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March 2014 trading update & acquisition

AdEPT Telecom PLC (“AdEPT” or the “Company”)

Trading Update and Acquisition

Please click here to read the full RNS announcement

AdEPT Telecom plc, one of the UK’s leading independent providers of voice and data telecommunications solutions, today announces a trading update for the year ended 31 March 2014 (ahead of its final results which are expected to be announced in early July 2014) and details of the acquisition of Bluecherry Telecom Limited.

Trading performance

The Company is pleased to announce that it anticipates that underlying EBITDA will be ahead of the previous year and in line with the market expectations of an 8% rise year-on-year. Adjusted* profit before tax is expected to be ahead of the prior year and in line with market expectations. Turnover is expected to be in line with the previous year but slightly below market expectations.

* adjusted for amortisation and share option costs

Cash flow and net debt

The reduction in net borrowings was ahead of market expectations. Net borrowings reduced by £0.3m in the year to £3.0m as at 31 March 2014. AdEPT continues to generate consistently strong cash flow. This reduction in debt is after payment of (i) the deferred consideration for the acquisition of customer contracts from Expanse Communications (UK) Limited and Bluebell Telecom Limited, (ii) 18 months corporation tax following the transition to large company status for tax purposes and (iii) a 200 per cent. increase in dividends.

Dividends

AdEPT announced an interim dividend of 1.50p per share in its September 2013 interim statement, which will paid to shareholders on 11 April 2014. The Board today announces that it recommends a final dividend of 1.50p (2012: 0.75p) per Ordinary Share which, subject to Shareholder approval at the Annual General Meeting later in the year, will be paid in October 2014. Total dividends declared during the year ended 31 March 2014 of 3.00p per Ordinary Share represent a 100 per cent. increase year-on-year (2012: 1.50p).

Acquisition

AdEPT has c20,000 customers. The 1,000 largest customers equate to about half of the revenue and the 19,000 smaller customers the other half. Our strategy is to concentrate our organic sales efforts on attracting larger customers, particularly in the public sector. Rather than operate a telesales operation aimed at acquiring smaller business customers we instead use our cash generation to buy customer bases from other telesales operations in the industry. Our smaller in-fill acquisitions are therefore simply an alternative to sales and marketing spend.

The Board of AdEPT is pleased to announce another small, partly in-fill, acquisition. We have signed an agreement to acquire the share capital of Bluecherry Telecom Limited (“Bluecherry”) for an initial consideration of £1.8m plus the value of the net assets at completion (estimated to amount to £0.25m and being represented by cash), payable in cash. Further consideration of between £0.2m and £0.75m will be payable, also in cash, dependent upon performance of the contracts post-acquisition. The total consideration will be funded out of AdEPT’s existing bank facilities. The business customers of Bluecherry complement the AdEPT portfolio as they are all UK-based fixed-line telecom business customers taking communications products including lines, calls and broadband services. Management of the Bluecherry contracts will be transferred to AdEPT’s office in Tunbridge Wells, Kent during April 2014. Based on recent management accounting information, annualised revenue and EBITDA of Bluecherry is approximately £1.2 million and £0.45 million respectively.