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16 – Telecom Direct

November 2007 – Acquisition No. 16 – Telecom Direct

AdEPT Telecom plc announces the £6.4 million acquisition of Telecom Direct Limited

AdEPT Telecom plc ( “AdEPT” or “the Company”), a leading independent provider of award-winning telecommunications services and landline calls, line rental and broadband is pleased to announce

  • A substantial acquisition of fixed line reseller Telecom Direct Limited (“Telecom Direct”) which for the 12 months to March 2007 generated revenues of £13 million. As a result, AdEPT has become one of the UK’s largest fixed line resellers.

AdEPT separately announces its interim results today for the six months ended 30 September 2007.

Roger Wilson, Chairman of AdEPT said: “Today’s announcement marks a step change in the size and future potential of our business. The acquisition of Telecom Direct will increase turnover by 60% and we expect the deal to be significantly earnings enhancing over the medium term. We are also delighted that the founder of Telecom Direct, Dave Stretch, is remaining with AdEPT to run the Telecom Direct division.”

Dave Stretch, Director of Telecom Direct said, “I believe that the strength and experience of AdEPT will bring significant benefits to our customers and channel partners. I am looking forward to working with the AdEPT team and continuing to expand the enlarged business.”

Acquisition of Telecom Direct Limited

AdEPT is acquiring Telecom Direct, one of the oldest independent fixed line telecom resellers in the UK, established in 1997. The acquisition follows the Company’s core strategy of acting as a consolidator of the highly fragmented fixed line business market. Telecom Direct represents a natural fit with AdEPT as it operates o ery similar model and customer base and should immediately benefit from the introduction of AdEPT’s automated back-office systems.

Telecom Direct currently provides voice telephone services to 5,500 business customers. In the year to 31 March 2007, Telecom Direct generated revenues of £13 million and profits before tax of £0.2 million. The acquisition will therefore increase AdEPT’s turnover by over 60% per annum, making the Company one of the largest fixed-line reseller’s in the UK.

The consideration payable by AdEPT is subject to performance criteria. We are currently estimating a total payment of £6.4 million, to be satisfied by a cash payment of £5 million on completion, £0.4 million payable six months following completion, and the balance of £1 million payable after 12 months. As the final amount paid is subject to future operational and financial criteria the actual amount may be more or less than this. The total consideration will be funded by a mixture of cash and bank debt.

Commenting on the acquisition, Roger Wilson, Chairman of AdEPT said, “This is a very significant transaction as it has immediately changed the scale of the business. We expect the deal to be significantly earnings enhancing in the medium term.”