AdEPT Technology Group plc (LON:ADT), one of the UK’s leading independent providers of managed services for IT, unified communications, connectivity, and voice solutions, has provided the following trading update ahead of its AGM, which is being held later today.
The Board is pleased to report a positive start to the year, with current trading in line with its expectations. Organic growth has delivered improvements in recurring revenues for cloud centric services both ahead of Q121 and pleasingly, also ahead of Q421, a trading quarter which saw more normal business activity following the disruption caused by COVID-19.
Revenues in one-off services are also ahead of Q121 with demand for technology products returning. We are also seeing an encouraging trend of repeated business from existing clients for their one-off purchases. The well documented supply issues caused by the global chip shortage has the potential to delay the delivery of some products and associated services, but we are working closely with our partners to mitigate supply chain delays where possible.
Given the COVID driven focus on working from home during the first half of 2021 the increased decline in traditional telephony revenues is as expected and is unlikely to stabilise until employees return more fully to onsite working. This area now accounts for only 12% of the Group’s total revenues reflecting the strategy to grow in other products and services to mitigate the decline in this area.
Continued strong cash generation
Cash generation in Q1FY22 remained strong, with the Group generating £2.5m of operating cash flow, which represents 96% cash conversion. Strong cash flows and the Group’s new banking facility, signed in March 2021, were employed to fund the acquisition of Datrix in April 2021. Net cash outflow in Q1 FY22 was £7.5m. Following these movements, the net debt at the end of Q1 (June 2021) stands at £32.0m (FY21: £25.6m).
Considerable progress has been achieved on the integration of Datrix, the award-winning supplier of advanced cloud-based networking, communications, and cyber security solutions business acquired in April for an initial consideration of £9.0m.
Since acquisition, Datrix has been successfully, and ahead of schedule, migrated onto One AdEPT, the Group’s core operating system. One AdEPT lies at the heart of the Group’s growth strategy, providing high levels of operational visibility and a scalable platform for cross-selling its growing range of in-demand capabilities. The rapid integration of Datrix on to the platform demonstrates the Group’s ability to deliver on its strategy to continuously consolidate this fragmented market.
The Board is pleased to note that Datrix has secured contract renewals and new business wins since joining the Group and received positive client feedback about the benefits of being part of a larger business.
As an example of AdEPT’s ability to deliver on its promises, the contract with the TUC, reported in the Final Results in July, has been successfully completed on time and on budget. This engagement utilised AdEPT Nebula, the Group’s hybrid cloud platform, a solution that proved to be a key differentiator in securing the project win, enabling AdEPT to provide the TUC with a full IT solution which addressed all its business continuity objectives. This project win and subsequent delivery clearly demonstrates the value of our investment in AdEPT Nebula and the potential new opportunities it brings to the Group.
In relation to product, AdEPT Technology Group continues to evolve its Education Suite, having recently launched a new software product for the education market, comprising a low-cost synchronising utility, ‘Nimbus Sync’.
Nimbus Sync is designed to help schools synchronise their cloud-based learning platforms with their Management Information Systems (MIS) without the need to re-key. This is an area that had previously proved challenging, creating additional work for administrators already under significant pressure. The software can synchronise data in minutes and continue to do so in the background without the need for any intervention.
Launch of ESG
The Group has now completed its review of Environmental, Social and Governance frameworks and has elected to adopt the UN Global Compact as a sensible and pragmatic option, allowing AdEPT to report against the goals relevant to AdEPT and where it can have the most impact.
As part of this published ESG policy AdEPT is looking to achieve Carbon Neutral status by 2030.
An initial report has been produced to set out the most relevant goals and how AdEPT can contribute to these. This has been launched internally and will be updated regularly. For transparency, this is also available on the ADEPT investor website.
Outlook and half year results
AdEPT’s primary focus remains the delivery of strong organic growth, harnessing the overall market shift to cloud centric solutions. In parallel, we will seek opportunities to consolidate the fragmented ICT market further, through complementary acquisitions which generate strong levels of recurring revenue and margin.
The Board is pleased to report a positive start to the year with the Group trading in line with its expectations in the first four months of the financial year ending 31 March 2022 (“FY22”).
AdEPT intends to announce its half year results for the six months to 30 September 2021 in mid-November 2021.
Our priority for the next 6 months will be to pay down debt and we will review our dividend policy at year-end.