AdEPT confident despite ongoing supply chain challenges
By Josh White
Date: Tuesday 15 Nov 2022
(Sharecast News) - Managed IT and communications service provider AdEPT reported a "resilient" set of interim results on Tuesday, with group revenue broadly stable at £34.2m, compared to £34.3m a year earlier, amid ongoing global supply chain issues.
The AIM-traded firm reported organic growth of 3% in cloud-centric strategic services, with revenue increasing £0.5m to total £15.1m in the six months ended 30 September.
Managed services revenue grew 3% organically, increasing to 89% of group revenue from 87% in the same period a year ago, offsetting the structural decline in revenue from legacy traditional telephony, from which it was continuing to move away from.
Underlying EBITDA slipped to £5.4m from £5.7m, while the company's underlying EBITDA margin fell to 15.9% from 16.7%.
Adjusted profit after tax came in at £3m, broadly in line with the £3.1m it recorded in the first half of the 2022 financial year, while adjusted, fully-diluted earnings per share were 12.1p, compared to 12.5p a year earlier.
AdEPT paid deferred consideration of £4.3m for Datrix in July, with no further amounts now due.
The board described "strong" cash flows, with its strategy to reduce gearing progressing to plan.
Net senior debt, after the £4.3m Datrix payment, totalled £30.7m as at 30 September, down from £31.2 million year-on-year.
It said its senior debt and acquisition liabilities had decreased by £5.9m, or 16%, in the last 12 months, while its reported EBITDA conversion to post-tax cash from operating activities rose to 91% from 82%.
The firm maintained its "low" capital expenditure at 1.6% of revenue, in line with the same period last year.
An interim dividend of 2.5p was declared, up from the nil distribution it made for the first half last year, and 150% higher than the final dividend of 1p for the 2022 financial year.
That made for a dividend cover of 4.8x.
Looking ahead, AdEPT reported a secured project revenue backlog of £1.1m, resulting from global equipment supply shortages - which began to ease in the second quarter - being deferred to the second half, and the 2024 financial year.
The board said the company's future growth prospects were "strong", supported by its new strategic alliance with Canon UK, its ability to capture a "greater wallet-share" with AdEPT now accredited as a Sage Intacct Partner, its success using the Department for Education's £150m fund under the 'Connect the Classroom' initiative, and a "strong pipeline" of opportunities driven by macro technology market trends.
Its short-term outlook was still "challenging", but the board said it considered the group's long-term prospects to be "as strong as ever".
"With many of the challenges affecting the group being outside of our control, we have focussed on the areas which we are able to influence, making good progress on our three strategic pillars," said chairman Ian Fishwick.
"Whilst headwinds remain, constraining organic growth, the group has made good strategic progress and there remains a strong pipeline of opportunities across the public and private sectors, driven by macro technology market trends, and helped by specific government initiatives relating to education.
"The long-term prospects for AdEPT remain as strong as ever."
At 1233 GMT, shares in AdEPT Technology Group were down 12.45% at 107.25p.
Reporting by Josh White for Sharecast.com.
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