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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 : 1094H
AdEPT Technology Group PLC
13 November 2018
AdEPT Technology Group plc
("AdEPT" or the "Company", together with its subsidiaries the "Group")
Interim results for the 6 months ended 30 September 2018
AdEPT (AIM: ADT), one of the UK's leading independent providers of managed services for IT, unified communications, connectivity, voice and cloud services, announces its unaudited results for the 6 months ended 30 September 2018.
Highlights
Revenue and EBITDA
-- Total revenue increased by 9.5% to GBP24.4 million (2017: GBP22.3 million) -- Managed services revenue increased by 19.2% to GBP18.0 million (2017: GBP15.1 million) -- Managed services revenue up to 74% of total revenue (2017: 67%) -- EBITDA* increased by 10.7% to GBP5.2 million (2017: GBP4.7 million) -- EBITDA* margin 21.2% (2017: 20.9%)
PBT, EPS and Dividends
-- Adjusted profit after tax** increased by 13.4% to GBP3.7 million (2017: GBP3.2 million) -- Adjusted EPS increased by 11.7% to 14.5p (2017: 13.0p) -- Interim dividend increased by 15.3% to 4.9p per share (2017: 4.25p)
Cash Flow and Debt
-- Reported EBITA conversion to pre-tax cash from operating activities 81.9% (2017: 90.7%) -- Net senior debt at period end of GBP25.1 million (2017: GBP20.8 million) -- GBP8.5m of funds used to fund Shift F7 Group Limited acquisition and Our IT earnout
Roger Wilson, Chairman, commented:
"I am delighted by the continued progress being made by the Group in its transformation into a managed service provider for unified communications and IT. The results for the period demonstrate the strength of our capex light model and our organic and acquisitive growth strategy.
Trading continues to be in line with management's expectations, we continue to be highly cash generative and with a fully supportive investor base and funding partners we remain confident in our strategy to identify earnings-enhancing acquisitions whilst retaining scope for a progressive dividend policy."
*Earnings before interest, tax, depreciation, amortisation and excluding one off acquisition costs and share based payments
** Adjusted profit after tax represents profit after tax adding back one off acquisition costs and amortisation
Enquiries:
AdEPT Technology Group Plc Roger Wilson, Chairman 07786 111 535 Ian Fishwick, Chief Executive 01892 550 225 John Swaite, Finance Director 01892 550 243 Cantor Fitzgerald Europe Nominated Adviser & Broker 020 7894 7000 Marc Milmo/Catherine Leftley
About AdEPT Technology Group plc:
AdEPT Technology Group plc is one of the UK's leading independent providers of managed services for IT, unified communications, connectivity and voice solutions. AdEPT's tailored services are used by thousands of customers across the UK and are brought together through the strategic relationships with tier-1 suppliers such as BT Openreach, Vodafone, Virgin Media, Avaya, Microsoft, Dell and Apple.
AdEPT is listed on the London Stock Exchange (Ticker: ADT). For further information please visit: www.adept.co.uk
BUSINESS REVIEW
I am pleased to report that in the 6 months to 30 September 2018 the Group has made considerable progress on its journey to transform AdEPT building upon our original telecom's heritage into a managed service provider for unified communications and IT, reflecting the trend of convergence within the marketplace. As a Group we have remained focused on the UK and have continued to make headway in the Public Sector reflecting the Government's commitment to expand the role of SME's in the Public arena.
In March 2016, the Government set a target that 33% of public sector spend would be with SME's by 2022. 34% of total Group revenue at September 2018 is now from public sector and healthcare customers (September 2017: 33%). The total revenue generated from public sector and healthcare customers has increased, however the proportion of total revenue has not changed significantly as the customer base of Shift F7 is commercially focused IT and does not currently provide services into the public sector. We now have over 100 Councils, more than 20 NHS Trusts, over 30 private hospitals, 15 universities, in excess of 3,000 schools as customers - we are also providing services into a number of central government departments.
As part of this commitment to the Public Sector, AdEPT has secured approved supplier status on 9 central and local government frameworks designed to make it easier for public sector customers to buy our products and services.
Largest NHS contract award to date
In early 2018 AdEPT Tunbridge Wells was awarded HSCN (Health and Social Care Network) Compliance and is now authorised to sell data networks to the NHS. There have been a number of successful tenders awarded to AdEPT under the HSCN framework, including our largest NHS contract to date with Kent. We have been contracted to build the data network which connects 140 hospitals and around 300 GP surgeries across Kent.
ACQUISITION UPDATE
OurIT Department, Chingford, St Neots and London
In February 2017, we acquired OurIT Department; our first IT business. OurIT brings AdEPT a wide range of IT products and services focused on London and South East customers. The earn out period ended on 31 January 2018 and in accordance with the terms of the share purchase agreement deferred consideration of GBP3.7m was paid in April 2018 in cash. There are no further amounts due in respect of this acquisition.
Atomwide, Orpington
In August 2017 we acquired Atomwide, based at Orpington. Atomwide is the UK's leading specialist in IT for Education with more than 3,000 schools and over 2 million users. We now have over 1 million Office 365 users; this is one of the largest single Office 365 deployments in the world. Included with the acquisition was a data centre at Orpington and a specialist app development team. The earn out period ended on 31 July 2018 and in accordance with the terms of the share purchase agreement deferred consideration of GBP1.5m was paid after the end of the interim period, in October 2018, in cash. There are no further amounts due in respect of this acquisition.
Shift F7, Dorking
On 1 August 2018 we acquired Shift F7 Group Limited ('Shift F7'). Shift F7 is a highly accredited IT services provider with over 20 years' experience, offering highly specialised IT support services and technology solutions to more than 200 commercial mid-market customers. Initial consideration of GBP5.0 million in cash less net debt and tax liabilities at completion (approximately GBP0.5m) has been paid. Further contingent deferred consideration of between GBPnil and GBP2.9 million may be payable, also in cash, dependent upon the performance of Shift F7 in the 12 month period to July 2019.
REVENUE
Total revenue in the period increased by 9.5% to GBP24.4 million and includes the 2-month revenue contribution from Shift F7 following the acquisition in August 2018; and a full 6 month contribution from Atomwide following the acquisition in August 2017.
The continued progress of the Group's transition to a complete managed service provider for IT, unified communications, connectivity and voice solutions provider can be demonstrated with the 19.2% increase in revenue from managed services, including IT, unified communications, data connectivity and cloud services to GBP18.0 million, accounting for 74% of total revenue for the six months ended 30 September 2018 (2017: 67%).
Fixed line revenues reduced by 11.5% from the comparative period, which is a reflection of the organic sales focus of the Group on managed services and IT combined with the substitution impact of existing customers transitioning to new technologies. AdEPT, with its expanded IT and unified communications portfolio, is well positioned to embrace customer migration to next generation products and services.
One of the strengths of the AdEPT business model is having good revenue visibility. The proportion of revenue being generated from recurring products and services (being all revenue excluding one-off projects, hardware and software procurement) remains high at 79.3% of total revenue for the 6 month period ended 30 September 2018. The managed service and IT product sets include software, hardware procurement and professional services for configuration and installation, which by their nature are project based and not a recurring revenue stream, however a high proportion of the one-off revenues are further products and services being supplied to the existing customer base.
PROFIT BEFORE TAX AND EARNINGS PER SHARE
Reported profit before tax decreased to GBP1.7 million (2017: GBP2.0 million) which takes into account the GBP0.4 million increase in amortisation and GBP0.2 million increase in interest charges, arising from a higher average net debt position from the funding of the acquisition consideration in the last 18 months. The interest cost in the statement of comprehensive income of GBP0.9m includes several non-cash items, such as discounting of the estimated contingent deferred consideration for acquisitions and the amortisation of bank facility fees, the interest cost of GBP0.7 million in the cash flow statement is a better measure of the cash costs of financing.
Adjusted profit after tax (before one off acquisition fees and amortisation) increased by 13.4% to GBP3.7 million (2017: GBP3.2 million) which is a reflection of the increased EBITDA, less the additional interest costs arising from the higher average net debt position which is largely a result of the acquisition consideration outflows.
The adjusted operating profit (before one off acquisition fees, depreciation and amortisation of intangible fixed assets) increased by 10.7% to GBP5.2 million (2017: GBP4.7 million). This increase arises from the full period impact of the acquisition of Atomwide undertaken in the comparative period combined with the Shift F7 contribution in the current interim period and is slightly ahead of the revenue increase, reflecting economies of scale.
Adjusted (basic) earnings per share increased by 11.7% to 14.5p for the six months ended 30 September 2018 (2017: 13.0p). Taking into account the share options in issue and the potential dilutive effect of the BGF convertible instrument, adjusted diluted earnings per share increased by 11.5% to 14.4p (2017: 12.9p).
FINANCING AND CASH FLOW
Cash generated from operating activities before tax remained consistent at GBP3.8 million (2017: GBP3.9 million), which equates to an 81.9% conversion of reported EBITA (after GBP0.3 million acquisition fees) (2017: 90.7%).
Dividends paid in the period absorbed GBP1.0 million of funds (2017: GBP0.9 million), this increase reflects the progressive dividend policy of the Board.
The Company operates a capex-light model with capital expenditure on tangible fixed assets of 1.7% of revenue (2017: 0.3%). The increase in proportion of capital expenditure over the comparative period arises partly from the refurbishment of the Our IT Department premises in Chingford completed in April 2018 but mainly from AdEPT investing a relatively small amount of capital in the development of a network connecting three data centres (which, combined with other capabilities and services is known as "AdEPT Nebula"). AdEPT Nebula is built around the core data centre in Orpington which is owned by AdEPT. The network allows AdEPT to provide its own cloud hosting capability.
AdEPT Nebula is now live and already delivering benefits to customers by providing Avaya IP cloud telephony services, hosted IT services and a range of data connectivity services. The network underpinning AdEPT Nebula has been developed using the in-house skills and capabilities of the AdEPT technical team. The Company will continue to review development opportunities for the addition of new products and services to AdEPT Nebula as customer demand dictates.
GBP4.8 million of available funds (net of cash acquired) was used to fund the initial cash consideration for the acquisition of the entire share capital of Shift F7 on 1 August 2018. Deferred consideration of GBP3.7 million in respect of the Our IT acquisition (undertaken in February 2017) was paid in April 2018.
Total senior debt has increased to GBP25.1 million at 30 September 2018 (2017: GBP20.8 million), with the increase arising from the acquisition consideration paid in the period for Shift F7 Group Limited. The Senior Debt:EBITDA (annualised) ratio remained comfortable at 2.4x at 30 September 2018 (2017: 2.2x), although it should be noted that the reported leverage multiple includes all of the debt in relation to the funding of the acquisition of Shift F7 Group Limited, undertaken in August 2018, but only 2 months post-acquisition profitability. Post period end, the Company paid the deferred consideration of GBP1.5 million due in respect of the Atomwide acquisition and also concluded the acquisition of ETS Communications Limited for an initial consideration of GBP2.5 million (less the net debt within ETS as at 31 October 2018) in cash.
DIVIDS
As announced on 27 September 2018, the Directors have declared an interim dividend of 4.90p per Ordinary Share in respect of the period ended 30 September 2018, an increase of 15.3% over the interim dividend for the comparative period (2017: 4.25p). This will absorb approximately GBP1.2 million of shareholders' funds (2017: GBP1.0 million). It is proposed by the Directors that this dividend will be paid on 8 April 2019 to shareholders who are on the register of members on the record date of 15 March 2019.
Dividend cover for the interim period was 3.0x (2017: 3.1x). Strong free cash flow generation has continued since the end of the period, and there continues to be scope for the Board to continue its progressive dividend policy.
SUBSEQUENT EVENTS
Bank facility extension
On 7 November 2018 the Company signed a GBP5 million extension to its existing GBP30 million 5-year revolving credit facility agreement, enlarging the total debt facility to GBP35 million. The enlarged facility is provided by Barclays Bank Plc and The Royal Bank of Scotland Plc on an equal basis. The facility will be used by AdEPT to fund acquisition of businesses that extend the AdEPT product set and by being part of the AdEPT group, will benefit from economies of scale. The terms of the enlarged facility remain the same as the existing facility.
Acquisition of ETS Communications
On 8 November 2018 the Company acquired the entire issued share capital of ETS Communications Holdings Limited ("ETS Holdings") and its trading subsidiary ETS Communications Limited ("ETS Comms"), (together referred to as "ETS") both well-established UK based specialist providers of unified communications services. ETS, founded in 1981, is an independent unified communications services provider based in Wakefield with nearly 40 years' experience. ETS is focused on providing unified communications and connectivity to business customers and has a strong public sector presence, including managing and supporting cloud-based telephony solutions to more than 200 GP surgeries. With AdEPT having an existing specialist Avaya IP Office operation in Northampton, the acquisition of ETS builds on this capability and extends the geographical reach to Yorkshire and Lincolnshire. ETS has a well-developed customer base with long term relationships, which builds upon AdEPT's existing public sector healthcare presence.
Initial consideration of GBP2.5 million less the net debt of ETS at 31 October 2018 ("Net Debt") was paid in cash. Pursuant to the terms of the share purchase agreement, the effective date of the acquisition is 1 November 2018. Further contingent deferred consideration of up to GBP1.75 million may be payable in cash dependent upon the trading performance of ETS in the 12-month period ended 31 October 2019. Further details are included in Note 8 of this interim statement.
OUTLOOK
Results such as these can only be achieved with the commitment of an outstanding team at all levels of the business. The transformation to a fully integrated managed service operation has continued at a pace and, on behalf of the Board, I would like to thank the entire team for another amazing 6 months.
We are now more than 200 staff with several thousand years of industry experience delivering benefits to clients across an increasingly wide range of technologies and skill sets. This breadth of expertise provides an excellent platform for our future growth. AdEPT has a full suite of managed services and is now embracing the continuing convergence between IT and Telecoms. The investment in AdEPT Nebula, our own network and IT services infrastructure, is already providing benefits across the Group - an initiative that has capitalised on the capability and expertise acquired with Atomwide in 2017.
The Board is delighted with the continued progress being made by the Group and trading continues to be in line with management's expectations. We continue to be highly cash generative with a fully supportive investor base and funding partners to enable the Board to continue to identify earnings-enhancing acquisitions whilst retaining scope for a progressive dividend policy.
Roger Wilson
Chairman
13 November 2018
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Hot Features
Premium
Six months ended
Restated
30 September 30 September
2018 2017
Note GBP'000 GBP'000
-------------------------------------------------- ----- ------------- -------------
REVENUE 24,390 22,280
Cost of sales (12,042) (11,892)
-------------------------------------------------- ----- ------------- -------------
GROSS PROFIT 12,348 10,388
Administrative expenses (9,751) (7,708)
-------------------------------------------------- ----- ------------- -------------
OPERATING PROFIT 2,597 2,680
Total operating profit - analysed:
Operating profit before acquisition fees,
share-based payments,
depreciation and amortisation 5,161 4,662
Share-based payments (25) (20)
Acquisition fees (319) (217)
Depreciation of tangible fixed assets (229) (195)
Amortisation of intangible fixed assets (1,991) (1,550)
-------------------------------------------------- ----- ------------- -------------
Total operating profit 2,597 2,680
-------------------------------------------------- ----- ------------- -------------
Finance costs (895) (660)
Finance income - 1
-------------------------------------------------- ----- ------------- -------------
PROFIT BEFORE INCOME TAX 1,702 2,021
Income tax expense (329) (541) -------------------------------------------------- ----- ------------- ------------- TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 1,373 1,480 -------------------------------------------------- ----- ------------- ------------- Attributable to: Equity holders 1,373 1,480 Earnings per share Basic earnings per share (pence) 3 5.8p 6.2p Diluted earnings per share (pence) 3 5.8p 6.2p Adjusted earnings per share, after adding back acquisition fees, amortisation and non-recurring costs Basic earnings per share (pence) 3 14.5p 13.0p Diluted earnings per share (pence) 3 14.4p 12.9p
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------- ------------- ------------- ---------
ASSETS
Non-current assets
Goodwill 17,672 12,493 14,531
Intangible assets 37,550 39,404 35,666
Property, plant and equipment 1,653 1,169 1,114
-------------------------------- ------------- ------------- ---------
56,875 53,066 51,311
Current assets
Inventories 217 240 266
Contract assets 391 585 423
Trade and other receivables 9,394 6,970 5,867
Cash and cash equivalents 4,626 3,184 7,127
-------------------------------- ------------- ------------- ---------
14,628 10,979 13,683
Total assets 71,503 64,045 64,994
LIABILITIES
Current liabilities
Trade and other payables 11,889 13,117 11,832
Contract liabilities 1,228 836 568
Income tax 147 282 199
Short term borrowings - - -
------------------------------- ------------- ------------- ---------
13,264 14,235 12,599
Non-current liabilities
Deferred income tax 5,960 5,159 5,590
Convertible loan instrument 6,092 6,152 6,011
Long term borrowings 29,751 24,000 24,749
-------------------------------- ------------- ------------- ---------
Total liabilities 55,067 49,546 48,949
--------------------------------
Net assets 16,436 14,499 16,045
SHAREHOLDERS' EQUITY
Share capital 2,370 2,370 2,370
Share premium 479 479 479
Share capital to be issued 1,037 992 1,012
Capital redemption reserve 18 18 18
Retained earnings 12,532 10,640 12,166
-------------------------------- ------------- ------------- ---------
Total equity 16,436 14,499 16,045
-------------------------------- ------------- ------------- ---------
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of
parent
Share Capital
Share Share capital redemption Retained Total
to
capital premium be issued reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- ---------- ----------- --------- --------
Balance at 1 April 2017 2,370 479 34 18 10,222 13,123
Impact of change in accounting
policy - - - - (174) (174)
-------------------------------- -------- -------- ---------- ----------- --------- --------
Balance at 1 April 2017
(restated) 2,370 479 34 18 10,048 12,949
Profit for 6 months ended
30 September 2017 - - - - 1,480 1,480
Dividend - - - - (888) (888)
Share based payments - - 20 - - 20
Equity element of convertible
instrument issued - - 938 - - 938
Balance at 30 September
2017 (restated) 2,370 479 992 18 10,640 14,499
-------------------------------- -------- -------- ---------- ----------- --------- --------
Profit for 6 months ended
31 March 2018 - - - - 2,456 2,456
Dividend - - - - (949) (949)
Deferred tax asset adjustment - - - - 19 19
Share based payments - - 20 - - 20
Balance at 31 March 2018 2,370 479 1,012 18 12,166 16,045
-------------------------------- -------- -------- ---------- ----------- --------- --------
Profit for 6 months ended
30 September 2018 - - - - 1,373 1,373
Share based payments - - 25 - - 25
Dividend - - - - (1,007) (1,007)
Balance at 30 September
2018 2,370 479 1,037 18 12,532 16,436
-------------------------------- -------- -------- ---------- ----------- --------- --------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended
Restated Year ended
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- -----------
Cash flows from operating activities
Profit before income tax 1,702 2,021 4,520
Depreciation and amortisation 2,220 1,745 4,148
Share based payments 25 20 40
Net finance costs 895 660 1,561
Decrease/(Increase) in inventories 51 (14) (39)
Decrease/(increase) in trade and other
receivables (3,007) (481) 479
Increase/(decrease) in trade and other
payables 1,873 (127) (972)
-------------------------------------------------- ------------- ------------- -----------
Cash generated from operations 3,759 3,824 9,737
Income taxes paid (663) (649) (1,501)
-------------------------------------------------- ------------- ------------- -----------
Net cash from operating activities 3,096 3,175 8,236
-------------------------------------------------- ------------- ------------- -----------
Cash flows from investing activities
Interest paid (701) (317) (906)
Acquisition of trade and assets (8,474) (14,324) (14,523)
Purchase of intangible assets (9) (36) (54)
Purchase of property, plant and equipment (406) (57) (364)
-------------------------------------------------- ------------- ------------- -----------
Net cash used in investing activities (9,590) (14,734) (15,847)
Cash flows from financing activities
Dividends paid (1,007) (888) (1,837)
Repayment of borrowings (1,000) - (2,750)
Convertible loan instrument - 7,293 7,293
Increase in bank loan 6,000 7,806 11,500
Net cash (used in)/from financing activities 3,993 14,211 14,206
-------------------------------------------------- ------------- ------------- ----------- Net increase/(decrease) in cash and cash equivalents (2,501) 2,652 6,595 Cash and cash equivalents at beginning of period/year 7,127 532 532 -------------------------------------------------- ------------- ------------- ----------- Cash and cash equivalents at end of period/year 4,626 3,184 7,127 -------------------------------------------------- ------------- ------------- ----------- Cash at bank and in hand 4,626 3,184 7,127 Bank overdrafts - - - ------------------------------------------------- ------------- ------------- ----------- Cash and cash equivalents 4,626 3,184 7,127 -------------------------------------------------- ------------- ------------- -----------
ACCOUNTING POLICIES
1 Basis of preparation
The financial information set out in this interim report, which has not been audited, does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Company's statutory financial statements for the year ended 31 March 2018, prepared under International Financial Reporting Standards, were approved by the board of directors on 13 July 2018 and have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified, did not contain any emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
The interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the EU. Comparatives for the year ended 31 March 2018 have been extracted from the audited statutory accounts.
2 Accounting policies
The same accounting policies, presentation and methods of computation are followed in this interim report as were applied in the preparation of the Group's annual financial statements for the year ended 31 March 2018.
As detailed in the financial statements for the year ended 31 March 2018, the Group early adopted IFRS 15 "Revenue from contracts with customers" with a date of initial application of 1 April 2017, which has been applied in the interim results for the 6 months ended 30 September 2018 in respect of data circuit installation and rental. The Group has recognised the cumulative effect of initially applying IFRS 15 with an opening adjustment to equity of GBP173,904 at 1 April 2017. The September 2017 comparative information has been restated to be on the same accounting basis as the audited financial statement for the year ended 31 March 2018 and the current interim period. The impact of the application of IFRS 15 on the results for the comparative period are reduction to revenue of GBP286,825, reduction to gross profit and profit before tax of GBP77,490 and reduction to profit after tax of GBP62,767. The closing net assets shown by the statement of financial position for the comparative period have been reduced by GBP62,767 which is included in the statement of changes in equity. There is no impact on the cash generated from operating activities reported in the statement of cash flows for the comparative period as this is purely an accounting adjustment.
In August 2017 the Group raised GBP7.29m in the form of a convertible loan instrument from BGF to part fund the acquisition of Atomwide. The September 2017 comparative information in the statement of financial position and statement of changes in equity have been restated to be consistent with the principles of IAS 32 and IAS 39 for the recognition and measurement of the convertible loan in the March 2018 audited financial statements. This is purely an accounting adjustment which affects the balance sheet allocation between debt and equity and there is no impact on the statement of comprehensive income or statement of cash flows as a result of this restatement. The net present value of the loan of GBP7.09m has been split between the debt and equity components and an amount of GBP0.94m has been recorded in equity, with GBP6.15m being included within long-term debt. The transaction cost of GBP0.20m is being recognised in the interest charge in the income statement across the term of the convertible instrument.
3 Earnings per share
Six months ended
Restated Year ended
30 September 30 September 31 March
2018 2017 2018
GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------------- ------------- -----------
Earnings for the purposes of basic
and diluted earnings per share
Profit for the period attributable
to equity holders of the parent 1,373 1,480 3,936
Add: amortisation 1,991 1,550 3,730
Less: taxation on amortisation of purchased
customer contracts (59) (59) (121)
Less: deferred tax credit on amortisation
charges (284) (195) (506)
Add: share option charges 25 20 40
Add: acquisition fees 319 217 230
Add: revaluation of deferred consideration - - 28
Less: compensation credits - - (755)
Add: interest unwind on loan note 77 70 79
Adjusted profit attributable to equity
holders of the
parent, adding back acquisition fees
and amortisation 3,442 3,083 6,661
Number of shares
Weighted average number of shares used
for earnings per share 23,701,832 23,701,832 23,701,832
Dilutive effect of share plans 160,337 113,651 350,628
--------------------------------------------- ----------------- ------------- -----------
Diluted weighted average number of
shares used to
calculate fully diluted earnings per
share 23,862,169 23,815,483 24,052,460
Earnings per share
Basic earnings per share (pence) 5.8p 6.2p 16.6p
Fully diluted earnings per share (pence) 5.8p 6.2p 16.4p
Adjusted earnings per share, after
adding back
acquisition fees, amortisation and
non-recurring costs
Adjusted basic earnings per share (pence) 14.5p 13.0p 28.1p
Adjusted fully diluted earnings per
share (pence) 14.4p 12.9p 27.7p
Earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue.
Adjusted earnings per share is calculated by dividing the profit attributable to equity holders of the Company (after adding back amortisation, the taxation deduction on purchased customer contracts, the deferred tax credit on amortisation charges, share option charges and acquisition costs, as all of these are purely non-cash accounting adjustments) by the weighted average number of ordinary shares in issue.
Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options, assuming dilution through conversion of all existing options. The September 2017 comparative has been restated and calculated on the same basis as the March 2018 audited financial statements, which uses the treasury stock method to account for the dilutive impact of share options and the convertible loan instrument.
4 Segmental information
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 and managed services, which incorporates IT services, data connectivity, mobile, hardware and VoIP services. These 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 EBITDA.
Unaudited Unaudited (restated)
6 months ended 30 September 6 months ended 30 September
2018 2017
---------------------------------------- ----------------------------------------
Fixed Fixed
line Managed Central line Managed Central
services services costs Total services services costs Total
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Revenue 6,390 18,000 - 24,390 7,224 15,056 - 22,280
Gross profit 2,628 9,720 - 12,348 2,800 7,588 - 10,388
Gross margin % 41.1% 54.0% - 50.6% 38.8% 50.4% - 46.6%
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
EBITDA 1,185 3,976 - 5,161 1,472 3,190 - 4,662
EBITDA % 18.5% 22.1% - 21.2% 20.4% 21.2% - 20.9%
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Amortisation (889) (1,102) - (1,991) (1,005) (545) - (1,550)
Depreciation - - (229) (229) - - (195) (195)
One-off costs - - (319) (319) - - (217) (217)
Share-based payments - - (25) (25) - - (20) (20)
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Operating profit/(loss) 296 2,874 (573) 2,597 467 2,645 (432) 2,680
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Finance costs - - (895) (895) - - (659) (659)
Income tax - - (329) (329) - - (541) (541)
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Profit after tax 296 2,874 (1,797) 1,373 467 2,645 (1,632) 1,480
------------------------- --------- --------- -------- -------- --------- --------- -------- --------
Audited
Year ended 31 March
2018
----------------------------------------
Fixed
line Managed Central
services services costs Total
--------------------------------------- --------- --------- -------- --------
Revenue 14,001 32,433 - 46,434
Gross profit 5,439 17,480 - 22,919
Gross margin % 38.8% 53.9% - 49.4%
--------------------------------------- --------- --------- -------- --------
EBITDA 2,877 6,894 - 9,771
EBITDA % 20.5% 21.3% - 21.0%
--------------------------------------- --------- --------- -------- --------
Amortisation (2,071) (1,659) - (3,730)
Depreciation - - (418) (418)
Revaluation on deferred consideration - - (28) (28)
Acquisition costs - - (229) (229)
Compensation credits - - 755 755
Share-based payments - - (40) (40)
--------------------------------------- --------- --------- -------- --------
Operating profit/(loss) 806 5,235 40 6,081
--------------------------------------- --------- --------- -------- --------
Finance costs - - (1,561) (1,561)
Income tax - - (584) (584)
--------------------------------------- --------- --------- -------- --------
Profit after tax 806 5,235 (2,105) 3,936
--------------------------------------- --------- --------- -------- --------
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. For the six months ended 30 September 2018, transactions with the largest customer of the Group accounted for 7.9% of revenue.
5 Share options
Details of the share options outstanding during the period are as follows:
6 months ended 6 months ended Year ended
30 September 30 September 31 March 2018
2018 2017
--------------------------- --------------------- ---------------------
Number Weighted Number Weighted Number Weighted
of shares average of shares average of shares average
under exercise under exercise under exercise
option price option price option price
--------------------------- ---------- --------------- ---------- --------- ---------- ---------
Outstanding at start
of period 2,488,410 361p 392,500 228p 392,500 228p
Granted during the period 200,000 353p 2,095,910 386p 2,095,910 386p
Exercised during the - - - - - -
period
--------------------------- ---------- --------------- ---------- --------- ---------- ---------
Outstanding at end of
period 2,688,410 361p 2,488,410 361p 2,488,410 361p
--------------------------- ---------- --------------- ---------- --------- ---------- ---------
The weighted average fair values have been determined using the Black-Scholes-Merton Pricing Model with the following assumptions and inputs:
30 September 30 September 31 March
2018 2017 2018
--------------------------------- ------------- ------------- ---------
Risk free interest rate 1.68% 0.50% 1.68%
Expected volatility 16.0% 19.0% 17.0%
Expected option life (years) 3.0 3.0 3.0
Expected dividend yield 2.7% 2.5% 2.7%
Weighted average share price 353p 269p 335p
Weighted average exercise price 353p 269p 335p
Weighted average fair value of
options granted 32p 33p 32p
--------------------------------- ------------- ------------- ---------
The expected average volatility was determined by reviewing the 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% which is based upon the actual dividend yield for the period ended 30 September 2018. It does not bear any relation to the future dividend policy of AdEPT Technology Group plc.
The mid-market price of the ordinary shares on 30 September 2018 was 410p and the range during the period was 110p.
The share option expense recognised during the period in the statement of comprehensive income was GBP20,342 (September 2017: GBP12,110).
6 Business combinations
On 1 August 2018 the Company acquired the entire issued share capital of Shift F7 Limited ('Shift F7') for an initial consideration of GBP5.0 million in cash less net debt and tax liabilities at completion (approximately GBP0.5m). Further contingent deferred consideration of between GBPnil and GBP2.9 Million may be payable, also in cash, dependent upon the performance of Shift F7 post-acquisition.
The contingent deferred consideration will be determined by reference to the gross margin of the acquired business and applying the contingent deferred consideration calculation as specified in the share purchase agreement. The fair value of contingent deferred consideration has been determined by reference to the expected growth rate for the gross margin of the acquired business and applying the contingent deferred consideration calculation as specified in the share purchase agreement. The contingent consideration liability of GBP1.83 million has been discounted at the Group's weighted average cost of capital with the value of the discount of GBP0.14 million being included within finance costs over the deferred consideration period as an interest charge. Total consideration is anticipated to be GBP6.6 million (including acquired debts and tax liabilities).
Shift F7, founded in 1995, is a highly accredited IT services provider with over 20 years' experience, offering highly specialised IT support services and technology solutions to more than 200 commercial mid-market customers.
Shift F7 has security accredited dedicated hosted platform environments in London Docklands and Heathrow. Key suppliers include Citrix, Microsoft, HP, Cisco, Ericsson LG and VMWare.
All services provided by Shift F7 are supported by a highly experienced team of IT professionals based at Shift F7's premises in Dorking, Surrey, which have been retained post-acquisition. The senior management team responsible for the strategic direction, technical development and the day-to-day operations of Shift F7 have been retained within the business post-acquisition.
Details of the fair value of the assets acquired at completion and the consideration payable:
Fair
Book cost value
GBP'000 GBP'000
------------------------------- --------- --------
Intangible assets 2,036 3,864
Property, plant and equipment 355 355
Inventories 2 2
Trade and other receivables 549 549
Cash and cash equivalents 247 247
Trade and other payables (1,426) (893)
Income tax 3 3
Deferred tax - (657)
Net assets 1,766 3,470
------------------------------- --------- --------
Cash (4,914)
Contingent cash consideration (1,696)
------------------------------- --------- --------
Fair value total consideration (6,610)
------------------------------- --------- --------
Goodwill 3,140
------------------------------- --------- --------
Shift F7 contributed revenue and profit after tax of GBP0.68 million and GBP0.10 million respectively for the two month period ended 30 September 2018 and represents a two month contribution. Acquisition related costs of GBP0.32m have been recognised as an expense in the statement of comprehensive income for the period ended 30 September 2018.
7 Change of name
Subsequent to the passing of the special resolution at the AGM on 27 September 2018, the company changed its name to AdEPT Technology Group plc.
8 Subsequent events
Bank facility extension
On 7 November 2018 the Company signed a GBP5 million extension to its existing GBP30 million 5-year revolving credit facility agreement, enlarging the total debt facility to GBP35 million. The enlarged facility is provided by Barclays Bank Plc ("Barclays") and The Royal Bank of Scotland Plc ("RBS) on an equal basis. The facility will be used by AdEPT to fund acquisition of businesses that extend the AdEPT product set and by being part of the AdEPT group, will benefit from economies of scale. The terms of the enlarged facility remain the same as the existing facility, the details of which are included in Notes 21 and 29 to the statutory financial statements of the Company for the year ended 31 March 2018.
Acquisition of ETS Communications
On 8 November 2018 the Company acquired the entire issued share capital of ETS Communications Holdings Limited ("ETS Holdings") and its trading subsidiary ETS Communications Limited ("ETS Comms"), (together referred to as "ETS") both well-established UK based specialist providers of unified communications services.
ETS, founded in 1981, is an independent unified communications services provider based in Wakefield with nearly 40 years' experience. ETS is focused on providing unified communications and connectivity to business customers and has a strong public sector presence, including managing and supporting cloud-based telephony solutions to more than 200 GP surgeries.
Initial consideration of GBP2.5 million less the net debt of ETS at 31 October 2018 ("Net Debt") was paid in cash. Pursuant to the terms of the share purchase agreement, the effective date of the acquisition is 1 November 2018. Further contingent deferred consideration of up to GBP1.75 million may be payable in cash dependent upon the trading performance of ETS in the 12 month period ended 31 October 2019. The contingent deferred consideration will be determined by reference to the gross margin of the acquired business and applying the contingent deferred consideration calculation as specified in the share purchase agreement. The fair value of the assets and the contingent consideration liability have not yet been identified at the date of these interim results as the completion balance sheet was not available and there have been no post-acquisition period financial results.
The last filed statutory accounts of ETS for the year ended 31 March 2018 reported turnover, operating profit and profit before tax of GBP3.16 million, GBP0.32 million and GBP0.31m respectively. Capital expenditure in the year ended 31 March 2018 was insignificant. Net and gross assets (pro-forma consolidated basis) at that date were GBP0.10 million and GBP0.53 million respectively. Acquisition related costs will be recognised as an expense in the statement of comprehensive income for the year ending 31 March 2019.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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November 13, 2018 02:00 ET (07:00 GMT)
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