ADT.L Regulatory News (ADT)

3 Jul 2006 07:01

AdEPT Telecom plc03 July 2006 AdEPT Telecom plc ("AdEPT" or the "Company") Final Results for the Twelve Months Ended 31 March 2006 AdEPT, a leading independent provider of telecommunications services forlandline calls, line rental, and broadband, announces its results for thetwelve months ended 31 March 2006. Continued increases in both revenues and profitability. Group Financial • Total Revenue up 33% from £8,676k (2004/5) to £11,521k (2005/6)• EBITDA up 87% from £998k (2004/5) to £1,864k (2005/6)• Profit before tax up by 99% from £236k (2004/5) to £469k (2005/6)• EPS up by 55% from 0.75pps (2004/5) to 1.16pps (2005/6) Operational • Revenue from Business customers up 240% from £3,197k (2004/5) to £7,659k (2005/6)• Line Rental revenues up from £43k (2004/5) to £1,331k (2005/6)• Call revenues up by 17% from £8,633k (2004/5) to £10,135k (2005/6) Acquisitions • Four SME acquisitions completed and integrated in the year, taking the total to 13 since the company's inception• Acquisitions integrated within 6 weeks• Increase in gross margin to 40.4% reflects ability to leverage cost base• AdEPT has the highest EBITDA : Sales ratio in its sector Commenting upon these results Chairman Roger Wilson said: "I am pleased to report that these results reflect another year of substantial growth on all fronts. The success of our strategy of acquiring companies orcustomer bases in our sector and integrating them rapidly is demonstrated veryclearly by the growth in both revenues and EBITDA. Our EBITDA : Sales ratio isindustry leading, largely as a result of our extensively automated back-officesystems, and subsequently much lower headcount than our competitors." Enquiries:+--------------------+------------------------------+------------------+|Adept Telecom |Roger Wilson |Tel: 01491 571120 || |Chairman | || | | || | | |+--------------------+------------------------------+------------------+|Cardew Group |Tim Robertson |Tel: 020 7930 0777|| |Shan Shan Willenbrock | |+--------------------+------------------------------+------------------+ Chairman's Statement It is with great pleasure that I announce our maiden annual results followingthe company's successful admission to the Alternative Investment Market inFebruary 2006. For the year ended 31 March 2006 the Company delivered another strong tradingperformance with turnover increasing by 33% to £11.5 million driven by theacquisitions made during the year. This led to EBITDA increasing nearly twofoldto £1.9 million reflecting our ability to integrate the acquired businesseswithout significantly increasing our cost base. At the time of our admission to AIM, we successfully raised £8.2 million whichwe have used to repay debt and fund the acquisitions. The Company currently haspositive cash balances of £205k. It is the Board's intention to pay dividends in the future; however, we havepaid an interim dividend pre flotation but have not declared a final dividendfor this financial year and will use the surplus funds to further grow thebusiness. Growth Strategy AdEPT is ideally positioned to continue to grow rapidly through acquisition. Thebusiness was established to be a consolidator of the highly fragmented UK fixedline reseller sector which is estimated to include approximately 1,000 mostlysmaller telecom businesses. To date the Company has acquired 13 competitors and/or their customer bases of which the four listed below were completed in theperiod under review: 1. Call Options July 20052. Talk Direct August 20053. Transglobal February 20064. Admiral Managed Networks March 2006 Completion of these acquisitions was particularly pleasing given that we alsofloated the Company on AIM in February 2006. In the current financial year,AdEPT has completed the acquisition of 10,000 business customers from FizzTelecom in May 2006, making a total of three acquisitions within four months ofthe flotation. A critical part of our acquisition strategy is the ability to integrate theacquired customer bases into AdEPT's systems within 6 weeks. Each of theacquisitions referred to above were integrated within this timeframe. Rapid integration into AdEPT's automated back office systems significantly enhancesthe profitability of the acquired customer bases. Customers 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 2006, 67% of group revenues were derived from business customers compared to 37% 12 months earlier.However looking at the full year understates the extent of the changethroughout the year. This is best demonstrated by comparing March 2005 withMarch 2006: Business revenues in March 2005 were £372k (46% of the £808k totalmonthly sales). In March 2006 Business revenue had risen to £1,345k (83% of the£1,620k total monthly sales). This reversal of customer focus has been driven by the recent acquisitions allof which have been focused on business customers. As the Company continues tomake further acquisitions we expect this trend to accelerate. Business customers historically churn less frequently than residentialcustomers. This change in customer mix will therefore also increase thestability of our customer base. Around 70% of our business customers now take line rental and this has theimpact of both increasing revenue and reducing churn as customers are tied inon long-term contracts. Growing line rental revenues has been a key objective and we are delighted to report line rental revenues increased dramatically to£1.3 million compared to £43,000 in the prior year. Market trends The market for fixed line telephony remains competitive, with an ongoingdownward pressure on the retail price of calls. Margin on calls is higher thanline rental. However, even with price pressure and increasing line rental sales,gross margins have increased from 34.7% to 40.4% as a result of increased buyingpower with the telephone network carriers as AdEPT gets larger, combined withthe general downward pressure on prices charged by the network carriers. Thisis a clear demonstration of one of the benefits of our acquisition strategy. Our target customers are still at the lower end of the SME (small and mediumsized enterprises) market; with an average spend per month of c £150. Sales channels AdEPT continues to operate an indirect-only approach to sales with all neworders coming from independent dealers (or agents). AdEPT does not have adirect sales force. As this channel has grown, commission payments grew to £391kin 2005/6, compared to £130k in 2004/5. Award winning Customer Service Our commitment to the highest standards of customer service has been recognised with a number of awards in the year:- • Winner - Best Customer Service (any industry) in Kent 2005• Winner - Best New Business in Kent 2005• Finalist - UK Telecom Reseller of the Year 2006 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 Looking ahead, AdEPT will continue its strategy of acquiring businesses whichwill be earnings enhancing. The current financial year has started well withline rental and call revenues significantly ahead of last year. We will benefitfor the first time from the full year impact of the four acquisitions made in2005/6 along with revenues from Fizz Telecom's customer base acquired in May2006. Our EBITDA has grown for 11 consecutive quarters. The outlook therefore looksvery positive with both revenue and profitability expected to growsubstantially. Roger WilsonChairman3rd July 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 March 2006-------------------------------------------------------------------------------- As restated Note 2006 2005 £ £TURNOVER 11,520,855 8,676,499Cost of sales (6,864,629) (5,658,295) ----------- -----------GROSS PROFIT 4,656,226 3,018,204Administrative expenses (2,792,206) (2,019,631) ----------- -----------EARNINGS BEFORE INTEREST TAXATION DEPRECIATION AND AMORTISATION 1,864,020 998,573Depreciation (120,579) (75,047)Amortisation (944,211) (479,072) ----------- -----------OPERATING PROFIT 3 799,230 444,454Interest receivable 4,351 16,381Interest payable 4 (334,292) (224,700) ----------- -----------PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 469,289 236,135Tax on profit on ordinary activities 5,6 (284,487) (121,475) ----------- -----------PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 184,802 114,660Dividends 7 (115,965) - ----------- -----------RETAINED PROFIT FOR THE FINANCIAL YEAR 68,837 114,660 =========== ===========EARNINGS PER SHAREBasic earnings per share 14 1.16pps 0.75ppsDiluted earnings per share 14 1.05pps 0.71pps There were no recognised gains and losses for 2006 or 2005 other than thoseincluded in the profit and loss account. Following the adoption of FRS 25, the Preference Shares have been reclassifiedas debt falling due after more than one year in the prior year and all dividendspaid on the Preference Shares have been reclassified as interest payable in theprior year as disclosed in note 6 to the financial statements. CONSOLIDATED BALANCE SHEET As at 31 March 2006-------------------------------------------------------------------------------- As restated 2006 2005 Note £ £ £ £FIXED ASSETSIntangible fixed assets 11,174,175 4,585,380Tangible fixed assets 223,577 167,030 ---------- --------- 11,397,752 4,752,410 CURRENT ASSETSDebtors 8 3,336,684 1,434,464Cash at bank and in hand 579,816 160,090 --------- --------- 3,916,500 1,594,554CREDITORS: amounts falling due within one year 9 (5,042,960) (3,304,657) --------- ---------NET CURRENT LIABILITIES (1,126,460) (1,710,103) ---------- ---------TOTAL ASSETS LESS CURRENT LIABILITIES 10,271,292 3,042,307 CREDITORS: amounts falling due after more than one year 10 - (1,870,593) ---------- ---------NET ASSETS 10,271,292 1,171,714 ========== =========CAPITAL AND RESERVES Called up share capital 2,106,744 64,425Share premium account 7,975,680 987,258Profit and loss account 188,868 120,031 ---------- ---------SHAREHOLDERS' FUNDS - ALL EQUITY 10,271,292 1,171,714 ---------- --------- COMPANY BALANCE SHEET As at 31 March 2006-------------------------------------------------------------------------------- As restated 2006 2005 Note £ £ £ £FIXED ASSETSIntangible fixed assets 11,174,175 4,585,382Tangible fixed assets 223,577 167,030Investments - 1,002 ---------- --------- 11,397,752 4,753,414CURRENT ASSETSDebtors 8 3,577,796 1,434,460Cash at bank and in hand 338,602 160,090 --------- ---------- 3,916,398 1,594,550CREDITORS: amounts falling due within one year 9 (5,250,443) (3,305,657) --------- ----------NET CURRENT LIABILITIES (1,334,045) (1,711,107) ---------- ---------TOTAL ASSETS LESS CURRENT LIABILITIES 10,063,707 3,042,307 CREDITORS: amounts falling due after more than one year 10 - (1,870,593) ---------- ---------NET ASSETS 10,063,707 1,171,714 ========== =========CAPITAL AND RESERVESCalled up share capital 2,106,744 64,425Share premium account 7,975,680 987,258Profit and loss account (18,717) 120,031 ---------- ---------SHAREHOLDERS' FUNDS - All Equity 10,063,707 1,171,714 ---------- --------- CASH FLOW STATEMENT For the year ended 31 March 2006-------------------------------------------------------------------------------- As restated 2006 2005 Note £ £Net cash flow from operating activities 11 1,252,753 1,690,930Returns on investments and servicing of finance 12 (506,708) (208,319)Taxation (158,900) (43,266)Capital expenditure and financial investment 12 (6,655,983) (2,629,513)Equity dividends paid (115,965) - ---------- -----------CASH OUTFLOW BEFORE FINANCING (6,184,803) (1,190,168)Financing 12 7,106,109 54,040 ---------- -----------INCREASE/(DECREASE) IN CASH IN THE YEAR 921,306 (1,136,128) ========== =========== -------------------------------------------------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS/DEBT For the year ended 31 March 2006-------------------------------------------------------------------------------- As restated 2006 2005 Note £ £Increase/(decrease) in cash in the year 921,306 (1,136,128)Cash outflow/(inflow) from decrease/(increase) in debt and invoice discounting 54,040 (54,040)Deferred consideration outflow 1,293,118 252,000 ---------- -----------CHANGE IN NET DEBT RESULTING FROM CASH FLOWS 2,268,464 (938,168)Deferred consideration (2,347,466) (400,000)Preference share conversion to equity shares 1,870,593 - ---------- -----------MOVEMENT IN NET DEBT IN THE YEAR 1,791,591 (1,338,168)Net debt at 1 April 2005 (2,721,743) (1,383,575) ---------- -----------NET DEBT AT 31 MARCH 2006 13 (930,152) (2,721,743) ========== =========== 1. BASIS OF PREPARATION The financial information set out in the preliminary statement does not comprisethe company's statutory accounts within the meaning of section 240(5) of theCompanies Act 1985. The preliminary statement is prepared on the basis of the accounting policiesadopted in the company's financial statements for the period ended 31 March2005. Statutory accounts for 2005 have been delivered to the Registrar ofCompanies, and those for 2006 will be delivered following the Company's AnnualGeneral Meeting. The financial information set out above has been extracted fromthe draft statutory accounts of the company for the period ended 31 March 2006,in respect of which the auditors have not yet signed their audit report. 2. ACCOUNTING POLICIES 2.1 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. 2.2 Basis of consolidation The financial statements consolidate the accounts of AdEPT and all of itssubsidiary undertakings (the 'Subsidiaries'). The results of the Subsidiaries acquired during the year are included from theeffective date of acquisition. Under Section 230 of the Companies Act 1985 the company is exempt from therequirement to present its own profit and loss account. 2.3 Investments Shares in the Subsidiaries are valued at cost less provision for permanentimpairment. 2.4 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. 2.5 Intangible fixed assets and amortisation Goodwill is stated at cost, less amortisation and any provision for impairment.The cost of goodwill is the difference between amounts paid on the acquisitionof a business and the fair value of the identifiable assets and liabilities. Itis amortised to the profit and loss over its estimated economic life. Theaverage estimated useful economic life has been estimated at 9 years and hasbeen capped at 10 years. Included with intangible fixed assets is a licencewhich is being amortised over its life of 10 years. 2.6 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 - 5 years straight line improvements Fixtures and fittings - 3 years straight line Office equipment - 3 years straight line Computer software - 3 years straight line 2.7 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. 2. ACCOUNTING POLICIES (continued) 2.8 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. 2.9 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. 3. OPERATING PROFIT The operating profit is stated after charging: 2006 2005 £ £ Amortisation of goodwill 944,211 479,072 Depreciation of tangible fixed assets: - owned by the group 120,579 75,048 Auditors' remuneration - audit 35,000 24,700 Loss on disposal of tangible fixed assets 201 - Rentals under operating leases - land and buildings 77,465 77,465 - other assets 1,344 - ======= ======= Auditors' fees for the Company were £35,000 (2005:£24,700) Remuneration paid to the auditor for non-audit services amounted to £161,900 (2005 - £3,000) of which £157,500 (2005 - £nil) has been charged to the share premium account. 4. INTEREST PAYABLE As restated 2006 2005 £ £ On bank loans and overdrafts 23,090 57 On other loans 30,417 - Preference shares 224,379 224,643 Bank fees 56,406 - ------- -------- 334,292 224,700 ======= ========In accordance with FRS 25 the dividends paid on the Preference Shares have beenreclassified as interest in the prior year. 5. TAXATION 2006 2005 £ £ Analysis of tax charge in year Current tax (see note below) UK corporation tax charge on profits of the year 284,632 120,692 Adjustments in respect of prior periods 18,448 21,832 ------- ------- Total current tax 303,080 142,524 ------- ------- Deferred tax Origination and reversal of timing differences (18,593) (21,049) ------- ------- Total deferred tax (see note 15) (18,593) (21,049) ------- ------- Tax on profit on ordinary activities 284,487 121,475 ======= ======= 6. TAXATION (continued) 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: 2006 2005 £ £ Profit on ordinary activities before tax 469,289 236,135 ======= ======= Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2005 - 30%) 140,787 70,841 Effects of: Amortisation & expenses not deductible for tax purposes 127,680 95,798 Capital allowances for period in excess of depreciation 3,312 1,760 Movement in general provisions 15,280 19,136 Adjustments to tax charge in respect of prior periods 18,448 (21,832) Ineligible depreciation of fixed assets - 806 Marginal relief (2,427) (23,985) ------- -------- Current tax charge for year (see note above) 303,080 142,524 ======= ======== There were no factors that may affect future tax charges. 7. DIVIDENDS 2006 2005 £ £ Total dividends paid 115,965 - On 14 February 2006 a dividend of 18 pence per ordinary share was paid to all shareholders on the register of members at 10 February 2006. 8. DEBTORS Group Company ----------------------------------------------- 2006 2005 2006 2005 £ £ £ £ Due after more than one year Other debtors 127,650 92,400 127,650 92,400 Due within one year Trade debtors 2,805,306 1,245,113 2,805,306 1,245,112 Amounts owed by group - - 241,114 - undertakings Other debtors 8,590 26,191 8,590 26,191 Prepayments and accrued income 355,236 49,451 355,234 49,448 Deferred tax asset 39,902 21,309 39,902 21,309 -------- --------- --------- --------- 3,336,684 1,434,464 3,577,796 1,434,460 ======== ========= ========= ========= 9. CREDITORS: Amounts falling due within one year Group Company ----------------------------------------------- 2006 2005 2006 2005 £ £ £ £ Bank loans and overdrafts - 555,620 - 555,620 Trade creditors 2,831,298 1,704,070 2,831,298 1,704,070 Amounts owed to group undertakings - - 1,000 1,000 Corporation tax 286,704 142,524 198,167 142,524 Social security and other taxes 54,157 67,886 54,157 67,886 Other creditors 8,379 4,410 303,399 4,410 Accruals including deferred consideration 1,862,422 830,147 1,862,422 830,147 -------- --------- --------- --------- 5,042,960 3,304,657 5,250,443 3,305,657 ======== ========= ========= ========= Included within bank loans and overdrafts is an amount of £nil (2005 - £54,040)in relation to the balance on the invoice discounting facility. This was securedupon the underlying trade debtors. The bank overdraft is repayable on demand. Interest is charged at 1.75 per cent.above the bank's base rate. Barclays Bank plc has a debenture incorporating a fixed and floating charge overthe undertaking and all property and assets present and future includinggoodwill, book debts, uncalled capital, buildings, fixtures, fixed plant andmachinery. MCL Property Investments Limited has a rent deposit deed secured against allmonies due or becoming due from the company to the chargee under the terms ofthe instrument creating the charge. The charge is over the separate designatedinterest bearing deposit account opened in the name of the landlord with Coutts& Co. Included within accruals is deferred consideration of £1,509,968 (2005 -455,620) in respect of the Subsidiaries acquired in the current and prior years. 10. CREDITORS: Amounts falling due after more than one year Group Company -------------------------------------------- As restated As restated 2006 2005 2006 2005 £ £ £ £ Cumulative redeemable preference shares - 1,870,593 - 1,870,593 ===== =========== ======= ========= In accordance with FRS 25, the Preference Shares have been reclassified as debtfalling due after more than one year in the prior year. The cumulativeredeemable preference shares had an interest rate of 12 per cent. Immediatelyprior to the group's admission to AIM on 15 February 2006 the Preference Shareswere converted to ordinary shares. 11. NET CASH FLOW FROM OPERATING ACTIVITIES 2006 2005 £ £ Operating profit 799,230 444,454 Amortisation of intangible fixed assets 944,211 479,072 Depreciation of tangible fixed assets 120,579 75,047 Loss on disposal of tangible fixed assets 201 - Increase in debtors (1,706,863) (230,691) Increase in creditors 1,095,395 923,048 ---------- --------- NET CASH INFLOW FROM OPERATIONS 1,252,753 1,690,930 ========== ========= 12. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 2006 2005 £ £ RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received 4,351 16,381 Interest paid (511,059) (224,700) ----------- ----------- NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (506,708) (208,319) ----------- ----------- 2006 2005 £ £ CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of intangible fixed assets (6,478,656) (2,523,767) Purchase of tangible fixed assets (179,400) (105,746) Sale of tangible fixed assets 2,073 - ----------- ----------- NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (6,655,983) (2,629,513) =========== =========== 2006 2005 £ £ FINANCING Issue of ordinary shares 8,200,000 - Expenses paid in connection with share issues (1,039,851) - Invoice discounting - 54,040 Repayment of invoice discounting (54,040) - Shareholder loans 250,000 - Repayment of shareholder loans (250,000) - ----------- ----------- NET CASH INFLOW FROM FINANCING 7,106,109 54,040 =========== ===========13. ANALYSIS OF CHANGES IN NET DEBT 1 April Cash flow Other 31 March non-cash changes 2005 2006 £ £ £ £ Cash at bank and in hand 160,090 419,726 - 579,816 Bank overdraft (501,580) 501,580 - - --------- -------- ---------- -------- (341,490) 921,306 - 579,816 DEBT : Deferred consideration (455,620) 1,293,118 (2,347,466) (1,509,968) Invoice discounting (54,040) 54,040 - - Preference shares (1,870,593) - 1,870,593 - --------- -------- ---------- -------- NET DEBT (2,721,743) 2,268,464 (476,873) (930,152) ========== ========= ========== ========= 14. EARNINGS PER SHARE Earnings per share is calculated on the basis of profit of £184,802 (2005 -£114,660) divided by the weighted average number of shares in issue for the yearof 15,916,367 (2005 -15,210,300). The weighted average number of shares has beenadjusted to reflect the conversion of the Preference Shares into ordinary sharesand the bonus issue of 13,942,775 ordinary shares prior to admission. Thediluted earnings per share is calculated on the assumption all options areexcerised, Preference Shares are converted and the bonus issue had taken place.This would give rise to a total weighted average number of ordinary shares inissue for the period of 17,598,650 (2005 - 16,164,530). A more realistic measure for basic earnings per share is arrived at by using theprofit for the financial year before interest taxation depreciation andamortisation of £1,864,020 (2005 - £998,573) divided by the relevant weightedaverage number of shares. Year ended Year ended 31 March 2006 31 March 2005 Basic Diluted Basic Diluted £ £ £ £Profit for the financial year before interesttaxation depreciation andamortisation 1,864,020 1,864,020 998,573 998,573Profit for the financial year 184,802 184,802 114,660 114,660 Earnings per share before interest taxationdepreciation andamortisation 11.71 pence 10.59 pence 6.57 pence 6.18 penceEarnings per share 1.16 pence 1.05 pence 0.75 pence 0.71 pence Number of shares Number of sharesWeighted average number of shares:For basic earnings per share 15,916,367 15,210,300Exercise of share options 1,682,283 954,230 ---------- ----------- 17,598,650 16,164,530 ========== =========== This information is provided by RNS The company news service from the London Stock Exchange