TIDMADT
RNS Number : 4503S
AdEPT Technology Group PLC
16 November 2021
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
16 November 2021
AdEPT Technology Group plc
("AdEPT" or the "Company", together with its subsidiaries the
"Group")
Interim results for the six months ended 30 September 2021
AdEPT (AIM: ADT), one of the UK's leading independent providers
of managed services for IT, unified communications, connectivity,
voice and cloud services, is pleased to announce its unaudited
results for the six months ended 30 September 2021 ("H1 FY22" or
the "Period").
Highlights
Revenue and EBITDA
-- Group revenue increased by 20% to GBP34.3 million (H1
FY21: GBP28.5 million), despite deferral of c.GBP0.9 million
into H2 FY22 due to global supply chain issues and customer
resource allocation
-- Strong organic growth of 6% in Cloud Centric Strategic
Services revenue - up 19% to GBP14.6 million
-- Managed service revenue grew organically by 4% and increased
to 87% of revenue (H1 FY21: 82%), as the Group continues
its strategic move away from Traditional Telephony
-- Underlying EBITDA(1) increased 16% to GBP5.7 million (H1
FY21: GBP4.9 million)
-- Underlying EBITDA(1) margin 17% (H1 FY21: 17%)
PBT and EPS
-- Adjusted profit after tax(2) increased 16% to GBP3.5 million
(H1 FY21: GBP2.8 million)
-- Adjusted fully diluted EPS increased 30% to 13.2p (H1
FY21: 10.2p)
Cash Flow and Debt
-- Net senior debt at the Period end at GBP31.2m (31 Mar
FY21: GBP25.6 million), with GBP9.0 million of cash used
to fund strategic acquisition of Datrix in April 2021
-- Reported EBITDA conversion to post-tax cash from operating
activities at 82% (H1 FY21: 152%) after the payment of
deferred VAT (re Covid-19) - 124% if adjusted for this
payment
-- Customer debt collection improved to 39 days (H1 FY21:
45 days)
-- Low capital expenditure maintained at 2% of revenue (H1
FY21: 2%)
Operational
-- Winner of 'Managed Service Provider of the Year' at the
Comms Business Awards 2021
-- Datrix performing ahead of management expectations
-- Successful integration of Datrix, now operating fully
on the One AdEPT platform, with expected cost synergies
achieved, a cross-sell project secured, and a significant
contract win with Public Health England
-- AdEPT Nebula revenue increased 26% to GBP1.5 million (H1
FY21: GBP1.2 million) with 635 customers now using the
Group's cloud platform
-- Voice over IP ("VoIP") revenues increased 54% to GBP1.9
million (H1 FY21: GBP1.2 million), demonstrating the success
of the 8x8 proposition and the Group's ability to help
customers transition from Traditional Telephony, which
now comprises only 13% of total revenue
-- Presence in education sector strengthened further with
the launch of a new software product, AdEPT Nimbus, helping
schools to address synchronisation issues as they continue
to transition to cloud services
-- Revenue generated from public sector and healthcare customers
in H1 FY22 increased to 48% (H1 FY21: 45%)
-- Project Fusion, integrating all AdEPT businesses to the
One AdEPT platform, nearing 100% of the Group utilising
the CRM and Service Management platform - providing greater
efficiency, business insight and cross-selling opportunities
-- Launch of ESG initiative with a clear 17 point plan of
action
(1) Earnings before interest, tax, depreciation, amortisation
and excluding one off furlough grants, acquisition and restructuring
costs and share based payments
(2) Profit after tax adding back one-off acquisition and restructuring
costs, amortisation and share based payments, excluding
revaluation of deferred consideration
Commenting on the results and outlook for the Group, Chairman,
Ian Fishwick, said:
"I am delighted with the Group's strong performance in the
Period, as activity continued to normalise in our sector, albeit
somewhat tempered by the aftershocks of Covid-19.
We continued to deliver successfully on our strategic
objectives, completing the strategic acquisition of Datrix, which
strengthened our core competencies in cloud services and next
generation technologies. One AdEPT, which lies at the heart of the
Group's growth strategy, providing high levels of operational
visibility and a scalable platform for cross-selling, is nearing
100% utilisation.
Our focus in H2 is on the continued delivery of our stated
objectives with an emphasis on the achievement of further organic
growth, using the Group's strong cash generation to reduce net
senior debt, as we capitalise on the macro shift to cloud centric
solutions.
AdEPT is on track to achieve management expectations for FY22,
with GBP0.9 million of revenue and its associated margin, deferred
from H1 due to supply chain issues and customer resource
allocation, underpinning the Board's confidence. The Group's
strategic progress, coupled with a strong pipeline of opportunities
across the public and private sectors, driven by macro technology
market trends, ensure that the prospects for AdEPT are stronger
than ever."
Enquiries
AdEPT Technology Group Plc
Ian Fishwick, Chairman 07720 555 050
Phil Race, Chief Executive 07798 575 338
John Swaite, Finance Director 01892 550 243
Singer Capital Markets
Nominated Adviser & Broker
Shaun Dobson / Rachel Hayes / Will
Goode 020 7496 3000
Belvedere Communications
Cat Valentine 07715 769 078
Keeley Clarke 07967 816 525
This announcement has been released by John Swaite, Finance
Director, on behalf of the Company.
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 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
CEO STATEMENT
Confidence is gradually returning in AdEPT's customer community
with cloud technology solutions being instrumental in addressing
the many challenges and consequences of the Covid-19 pandemic.
AdEPT continues to adapt to the morphing demands of customers and
to capitalise on the opportunity this presents, as organisations
move to a hybrid model of working on a permanent basis and seek to
engage effectively with their staff and clients digitally.
The Group's strategic focus on growth in Cloud Centric Services
is progressing well. Having achieved 6% organic growth in the
Period, these now comprise 43% of Group revenue. Managed Services
revenue has grown organically 4% in the Period, with total managed
services revenue representing 87% of Group revenue, up from 82% in
H1 FY21. Traditional Telephony continued to decline as anticipated,
with customers choosing alternative solutions. This is in line with
the Board's stated strategy and this segment of the business has
now reduced to 13% of Group revenue from 19% in H1 FY21.
AdEPT was strengthened significantly at the start of the Period
with the game changing acquisition of Datrix. We are delighted by
the contribution of the business in its first six months and the
attitude of this new team, particularly in the manner in which they
have embraced our strategic operating platform, One AdEPT. Datrix
has secured critical renewals since acquisition and, notably,
significant new contracts with customers including Public Health
England and Yesss Electrical and we are seeing cross sell
opportunities appearing.
We have also delivered revenue growth in our hybrid cloud
platform, AdEPT Nebula, with Microsoft 365 seats and Cloud
Communication deployments advancing significantly. Crucially, we
have remained agile, adapting our product portfolio to address the
constantly changing requirements of our market.
Industry research by consultancy EY indicates that service
quality is a key criterion for customers when choosing a Managed
Service Provider ("MSP"). We are, therefore, delighted to report
that an independent survey of our customers, conducted by EY,
revealed a Net Promoter Score of +19, with an outstanding score of
+59 from our top customers. This may well have contributed to AdEPT
winning the 'Managed Service Provider of the Year' at the 2021
prestigious Comms Business Awards. These achievements demonstrate
our strategic progress and stand us in good stead for the
future.
Operational Overview
While the Group performed well in the Period, as our market
continued to rebound, activity was somewhat tempered by the
aftershocks of Covid-19. The global chip shortage caused some
supply chain issues towards the end of the Period, as flagged in
our AGM Statement, deferring GBP0.5 million revenue and its
associated margin into H2 FY22. In addition, customer resource
constraints have meant that GBP0.4 million of revenue and gross
margin in relation to orders for professional services and software
development work has been delayed and is expected to be delivered
in H2 FY22. Despite these issues, we are pleased with the
performance of the Group and the first full six-month contribution
from Datrix.
AdEPT Nebula, our hybrid cloud platform, continues to play an
important role in the growth of our Cloud Centric Services.
Nebula's overall revenue contribution grew by 26% in the Period,
with significant growth in Microsoft 365 Seats, cloud backup and
cloud communication. The number of customers now using the platform
is 635.
I am pleased to report that our partnership with 8x8 is
continuing to deliver good results, playing an important role in
the increase in Voice over IP ("VoIP") deployments, as we continue
to migrate customers away from Traditional Telephony products to
new VoIP-based solutions. This transition has been accelerated by
the demands for flexible and remote working during the Covid
lockdowns.
Cybersecurity is an increasingly critical aspect of our
customers' IT landscape and, to ensure we are able to meet this
growing demand, we have appointed a Head of Security to work as
part of the AdEPT Consulting Team.
We have extended our Education Suite with the addition of AdEPT
Nimbus, a software product to synchronise School Management
Information Systems with their cloud platforms. This software,
which addresses a synchronising issue as schools migrate to the
cloud, has already been sold to over 20 schools since its launch at
the end of the summer.
It is vitally important that we continue to evaluate our
existing product offerings to ensure we maintain our leading
position in the markets we serve and remain relevant. As an
example, AdEPT has an extensive presence across hundreds of
Doctor's surgeries. Through a process of review and feedback, we
identified a clear set of needs; a) to remotely triage patients
using video conferencing tools alongside telephony, and b)
seamlessly integrate to the Patient Administration Systems. As a
result of these identified needs, we have partnered with provider
X-ON to launch a cloud centric communications solution called
'Surgery Connect' - for which we have already contracted our first
Doctor's practice.
Datrix Acquisition Update
Datrix is an award-winning supplier of advanced cloud-based
networking, communications, and cyber security solutions business,
which the Group acquired in April 2021 for an initial cash
consideration of GBP9.0 million (on a cash and debt free basis).
Its expertise in next-generation technologies broadens AdEPT's core
competencies in cloud services and enables a more end-to-end
service.
Considerable progress has been achieved since acquisition.
Datrix has been successfully migrated onto One AdEPT, the Group's
core operating system, ahead of schedule. The rapid integration of
Datrix onto the platform demonstrates the Group's ability to
integrate acquisitions quickly, supporting its strategy to
consolidate this fragmented market.
Since acquisition, Datrix has secured key contract renewals and
extensions with several major customers, including Public Health
England, Yesss Electrical, Community Housing Partnership and South
Hook LNG, and has received positive client feedback about the
benefits of being part of a larger organisation. It is particularly
pleasing to report that AdEPT has, during the Period, recently
secured a new project with an existing Datrix customer, a clear
demonstration of our cross-selling strategy in action.
Progress on FY22 Objectives
At the start of FY22, we set ourselves a number of targets to
help us achieve our organic growth ambitions. These are set out
below, with an interim update against each:
-- Integrate Datrix effectively, to ensure that we obtain the benefit
of Project Fusion across all elements of our business;
This objective is complete with Datrix on the One AdEPT operating
platform. We will be transitioning away from the Datrix brand over
the balance of the year.
-- Capture opportunity, by helping our customers benefit from the full
portfolio of AdEPT offerings, including the enhanced offerings brought
by the Datrix team;
This objective is ongoing. A number of cross-sell engagements are
in progress and we have already secured a cross sell project for
AdEPT capability with an existing significant Datrix customer.
-- Market effectively to key sectors, ensuring our offerings are fine
tuned to reflect the specific needs of our target markets;
We maintain our strong presence across the education sector and have
won a number of contracts with new Multi Academy Trusts (MATs). We
are exploring the creation of a Health & Social Care vertical, given
our increasing success in developing this marketplace.
-- Invest wisely, so that our AdEPT Intellectual Property, be that know-how,
AdEPT Nebula, or the Education Suite all capture greater market share;
We have continued to upgrade Nebula and we have successfully launched
another component if the Education Suite with the release of AdEPT
Nimbus.
-- Manage our portfolio, by working with our existing (and potentially
new) partners to ensure that market needs are matched carefully to
our partner offerings, and high growth propositions;
In respect of this, we have engaged X-ON and Telco Switch to adapt
our solutions for the Doctor's surgery and flexible office markets
respectively. We continue to make progress in deploying Microsoft
solutions (Teams and Office 365) and have grown our Cloud Centric
business by 6% organically Year on Year (YoY).
-- Explore further accretive acquisition opportunities, to continue
our consolidation journey.
We continue to explore suitable candidates against our strict acquisition
criteria of: a) strong recurring margins; b) cloud centric product
focus; c) operating in an appropriate geography; d) adding relevant
capability; e) consolidating a vertical market; or bringing new strategic
product partnerships. There remains no shortage of potential options.
The progress we have made against our declared objectives is
encouraging and underpins our confidence in the long term growth of
the business.
Vertical markets and frameworks
AdEPT continued to be successful in gaining further traction in
the public sector space through leveraging its approved status on
various frameworks. AdEPT is an approved supplier on 13 public
sector frameworks. Some are Crown Commercial Service frameworks,
and others are wider public sector procurement agencies. The
proportion of total revenue generated from public sector and
healthcare customers in H1 FY22 has increased to 48% (H1 FY21:
45%), which partly arises due to the organic customer contract
awards, particularly under the various frameworks on which AdEPT is
accredited but is also a reflection of the Datrix customer base
including a higher proportion of public sector and healthcare
clients.
The Group is continuing to focus its organic sales efforts on
selling a wider portfolio to existing customers, adding and
retaining larger customers whilst complementing this with an
acquisitive strategy. AdEPT is managing the customer risk with a
wide spread of business sectors and low customer concentration,
with no customer accounting for more than 5% of the total.
Focus on Service Excellence
We continue to invest carefully in our own capability. Project
Fusion delivering our One AdEPT programme - the deployment of a
suite of integrated operational systems for use by all employees
designed to improve efficiency, ensure the delivery of increasingly
high levels of customer service, and provide operational
insight.
Project Fusion has made excellent progress with the entire group
now operating on the same Human Resource solution (Sage People) and
Financial Management Solution (Sage 200), as well as 95% of
employees utilising the same service management and Customer
Relationship Management (CRM) platform (Autotask from Datto).
Operational insight is now flowing throughout the business,
utilising the Microsoft Business Intelligence solution (Power BI)
accessed through an employee portal to facilitate knowledge sharing
(Microsoft SharePoint).
Our People and Commitment to Diversity
As at the Period end the AdEPT team now numbers 340. This
talented and diverse team, strengthened following the acquisition
of Datrix, is enabling us to achieve high levels of customer
satisfaction.
AdEPT is committed to ensuring diversity, equity, and
inclusivity. We have a team from diverse backgrounds and genders
and continue to foster balance and promote equal opportunities.
This mix of skill sets, experience, and backgrounds enables us to
perform better. We have recently undertaken our first Gender Pay
Gap report which like many businesses in our sector highlighted the
challenges of hiring women into senior roles. We use the report and
work with our staff and stakeholders to shape policies that ensure
an appropriate gender balance.
Environmental, Social and Governance ("ESG")
AdEPT has a social conscience, and the Board is keen to ensure
that AdEPT plays its part in making the world a better place both
for current generations and those of the future.
Sustainability is of interest across the full spectrum of AdEPT
stakeholders: customers, employees, suppliers, shareholders, and
communities and, as a result, we have set out our initiatives for
engaging with this subject as a company.
The three pillars for clarity are:
-- Environmental Responsibility - energy use, waste management,
and climate change;
-- Social Responsibility - labour relations, human rights,
diversity and inclusion, and product liability; and
-- Governance - compliance, business ethics, controls, and
procedures.
After reviewing the numerous frameworks that can be used for ESG
reporting, AdEPT has adopted relevant aspects of the UN Global
Compact. During the Period, we have published our inaugural ESG
plan with 17 key actions to advance our position across each of the
three pillars, which can be found on our website
www.adept.co.uk.
The Market
A recent article by McKinsey & Company published in October
2021, entitled 'Cloud-migration opportunity: Business value grows,
but missteps abound', succinctly sets the backdrop for why AdEPT is
focused on Cloud Centric Strategic Services:
"By 2024, most enterprises aspire to have $8 out of every $10
for IT hosting go toward the cloud, including private cloud,
infrastructure as a service (IaaS), platform as a service (PaaS),
and software as a service (SaaS). Achieving that aspiration will
require significant effort from both enterprises and technology
providers.
"The Covid-19 pandemic is one factor driving the ambitious goal,
as it triggered the need to speed the pace of enterprise
digitization. But the more significant catalyst is the $1 trillion
in business value that cloud adoption can unlock. Some
organizations, however, are leaking their share of that value
instead of capturing it, with inefficiencies in orchestrating cloud
migrations adding unexpected cost and delays. Approximately $100
billion of wasted migration spend is expected over the next three
years, and most enterprises cite the costs around migration as a
major inhibitor to adopting the cloud."
We are seeing this macro trend resonate throughout our business
and continue help customers realise their ambitions to move to the
cloud in a secure, cost effective, and beneficial way.
FINANCIAL RESULTS
Revenue
Total revenue increased by 20% to GBP34.3 million (H1 FY21:
GBP28.5 million), this includes the six-month revenue contribution
from Datrix of GBP6.0 million in H1 FY22. The Group delivered
GBP0.9 million or 6% organic growth in recurring managed service
revenue, GBP0.1 million or 1% organic growth in one-off products
and services offsetting the continued structural decline in
Traditional Telephony which fell by GBP1.0 million or 18%, in line
with the Group's strategy to move away from Traditional
Telephony.
Recurring revenues versus one off revenues
The proportion of AdEPT revenue generated from recurring
products and services (being all revenue excluding one-off
projects, hardware and software) remains high at 74% of total
revenue (H1 FY21: 76%). The marginal reduction in the proportion of
recurring revenue arises from Datrix having a slightly higher mix
of one-off revenues.
Cloud Centric Strategic Services - Our strategy is to focus on
Cloud Centric Strategic Services (including the AdEPT Nebula
proposition, hosting services, hybrid and public cloud, Voice over
IP, and Professional Services). This clear focus is delivering
rewards, as Cloud Centric Strategic Services revenue increased by
19% in H1 FY22 to GBP14.6 million. The Group delivered an organic
6% increase in revenues to GBP14.6 million (H1 FY21: GBP12.3
million) with 13% of the increase from Datrix.
This growth has been achieved through organic and acquired
revenue increases in data connectivity services, software and IT
support. In addition, revenues from VoIP increased by 54% year on
year to GBP1.9 million (H1 FY21: GBP1.2 million), which is partly
as a result of our success with the new 8x8 proposition alongside
our other VoIP solutions and our activity to migrate customers from
Traditional Telephony products to new IP based solutions. This
trend has been accelerated by the increased demands for flexible
and remote working during the Covid-19 lockdowns.
Support Services - Support Services revenues increased by 45% to
GBP8.7 million (H1 FY21: GBP6.0 million), with the increase driven
by Datrix. During the first 12 months of the Covid-19 pandemic,
some sectors' customers, notably leisure, hospitality, retail, and
office groups, were unable to continue trading during the
nationwide lockdowns, resulting in downwards flex in service demand
which impacted the opening revenue run rate. The impact of
customers reducing the scale and scope of their services in the
financial year ended 31 March 2021 has been regained, resulting in
underlying Support Services revenue (excluding acquired revenue)
being flat against the comparative period despite the lower opening
run rate entering H1 FY22.
Technology Products - The demand for capital projects has
resulted in a 48% increase to hardware and software revenues to
GBP6.5 million (H1 FY21: GBP4.4 million). This increase includes
37% in relation to the contribution from Datrix. Technology
Products revenue increased organically 10% compared to H1 FY21. The
organic increase has been achieved despite the well documented
supply chain issues for equipment caused by the global chip
shortage in the latter part of the interim period, which has pushed
out revenue recognition for a number of projects, amounting to
GBP0.5 million revenue, into H2 FY22. We continue to work closely
with our partners to mitigate supply chain delays where
possible.
Traditional Telephony - The structural decline in Traditional
Telephony has continued at an accelerated level, with an 18%
reduction to GBP4.5 million (H1 FY21: GBP5.7 million). This
decline, as Openreach continues to switch off the copper telephone
network ending traditional fixed line and calls services and
forcing the shift to messaging and VoIP based services, is in line
with our expectations and strategy to diversify revenues away from
fixed line. In addition, the last 18 months has been further
impacted by the substantial reductions in desk-based telephone call
revenue due to multiple Covid lockdowns. Given the ending of
lockdown restrictions was not felt until Q2 FY22, very little
recovery of call volumes was seen in H1 FY22 and Traditional
Telephony is now only 13% of Group revenues (H1 FY21: 20%)..
Gross margin
The gross profit margin for H1 FY22 was 49%, which is a marginal
decrease from the 50% achieved in H1 FY21 driven from a higher
proportion of revenue from lower relative margin hardware and
software within one-off managed services.
Managed service gross margins have been maintained in line with
the comparative period at 50% (H1 FY21: 51%), as the acquired
Datrix revenue had comparable gross margins to that of the existing
Group. Gross margins in fixed line services have experienced a
reduction from the comparative period due to a lower proportion of
higher margin call usage and attrition in the lower value but
higher relative margin retail customer base.
The proportion of revenue from professional services was lower
in the Period, in part because of the exceptional prior period
activity to digitise schools in the face of the Covid-19 pandemic.
This, combined with a higher blend of third-party project
consultancy, has resulted in one-off gross margins reducing to 41%
(H1 FY21: 46%). However, the previous pressure on one-off margins
from low margin equipment supply for tactical solutions, such as
iPads and laptops, during the onset of Covid-19 has reduced in the
Period, resulting in an improvement to hardware and software margin
to 27% (H1 FY21: 24%).
The supply chain issues, which have pushed out GBP0.5 million
revenue recognition into the second half of FY22, impacted gross
margin by GBP0.1 million, which is expected to be delivered in H2
FY22 subject to returning to a normalised supply chain environment.
In addition, despite a strong pipeline of signed sales orders in H1
FY22, there were substantial orders for professional services and
software development work for public sector and healthcare
customers that have a delayed delivery timescale, due to resource
constraints at the customer end, which has meant that a further
GBP0.4 million of revenue and associated gross margin has been
pushed and expected to be delivered in H2 FY22.
Underlying EBITDA
Underlying EBITDA of GBP5.7 million represents a 16% increase
from the comparative period (H1 FY21: GBP4.9 million).
Covid-19 impacted H1 FY21 benefitted from several operating cost
reductions compared to H1 FY22. Many of these operating cost
reductions were temporary as a result of changes to working
practices during the Covid-19 pandemic, such as significantly
reduced recruitment, travel and reduced levels of advertising, and
marketing activity. The financial impact of these provided GBP0.3
million benefit to the operating costs in H1 FY21.
These operating costs have returned to a more normalised level
in H1 FY22, with the costs being incurred in advance of the
anticipated returns, for example the benefit of sales order volume
from increased sales and marketing activity expected in future
periods. Despite this, the underlying EBITDA margin achieved was
consistent at 17% (H1 FY21: 17%), demonstrating the strength of the
business model, which is underpinned by a high proportion of
recurring revenue (H1 FY22: 74%).
Profit/loss Before Tax and Earnings Per Share
Reported loss before tax was GBP0.9 million. The Period includes
one-off costs of GBP0.6 million for acquisition related fees
related to Datrix and GBP0.3 million of restructuring costs in
relation to the streamlining and restructuring the headcount of
Datrix post-acquisition combined with operational efficiencies
delivered by Project Fusion.
There was GBP0.3 million increase in interest charges, as result
of the cash outflow for the Datrix acquisition which increased
average net borrowings compared to that of H1 FY21. It should be
noted that the interest cost in the statement of comprehensive
income of GBP1.4 million includes several non-cash items, such as
discounting of the estimated contingent deferred consideration for
acquisitions and the amortisation of bank facility fees, both of
which have been paid in cash. The interest cost of GBP1.1 million
in the cash flow statement is considered a better measure of the
cash costs of financing.
Adjusted profit after tax before one off acquisition fees,
restructuring costs, furlough grant receipts and amortisation was
GBP3.3 million (H1 FY21: GBP2.8 million). This movement largely
reflects the GBP0.8 million Underlying EBITDA increase, less the
GBP0.3 million interest costs increase, arising from the higher
average net debt position, combined with the discounting of
deferred consideration liabilities, GBP0.3 million one-off furlough
grant receipts in H1 FY21, and GBP0.2 million reduction in income
tax expense from the lower profit before tax and use of brought
forward accumulated tax losses in the Datrix business.
Adjusted diluted earnings per share, taking into account the
share options in issue and the potential dilutive effect of the BGF
convertible instrument under the treasury stock accounting method,
increased by 30% to 13.2p (H1 FY21: 10.2p). The improvement in
adjusted earnings per share reflects the GBP0.8 million increase in
adjusted profit after tax with a virtually flat weighted average
number of shares.
Dividend
The Board continues to monitor the changing economic environment
and, at this stage, believes it is prudent to continue using the
Group's strong cash generation to pay down debt. As a result, no
dividend is being declared for the Period.
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 proportion of reported
EBITDA which turned into net cash from operating activities after
income tax was 82% (H1 FY21: 152%). The prior period cash
conversion figure was flattered by the Company deferring the Q1 VAT
payments through to Q4 of the previous financial year in line with
the HMRC financial support guidance under Covid-19. The VAT
deferral value was GBP1.3 million, which if adjusted gives
underlying post-tax operating cash conversion from reported EBITDA
of 124% for H1 FY21.
H1 FY22 working capital was impacted by GBP0.2 million in
inventories for the advance purchase of equipment for October
half-term installations in the Education division. A further
increase to working capital was anticipated with the continued
transition of the Group towards growing proportion of data
connectivity services increasing the level of working capital, with
a further GBP0.5 million absorbed by the advance charging structure
of wholesale data connectivity rentals, which are typically
quarterly in advance compared to monthly in advance for the end
customer. This has been partially offset by improvement to customer
credit collection.
Throughout the Covid period, the Group has focused on cash
management and is pleased to have reduced the potential bad-debt
risk inherent in working capital since September 2020 through a
reduction in collection periods to 39 days at September 2021.
In April 2021, the Group paid the initial consideration of
GBP9.0 million (on a cash and debt free basis) in respect of the
Datrix Limited acquisition. Following the successful migration of
all Datrix operating systems to the One AdEPT operating systems, a
further GBP0.3 million deferred consideration was paid in October
2021. There is a performance-based element to the deferred
consideration which is dependent upon the trading results of the
Datrix customer base for FY22.
Cash interest paid in the Period increased by GBP0.3 million,
which reflects a higher level of average net borrowings compared to
H1 FY21 following the acquisition of Datrix at the start of H1
FY22.
As required under IFRS 16, the balance sheet value of tangible
fixed assets includes the discounted value of the remaining
operating lease rentals for any material agreements which have a
lease term greater than twelve months. The net present value of any
new operating leases is included in tangible fixed assets. These
are not upfront cash purchases as the rentals are paid on a monthly
or quarterly basis and therefore the cost is not included within
capital expenditure, instead the cash outflows from the operating
lease agreements are included in the cash flow statement under the
heading 'Payments of lease liabilities'.
Capital Expenditure
The Group continues to operate an asset-light strategy and has
low capital requirements; therefore, expenditure on fixed assets is
low at 2% of revenue.
The Group used GBP0.1 million of cash on capital expenditure of
tangible fixed assets for further investment in the development of
the AdEPT Nebula platform to increase the data storage capacity
driven by increasing customer demand. AdEPT Nebula is centered on
the core data centre in Orpington which is owned by AdEPT. AdEPT
Nebula allows AdEPT to provide its own cloud hosting capability and
is the foundation for the following portfolio: Nebula Cloud, Nebula
Security, Nebula Business Continuity and Disaster Recovery, Nebula
Voice, Nebula Apps, and Nebula Network.
AdEPT Nebula revenue growth was 26% in H1 FY22 to GBP1.5 million
annualised revenue (H1 FY21: GBP1.2 million annualised). AdEPT
Nebula is now delivering benefits to more than 600 customers and
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.
A further GBP0.4 million was spent in the Period on intangible
assets, which is the continued investment in Project Fusion and
includes the cost of third-party consultancy and some
capitalisation of the salary costs of the internal development team
for time dedicated to delivering the project. The progress on the
Group-wide CRM has continued at a pace and it is now live in all of
the AdEPT operating sites.
Following the acquisition of Datrix in April 2021, all systems
were fully migrated to the AdEPT operating systems by August 2021,
which is a testament to the hard work and focus of both the Project
Fusion team and the Datrix team. In addition, the Group has been
transitioning to a centralised finance platform which is hosted in
the AdEPT Nebula network, with all divisions now live in the
centralised finance system.
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, net operating cash flow after
taxes but before bank interest paid of GBP3.6 million was generated
during H1 FY22 (H1 FY21: GBP7.0 million). The H1 FY21 period
benefitted from the temporary deferral of GBP1.3 million of VAT
payments from Q1 to Q4, the GBP2.4 million favourable working
capital impact of the reversal of the March 2021 year end extended
payment periods taken by customers during the initial onset of the
Covid-19 pandemic and the subsequent increased focus on customer
cash collection during H1 FY21. Whilst customer collection periods
have been maintained since March 2021, there has been little scope
for further improvement and hence there has been no further
incremental working capital benefit in H1 FY22. The H1 FY22 period
also includes GBP0.9 million of non-recurring costs in relation to
acquisition related fees and restructuring costs.
Senior net debt at 30 September 2021 was GBP31.2 million, which
is an increase of GBP5.4 million from the comparative period (H1
FY21: GBP25.8 million) and represents a senior debt leverage ratio
of 2.7x adjusted EBITDA (H1 FY21: 2.4x). The prior period senior
net debt was flattered by GBP1.3 million of deferred VAT payments
under the Covid HMRC financial support guidance, which were paid in
full in the second half of the year ended 31 March 2021. The
current period net debt includes GBP9.0 million of cash outflows
(on a cash and debt free basis) in relation to the consideration
for the acquisition of Datrix.
In March 2021, the Company signed a new enlarged banking
facility agreement with NatWest and Bank of Ireland, to support its
growth ambitions. This agreement is for a three-year term,
extendable by one year, and provides the Company with up to GBP70
million senior debt, comprising a GBP35 million revolving credit
facility, a GBP15 million term loan, and a GBP20 million accordion
facility. The commercial terms of the enlarged facility are the
same as the previous existing facility.
Acquisitions
On 12 April 2021 the Company acquired the entire issued share
capital of Datrix, a well-established, award-winning supplier of
advanced cloud-based networking, communications, and cyber security
solutions, headquartered in London, with expertise in the growing
Software Defined Wide Area Networking ("SD-WAN") market focused on
the public and healthcare sector. The vendors and the senior
management team responsible for the strategic direction, technical
development, and day-to-day operations of Datrix have been retained
within the business post-acquisition.
Initial consideration of GBP9.0 million, on a cash and debt free
basis, was paid in cash and the effective date of the acquisition
was 1 April 2021. Further contingent deferred consideration of up
to GBP7.0 million may be payable in cash dependent upon the trading
performance of Datrix in FY22. In October 2021 GBP0.3 million of
the deferred consideration was paid in relation to the successful
transition of Datrix onto the One AdEPT platform.
The history of AdEPT contains many examples of successful
earnings enhancing acquisitions with the most recent, Datrix,
demonstrating yet again the ability of the Group to identify and
integrate a successful business for the benefit of the acquired
team and their respective clients. AdEPT will remain a consolidator
in the marketplace, and we continue to evaluate suitable targets
and will continue with this successful aspect of our business
strategy when the time is right.
Vision and Strategy
Our mission remains one of 'Uniting Technology, Inspiring
People'. We will help our customers navigate the storm of ICT
innovation, to help them make the best use of technology, so they
can communicate, operate, and transform successfully. We will do
this by continuing to learn, adapt, and listen, working with great
partners, to deliver flawless solutions.
Our aim is to become the industry benchmark and a business with
whom customers, staff and partners aspire to work, all powered by a
unified platform that makes us both efficient and effective.
Outlook
AdEPT is on track to achieve management expectations for FY22,
with GBP0.9 million of revenue and its associated margin, deferred
from H1 into H2 due to supply chain issues and customer resource
allocation, a backlog that serves to underpin the Board's
confidence.
Our focus in H2 FY22 is on the continued delivery of our stated
objectives with an emphasis on the achievement of further organic
growth, using the Group's strong cash generation to reduce net
senior debt, as we capitalise on the macro shift to cloud centric
solutions. The Group's strategic progress to date, coupled with a
strong pipeline of opportunities across the public and private
sectors aided by overarching technology market trends, ensure that
the prospects for AdEPT are stronger than ever.
Phil Race
Chief Executive Officer
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months
ended ended
30 September 30 September
2021 2020
Note GBP'000 GBP'000
--------------------------------------- ------ -------------- --------------
REVENUE 34,275 28,488
Cost of sales (17,594) (14,334)
--------------------------------------- ------ -------------- --------------
GROSS PROFIT 16,681 14,154
Administrative expenses (16,177) (13,076)
--------------------------------------- ------ -------------- --------------
OPERATING PROFIT 504 1,078
Total operating profit - analysed:
Operating profit before acquisition
fees, share-based payments,
depreciation and amortisation 5,719 4,934
Share-based payments (31) (33)
Acquisition fees (569) -
Restructuring costs (322) (480)
Furlough grant receipts - 304
Depreciation of tangible fixed assets (714) (741)
Amortisation of intangible fixed
assets (3,579) (2,906)
--------------------------------------- ------ -------------- --------------
Total operating profit 504 1,078
--------------------------------------- ------ -------------- --------------
Finance costs (1,373) (1,060)
Finance income - -
--------------------------------------- ------ -------------- --------------
PROFIT/(LOSS) BEFORE INCOME TAX (869) 18
Income tax expense (168) (319)
--------------------------------------- ------ -------------- --------------
TOTAL COMPREHENSIVE INCOME FOR THE
PERIOD (1,037) (301)
--------------------------------------- ------ -------------- --------------
Attributable to:
Equity holders (1,037) (301)
Earnings per share
Basic earnings per share (pence) 3 (4.1)p (1.2)p
Diluted earnings per share (pence) 3 N/a N/a
Adjusted earnings per share, after
adding back
acquisition fees, amortisation and
non-recurring costs
Basic earnings per share (pence) 3 13.2p 10.2p
Diluted earnings per share (pence) 3 13.2p 10.2p
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Restated
--------------------------
Audited
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
-------------------------------- -------------- -------------- ----------
ASSETS
Non-current assets
Goodwill 17,408 17,408 17,408
Intangible assets 47,004 39,354 36,895
Property, plant and equipment 2,155 2,707 2,700
Deferred tax asset - - -
-------------------------------- -------------- -------------- ----------
66,567 59,469 56,512
Current assets
Inventories 780 900 569
Contract assets 643 1,144 978
Trade and other receivables 17,536 11,872 12,405
Cash and cash equivalents 3,614 5,065 13,166
--------------------------------- -------------- -------------- ----------
22,573 18,982 27,118
Total assets 89,140 78,451 83,630
LIABILITIES
Current liabilities
Trade and other payables 21,314 13,499 10,884
Contract liabilities 2,470 2,194 2,244
Income tax 301 574 357
Short term borrowings 85 82 81
--------------------------------- -------------- -------------- ----------
24,170 16,350 13,566
Non-current liabilities
Deferred income tax 6,507 7,473 6,700
Convertible loan instrument 6,623 6,429 6,524
Long term borrowings 35,118 30,532 39,110
--------------------------------- -------------- -------------- ----------
Total liabilities 72,418 60,784 65,900
---------------------------------
Net assets 16,722 17,666 17,730
SHAREHOLDERS' EQUITY
Share capital 2,503 2,503 2,503
Share premium 4,378 4,378 4,378
Share capital to be issued 1,206 1,141 1,175
Capital redemption reserve 18 18 18
Retained earnings 8,617 9,627 9,656
--------------------------------- -------------- -------------- ----------
Total equity 16,722 17,666 17,730
--------------------------------- -------------- -------------- ----------
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
-------------------------- --------- --------- ----------- ------------ ---------- ---------
Equity at 1 April 2020 2,503 4,378 1,108 18 10,375 18,382
Prior year adjustment
(note 2) - - - - (449) (449)
Equity at 1 April 2020
(restated) 2,503 4,378 1,108 18 9,928 17,934
Profit for 6 months
ended 30 September
2020 - - - - (301) (301)
Share based payments - - 33 - - 33
Balance at 30 September
2020 (restated) 2,503 4,378 1,141 18 9,627 17,666
-------------------------- --------- --------- ----------- ------------ ---------- ---------
Profit for 6 months
ended 31 March 2021 - - - - 120 120
Share based payments - - 34 - - 34
Balance at 31 March
2021 (restated) 2,503 4,378 1,175 18 9,656 17,730
Profit for 6 months
ended 30 September
2021 - - - - (1,037) (1,037)
IFRS16 acquisition
liability reserves
adjustment - - - - (2) (2)
Share based payments - - 31 - - 31
Balance at 30 September
2021 2,503 4,378 1,206 18 8,617 16,722
-------------------------- --------- --------- ----------- ------------ ---------- ---------
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2021 2020 2021
GBP'000 GBP'000 GBP'000
------------------------------------- -------------- -------------- ----------
Cash flows from operating
activities
Profit before income tax (869) 18 (505)
Depreciation and amortisation 4,292 3,647 7,325
(Profit)/loss on sales of
fixed assets - (13) (133)
Share based payments 31 33 67
Net finance costs 1,373 1,060 2,102
Decrease/(Increase) in inventories (210) (287) 43
Decrease/(increase) in trade
and other receivables 1,107 2,655 1,643
Increase/(decrease) in trade
and other payables (1,787) 69 (2,566)
-------------------------------------- -------------- -------------- ----------
Cash generated from operations 3,937 7,182 7,976
Income taxes paid (343) (193) (598)
-------------------------------------- -------------- -------------- ----------
Net cash from operating activities 3,594 6,989 7,378
-------------------------------------- -------------- -------------- ----------
Cash flows from investing
activities
Interest paid (1,111) (841) (1,603)
Acquisition of subsidiaries
net of cash acquired (7,054) (1,798) (1,798)
Purchase of intangible assets (433) (288) (751)
Sale of property, plant and
equipment - - 344
Purchase of property, plant
and equipment (111) (349) (627)
-------------------------------------- -------------- -------------- ----------
Net cash used in investing
activities (8,709) (3,276) (4,435)
Cash flows from financing
activities
Payments of lease liabilities (440) (447) (866)
Repayment of borrowings (3,997) (10,050) (760)
Net cash (used in)/from financing
activities (4,437) (10,497) (1,626)
-------------------------------------- -------------- -------------- ----------
Net increase/(decrease) in
cash and cash equivalents (9,552) (6,784) 1,317
Cash and cash equivalents
at beginning of period/year 13,166 11,849 11,849
-------------------------------------- -------------- -------------- ----------
Cash and cash equivalents
at end of period/year 3,614 5,065 13,166
-------------------------------------- -------------- -------------- ----------
Cash at bank and in hand 3,614 5,065 13,166
Bank overdrafts - - -
------------------------------------- -------------- -------------- ----------
Cash and cash equivalents 3,614 5,065 13,166
-------------------------------------- -------------- -------------- ----------
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 2021,
prepared under International Financial Reporting Standards, were
approved by the board of directors on 23 July 2021 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 2021 have been
extracted directly from the audited statutory accounts with the
figures presented in the statement of financial position in this
interim report for comparative periods restated to take account the
prior year adjustment to the opening equity position, the details
of which are set out in Note 2 below.
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 2021.
Prior year adjustment
As set out in the Company's statutory financial statements for
the year ended 31 March 2021, the Group's policy in respect of
revenue recognition requires that revenue is only recognised when
the obligations associated with the revenue have been completed,
therefore invoiced amounts in respect of charges in advance are
recognised in the deferred revenue liability in the balance sheet.
A prior year adjustment has been recognised in respect of deferred
income which was incorrectly reported at the March 2018 and 2019
year ends. In accordance with IAS 8 the opening balance sheet
position at 1 April 2018 has been restated to account correctly for
the deferred income balance at that date resulting in the
recognition of an additional liability of GBP70,172 at 1 April
2018.
Following a detailed review of the bad debt provision, a
historic error in the calculation has been identified in the period
from February 2003 to March 2014. Under IAS8, given that this is an
error rather than a change to a judgement or estimate, an
adjustment has been made to correct the reserves brought forward.
The adjustment increases the provision for potential bad debts by
GBP378,838 with a corresponding entry to the brought forward
reserves at 1 April 2020, being the earliest period presented in
these financial statements. There is no impact on either the income
statement, the cashflow statement and the earnings per share in
either the current or comparative period as a result of this
correction.
3 Earnings per share
6 months 6 months Year ended
ended ended
30 September 30 September 31 March
2020 2019 2021
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 (1,037) (301) (340)
Add: amortisation 3,579 2,906 5,793
Less: taxation on amortisation of
purchased customer contracts (59) (59) (117)
Less: deferred tax credit on amortisation
charges (197) (291) (963)
Add: share option charges 31 33 67
Add: acquisition fees and restructuring
costs 892 480 974
Less: furlough grant receipts - (304) (307)
Add: interest unwind on loan note
and deferred consideration 99 89 184
Adjusted profit attributable to equity
holders of the
parent, adding back acquisition fees
and amortisation 3,308 2,554 5,291
Number of shares
Weighted average number of shares
used for earnings per share 25,029,967 25,029,957 25,029,957
Dilutive effect of share plans 100,320 11,437 22,180
-------------------------------------------- -------------- -------------- ------------
Diluted weighted average number of
shares used to
calculate fully diluted earnings
per share 25,130,286 25,041,394 25,052,137
Earnings per share
Basic earnings per share (pence) (4.1)p (1.2)p (1.4)p
Fully diluted earnings per share N/a N/a N/a
(pence)
Adjusted earnings per share, after
adding back
acquisition fees, amortisation and
non-recurring costs
Adjusted basic earnings per share
(pence) 13.2p 10.2p 21.1p
Adjusted fully diluted earnings per
share (pence) 13.2p 10.2p 21.1p
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.
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
6 months ended 30 September 6 months ended 30 September
2021 2020
-------------------------------------------- --------------------------------------------
Fixed Fixed
line Managed Central line Managed Central
services services costs Total services services costs Total
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Revenue 4,478 29,797 - 34,275 5,465 23,024 - 28,488
Gross profit 1,730 14,951 - 16,681 2,348 11,807 - 14,154
Gross margin
% 39% 50% - 49% 43% 51% - 50%
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
EBITDA 709 5,010 - 5,719 1,138 3,796 - 4,934
EBITDA % 16% 17% - 17% 21% 17% - 18%
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Amortisation (794) (2,785) - (3,579) (808) (2,098) - (2,906)
Depreciation - - (714) (714) - - (741) (741)
Acquisition
costs - - (569) (569) - - -
Restructuring
costs - - (322) (322) - - (480) (480)
Furlough grant
receipts - - - - - - 304 304
Share-based
payments - - (31) (31) - - (33) (33)
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Operating
profit/(loss) (85) 2,225 (1,636) 504 330 1,698 (950) 1,078
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Finance costs - - (1,373) (1,373) - - (1,060) (1,060)
Income tax - - (168) (168) - - (319) (319)
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Profit after
tax (85) 2,225 (3,177) (1,037) 330 1,698 (2,329) (301)
------------------------ ---------- ---------- --------- --------- ---------- ---------- --------- ---------
Audited
Year ended 31 March 2021
--------------------------------------------
Fixed
line Managed Central
services services costs Total
-------------------------- ---------- ---------- --------- ---------
Revenue 10,739 47,112 - 57,851
Gross profit 3,999 23,641 - 27,640
Gross margin % 37% 50% - 48%
-------------------------- ---------- ---------- --------- ---------
EBITDA 1,880 7,643 - 9,523
EBITDA % 18% 16% - 17%
-------------------------- ---------- ---------- --------- ---------
Amortisation (1,741) (4,052) - (5,793)
Depreciation - - (1,532) (1,532)
Profit on sale - - 133 133
Restructuring costs - - (974) (974)
Furlough grant receipts - - 307 307
Share-based payments - - (67) (67)
-------------------------- ---------- ---------- --------- ---------
Operating profit/(loss) 139 3,591 (2,133) 1,597
-------------------------- ---------- ---------- --------- ---------
Finance costs - - (2,102) (2,102)
Income tax - - 165 165
-------------------------- ---------- ---------- --------- ---------
Profit after tax 139 3,591 (4,070) (340)
-------------------------- ---------- ---------- --------- ---------
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 2021, transactions
with the largest customer of the Group accounted for 4.7% of
revenue (2020: 7.6%).
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 2021
2021 2020
----------------------- ----------------------- -----------------------
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 3,244,064 355p 3,162,448 361p 3,162,446 359p
Granted during
the period - - - - 250,298 222p
Forfeited during
the period - - (16,180) 223p (168,680) 236p
Exercised during - - - - -
the period
------------------- ----------- ---------- ----------- ---------- ----------- ----------
Outstanding at
end of period 3,244,064 355p 3,146,268 361p 3,244,064 355p
------------------- ----------- ---------- ----------- ---------- ----------- ----------
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
2021 2020 2021
------------------------------- -------------- -------------- ----------
Risk free interest rate 1.52% 1.86% 0.81%
Expected volatility 18.0% 10.0% 11.0%
Expected option life (years) 3.0 3.0 3.0
Expected dividend yield 2.5% 2.8% 2.5%
Weighted average share price 220p 330p 220p
Weighted average exercise
price 220p 330p 220p
Weighted average fair value
of options granted 11p 17p 11p
------------------------------- -------------- -------------- ----------
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 2.5% which is based upon the historical dividend
yield. 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 2021
was 285p and the range during the period was 90p.
The share option expense recognised during the period in the
statement of comprehensive income was GBP30,841 (September 2020:
GBP32,807).
6 Business combinations
On 12 April 2021 the Company acquired the entire issued share
capital of Datrix Limited ('Datrix') a well-established,
award-winning supplier of advanced cloud-based networking,
communications, and cyber security solutions, headquartered in
London, with expertise in the growing Software Defined Wide Area
Networking ("SD-WAN") market focused on the public and healthcare
sector.
Initial consideration of GBP9.0 million, on a debt free cash
free basis, was paid in cash. Pursuant to the terms of the share
purchase agreement, the effective date of the acquisition is 1
April 2021. Further contingent deferred consideration of up to
GBP7.0 million may be payable in cash dependent upon the trading
performance of Datrix in the twelve-month period ended 31 March
2022. 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.
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 - 13,280
Property, plant and equipment 251 251
Inventories - -
Trade and other receivables 5,867 5,867
Cash and cash equivalents 67 67
Trade and other payables (6,929) (6,938)
Short term borrowings (651) (651)
Income tax 79 79
Deferred tax - -
Net assets (1,316) 11,955
------------------------------- --------- --------
Cash 6,518
Contingent cash consideration 5,437
------------------------------- --------- --------
Fair value total consideration 11,955
------------------------------- --------- --------
Goodwill -
------------------------------- --------- --------
Datrix contributed revenue and profit after tax of GBP6.0
million and GBP0.8 million respectively for the six-month period
ended 30 September 2021 and represents a six month contribution.
Acquisition related and restructuring costs of GBP0.6 million have
been recognised as an expense in the statement of comprehensive
income for the period ended 30 September 2021.
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END
IR EAPFSFDLFFFA
(END) Dow Jones Newswires
November 16, 2021 02:00 ET (07:00 GMT)
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