A ‘step change’ in AdEPT Telecoms ambition and scope for growth – Northland Capital Partners

* On February AdEPT Telecom Plc (LON:ADT) announced the acquisition of OurIT Group – dated February 1st – for an initial consideration of £4.75m.

* AdEPT also announced that it had signed a £30m, 5-year revolving credit facility with Barclays Bank and The Royal Bank of Scotland to fund expansion and provide for acquisition activity.

* As AdEPT has noted, delineation of unified communications provision from that of managed IT services is increasingly semantic, as required by clients’ needs. The acquisition of OurIT Group is aligned with AdEPT’s unified communications strategy and takes its exposure to this value-added segment from 27% of total revenue in 2015 to an estimated 62% by 2018. The acquisition should greatly increase the target clients within AdEPT’s range.

* The new credit agreement signals an increase in the Group’s ability to support expansion via acquisition and added services provision and equates, in our view, to a ‘step change’ in AdEPT’s ambition and scope for growth.

NORTHLAND CAPITAL PARTNERS VIEW: Overall, we estimate that the acquisition of OurIT Group will result in a 16% uplift to FY18 revenue and an additional 12% at adjusted EBITDA level. Net debt increases from an estimated £11.5m in FY17 to £17.1m. In FY17 there is a minimal, two-month, earnings contribution from OurIT. The 2018 earnings uplift underpins our raised target price on the basis of maintained target multiples.

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