580 - 22,806
------------------------- -------- --------- -------- --------- --------
Net book value
At 31 March 2017 - 100 26,715 1,744 28,559
------------------------- -------- --------- -------- --------- --------
At 31 March 2016 - 162 21,258 - 21,420
------------------------- -------- --------- -------- --------- --------
Included within the Group's intangible assets is:
Useful March March
life 2017 2016
GBP'000 GBP'000
------------------------- --------- --------- ---------
Centrix Limited 30 years GBP7,946 GBP8,202
Comms Group UK Limited 17 years GBP4,670 GBPNil
OurIT Department Limited 17 years GBP3,168 GBPNil
The useful lives for the customer base intangible assets are determined by reference to the actual historical churn rates of the revenue stream for each customer base acquired. Sensitivity of the assumptions are included in note 3.
Company
Computer Customer
Licence software base Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- --------- -------- --------
Cost
At 1 April 2015 26 1,080 32,045 33,151
Additions - 194 - 194
-------------------- -------- --------- -------- --------
At 1 April 2016 26 1,274 32,045 33,345
Additions - 26 - 26
-------------------- -------- --------- -------- --------
At 31 March 2017 26 1,300 32,045 33,371
-------------------- -------- --------- -------- --------
Amortisation
At 1 April 2015 25 1,028 17,224 18,277
Charge for the year 1 84 1,683 1,768
Impairment charge - - 45 45
-------------------- -------- --------- -------- --------
At 1 April 2016 26 1,112 18,952 20,090
Charge for the year - 88 1,631 1,719
Impairment charge - - 186 186
-------------------- -------- --------- -------- --------
At 31 March 2017 26 1,200 20,769 21,995
-------------------- -------- --------- -------- --------
Net book value
At 31 March 2017 - 100 11,276 11,376
-------------------- -------- --------- -------- --------
At 31 March 2016 - 162 13,093 13,255
-------------------- -------- --------- -------- --------
Intangible assets are reviewed annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The net present value of cash flows for each cash-generating unit is reviewed against the carrying value at the balance sheet date. At the final reporting date of 31 March 2017 the net present value of future cash flows of certain cash-generating units was below the carrying value and an impairment charge of GBP185,583 (2016: GBP45,041) has been recorded in respect of one cash generating unit.
14. Investments in subsidiaries
Company
Company Total
GBP'000 GBP'000
---------------------------- -------- --------
Cost
1 April 2015 - -
Additions 11,846 11,846
------------------------------ -------- --------
1 April 2016 11,846 11,846
Additions 16,157 16,157
Disposals (1,461) (1,461)
------------------------------ -------- --------
At 31 March 2017 26,542 26,542
------------------------------ -------- --------
Amounts written off
At 1 April 2015 - -
Written off during the year - -
---------------------------- -------- --------
1 April 2016 - -
Written off during the year - -
---------------------------- -------- --------
At 31 March 2017 - -
---------------------------- -------- --------
Net book value
At 31 March 2017 26,542 26,542
------------------------------ -------- --------
At 31 March 2016 11,846 11,846
------------------------------ -------- --------
During the year the Company transferred its investment in CAT Communications Limited of GBP1.46m to Centrix Limited as the customer base is being serviced and managed by Centrix Limited.
Details of the principal subsidiaries of the Company are included in Note 30 to the financial statements.
15. Property, plant and equipment
Group
Short-term Fixtures
Motor leasehold and Office
vehicles improvements fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- ------------- --------- ---------- --------
Cost
At 1 April 2015 25 7 139 327 498
Additions 105 - 199 337 641
Disposals (25) - - (116) (141)
------------------------- --------- ------------- --------- ---------- --------
At 1 April 2016 105 7 338 548 998
Acquired with subsidiary - - 11 461 472
Additions - - 1 145 146
Disposals - - - (62) (62)
------------------------- --------- ------------- --------- ---------- --------
At 31 March 2017 105 7 350 1,092 1,554
------------------------- --------- ------------- --------- ---------- --------
Depreciation
At 1 April 2015 9 7 135 265 416
Charge for the year 9 - 17 162 188
Disposals (14) - - (116) (130)
------------------------- --------- ------------- --------- ---------- --------
At 1 April 2016 4 7 152 311 474
Charge for the year 26 - 56 197 279
Disposals - - - (62) (62)
------------------------- --------- ------------- --------- ---------- --------
At 31 March 2017 30 7 208 446 691
------------------------- --------- ------------- --------- ---------- --------
Net book value
At 31 March 2017 75 - 142 646 863
------------------------- --------- ------------- --------- ---------- --------
At 31 March 2016 101 - 186 237 524
------------------------- --------- ------------- --------- ---------- --------
Company
Short-term Fixtures
Motor leasehold and Office
vehicles improvements fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- ------------- --------- ---------- --------
Cost
At 1 April 2015 25 7 139 327 498
Additions 105 - 69 19 193
Disposals (25) - - - (25)
-------------------- --------- ------------- --------- ---------- --------
At 1 April 2016 105 7 208 346 666
Additions - - - 10 10
Disposals - - - - -
-------------------- --------- ------------- --------- ---------- --------
At 31 March 2017 105 7 208 356 676
-------------------- --------- ------------- --------- ---------- --------
Depreciation
At 1 April 2015 9 7 135 265 416
Charge for the year 9 - 11 40 60
Disposals (14) - - - (14)
-------------------- --------- ------------- --------- ---------- --------
At 1 April 2016 4 7 146 305 462
Charge for the year 26 - 24 27 77
Disposals - - - - -
-------------------- --------- ------------- --------- ---------- --------
At 31 March 2017 30 7 170 332 539
-------------------- --------- ------------- --------- ---------- --------
Net book value
At 31 March 2017 75 - 38 24 137
-------------------- --------- ------------- --------- ---------- --------
At 31 March 2016 101 - 62 41 204
-------------------- --------- ------------- --------- ---------- --------
16. Deferred taxation
Restated
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------
At 1 April 2016 (3,042) 106 (1,703) 145
Income statement credit/(charge) 700 6 337 (16)
Movement in deferred tax on
share options (69) (69) (23) (23)
Deferred tax on business combination (1,646) - (1,652) -
At 31 March 2017 (4,057) 43 (3,041) 106
------------------------------------- -------- -------- -------- --------
The deferred tax (liability)/asset is made up as follows:
Restated
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- --------
Capital allowances (7) 6 (43) 7
Short-term timing differences
- provision for receivables 17 16 17 17
Deferred tax on business combinations (4,088) - (3,097) -
Share options 21 21 82 82
-------------------------------------- -------- -------- -------- --------
(4,057) 43 (3,041) 106
-------------------------------------- -------- -------- -------- --------
17. Inventories
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- -------- -------- --------
Consumables 196 1 48 1
------------ -------- -------- -------- --------
As at 31 March 2017, inventories of GBP74,036 (2016: GBP3,095) were fully provided for. During the year GBP18,849 has been recognised as an expense in the statement of comprehensive income.
There is no material difference between the replacement cost of inventories and the amount stated above.
18. Trade and other receivables
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- --------
Trade receivables 3,738 1,178 2,372 1,305
Other receivables 24 7 7 7
Income tax - - - -
Prepayments 1,432 291 1,615 316
Accrued income 320 212 366 257
------------------ -------- -------- -------- --------
5,513 1,688 4,360 1,885
------------------ -------- -------- -------- --------
As at 31 March 2017, trade receivables of GBP215,939 (2016: GBP128,811) were impaired and fully provided for. The ageing of the trade receivables which are past due and not impaired is as follows:
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------- -------- -------- -------- --------
31-60 days 512 147 282 145
61-90 days 182 20 159 8
Over 90 days 162 - 65 2
------------- -------- -------- -------- --------
856 167 506 155
------------- -------- -------- -------- --------
All debts which are older than 90 days relate to interim amounts in respect of large customer projects which have not yet fully completed and are considered to be fully recoverable upon completion. The movement of the provision for impairment of trade receivables is as follows:
Group Company
GBP'000 GBP'000
--------------------------------------- -------- --------
At 1 April 2015 131 131
Receivables collected during the year
which had been previously written off (3) (3)
--------------------------------------- -------- --------
At 1 April 2016 128 128
Receivables provided for during the
year as uncollectable 87 1
--------------------------------------- -------- --------
At 31 March 2017 215 129
--------------------------------------- -------- --------
The creation and release of a provision for impaired receivables has been included in administration expenses in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovering cash. Management regularly reviews the outstanding receivables and does not consider that any further impairment is required. The other asset classes within trade and other receivables do not contain impaired assets.
19. Trade and other payables
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Trade payables 1,706 617 2,757 1,339
Other taxes and social security
costs 910 174 665 489
Other payables 67 54 72 45
Amounts owed to Group undertakings - 2,065 - 474
Accruals and deferred income 3,630 1,009 2,302 891
Contingent consideration 6,736 6,736 2,957 2,957
----------------------------------- -------- -------- -------- --------
13,049 10,655 8,753 6,195
----------------------------------- -------- -------- -------- --------
The contingent consideration liability of GBP6,735,837 (2016: GBP2,956,571) represents the year end fair value of the contingent consideration liabilities arising on the acquisitions made during the year. The fair value of the contingent consideration liability was initially determined by reference to the forecast growth rate for the customer base and applying the contingent consideration matrix as specified in the share purchase agreement. Further details are included in note 27.
20. Long-term borrowings
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Between one and two years - - - -
Between two and five years 15,988 15,988 12,148 12,148
More than five years - - - -
--------------------------- -------- -------- -------- --------
Bank loans 15,988 15,988 12,148 12,148
--------------------------- -------- -------- -------- --------
The bank loan is secured by a debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future, including goodwill, book debts, uncalled capital, buildings, fixtures and fixed plant and machinery. Details of the interest rates applicable to the loans are included in Note [26].
Included within bank loans are arrangement fees amounting to GBP261,635 (2016: GBP132,000) which are being released over the term of the loan in accordance with IAS 39.
21. Share capital
2017 2016
GBP'000 GBP'000
--------------------------------------- -------- --------
Authorised
65,000,000 ordinary shares of 10p each 6,500 6,500
--------------------------------------- -------- --------
Allotted, called up and fully paid
23,701,832 (2016: 22,484,108) ordinary
shares of 10p each 2,370 2,248
--------------------------------------- -------- --------
Movement in shares in issue
31 March 31 March
2017 2016
-------------------------------------- ---------- ----------
Ordinary shares of 10p each 22,484,108 22,297,400
Issued upon exercise of share options
and warrants 1,236,860 221,708
Shares repurchased and cancelled (19,136) (35,000)
-------------------------------------- ---------- ----------
23,701,832 22,484,108
-------------------------------------- ---------- ----------
Share buyback scheme
On 18 December 2014 the Company announced that it intended to commence a limited share buyback of its own ordinary shares. During the year ended 31 March 2017 the Company repurchased 19,136 shares (2016: 35,000) at an average price of 318p (2016: 257.7p). All shares repurchased by the Company were cancelled prior to the year end.
Share options
At 31 March 2017, the following options and warrants over the shares of AdEPT were in issue:
2017 2016
---------------------- ---------------------
Number Weighted Number Weighted
of shares average of shares average
under exercise under exercise
option price option price
-------------------------- ----------- --------- ---------- ---------
Outstanding at 1 April 1,469,840 49p 1,440,759 20p
Granted during the year 159,520 228p 250,789 213p
Exercised during the year (1,236,860) 14p (221,708) 52p
-------------------------- ----------- --------- ---------- ---------
Outstanding at 31 March 392,500 228p 1,469,840 49p
-------------------------- ----------- --------- ---------- ---------
During the year, pursuant to the warrant instrument dated 21 January 2009, Barclays Bank plc exercised its right to subscribe for 1,204,717 ordinary shares of 10p each.
The weighted average share price at date of exercise for options exercised during the year was 353.6p (2016: 270.0p).
The weighted average remaining contractual life of share options and warrants at 31 March 2017 was two years.
Employee share option schemes have a vesting period of three years and are settled through new equity issues in return for cash consideration and the maximum term of share options is ten years.
The weighted average fair values of options issued during the year have been determined using the Black-Scholes-Merton Pricing Model with the following assumptions and inputs:
2017 2016
--------------------------------------- ----- -----
Risk-free interest rate 0.50% 2.69%
Expected volatility 28.0% 22.0%
Expected option life (years) 3.0 3.0
Expected dividend yield 2.3% 2.9%
Weighted average share price 229p 222p
Weighted average exercise price 229p 222p
Weighted average fair value of options
granted 31p 30p
--------------------------------------- ----- -----
The expected average volatility was determined by reviewing historical fluctuations in the share price prior to the grant date of each share instrument. An expected take-up of 100% has been applied to each share instrument. Expected dividend yield is estimated at 2.7%; this is based upon the past dividend yield of AdEPT Telecom plc and in accordance with the guidance in IFRS 2.
Expected
Exercise option
price life 31 March 31 March
(p) (years) 2017 2016
---------------- -------- -------- -------- ---------
21 January 2009 11 3.0 - 1,197,697
23 August 2013 126 3.0 - 32,143
1 March 2016 222 3.0 240,000 240,000
1 October 2016 238 3.0 152,500 -
---------------- -------- -------- -------- ---------
392,500 1,469,840
---------------- -------- -------- -------- ---------
The mid-market price of the ordinary shares on 31 March 2017 was 327.5p and the range during the year was 142.5p.
22. Pension commitments
At 31 March 2017 there were no pension commitments (2016: GBPNil).
23. Operating lease commitments
At 31 March 2017 the lease commitments were as follows:
Group
Land and
buildings Other
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Within one year 382 266 58 53
Between two and five years 413 520 52 51
--------------------------- -------- -------- -------- --------
Company
Land and
buildings Other
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Within one year 172 173 43 39
Between two and five years 29 187 41 42
--------------------------- -------- -------- -------- --------
Land and buildings
The Company leases its offices under non-cancellable operating lease agreements. There is no material contingent rent payable. The lease agreements do not offer security of tenure. The lease terms are for five years.
Other
The Company leases various office equipment and motor vehicles under non-cancellable operating lease agreements. The lease terms are three years.
The lease expenditure charged to the income statement during the year is disclosed in Note [5].
24. Operating lease rentals
At 31 March 2017 the lease rental commitments outstanding from customers were as follows:
Group
Land and
buildings Other
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Within one year - - 115 97
Between two and five years - - 112 137
--------------------------- -------- -------- -------- --------
Company
Land and
buildings Other
------------------ ------------------
2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Within one year - - 115 97
Between two and five years - - 112 137
--------------------------- -------- -------- -------- --------
Other
The Company leases various telecommunications equipment to customers under non-cancellable operating lease agreements. The lease terms are three years.
The lease income is recognised in the income statement evenly during the term of the agreement.
25. Related party transactions
During the year dividends were paid to the following directors:
2017 2016
GBP GBP
------------ ---- ----
I Fishwick 78 57
R Wilson 51 37
D Lukic 3 3
A Woodruffe 10 13
R Burbage 7 -
J Swaite 5 3
------------ ---- ----
There is no ultimate controlling party.
26. Capital commitments
At 31 March 2017 there were capital commitments of GBPNil (2016: GBPNil).
27. Earnings per share
Earnings per share is calculated on the basis of a profit of GBP2,749,130 (2016: GBP2,390,617) divided by the weighted average number of shares in issue for the year of 22,585,580 (2016: 22,364,213). The diluted earnings per share is calculated on the treasury stock method and the assumption that the weighted average unapproved and EMI share options outstanding during the period are exercised. This would give rise to a total weighted average number of ordinary shares in issue for the period of 23,768,178 (2016: 23,608,713).
Adjusted earnings per share is used to reflect the non-cash nature of certain items which are charged to the income statement and the non-trading items, such as acquisition costs, to give a better indicator of the underlying cash generation of the Group. Adjusted earnings per share is calculated by adding back amortisation of intangible assets, impairment of goodwill, the taxation deduction on purchased customer contracts, deferred tax credits on amortisation charges, share option charges and acquisition costs to retained earnings, giving GBP5,213,923 (2016: GBP4,279,633). This is divided by the same weighted average number of shares as above.
Restated
2017 2016
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Earnings for the purposes of basic
and diluted earnings per share
Profit for the period attributable
to equity holders 2,749 2,390
Add: amortisation 2,482 2,048
Less: taxation on amortisation of
purchased customer contracts (118) (192)
Less: deferred tax credit on amortisation
charges (633) (353)
Add: share option charges 31 (2)
Add: acquisition costs 703 389
------------------------------------------ ---------- ----------
Adjusted profit attributable to equity
holders 5,214 4,280
------------------------------------------ ---------- ----------
Number of shares
Weighted average number of shares
used for earnings per share 22,585,580 22,364,213
Weighted average dilutive effect of
share plans 1,182,598 1,244,500
------------------------------------------ ---------- ----------
Diluted weighted average number of
shares 23,768,178 23,608,713
------------------------------------------ ---------- ----------
Earnings per share
Basic earnings per share 12.17p 10.72p
Diluted earnings per share 11.57p 10.15p
Adjusted earnings per share
Adjusted basic earnings per share 23.09p 19.19p
Adjusted diluted earnings per share 21.94p 18.18p
------------------------------------------ ---------- ----------
Earnings per share is calculated by dividing the retained earnings attributable to the equity holders by the weighted average number of ordinary shares in issue.
Adjusted earnings per share is calculated by dividing the retained earnings attributable to the equity holders (after adding back amortisation, the taxation deduction on purchased customer contracts and acquisition costs) by the weighted average number of ordinary shares in issue. The prior period adjusted profit attributable to equity holders has been restated to take account of the prior year restatement for the deferred tax credit on amortisation charges, this has been adjusted as it is a non-cash accounting adjustment.
28. Financial instruments
Set out below are the Group's financial instruments. The directors consider there to be no difference between the carrying value and fair value of the Group's financial instruments.
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Loans and receivables at amortised
cost
Cash and cash equivalents 1,238 - 6,166 5,489
Loans and receivables 3,912 1,352 2,584 1,517
----------------------------------- -------- -------- -------- --------
5,150 1,352 8,750 7,006
----------------------------------- -------- -------- -------- --------
Financial liabilities at amortised
cost
Liabilities at amortised cost 18,400 17,312 14,905 13,487
Financial liabilities at fair
value
Contingent consideration 6,426 6,426 2,956 2,956
----------------------------------- -------- -------- -------- --------
24,826 23,738 17,861 16,443
----------------------------------- -------- -------- -------- --------
Amounts due for settlement
Within twelve months 8,838 7,750 5,713 4,295
After twelve months 15,988 15,988 12,148 12,148
----------------------------------- -------- -------- -------- --------
24,826 23,738 17,861 16,443
----------------------------------- -------- -------- -------- --------
On 2 February 2017 the Company signed a new five-year GBP30m revolving credit facility agreement with Barclays Bank plc and Royal Bank of Scotland plc. The revolving credit facility bears interest at 1.85-2.30% over LIBOR on drawn funds, dependent upon the Net debt : EBITDA ratchet, and is repayable in full on the final repayment date of 2 February 2022.
The financial assets of the Group are cash and cash equivalents and trade and other receivables, which are offset against borrowings under the facility, and there is no separate interest rate exposure.
Barclays Bank plc has a cross guarantee and debenture incorporating a fixed and floating charge over the undertaking and all property and assets present and future, including goodwill, book debts, uncalled capital, buildings, fixtures and fixed plant and machinery.
The bank also holds a charge over the life assurance policy of Ian Fishwick, director of the Company, for GBP1,500,000.
Contingent consideration obligations
At 31 March 2016 a financial liability of GBP6,426,040 has been recognised in respect of the fair value of the contingent consideration due in respect of the acquisitions of:
Fair value as
at
------------------
Relationship
of unobservable
31 March 31 March Fair Significant inputs
2016 2017 value Valuation technique(s) unobservable to fair
GBP'000 GBP'000 hierarchy and key input(s) input(s) value
------------------ -------- -------- ---------- ---------------------- ------------- ----------------
Centrix GBP2,957 - Level Based upon a Growth The higher
Limited 3 multiple of gross rate being the growth
margin calculated the gross rate the
by the growth margin higher
rate over a period increase the multiple.
of twelve months. as measured The higher
by actual the
increase gross
of margin
gross the higher
margin the earn
over a out.
twelve-month
period.
------------------ -------- -------- ---------- ---------------------- ------------- ----------------
Comms Group - GBP3,434 Level Based upon a Growth The higher
UK Limited 3 multiple of gross rate being the growth
margin calculated the gross rate the
by the growth margin higher
rate over a period increase the multiple.
of twelve months. as measured The higher
by actual the
increase gross
of margin
gross the higher
margin the earn
over a out.
twelve-month
period.
------------------ -------- -------- ---------- ---------------------- ------------- ----------------
CAT Communications - GBP508 Level Based upon a Growth The higher
Limited 3 multiple of gross rate being the growth
margin calculated the gross rate the
by the growth margin higher
rate over a period increase the multiple.
of twelve months. as measured The higher
by actual the
increase gross
of margin
gross the higher
margin the earn
over a out.
twelve-month
period.
------------------ -------- -------- ---------- ---------------------- ------------- ----------------
OurIT Department - GBP2,785 Level The contingent Measured The higher
Limited 3 consideration by actual the
was based upon EBITDA EBITDA
a multiple of over a the higher
EBITDA calculated twelve-month the earn
over a period period. out.
of twelve months.
------------------ -------- -------- ---------- ---------------------- ------------- ----------------
All contingent consideration is subject to the maximum value as stated in the share purchase agreement. The fair value of the estimated deferred consideration liability at 31 March 2017 is not materially different to that estimated at the date of acquisition. The discount charge which has been recognised as an expense in the statement of comprehensive income in relation to the deferred consideration liability is disclosed in Note 7 to these financial statements.
Reconciliation of the movement in the fair value of contingent consideration:
CAT Communications OurIT
Centrix Comms Limited Department
Limited Group GBP'000 Limited Total
GBP'000 UK Limited GBP'000 GBP'000
GBP'000
------------------------- ---------- ------------- ------------------- ------------ ----------
As at 1 April 2016 2,957 - - - 2,957
Additions - 3,192 481 2,769 6,442
Discounting of
deferred consideration 37 242 27 16 322
Settled in cash (2,994) - - - (2,994)
------------------------- ---------- ------------- ------------------- ------------ ----------
As at 31 March
2017 - 3,434 508 2,785 6,727
------------------------- ---------- ------------- ------------------- ------------ ----------
The earn out for Comms Group UK Limited, CAT Communications Limited, Progressive Communications Limited and OurIT Department Limited had not been achieved by 31 March 2017.
During the year total cash consideration of GBP11,987,303 was paid in respect of acquisitions, GBP2,993,341 was in respect of the settlement of deferred consideration and GBP8,993,962 was in respect of initial consideration (net of cash acquired).
The contingent consideration arising on the acquisition of OurIT is payable to a vendor who remained in employment in the business after acquisition. In accordance with the requirements of IFRS 3, management has considered the indicators therein and determined that the contingent amounts payable to the vendor represent consideration for the acquisition and not remuneration for post-acquisition services.
Obligations under finance leases
As at 31 March 2017 the Group had no finance lease obligations.
Sensitivity analysis
At 31 March 2017 it was estimated that a movement of 1% in interest rates would impact the Group's profit before tax by approximately GBP135,000.
Interest rate risk
The Group's current interest rate policy is subject to ongoing review in line with the level of borrowings and potential interest risk exposure. At 31 March 2017, none of the Group's borrowings are at a fixed rate of interest (2016: 0%).
Credit risk
Credit risk associated with cash balances is managed by transacting with financial institutions with high quality credit ratings. Accordingly the Company's associated credit risk is deemed to be limited.
The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at 31 March 2017 was GBP4,976,694 (2016: GBP8,757,529).
Loans and receivables
2017 2017 2016 2016
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------
Trade receivables 3,738 1,352 2,371 1,517
Other receivables 21 7 7 7
Cash and cash equivalents 1,238 - 6,166 5,489
-------------------------- -------- -------- -------- --------
4,997 1,359 8,544 7,013
-------------------------- -------- -------- -------- --------
Credit risk refers to the risk that the counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and this policy has been implemented by requiring staff to carry out appropriate credit checks on customers before sales commence.
Trade receivables consist of a large number of customers, spread across diverse industries across the United Kingdom. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The Group does not have any significant credit risk exposure to any single counterparty.
Liquidity risk
The Group has an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity risk management requirements. The Group manages liquidity risk by maintaining adequate banking facilities and through cash flow forecasting, acquisition planning and monitoring working capital and capital expenditure requirements on an ongoing basis.
Amortised cost
More
Within 1-2 2-5 than
1 year years years 5 years
Year ended 31 March 2017 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- --------
Borrowings 706 - 15,988 -
Trade and other payables 1,706 - - -
------------------------- -------- -------- -------- --------
2,412 - 15,988 -
------------------------- -------- -------- -------- --------
More
Within 1-2 2-5 than
1 year years years 5 years
Year ended 31 March 2016 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- --------
Borrowings - - 12,148 -
Trade and other payables 2,758 - - -
------------------------- -------- -------- -------- --------
2,758 - 12,148 -
------------------------- -------- -------- -------- --------
Currency risk
The Group's operations are handled entirely in sterling.
Capital risk management
The Group is subject to the risk that its capital structure will not be sufficient to support the growth of the business. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. There were no changes to the Group's approach to capital management during the year.
As part of the banking arrangements, the Group is required to comply with certain covenants, including net debt to adjusted EBITA and interest cover.
In order to maintain or adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets to reduce debt.
29. Business combinations
On 1 May 2016 the Company acquired the entire issued share capital of Comms Group UK Limited ('Comms') for an initial consideration of GBP3.6m plus the value of the cash balance of Comms at completion (approximately GBP1.1m), payable in cash. Further contingent deferred consideration of between GBP0.5m and GBP3.5m will be payable in July 2017, also in cash, dependent upon the performance of Comms post-acquisition. The contingent deferred consideration will be determined by reference to the forecast churn/growth rate for the gross margin of the acquired business and applying the contingent deferred consideration matrix as specified in the share purchase agreement. The fair value of contingent deferred consideration has been determined by reference to the growth rate for the gross margin of the acquired business and applying the contingent deferred consideration matrix as specified in the share purchase agreement. The contingent consideration liability of GBP3.46m has been discounted at the Group's weighted average cost of capital with the value of the discount of GBP0.25m being included within finance costs over the deferred consideration period as an interest charge. Total consideration is expected to be GBP6.77m (net of the surplus cash acquired).
Comms, based in Northampton, is a well-established UK-based specialist provider of unified communications, Avaya IP telephony, hosted IP solutions, IT and managed services. Comms offers its clients the delivery of unified communications and managed service solutions, which is an increasing requisite for AdEPT's existing and targeted enterprise and public sector customer base. Comms technical skills and product set will complement and enhance AdEPT's existing services. Comms has retained its presence and customer service operation in Northampton. The vendors of Comms are to be retained in their current capacity within the business for a period of at least twelve months post-acquisition.
AdEPT and Comms have both adopted capital asset light strategies and are dedicated to offering a full suite of flexible data and unified communication strategies.
Fair
Book cost value
GBP'000 GBP'000
------------------------------- --------- --------
Intangible assets 55 4,904
Property, plant and equipment 28 28
Inventories 145 145
Trade and other receivables 794 794
Cash and cash equivalents 1,055 1,055
Trade and other payables (935) (935)
Deferred tax - (834)
Income tax - -
Net assets 1,142 5,157
------------------------------- --------- --------
Cash (4,637)
Contingent cash consideration (3,192)
------------------------------- --------- --------
Fair value total consideration (7,829)
------------------------------- --------- --------
Goodwill 2,672
------------------------------- --------- --------
The trade and other receivables are all considered recoverable.
Comms contributed revenue and profit after tax of GBP3.65m and GBP0.76m respectively for the year ended 31 March 2017 and represents an eleven month contribution. On a full year basis, Comms would have contributed revenue and profit after tax of GBP4.0m and GBP0.7m respectively. Acquisition related costs of GBP0.3m have been recognised as an expense in the statement of comprehensive income for the year ending 31 March 2017.
On 1 November 2016 the Company acquired the entire issued share capital of CAT Communications Limited and Progressive Communications Limited (together referred to as 'CAT') for an initial consideration of GBP1.05m less the value of the net debt of CAT at completion (approximately GBP0.09m), payable in cash. Further contingent deferred consideration of between GBP0.2m and GBP0.95m will be payable in December 2017, also in cash, dependent upon the performance of CAT post-acquisition. The contingent deferred consideration will be determined by reference to the forecast churn/growth rate for the gross margin of the acquired business and applying the contingent deferred consideration matrix as specified in the share purchase agreement. The fair value of contingent deferred consideration has been determined by reference to the growth rate for the gross margin of the acquired business and applying the contingent deferred consideration matrix as specified in the share purchase agreement. The contingent consideration liability of GBP0.53m has been discounted at the Group's weighted average cost of capital with the value of the discount of GBP0.04m being included within finance costs over the deferred consideration period as an interest charge. Total consideration is expected to be GBP1.60m (net of the debt acquired).
CAT, based in Pewsey, Wiltshire, is a well-established UK-based specialist provider of unified communications, Avaya Aura telephony, hosted IP solutions and managed services. CAT offers its clients the delivery of complex unified communications, managed service solutions and specialist inbound call centre management, which is an increasing requisite for AdEPT's existing and targeted enterprise and public sector customer base. The vendors of CAT are to be retained in their current capacity within the business for a period of at least twelve months post-acquisition.
AdEPT and CAT have both adopted capital asset light strategies and are dedicated to offering a full suite of flexible data and unified communication strategies.
Fair
Book cost value
GBP'000 GBP'000
------------------------------- --------- --------
Intangible asset 23 1,460
Investments - -
Property, plant and equipment - -
Inventories 17 17
Trade and other receivables 140 140
Cash and cash equivalents 20 20
Trade and other payables (238) (103)
Deferred tax - (248)
Income tax (73) (73)
Net assets (111) 1,213
------------------------------- --------- --------
Cash (990)
Contingent cash consideration (471)
------------------------------- --------- --------
Fair value total consideration (1,461)
------------------------------- --------- --------
Goodwill 248
------------------------------- --------- --------
The trade and other receivables are all considered recoverable.
CAT contributed revenue and profit after tax of GBP0.51m and GBP0.15m respectively for the year ended 31 March 2017 and represents a five month contribution. On a full year basis, CAT would have contributed revenue and profit after tax of GBP1.2m and GBP0.2m respectively. Acquisition related costs of GBP0.09m have been recognised as an expense in the statement of comprehensive income for the year ending 31 March 2017.
On 1 February 2017 the Company acquired the entire issued share capital of OurIT Department Limited ('OurIT') and its trading subsidiary called Brightvisions Limited ('Brightvisions'), (together referred to as 'OurIT Group') for an initial consideration of GBP4.75m less the net debt plus working capital of OurIT Group at completion (approximately GBP1.20m debt and GBP0.46m working capital), payable in cash. Further contingent deferred consideration of between GBPNil and GBP3.75m will be payable in April 2018, also in cash, dependent upon the performance of OurIT Group post-acquisition. The contingent deferred consideration will be determined by reference to the the EBITDA of the acquired business and applying the consideration multiple as specified in the share purchase agreement, less the initial consideration. The fair value of contingent deferred consideration has been determined by reference to the growth/churn rate for the EBITDA of the acquired business and applying the consideration multiple as specified in the share purchase agreement, less the initial consideration. The contingent consideration liability of GBP2.98m has been discounted at the Group's weighted average cost of capital with the value of the discount of GBP0.21m being included within finance costs over the deferred consideration period as an interest charge. Total consideration is expected to be GBP7.08m (net of the debt acquired).
OurIT, founded in 1993, is is a highly accredited IT services provider with over 20 years' experience, offering award winning 24 hour IT support services and technology solutions. OurIT and Brightvisions have a directly employed team of highly skilled certified professionals with qualifications including Microsoft Gold Partner and Business Specialist, Apple Specialist, Cisco Certified Partner and Dell Preferred Partner, and is focused on providing outsourced IT services to customers in London and the South East.
OurIT operates from premises in Chingford, East London and Bevis Marks. Brightvisions is based in St Neots, near Cambridge. OurIT and Brightvisions will retain their current presence and customer service operations in Chingford, Bevis Marks and St Neots. The vendor of OurIT Group is to be retained in his current capacity within the business for a period of at least 12 months post-acquisition.
AdEPT and OurIT Group have both adopted capital asset light strategies and are dedicated to offering a full suite of flexible voice and IT strategies.
Fair
Book cost value
GBP'000 GBP'000
------------------------------- --------- --------
Intangible asset 1,625 3,187
Investments - -
Property, plant and equipment 267 267
Inventories 20 20
Trade and other receivables 770 770
Cash and cash equivalents 151 151
Trade and other payables (1,307) (1,307)
Deferred tax - (542)
Income tax (364) (364)
Net assets 1,162 2,182
------------------------------- --------- --------
Cash (4,097)
Contingent cash consideration (2,769)
------------------------------- --------- --------
Fair value total consideration (6,866)
------------------------------- --------- --------
Goodwill 4,684
------------------------------- --------- --------
The trade and other receivables are all considered recoverable.
OurIT Group contributed revenue and profit after tax of GBP1.09m and GBP0.19m respectively for the year ended 31 March 2017 and represents a two month contribution. On a full year basis, OurIT Group would have contributed revenue and profit after tax of GBP5.7m and GBP0.5m respectively. Acquisition related costs of GBP0.32m have been recognised as an expense in the statement of comprehensive income for the year ending 31 March 2017.
30. Subsidiaries
Registered office Class
Country of share % shareholding Description
------------------ --------- ----------------- --------- -------------- -----------
Bluecherry Telecom England & One London Wall, Ordinary 100 Dormant
Limited Wales London EC2Y 5AB
Centrix Limited England & One London Wall, Ordinary 100 Trading
Wales London EC2Y 5AB
Comms Group England & One London Wall, Ordinary 100 Trading
UK Limited Wales London EC2Y 5AB
Our IT Department England & One London Wall, Ordinary 100 Trading
Limited Wales London EC2Y 5AB
BrightVisions England & One London Wall, Ordinary 100 Trading
Limited Wales London EC2Y 5AB
CAT Communications England & One London Wall, Ordinary 100 Dormant
Limited Wales London EC2Y 5AB
Progressive England & One London Wall, Ordinary 100 Dormant
Communications Wales London EC2Y 5AB
Limited
Centrix Limited England & One London Wall, Ordinary 100 Trading
Wales London EC2Y 5AB
------------------ --------- ----------------- --------- -------------- -----------
31. Subsequent events
There are no subsequent events after the balance sheet date.
32. Prior year adjustment
Adjustment 1 - The Group has applied the principles of IFRS3 and IAS12 and made full provision for the deferred tax liability on future amortisation charges in relation to the company acquisitions undertaken to date. The deferred tax liability is released as the amortisation is charged to the statement of comprehensive income. The prior year comparatives have been restated to apply this accounting principle as if it had been adopted throughout the periods covered by the financial statements. All goodwill created on the deferred tax liability in respect of company acquisitions prior to 1 April 2015 has been fully written down. This is purely an accounting adjustment with no impact on underlying profitability or cash flow but has resulted in a decrease to the opening retained earnings in the comparative period of GBP2.08m (as at 1 April 2015) and an increase to retained earnings of GBP0.35m for the year ended 31 March 2016.
Adjustment 2 - The Group has reviewed the intangible assets acquired during the year ended 31 March 2016 and consider that an error was made when calculating the fair value of the assets purchased. This has resulted in the reallocation of some of the intangible assets to goodwill acquired as part of business combination. As a result of the revised intangible asset value the corresponding amortisation charge has been adjusted, which has resulted in an increase to retained earnings of GBP0.17m for the year ended 31 March 2016. This is purely an accounting adjustment with no impact on underlying profitability or cash flow.
2016 Adjustment 2016 2015 Adjustment 2015
Opening 1 Adjustment Restated Opening 1 Restated
Balance GBP'000 2 balance Balance GBP'000 balance
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
Statement of financial
position:
Goodwill - 1,603 2,011 3,614 - - -
Intangible assets 23,263 - (1,843) 21,420 14,874 - 14,874
Deferred tax 56 (3,098) - (3,042) 145 (1,847) (1,702)
Income tax (335) (95) - (430) 324 - 324
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
Total impact on
net assets (1,590) 169 (1,847)
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
Statement of comprehensive
income:
Amortisation (2,215) - 169 (2,048) (2,169) - (2,169)
Write down of deferred
tax liability goodwill - - - - (2,084) (2,084)
Income tax expense (786) 258 - (528) (603) 237 (366)
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
Total impact on
retained earnings 258 169 (1,847)
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
Basic earnings
per share 8.78p 10.72p 6.90p 9.84p
--------------------------- -------- ----------- ---------- --------- -------- ----------- ---------
NOTE TO THE PRELIMINARY RESULTS ANNOUNCEMENT OF ADEPT TELECOM PLC FOR THE YEAR ENDED 31 MARCH 2017
The financial information set out above does not constitute the Group's financial statements for the years ended 31 March 2017 or 2016, but is derived from those financial statements. Statutory financial statements for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Group's annual general meeting. The auditors have reported on the 2016 financial statements which carried an unqualified audit report, did not include a reference to any matters to which the auditor drew attention by way of emphasis and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The audit report on the 2017 financial statements is not yet signed, however an unqualified opinion is expected.
Whilst the financial information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not in itself contain sufficient information to comply with IFRS. The accounting policies used in preparation of this preliminary announcement are consistent with those in the full financial statements that have yet to be published.
AVAILABILITY OF FINANCIAL STATEMENTS
The annual report containing the full financial statements for the year to 31 March 2017 will be posted to shareholders on or around 19 August 2017, a soft copy of which will be available to download from the Company's website www.adept-telecom.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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