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Northland Capital partners view on AdEPT Telecom this morning

Northland Capital partners view on AdEPT Telecom: Full year results were in line with AdEPT’s outlook at  April 5th Trading Update – EBITDA at £6.15m matching the outlook; net debt of £6.0m, slightly better than the Update £6.2m expectation – at which time the increase in proposed dividend was announced.  We subsequently raised our price target from 305p to 310p on June 29th with the acquisition of Comms Group U.K. Ltd., reflecting AdEPT’s continuing commitment to its unified communications offering.  This is the restated message of today’s results; a clear strategy matched by progress in both contract freuqnecy and quality.

March 2016 EBITDA +34%, in line; emphasis on unified communications offering
n  AdEPT reported strong performance for the year to March 31st 2016 led by EBITDA of £6.15m, +34%YoY, ahead of our initial outlook of £5.9m, and reduced year-end net debt at £6.0m (previous NCP estimate was £7.0m).   The recommended full year dividend is 6.50p/share, +37%YoY.


n  During FY16 AdEPT continued to build on the public sector-oriented unified communications services platform established with the acquisition of Centrix in May 2015, developing inroads into local authority and NHS public sector institutions,  built on its presence in around 70% of London-based private hospitals


n  Backed by its Barclays PLC revolving credit facility, AdEPT underpinned its Centrix platform with the post-period (May 2016) acquisition of unified communications provider Comms Group U.K. Ltd., for an initial cash consideration of £3.5m.  We estimate that £5.0m of the Barclays facility currently remains undrawn, and expect AdEPT to continue its strategy of selective acquisition.


n  FY17-18 estimates.  For FY17 we expect revenue of £32.6m, EBITDA at £7.0m (estimates unchanged); EBITDA margin of 21.5%.  Our FY18 outlook takes a prudent stance at this point, mindful of the impact of medium-term economic uncertainty on potential for additional growth through new contract demand


n  Price target remains unchangedWe raised our price target from 305p to 310p on the acquisition of Comms Group U.K. Ltd., subsequent also to the April Trading Update at which AdEPT previewed FY16 earnings which were confirmed in today’s announcement



Year end Mar Revs (£m) Adj. EBITDA (£m) Adj. PBT (£m) Tax (%) Adj. EPS (p) PER (x) Div (p) Net cash (£m) Yield (%)
2015A 22.1 4.6 4.4 14.0 14.8 17.0 4.8 (1.5) 1.9
2016A 28.9 6.2 5.5 14.2 18.5 13.6 6.5 (6.0) 2.6
2017E 32.6 7.0 6.3 18.5 21.8 11.6 7.0 (10.0) 2.8
2018E 32.9 7.1 6.4 18.0 22.1 11.4 7.5 (8.8) 3.0

Source: Company Data and Northland Capital Partners Limited.   *Northland Capital Partners Limited is the Nominated Advisor and Broker to AdEPT.


Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.