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Final Results March 2008

RNS Number: 3567Z
AdEPT Telecom plc
18 July 2008

Final Results for the 12 months ended 31 March 2008

AdEPT, a leading independent provider of award-winning telecommunications services for fixed line, mobile and data, announces its results for the year ended 31 March 2008.

Financial Highlights

  • Revenue increased by 25% to £23.6 million driven by the acquisitions made during this year and the previous period;
  • EBITA excluding non-recurring costs increased by 30% to £3.2 million;
  • EBITA margin excluding non-recurring costs up from 12.9% of sales in 2007 to 13.4% in 2008;
  • 97% of EBITA (£1.8m) turned into cash generated from operations (£1.8m) (114% in 2007); and
  • Adjusted earnings per share, after adding back amortisation and non-recurring costs up 48% to 11.43p per share (2007: 7.71p).

Operational Highlights

  • Acquired two of our competitors’ customer bases, including Telecom Direct with £12m sales per annum;.
  • Completed the integration of both acquisitions within six weeks;
  • Achieved a higher mix of business customers with total business revenue up from 87% at March 2007 to 93% this year, increasing the stability of our overall customer base;
  • Customer churn reduced substantially in the year and continued growth in organic sales channels;
  • Direct debit customers now 66% of revenue, up from 58% March 2007;
  • Excellent progress in increasing revenue from fixed monthly charges, with line rental revenues at March 2008 up 86% at £7.8m (2007: £4.2m);
  • Line rental and data products represented 35% of total revenues at March 2008 (23% March 2007); and
  • Administration costs (excluding one-off restructuring costs) fell from 26% of revenue in 2007 to 23% in 2008.

Commenting upon these results Chairman Roger Wilson said:

“We are delighted to report another strong set of results. The business continues to be strongly cash generative, with an EBITA: Sales ratio amongst the sector’s leaders. The integration of Telecom Direct was completed within our normal six weeks and the call centre and operations departments were transferred to Tunbridge Wells in January 2008.”

CHAIRMAN’S STATEMENT

It is with great pleasure that I announce our annual results.

For the year ended 31 March 2008 AdEPT Telecom plc (“AdEPT” or the “Company”) delivered another strong trading performance.

Review of Operations

The business was established to be a consolidator of the highly fragmented UK fixed line reseller sector which is estimated to comprise approximately 1,000 mostly smaller telecom businesses. To date AdEPT has acquired 16 competitors and/or their customer bases of which the two listed below were completed in the period under review:

June 2007
The remaining part of Fizz Telecom Limited (“Fizz Telecom”) not acquired in June 2006

December 2007
Telecom Direct Limited (“Telecom Direct”)

A critical element of our acquisition strategy is the ability to integrate the acquired customer bases into AdEPT’s systems within 6 weeks. Both of the acquisitions referred to above were integrated within this timeframe. Rapid integration into AdEPT’s automated back office systems significantly enhances the profitability of the acquired customer bases.

We are fast achieving our strategic aim of making our customer base more stable by moving away from lower-spending, higher churn residential customers to focus on business customers. In the year to 31 March 2008, 93% of group revenues were derived from business customers compared to 87% in the prior period. This reversal of customer focus has been driven by the recent acquisitions; all of which continue to be focused on business customers.

Our retention and customer service teams have reduced customer churn substantially in the year. Our indirect sales channel of independent business partners continues to grow with over 60 partners active in bringing us new customers in the second half of the year. We have seen an increase in the size of new customers with important wins such as nine of the regional Probation Services, and a further two awarded since year end.

Growing line rental revenues has been a key objective and we are delighted to report line rental revenues increased 86% to £7.8m compared to £4.2m in the prior year. Our revenue is becoming more stable as we reduce our reliance on variable monthly call charges, replacing them with fixed monthly line rentals.

Employees

As a company we are immensely proud of the track record we have created in a relatively short period of time. Our success is a result of the efforts of all our employees and on behalf of the Board I would like to take this opportunity to thank them for all their hard work.

Outlook

As we enter a period of economic uncertainty the business is in a much stronger position than before with a more stable customer base, a higher proportion of fixed monthly revenues and more customers paying by Direct Debit. We will focus very closely on our debtors to ensure payment terms do not get extended.

The business focus for this coming year is to continue to increase organic sales and customer retention. We will therefore invest more in our organic sales channels and complement this with continued investment in retention activities to retain more customers. The launch of our new Telesales team in February 2008 allows us to target up-selling of products and contract renewals to our existing customers along with new customer acquisition.

Roger Wilson
Chairman
18 July 2008

A SUMMARY of our three year financial performance is set out in the following table:

  2008 £’000 YOY Growth % 2007 £’000 YOU Growth % 2006 £’000
Revenue 23,618 25% 18,827 63% 11,521
EBITA* excluding non-recurring costs 3,161 30% 2,427 41% 1,724
Retained earnings (add back amortisation and non-recurring costs) 2,408 48% 1,625 47% 1,109

* Earnings Before Interest, Tax and Amortisation