TIDMADT
RNS Number : 3618E
AdEPT Technology Group PLC
07 July 2021
7 July 2021
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. It forms part of United Kingdom
domestic law by virtue of the European Union (Withdrawal) Act 2018.
Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
ADEPT TECHNOLOGY GROUP PLC
("AdEPT" or the "Company" or the "Group")
FINAL RESULTS 2021
AdEPT, one of the UK's leading independent providers of managed
services for IT, connectivity, unified communications solutions,
and cloud services, is pleased to announce its final results for
the full year ended 31 March 2021 ("FY21").
The Group delivered a resilient financial performance under
highly challenging trading conditions and made considerable
progress in its strategic ambitions, despite the disruption.
Financial highlights
-- Revenue of GBP57.9m at 94% of FY20 (2020: GBP61.7m)
-- Gross Profit of GBP27.6m at 91% of FY20 (2020: GBP30.2m)
-- Underlying EBITDA of GBP9.8m at 84% of FY20 (2020: GBP11.7m)(1)
-- Underlying EBITDA margin of 17% (2020: 19%)
-- Adjusted fully diluted earnings per share of 22.4p (2020:
28.0p)(2)
-- Cash generation from operating activities after tax GBP7.4m
(2020: GBP7.6m)
-- Cash at year-end GBP13.2m (2020: GBP11.8m)
-- Conversion of reported EBITDA to operating cash flow before
tax of 89% (2019: 82%)
-- Year-end net senior debt reduced to GBP25.6m (2020: GBP27.9m)(3)
-- Capital expenditure remains at 2% of revenue (2020: 2%)
1 Underlying EBITDA is defined as operating profit after adding
back depreciation, amortisation, acquisition fees, restructuring
costs, adjustment to deferred consideration and share-based
payment charges
2 Profit after tax adding back amortisation, share option
charges, the taxation deduction on purchased customer contracts,
deferred tax credits on amortisation charges, restructuring
and acquisition costs
3 Net senior debt is defined as cash and cash equivalents
less short-term and long-term senior bank borrowings and
prepaid bank fees
Operational highlights
-- Significant progress on Project Fusion, the creation of ONE
AdEPT - a single set of financial and operational systems
providing the Group with a scalable platform for growth
-- Revenue from Public Sector & Healthcare has increased to
55.5% (2020: 44.7%)
-- Cloud Centric Strategic Services revenues up 9% year on year
to GBP25.1m (2020: GBP23.1m)
-- Traditional Telephony as a percentage of revenues reduced
to 19% (2020: 21%)
-- Managed services accounted for 81% of both total revenue
and EBITDA (2020: 79%)
-- New enlarged GBP50m banking facility to support investment
in growth
Post year-end highlights
-- Strategic acquisition of Datrix Limited ("Datrix"), in April
2021, a business focused on enterprise networks and security
which enhances the Group's core capabilities and strengthens
its presence in the NHS vertical market - integration on
track
-- Firm plans for Datrix to transition to the One AEPT platform
by September 2021
-- Brings new strategic partnerships with Cato Networks, Extreme
Networks and Palo Alto which fulfil key customer needs
Current trading and outlook
-- Strong momentum from Q4 FY21 has continued into the new financial
year
-- Sales and margins achievement in line with market expectations
in the year to date
-- The Board views the future opportunities for the Group with
confidence
Phil Race, CEO of AdEPT, said: "While the pandemic temporarily
interrupted the trajectory of our growth, the Board is pleased with
the progress achieved under challenging circumstances. Given our
strategic focus on Cloud Centric Strategic Services the organic
growth of 9% in this aspect of our business is particularly
pleasing. We are confident that the opportunities for the Group
remain strong, in a vibrant technology market, with demand for
effective ICT services at an all-time high and likely to remain
so.
The momentum gained by the Group in Q4 FY21 has continued into
Q1 FY22 with sales and margins in the new financial year to date
firmly in line with market expectations. Our focus remains on the
delivery of strong organic growth, whilst seeking further
opportunities to consolidate the fragmented market, through
complementary acquisitions which generate strong levels of
recurring revenue and margin. Our new integrated operating system,
ONE AdEPT, lies at the heart of our plans, providing the Group with
a scalable platform for growth.
The business is in great shape and the Board views the prospects
for the Group in the year ahead and beyond with confidence."
The person responsible for the disclosure of this announcement
for the purposes of EU Regulation 596/2014 is John Swaite, Finance
Director.
For more information please contact:
AdEPT Technology Group Plc
Ian Fishwick, Chairman Tel: 07720 555 050
Phil Race, Chief Executive Officer Tel: 07798 575 338
John Swaite, Finance Director Tel: 01892 550 243
Singer Capital Markets (Nominated
Adviser & Broker)
Shaun Dobson / Iqra Amin Tel: 020 7496 3000
Belvedere Communications
Cat Valentine Tel: 07715 769 078
Keeley Clarke Tel: 07967 816 525
adeptpr@belvederepr.com
About AdEPT:
AdEPT Technology Group plc is one of the UK's leading
independent providers of managed services for IT, unified
communications, connectivity, and voice solutions. AdEPT's tailored
services are used by thousands of customers across the UK and are
brought together through the strategic relationships with tier-1
suppliers such as Openreach, BT Wholesale, Virgin Media, Avaya,
Microsoft, Dell, and Apple.
AdEPT is quoted on AIM, operated by the London Stock Exchange
(Ticker: ADT). For further information please visit:
www.adept.co.uk .
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present AdEPT Technology Group's results for the
year ended 31 March 2021, which show a resilient financial
performance and considerable strategic achievement under highly
challenging trading conditions.
Our strong presence in the Public Sector and limited exposure to
the sectors most impacted by the pandemic, such as travel, high
street retail and leisure, have shielded AdEPT from the extreme
impacts of the lockdown restrictions. The Group was, however,
affected by a reduction in demand for support services and in the
sale of technology products, as business closures during lockdown
restricted on-site access and customers swapped significant
infrastructure projects for more tactical purchases, including
laptops and tablets. Customer confidence, which returned in Q4
FY21, is continuing through into the current Financial Year, as the
vaccine programme rolls out and restrictions lift. Attention is
moving to strategic solutions and the Group is securing new
projects in this market.
Despite the many challenges, AdEPT continued to deliver on its
strategy in FY21, adding new framework agreements, a key route to
market; extending its partnerships; and, post the year-end,
completing a major acquisition - Datrix, utilising our new, larger,
banking facility agreed in April 2021. Our cloud centric services
portfolio, which is at the heart of our strategic ambitions,
continued to grow during the year. We are particularly proud of the
support we gave to over 500 schools, helping them migrate to remote
learning, and to more than 400 Doctors' surgeries, as they switched
to remote practice.
Our resilient performance was achieved through swift management
action, the agility of our business operations, and the commitment
and hard work of the entire AdEPT team.
The pandemic has significantly accelerated changes to the way we
work, and AdEPT is in an excellent position to capitalise on the
growth opportunities this presents. Our focus on unifying
technology and bringing together and integrating communications,
technology platforms and networking for our clients puts us at the
heart of a converging ICT world. The new financial year has started
well for the Group with a strong pipeline of organic growth
opportunities, arising from a need for long term strategic
Information & Communications Technology ("ICT") solutions, and
an ongoing focus on acquisition opportunities to expand the Group's
core strengths and consolidate the market further. Our growth
ambitions are supported by the Group's renewed banking facility and
ONE AdEPT, which give us the necessary financial resources and
integrated infrastructure to build a Group of breadth and
scale.
We are hugely optimistic for the future of cloud centric
technologies and in turn remain confident in the prospects for
AdEPT in the year ahead and beyond.
Long-term vision and strategy
The subject of ICT in all its guises, from; unified
communications empowering businesses to operate from bedrooms and
kitchens to high performance networks to transport huge amounts of
data, to the acceleration of cloud adoption, placing business
applications where they can be easily accessed, have all been key
to allowing business to trade and in some cases flourish during the
pandemic.
This is the world in which AdEPT operates. AdEPT supports
thousands of companies and millions of people with critical aspects
of their day to day lives.
Clear mission
Our mission is 'Uniting Technology, Inspiring People'. We will
help our customers navigate the storm of ICT innovation, to help
them make the best use of technology, so they can communicate,
operate, and transform successfully. We will do this by continuing
to learn, adapt, and listen, working with great partners, to
deliver flawless solutions.
Our aim is to become the industry benchmark and a business with
whom organisations and partners aspire to work, all powered by a
unified platform that makes us both efficient and effective.
Market consolidator
We remain focused on our goal to grow both organically and by
acquisition, leveraging the Group's banking facilities which are
supported by a strong balance sheet and high cash generation. By
consolidating a fragmented market, through complementary
acquisitions with strong levels of recurring revenue and margin, we
will bring enhanced capability to customers and strengthen our
presence in key vertical markets.
Many opportunities present themselves in our markets and we will
continue to select and examine these carefully against our clearly
defined target profile of strong recurring margins; cloud centric
product focus; operating in an appropriate geography; adding
relevant capability; consolidating a vertical market; or bringing
new strategic product partnerships.
The acquisition of Datrix, post year end, is an excellent
example of our strategy in action. It has excellent recurring
margins, provides enterprise networking and security focused on the
cloud, is UK centric with a London headquarters, brings new market
relevant SD-WAN capability to the AdEPT Group, has a strong
presence in the NHS - a vertical of interest and relevance to
AdEPT, and has excellent partnerships with Cato and Extreme, both
highly successful players within the secure networking arena. As
such, Datrix ticks every box within our stated target profile.
Focus on service excellence
We will continue to invest carefully in our own capability,
funding Project Fusion that is delivering our ONE AdEPT programme -
a suite of operational systems for use by all employees that
improves efficiency, ensures the delivery of increasingly high
levels of customer service, and provides operational insight. We
will also invest further in AdEPT Nebula, the hybrid cloud platform
now used by over 635 of our clients.
Whilst the Group continues to generate revenues from traditional
telephony, such as call billing and telephone line provision, this
is a diminishing aspect of our business, as we encourage our
customers to transition from copper-wire technologies. AdEPT's
portfolio is now firmly aligned to cloud centric solutions, and
this is underpinned by a range of class-leading partners. As a
result, we are well placed to take advantage of the accelerated
growth in advanced cloud-based solutions, as businesses switch to
more flexible working patterns and increased homeworking.
People and our commitment to diversity
Our growth is dependent on the commitment of our entire team and
good employee communication and engagement is vital. We conduct an
Employee Engagement Survey annually and use the feedback gathered
to refresh our people strategy. We fully appreciate that we will
only succeed if everyone in the Group is aligned to our goals and
objectives.
The Group is committed to ensuring diversity, equity and
inclusivity. We have a team from diverse backgrounds and genders
and will continue to foster balance and promote equal
opportunities. This mix of skill-sets, experience, and backgrounds
delivers a better outcome for all concerned.
We are implementing a new Human Resources (HR) platform, as part
of our Project Fusion initiative, to ensure we are able to measure
key aspects of our policies.
We deliberately did not materially reduce our staffing levels
during the pandemic, as we have highly skilled, sought-after staff,
and we could see that any revenue reduction was temporary. Whilst
our profits took a slight hit in the short-term, this decision
places us in a great position to capitalise on the growth
opportunities post-lockdown.
Environmental, Social and Governance ("ESG")
We are committed to having a positive impact on society, the
environment, and our stakeholders. Whilst this is an area in which
we are already active, our intention is to report progress in a
more structured manner. In the coming months, we will adopt one or
more of the various frameworks that continue to emerge through the
growing emphasis placed on ESG by investors, employees, the
Government, and customers.
This will cover the:
-- Impact of our business on our environment;
-- Diversity, equity and inclusion;
-- Board independence, ethics and leadership; and
-- Risk management processes.
Team
The AdEPT Management Team evolved, during the year, with the
appointment of a Group Chief Technology Officer, Clive Bryden, who
was promoted internally. This new role reflects the increasing
importance the Group places on the AdEPT Nebula solution and the
customer facing technologies this facilitates.
The formation of the AdEPT Consulting Team, led by Chief
Commercial Officer, Tim Scott, is another example of how we are
evolving as a business. It brings together our Cloud enablement
skills and our Security capability. This team has recently been
strengthened with the recruitment of a Product Manager, focused on
increasing our presence in the Microsoft marketplace given the
rapid emergence of Microsoft Teams and other Microsoft products
during the lockdown.
Dividend
As previously communicated given the impact of the pandemic; the
Group's focus on cash preservation; and our use of the UK Job
Retention Support Scheme ("furlough") in the year under review, the
Board considers that a dividend payment in respect of FY21 would be
inappropriate.
It should be noted that, during this same period, payments of
bonuses to the Senior Management Team were suspended in line with
good corporate practice during this pandemic.
As the new financial year progresses, the Board will continue to
monitor the changing economic environment and adopt an appropriate
dividend for future periods, with a further update alongside the
September 2021 interim results.
Summary and Outlook
The new financial year has started well, building on the
momentum which returned in the last quarter of FY21, with a number
of new wins and overall a positive performance across the business.
The team and the Board are confident that investment in ICT will
remain a key focus for our customers, as they look to capitalise on
the opportunities and efficiencies that our solutions unlock. We
have a strong belief that the strategies which we are pursuing will
serve to increase our position in this marketplace.
I would like to thank all our stakeholders, and in particular
our people, for their exceptional efforts throughout a challenging
year, which has been much appreciated by the Board.
Ian Fishwick
Chairman
CHIEF EXECUTIVE'S REVIEW
Overview
AdEPT has proven its resilience and agility in the year under
review, rising to meet the many challenges presented by the
pandemic and its associated lockdowns, and I am pleased to provide
shareholders with a full report on the Group's performance and
progress in this unparalleled trading period.
Our ambition is to provide exceptional customer service, through
our profound knowledge of technology and underpinned by our
comprehensive operational systems. During FY21 we achieved a Net
Promoter score of 83% from our significant clients, this is
incredibly positive feedback and, when set against the COVID-19
backdrop and an unprecedented surge in customer demand for help,
advice, and support, this is an outstanding achievement.
I cannot praise our team highly enough for their professionalism
and willingness to deliver under extreme pressure.
As an exceptional example of our impact over the course of the
pandemic, AdEPT helped over 500 schools move to the cloud on both
Microsoft 365 and Google G Suite platforms and became a leading
player in the Department for Education initiative to facilitate
remote education.
As a result of our team's considerable efforts, we have been
able to further deliver our strategic objectives, despite the
circumstances.
Project Fusion is now enabling all the Group Divisions to
operate from a single set of financial and operational systems.
This platform, delivering 'ONE AdEPT', gives us the infrastructure
on which to build a business of scale, by enabling the fast and
efficient integration of acquisitions, providing business insight
and enhancing the Group's cross-selling capabilities.
In addition, we have added new services, new frameworks, and new
channel partners, and, shortly after the year end, a major
acquisition, Datrix, all of which significantly expand the Group's
capabilities and potential.
The new financial year ending 31 March 2022 ("FY22") has started
well, with the momentum achieved in H2 continuing. This positive
return to more normal trading conditions, combined with the
progress we have made with the Group strategically over the course
of the last 18 months, gives us confidence for the year ahead and
makes us excited about the long-term opportunity for AdEPT.
Results
The Group delivered a resilient performance in FY21 under
challenging circumstances, generating revenue of GBP57.9m (FY20:
GBP61.7m) and gross profit of GBP27.7m (FY20: 29.4m). Underlying
EBITDA was GBP9.8m (GBP11.7m). Adjusted profit before taxation was
GBP6.2m (FY20: GBP7.7m). Adjusted fully diluted earnings per share
was 22.4p (FY20: 28.0p).
The Group's balance sheet remains strong with excellent
operating cash generation. Conversion of reported EBITDA to
operating cash flow before tax was strong at 89% (2019: 82%). Cash
generation from operating activities after tax was broadly
unchanged from FY20 at GBP7.4m (FY20: GBP7.6m). Cash at year-end
GBP13.2m (FY20: GBP11.8m). Net senior debt reduced to GBP25.6m at
the year-end (FY20: GBP27.9m).
Business review
Achieving revenue at 93.8% of FY20's level and gross profit at
94.2% of FY20 at GBP28.0m (FY20: GBP29.4m) in a year of
unprecedented challenges reflects the resilience of our business
and the important role AdEPT plays in supporting its clients.
The Group's Underlying EBITDA performance at 83.9% of FY20 at
GBP9.8m (FY20: GBP11.7m) results from our strategy to retain
expertise within the business, throughout the early stages of the
pandemic and its associated lockdowns, on the anticipation of a
swift return in demand. Accordingly, our costs did not decline
directly in line with revenue. This strategy has proven sensible
given the H2 trends, with growth in Professional Services (up 20%
in H2 vs H1) and Cloud Centric Strategic Services (up 7% H2 vs H1).
With team utilisation in Q4 recovering substantially, there was no
requirement for the Coronavirus Job Retention Scheme ("furlough"),
in the second half of the year.
AdEPT also elected to top up the salaries of those employees
impacted by furlough in the first half of the year from the 80%
support, provided by the Government, to full salary levels. This
decision was extremely well received by those impacted and
contributed to the employee Net Promoter Score of 85%. To mitigate
the impact of the pandemic, the Group took prudent actions to
reduce costs, namely a reduction in recruitment; a focus on
expenses; a withdrawal of Executive Team bonus; and a pay
freeze.
The story of the year quarter by quarter
To aid understanding of impact of the rapidly changing trading
dynamics on the Group over the course of the year, driven by the
spread of the pandemic and government lockdowns, we have reviewed
our performance on a quarterly basis to provide context.
Q1 & Q2 FY21: The immediate impact of COVID-19
At the outset of the year the Group's service operations faced a
significant increase in demand, as 'Lockdown 1.0' forced customers
to shift rapidly to working from home. This created a surge in
requests for help. Call volumes to our support desks rose by over
85%, during this period, demonstrating the critical role AdEPT
plays supporting customers with their ICT.
This increased demand was spread across all parts of the AdEPT
business. In the Public Sector, schools needed to educate virtually
and doctors were required to diagnose remotely, whilst, in the
Commercial Sector, businesses needed help setting up effective home
office solutions for their staff.
Through this period, we also provided enhanced network
capability to many NHS Trusts and hospitals with the help of our
partners, such as Convergence Group, Virgin and BT. Within the
education sector, AdEPT helped approximately 3,300 schools and over
100 universities and colleges transition successfully to remote
schooling.
We assisted many of our commercial customers in their transition
to homeworking, fulfilling a surge in demand for laptops, networks,
new communications platforms to support cloud-centric
collaboration, mobile telephony, and systems, which people could
access remotely. In addition, we advised on and implemented a
number of cyber security solutions to counter any threats brought
about by the transition to homeworking.
During this time, we saw a significant decline in call revenues
as organisations moved to IP based messaging such as Microsoft
Teams or Zoom as their staff didn't use office-based telephony
systems. The overall decline in traditional telephony was,
therefore, greater than anticipated pre-COVID, at 15.2% Year on
Year against our pre COVID expectation of c. 10%.
In contrast our on-site teams, whilst classified as key workers,
were unable to work as many of our customers' offices were closed.
As a result, we took the necessary decision to furlough 70 staff,
mainly school technicians who were unable to access site.
With customer conferences cancelled, and a marketplace rightly
focusing on the impact of COVID-19 our ability to win new clients
was hampered, impacting new business, which we would have
anticipated feeding into Q3 performance.
We also had to make the necessary changes within our own
business, during this period of uncertainty. We acted quickly to
support our staff, manage liquidity, and evaluate likely potential
scenarios, all with the aim of protecting our stakeholders. We
chose to top up the government's furlough payments back to full
salary, as we felt strongly that none of our employees should
suffer financially as a result of furlough.
Operationally, we proved immensely resilient, a benefit of our
investment in Project Fusion in 2019. Every AdEPT employee was able
to exploit our recently implemented Microsoft 365, Teams and Avaya
communications infrastructure and smoothly transition to home
working.
We constantly kept in touch with our people throughout this
difficult period, communicating frequently and effectively to
ensure everyone understood how government policy was impacting
working practices. We provided home working equipment, undertook
regular training events, and even held virtual cocktail evenings to
keep spirits up! We also provided access to an anonymous
counselling service to help anyone struggling with the changes
forced upon them.
The positive feedback that we received from clients during this
time about our team, their dedication and their adaptability was
truly humbling.
Q3 FY21: A tentative recovery
As the country exited the first national lockdown at the end of
the Summer 2020, optimism began to return with the belief that the
pandemic was on the wane. Sales activity picked up and our
engineering teams were able to attend site more readily. AdEPT and
our clients had become familiar with the new working practices
resulting from COVID-19, and there was sense of more normality as
the Government eased restrictions.
Frustratingly, the re-introduction of restrictions in November
and the second full lockdown in December 2020 due to the COVID-19
'second wave' dampened this recovery, but we continued to help and
support our customers throughout. Our work in the education sector
was a highlight, as the AdEPT team provided further support to
schools, enabling them to teach remotely, and supplying equipment
to pupils to enable them to study at home.
With the support of our strategic partner, London Grid for
Learning (LGfL), AdEPT completed the next phase of a development
called eAdmissions. This empowers 34 Local Authorities to make
240,000 offers of school places to parents annually - facilitated
by approximately half a million SMS text messages and mobile app
push messages - all in support of the overall process.
Our sales team performed better than anticipated during the
second wave and our customer base remained resilient with cash
collection improving over this period.
In support of our strategic goal to constantly refine and
refresh our business proposition, we onboarded a new partner in Q3,
8x8. As a leading provider of unified communications solutions, 8x8
is an excellent addition to our successful portfolio of voice
solutions, which sits neatly alongside Avaya and Ericsson LG.
We were also awarded Platinum Partner status by Gamma, during
this quarter, which brings benefits to both AdEPT and our customers
in terms of marketing assistance, access to Gamma technicians and
improved commercial support.
Furthermore, we launched AdEPT Consulting initiative, to help
customers transition to more permanent post COVID-19 strategic IT
solutions from the tactical 'quick fixes' deployed rapidly during
the early days COVID-19.
Q4 FY21: Momentum returns
The Group delivered a resilient performance in Q4, gaining
momentum across the quarter despite the ongoing challenges of the
pandemic. All our furloughed staff returned to work as a result of
sustained customer demand and sales activity across the Group
improved in Q4. Our support teams returned to some form of
normality and our engineers and remote technicians were fully able
to return to site.
The momentum felt in H2 FY21 has continued into Q1 of FY22 with
sales bookings in line with our plans across all parts of the
business, as confidence in the future returns.
As an example of our ability to win new clients AdEPT is pleased
to report that it has been chosen to provide a full IT solution for
the Trades Union Congress ("the TUC"). AdEPT Nebula is at the heart
of the solution providing a Private Cloud and Connectivity
platform, wrapped in a Managed Service.
This allows the TUC to have a hybrid, hosted and Cloud enabled
service and allows the TUC to mix and match carriers to get the
best connectivity across their offices. AdEPT is providing
Microsoft Office 365 and Teams for communication, all supported by
our proactive support team.
Our Cloud Centric Strategic Services is a portfolio that
includes the AdEPT Nebula proposition, hosting services, hybrid and
public cloud, Voice over IP, and Professional Services. Our
strategic focus on this market is delivering rewards with an 8.6%
year on year increase in revenues (FY21: GBP25.2m vs. FY20:
GBP23.1m) and with H2 up 7.2% over H1. Furthermore, within this
segment, Professional Services is a highlight. This is due to our
success with the School Cloud Enablement activity and the success
of AdEPT Consulting, demonstrated by a GBP1.2m year on year
increase to GBP4.5m (FY20: GBP3.3m). Furthermore, Professional
Services revenues were up 20% H2 over H1 demonstrating clear
momentum.
In addition, revenues from VoIP increased by 11% year on year
GBP2.7m (FY20: GBP2.4m), which is a result of our success with the
new 8x8 proposition (17 new clients secured since signing 8x8 as a
new partner) and our activity to migrate customers to new IP based
solutions.
A new Banking Facility & improvement in the cash position of
AdEPT
As previously announced on 7 April 2021 we secured a new
enlarged banking facility to support the Group's investment in
growth and to finance its strategy to consolidate the fragmented
market through acquisition. The agreement is for a three-year term,
extendable by one year, and provides the Company with up to GBP70m
senior debt, comprising a GBP35m revolving credit facility, a
GBP15m term loan, and a GBP20m accordion facility. This new
facility replaces the GBP40m revolving credit facility, which was
due to expire in February 2022. It is on the same commercial terms
as the facility it replaces, supported by the Group's strong
balance sheet and cash generation.
The Group's strong cash flow generation continued in Q4 with
senior net debt down from GBP27.9m to GBP25.5m in a year in which
we paid the final consideration of GBP1.8m in relation to the
Advanced Computer Systems Group (ACS Group) acquisition. This
results in an EBITDA to Senior Net Debt ratio of 2.6x (FY20: 2.4x).
this is in line with management expectations. This includes Q4
outflows for the repayment of the deferred Q1 VAT liability.
Further, the Group remains a strong generator of cash with
EBITDA to Cash conversion at 89% in FY21 (82% in FY20).
ONE AdEPT - benefitting from one integrated system
Our unswerving focus on a) providing the best service, b) having
an efficient operation, c) facilitating organic growth across the
business and d) having real time operational insight across the
business are the reasons we are undertaking Project Fusion in a
drive to achieve 'ONE AdEPT'. ONE AdEPT uses a suite of commercial
off-the-shelf solutions that is now utilised by every Division
within the business and provides the AdEPT leadership and staff
with real-time information on performance, trends, and operational
bottlenecks.
ONE AdEPT is at the core of our plans to build a business of
scale through acquisition and market consolidation. It enables
newly acquired businesses to be quickly and efficiently integrated
and to benefit from the Group, as well as allowing the rapid
delivery of synergies, enhanced organic growth and operational
insight.
During the course of FY22, the recently acquired Datrix business
will be transitioned to ONE AdEPT.
The market we serve
It is well documented that the global pandemic has thrust the
ICT market in which we operate into the spotlight; as the world
switched to communicating virtually through Zoom and Microsoft
Teams, the shift away from traditional telephony solutions to those
provided through technology has accelerated at speed. There is a
dramatic trend to place applications on the cloud whether that be
public, private or a mix of the two (hybrid), whilst this change
needs to be executed in a secure manner on highly performant and
resilient networks.
By being agile and constantly evolving our offering and skills,
we have remained aligned with fast growing markets such as cloud
services, unified communications, and cyber security and are able
to deliver the dynamic technologies our customers need.
Our success will only continue if we continuously adapt. As a
tangible example, we have enhanced our portfolio of strong
partnerships in FY21 with the on boarding of 8x8. Since becoming a
partner with 8x8 AdEPT has secured 17 new customers.
Investment for growth
There is an increasing demand for 'hybrid cloud' services, where
customers purchase public cloud solutions alongside private cloud
owned and hosted applications. AdEPT is meeting this demand through
its investment in AdEPT Nebula.
Through a single secure connection a business can get access to
services such as hosted applications, cloud telephony, Microsoft
solutions, public or private cloud services (or a mix called hybrid
cloud), carrier class connectivity and much more, all within a
secure and managed service.
In the year under review, we invested 2% of Revenues in Capex,
with Nebula forming part of this spend. AdEPT Nebula continues to
increase in capacity and capability as a platform and is now
supporting over 635 customers.
Channels to market
In addition to direct engagement with customers and prospects
with our own sales teams, AdEPT is also present on multiple market
frameworks. These allow buyers to tender for services with
confidence and engage with pre-screened companies who have
demonstrated expertise in a particular field, utilising contracts
that are 'off the shelf'.
We are present on nine of these frameworks and have added the
following to our roster over recent weeks:
Virgin Media Business (VMB) - VMB has chosen AdEPT to be its
Avaya partner for three years. This means that any opportunity to
sell Avaya products and services, unearthed by the extensive VMB
direct sales teams (across both Public Sector and Enterprise), will
be fulfilled and supported by AdEPT. Effectively we are now VMB's
exclusive Avaya specialist team.
The Foreign and Commonwealth Office - AdEPT is the first company
to be placed on the Foreign and Commonwealth and Development Office
framework for connectivity. This framework will create significant
opportunities for AdEPT as a potential provider, to enhance the
communications and network infrastructure of this important Central
Government department.
Crescent Purchasing Consortium (CPC) - AdEPT has secured a place
on the CPC ICT framework for education. This is a framework for the
supply and delivery of ICT hardware, peripherals, and support
services. The CPC has over 7000 education customers who buy through
its framework.
Objectives for FY22
In the context of our vision, the changes in the market we
serve, and the impact of the pandemic globally, we have set
ourselves a number of targets for the coming months to ensure we
grow organically:
-- Integrate Datrix effectively, to ensure that we obtain the
benefit of Project Fusion from all elements of our business;
-- Capture opportunity, by helping our customers benefit from
the full portfolio of AdEPT offerings, including the enhanced
offerings brought by the Datrix team;
-- Market effectively to key sectors, ensuring our offerings
are fine tuned to reflect the specific needs of our target
markets;
-- Invest wisely, so that our AdEPT Intellectual Property, be
that know-how, AdEPT Nebula or the Education Suite all capture
greater market share;
-- Manage our portfolio, by working with our existing (and potentially
new) partners to ensure that market needs are matched carefully
to our partner offerings, and high growth propositions; and
-- Explore further accretive acquisition opportunities, to continue
our consolidation journey.
The organisations acquired by AdEPT will benefit from a broader
range of solutions, a deeper skill set that will improve the
quality of service they receive, and an operating platform that
enhances the service they provide. Investors, meanwhile, should
benefit from greater revenue generation through cross and
up-selling activity, and synergies achieved from further
consolidation of our market.
The market for acquisitions remains highly fragmented, with over
3,000 potential ICT company targets across the UK. AdEPT has a
proven track record of identifying suitable acquisitions,
purchasing, and then integrating them successfully, to increase
shareholder value and we will seek to acquire in line with this
strategy during the course of this year.
Post year end activity
We were delighted to be able to put our new bank facility to
work with the transformational acquisition of Datrix in April
2021.
This acquisition signals a return to AdEPT's strategic pillar to
consolidate the market, purchasing strategically significant
businesses that are beneficial to the Group and demonstrates the
AdEPT core competence in consolidating markets and purchasing
strategically significant businesses that are beneficial to the
Group.
Datrix designs, delivers, and manages end-to-end enterprise
solutions for large, complex, multi-site, mission-critical
environments. Approximately 63% of Datrix revenue and gross margin
is generated from recurring services, with 63% of total revenue
generated from public sector customers.
-- Datrix provides instant scale in the growing advanced cloud-based
networking market, expanding the Group's portfolio of core
competencies to include the latest technology, SD-WAN.
-- With 63% of revenues generated from complementary customers
in the public sector, Datrix strengthens the Group's position
on Local and Central Government supplier frameworks and its
presence in key vertical markets, particularly the NHS.
-- Datrix enhances AdEPT's cloud product portfolio, bringing
additional highly complementary, market-leading, Gartner
Magic Quadrant products to the Group, from significant new
partner relationships.
-- Experienced senior management team, who have transformed
the business since joining Datrix in 2019, are being retained
by AdEPT and incentivised to continue delivering growth.
The integration of Datrix is going as planned and firm plans are
in place to add the business to the ONE AdEPT platform in September
2021. We see a number of opportunities for both Datrix and AdEPT to
benefit from each other's capabilities.
Current trading and outlook
While the pandemic temporarily interrupted the trajectory of our
growth, the Board is pleased with the progress achieved under
challenging circumstances. We are confident that the opportunities
for the Group remain strong, in a vibrant technology market, with
demand for effective ICT services at an all-time high.
The momentum gained by the Group in Q4 FY21 has continued into
Q1 FY22 with sales and margins in the new financial year to date
firmly in line with market expectations. Our focus remains on the
delivery of strong organic growth, whist seeking further
opportunities to consolidate the fragmented market, through
complementary acquisitions which generate strong levels of
recurring revenue and margin. Our new integrated operating system,
ONE Adept, lies at the heart of our plans, providing the Group with
a scalable, platform for growth.
The business is in great shape and the Board views the prospects
for the Group in the year ahead and beyond with confidence.
Phil Race
Chief Executive Officer
STRATEGIC REPORT
Principal activities and review of business
The principal activity of the Group is the provision of unified
communication and IT services to both domestic and business
customers. A review of the business is contained in the Chairman's
and CEO's statements.
Summary of three year financial performance
Year ended 31 March
2021 Year on 2020 Year on 2019
GBP'000 year GBP'000 year GBP'000
% %
-------------------- ----------- ----------- ----------- ----------- -----------
Revenue 57,851 (6.2%) 61,688 20.3% 51,294
Gross profit 27,683 (8.4%) 30,232 19.4% 25,328
Underlying EBITDA 9,829 (16.1%) 11,709 8.6% 10,781
Net senior debt 25,562 27,938 27,113
-------------------- ----------- ----------- ----------- ----------- -----------
Revenue and gross margin
The business is split into two segments, fixed line and managed
services. In respect of managed services versus fixed line
revenues, during the year AdEPT has continued to grow its managed
services business through a combination of organic contract wins
and company acquisition. Total revenue decreased by 5.7% to
GBP58.2m (2020: GBP61.7m). The revenue and gross margin breakdown
is viewed through four strategic groups, where managed services is
split into three sub-segments:
31 March 2021 31 March 2020
GBP'000s Revenue Gross margin Revenue Gross margin
-------------------------- --------- -------------- --------- --------------
Fixed line telecom 10,739 3,999 12,891 5,040
Cloud centric strategic
services 25,092 11,866 23,127 10,891
Support services 11,817 9,965 13,348 11,256
Technology products 10,201 1,809 12,322 3,045
-------------------------- --------- -------------- --------- --------------
Total 57,851 27,640 61,688 30,232
Cloud Centric Strategic Services - Our strategy is to focus on
Cloud Centric Strategic Services (including; the AdEPT Nebula
proposition, hosting services, hybrid & public cloud, Voice
over IP, and Professional Services). This clear focus is delivering
rewards with an 8.5% Year on Year increase in revenues (FY21:
GBP25.1m vs. FY20: GBP23.1m) and with H2 up 7.2% over H1.
Within this segment Professional Services performance is a
highlight. This is primarily due to the School Cloud Enablement
activity and the success of AdEPT Consulting, demonstrated by a
GBP1.2m Year on Year increase to GBP4.5m (FY20: GBP3.3m).
Furthermore, Professional Services revenues were up 18.6% H2 over
H1 demonstrating clear momentum.
In addition, revenues from VoIP increased by 11.0% year on year
to GBP2.7m (FY20: GBP2.4m) which is a result of our success with
the new 8x8 proposition (17 new clients secured since signing 8x8
as a new partner) and our activity to migrate customers from
traditional fixed line products to new IP based solutions. This is
a trend which has been aided by the increased demands for flexible
and remote working during the Covid-19 lockdowns.
Technology Products - The increase in one-off Professional
Services was frustratingly offset by a reduction in one-off
Technology Products (hardware and software sales) as customers
throughout the year declined to invest in strategic infrastructure
initiatives (FY21: GBP10.2m, vs. FY20: GBP12.3m). However, yet
again, the H2 trend over H1 provides encouragement with a rise of
31.0% H2 over H1. Whilst sales remained resilient the product mix
(i.e. a propensity for laptops and tablets over more sophisticated
infrastructure) was felt in the Technology Products margins (FY21:
17.9% vs. FY20: 24.4%).
Support Services - Support Services revenues were impacted by
the onset of Covid-19 (at 88.5% of FY20 levels, FY21 GBP11.8m vs.
FY20 GBP13.3m) as customers reduced the scale and scope of their
services. In some sectors notably, leisure, hospitality, retail and
office groups, customers were unable to continue trading during the
nationwide lockdowns resulting in downwards flex in service demand.
The AdEPT exposure to these sectors is modest, with 55.5% of the
Groups businesses generated from Public Sector and Healthcare which
has provided stability within a large proportion of the underlying
customer base.
Traditional Telephony - The structural decline in Traditional
Telephony has been accelerated in FY21. This is as anticipated
given that Openreach are continuing with their strategy to switch
off the copper telephone network and there is a clear shift to
messaging and IP based services over traditional fixed line and
calls services. Additionally, the last 12 months fixed line
revenues have been impacted by substantial reductions in call
revenue as a result of access restrictions to business premises
during the multiple Covid-19 lockdowns resulting in businesses
using other means of communication rather than the desk-based
telephone.
The ongoing reduction in the proportion of AdEPT revenues linked
to Traditional Telephony is a result of our strategy to diversify
away from Traditional Telephony into Cloud Centric Strategic
Services. Traditional Telephony is now only 19% of Group revenues
(FY20: 21%) and following the acquisition of Datrix is anticipated
to be only approximately 12% of our revenues in FY22.
Recurring revenues versus one off revenues
In respect of recurring revenues versus one off revenues, the
proportion of AdEPT revenue being generated from recurring products
and services (being all revenue excluding one-off projects,
hardware and software) remains high at 74.5% of total revenue
(2020: 74.7%). All of the managed service product sets include an
element of hardware supply and installation services, which, by
their nature, are project based and not fixed recurring revenue
streams; however, a high proportion of hardware supply and
installations are further products and services being supplied to
the existing customer base.
Market sector analysis
AdEPT continued to be successful in gaining further traction in
the public sector space during the last year through leveraging its
approved status on various frameworks. AdEPT is an approved
supplier to the Crown Commercial Service under the following
frameworks RM3808 Network Services, RM3825 HSCN Access Services,
RM1557 G-Cloud, RM6103 Education Technology and RM3804 Technology
Services 2. The Group has been successful in winning further new
business through a number of these frameworks.
The proportion of total revenue generated from public sector and
healthcare customers has increased considerably to 57.6% at March
2021 (2020: 44.7%) which partly arises due to the organic customer
contract awards, particularly under the various frameworks on which
AdEPT is accredited but is also a reflection of the general
contraction in the commercial customer sectors during the Covid-19
lockdown.
The Group is continuing to focus its organic sales efforts on
selling a wider portfolio to existing customers, adding and
retaining larger customers whilst complementing this with an
acquisitive strategy. AdEPT is managing the customer risk with a
wide spread of business sectors and low customer concentration,
with the top ten customers accounting for 23.0% of total revenue
(2020: 17.1%) and no customer accounting for more than 10% of the
total.
Gross margin
Gross margin percentage decreased to 48.3% during the year
(2020: 49.0%). The gross margin percentage from managed services
reduced to 50.7%, due to trading challenges during lockdown
resulting in customers flexing downwards support services, which
are 100% gross margin. The gross margin generated from
non-recurring products and services increased to 40.6% (2091:
38.1%) with the increase over the prior year driven by a greater
proportion of revenue from professional services, particularly with
the cloud enablement of hundreds of schools and academies to remote
education through Google G-Suite and Microsoft Office 365
Education. The gross margin for fixed line services reduced to
37.2%% (2020: 39.6%) which reflects a lower proportion of higher
gross margin call revenue as business premises were closed during
the national lockdowns resulting in depressed business call
volumes.
Recurring gross margin reduced to 51.3% (2020: 53.7%) which
reflects the decrease in relative higher margin online back-up
services combined with a reduction to software margins from an
increased take-up of lower relative margin product, such as
Microsoft 365, but this software represents a growing ongoing
recurring revenue stream. In addition, a number of customers in
challenged sectors during Covid-19 lockdown have downsized managed
IT and telephony support services during business closures or as a
result of reduced operating capacity. Gross margins for these
support services are 100% as the headcount costs of supporting the
services are included within operating expenditure.
Underlying EBITDA
Underlying EBITDA is defined as operating profit after adding
back depreciation, amortisation, acquisition fees, restructuring
costs, adjustment to deferred consideration and share-based payment
charges. The Group uses underlying EBITDA as a measure of
performance in line with the telecommunications sector's general
approach to relative performance measurement. As the Group operates
a capex-light model, the Board considers that a good indication of
the underlying cash generation of the business for comparison
against operating cash flow before tax is underlying EBITDA. Below
is a reconciliation of underlying EBITDA to the reported
profit/(loss) before tax:
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Underlying EBITDA 9,830 11,709
Acquisition fees - (267)
Restructuring costs (974) (288)
Share option charges (67) (29)
Adjustment to deferred consideration - 654
Depreciation (1,532) (1,513)
Amortisation (5,793) (5,772)
Profit on sale of assets 133 -
Interest (2,102) (2,523)
------------------------------------- -------- --------
Profit/(loss) before tax (505) 1,971
During the year, the Group sold a freehold property that was
acquired with the Atomwide acquisition resulting in a profit on
sale of GBP0.1m, this is not considered to be part of the trading
profitability of the Group and so has been added back for the
purposes of the calculation of underlying EBITDA.
The Group incurred GBP1.0m of restructuring costs from the
ongoing headcount efficiencies generated from the Project Fusion
initiative, combined with some realignment of the operating cost
base of the Group as a result of customer demand reduction during
Covid-19. These represent redundancy and salary costs creating a
permanent ongoing reduction to the operating costs of the
Group.
Depreciation
The Group has continued to invest in s trengthening AdEPT Nebula
- Nebula is the AdEPT owned platform that supports over 635
customers who take various services from our portfolio of: Nebula
Cloud, Nebula Security, Nebula BC/DR, Nebula Voice, Nebula Apps and
Nebula Network.
GBP0.76m of depreciation relates to the liability accounting
under IFRS16 right of use assets. The Group has no ownership of
these assets. The cash cost in respect of the right of use asset
leases is included within the cash flow statement under the heading
'Payment of lease liabilities'.
Finance costs
Total interest costs have decreased by 16.6% to GBP2.1m (2020:
GBP2.5m). Cash interest decreased to GBP1.6m largely from the
decrease in the average level of net borrowings to GBP26.1m (from
GBP32.3m). The Group took a number of prudent measures during the
early period of the Covid-19 lockdown to preserve cash, including
cancellation of the April 2020 dividend payment, deferral of the Q1
2020 VAT liability and limited use of the coronavirus job retention
scheme (furlough). Additionally, the Group focused on careful
management of customer credit terms and working capital during the
Covid-19 pandemic as it was considered a lead indicator of customer
trading and financing challenges. The Group has used treasury
management of surplus cash balances to minimise the amount of drawn
funds has been used during the year to minimise interest costs.
Included within interest costs is GBP0.1m of interest charges in
relation to IFRS16 Leased Assets which is a cash related item.
Profit/(loss) before tax
This year reported loss before tax was (GBP0.5m) (2020: profit
GBP2.0m). Operating profit decreased to GBP1.6m (2020: GBP4.5m)
from the GBP1.4m reduction to gross margin, GBP0.6m reduction to
the accounting profit from the revaluation of deferred
consideration and GBP0.3m reduction in acquisitions fees from the
prior period (with no acquisitions completed in the current year)
and GBP0.7m increase to the restructuring costs from the ongoing
headcount efficiencies generated from the Project Fusion initiative
combined with some realignment of the operating cost base of the
Group as a result of customer demand reduction during Covid-19.
The operating profit was absorbed by non-cash items including;
GBP5.8m amortisation of intangible assets arising from acquisitions
undertaken during prior years, GBP0.8m non-cash depreciation and
GBP0.1m share-based payments. Profit before tax for the year is
also impacted by the following cash items; GBP0.4m decrease in cash
finance costs, the restructuring costs of GBP1.0m and GBP0.8m of
depreciation which is a cash item under IFRS16 Leased Assets.
Earnings per share
Adjusted profit before tax, adding back amortisation,
restructuring costs and interest costs discounting, removing
deferred tax credits, was GBP5.1m (2020: GBP6.7m).
The Company issued 1.33 million shares in a placing at the end
of February 2020, so there is a full 12 month dilution impact from
the share placing in the current year but only a 1 month impact on
the prior year as the number of shares in issue is calculated on a
weighted average basis across the twelve month period. This
provides a 5.1% equity dilution impact on earnings per share.
Basic earnings per share was negative 1.40p (2020: 4.14p
positive). Adjusted fully diluted earnings per share, based on the
profit for the year attributable to equity holders adding back
amortisation, share option charges, restructuring and acquisition
costs, was 22.35p per share (2020: 28.05p).
Dividends
Our historical policy has been to distribute roughly one-third
of free cash flow as dividends and to reinvest the remaining
two-thirds in the business. On 25 September 2019, the directors
announced their intention to declare an interim dividend of 5.10p
per ordinary share in respect of the September 2019 interim
results. This interim dividend was due to be paid in April 2020 and
would have absorbed approximately GBP1.3m of cash and shareholders'
funds. However, in early April 2020, considering the potential
Covid-19 disruption, the Board resolved to cancel the interim
dividend that had been declared with the September 2019 interim
results.
The Board will continue to monitor the changing economic
environment and adopt an appropriate dividend for future periods,
with a further update alongside the September 2021 interim
results.
Cash flow
The Group benefits from an excellent cash-generating operating
model. Low capital expenditure results in a high proportion of
underlying EBITDA turning into cash. The proportion of reported
EBITDA which turned into net cash from operating activities before
income tax was 89.3% (2020: 81.7%).
Overall working capital has absorbed GBP0.7m of cash during the
year. Part of the working capital absorption was anticipated with
the continued transition of the Group towards a growing proportion
of data connectivity services increasing the level of working
capital, with a further GBP0.2m absorbed by the advanced charging
structure of wholesale data connectivity rentals, which are
typically quarterly in advance compared to monthly in advance for
the end customer. As in prior periods, this is an ongoing increase
to the working capital requirement of the Group. Customer payment
periods have been a focus for the Group during the Covid-19
pandemic as they are considered a lead indicator of potential
future trading and cash issues within the customer base. Through
careful management of customer credit terms, the trade receivables
payment periods have decreased to 44 days at year end (2022: 49
days). The Group has consciously continued to meet supplier
payments on time throughout the Covid-19 period, this combined with
hardware pre-purchased to secure supply for the busy Easter holiday
installation period in the education sector has resulted in
absorption of cash at year end.
Income taxes paid in cash during the year have decreased to
GBP0.8m (2020: GBP2.0m). During the current year end HMRC processed
the cash refund to the Company of GBP0.1m in respect of corporation
tax overpaid in the year ended 31 March 2019. In addition, the
Group moved to a Group Payment Arrangement for corporation tax
purposes which moved Centrix Limited back to 'large' status from
'very large' status for corporation tax which deferred GBP0.2m of
cash payment to HMRC.
Cash interest paid has decreased during the year to GBP1.6m
(2020: GBP1.9m), which arises from the GBP6.2m decrease in average
net borrowings against the prior year.
Cash outflows in the year ended 31 March 2021 in relation to
acquisitions amounted to GBP1.8m. The contingent consideration in
respect of the acquisition of ACS of GBP1.8m was paid in May 2020
with no further amounts due in relation to this acquisition.
There was an increase to cash and cash equivalents during the
year of GBP1.3m to year-end cash of GBP13.2m. This arises from a
net increase in the drawn element of the revolving credit facility
at March 2021 which was in order to fund the initial consideration
for Datrix Limited which was acquired in early April 2021.
Capital expenditure
The Group continues to operate an asset-light strategy and has
low capital requirements; therefore, expenditure on fixed assets is
low at 1.8% of revenue (2020: 1.8%). During the year, the Group
sold a freehold property for proceeds of GBP0.3m. The capital
expenditure in the current year arises from AdEPT investing a
further GBP0.6m in the development of a network connecting three
data centres (which, combined with other capabilities and services,
is known as 'AdEPT Nebula'). AdEPT Nebula is built around the core
data centre in Orpington, which is owned by AdEPT. The network
allows AdEPT to provide its own Nebula Cloud hosting capability,
Nebula Security, Nebula BC/DR, Nebula Voice, Nebula Apps and Nebula
Network.
AdEPT Nebula is live and already delivering benefits to hundreds
of customers by providing Avaya IP cloud telephony services, hosted
IT services and a range of data connectivity services. The network
underpinning AdEPT Nebula has been developed using the in-house
skills and capabilities of the AdEPT technical team. The Company
will continue to review development opportunities for the addition
of new products and services to AdEPT Nebula as customer demand
dictates.
Over the last twelve months the AdEPT team has continued to work
hard on the 'ONE AdEPT' project, christened 'Project Fusion',
including initiatives in relation to sales, marketing, systems,
finance, and branding. A further investment of GBP0.6m has been
made over the last twelve months, which includes the cost of
third-party consultancy and some capitalisation of the internal
development teams time spent dedicated to the project. Despite the
challenges of lockdown and remote working, during the year three
further operating divisions have been migrated to the centralised
CRM and finance platforms. This achievement means that seven of the
eight operating sites are now benefitting from Project Fusion, with
over 80% of Group employees now using the platform. The final
remaining operating divisions' migration has gone live in April
2021.
Payments of lease liabilities
As required under IFRS 16, the balance sheet value of tangible
fixed assets includes the discounted value of the remaining lease
rentals for any material agreements which have a lease term greater
than twelve months. The net present value of any new leases is
included in tangible fixed assets. These are not upfront cash
purchases as the rentals are paid on a monthly or quarterly basis
and therefore the cost is not included within capital expenditure,
instead the cash outflows from the lease agreements are included in
the cash flow statement under the heading 'Payments of lease
liabilities' and amounted to GBP0.9m in the current year (2020:
GBP0.8m).
Business combinations
On 12 April 2021, the Company acquired the entire issued share
capital of Datrix Limited ('Datrix') a well-established,
award-winning supplier of advanced cloud-based networking,
communications, and cyber security solutions, headquartered in
London, with expertise in the growing Software Defined Wide Area
Networking ("SD-WAN") market focused on the public and healthcare
sector. The vendors and the senior management team responsible for
the strategic direction, technical development, and day-to-day
operations of Datrix have been retained within the business
post-acquisition. Initial consideration of GBP9.0m, on a debt free
cash free basis, was paid in cash. Pursuant to the terms of the
share purchase agreement, the effective date of the acquisition is
1 April 2021. Further contingent deferred consideration of up to
GBP7.0m may be payable in cash dependent upon the trading
performance of Datrix in the twelve month period ended 31 March
2022. The contingent deferred consideration will be determined by
reference to the gross margin of the acquired business and applying
the contingent deferred consideration calculation as specified in
the share purchase agreement.
The fair value of the assets and the contingent consideration
liability have not yet been identified at the date of these results
as the completion balance sheet was not available.
Net debt and bank facilities
A key strength of AdEPT is its consistent, proven ability to
generate strong free cash flow and therefore support net
borrowings. As a result of the Group's focus on underlying
profitability and cash conversion, net operating cash flow after
taxes but before bank interest paid of GBP7.4m was generated during
the year ended 31 March 2021 (2020: GBP7.6m).
In March 2021, the Company signed a new enlarged banking
facility agreement with NatWest and Bank of Ireland, to support its
growth ambitions. This agreement is for a three-year term,
extendable by one year, and provides the Company with up to GBP70m
senior debt, comprising a GBP35m revolving credit facility, a
GBP15m term loan, and a GBP20m accordion facility. This new
facility replaces the GBP40m revolving credit facility, which was
due to expire in February 2022. The commercial terms of the
enlarged facility are the same as the previous existing
facility.
Opening cash plus the free cash flow generated in the year and
borrowing drawdowns from the senior debt facility have been used to
fund GBP1.8m acquisition consideration and GBP1.0m of capital
expenditure on tangible and intangible assets. Net senior debt,
which comprises cash balances and senior bank borrowings (excluding
IFRS 16 liabilities), has decreased to GBP25.6m at the year-end
(2020: GBP27.9m).
Segmental key performance indicators (KPIs)
The segmental KPIs outlined below are intended to provide useful
information when interpreting the accounts. 81% of revenue and
EBITDA is generated from Managed Services (2020: 79% revenue and
77% EBITDA).
Fixed
line services Managed
services Total
GBP'000 GBP'000 GBP'000
--------------------------- ---------------- ------------ ---------
Year ended 31 March 2021
Revenue 10,739 47,112 57,851
Gross profit 3,999 23,641 27,640
Gross margin % 37% 50% 49%
Underlying EBITDA 1,880 7,949 9,830
Underlying EBITDA% 18% 17% 17%
Year ended 31 March 2020
Revenue 12,891 48,797 61,688
Gross profit 5,040 25,193 30,232
Gross margin % 39% 52% 49%
Underlying EBITDA 2,675 9,034 11,709
Underlying EBITDA% 21% 18% 19%
There are no non-financial KPIs which are reviewed regularly by
the senior management team.
Section 172 requirements of the Companies Act
The section 172 requirements of the Companies Act in respect of
the directors' duty to promote the success of the Company is
covered in the Corporate Governance Statement included in these
accounts.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's long-term performance
and could cause actual results to differ materially from expected
results.
Customer loss risk
The impact of this is partially mitigated with no customer
accounting for more than 10% of the Group revenue. The top ten
customers account for approximately 23.0% of revenues. The customer
base of the Company is also spread across a wide geographical area
and across a wide range of business sectors. We continue to monitor
customer churn, develop our customer offering and service delivery.
We acknowledge that some of our customers may come under increased
financial pressure as a result of continued Covid-19 disruption. To
manage this risk, we maintain regular contact with our customers to
identify and respond to any risks as early as possible.
Catastrophic event risk
All employees are able to work remotely, and the Group's
operational and administrative servers are located and managed such
that damage from an outage is minimised. A business continuity plan
is in place which is reviewed regularly and enhanced from the
results of testing. The Group is increasingly moving to cloud based
systems, which are more readily available for a timely response to
a catastrophic event. A testimony of the Group's ability to deal
with a catastrophic event is the response to the Covid-19 pandemic
which saw virtually all of the Group's workforce transition to
remote working in the space of a couple of days in March 2020.
Credit risk
The Group extends credit of various durations to customers
depending on customer credit worthiness and industry custom and
practice for the product or service. In the event that a customer
proves unable to meet payments when they fall due, the Group will
suffer adverse consequences. To manage this, the Group continually
monitors credit terms to ensure that no single customer is granted
credit inappropriate to its credit risk. Additionally, a large
proportion of our customer receipts are collected by monthly direct
debit. The risk is further reduced by the customer base being
spread across a wide variety of industry and service sectors.
Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. External funding facilities are
managed to ensure that both short-term and longer-term funding is
available to provide short-term flexibility whilst providing
sufficient funding to the Group's forecast working capital
requirements.
Competitor risk
The Group operates in a highly competitive market with rapidly
changing product and pricing innovations. We are subject to the
threat of our competitors launching new products in our markets
(including updating product lines) before we make corresponding
updates and developments to our own product range. This could
render our products and services out of date and could result in
loss of market share. To reduce this risk, we undertake new product
development and maintain strong supplier relationships to ensure
that we have products at various stages of the life cycle.
Competitor risk also manifests itself in price pressures which
are usually experienced in more mature markets. This results not
only in downward pressure on our gross margins but also in the risk
that our products are not considered to represent value for money.
The Group therefore monitors market prices on an ongoing basis.
Cyber-attack on Company, customer, or supplier systems
The Group has extensive experience in cyber security and
continues to invest in training, systems, and tools to protect the
Company and its customers. Customer networks are securely
segregated from those of the Company and systems are
replicated/backed up in more than one location. AdEPT holds several
security accreditations including ISO27001, Cyber Essentials and
PCI DSS. The Company's security systems and processes are subject
to extensive third-party external auditing. In addition, the
Company has in place a cyber insurance protection.
Acquisition integration execution
The Group has set out that its strategy includes the acquisition
of businesses where they are earnings enhancing. The Board
acknowledges that there is a risk of operational disturbance in the
course of integrating the acquired businesses with existing
operations. The Group mitigates this risk by careful planning and
rigorous due diligence.
John Swaite
Finance Director
Consolidated statement of comprehensive income
For the year ended 31 March 2021
Restated
2021 2020
Note GBP'000 GBP'000
---------------------------------------- ---- -------- --------
Revenue 3 57,851 61,688
Cost of sales (30,211) (31,456)
---------------------------------------- ---- -------- --------
Gross profit 27,640 30,232
Other income 4 304 -
Administrative expenses (26,347) (25,739)
---------------------------------------- ---- -------- --------
Operating profit 1,597 4,494
---------------------------------------- ---- -------- --------
Total operating profit - analysed:
Underlying EBITDA 9,830 11,709
Share-based payments (67) (29)
Depreciation of tangible fixed assets (1,532) (1,513)
Amortisation of intangible fixed assets (5,793) (5,772)
Adjustment to deferred consideration - 654
Profit on sale of freehold property 133 -
Acquisition fees - (267)
Restructuring costs (974) (288)
---------------------------------------- ---- -------- --------
Total operating profit 1,597 4,494
---------------------------------------- ---- -------- --------
Finance costs 6 (2,102) (2,523)
---------------------------------------- ---- -------- --------
(Loss)/profit before income tax (505) 1,971
Income tax expense 7 165 (986)
---------------------------------------- ---- -------- --------
(Loss)/profit for the year (340) 985
Other comprehensive income - -
---------------------------------------- ---- -------- --------
Total comprehensive income (340) 985
---------------------------------------- ---- -------- --------
Note 2021 2020
------------------- ---- ------- -----
Earnings per share
Basic earnings 18 (1.36p) 4.14p
Diluted earnings 18 N/a 4.12p
------------------- ---- ------- -----
All amounts relate to continuing operations.
Consolidated statement of financial position
As at 31 March 2021
31 March 31 March
2021 2020
Note GBP'000 GBP'000
-------------------------------------- ---- -------- --------
Assets
Non-current assets
Goodwill 8 17,408 17,408
Intangible assets 9 36,895 41,952
Property, plant and equipment 10 2,209 2,700
Deferred tax asset 11 - -
-------------------------------------- ---- -------- --------
56,512 62,060
-------------------------------------- ---- -------- --------
Current assets
Inventories 12 569 612
Contract assets 3 978 1,379
Trade and other receivables 13 12,784 14,695
Cash and cash equivalents 13,166 11,849
-------------------------------------- ---- -------- --------
27,497 28,535
-------------------------------------- ---- -------- --------
Total assets 84,009 90,595
-------------------------------------- ---- -------- --------
Current liabilities
Trade and other payables 14 10,884 14,979
Contract liabilities 3 2,244 2,502
Income tax 357 156
Short-term borrowings 81 54
-------------------------------------- ---- -------- --------
13,566 17,691
-------------------------------------- ---- -------- --------
Non-current liabilities
Deferred tax 11 6,700 7,738
Convertible loan instrument 15 6,524 6,340
Long-term borrowings 15 39,110 40,444
-------------------------------------- ---- -------- --------
Total liabilities 65,900 72,213
-------------------------------------- ---- -------- --------
Net assets 18,109 18,382
-------------------------------------- ---- -------- --------
Equity attributable to equity holders
Share capital 17 2,503 2,503
Share premium 4,378 4,378
Share option reserve 1,175 1,108
Capital redemption reserve 18 18
Retained earnings 10,035 10,375
-------------------------------------- ---- -------- --------
Total equity 18,109 18,382
-------------------------------------- ---- -------- --------
Consolidated statement of changes in equity
For the year ended 31 March 2021
Attributable to equity holders
--------------------------------------------------------------
Share Capital
Share Share option redemption Retained Total
capital premium reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- -------- ----------- --------- --------
Equity at 1 April 2019 2,370 479 1,079 18 11,753 15,699
------------------------ -------- -------- -------- ----------- --------- --------
Profit for the year - - - - 986 986
Other comprehensive
income - - - - - -
------------------------ -------- -------- -------- ----------- --------- --------
Total comprehensive
income - - - - 986 986
Deferred tax on share
options - - - - (41) (41)
Dividends - - - - (2,323) (2,323)
Share-based payments - - 29 - - 29
Issue of new equity 133 3,899 - - - 4,032
------------------------ -------- -------- -------- ----------- --------- --------
Equity at 1 April 2020 2,503 4,378 1,108 18 10,375 18,382
------------------------ -------- -------- -------- ----------- --------- --------
Loss for the year - - - - (340) (340)
Other comprehensive
income - - - - - -
------------------------ -------- -------- -------- ----------- --------- --------
Total comprehensive
income - - - - (340) (340)
Share-based payments - - 67 - - 67
------------------------ -------- -------- -------- ----------- --------- --------
Equity at 31 March 2021 2,503 4,378 1,175 18 10,035 18,109
------------------------ -------- -------- -------- ----------- --------- --------
Consolidated statement of cash flows
For the year ended 31 March 2021
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Cash flows from operating activities
Profit before income tax (505) 1,971
Depreciation and amortisation 7,325 7,285
Adjustment to deferred consideration - (653)
Profit on sale of fixed assets (133) (17)
Share-based payments 67 29
Net finance costs 2,102 2,523
--------------------------------------------------- -------- --------
Operating cash flows before movements in working
capital 8,856 11,138
Decrease/(increase) in inventories 43 (45)
Decrease/(increase) in trade and other receivables 1,643 (4,072)
(Decrease)/increase in trade and other payables (2,566) 2,604
--------------------------------------------------- -------- --------
Cash generated from operations 7,976 9,625
Income taxes paid (598) (2,018)
--------------------------------------------------- -------- --------
Net cash from operating activities 7,378 7,607
--------------------------------------------------- -------- --------
Cash flows from investing activities
Interest paid (1,603) (1,861)
Acquisition of subsidiaries net of cash acquired (1,798) (6,285)
Purchase of intangible assets (751) (419)
Sale of property, plant and equipment 344 -
Purchase of property, plant and equipment (627) (706)
--------------------------------------------------- -------- --------
Net cash used in investing activities (4,435) (9,271)
--------------------------------------------------- -------- --------
Cash flows from financing activities
Dividends paid - (2,323)
New bank loans 38,490 5,000
Repayment of bank loans (39,250) (9)
Payments of lease liabilities (866) (837)
Issue of new equity - 4,032
--------------------------------------------------- -------- --------
Net cash from financing activities (1,626) 5,863
--------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 1,317 4,199
Cash and cash equivalents at beginning of year 11,849 7,650
--------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 13,166 11,849
--------------------------------------------------- -------- --------
Cash and cash equivalents
Cash at bank and in hand 13,166 11,849
--------------------------------------------------- -------- --------
Cash and cash equivalents 13,166 11,849
--------------------------------------------------- -------- --------
Note to the Preliminary Results announcement of Adept Technology
Group Plc for the year ended 31 March 2021
The financial information set out below does not constitute the
Group's financial statements for the years ended 31 March 2021 or
2020, but is derived from those financial statements. Statutory
financial statements for 2020 have been delivered to the Registrar
of Companies and those for 2021 will be delivered following the
Group's annual general meeting. The auditors have reported on the
2020 financial statements which carried an unqualified audit
report, did not include a reference to any matters to which the
auditor drew attention by way of emphasis and did not contain a
statement under section 498(2) or 498(3) of the Companies Act 2006.
The audit report on the 2021 financial statements is not yet
signed, however an unqualified opinion is expected.
Whilst the financial information included in this preliminary
announcement has been computed in accordance with International
Financial Reporting Standards (IFRS), this announcement does not in
itself contain sufficient information to comply with IFRS. The
accounting policies used in preparation of this preliminary
announcement are consistent with those in the full financial
statements that have yet to be published.
Availability of Financial Statements
The annual report containing the full financial statements for
the year to 31 March 2021 is expected to be posted to shareholders
in August 2021, a soft copy of which will be available to download
from the Company's website www.adept.co.uk.
1. Accounting policies
Basis of preparation of financial statements
The financial statements have been prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
Accounting standards require the directors to consider the
appropriateness of the going concern basis when preparing the
financial statements. The directors confirm that they consider that
the going concern basis remains appropriate. The Group's available
banking facilities are described in Note 19. The Group has adequate
financing arrangements which can be utilised by the Group as
required. Thus, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
At the date of authorisation of these financial statements, the
directors have considered the standards and interpretations which
have not been applied in these financial statements that were in
issue but not yet effective (and in some cases had not yet been
adopted by the EU) and none were considered to be materially
relevant.
Adoption of the other standards and interpretations is not
expected to have a material impact on the results of the Group.
Application of these standards may result in some changes in the
presentation of information within the Group's financial
statements.
The financial statements are presented in sterling, which is the
Group's functional and presentation currency. The figures shown in
the financial statements are rounded to the nearest thousand
pounds.
Prior year restatement
The direct salary costs of employees for one of the trading
divisions (Comms North) have been reclassified from costs of sales
to administrative expenses for the year ended 31 March 2020 to be
consistent with the allocation of costs with the same nature in the
other trading divisions within the Group. As a result, GBP841,604
of costs have moved from cost of sales to administrative expenses
during the prior year. This is purely reallocation of costs in the
income statements and there is no change to operating profit.
2. Segmental information
IFRS 8 'Operating Segments' requires identification on the basis
of internal reporting about components of the Group that are
regularly reviewed by the chief operating decision maker to
allocate resources to the segments and to assess their
performance.
The chief operating decision maker has been identified as the
Board. The Board reviews the Group's internal reporting in order to
assess performance and allocate resources. The operating segments
are fixed line services (being calls and line rental services) and
managed services (which are data connectivity, hardware, IP
telephony, support and maintenance services), which are reported in
a manner consistent with the internal reporting to the Board. The
Board assesses the performance of the operating segments based on
revenue, gross profit and underlying EBITDA.
Year ended 31 March 2020
Year ended 31 March 2021 (restated)
--------------------------------------- ---------------------------------------
Fixed Fixed
line Managed Central line Managed Central
GBP'000 services services costs Total services services costs Total
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Revenue 10,739 47,112 - 57,851 12,891 48,797 - 61,688
Gross profit 3,999 23,641 - 27,640 5,040 25,193 - 30,232
Gross margin
% 37% 50% - 48% 39% 51% - 49%
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Other income 56 247 - 304 - - - -
Administrative
expenses (2,175) (15,939) - (18,114) (2,364) (16,158) - (18,523)
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Underlying EBITDA 1,880 7,949 - 9,830 2,675 9,034 - 11,709
Underlying EBITDA
% 18% 17% - 17% 21% 18% - 19%
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Amortisation (1,741) (4,052) - (5,793) (1,573) (4,199) - (5,772)
Depreciation - - (1,532) (1,532) - - (1,513) (1,513)
Adjustment to
deferred consideration - - - - - - 654 654
Acquisition costs - - - - - - (267) (267)
Profit on sale - - 133 133
Restructuring
costs - - (974) (974) - - (288) (288)
Share-based payments - - (67) (67) - - (29) (29)
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Operating profit/(loss) 139 3,897 (2,440) 1,597 1,102 4,835 (1,443) 4,494
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Finance costs - - (2,102) (2,102) - - (2,523) (2,523)
Income tax - - 165 165 - - (986) (986)
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
Profit/(loss)
after tax 139 3,897 (4,380) (340) 1,102 4,835 (4,952) 985
------------------------ --------- --------- ------- -------- --------- --------- ------- --------
The segmental figures for year ended 31 March 2020 have been
restated to reclassify revenues and costs associated with
Non-Geographic Number services to the fixed line services segment
as it better reflects the characteristics of the service.
The assets and liabilities relating to the above segments have
not been disclosed as they are not separately identifiable and are
not used by the chief operating decision maker to allocate
resources. All segments are in the UK and all revenue relates to
the UK.
Transactions with the largest customer of the Group are less
than 10% of total turnover and do not require disclosure for either
2020 or 2021.
3. Revenue
In the following table, revenue is disaggregated by major
product/service lines and timing of revenue recognition. All
revenue is derived from the UK.
2021 2020
GBP'000 GBP'000
-------------------------------------------- -------- --------
Sale of goods 14,703 15,616
Provision of services:
- calls and line rental 10,739 12,891
- data networks 14,228 13,976
- support services 14,659 16,232
- cloud telephony and other services 3,522 2,973
-------------------------------------------- -------- --------
57,851 61,688
-------------------------------------------- -------- --------
Timing of revenue recognition
Products transferred at a point in time 14,703 15,616
Products and services transferred over time 43,148 46,072
-------------------------------------------- -------- --------
57,851 61,688
-------------------------------------------- -------- --------
The following table provides information about receivables,
contract assets and contract liabilities with customers:
2021 2020
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Receivables, which are included in 'Trade and other
receivables' 8,472 9,984
Contract assets 978 1,379
Contract liabilities (2,244) (2,502)
---------------------------------------------------- -------- --------
Contract assets relate to the deferred direct costs in respect
of data circuit installations which have been completed and are
being recognised across the customer's contractual term to which
the installation relates. The contract liabilities relate to the
deferred revenue in respect of data installations which have been
completed and the revenue is being recognised across the term of
the customer contract.
Significant changes in the contract assets and contract
liabilities balances during the period are as follows:
2021 2020
GBP'000 GBP'000
----------------------------------------------- -------- --------
Revenue deferred into future periods (2,244) (2,502)
Deferred revenue recognised in the period 2,470 2,201
Direct costs deferred into future periods 978 1,379
Deferred direct costs recognised in the period 839 724
----------------------------------------------- -------- --------
The performance obligations of the underlying contracts to which
the contract assets relate are expected to be met over periods of
up to five years. However, the performance obligations for all
revenues and costs that have been deferred into future periods have
been satisfied at the year end, as these relate to the installation
and equipment of data networks which have been completed and the
service is being used by the customer.
4. Other income
2021 2020
GBP'000 GBP'000
---------------------------------------- -------- --------
Coronavirus Job Retention Scheme claims 304 -
---------------------------------------- -------- --------
5. Operating profit
The operating profit is stated after charging:
2021 2020
GBP'000 GBP'000
-------------------------------------------------- -------- --------
Amortisation of customer base, billing system and
licence 5,793 5,772
Depreciation of tangible fixed assets:
- owned by the Group 845 711
- right of use assets 687 801
Share option expense 67 29
Acquisition costs - 267
Restructuring costs 974 288
-------------------------------------------------- -------- --------
Acquisition costs relate to the legal and professional fees
incurred as a direct result of acquisitions completed during the
year. Restructuring costs relate to the acquisition operating costs
(from the date of acquisition) and other operating costs which have
been either terminated or notice to terminate has been served and
therefore these items will not form part of the future operating
costs of the Group.
6. Finance costs
2021 2020
GBP'000 GBP'000
----------------------------------------- -------- --------
On bank loans and overdrafts 1,608 1,870
Bank arrangement fees 435 357
IFRS 16 lease liability interest 59 81
Finance cost on contingent consideration - 215
----------------------------------------- -------- --------
2,102 2,523
----------------------------------------- -------- --------
The finance costs on contingent consideration arise from the
release of the discounted contingent consideration liability evenly
across the term of the deferred consideration period in relation to
each acquisition. This is a non-cash item.
7. Income tax expense
2021 2020
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Current tax
UK corporation tax on profit for the year 860 1,129
Adjustments in respect of prior periods - (91)
---------------------------------------------------- -------- --------
Total current tax 860 1,038
---------------------------------------------------- -------- --------
Deferred tax
Origination and reversal of temporary differences:
- fixed assets and short-term temporary differences (43) 67
- share options (14) 14
- intangibles on business combinations (963) (968)
Effect of tax rate change on opening balance - 763
Adjustments in respect of prior periods (5) 72
---------------------------------------------------- -------- --------
Total deferred tax (1,025) (52)
---------------------------------------------------- -------- --------
Total income tax expense (165) 986
---------------------------------------------------- -------- --------
Factors affecting tax charge for the year
The relationship between expected tax expense based on the
effective tax rate of AdEPT at 19% (2020: 19%) and the tax expense
actually recognised in the income statement can be reconciled as
follows:
2021 2020
GBP'000 GBP'000
------------------------------------------------------ -------- --------
Profit before income tax (505) 1,971
Tax rate 19% 19%
Expected tax charge (96) 374
Expenses not deductible for tax purposes 1 (40)
Adjustments to tax charge in respect of prior periods (25) (19)
Depreciation/amortisation on non-qualifying assets 22 12
Difference due to deferred tax rate being lower
than the standard tax rate - -
Movement on share option deferred tax assets taken
to equity - 20
R&D enhanced tax deduction (50) (45)
RDEC credit taxed (21) (30)
Effect of tax rate change on deferred tax opening
balance - 763
Other 4 (49)
------------------------------------------------------ -------- --------
Actual tax expense net (165) 986
------------------------------------------------------ -------- --------
Future changes to tax rates are anticipated in line with the UK
government announcement in the 2021 Budget of an increase in the
tax rate to 25% from 1 April 2023.
8. Goodwill
Group
Total
GBP'000
------------------ --------
Cost
At 1 April 2019 18,108
Additions 1,384
------------------ --------
At 1 April 2020 19,492
Additions -
------------------ --------
At 31 March 2021 19,492
------------------ --------
Impairment
At 1 April 2019 2,084
Impairment charge -
------------------ --------
At 1 April 2020 2,084
Impairment charge -
------------------ --------
At 31 March 2021 2,084
------------------ --------
Net book value
At 31 March 2021 17,408
------------------ --------
At 31 March 2020 17,408
------------------ --------
We perform an annual goodwill impairment review and we tested
our goodwill for impairment as at 31 March 2021.
Goodwill is recognised when a business combination does not
generate cash flows independently of other assets or groups of
assets. As a result, the recoverable amount, being the value in
use, is determined at a cash-generating unit (CGU) level. These
CGUs represent the smallest identifiable group of assets that
generate cash flows. Our CGUs are deemed to be the assets within
the operating units. Each CGU to which goodwill is allocated
represents the lowest level within the Group at which the goodwill
is monitored for internal management purposes.
The total intangible value in use for each CGU, incorporating
goodwill and the intangible asset value, is determined using
discounted cash flow projections derived from the total historical
revenue profile of each identifiable CGU. The assumptions which are
applied to each CGU in respect of churn rate, discount rate, margin
and useful economic life are set out in Note 9.
The Group's goodwill is split by CGU as follows:
March March
2021 2020
GBP'000 GBP'000
------------------------------------- -------- --------
Centrix Limited 3,614 3,614
Comms Group UK Limited 2,672 2,672
CAT Communications Limited 248 248
Our IT Department Limited 4,683 4,683
Atomwide Limited 3,313 3,313
Shift F7 Limited 879 879
ETS Communications Limited 615 615
Advanced Computer Systems UK Limited 1,384 1,384
------------------------------------- -------- --------
The net present value of the future cash flows for the CGUs is
sensitive to the weighted average cost of capital. The rate used to
discount the future cash flows is the Group's pre-tax weighted
average cost of capital of 8.9% An increase in the Group's weighted
average cost of capital to above 16.2% would materially impair the
carrying value of the Group's goodwill by more than GBP400,000.
Further details of the sensitivity of the variables used in the
impairment testing are included in Note 9.
9. Intangible fixed assets
Group
Computer Customer Software
Licence software base apps Website Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- --------- -------- -------- -------- --------
Cost
At 1 April 2019 154 1,345 64,343 3,535 1,745 71,122
Additions 108 343 7,292 - - 7,743
-------------------- -------- --------- -------- -------- -------- --------
At 1 April 2020 262 1,688 71,616 3,535 1,745 78,846
Additions 139 575 - - 22 736
-------------------- -------- --------- -------- -------- -------- --------
At 31 March 2021 401 2,263 71,616 3,535 1,767 79,582
-------------------- -------- --------- -------- -------- -------- --------
Amortisation
At 1 April 2019 57 1,320 28,537 586 623 31,123
Charge for the year 63 22 4,961 350 375 5,771
-------------------- -------- --------- -------- -------- -------- --------
At 1 April 2020 120 1,342 33,498 936 998 36,894
Charge for the year 82 13 4,957 351 390 5,793
-------------------- -------- --------- -------- -------- -------- --------
At 31 March 2021 202 1,355 38,455 1,287 1,388 42,687
-------------------- -------- --------- -------- -------- -------- --------
Net book value
At 31 March 2021 199 908 33,161 2,248 379 36,895
-------------------- -------- --------- -------- -------- -------- --------
At 31 March 2020 142 346 38,118 2,599 747 41,952
-------------------- -------- --------- -------- -------- -------- --------
Included within the Group's intangible assets is:
March March
2021 2020
Useful life GBP'000 GBP'000
-------------------------------------------------- ------------ -------- --------
Centrix Limited - customer base 17 years 6,030 6,575
Comms Group UK Limited - customer base/website 17 years 3,174 3,544
Our IT Department Limited - customer base/website 17 years 1,823 2,232
CAT Communications Limited - customer base 10 years 699 845
Atomwide Limited - customer base 16 years 4,592 5,308
Atomwide Limited - software/apps 5 years 2,249 2,599
Shift F7 Limited - customer base 10 years 3,718 4,304
ETS Communications Limited - customer base 10 years 2,747 3,110
Advanced Computer Systems UK Limited - customer
base 10 years 6,001 6,563
Other customer bases - AdEPT Technology Group
plc trading business 10-16 years 5,591 6,356
-------------------------------------------------- ------------ -------- --------
Critical accounting estimates and key judgements made in
reviewing intangible assets and goodwill for impairment
The key assumptions concerning the future and other key sources
of estimation and uncertainty at the reporting date, which have a
significant risk of causing a material adjustment to the carrying
amounts of intangible assets and goodwill, are discussed below.
Measuring the fair value of intangible assets on acquisition
The main estimates used to measure the fair value of the
intangible assets on acquisition are:
-- churn rate;
-- discount rate; and
-- gross margins.
Intangible assets are reviewed annually or more frequently if
events or changes in circumstances indicate that the carrying value
may be impaired. The net present value of cash flows for each
cash-generating unit is reviewed against the carrying value at the
balance sheet date. At the final reporting date of 31 March 2021
the net present value of future cash flows of certain
cash-generating units was above the carrying value and therefore no
impairment charge has been recorded (2020: GBPNil).
We tested our intangible assets and goodwill for impairment as
at 31 March 2021. The carrying value of the intangible assets and
the key assumptions used in performing the annual impairment
assessment and sensitivities are disclosed below:
Book value
of Estimated
cash-generating value
unit in use
GBP'000 GBP'000
----------------------------------------------- ---------------- ---------
Centrix Limited and CAT Communications Limited 6,743 16,394
Comms Group UK Limited and ETS Communications
Limited 5,423 9,814
Our IT Department Limited and Shift F7 Limited 5,653 9,548
Atomwide Limited and Advanced Computer Systems
UK Limited 12,659 26,446
----------------------------------------------- ---------------- ---------
What discount rate have we used?
The rate used to discount the future cash flows is the Group's
pre-tax weighted average cost of capital (WACC) of 8.9% (2020:
8.5%). The directors have chosen to use WACC as it is a calculated
figure using actual input variables where available and applying
estimates for those which are not, such as the equity market
premium. An increase in the Group's weighted average cost of
capital to above 16.2% would materially impair the carrying value
of the Group's intangible assets by more than GBP400,000.
What churn rate have we used?
For the customer bases which have been fully integrated into the
AdEPT Technology Group plc trading business in Tunbridge Wells, the
churn rate of 5.4% per annum is based upon the actual historical
churn rate of the revenue stream from the customer bases.
For Centrix, Comms Group, Our IT Department, CAT Communications,
Atomwide, Shift F7, ETS Communications and ACS the net present
value of the discounted future cash flows is based on the actual
revenues of the acquired customer bases. The actual historical
churn rates for the acquired customer bases vary between nil and
6.6% per annum. Where an acquired customer base has shown growth, a
default churn assumption of 3% per annum has been applied.
For the software and apps which have been developed by Atomwide
the net present value of the discounted future cash flows is based
on the actual revenues being derived from the customer base to
which the software licences and charges relate. The actual
historical churn rates for the software and app revenue stream is
nil% per annum, but a default churn rate of 3% per annum has been
applied for the purpose of impairment testing.
What margin have we used?
Gross margins applied are based upon actual margins achieved by
the customer bases in the current and previous years. A proportion
of overheads are applied to the gross margin to represent the
actual operating cost required to support the acquired customer
revenue stream, resulting in a net margin which is used for the
discounted net present valuation.
What is the estimated useful life of customer bases?
The method used to estimate the useful life of each customer
base to conduct the impairment review is the revenue churn rate.
The average useful economic life of all the customer bases has been
estimated at 14 years (2020: 14 years) with a range of 10 to 17
years.
What sensitivities have we applied?
The calculations are sensitive to movements in the discount
rate, margin or churn rate and may therefore result in an
impairment charge to the income statement. A 1% change to the
discount rate, churn rate and, gross margin would result in no
additional impairment charges.
10. Property, plant and equipment
Group
Right of Short-term Fixtures
Motor use leasehold and Office
vehicles assets improvements fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- -------- ------------- --------- ---------- --------
Cost
At 1 April 2019 320 - 294 569 1,941 3,124
Adjustment from adoption
of IFRS 16 - 1,848 - - - 1,848
Additions 87 324 1 48 570 1,030
Disposals (50) (183) - (14) (625) (872)
------------------------- --------- -------- ------------- --------- ---------- --------
At 1 April 2020 357 1,989 295 603 1,886 5,130
Additions 78 514 4 25 599 1,220
Disposals (183) (439) (238) - (164) (1,024)
------------------------- --------- -------- ------------- --------- ---------- --------
At 31 March 2021 252 2,064 61 628 2,321 5,326
------------------------- --------- -------- ------------- --------- ---------- --------
Depreciation
At 1 April 2019 238 - 44 371 999 1,652
Charge for the year 66 825 19 88 530 1,528
Disposals (38) (100) - (7) (605) (750)
------------------------- --------- -------- ------------- --------- ---------- --------
At 1 April 2020 266 725 63 452 924 2,430
Charge for the year 44 758 15 98 590 1,505
Disposals (182) (434) (39) - (163) (818)
------------------------- --------- -------- ------------- --------- ---------- --------
At 31 March 2021 128 1,049 39 550 1,351 3,117
------------------------- --------- -------- ------------- --------- ---------- --------
Net book value
At 31 March 2021 124 1,015 22 78 970 2,209
------------------------- --------- -------- ------------- --------- ---------- --------
At 31 March 2020 91 1,264 232 151 962 2,700
------------------------- --------- -------- ------------- --------- ---------- --------
The right of use asset is made up as follows:
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------
Property 850 342 924 389
Motor vehicles 140 54 183 80
Other 25 13 157 45
--------------- -------- -------- -------- --------
1,015 409 1,264 514
--------------- -------- -------- -------- --------
The depreciation charge for right of use assets is as
follows:
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
--------------- -------- -------- -------- --------
Property 472 111 506 110
Motor vehicles 166 40 72 43
Other 120 112 247 64
--------------- -------- -------- -------- --------
758 263 825 217
--------------- -------- -------- -------- --------
11. Deferred taxation
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ -------- -------- -------- --------
At 1 April 2020 (7,738) (279) (6,362) (122)
Income statement credit/(charge) 1,025 89 52 (114)
Movement in deferred tax on share options
taken to equity 4 4 (43) (43)
Deferred tax transferred from group
company - (10) - -
Adjustments in respect of prior periods 9 24 - -
Deferred tax on business combination - - (1,385) -
------------------------------------------ -------- -------- -------- --------
At 31 March 2021 (6,700) (172) (7,738) (279)
------------------------------------------ -------- -------- -------- --------
The deferred tax (liability)/asset is made up as follows:
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- --------
Accelerated capital allowances (181) (58) (213) (124)
Short-term temporary differences 5 - 18 2
Convertible loan note equity element (128) (128) (158) (157)
Deferred tax on business combinations (6,410) - (7,385) -
Share options 14 14 - -
-------------------------------------- -------- -------- -------- --------
(6,700) (172) (7,738) (279)
-------------------------------------- -------- -------- -------- --------
12. Inventories
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------ -------- -------- -------- --------
Consumables 569 111 612 -
------------ -------- -------- -------- --------
As at 31 March 2021, inventories of GBP25,765 (2020: GBP60,407)
were fully provided for. During the year GBP7,320,490 has been
recognised as an expense in the statement of comprehensive
income.
There is no material difference between the replacement cost of
inventories and the amount stated above.
13. Trade and other receivables
We initially recognise trade and other receivables at fair
value, which is usually the original invoiced amount. They are
subsequently carried at amortised cost using the effective interest
method. The carrying amount of these balances approximates to fair
value due to the short maturity of amounts receivable.
We provide services to consumer and business customers, mainly
on credit terms. We know that certain debts due to us will not be
paid through the default of a small number of our customers.
Because of this, we recognise an allowance for doubtful debts on
initial recognition of receivables, which is deducted from the
gross carrying amount of the receivable. The allowance is
calculated by reference to credit losses expected to be incurred
over the lifetime of the receivable. In estimating a loss allowance
we consider historical experience and informed credit assessment
alongside other factors such as the current state of the economy
and particular industry issues. We consider reasonable and
supportable information that is relevant and available without
undue cost or effort.
Once recognised, trade receivables are continuously monitored
and updated. Allowances are based on our historical loss
experiences for the relevant aged category as well as
forward-looking information and general economic conditions.
Allowances are calculated by individual customer-facing units in
order to reflect the specific nature of the customers relevant to
that customer-generating unit.
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Trade receivables 8,480 3,793 9,842 3,177
Other receivables - - 119 21
Amounts owed by Group undertakings - 9,200 - 5,899
Prepayments 3,692 2,268 3,917 1,208
Accrued income 612 58 817 -
----------------------------------- -------- -------- -------- --------
12,784 15,319 14,695 10,243
----------------------------------- -------- -------- -------- --------
The Group has one type of financial asset that is subject to
IFRS 9's expected credit loss model:
-- trade receivables for sales of inventory and from the provisions of consulting services.
Trade receivables and contract assets
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets. As at 31
March 2021, trade receivables of GBP387,712 (2020: GBP411,319) were
fully provided for.
All debts which are older than 90 days relate to interim amounts
in respect of large customer projects which have not yet fully
completed and are considered to be fully recoverable on completion.
The movement of the provision for impairment of trade receivables
is as follows:
Group Company
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
At 1 April 2019 326 120
Receivables provided for during the year as uncollectable 149 33
Receivables collected during the year which were
previously provided (15) -
Receivables written off in the year which were
previously provided for (64) (72)
Acquired through acquisition 15 -
---------------------------------------------------------- -------- --------
At 1 April 2020 411 81
Receivables provided for during the year as uncollectable 245 245
Receivables collected during the year which were
previously provided (153) -
Receivables written off in the year which were
previously provided for (115) (51)
Acquired through acquisition - 25
---------------------------------------------------------- -------- --------
At 31 March 2021 388 275
---------------------------------------------------------- -------- --------
The creation and release of a provision for impaired receivables
have been included in administration expenses in the income
statement. Amounts charged to the allowance account are generally
written off when there is no expectation of recovering cash.
Management regularly reviews the outstanding receivables and does
not consider that any further impairment is required. The other
asset classes within trade and other receivables do not contain
impaired assets.
14. Trade and other payables
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- --------
Trade payables 4,176 2,001 4,494 1,210
Other taxes and social security
costs 1,998 741 1,982 508
Other payables 179 36 155 36
Lease liability 547 220 674 253
Amounts owed to Group undertakings - - - -
Accruals and deferred income 3,984 1,440 5,876 362
Contingent consideration - - 1,798 1,798
----------------------------------- -------- -------- -------- --------
10,884 4,438 14,979 4,167
----------------------------------- -------- -------- -------- --------
The contingent consideration liability of GBPnil (2020:
GBP1,797,738) represents the year-end fair value of the contingent
consideration liabilities arising on the acquisitions made during
the year. The fair value of the contingent consideration liability
was initially determined by reference to the forecast growth rate
for the customer base and applying the contingent consideration
matrix as specified in the share purchase agreement.
15. Long-term borrowings
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Between one and two years - - - -
Between two and five years 45,634 45,322 40,444 40,079
More than five years - - 6,340 6,340
--------------------------- -------- -------- -------- --------
45,634 45,322 46,784 46,419
--------------------------- -------- -------- -------- --------
The bank loan of GBP38,588,128 is secured by a debenture
incorporating a fixed and floating charge over the undertaking and
all property and assets present and future, including goodwill,
book debts, uncalled capital, buildings, fixtures and fixed plant
and machinery.
Included in long-term borrowings is an amount of GBP6,524,462
which is the debt component of the convertible loan instrument from
BGF. This loan instrument is subordinated and ranks behind the bank
loan.
Details of the interest rates applicable to the borrowings are
included in Note 19.
Included within bank loans are arrangement fees amounting to
GBP661,871 (2020: GBP211,928) which are being released over the
term of the loan in accordance with IFRS 9.
16. Lease liability
Included within long-term borrowings (Note 21) between two and
five years is an amount of GBP521,468 (2020: GBP655,001) which
relates to the IFRS 16 lease liability.
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- --------
Within one year 547 220 674 253
Between two and five years 521 218 655 291
More than five years - - - -
--------------------------- -------- -------- -------- --------
1,069 438 1,329 544
--------------------------- -------- -------- -------- --------
Total cash payments in respect of IFRS 16 lease agreements
during the year was GBP866,442 (2020: GBP836,580).
17. Share capital
2021 2020
GBP'000 GBP'000
------------------------------------------------- -------- --------
Authorised
65,000,000 ordinary shares of 10p each 6,500 6,500
------------------------------------------------- -------- --------
Allotted, called up and fully paid
25,029,957 (2020: 25,029,957) ordinary shares of
10p each 2,503 2,503
------------------------------------------------- -------- --------
18. Earnings per share
Earnings per share is calculated on the basis of a loss of
GBP339,787 (2020: profit of GBP985,637) divided by the weighted
average number of shares in issue for the year of 25,029,959 (2020:
23,812,509). The diluted earnings per share is calculated on the
treasury stock method and the assumption that the weighted average
unapproved and EMI share options outstanding during the period are
exercised. This would give rise to a total weighted average number
of ordinary shares in issue for the period of 25,052,139 (2020:
23,945,655).
Adjusted earnings per share is used to reflect the non-cash
nature of certain items which are charged to the income statement
and the non-trading items, such as acquisition costs, to give a
better indicator of the underlying cash generation of the Group.
Adjusted earnings per share is calculated by adding back
amortisation of intangible assets, impairment of goodwill, the
taxation deduction on purchased customer contracts, deferred tax
credits on amortisation charges, share option charges, adjustment
to deferred consideration, acquisition fees and restructuring costs
from retained earnings, giving GBP5,597,601 (2020: GBP6,716,948).
This is divided by the same weighted average number of shares as
above.
2021 2020
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Earnings for the purposes of basic and diluted
earnings per share
Profit for the period attributable to equity holders (340) 985
Add: amortisation 5,793 5,772
Less: taxation on amortisation of purchased customer
contracts (117) (117)
Less: deferred tax credit on amortisation charges (963) (235)
Add: share option charges 67 29
Add/(less): adjustment to deferred consideration - (654)
Add: acquisition fees and restructuring costs 974 555
Add: interest unwind on loan note 184 381
----------------------------------------------------- ---------- ----------
Adjusted profit attributable to equity holders 5,598 6,717
----------------------------------------------------- ---------- ----------
Number of shares
Weighted average number of shares used for earnings
per share 25,029,957 23,812,509
Weighted average dilutive effect of share plans 22,180 133,146
----------------------------------------------------- ---------- ----------
Diluted weighted average number of shares 25,052,137 23,945,655
----------------------------------------------------- ---------- ----------
Earnings per share
Basic earnings per share (1.36p) 4.14p
Diluted earnings per share N/a 4.12p
Adjusted earnings per share
Adjusted basic earnings per share 22.36p 28.21p
Adjusted diluted earnings per share 22.34p 28.05p
----------------------------------------------------- ---------- ----------
Earnings per share is calculated by dividing the retained
earnings attributable to the equity holders by the weighted average
number of ordinary shares in issue. Diluted earnings per share has
not been calculated as the impact of share plans is
anti-dilutive.
Adjusted earnings per share is calculated by dividing the
retained earnings attributable to the equity holders (after adding
back amortisation, the taxation deduction on purchased customer
contracts, deferred tax credits on amortisation charges, share
option charges, adjustment to deferred consideration and
acquisition costs) by the weighted average number of ordinary
shares in issue.
19. Financial instruments
Set out below are the Group's financial instruments. The
directors consider there to be no difference between the carrying
value and fair value of the Group's financial instruments.
2021 2020
------------------ ------------------
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- -------- --------
Loans and receivables at amortised
cost
Cash and cash equivalents 13,166 10,652 11,849 6,619
Loans and receivables 8,472 3,793 9,961 3,197
------------------------------------ -------- -------- -------- --------
21,638 14,445 21,810 9,816
------------------------------------ -------- -------- -------- --------
Financial liabilities at amortised
cost
Liabilities at amortised cost 51,390 48,357 53,083 48,871
Financial liabilities at fair value
Contingent consideration - - 1,798 1,798
------------------------------------ -------- -------- -------- --------
51,390 48,357 54,881 50,669
------------------------------------ -------- -------- -------- --------
Amounts due for settlement
Within twelve months 4,987 2,257 6,965 3,297
After twelve months 46,403 46,100 47,916 47,372
------------------------------------ -------- -------- -------- --------
51,390 48,357 54,881 50,669
------------------------------------ -------- -------- -------- --------
The Company has a three plus one year GBP50m committed revolving
credit facility agreement with Natwest and Bank of Ireland. The
revolving credit facility bears interest at 1.85-3.25% over LIBOR
on drawn funds, dependent upon the net debt to EBITDA ratchet. The
facility is repayable in full on the final repayment date in March
2024, or March 2025 if the one-year extension option is
activated.
The financial assets of the Group are cash and cash equivalents
and trade and other receivables, which are offset against
borrowings under the facility, and there is no separate interest
rate exposure.
Natwest and Bank of Ireland have a cross guarantee and debenture
incorporating a fixed and floating charge over the undertaking and
all property and assets present and future, including goodwill,
book debts, uncalled capital, buildings, fixtures and fixed plant
and machinery.
The banks also hold a charge over the life assurance policy of
Ian Fishwick, director of the Company, for GBP1,500,000.
In August 2017 the Group raised GBP7,293,726 in the form of a
convertible loan instrument from BGF to part fund the acquisition
of Atomwide. The convertible loan instrument is excluded from the
leverage calculations by the senior debt partners, Natwest and Bank
of Ireland. The Group has applied the principles of IAS 32 and IFRS
9 in the recognition and measurement of the convertible loan. The
net present value of the loan of GBP7,090,201 has been split
between the debt and equity components and an amount of
GBP1,158,317 has been recorded in equity, with GBP5,931,884 being
included within long-term debt at the initial date of
recognition.
BGF has the right to convert the loan to 1,855,910 ordinary
shares at a share price of GBP3.93 per share at any time. The loan
instrument can be redeemed by the Company from the third
anniversary. The convertible loan instrument bears an interest rate
of 7%. In addition, the transaction costs with a net present value
of GBP203,525 are being recognised in the interest charge in the
income statement across the term of the convertible instrument. The
equity component of the convertible loan is included in the share
option reserve in the statement of changes in equity and statement
of financial position.
20. Business combinations
Contingent consideration obligations
Reconciliation of the movement in the fair value of contingent
consideration:
Advanced
Computer
Systems
UK Limited Total
GBP'000 GBP'000
----------------- ----------- --------
At 1 April 2020 1,798 1,798
Settled in cash (1,798) (1,798)
----------------- ----------- --------
At 31 March 2021 - -
----------------- ----------- --------
The earnout period for Advanced Computer Systems Limited ended
on 31 March 2020 and deferred consideration of GBP1,797,738 was
paid on 9 May 2020.
21. Subsequent events
Acquisition of Datrix Limited
On 12 April 2021 the Company acquired the entire issued share
capital of Datrix Limited ('Datrix') a well-established,
award-winning supplier of advanced cloud-based networking,
communications, and cyber security solutions, headquartered in
London, with expertise in the growing Software Defined Wide Area
Networking ("SD-WAN") market focused on the public and healthcare
sector.
Initial consideration of GBP9.0m, on a debt free cash free
basis, was paid in cash. Pursuant to the terms of the share
purchase agreement, the effective date of the acquisition is 1
April 2021. Further contingent deferred consideration of up to
GBP7.0m may be payable in cash dependent upon the trading
performance of Datrix in the twelve month period ended 31 March
2022. The contingent deferred consideration will be determined by
reference to the gross margin of the acquired business and applying
the contingent deferred consideration calculation as specified in
the share purchase agreement. The fair value of the assets and the
contingent consideration liability have not yet been identified at
the date of these results as the completion balance sheet was not
available.
The last filed statutory accounts of Datrix for the year ended
30 June 2020 reported turnover, operating loss and loss before tax
of GBP10.3m, GBP0.1m and GBP0.1m respectively. There was GBP0.2m of
capital expenditure in the year ended 30 June 2020. Net liabilities
and gross assets at that date were GBP2.1m and GBP5.5m
respectively. Acquisition related costs will be recognised as an
expense in the statement of comprehensive income for the year
ending 31 March 2022.
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END
FR BLGDRBGGDGBL
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July 07, 2021 02:00 ET (06:00 GMT)
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