ADT.L Regulatory News (ADT)

2 Jul 2007 07:01

AdEPT Telecom plc02 July 2007 2 July 2007 AdEPT Telecom plc Final Results for the 12 months ended 31 March 2007 AdEPT Telecom plc ("AdEPT" or the "Company") a leading independent provider oftelecommunications services for landline calls, line rental and broadband,announces its annual results for the year ended 31 March 2007. AdEPT delivered strong trading performance with: Financial Highlights •Turnover increasing by 63% to £18.8 million driven by the acquisitions made during this year and the previous period: •EBITA increasing by 34% to £2.3 million: •Profit before tax increasing by 76% to £0.8 million reflecting our ability to integrate the acquired businesses quickly;and €120% of EBITA (£2.3m) turned into cash (£2.8m). Operational Highlights •Acquired two of our competitors' customer bases. •Achieved a higher mix of business customers with total business revenue up from 67% at March 2006 to 87% this year, increasing stability of overall customer base. •Launching a wide range of new products aimed at small businesses, including broadband to create new revenue streams and reduce the propensity to churn. €79% (up from 70%: March 2006) of business customers take line rental. Commenting upon these results Chairman Roger Wilson said: "I am pleased to present an excellent set of results. AdEPT has deliveredcontinued growth in revenues and profitability. We have been successful indelivering on our strategy and continue to make significant progress inincreasing and stabilising our customer base. In addition, we are in the processof launching a wider range of products including broadband which will create newrevenue streams." Enquiries AdEPT Telecom Roger Wilson Tel: 07786111535 Chairman Strand Partners Simon Raggett Tel: 0207 409 3494 Warren Pierce Cardew Group Tim Robertson Tel: 020 7930 0777 M: 07900 927650 Shan Shan Willenbrock David Roach Chairman's Statement It is with great pleasure that I announce our annual results. Revenue in 2007increased by 63% to £18.8m (2006: £11.5m) with growth derived from the twoacquisitions completed during the year. There was a substantial change in thecustomer base and as a result, 87% of revenue was derived from businesscustomers compared to 67% in 2006. The introduction of line rental in March 2005has had a marked impact and now represents about 22% of our total revenue. We remain one of the lowest cost operators in the industry. EBITA increased by34% to £2.3 million (2006: £1.7 million) although EBITA margins decreased(slightly) to 12.3% of revenues as a result of the change in product mix. Earnings per share increased by 3% to 7.18p per share (2006: 6.97p). Cashflowwas strong as the Company benefits from an excellent operating cash model, withnet funds increasing by £0.7m in the year to £1.3m at year end (2006: £0.6m). Net Debt which comprises cash balances, bank borrowings and deferredconsideration, increased by £2.3m to £3.2m (2006: reduced by £1.8m). This wasdue to the draw down of £4.25m borrowing from the new debt facility withBarclays Bank plc, a reduction in deferred consideration of £1.2m and anincrease in cash of £0.7m. Review of Operations The business was established to be a consolidator of the highly fragmented UKfixed line reseller sector which is estimated to include approximately 1,000mostly smaller telecom businesses. To date AdEPT has acquired 14 competitors and/or their customer bases of which the two listed below were completed in theperiod under review: June 2006 Fizz Telecom Limited ("Fizz Telecom") October 2006 Worldwide Telecom Limited A critical part of our acquisition strategy is the ability to integrate theacquired customer bases into AdEPT's systems within 6 weeks. Both of theacquisitions referred to above were integrated within this timeframe. Rapidintegration into AdEPT's automated back office systems significantly enhancesthe profitability of the acquired customer bases. We are fast achieving our strategic aim of making our customer base more stableby moving away from lower-spending, higher churn residential customers to focuson small business customers. In the year to 31 March 2007, 87% of group revenueswere derived from business customers compared to 67% in the prior period. Thisreversal of customer focus has been driven by the recent acquisitions all ofwhich have been focused on business customers. At the half year we reported that we had seen an increase in churn after thelaunch of "free broadband" in the UK. We are pleased to report that churn hasnow reduced from its peak last year and the hard work of our customer serviceand retention teams is bearing fruit. We are now in the process of launching a wider range of products aimed at thesmall business market. These include broadband with speeds of up to 8Mb and 24Mband remote IT support services. We will continue to look at options to enter themobile market. The Board believes that increasing the range of products andservices on offer, and encouraging customers to take larger "bundles" ofproducts, will create additional opportunities for new revenue streams, whilemaking customers increasingly "sticky" and reducing their propensity to churn. Around 79% of our business customers now take line rental (up from 70%: March2006) and this has the impact of both increasing revenue and reducing churn ascustomers are tied in on long-term contracts. Growing line rental revenues hasbeen a key objective and we are delighted to report line rental revenuesincreased 315% to £4.2 million compared to £1.3m in the prior year. Employees As a company we are immensely proud of the track record we have created in arelatively short period of time. Our success is a result of the efforts of allour employees and on behalf of the Board I would like to take this opportunityto thank them for all their hard work. Outlook AdEPT has now reached a size where scope exists to generate increasing revenuesorganically to complement growth through acquisition. Following the completionof the second Fizz Telecom acquisition the Company now has over 20,000 businesscustomers, which provides significant opportunities to cross-sell additionalproducts. AdEPT now possesses an enhanced set of products and services for smalland medium-sized businesses which are attractive to our core customer base. The business focus for this coming year is therefore to increase organic salesand customer retention to achieve a stable business which can then progress intopositive organic growth. We will therefore invest more in our organic sales channels and complement thiswith continued investment in retention activities to retain more customers andupsell more of our products. We believe the launch of our broader productportfolio also makes it easier for the company to strengthen its existingindirect distribution channel and recruit new dealers, which will furthersupport increased sales. The Board is not declaring a dividend for this financial year and will insteadreinvest the surplus funds in the business. Whilst increasing our focus on net organic growth, AdEPT will continue itsstrategy of acquiring businesses where they add value, enhance earnings pershare and do not exceed sensible levels of gearing. The current financial yearhas started well with the second part of the Fizz Telecom customer base beingacquired in June 2007. This gives us another 5,000+ customers. The first part ofthe Fizz Telecom customer base was acquired in June 2006. Roger WilsonChairman 29th June 2007 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 March 2007-------------------------------------------------------------------------------- As restated 2007 2006 Note £ £ TURNOVER 1,2,31 18,827,007 11,520,855Cost of sales (11,535,949) (6,864,629) ----------- -----------GROSS PROFIT 7,291,058 4,656,226Administrative expenses (4,801,219) (2,811,800) ----------- -----------EARNINGS BEFORE INTEREST TAXATIONDEPRECIATIONAND AMORTISATION 2,489,839 1,844,426Depreciation (175,833) (120,579)Amortisation (1,212,244) (944,211) ----------- -----------OPERATING PROFIT 3 1,101,762 779,636Interest receivable 8,708 4,351Interest payable and similar charges 7 (321,141) (334,292) ----------- -----------PROFIT ON ORDINARY ACTIVITIES BEFORETAXATION 789,329 449,695Tax on profit on ordinary activities 8 (489,539) (284,487) ----------- -----------PROFIT ON ORDINARY ACTIVITIES AFTERTAXATION 18 299,790 165,208 =========== ===========EARNINGS PER SHAREBasic earnings per share 32 1.42 pence 1.04 penceDiluted earnings per share 32 1.30 pence 0.92 pence All amounts relate to continuing operations. Details of acquisitions are set out in note 31. The notes on pages 17 to 34 form part of these financial statements. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES For the year ended 31 March 2007-------------------------------------------------------------------------------- As restated Year ended Year ended 31 March 31 March 2007 2006 £ £ PROFIT FOR THE FINANCIAL YEAR AND TOTAL RECOGNISEDGAINS AND LOSSES RELATING TO THE YEAR 299,790 165,208 ===========Prior year adjustment (Note 19) (19,594) -----------TOTAL GAINS AND LOSSES RECOGNISEDSINCE LAST FINANCIAL STATEMENTS 280,196 ----------- The notes on pages 17 to 34 form part of these financial statements. CONSOLIDATED BALANCE SHEET As at 31 March 2007-------------------------------------------------------------------------------------- 2007 2006 Note £ £ £ £FIXED ASSETSIntangible fixed assets 10 14,422,437 11,174,175Tangible fixed assets 11 389,958 223,577 ----------- ----------- 14,812,395 11,397,752 CURRENT ASSETSDebtors 13 3,327,644 3,336,684Cash at bank and in hand 1,340,213 579,816 ----------- ----------- 4,667,857 3,916,500CREDITORS: amounts fallingdue within one year 14 (4,606,426) (5,042,960) ----------- -----------NET CURRENT ASSETS/ (LIABILITIES) 61,431 (1,126,460) ----------- ----------- TOTAL ASSETS LESS CURRENT LIABILITIES 14,873,826 10,271,292 CREDITORS: amounts falling 15due after more than one year (4,250,000) - ----------- -----------NET ASSETS 10,623,826 10,271,292 =========== ===========CAPITAL AND RESERVESCalled up share capital 17 2,106,744 2,106,744Share premium account 18 7,965,381 7,975,680Profit and loss account 18 551,701 188,868 SHAREHOLDERS' FUNDS 20 10,623,826 10,271,292 The financial statements were approved and authorised for issue by the Board on29th June 2007 and signed on its behalf. Ian FishwickDirector The notes on pages 17 to 34 form part of these financial statements. COMPANY BALANCE SHEET As at 31 March 2007---------------------------------------------------------------------------------------- 2007 2006 Note £ £ £ £FIXED ASSETSIntangible fixed assets 10 14,422,437 11,174,175Tangible fixed assets 11 389,958 223,577Investments 12 - - ---------- ---------- 14,812,395 11,397,752CURRENT ASSETSDebtors 13 3,327,644 3,577,796Cash at bank and in hand 1,340,213 338,602 ---------- ---------- 4,667,857 3,916,398CREDITORS: amounts fallingdue within one year 14 (4,606,426) (5,250,443) ---------- ----------NET CURRENT ASSETS/ (LIABILITIES) 61,431 (1,334,045) ---------- ----------TOTAL ASSETS LESS CURRENT LIABILITIES 14,873,826 10,063,707 CREDITORS: amounts fallingdue after more than one year 15 (4,250,000) - ---------- ----------NET ASSETS 10,623,826 10,063,707 ========== ==========CAPITAL AND RESERVESCalled up share capital 17 2,106,744 2,106,744Share premium account 18 7,965,381 7,975,680Profit and loss account 18 551,701 (18,717) ---------- ----------SHAREHOLDERS' FUNDS 20 10,623,826 10,063,707 ========== ========== The financial statements were approved and authorised for issue by the Board on29th June 2007 and signed on its behalf. Ian FishwickDirector The notes on pages 17 to 34 form part of these financial statements. CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 March 2007-------------------------------------------------------------------------------- 2007 2006 Note £ £ Net cash flow from operating activities 21 2,770,898 1,252,753Returns on investments and servicing of finance 22 (242,939) (506,708)Taxation - (158,900)Capital expenditure and financial investment 22 (6,007,263) (6,655,983)Equity dividends paid - (115,965) ---------- ----------CASH OUTFLOW BEFORE FINANCING (3,479,304) (6,184,803)Financing 22 4,239,701 7,106,109 ---------- ----------INCREASE IN CASH IN THE YEAR 760,397 921,306 ---------- ---------- -------------------------------------------------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT For the year ended 31 March 2007-------------------------------------------------------------------------------- 2007 2006 Note £ £ Increase in cash in the year 760,397 921,306Cash outflow from decrease in debtand invoice discounting - 54,040Bank loan (4,250,000) -Deferred consideration outflow 3,009,968 1,293,118 ---------- ----------CHANGE IN NET DEBT RESULTING FROM CASH FLOWS (479,635) 2,268,464Deferred consideration (1,806,545) (2,347,466)Preference share conversion to equity shares - 1,870,593 ---------- ----------MOVEMENT IN NET DEBT IN THE YEAR (2,286,180) 1,791,591Net debt at 1 April 2006 (930,152) (2,721,743) ---------- ----------NET DEBT AT 31 MARCH 2007 23 (3,216,332) (930,152) ========== ========== The notes on pages 17 to 34 form part of these financial statements. NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 March 2007 1. ACCOUNTING POLICIES 1.1 Basis of preparation of financial statements The financial statements have been prepared under the historical cost conventionand in accordance with applicable United Kingdom accounting standards. 1.2 Basis of consolidation The financial statements for the year ended 31 March 2007 consolidate theaccounts of AdEPT and Transglobal Telecommunications Limited, the remainingsubsidiary undertakings (the 'Subsidiaries') are considered to be immaterial. Under Section 230 of the Companies Act 1985 the company is exempt from therequirement to present its own profit and loss account. The profit/(loss) forthe financial period, before dividends payable, dealt with in the financialstatements of the holding company, which have been approved by the Board, was£507,375 (2006: £(42,377)). 1.3 Turnover Turnover comprises of both invoiced and uninvoiced amounts for services suppliedby the group during the year, exclusive of Value Added Tax and trade discounts.Call revenues are recognised when the calls are made and line rental revenuesare recognised over the period to which they relate. 1.4 Investments Shares in the Subsidiaries are valued at cost less provision for permanentimpairment. 1.5 Intangible fixed assets and amortisation Intangible fixed assets are stated at cost, less amortisation and continue to besubject to an impairment review at 1st anniversary, when appropriate lives areselected. Goodwill has been re-classified as the "customer base" to more accuratelyreflect its description. The cost of customer base is the difference between amounts paid on theacquisition of a business and the fair value of the identifiable assets andliabilities. It is amortised to the profit and loss account over its estimatedeconomic life. The average estimated useful economic life has been estimated at11 years. Also included within intangible fixed assets is a license which is beingamortised over its life of 10 years. 1.6 Tangible fixed assets and depreciation Tangible fixed assets are stated at cost, less depreciation. Depreciation isprovided on all tangible fixed assets at rates calculated to write off the cost,less estimated residual value of each asset, over its expected useful life onthe following bases: Short term leasehold improvements - 5 years straight lineFixtures and fittings - 3 years straight lineOffice equipment - 3 years straight lineComputer software - 3 years straight line 1.7 Operating leases Rentals under operating leases, where substantially all of the benefits andrisks of ownership remain with the lessor, are charged to the profit and loss ona straight line basis, even if payments are not made on such a basis. 1.8 Taxation UK corporation tax is provided for amounts expected to be paid (or received)using tax rates and laws that have been enacted or substantially enacted at thebalance sheet date. Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date, where transactions orevents have occurred at that date that will result in an obligation to pay moretax in future or a right to pay less tax in future, except for gains on disposalof fixed assets which will be rolled over into replacement assets. Timingdifferences are differences between the group's taxable profits and its resultsstated in the financial statements that arise from the inclusion of gains andlosses in tax recognised in the financial statements. Deferred tax is measured at the average tax rates that are expected to apply inthe periods in which the timing differences are expected to reverse based upontax rates and laws that have been enacted or substantially enacted at thebalance sheet date. Deferred tax is measured on a non-discounted basis. Deferred tax assets are recognised to the extent that it is more likely than notthat they will be recovered. 1.9 Pensions The group contributes to personal pension plans. The amount charged to theprofit and loss account in respect of pension costs is the contribution payablein the year. 1.10 Capital instruments The costs incurred directly in connection with the issue of debt instruments arecharged to the profit and loss account on a straight line basis over the life ofthe debt instrument. 1.11 Share based payments These are equity settled share based payments measured by reference to the fairvalue at the date of grant for all options granted after 7 November 2002 and hadnot yet vested at 1 January 2005 in accordance with FRS20 "Share basedpayments". The fair value of the options have been calculated using the BlackScholes-Merton model, based upon publicly available market data and based on thegroup's estimate of shares that will eventually vest. The respective cost ischarged to the profit and loss account over the vesting period. Accordingly, theCompany has restated its comparatives for the prior year adjustment as disclosedin Note 19 to the financial statements. 2. TURNOVER The whole of the turnover is attributable to the provision of voice telephoneservices to both residential and business customers. The directors regard the group as having a single business segment. All turnover arose within the United Kingdom. 3. OPERATING PROFIT The operating profit is stated after charging: 2007 2006 £ £Amortisation of customer base and license 1,212,244 944,211Depreciation of tangible fixed assets: - owned by the group 175,833 120,579Loss on disposal of tangible fixed assets 1,118 201Rentals under operating leases - land and buildings 77,465 77,465 - other 4,033 1,344 ---------- ---------- 4. AUDITORS' REMUNERATION 2007 2006 £ £Fees payable to the company's auditor for the auditof the company's annual financial statements 30,000 30,000Fees payable to the company's auditor and its associatesin respect of :Other services relating to taxation 5,500 5,000Services relating to corporate finance transactions 20,000 157,500All other services 31,010 - ---------- ---------- The services relating to corporate finance transactions in both the current andprior years have been charged to the share premium account. 5. STAFF COSTS Staff costs, including directors' remuneration, were as follows: As restated 2007 2006 £ £Wages and salaries 1,697,112 1,158,530Social security costs 181,698 129,142Other pension costs 15,094 10,500 ---------- ---------- 1,893,904 1,298,172 ========== ========== The average monthly number of employees, including the directors, during theyear was as follows: 2007 2006 No. No. Non-executive directors 4 2Administrative staff 36 23 ------- ------- 40 25 ======= =======6. DIRECTORS' EMOLUMENTS 2007 2006 £ £ Emoluments 755,943 606,021 ======= =======Group pension contributions to money purchasepension schemes 15,094 10,500 ======= ======= During the year retirement benefits were accruing to 1 director (2006:1) inrespect of money purchase pension schemes. The highest paid director received remuneration of £262,563 (2006: £234,350). The value of the group's contributions paid to a money purchase pension schemein respect of the highest paid director amounted to £15,094 (2006: £10,500). Details regarding the share options of the directors who held office at 31 March2007 in AdEPT are disclosed in note 17 to the financial statements. 7. INTEREST PAYABLE AND SIMILAR CHARGES 2007 2006 £ £ On bank loans and overdrafts 250,997 23,090On other loans - 30,417Preference shares dividend - 224,379Bank fees 61,668 54,165Other interest payable 8,476 2,241 --------- --------- 321,141 334,292 ========= =========8. TAXATION 2007 2006 £ £Analysis of tax charge in yearCurrent tax (see note below)UK corporation tax charge on profits of the year 444,564 284,632Adjustments in respect of prior periods 22,636 18,448 --------- --------- Total current tax 467,200 303,080 --------- --------- Deferred taxOrigination and reversal of timing differences (13,516) (18,593)Adjustments in respect of prior periods 35,855 - Total deferred tax (see note 16) 22,339 (18,593) --------- --------- Tax on profit on ordinary activities 489,539 284,487 ========= ========= Factors affecting tax charge for year The tax assessed for the year is higher than the standard rate of corporationtax in the UK applicable to the group (30%). The differences are explainedbelow: As restated 2007 2006 £ £ Profit on ordinary activities before tax 789,329 449,695 ========= =========Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2006: 30%) 236,799 134,909 Effects of:Expenses not deductible for tax purposes 28,344 20,728Amortisation not deductible for tax purposes 191,152 106,952Depreciation for period in excess of capital allowances (4,369) 3,312Movement in general provisions (6,906) 15,280Adjustments to tax charge in respect of prior periods 22,636 24,326Marginal relief (456) (2,427) --------- ---------Current tax charge for year (see note above) 467,200 303,080 ========= ========= There were no material factors that may affect future tax charges. 9. DIVIDENDS 2007 2006 £ £ Total dividends paid - 115,965 --------- --------- 10. INTANGIBLE FIXED ASSETS License Customer base TotalGroup and company £ £ £CostAt 1 April 2006 23,400 12,709,068 12,732,468Additions - 4,254,192 4,254,192Retrospective adjustment* (1,093) 207,407 206,314 ---------- ---------- ----------At 31 March 2007 22,307 17,170,667 17,192,974 ---------- ---------- ----------AmortisationAt 1 April 2006 1,170 1,557,123 1,558,293Charge for the year 2,329 1,209,915 1,212,244 ---------- ---------- ----------At 31 March 2007 3,499 2,767,038 2,770,537 ---------- ---------- ----------Net book valueAt 31 March 2007 18,808 14,403,629 14,422,437 ========== ========== ==========At 31 March 2006 22,230 11,151,945 11,174,175 ---------- ---------- ---------- *A retrospective adjustment in accordance with FRS 7 'Fair values in acquisitionaccounting' was made in relation to the fair value of the consideration paid forthe prior year acquisitions. An adjustment in respect of amortisation was madeaccordingly, as directed by FRS 7, which has been recognised in the currentyear's profit and loss account. 11. TANGIBLE FIXED ASSETS Short term leasehold Fixtures Office Computer improvements and fittings equipment software TotalGroup and company £ £ £ £ £CostAt 1 April 2006 7,117 39,046 165,091 249,181 460,435Additions - 8,153 126,532 208,648 343,333Disposals - - (3,017) - (3,017) ---------- ---------- ---------- ---------- ----------At 31 March 2007 7,117 47,199 288,606 457,829 800,751 ---------- ---------- ---------- ---------- ----------DepreciationAt 1 April 2006 4,033 24,322 95,240 113,263 236,858Charge for theyear 1,423 10,898 50,527 112,985 175,833On disposals - - (1,898) - (1,898) ---------- ---------- ---------- ---------- ----------At 31 March 2007 5,456 35,220 143,869 226,248 410,793 ---------- ---------- ---------- ---------- ----------Net book valueAt 31 March 2007 1,661 11,979 144,737 231,581 389,958 ========== ========== ========== ========== ==========At 31 March 2006 3,084 14,724 69,851 135,918 223,577 ---------- ---------- ---------- ---------- ---------- 12. FIXED ASSET INVESTMENTS Share in group undertakings Company Total £ £Cost or valuationAt 1 April 2006 and at 31 March 2007 7,198,326 7,198,326 Amounts written offAt 1 April 2006 and at 31 March 2007 7,198,326 7,198,326 ----------- -----------Net book valueAt 1 April 2006 and at 31 March 2007 - - =========== =========== There were no fixed asset investment additions during the year. Details of theprincipal Subsidiaries are disclosed in note 29 to the financial statements. 13. DEBTORS Group Company ------------------------ ---------------------- 2007 2006 2007 2006 £ £ £ £Due after more than one yearOther debtors - 127,650 - 127,650Due within one yearTrade debtors 2,921,054 2,805,306 2,921,054 2,805,306Amounts owed by groupundertakings - - - 241,114Other debtors 14,807 8,590 14,807 8,590Prepayments and accrued 374,220 355,236 374,220 355,234incomeDeferred tax asset (see note16) 17,563 39,902 17,563 39,902 ---------- ---------- ---------- ---------- 3,327,644 3,336,684 3,327,644 3,577,796 ========== ========== ========== ========== During the year the secured rent deposit of £60,000 held by the landlord, MCLProperty Investments Limited was repaid, in the previous year this was heldwithin other debtors due after more than one year. Included within prepayments are deferred finance costs of £115,097 (2006:£176,765) in relation to the issue of debt instruments. 14. CREDITORS: Amounts falling due within one year Group Company ------------------------ ---------------------- 2007 2006 2007 2006 £ £ £ £ Trade creditors 2,571,324 2,831,298 2,571,324 2,831,298Amounts owed to groupundertakings - - 88,536 296,120Corporation tax 753,905 286,704 665,369 198,167Social security and othertaxes 323,183 54,157 323,183 54,157Other creditors 17,315 8,379 17,315 8,279Accruals and deferred income 940,699 1,862,422 940,699 1,862,422 ---------- ---------- ---------- ---------- 4,606,426 5,042,960 4,606,426 5,250,443 ========== ========== ========== ========== Included within accruals is deferred consideration of £306,545 (2006: £1,509,968)in respect of the customer bases and subsidiaries acquired in the current andprior years. 15. CREDITORS: Amounts falling due after more than one year Group Company ------------------------ ---------------------- 2007 2006 2006 2006 £ £ £ £ Bank loans 4,250,000 - 4,250,000 - ---------- ---------- ---------- ---------- The bank loan is secured by a debenture incorporating a fixed and floatingcharge over the undertaking and all property and assets present and futureincluding goodwill, book debts, uncalled capital, buildings, fixtures, fixedplant and machinery, and is repayable in less than 5 years. The loan bearsinterest at 2% above the bank's base rate. 16. DEFERRED TAXATION Group Company --------------------- ---------------- 2007 2006 2007 2006 £ £ £ £ At 1 April 2006 39,902 - 39,902 - Provision for the year (22,339) 39,902 (22,339) 39,902 --------- --------- --------- -------- At 31 March 2007 17,563 39,902 17,563 39,902 ========= ========= ========= ======== The deferred tax asset is made up as follows: Group Company --------------------- ---------------- As restated As restated 2007 2006 2007 2006 £ £ £ £ Accelerated capital allowances 7,228 (2,858) 7,228 (2,858) Other timing differences (24,791) 42,760 (24,791) 42,760 --------- --------- --------- -------- (17,563) 39,902 (17,563) 39,902 ========= ========= ========= ========17. SHARE CAPITAL 2007 2006 £ £ Authorised65,000,000 Ordinary shares of 10p each 6,500,000 6,500,000 ========== ==========Allotted, called up and fully paid21,067,443 Ordinary shares of 10p each 2,106,744 2,106,744 ---------- ---------- Share Options At 31 March 2007, the following options and warrants over the shares of AdEPTwere in issue: No. of options Unapproved EMI Warrants Total---------------------------- ---------- ---------- --------- ----------Outstanding at 1 April 2006 422,948 1,530,750 421,349 2,375,047Granted during the year - 16,168 - 16,168Forfeited during the year - (12,795) - (12,795)Exercised during the year - - - - ---------- ---------- --------- ----------Outstanding at 31 March 2007 422,948 1,534,123 421,349 2,378,420---------------------------- ---------- ---------- --------- ---------- The fair values have been determined using the Black Scholes-Merton PricingModel and the weighted average fair value of these options at the measurementdate is £0.06 per option. Expected volatility at 20%, was determined byreviewing the historical fluctuations in the share price since the company'sadmission to AIM. Expected dividend yield is estimated at 0%, this estimate ofnil is per the requirement of FRS20 where a company such as AdEPT has no currentdividend history, it does not bear any relation to the actual dividend policy ofAdEPT Telecom PLC. The risk free interest rate is estimated at 4.8%. Number of ordinary Share Exercise Expected Share shares price at price Option option subject to Date of grant per life scheme options grant date share (years)Name--------------------------------------------------------------------------------DirectorsIan Fishwick Unapproved 152,160 31/07/03 £0.30 £0.30 5.7Ian Fishwick EMI 300,000 28/12/03 £0.30 £0.30 5.3Ian Fishwick EMI 300,000 28/12/03 £0.30 £0.30 5.3Chris Riggs EMI 85,548 29/08/04 £0.42 £0.42 4.6Chris Riggs EMI 85,560 29/08/04 £0.42 £0.42 4.6Chris Riggs EMI 85,548 06/06/05 £0.42 £0.42 4.8Chris Riggs EMI 85,560 06/06/05 £0.42 £0.42 3.8Amanda Woodruffe EMI 85,548 29/08/04 £0.42 £0.42 4.6Amanda Woodruffe EMI 85,560 29/08/04 £0.42 £0.42 4.6Amanda Woodruffe EMI 85,548 06/06/05 £0.42 £0.42 4.8Amanda Woodruffe EMI 85,560 06/06/05 £0.42 £0.42 3.8Tim Holland EMI 71,428 13/12/05 £1.40 £1.40 2.3Tim Holland Unapproved 99,680 13/12/05 £1.40 £1.40 3.1Tim Holland Unapproved 171,108 13/12/05 £1.40 £1.40 4.1OthersEmployees EMI 83,811 15/02/06 £1.40 £1.40 1.25Employees EMI 83,811 15/02/06 £1.40 £1.40 2.25Employees EMI 5,320 09/05/06 £1.99 £1.99 1.25Employees EMI 5,321 09/05/06 £1.99 £1.99 2.25Strand PartnersLimited Warrants 316,012 14/02/06 £1.40 £1.40 4.1Teather &GreenwoodLimited Warrants 105,337 14/02/06 £1.40 £1.40 3.1-------------------------------------------------------------------------------- The mid-market price of the ordinary shares on 31 March 2007 was 36.5p and therange during the year was 36.5p to 204.5p. 18. RESERVES ShareGroup premium Profit and account loss account £ £ At 1 April 2006 7,975,680 188,868Profit retained for the year - 299,790Additional expenses in connectionwith previous share issue (10,299) -Share options issued during the year - 63,043 ---------- ----------At 31 March 2007 7,965,381 551,701 ========== ========== Share premium Profit and account loss accountCompany £ £ At 1 April 2006 7,975,680 (18,717)Profit retained for the year - 507,375Additional expenses in connection withprevious share issue (10,299) -Share options issued during the year - 63,043 ---------- ----------At 31 March 2007 7,965,381 551,701 ========== ========== Included within the Company's retained profit for the year is the receipt of adividend for £206,583, from a subsidiary company. 19. PRIOR YEAR ADJUSTMENT - Share based payments With reference to notes 1.11 and 17, in accordance with the first time adoptionof FRS 20 - "Share Based Payments", the Company has restated its comparativesand adjusted the prior year profit by £19,594, which represents the expense tothe profit and loss account relating to the share options issued. 20. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS As restatedGroup 2007 2006 £ £ Profit for the year 299,790 165,208Dividends - (115,965) ----------- ----------- 299,790 49,243Shares issued during the year - 2,042,319Share premium on shares issued (net of expenses) - 6,988,422Additional expenses in connection with previousshare issue (10,299) -Share options issued during the year 63,043 19,594 ----------- ----------- 352,534 9,099,578 Opening shareholders' funds 10,271,292 1,171,714 ----------- -----------Closing shareholders' funds 10,623,826 10,271,292 =========== =========== As restatedCompany 2007 2006 £ £ Profit/(loss) for the year 507,375 (42,377)Dividends - (115,965) ----------- ----------- 507,375 (158,342)Shares issued during the year - 2,042,319Share premium on shares issued (net of expenses) - 6,988,422Additional expenses in connection with previousshare issue (10,299) -Share options issued during the year 63,043 19,594 ----------- ----------- 560,119 8,891,993 Opening shareholders' funds 10,063,707 1,171,714 ----------- -----------Closing shareholders' funds 10,623,826 10,063,707 =========== =========== 21. NET CASH FLOW FROM OPERATING ACTIVITIES As restated 2007 2006 £ £ Operating profit 1,101,762 779,636 Amortisation of intangible fixed assets 1,212,244 944,211 Depreciation of tangible fixed assets 175,833 120,579 Loss on disposal of tangible fixed assets 1,118 201 Cost of share options charged to profit and 63,043 19,594 loss account Increase in debtors (74,967) (1,706,863) Increase in creditors 291,865 1,095,395 ----------- ----------- NET CASH INFLOW FROM OPERATIONS 2,770,898 1,252,753 =========== =========== 22. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2007 2006 £ £ RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 8,708 4,351 Interest paid (251,647) (511,059) ----------- ----------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (242,939) (506,708) =========== =========== As restated 2007 2006 £ £ CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of intangible fixed assets (5,663,930) (6,478,656) Purchase of tangible fixed assets (343,333) (179,400) Sale of tangible fixed assets - 2,073 ----------- ----------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (6,007,263) (6,655,983) =========== =========== As restated 2007 2006 £ £ FINANCING Issue of ordinary shares - 8,200,000 Expenses paid in connection with share issues (10,299) (1,039,851) New secured loans 4,250,000 - Repayment of invoice discounting - (54,040) Shareholder loans - 250,000 Repayment of shareholder loans - (250,000) ----------- ----------- NET CASH INFLOW FROM FINANCING 4,239,701 7,106,109 =========== =========== 23. ANALYSIS OF CHANGES IN NET DEBT At Other At 1 April non-cash 31 March 2006 Cash flow changes 2007 £ £ £ £ Cash at bank and in hand 579,816 760,397 - 1,340,213 ----------- ----------- ----------- ----------- 579,816 760,397 - 1,340,213DEBT :Deferred consideration (1,509,968) 3,009,968 (1,806,545) (306,545)Bank Loan - (4,250,000) - (4,250,000) ----------- ----------- ----------- -----------NET DEBT (930,152) (479,635) (1,806,545) (3,216,332) =========== =========== =========== =========== 24. PENSION COMMITMENTS At 31 March 2007 there were no pension commitments (2006: £Nil). 25. OPERATING LEASE COMMITMENTS At 31 March 2007 the group and company had annual commitments undernon-cancellable operating leases as follows: Land and buildings Other ------------------------ --------------- 2007 2006 2007 2006Group and company £ £ £ £Expiry date:Between 2 and 5 years 77,465 77,465 4,033 4,033 ========= ========= ====== ====== 26. RELATED PARTY TRANSACTIONS There were no related party transactions during the year. 27. EVENTS AFTER THE BALANCE SHEET DATE In June 2007, AdEPT purchased the second part (another 5,000+ customers) of thecustomer base of Fizz Telecom Limited. 28. ACQUISITIONS During the year AdEPT made the following acquisitions: Name Method Date of acquisition Fizz Telecom Limited Trade and assets June 2006Worldwide Telecom Limited Trade and assets October 2006 The fair value tables in respect of these acquisitions can be summarised asfollows: 31 March 31 March 2007 2006 £ £ Satisfied by: Cash 3,691,295 4,927,087 Deferred consideration 306,545 2,253,540 Acquisition costs 256,352 221,738 ---------- ---------- Customer bases acquired 4,254,192 7,402,365 ========== ========== 29. PRINCIPAL SUBSIDIARIES Percentage Shareholding ofCompany name Country Ordinary shares Description Transglobal Telecommunications Limited England & Wales 100 Non tradingConnaught Telecommunications Limited England & Wales 100 Non tradingCall Options UK Limited England & Wales 100 Non tradingAdept Managed Networks Limited England & Wales 100 Non tradingConnectacom Network Solutions Limited England & Wales 100 Non trading The business and assets of Subsidiaries are hived up to AdEPT immediately orwithin 1 month following acquisition. After the hive up, the Subsidiaries becomeinactive. With effect from April 2007 all of the above Subsidiaries are in theprocess of being taken through a members voluntary liquidation. 30. CAPITAL COMMITMENTS At 31 March 2007 there were capital commitments of £4,042 (2006: £Nil). 31. ANALYSIS OF ACQUISITIONS DURING THE YEAR During the the year the group made two acquisitions (2006:4). Followingacquisition the customers are fully integrated into a single billing andcustomer service platform. Whilst turnover can be separately identified byacquisition, cost of sales cannot. Calls are routed across various networksuppliers and the overhead base services all of our customers. The analysis ofturnover by existing and acquired businesses is therefore as follows :- Sales Revenue 31 March 31 March 2007 2006 £ £ Existing businesses as at 31 March 2006 14,911,072 8,476,836 Businesses acquired in the year 3,915,935 3,044,019 ----------- ----------- Total sales 18,827,007 11,520,855 =========== ===========32. EARNINGS PER SHARE Earnings per share is calculated on the basis of profit of £299,790 (2006:£165,208) divided by the weighted average number of shares in issue for the yearof 21,067,443 (2006:15,916,367). The diluted earnings per share is calculated onthe assumption that the unapproved and EMI share options as disclosed in Note 17to the financial statements are exercised. This would give rise to a totalweighted average number of ordinary shares in issue for the period of 23,024,513(2006:17,870,064). A more realistic representation of earnings per share is to add backamortisation of goodwill (as a non-cash cost) to profit on ordinary activitiesafter tax, giving £1,512,034 (2006: £1,109,419). This is divided by the samenumber of weighted shares as above. Year ended Year ended 31 March 2007 31 March 2006 Basic Diluted Basic Diluted £ £ £ £ Profit after tax preamortisation 1,512,034 1,512,034 1,109,419 1,109,419Profit after tax 299,790 299,790 165,208 165,208 Earnings per share :Based on profit after taxpre-amortisation 7.18 pence 6.57 pence 6.97 pence 6.21 penceBased on profit after tax 1.42 pence 1.30 pence 1.04 pence 0.92 pence Number of shares Number of sharesWeighted average numberof shares:For basic earnings per share 21,067,443 15,916,367Exercise of share options 1,957,070 1,953,697 ----------- -----------Fully diluted 23,024,513 17,870,064 =========== =========== 33. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS AdEPT finances the group's operations through long term bank facilities. Themain purpose of these instruments is to finance AdEPT's operations andacquisitions. The numerical disclosures in this note deal with financial assets andliabilities as defined in FRS 25 'Financial instruments: disclosure andpresentation'. As permitted by FRS 25, short term debtors and creditors have been excluded fromthe disclosures other than currency disclosures. Maturity profile AdEPT's borrowing at the beginning and end of each year and details of theinterest rate cost are detailed in note 15 to the financial statements. As at 31 March 2007 AdEPT had financial assets which were part of its financingarrangements of £1,340,213 (2006: £579,816). AdEPT has various borrowing facilities available to it. The undrawn committedfacilities available at the year end, in respect of which all conditionsprecedent had been met at that date were as follows: 2007 2006 £ £Expiry in:-One year or less 1,000,000 1,000,000More than one year but not more than two years - -More than two years 750,000 5,000,000 ---------- ---------- 1,750,000 6,000,000 ========== ==========Interest rate profile The interest rate profile of AdEPT's financial liabilities was as follows: Total Floating rate Fixed rate No interest Currency £ £ £ £SterlingDeferred consideration 1,509,968 - - 1,509,968 ---------- ---------- ---------- ----------At 31 March 2006 1,509,968 - - 1,509,968 ========== ========== ========== ==========SterlingDeferred consideration 306,545 306,545Bank loan 4,250,000 4,250,000 - - ---------- ---------- ---------- ----------At 31 March 2007 4,556,545 4,250,000 - 306,545 ========== ========== ========== ========== The weighted average period on AdEPT's sterling financial liabilities on whichno interest is paid is 12 months (2006: 12 months). The benchmark rate for determining interest payments on AdEPT's sterlingfloating rate financial liabilities is the bank's base rate. Currency profile AdEPT's operations are handled entirely in sterling. Gains and losses on hedges There are no unrecognised gains and losses arising on hedges at either year end. This information is provided by RNS The company news service from the London Stock Exchange