Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Investor's Champion comment (subscriber access) on last results :-
HTtps://www.investorschampion.com/channel/blog/plenty-of-promise-in-these-results-and-updates
"Despite the attractive cash generation, we aren’t sure the market likes the debt load carried by this business. Net senior debt at the period end was still a hefty £31.2m, and £38.1m if one includes the dilutive convertible debt.
The outlook statement confirmed that AdEPT is on track to achieve management expectations for the year ending 31 Mach 2022.
Full year March 2022 adjusted forecasts are for earnings of 28.8p. At the current 216p share price this represents a very modest earnings rating of only 7.5x, although forecasts allow for plenty of adjustments.
The c£54m market capitalisation and Enterprise Value of £92.1m (including the convertible) equates to 8.9x forecast adjusted EBITDA of £11.7m for March 2022.
The shares look cheap on many levels and may remain so until the debt can be brought down, and there is also the issue of the convertible.
In August 2017 the Group raised £7,293,726 in the form of a convertible loan instrument from BGF to part fund the acquisition of Atomwide. BGF has the right to convert the loan to 1,855,910 shares at a share price of £3.93 per share at any time. The loan instrument can be redeemed by the Company from the third anniversary and bears an interest rate of 7%. 1.8m shares is equivalent to 7.5% of the current issued share count, although the conversion price is over 80% higher than the current share price.
We are of the view that management should focus on organic growth for now to generate cash and reduce debt. The shares should then start to perk up."
Phil Race comes over well.
Looking at the chart it recovered over 3 months and then back down again.
This share does seem to hold some promise, but no real idea when it will return to some shareholder return.
Downing Strategic Micro Cap half year report comment was :-
AdEPT Technology Group PLC (AdEPT) (6.77% of net assets)
Cost: £3.83m. Value as at 31 August 2021, £3.26m
Background
AdEPT 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 functions as an aggregator of telecoms services providing a
smoother, integrated service to corporates and government
organisations. We were attracted by the high operational gearing
and recurring revenue streams at appealing margins.
Communications and technology have converged over recent
years and that trend is only set to accelerate into the future, and
AdEPT is well placed to benefit from this trend.
Update to the investment case
? Positive full year results - trading remained resilient despite Covid impacting trading
? Total revenue and gross profit down but recurring and managed services revenue increased
? New enlarged £50m banking facility to support investment in growth
? Cash generation remains strong
? Datrix, a strategically important acquisition, announced post reporting period end
Progress against investment case
AdEPT reported a positive start to the year, with current trading in line with market expectations. Organic
growth delivered improvements in recurring revenues for cloud centric services both ahead of Q1 FY21 and
also ahead of Q4 FY21, a quarter which saw more normal business activity following the disruption caused by
the pandemic.
The pandemic temporarily interrupted the trajectory of the group’s growth, although the board is pleased with
the progress achieved under challenging circumstances. Given its strategic focus on cloud centric strategic
services, organic growth of 9% in this aspect of the business gives confidence. Opportunities for AdEPT have
remained strong, in a vibrant technology market where demand for effective ICT services is at an all-time high,
and are likely to continue to do so.
The momentum gained in Q4 FY21 continued into Q1 FY22, with sales and margins in the new financial year to
date firmly in line with market expectations. Management focus remains on the delivery of strong organic
growth, whilst seeking further opportunities to consolidate the fragmented market, through complementary
acquisitions which generate strong levels of recurring revenue and margin
It does seem sudden, but could just be a large investor selling out...
Stuff doesn’t just drop like this for no reason…
Capital raising going on???
Hi troajan
The market is disaster atm
I expected them to make alot more of their public sector customers during this period.......take advantage of their desperation. That hasn't shown through in the results.
I've sold out for more commercial operators. I think they will plod along.
I thought the results were pretty reasonable given the Covid-19 crisis and at 216p a share they are not expensive IMO. The company should also come out of this crisis in better shape given its investment in Project Fusion and AdEPT Nebula platform.
However, maybe I should have waited for the stock to finish falling before buying.
CrispFin, Thanks for this, a useful and interesting analysis.
There was an earlier RNS where they disclosed would be 13% ahead of last year on EBITDA basis (https://www.lse.co.uk/rns/ADT/trading-and-coronavirus-update-ridb8laa9df849h.html) so results should be nice.
I think this is cheap at the moment and I have just got in. Key points for me are:
- Nice high margin recurring revenue stream is very attractive
- Good operating cash generation given low levels of capex - this combined with recurring revenue is a winner
- Fishwick's have a large stake and Ian's purchase is a big vote of confidence for me
- Big M&A opportunity in my opinion
Risks though are pretty clear:
- That debt pile needs managing. Its fine at current ratio to earnings but got to keep an eye on that
- Could be a risk of more austerity / government spending cuts given the COVID debt and Adepts increasing wins in public sector
- The convertible bond is potentially worth 7% of the outstanding common shares so that needs to be watched as well depending on what things look like when they convert it from a dilution point of view
I've done a full write up on Adept here - http://crispfinance.com/idea-adept-technology-lon-adt/
I'm a buyer and long term holder at these valuation levels though
I guess IF's purchase started the ball rolling again. I missed the rns until yesterday, I may have topped up with a few more if I had spotted it earlier. I guess about another month before the results, I think that they could be quite good.
could see 250p here quite quickly
this could be an online winner for online schools learning and remote working
Investor Overview with Chairman Ian Fishwick & CEO Phil Race. A good overview of their service, client base & growth strategy etc:
https://youtu.be/NPfMq74PwaM
Hi all - short results film with FD John Swaite here:
https://youtu.be/-F-9DbI8j0o
More in-depth overview film coming shortly.
Adept discussed as a key player in this report: https://marketresearchupdates.com/2019/05/30/service-robotics-systems-market-slated-grow-rapidly-coming-years/
Not read it myself - has anyone else?
Always pleased, as a shareholder, to see the CEO buying shares.
But why only £10k worth when his salary package is around £250k.
Hardly a ringing endorsement.
Could definitely try harder!
Interesting market reaction, generated the opportunity I was waiting for.
A great company for shareholders with one misleading highlight, read more http://bit.ly/2ukr1U4