TIDMADT
RNS Number : 8529O
AdEPT Telecom plc
06 July 2010
AdEPT Telecom plc
("AdEPT" or the "Company")
Final results for the year ended 31 March 2010
AdEPT, a leading independent provider of award-winning telecommunications
services for fixed line, mobile and data connectivity, announces its results
for the year ended 31 March 2010.
Financial Highlights
· Increased underlying EBITDA for seventh consecutive year
· EBITDA excluding non-recurring costs up by 3% to GBP3.6m (2009: GBP3.5m)
· Underlying EBITDA margin % up by 1.7% to 14.0% (2009: 12.3%)
· Excellent cash generation with free cash flow, after interest and before
non-recurring costs, of GBP1.9m (2009: GBP2.1m)
· 86% of reported EBITA (GBP3.1m) converted into cash generated from
operating activities (GBP2.7m) (2009: 103%)
· Net debt reduction of GBP1.6m year-on-year (2009: GBP0.5m) to GBP9.2m
(2009: GBP10.8m)
Operational Highlights
· Substantially increased product range
· 10% increase in ARPU as at March 2010 to GBP77.97 (2009: GBP71.16)
· Further progress in increasing revenue from fixed monthly charges to 48%
of revenue for the year ended March 2010 (2009: 43%). In the month of March 2010
fixed charges were 53% of revenue.
· Greater than 70% increase to mobile and data revenues year-on-year
· 86% of revenue generated from customers taking more than one product or
service (2009: 81%)
· 23% of revenue generated from customers taking 3 or more products (2009:
15%)
· Overhead costs (excluding one-off restructuring costs) decreased to 23%
of revenue (2009: 24%)
· Prior year improvement to credit collection processes and debt management
maintained with year end debtor days of 30 (2009: 29 days)
Commenting upon these results Chairman Roger Wilson said:
"The business has been resilient through challenging economic conditions,
generating increased profitability, developing new product sets and continues to
be highly cash generative. AdEPT has delivered on its strategy of deleveraging
from the continued strong operating cash generation."
For further information on AdEPT Telecom please visit www.adept-telecom.co.uk or
contact:
+------------------------------------------+----------------------+
| AdEPT Telecom Plc | |
| Roger Wilson, Chairman | 07786 111 535 |
| Ian Fishwick, Chief Executive | 01892 550 225 |
| John Swaite, Finance Director | 01892 550 243 |
| | |
+------------------------------------------+----------------------+
| Astaire Securities Plc | |
| Shane Gallwey | 020 7492 4775 |
| | |
+------------------------------------------+----------------------+
CHAIRMAN'S STATEMENT
It is with great pleasure that I announce our annual results.
For the year ended 31 March 2010 AdEPT Telecom plc ("AdEPT" or the "Company")
delivered another strong trading performance.
Review of Operations
During the past year the Company has focussed on larger customer contracts, with
target market businesses of 25 to 1,000 employees, which has enhanced our
ability to benefit from scale efficiencies and cross selling. Following a
number of multi-product, multi-site contract wins during the year AdEPT Telecom
is increasingly being recognised as one of the UK's leading communications
integration specialists, with over 700 multi-site customers. Important customer
wins during the year were Nationwide Autocentres with 216 sites, and a further
120 sites from Rexel.
This strategy of targeting larger customers has continued and since the year end
the Company has signed a new 36 month contract to supply a national electronic
games operator with a voice and data network of 450 sites, with an estimated
contract value in excess of GBP800,000. In addition AdEPT has been named by
Ja.net (the Joint Academic Network) as one of only 20 companies approved to sell
data products to Universities, Colleges, higher education and research
establishments connected to the Ja.net network in the UK.
Our revenue is becoming more stable as we reduce our reliance on variable
monthly call charges, replacing them with fixed monthly line rentals. The
proportion of revenue derived from fixed monthly charges now represents 48% of
total revenue (2009: 43%).
In an exceptionally tough economic climate during the last 12 months, it is
testament to the resilience of the business model and the skills of the
directors and management team in place at AdEPT that the business has been
successful in recording it's seventh consecutive year on underlying EBITDA
growth.
The strong cash flow generation continued during the year with GBP1.9m of free
cash flow after interest. This was used to fund GBP0.3m of non-recurring costs
and GBP1.6m net debt reduction. The Company ended the period with GBP1.6m lower
net borrowings, which at March 2010 was GBP9.2m. Since the year end the Company
has paid down a further GBP0.6m of debt, reducing net debt at 30 June 2010 to
GBP8.6m.
New products
AdEPT was originally a fixed-line telecom provider but is increasingly expanding
and diversifying its' product range and has become one of the UK's leading
communication integrators offering best of breed products from all major UK
networks.
A large number of data connectivity products were launched in the year
including:-
· EB-SA - up to 2Mb assured symmetrical broadband
· Ethernet First Mile
· Direct Internet Access
· MPLS IP-VPN
A new range of 21st Century Network-based Inbound Call Handling products has
enabled us to win some significant call centre contracts.
Key suppliers
AdEPT provides products from the following tier-1 networks in the UK:-
+-----------------------------------+-----------------------------------+
| · BT | · Kcom |
+-----------------------------------+-----------------------------------+
| · Virgin Business | · Vodafone |
+-----------------------------------+-----------------------------------+
| · Cable and Wireless | · O2 |
| Worldwide | |
+-----------------------------------+-----------------------------------+
| · Opal (CarphoneWarehouse) | · Orange |
+-----------------------------------+-----------------------------------+
| · Griffin | · T-Mobile |
+-----------------------------------+-----------------------------------+
Cross selling of products
A key strategy for the Company remains to sell more products to new and existing
customers. The product penetration has increased during the year; at March 2010
86% of revenue was generated from customers taking more than one product (2009:
81%).
In the larger customer base (those spending more than GBP1,000 per month) we
have seen further improvement in product penetration. At March 2010 customers
taking more than one product accounted for 97% of revenue generated (2009: 94%).
The proportion taking 3 or more products increased to 58% at March 2010 (2009:
45%).
Employees
The improved profitability this year was made possible by the continued hard
work and focus of all employees at AdEPT Telecom. As a Company we are immensely
proud of the track record we have created in a relatively short period of time
and on behalf of the Board I would like to take this opportunity to thank all of
our employees for their hard work.
I would also like to take this opportunity to thank the former directors and
non-executive directors who stepped down during the year for their substantial
contributions to AdEPT and to wish them all the best for the future.
Shareholder Benefits Scheme
The AdEPT shareholder benefits scheme has continued to attract new members
during the year. The scheme, which is available to all shareholders owning a
minimum of 1,000 shares, provides eligible shareholders with free residential
line rental worth approximately GBP120 per annum for as long as they remain
eligible shareholders.
Outlook
The management actions taken in the prior year to reduce overheads and tighten
credit management have enabled the Company to increase EBITDA levels despite top
line pressure. The business focus for the coming year remains on continued
development of organic sales, maintaining profitability and cash flow
generation, which will be used to reduce net borrowings. This has been
demonstrated by the GBP0.6m net debt reduction already achieved since March
2010. We will therefore continue to grow our organic sales channels, invest in
new products and complement this with continued investment in retention
activities to retain more customers.
Despite the continued uncertainty of the economic outlook, I am confident that
the Company is in a much stronger position with it's increasing ability to
provide complex multi-site, multi-product solutions to larger customer's. This
should provide more stability through longer customer contract durations and a
more stable customer base. We will also continue to focus on our customer cash
collection to ensure payment terms do not get extended.
Roger Wilson
Non-executive Chairman
FINANCIAL AND BUSINESS REVIEW
SUMMARY of three year financial performance:
+----------------------+---------+--------------+---------+--------------+---------+
| | Year ending March |
+----------------------+-----------------------------------------------------------+
| | 2010 | | 2009 | | 2008 |
| | GBP'000 | Year-on-Year | GBP'000 | Year-on-Year | GBP'000 |
| | | % | | % | |
+----------------------+---------+--------------+---------+--------------+---------+
| | | | | | |
+----------------------+---------+--------------+---------+--------------+---------+
| Revenue | 25,725 | (10)% | 28,567 | 21% | 23,618 |
+----------------------+---------+--------------+---------+--------------+---------+
| Gross margin | 9,561 | (8)% | 10,341 | 18% | 8,754 |
+----------------------+---------+--------------+---------+--------------+---------+
| EBITDA* | 3,612 | 3% | 3,517 | 7% | 3,280 |
+----------------------+---------+--------------+---------+--------------+---------+
| Net debt | 9,215 | | 10,843 | | 11,295 |
+----------------------+---------+--------------+---------+--------------+---------+
* excluding non-recurring costs
REVENUE
Revenue by product area
Group revenue decreased by 10% to GBP25.7m (2009: GBP28.6m)
· Fixed line revenues were 13.1% lower at GBP24.0m (2009: GBP27.6m), with
this reduction driven by call volume reductions which is primarily a reflection
of lower economic activity. The Company's previous reliance on call revenues
has been much reduced with call revenue providing only 47% of total revenue in
March 2010 (2009: 56%).
· Mobile revenues were ahead 86.1% to GBP0.32m (2009: GBP0.18m). We have
only been selling mobile for two years and handset volumes increased during the
year by 548 to 1,369 (2009: 821). The revenue per connection has increased to
GBP232 (2009: GBP208) driven by the increased take up of smartphones.
· Data product revenues were up 72.5% to GBP1.1m (2009: GBP0.6m), with
increases to the number of data circuits in place. At March 2010 the contract
revenue from data product orders placed awaiting connection was GBP0.4m due to
longer connection timescales.
Total revenue generated from the data and mobile divisions represented 8.7% of
total revenue in March 2010 (March 2009: 5.7%).
The proportion of revenue derived from business customers has remained at 95%
(2009: 95%).
Fixed monthly revenue streams
The Company continues to focus on fixed monthly revenue streams so as to reduce
revenue volatility. The proportion of revenue, which is fixed monthly values,
increased to 48% of total revenue for the year ended March 2010 (2009: 44%)
following the continued focus on multi-product sales (calls, line rental and
data products) and the introduction of a broad range of data connectivity
products in 2008.
Cross selling
The proportion of revenue generated from customers taking more than one product
or service has increased to 86% for the year ended March 2010 (2008: 81%) which
should provide a more stable future revenue stream.
The proportion of higher spending customers (recurring revenues of more than
GBP1,000 per month) taking 3 or more products increased to 58% at March 2010
(2009: 45%).
Average spend per customer
The Company is now increasingly focusing on larger customers and AdEPT's largest
200 customers account for approximately one third of March 2010 revenue.
Average customer monthly spend for business customers increased year-on-year by
9.6% to GBP77.97 in March 2010 reflecting the Group's success in gaining
contracts with higher spending customers and an increasing proportion of higher
spending business customers.
GROSS MARGIN
Gross margins for calls, lines, data connectivity and broadband have experienced
marginal increases during the year ended March 2010, despite pressures arising
from a highly competitive market. As a result, gross margin has improved during
the year ended March 2010 to 37.2% (2009: 36.2%).
Future gross margin pressure is anticipated as our product mix moves
increasingly towards the lower margin line rental, data connectivity and
broadband revenue streams.
ADMINISTRATION COSTS
Operational efficiencies achieved
Cost savings have been delivered as planned from:-
· operational efficiencies associated with managing larger customers, and
· savings derived from the restructuring undertaken towards the end of the
2009 financial year
As a result, the Company has seen a GBP0.9m reduction in underlying operating
costs during the year ended March 2010 to GBP5.9m which is 23% of revenue (2009:
24%).
We believe that we remain one of the lowest cost operators in the industry.
Non-recurring costs
The non-recurring costs identified are restructuring costs which will not recur
next year. These costs are represented by staff and the close out of leases
acquired with the Telecom Direct acquisition.
Impact of corporate failures
Whilst corporate failure has increased in the year it is still so small as to
have a minimal impact on overall results. In the year ended March 2010 there
was 207 such failures in our customer base (2009: 149). These were mostly
smaller companies with average debt per failed customer during the year ended
March 2010 being GBP435 (2009: GBP898). We anticipate the relatively high
corporate failure rate may continue some time after the economic recovery, but
that as a result of the improvements made in the prior year to collection
processes the Company's exposure and risk has been reduced.
EBITDA
I am pleased to report the seventh consecutive year of underlying EBITDA growth
since AdEPT's inception in 2003.
Excluding non-recurring costs EBITDA has increased by GBP0.1m during the year
despite top line pressure. The Company has focussed on the underlying
profitability or customers and revenue streams; as a result revenue reduction
has been more than absorbed by gross margin improvement combined with the
operational efficiencies and costs savings from the earlier restructuring.
EARNINGS PER SHARE
Adjusted earnings per share, based on retained earnings adding back amortisation
and non-recurring costs (see note 22), has reduced to 9.27p per share (2009:
10.44p). This arises largely due to the year-on-year movement in the tax
charge.
CASH FLOW
Cash conversion
The Group benefits from an excellent operating cash model, with EBITA turning
into cash. Reported EBITA turned into net cash from operating activities is 86%
(2009: 103%). There was a net working capital outflow of GBP0.5m during the
year arising from the reduction in trade payables following the reduction in
direct costs due to top line reductions.
Strong management of credit risk
The Group has continued to manage its credit risk in the current economic
climate and the collections of trade receivables have been maintained during the
year with customer collection periods of 30 days (2009: 29 days).
Increase in cash balances
After servicing its debt the Group achieved an increase in cash and cash
equivalents of GBP0.2m during the year. All acquisitions have been paid for and
no further earn-out payments are due.
CAPITAL EXPENDITURE
The Group has low capital requirements and therefore expenditure on tangible
assets is low at 0.2% of revenue (2009: 0.1%). Intangible asset additions were
GBP0.1m (2009: GBP0.1m).
NET DEBT
A key strength of AdEPT is its consistent, proven ability to generate strong
free cash flow. As a result of the Company's focus on underlying profitability
and cash conversion free cash flow after bank interest of GBP1.9m was generated
during the year ended March 2010; GBP0.3m of this was used to fund non-recurring
costs with GBP1.6m being applied to net reduction. Net debt, which comprises
cash balances and bank borrowings, has therefore improved to GBP9.2m (2009:
GBP10.8m).
Net debt has been reduced from a peak of more than GBP12m in November 2007 to
GBP9.2m at 31 March 2010. Free cash flow of GBP5.8m has been generated since
AdEPT acquired Telecom Direct in November 2007 and in addition to the debt
reduction of GBP2.8m a further GBP3m has been paid in restructuring costs
largely associated with the assimilation of Telecom Direct's business.
The Company's available banking facilities are described in Note 23 to the
financial statements. The existing facilities are renewable in December 2011,
and the Company is already in appropriate discussion with its bankers. The
Company continues to manage its exposure to interest rate risks arising from
financing activities.
KEY PERFORMANCE INDICATORS (KPIs)
The KPIs outlined below are intended to provide useful information when
interpreting the accounts. The KPIs outline the Group's position as at the final
month of the year, March, which provides an indication of the starting point for
the following financial year.
+----------------------------------------------+----------+----------+--------+
| | | Data, | |
+----------------------------------------------+----------+----------+--------+
| | Fixed | mobile | |
| | | | |
+----------------------------------------------+----------+----------+--------+
| | line | and | |
| | | other | |
+----------------------------------------------+----------+----------+--------+
| | services | services | Total |
+----------------------------------------------+----------+----------+--------+
| | | | |
+----------------------------------------------+----------+----------+--------+
| Year ended 31 March 2010 | | | |
+----------------------------------------------+----------+----------+--------+
| Revenue | 23,953 | 1,772 | 25,725 |
+----------------------------------------------+----------+----------+--------+
| Gross profit | 8,861 | 699 | 9,561 |
+----------------------------------------------+----------+----------+--------+
| Gross margin % | 37.0% | 39.4% | 37.2% |
+----------------------------------------------+----------+----------+--------+
| | | | |
+----------------------------------------------+----------+----------+--------+
| Year ended 31 March 2009 | | | |
+----------------------------------------------+----------+----------+--------+
| Revenue | 27,554 | 1,013 | 28,567 |
+----------------------------------------------+----------+----------+--------+
| Gross profit | 9,968 | 373 | 10,341 |
+----------------------------------------------+----------+----------+--------+
| Gross margin % | 36.2% | 36.8% | 36.2% |
+----------------------------------------------+----------+----------+--------+
| | | | |
+----------------------------------------------+----------+----------+--------+
RESILIENT BUSINESS MODEL
Despite the unprecedented conditions in the UK economy over the last 18-24
months the Board believes that AdEPT operates a resilient business model and has
a strong customer proposition which it is believed will present opportunities in
the coming year. These features include:
· highly cash generative with strong underlying profitability;
· supplies are nearly all business critical - an essential part of the
customer's daily operational requirements;
· highly automated systems provides sector leading labour costs : turnover
productivity;
· low capital investment requirements relative to turnover;
· continued focus on broadening its product range, particularly with regard
to data connectivity;
· customers are spread across all industries, the top ten customers account
for approximately 13.5% of revenues;
· trade suppliers and partners are all top tier suppliers, providing
confidence in the continuity and reliability of service to customers;
· 64.0% of the Company's customers pay by monthly direct debit, reducing
the Company's credit risk; and
· the Company has agreed banking facilities through to December 2011
· with the reorganisation and the level of cash generation forecast, the
Board expects the Company's net borrowing position to improve significantly over
the next twelve months.
John Swaite
Finance Director
STATEMENT OF COMPREHENSIVE INCOME
+-----------------------------------------+-+------+----------+----------+
| | | | 2010 | 2009 |
+-----------------------------------------+-+------+----------+----------+
| | |Note | GBP'000 | GBP'000 |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| REVENUE | | 4 | 25,725 | 28,567 |
+-----------------------------------------+-+------+----------+----------+
| Cost of sales | | | (16,164) | (18,226) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| GROSS PROFIT | | | 9,561 | 10,341 |
+-----------------------------------------+-+------+----------+----------+
| Administrative expenses | | | (8,382) | (10,451) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| OPERATING PROFIT | | | 1,179 | (110) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Total operating profit - analysed: | | | | |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Operating profit before non-recurring | | | | |
| costs, | | | | |
+-----------------------------------------+-+------+----------+----------+
| depreciation and amortisation | | | 3,612 | 3,517 |
+-----------------------------------------+-+------+----------+----------+
| Non-recurring costs | | | (326) | (1,314) |
+-----------------------------------------+-+------+----------+----------+
| Share based payments | | | (24) | (27) |
+-----------------------------------------+-+------+----------+----------+
| Depreciation of tangible fixed assets | | | (102) | (160) |
+-----------------------------------------+-+------+----------+----------+
| Impairment of intangible assets | | | (222) | - |
+-----------------------------------------+-+------+----------+----------+
| Amortisation of intangible fixed assets | | | (1,759) | (2,126) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Total operating profit/(loss) | | | 1,179 | (110) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Finance costs | | 7 | (1,293) | (1,294) |
+-----------------------------------------+-+------+----------+----------+
| Finance income | | | - | 1 |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| LOSS BEFORE INCOME TAX | | | (114) | (1,403) |
+-----------------------------------------+-+------+----------+----------+
| Income tax credit/(expense) | | 10 | (241) | 162 |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| LOSS FOR THE YEAR | | | (355) | (1,241) |
+-----------------------------------------+-+------+----------+----------+
| Other comprehensive income | | | - | - |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | | | (355) | (1,241) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Total comprehensive income attributable | | | | |
| to: | | | | |
+-----------------------------------------+-+------+----------+----------+
| Equity holders | | | (355) | (1,241) |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
| Earnings per share | | | | |
+-----------------------------------------+-+------+----------+----------+
| Basic earnings per share | | 22 | (1.68)p | (5.89)p |
+-----------------------------------------+-+------+----------+----------+
| Diluted earnings per share | | 22 | (1.68)p | (5.89)p |
+-----------------------------------------+-+------+----------+----------+
| | | | | |
+-----------------------------------------+-+------+----------+----------+
All amounts relate to continuing operations. Notes 1 to 23 form part of these
financial statements.
STATEMENT OF FINANCIAL POSITION
+--------------------------------------------+------+---------+---------+
| | | 31 | 31 |
| | | March | March |
+--------------------------------------------+------+---------+---------+
| | | 2010 | 2009 |
+--------------------------------------------+------+---------+---------+
| |Note | GBP'000 | GBP'000 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| ASSETS | | | |
+--------------------------------------------+------+---------+---------+
| Non-current assets | | | |
+--------------------------------------------+------+---------+---------+
| Intangible assets | 11 | 18,663 | 20,532 |
+--------------------------------------------+------+---------+---------+
| Property, plant and equipment | 12 | 72 | 135 |
+--------------------------------------------+------+---------+---------+
| Deferred income tax | 13 | 612 | 799 |
+--------------------------------------------+------+---------+---------+
| | | 19,347 | 21,466 |
+--------------------------------------------+------+---------+---------+
| CURRENT ASSETS | | | |
+--------------------------------------------+------+---------+---------+
| Trade and other receivables | 14 | 2,901 | 3,218 |
+--------------------------------------------+------+---------+---------+
| Income tax receivable | | - | 50 |
+--------------------------------------------+------+---------+---------+
| Cash and cash equivalents | | 885 | 733 |
+--------------------------------------------+------+---------+---------+
| | | 3,786 | 4,001 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| TOTAL ASSETS | | 23,133 | 25,467 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| CURRENT LIABILITIES | | | |
+--------------------------------------------+------+---------+---------+
| Trade and other payables | 15 | 4,702 | 5,288 |
+--------------------------------------------+------+---------+---------+
| Income tax | | 60 | - |
+--------------------------------------------+------+---------+---------+
| Short-term borrowings | | 1,478 | 1,474 |
+--------------------------------------------+------+---------+---------+
| | | 6,240 | 6,762 |
+--------------------------------------------+------+---------+---------+
| NON-CURRENT LIABILITIES | | | |
+--------------------------------------------+------+---------+---------+
| Long-term borrowings | 16 | 8,622 | 10,103 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| TOTAL LIABILITIES | | 14,862 | 16,865 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| NET ASSETS | | 8,271 | 8,602 |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| EQUITY ATTRIBUTABLE TO EQUITY HOLDERS | | | |
+--------------------------------------------+------+---------+---------+
| Share capital | 17 | 2,107 | 2,107 |
+--------------------------------------------+------+---------+---------+
| Share premium | | 7,965 | 7,965 |
+--------------------------------------------+------+---------+---------+
| Retained earnings | | (1,801) | (1,470) |
+--------------------------------------------+------+---------+---------+
| | | | |
+--------------------------------------------+------+---------+---------+
| TOTAL EQUITY | | 8,271 | 8,602 |
+--------------------------------------------+------+---------+---------+
The financial statements were approved and authorised for issue by the Board on
5 July 2010 and signed on its behalf.
Ian Fishwick
Director
Notes 1 to 23 form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
+------------------------+---------+---------+---------+----------+---------+
| | Attributable to equity | |
| | holders | |
+------------------------+----------------------------------------+---------+
| | | | Share | | |
+------------------------+---------+---------+---------+----------+---------+
| | Share | Share | capital | Retained | Total |
| | | | to | | |
+------------------------+---------+---------+---------+----------+---------+
| | capital | premium | be | earnings | equity |
| | | | issued | | |
+------------------------+---------+---------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| Equity at 1 April 2008 | 2,107 | 7,965 | 101 | (357) | 9,816 |
+------------------------+---------+---------+---------+----------+---------+
| Loss for the year | - | - | | (1,241) | (1,241) |
+------------------------+---------+---------+---------+----------+---------+
| Share-based payments | - | - | 27 | - | 27 |
+------------------------+---------+---------+---------+----------+---------+
| Share options lapsed | - | - | (41) | 41 | - |
| during the year | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| Net income/(expense) | 2,107 | 7,965 | 87 | (1,557) | 8,602 |
| recognised directly in | | | | | |
| equity | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| Equity at 1 April 2009 | 2,107 | 7,965 | 87 | (1,557) | 8,602 |
+------------------------+---------+---------+---------+----------+---------+
| Loss for the year | - | - | | (355) | (355) |
+------------------------+---------+---------+---------+----------+---------+
| Share-based payments | - | - | 24 | - | 24 |
+------------------------+---------+---------+---------+----------+---------+
| Share options lapsed | | | (10) | 10 | - |
| during the year | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| Net income/(expense) | 2,107 | 7,965 | 101 | (1,902) | 8,271 |
| recognised directly in | | | | | |
| equity | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| Equity at 31 March | 2,107 | 7,965 | 101 | (1,902) | 8,271 |
| 2010 | | | | | |
+------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+------------------------+---------+---------+---------+----------+---------+
Note 1 to 23 form part of these financial statements.
STATEMENT OF CASH FLOWS
+--------------------------------------------+----------+----+---------+---------+
| | | | 2010 | 2009 |
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| | | | GBP'000 | GBP'000 |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash flows from operating activities | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Loss before income tax | | | (114) | (1,403) |
+--------------------------------------------+----------+----+---------+---------+
| Depreciation and amortisation | | | 2,082 | 2,286 |
+--------------------------------------------+----------+----+---------+---------+
| Profit on sale of property, plant and | | | - | (1) |
| equipment | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Share-based payments | | | 24 | 27 |
+--------------------------------------------+----------+----+---------+---------+
| Net finance costs | | | 1,293 | 1,293 |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Operating cash flows before movements in | | | 3,285 | 2,202 |
| working capital | | | | |
+--------------------------------------------+----------+----+---------+---------+
| (Decrease)/increase in trade and other | | | (81) | 787 |
| receivables | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Decrease in trade and other payables | | | (478) | (920) |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash generated from operations | | | 2,726 | 2,069 |
+--------------------------------------------+----------+----+---------+---------+
| Income taxes received/(paid) | | | 57 | (79) |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Net cash from operating activities | | | 2,783 | 1,990 |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash flows from investing activities | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Interest received | | | - | 1 |
+--------------------------------------------+----------+----+---------+---------+
| Interest paid | | | (895) | (995) |
+--------------------------------------------+----------+----+---------+---------+
| Purchase of intangible assets | | | (112) | (762) |
+--------------------------------------------+----------+----+---------+---------+
| Purchase of property, plant and equipment | | | (39) | (14) |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Net cash used in investing activities | | | (1,046) | (1,770) |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash flows from financing activities | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Repayment of finance leases | | | (6) | (47) |
+--------------------------------------------+----------+----+---------+---------+
| Repayment of borrowings | | | (1,579) | (1,350) |
+--------------------------------------------+----------+----+---------+---------+
| Increase of bank loan | | | - | 1,755 |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Net cash from financing activities | | | (1,585) | 358 |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Net increase/(decrease) in cash and cash | | | 152 | 578 |
| equivalents | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash and cash equivalents at beginning of | | | 733 | 155 |
| year | | | | |
+--------------------------------------------+----------+----+---------+---------+
| | | | | |
+--------------------------------------------+----------+----+---------+---------+
| Cash and cash equivalents at end of year | | | 885 | 733 |
+--------------------------------------------+----------+----+---------+---------+
+--------------------------------------------+----------+----+--------+--------+
| Cash and cash equivalents : | | | | |
+--------------------------------------------+----------+----+--------+--------+
| Cash at bank and in hand | | | 885 | 733 |
+--------------------------------------------+----------+----+--------+--------+
| Bank overdrafts | | | - | - |
+--------------------------------------------+----------+----+--------+--------+
| | | | | |
+--------------------------------------------+----------+----+--------+--------+
| Cash and cash equivalents | | | 885 | 733 |
+--------------------------------------------+----------+----+--------+--------+
Notes 1 to 23 form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND GENERAL INFORMATION
AdEPT Telecom plc is one of the UK's leading independent providers of voice and
data telecommunications services with award winning customer service. The
Company is focused on delivering a complete telecommunications service for small
and medium sized business customers with a targeted product range including
landline calls, line rental, broadband, mobile and data connectivity services.
AdEPT Telecom plc is incorporated and domiciled in the UK. The Company's shares
are listed on the Alternative Investment Market (AIM) of the London Stock
Exchange.
2. ACCOUNTING POLICIES
Basis of preparation of financial statements
The financial statements have been prepared in accordance with applicable
International Financial Reporting Standards (IFRS) as adopted by the EU, as
issued by the International Accounting Standards Board.
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
directors have taken notice of the Financial Reporting Council guidance 'Going
Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009' which
requires the reasons for this decision to be explained. The directors regard
the going concern basis as remaining appropriate as the Company has adequate
resources to continue in operational existence for the foreseeable future based
upon the Company's forecasts. There Company has adequate financing arrangements
which can be utilised by the Company as required. Thus they continue to adopt
the going concern basis of accounting in preparing the annual financial
statements.
Certain new standards, amendments and interpretations of existing standards that
have been published and which are effective for the Company's accounting periods
beginning on or after 1 April 2009 and which are applicable to the Company, but
which have not been adopted early are:
· IAS 39 Financial instruments: Recognition and measurement (amendment) -
Eligible Hedged Items
· IFRS 7 Improving disclosures about financial instruments (amendments and
disclosures)
· IRIC 18 Transfers of Assets from Customers
· Amendment to IAS 32 Classification of Rights Issues
· Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions
· Improvements to IFRS (covering IFRS 3 & 7 and IAS 1 & 34 and IFRIC 13)
· Improvements to IFRS (covering IFRS 2 & 8 and IAS 1, 7, 17, 18, 36, 38 &
39 and IFRIC 9)
The adoption of these standards, amendments and interpretations is not expected
to have a material impact on the Company's profit for the year or equity.
Application of these standards will result in some changes in presentation of
information within the consolidated financial statements.
Segmental reporting
The directors have considered the requirements of IFRS 8 'Operating segments'
and have concluded that the Company only has two segments, one of which is below
the 10% threshold. This is consistent with the information reviewed by the
chief operating decision maker, and therefore the segmental reporting
disclosures required under IFRS 8 are not required.
Revenue
Revenue is measured by reference to the fair value of consideration received or
receivable by the Company for goods supplied and services provided, excluding
VAT and trade discounts. Revenue is recognised upon the performance of services
or transfer of the risks and rewards of ownership to the customer.
Revenue comprises of both invoiced and un-invoiced amounts for performance of
network services supplied by the Company during the year. The network services,
which include call revenues (billing for call minutes) and fixed charges such as
line rental or broadband, are generally billed monthly in arrears. The revenue
is recognised in the month to which the calls relate. Revenue from mobile
commissions is recognised when the customers are connected to the relevant
network.
Investments
Shares in the subsidiaries are valued at cost less provision for impairment.
Intangible fixed assets acquired as part of a business combination and
amortisation
In accordance with IFRS 3 Business Combinations, an intangible asset acquired in
a business combination is deemed to have a cost to the Company of its fair value
at the acquisition date. The fair value of the intangible asset reflects market
expectations about the probability that the future economic benefits embodied in
the asset will flow to the Company.
After initial recognition, intangible assets are carried at cost less any
accumulated amortisation and any accumulated impairment losses. Impairment
reviews are conducted annually from the first anniversary following acquisition.
The intangible asset "customer base" is amortised to the income statement over
its estimated economic life on a reducing balance basis. The average useful
economic life of all the customer bases has been estimated at 15 years (2009: 12
years).
Other intangible assets
Also included within intangible fixed assets are the development costs of the
Company's billing and customer management system plus an individual licence.
These other intangible assets are stated at cost, less amortisation and any
provision for impairment. Amortisation is provided at rates calculated to write
off the cost, less estimated residual value of each intangible asset, over its
expected useful life on the following basis:
+-------+--+--+------------------------+---+------------------------------+
| | | | Customer management | - | 3 years straight line |
| | | | system | | |
+-------+--+--+------------------------+---+------------------------------+
| | | | Other licences | - | Contract licence period |
+-------+--+--+------------------------+---+------------------------------+
Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost, less depreciation and any
provision for impairment. Depreciation is provided on all property, plant and
equipment at rates calculated to write off the cost, less estimated residual
value of each asset, over its expected useful life on the following basis:
+-------+--+--+------------------------+---+------------------------------+
| | | | Short term leasehold | - | 5 years straight line |
| | | | improvements | | |
+-------+--+--+------------------------+---+------------------------------+
| | | | Fixtures and fittings | - | 3 years straight line |
+-------+--+--+------------------------+---+------------------------------+
| | | | Office equipment | - | 3 years straight line |
+-------+--+--+------------------------+---+------------------------------+
| | | | Computer software | - | 3 years straight line |
+-------+--+--+------------------------+---+------------------------------+
Leasing and hire purchase commitments
Assets held under finance leases and hire purchase contracts, which are those
where substantially all the risks and rewards of ownership of the asset have
passed to the Company, are capitalised in the balance sheet and depreciated over
their useful lives. The corresponding lease or hire purchase obligation is
treated in the balance sheet as a liability.
The interest element of the rental obligations is charged to the income
statement over the period of the lease and represents a constant proportion of
the balance of capital repayments outstanding.
Rentals under operating leases, where substantially all of the benefits and
risks of ownership remain with the lessor, are charged to the profit and loss on
a straight line basis, even if payments are not made on such a basis.
Pensions
The Company contributes to personal pension plans. The amount charged to the
income statement in respect of pension costs is the contribution payable in the
year.
Capital instruments
The costs incurred directly in connection with the issue of debt instruments are
charged to the income statement on a straight line basis over the life of the
debt instrument.
Income tax
Income tax is the tax currently payable based on taxable profit for the year.
Deferred income tax is generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred income
tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability unless the related transaction is a
business combination or affects tax or accounting profit.
Deferred income tax on temporary differences associated with shares in
subsidiaries is not provided if reversal of these temporary differences can be
controlled by the Group and it is probable that reversal will not occur in the
foreseeable future. In addition, tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for recognition as
deferred income tax assets.
Deferred income tax liabilities are provided in full, with no discounting.
Deferred income tax assets are recognised to the extent that it is probable that
the underlying deductible temporary differences will be able to be offset
against future taxable income. Current and deferred income tax assets and
liabilities are calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively
enacted at the balance sheet date.
Changes in deferred income tax assets, or liabilities are recognised as a
component of income tax expense in the income statement, except where they
relate to items that are charged or credited directly to equity in which case
the related deferred income tax is also charged or credited directly to equity.
Share-based payments
The cost of equity-settled transactions with employees is measured by reference
to the fair value of the award at the date at which they are granted and is
recognised as an expense over the vesting period, which ends on the date at
which the relevant employees become fully entitled to the award. Fair value is
appraised at the grant date and excludes the impact on non-market vesting
conditions such as profitability and sales growth targets, using an appropriate
pricing model for which the assumptions are approved by the directors. In
valuing equity-settled transactions, only vesting conditions linked to the
market price of the shares of the Company are considered.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are satisfied.
At each balance sheet date, the cumulative expense (as above) is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non market conditions, the
number of equity instruments that will ultimately vest, or in the case of an
instrument subject to a market condition, be treated as vesting described above.
The movement in the cumulative expense since the previous balance sheet date is
recognised in the income statement, with a corresponding entry in equity.
Non-recurring items
Material and non-recurring items of income and expense are separated out in the
income statement. Examples of items which may give rise to disclosure as
non-recurring items include costs of restructuring and reorganisation of
existing businesses, integration of newly acquired businesses and asset
impairments. Non-recurring costs include the current year expense charged to
the income statement in relation to restructuring which has taken place since
the year end to derive the underlying profitability of the Group and Company.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together
with other short-term, highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
changes in value.
Financial instruments
Financial assets and liabilities are recognised on the Company's balance sheet
when the Company becomes a party to the contractual provisions of the
instrument.
The Company makes use of derivative financial instruments to hedge its exposure
to interest rate risks arising from financing activities. In accordance with
its treasury policy, the Company does not hold or issue derivative financial
instruments for trading purposes.
Derivative financial instruments are recognised initially at fair value, i.e.
cost. Subsequent to initial recognition derivative financial instruments are
measured at fair value. The gain or loss on re-measurement to fair value is
recognised immediately in the income statement as a component of financing
income or cost.
The fair value of the derivative financial instrument is the estimated amount
that the Company would receive or pay to terminate the instrument at the balance
sheet date, taking into account current interest rates and the current
creditworthiness of the instrument counterparties.
Capital
The capital structure of the Company consists of debt, which includes the
borrowings disclosed in Note 17, cash and cash equivalents, and equity
attributable to equity holders, comprising issued capital, reserves and retained
earnings.
Borrowings and borrowing costs
Borrowings are recorded initially at the proceeds received, net of transaction
costs incurred. Borrowings are subsequently stated at amortised cost. Any
differences between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Borrowing costs are expensed to the income statement as incurred with the
exception of arrangement fees which are deducted from the related liability and
are released over the term of the related liability in accordance with IAS 39.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The key assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities with the
next financial year are discussed below.
Impairment of intangible assets
The Company determines whether intangible assets are impaired on at least an
annual basis. This requires an estimation of the 'value in use' of the
cash-generating units to which the intangible value is allocated. Estimating a
value in use amount requires management to make an estimate of the expected
future cash flows from the cash-generating unit and also to choose a suitable
discount rate in order to calculate the present value of those cash flows. More
details including carrying values are included in Note 11.
Deferred tax assets
Deferred tax assets are recognised for all unused tax losses and other timing
differences to the extent that it is more likely than not that taxable profit
will be available against which the losses and other timing differences can be
utilised. Management judgement is required to determine the amount of deferred
tax assets that can be recognised, based upon the likely timing and level of
future taxable profits together with future tax planning strategies.
Share-based payment
The estimation of the fair value of share options and other equity instruments
at the date of grant requires management to make estimates concerning the number
of employees likely to exercise their options together with the expected
volatility and dividends payable on the underlying shares.
Receivables
Debts are recognised to the extent that they are judged recoverable. Management
reviews are performed to estimate the level of provision required for
irrecoverable debt. Provisions are made specifically against invoices where
recoverability is uncertain.
4. REVENUE
The whole of the revenue is attributable to the provision of voice and data
communication services to both residential and business customers. The
directors regard the Company as having a single business segment. All revenue
arose within the United Kingdom.
5. OPERATING LOSS
The operating (loss)/profit is stated after charging:
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Amortisation of customer base, billing system and | 1,981 | 2,126 |
| license | | |
+---------------------------------------------------+----------+----------+
| Depreciation of tangible fixed assets: | | |
+---------------------------------------------------+----------+----------+
| - owned by the Company | 102 | 160 |
+---------------------------------------------------+----------+----------+
| Loss on disposal of tangible fixed assets | - | (1) |
+---------------------------------------------------+----------+----------+
| Share option expense | 24 | 27 |
+---------------------------------------------------+----------+----------+
| Minimum operating lease payments land and | 153 | 192 |
| buildings | | |
+---------------------------------------------------+----------+----------+
| | 27 | 162 |
| motor vehicles and other equipment | | |
+---------------------------------------------------+----------+----------+
The operating loss includes non-recurring costs of GBP326,292 (2009:
GBP1,314,069), in relation to the costs of restructuring and reorganising
existing businesses, which will not recur next year. The bulk of these costs
are represented by staff, property and leases, which when stripped out leave the
underlying administrative costs for the business.
Included within the share option expense for the year is GBP20,109 relating to
the warrant instrument issued to Barclays Bank plc, see Note 18.
6. AUDITORS' REMUNERATION
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Fees payable to the Company's auditor for the | | |
| audit | | |
+---------------------------------------------------+----------+----------+
| of the Company's annual financial statements | 30 | 31 |
+---------------------------------------------------+----------+----------+
| Fees payable to the Company's auditor and its | | |
| associates | | |
+---------------------------------------------------+----------+----------+
| in respect of : | | |
+---------------------------------------------------+----------+----------+
| Other services relating to taxation | 5 | 5 |
+---------------------------------------------------+----------+----------+
7. FINANCE COSTS
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| On bank loans and overdrafts | 895 | 942 |
+---------------------------------------------------+----------+----------+
| Bank fees | 398 | 299 |
+---------------------------------------------------+----------+----------+
| Finance leases | - | 4 |
+---------------------------------------------------+----------+----------+
| Other interest payable | - | 49 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| | 1,293 | 1,294 |
| | | |
+---------------------------------------------------+----------+----------+
8. EMPLOYEE COSTS
Staff costs, including directors' remuneration, were as follows:
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Wages and salaries | 2,340 | 2,944 |
+---------------------------------------------------+----------+----------+
| Social security costs | 230 | 327 |
+---------------------------------------------------+----------+----------+
| Share option expense | 4 | 23 |
+---------------------------------------------------+----------+----------+
| Other pension costs | 14 | 18 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| | 2,588 | 3,312 |
+---------------------------------------------------+----------+----------+
Employee costs include GBP287,749 non-recurring costs (Note 5) (2009:
GBP1,016,194).
The average monthly number of employees, including the directors, during the
year was as follows:
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | Number | Number |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Non-executive directors | 3 | 4 |
+---------------------------------------------------+----------+----------+
| Administrative staff | 65 | 74 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| | 68 | 78 |
+---------------------------------------------------+----------+----------+
Key personnel:
The directors are considered to be the key management personnel of the Company,
having authority and responsibility for planning, directing and controlling the
activities of the Company.
9. DIRECTORS' EMOLUMENTS
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | Salary | | | | | |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | and fees | Bonus | | | | |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | paid or | paid or | Pension | Other | Total | Total |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | receivable | receivable | contributions | benefits | 2010 | 2009 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | GBP | GBP | GBP | GBP | GBP | GBP |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | | | | | | |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| R Wilson | 45,000 | - | - | 1,368 | 46,368 | 60,000 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| C Fishwick | 100,000 | - | - | - | 100,000 | - |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| D Lukic | 15,000 | - | - | - | 15,000 | 15,000 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| M Palios | - | - | - | - | - | 11,425 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| E Williams | - | - | - | - | - | 15,000 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| I Fishwick | 207,050 | 15,000 | 14,471 | 3,349 | 239,870 | 207,050 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| A Woodruffe | 135,020 | 15,769 | - | 1,037 | 151,826 | 152,037 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| J Swaite | 70,000 | 9,600 | - | 1,737 | 81,337 | 19,892 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| T Holland | - | - | - | - | - | 231,239 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| C Riggs | 133,124 | 4,229 | - | - | 137,353 | 138,607 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| | | | | | | |
+-------------------------+------------+------------+---------------+----------+----------+---------+
| Totals | 705,194 | 44,598 | 14,471 | 7,491 | 771,754 | 850,250 |
+-------------------------+------------+------------+---------------+----------+----------+---------+
During the year retirement benefits were accruing to 1 director (2009: 1) in
respect of money purchase pension schemes. Termination benefits of GBP128,786
were paid to a director during the year. The value of the Company's
contributions paid to a money purchase pension scheme in respect of the highest
paid director amounted to GBP14,471 (2009: GBP13,971).
The share option expense recognised during the year in respect of the directors
was GBP3,980 (2009: GBP5,000).
+-----------+------------+---------+---------+-----------+---------+----------+--------+--------+----------+
| | | | | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| Directors share options | | | | | | |
+----------------------------------+---------+-----------+--------------------+--------+--------+----------+
| | | | | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | | Options | | | | Options | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | Option | at 1 | Awarded | Options | Options | at 31 Mar | Option | Exercise |
| | | April | | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | scheme | 2009 | in | exercised | lapsed | 2010 | Price | dates |
| | | | year | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | | | | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | | | | | | | | |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| I | EMI | 600,000 | - | - | - | 600,000 | 30p | 28 Dec |
| Fishwick | | | | | | | | 10 |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| A | EMI | 171,108 | - | - | - | 171,108 | 42p | 28 Dec |
| Woodruffe | | | | | | | | 10 |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| A | EMI | 171,108 | - | - | - | 171,108 | 42p | 28 Dec |
| Woodruffe | | | | | | | | 10 |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| A | EMI | 250,000 | - | - | - | 250,000 | 42p | 1 Aug |
| Woodruffe | | | | | | | | 15 |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| C Riggs | EMI | 592,216 | - | - | 592,216 | - | 42p | - |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| I | Unapproved | 152,160 | - | - | - | 152,160 | 30p | 31 Jul |
| Fishwick | | | | | | | | 13 |
+-----------+------------+---------+---------+-----------+---------+-------------------+--------+----------+
| | | | | | | | | | |
+-----------+------------+---------+---------+-----------+---------+----------+--------+--------+----------+
Directors interest in the ordinary shares of AdEPT Telecom plc:
+---------------------------------------------------+-----------+-----------+
| | 2010 | 2009 |
+---------------------------------------------------+-----------+-----------+
| | No. of | No. of |
| | shares | shares |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| C Fishwick | 6,434,400 | 6,434,400 |
+---------------------------------------------------+-----------+-----------+
| I Fishwick | 1,134,000 | 1,134,000 |
+---------------------------------------------------+-----------+-----------+
| R Wilson | 788,300 | 760,800 |
+---------------------------------------------------+-----------+-----------+
| D Lukic | 42,500 | 32,500 |
+---------------------------------------------------+-----------+-----------+
| J Swaite | 3,656 | 3,656 |
+---------------------------------------------------+-----------+-----------+
| A Woodruffe | 3,400 | 3,400 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
10. INCOME TAX EXPENSE
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Current tax (see Note below) | | |
+---------------------------------------------------+----------+----------+
| UK corporation tax credit on profit for the year | 60 | (51) |
+---------------------------------------------------+----------+----------+
| Adjustments in respect of prior periods | (6) | (25) |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Total current tax | 54 | (76) |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Deferred tax | | |
+---------------------------------------------------+----------+----------+
| Origination and reversal of timing differences | 174 | 52 |
+---------------------------------------------------+----------+----------+
| Adjustments in respect of prior periods | 13 | (138) |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Total deferred tax (see Note 13) | 187 | (86) |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Total income tax (credit)/expense | 241 | (162) |
+---------------------------------------------------+----------+----------+
Factors affecting tax charge for year
The relationship between expected tax expense based on the effective tax rate of
AdEPT at 28% (2009: 28%) and the tax expense actually recognised in the income
statement can be reconciled as follows:
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| (Loss) before income tax | (114) | (1,403) |
+---------------------------------------------------+----------+----------+
| Tax rate | 28% | 28% |
+---------------------------------------------------+----------+----------+
| Expected tax credit | (32) | (392) |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Expenses not deductible for tax purposes | 13 | 7 |
+---------------------------------------------------+----------+----------+
| Amortisation not deductible for tax purposes | 274 | 353 |
+---------------------------------------------------+----------+----------+
| Share option relief | - | 14 |
+---------------------------------------------------+----------+----------+
| Effect of rate change on losses carried back | - | 19 |
+---------------------------------------------------+----------+----------+
| Adjustments to tax charge in respect of prior | 6 | (163) |
| periods | | |
+---------------------------------------------------+----------+----------+
| Marginal relief | (20) | - |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Actual tax (credit)/expense net (see Note above) | 241 | (162) |
+---------------------------------------------------+----------+----------+
There were no material factors that may affect future tax charges.
11. INTANGIBLE FIXED ASSETS
+------------------------------+----------+----------+----------+----------+
| | | Computer | Customer | |
+------------------------------+----------+----------+----------+----------+
| | License | software | base | Total |
+------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| Cost | | | | |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 1 April 2008 | 26 | 662 | 26,596 | 27,284 |
+------------------------------+----------+----------+----------+----------+
| Additions | - | 89 | 55 | 144 |
+------------------------------+----------+----------+----------+----------+
| Disposals | - | - | - | - |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 1 April 2009 | 26 | 751 | 26,651 | 27,428 |
+------------------------------+----------+----------+----------+----------+
| Additions | - | 95 | 17 | 112 |
+------------------------------+----------+----------+----------+----------+
| Disposals | - | - | - | - |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 31 March 2010 | 26 | 846 | 26,668 | 27,540 |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| Amortisation | | | | |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 1 April 2008 | 6 | 371 | 4,393 | 4,770 |
| | | | | |
+------------------------------+----------+----------+----------+----------+
| Charge for the year | 3 | 175 | 1,948 | 2,126 |
+------------------------------+----------+----------+----------+----------+
| Disposals | - | - | - | - |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 1 April 2009 | 9 | 546 | 6,341 | 6,896 |
+------------------------------+----------+----------+----------+----------+
| Charge for the year | 1 | 150 | 1,608 | 1,759 |
+------------------------------+----------+----------+----------+----------+
| Impairment charge | - | - | 222 | 222 |
+------------------------------+----------+----------+----------+----------+
| Disposals | - | - | - | - |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 31 March 2010 | 10 | 696 | 8,171 | 8,877 |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| Net book value | | | | |
+------------------------------+----------+----------+----------+----------+
| At 31 March 2010 | 16 | 150 | 18,497 | 18,663 |
+------------------------------+----------+----------+----------+----------+
| | | | | |
+------------------------------+----------+----------+----------+----------+
| At 31 March 2009 | 17 | 205 | 20,310 | 20,532 |
+------------------------------+----------+----------+----------+----------+
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 interim reporting date of
30 September 2010 the net present value of future cash flows of certain cash
generating units indicated that they were below the carrying value and the
directors considered it appropriate to record an impairment charge of GBP222,044
and adjust the economic lives of the respective cash generating units
appropriately. The impairment review conducted at 31 March 2010 indicated no
further impairment of any of the cash generating units.
The Company has no internally generated intangible assets.
12. PROPERTY, PLANT AND EQUIPMENT
+----------------------------+---------------+----------+-----------+----------+
| | Short term | | | |
+----------------------------+---------------+----------+-----------+----------+
| | leasehold | Fixtures | Office | |
+----------------------------+---------------+----------+-----------+----------+
| | improvements | and | equipment | Total |
| | | fittings | | |
+----------------------------+---------------+----------+-----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| Cost | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 1 April 2008 | 7 | 122 | 455 | 584 |
+----------------------------+---------------+----------+-----------+----------+
| Additions | - | - | 15 | 15 |
+----------------------------+---------------+----------+-----------+----------+
| Disposals | - | - | - | - |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 1 April 2009 | 7 | 122 | 470 | 599 |
+----------------------------+---------------+----------+-----------+----------+
| Additions | - | - | 39 | 39 |
+----------------------------+---------------+----------+-----------+----------+
| Disposals | - | - | - | - |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 31 March 2010 | 7 | 122 | 509 | 638 |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| Depreciation | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 1 April 2008 | 7 | 54 | 243 | 304 |
+----------------------------+---------------+----------+-----------+----------+
| Charge for the year | - | 30 | 130 | 160 |
+----------------------------+---------------+----------+-----------+----------+
| Disposals | - | - | - | - |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 1 April 2009 | 7 | 84 | 373 | 464 |
+----------------------------+---------------+----------+-----------+----------+
| Charge for the year | - | 25 | 77 | 102 |
+----------------------------+---------------+----------+-----------+----------+
| Disposals | - | - | - | - |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 31 March 2009 | 7 | 109 | 450 | 566 |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| Net book value | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 31 March 2010 | - | 13 | 59 | 72 |
+----------------------------+---------------+----------+-----------+----------+
| | | | | |
+----------------------------+---------------+----------+-----------+----------+
| At 31 March 2009 | - | 38 | 97 | 135 |
+----------------------------+---------------+----------+-----------+----------+
13. DEFERRED TAXATION
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| At 1 April 2009 | | | 799 | 713 |
+------------------------------+-----------+-----------+-----------+-----------+
| Income statement charge | | | (174) | 86 |
+------------------------------+-----------+-----------+-----------+-----------+
| Adjustments in respect of | | | (13) | - |
| prior periods | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| At 31 March 2010 | | | 612 | 799 |
+------------------------------+-----------+-----------+-----------+-----------+
The deferred tax asset is made up as follows:
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | GBP'000 | GBP,000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Capital allowances | | | 118 | 121 |
+------------------------------+-----------+-----------+-----------+-----------+
| Tax losses | | | 494 | 678 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 612 | 799 |
+------------------------------+-----------+-----------+-----------+-----------+
The deferred tax asset has been recognised as the Company continues to generate
taxable profits against which the asset continues to reverse.
14. TRADE AND OTHER RECEIVABLES
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Trade receivables | | | 2,446 | 2,628 |
+------------------------------+-----------+-----------+-----------+-----------+
| Other receivables | | | 8 | 8 |
+------------------------------+-----------+-----------+-----------+-----------+
| Prepayments and accrued | | | 447 | 582 |
| income | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2,901 | 3,218 |
+------------------------------+-----------+-----------+-----------+-----------+
As at 31 March 2010, trade receivables of GBP283,280 (2009: GBP560,629) were
impaired and fully provided for. The ageing of the trade receivables which are
past due and not impaired are as follows:
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| 31-60 days | | | 54 | 68 |
+------------------------------+-----------+-----------+-----------+-----------+
| 61-90 days | | | 9 | 1 |
+------------------------------+-----------+-----------+-----------+-----------+
| Over 90 days | | | 83 | 34 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 146 | 103 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
14. TRADE AND OTHER RECEIVABLES (continued)
Movement of the Company provision for impairment of trade receivables are as
follows:
+---------------------------------------------------+-----------+-----------+
| | | GBP'000 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| At 1 April 2008 | | 380 |
+---------------------------------------------------+-----------+-----------+
| Receivables written off during the year as | | (472) |
| uncollectable | | |
+---------------------------------------------------+-----------+-----------+
| Unused amounts reversed | | (35) |
+---------------------------------------------------+-----------+-----------+
| Provision for receivables impairment for the year | | 688 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| At 1 April 2009 | | 561 |
+---------------------------------------------------+-----------+-----------+
| Receivables written off during the year as | | (521) |
| uncollectable | | |
+---------------------------------------------------+-----------+-----------+
| Unused amounts reversed | | - |
+---------------------------------------------------+-----------+-----------+
| Provision for receivables impairment for the year | | 243 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
| At 31 March 2010 | | 283 |
+---------------------------------------------------+-----------+-----------+
| | | |
+---------------------------------------------------+-----------+-----------+
The creation and release of a provision for impaired receivables has 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 review the outstanding receivables and do
not consider that any further impairment is required. The other assets classes
within trade and other receivables do not contain impaired assets.
15. TRADE AND OTHER PAYABLES
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Trade payables | | | 2,685 | 3,292 |
+------------------------------+-----------+-----------+-----------+-----------+
| Other taxes and social | | | 411 | 411 |
| security costs | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| Finance lease obligations | | | - | 6 |
+------------------------------+-----------+-----------+-----------+-----------+
| Other payables | | | 121 | 150 |
+------------------------------+-----------+-----------+-----------+-----------+
| Accruals and deferred income | | | 1,485 | 1,429 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 4,702 | 5,288 |
+------------------------------+-----------+-----------+-----------+-----------+
16. LONG TERM BORROWINGS
+------------------------------+-----------+----------+-----------+-----------+
| | | | 2010 | 2009 |
+------------------------------+-----------+----------+-----------+-----------+
| | | | GBP'000 | GBP'000 |
+------------------------------+-----------+----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+----------+-----------+-----------+
| Between 1 and 2 years | | | 8,622 | 1,474 |
+------------------------------+-----------+----------+-----------+-----------+
| Between 2 and 3 years | | | - | 1,116 |
+------------------------------+-----------+----------+-----------+-----------+
| More than 3 years | | | - | 7,513 |
+------------------------------+-----------+----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+----------+-----------+-----------+
| Bank loans | | | 8,622 | 10,103 |
+------------------------------+-----------+----------+-----------+-----------+
The bank loan 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, fixed
plant and machinery. Details of the interest rates applicable to the loans are
included in Note 27.
Included within bank loans are arrangement fees amounting to GBP177,480 (2009;
GBP278,897) which are being released over the term of the loan in accordance
with IAS 39.
In addition an exit fee has also been included within this balance. Under the
terms of the loan agreement an amount of between GBP587,500 and GBP87,500 is due
to be paid on the settlement of the loan. The amount payable depends upon future
targets based upon the ratio of Net Debt to EBITDA. At the balance sheet date
the directors expect the maximum amount will become payable based upon the
Company's forecasts. The amount is being charged to finance charges over the
life of the loan.
17. SHARE CAPITAL
+---------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+---------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Authorised | | |
+---------------------------------------------------+----------+----------+
| 65,000,000 Ordinary shares of 10p each | 6,500 | 6,500 |
+---------------------------------------------------+----------+----------+
| | | |
+---------------------------------------------------+----------+----------+
| Allotted, called up and fully paid | | |
+---------------------------------------------------+----------+----------+
| 21,067,443 Ordinary shares of 10p each | 2,107 | 2,107 |
+---------------------------------------------------+----------+----------+
Share Options
At 31 March 2010, the following options and warrants over the shares of AdEPT
were in issue:
+-----------------------------+-------------+-----------+-----------+----------+
| | 2010 | 2010 | 2009 | 2009 |
+-----------------------------+-------------+-----------+-----------+----------+
| | Number of | Weighted | Number |Weighted |
| | shares | average | of | average |
| | under | exercise | shares |exercise |
| | option | price | under | price |
| | | | option | |
+-----------------------------+-------------+-----------+-----------+----------+
| | | | | |
+-----------------------------+-------------+-----------+-----------+----------+
| Outstanding at 1 April | 4,151,259 | 52p | 2,313,046 | 75p |
+-----------------------------+-------------+-----------+-----------+----------+
| Granted during the year | 96,431 | 11p | 1,858,813 | 23p |
+-----------------------------+-------------+-----------+-----------+----------+
| Forfeited during the year | (1,210,257) | 44p | (20,600) | 140p |
+-----------------------------+-------------+-----------+-----------+----------+
| Exercised during the year | - | - | - | - |
+-----------------------------+-------------+-----------+-----------+----------+
| | | | | |
+-----------------------------+-------------+-----------+-----------+----------+
| Outstanding at 31 March | 3,037,433 | 42p | 4,151,259 | 52p |
+-----------------------------+-------------+-----------+-----------+----------+
The weighted average fair values have been determined using the Black
Scholes-Merton Pricing Model with the following assumptions and inputs:
+------------------------------------+----------+------------+------------+
| | | 2010 | 2009 |
+------------------------------------+----------+------------+------------+
| | | | |
+------------------------------------+----------+------------+------------+
| Risk free interest rate | | 1.95-4.13% | 2.71-4.13% |
+------------------------------------+----------+------------+------------+
| Expected volatility | | 41-66% | 35-83% |
+------------------------------------+----------+------------+------------+
| Expected option life (years) | | 1.25-5.7 | 1.25-5.7 |
| | | years | years |
+------------------------------------+----------+------------+------------+
| Expected dividend yield | | 0% | 0% |
+------------------------------------+----------+------------+------------+
| Weighted average share price | | 27p | 43p |
+------------------------------------+----------+------------+------------+
| Weighted average exercise price | | 42p | 52p |
+------------------------------------+----------+------------+------------+
| Weighted average fair value of | | 6p | 5p |
| options granted | | | |
+------------------------------------+----------+------------+------------+
The expected average volatility was determined by reviewing the last 100
historical fluctuations in the share price prior to the grant date of each share
instrument. An expected take up of 100% has been applied to each share
instrument. Expected dividend yield is estimated at 0%, this estimate of nil is
per the requirement of IFRS2 where a Company such as AdEPT has no current
dividend history, it does not bear any relation to the actual dividend policy of
AdEPT Telecom plc.
+------------------------------+-----------+-----------+-----------+-----------+
| | Exercise | Expected | 31 March | 31 March |
| | price | option | 2010 | 2009 |
| | (pence) | life | | |
| | | (years) | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| 31 July 2003 | 29 | 5.7 | 152,160 | 152,160 |
+------------------------------+-----------+-----------+-----------+-----------+
| 28 December 2003 | 29 | 5.3 | 600,000 | 600,000 |
+------------------------------+-----------+-----------+-----------+-----------+
| 29 August 2004 | 42 | 4.6 | 171,108 | 342,216 |
+------------------------------+-----------+-----------+-----------+-----------+
| 6 June 2005 | 42 | 3.6-4.8 | 171,108 | 342,216 |
+------------------------------+-----------+-----------+-----------+-----------+
| 13 December 2005 | 140 | 2.3-4.1 | - | 342,216 |
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| 14 February 2006 | 140 | 3.1-4.1 | 421,349 | 421,349 |
+------------------------------+-----------+-----------+-----------+-----------+
| 15 February 2006 | 140 | 1.25-2.25 | 66,464 | 86,761 |
+------------------------------+-----------+-----------+-----------+-----------+
| 9 May 2006 | 199 | 1.25-2.25 | - | 5,528 |
+------------------------------+-----------+-----------+-----------+-----------+
| 1 August 2008 | 42 | 3.0 | 250,000 | 750,000 |
+------------------------------+-----------+-----------+-----------+-----------+
| 21 January 2009 | 12 | 3.0 | 1,205,244 | 1,108,813 |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | | |
+------------------------------+-----------+-----------+-----------+-----------+
| | | | 3,037,433 | 4,151,259 |
+------------------------------+-----------+-----------+-----------+-----------+
During the year to 31 March 2009 a warrant was issued to Barclays Bank plc over
5% of the diluted share capital of the Company. As at 31 March 2010 this
entitled the holder to 1,205,244 shares. The weighted average fair value of
this equity instrument of GBP60,327 has been determined using the Black
Scholes-Merton Pricing Model applying the same assumptions as those applied to
the other equity instruments issued during the period due to Barclays Bank plc
being unable to provide a sufficiently reliable estimate of the value of
services provided in relation to these warrants.
The mid-market price of the ordinary shares on 31 March 2010 was 16p and the
range during the year was 12p.
There have been no transactions with equity holders or dividends during the
current or previous year.
18. PENSION COMMITMENTS
At 31 March 2010 there were no pension commitments (2009: GBPNil).
19. OPERATING LEASE COMMITMENTS
At 31 March 2010 the Company had lease commitments as follows:
+----------------------------------------+----------+----------+----------+----------+
| | Land and buildings | Other |
+----------------------------------------+---------------------+---------------------+
| | 2010 | 2009 | 2010 | 2009 |
+----------------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+----------+----------+----------+
| | | | | |
+----------------------------------------+----------+----------+----------+----------+
| Within 1 year | 153 | 147 | 12 | 37 |
+----------------------------------------+----------+----------+----------+----------+
| Between 2 and 5 years | 331 | 484 | 11 | 7 |
+----------------------------------------+----------+----------+----------+----------+
| More than 5 years | - | - | - | - |
+----------------------------------------+----------+----------+----------+----------+
Land and Buildings :
The Company leases its offices under non cancellable operating lease agreements.
There is no material contingent rent payable. The lease agreements do not offer
security of tenure. The lease terms are for approximately 5 years.
Other :
The Company leases various office equipment and motor vehicles under non
cancellable operating lease agreements. The lease terms are either 2 or 3 years.
The lease expenditure charged to the income statement during the year is
disclosed in Note 5.
20. RELATED PARTY TRANSACTIONS
During the year CKR Holdings Ltd, a company controlled by Mr C Fishwick, a
director, provided consultancy services to the Company in the normal course of
business and at an arm's length basis with a total value of GBP100,000 (2009:
GBP14,215). There was no balance owing to CKR Holdings at the end of the year
(2009: GBPNil).
21. CAPITAL COMMITMENTS
At 31 March 2010 there were capital commitments of GBPNil (2009: GBP65,000).
22. EARNINGS PER SHARE
Earnings per share is calculated on the basis of a loss of GBP354,749 (2009:
loss GBP1,240,975) divided by the weighted average number of shares in issue for
the year of 21,067,443 (2009: 21,067,443). The diluted earnings per share is
calculated on the assumption that the unapproved and EMI share options as
disclosed in note 17 to the financial statements are exercised. This would give
rise to a total weighted average number of ordinary shares in issue for the
period of 25,218,702 (2009: 25,218,702).
An adjusted earnings per share is calculated by adding back amortisation of
intangible assets and non-recurring costs to retained earnings, giving
GBP2,306,862 (2009: GBP3,439,874). This is divided by the same weighted average
number of shares as above.
+-----------------------------------------------+--+------------+------------+
| | | 2010 | 2009 |
+-----------------------------------------------+--+------------+------------+
| | | GBP'000 | GBP'000 |
+-----------------------------------------------+--+------------+------------+
| | | | |
+-----------------------------------------------+--+------------+------------+
| Earnings for the purposes of basic and | | | |
| diluted earnings per share | | | |
+-----------------------------------------------+--+------------+------------+
| Loss for the period attributable to equity | | (355) | (1,241) |
| holders | | | |
+-----------------------------------------------+--+------------+------------+
| Amortisation | | 1,981 | 2,126 |
+-----------------------------------------------+--+------------+------------+
| Non-recurring costs | | 326 | 1,314 |
+-----------------------------------------------+--+------------+------------+
| Adjusted profit attributable to equity | | | |
| holders, adding back amortisation and | | 1,952 | 2,199 |
| non-recurring costs | | | |
+-----------------------------------------------+--+------------+------------+
| | | | |
+-----------------------------------------------+--+------------+------------+
| Number of shares | | | |
+-----------------------------------------------+--+------------+------------+
| Weighted average number of shares used for | | 21,067,443 | 21,067,443 |
| earnings per share | | | |
+-----------------------------------------------+--+------------+------------+
| Dilutive effect of share plans | | 3,037,433 | 4,151,259 |
+-----------------------------------------------+--+------------+------------+
| Diluted weighted average number of shares | | | |
| used to calculate fully diluted earnings per | | 24,104,876 | 25,218,702 |
| share | | | |
+-----------------------------------------------+--+------------+------------+
| | | | |
+-----------------------------------------------+--+------------+------------+
| Earnings per share | | | |
+-----------------------------------------------+--+------------+------------+
| Basic earnings per share | | (1.68)p | (5.89)p |
+-----------------------------------------------+--+------------+------------+
| Fully diluted earnings per share | | n/a | n/a |
+-----------------------------------------------+--+------------+------------+
| | | | |
+-----------------------------------------------+--+------------+------------+
| Adjusted earnings per share, after adding | | | |
| back amortisation and non-recurring costs | | | |
+-----------------------------------------------+--+------------+------------+
| Adjusted basic earnings per share | | 9.27p | 10.44p |
+-----------------------------------------------+--+------------+------------+
| Adjusted fully diluted earnings per share | | 8.10p | 8.72p |
+-----------------------------------------------+--+------------+------------+
| | | | |
+-----------------------------------------------+--+------------+------------+
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.
Adjusted earnings per share is calculated by dividing the retained earnings
attributable to the equity holders (after adding back amortisation and
non-recurring costs) by the weighted average number of ordinary shares in issue.
The adjustment for the dilutive effect of share options has not been reflected
in the calculation of the diluted loss per share as the effect would be
anti-dilutive, therefore diluted and basic earnings per share are equal.
23. FINANCIAL INSTRUMENTS
Set out below are the Company's financial instruments. The directors consider
there to be no difference between the carrying value and fair value of the
Company's financial instruments.
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Financial assets | | |
+----------------------------------------------------+---------+---------+
| Cash | 885 | 733 |
+----------------------------------------------------+---------+---------+
| Trade and other receivables | 2,446 | 2,636 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Financial liabilities | | |
+----------------------------------------------------+---------+---------+
| Interest bearing loans and borrowings: | | |
+----------------------------------------------------+---------+---------+
| Obligations under finance lease contracts | - | 6 |
+----------------------------------------------------+---------+---------+
| Floating rate borrowings | - | 4,455 |
+----------------------------------------------------+---------+---------+
| Fixed rate borrowings | 10,099 | 7,400 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| | 10,099 | 11,861 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Amounts due for settlement: | | |
+----------------------------------------------------+---------+---------+
| Within 12 months | 1,477 | 1,579 |
+----------------------------------------------------+---------+---------+
| After 12 months | 8,622 | 10,282 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| | 10,099 | 11,861 |
+----------------------------------------------------+---------+---------+
The Facility A term loan bears interest at 3.5% over LIBOR and is repayable by
quarterly instalments of GBP394,650 with the final repayment of GBP5.41m due on
31 December 2011. At the year end the amount outstanding in respect of this
facility was GBP7.6m.
The Alternative Structured Facility bears cash interest at a rate at 5.5% over
LIBOR. Payment In Kind interest is accruing on the Alternative Structured
Facility at a rate of 2.0% per annum which is payable on the final repayment
date of 31 December 2011. At the year end the amount outstanding in respect of
the Alternative Structured Facility was GBP2.5m.
The fixed interest rate liabilities also include amounts payable on finance
lease liabilities. The weighted average interest rate of these liabilities was
8.0% and the weighted average period for which the interest rates are fixed was
60 months.
The financial assets of the Company are surplus funds, which are offset against
borrowings under the facility, and there is no separate interest rate exposure.
Barclays Bank plc has 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,
fixed plant and machinery.
The bank also holds a charge over the life assurance policies of Ian Fishwick
and Amanda Woodruffe, directors of the Company, for GBP1,500,000 and GBP250,000
respectively.
Obligations under finance leases
+----------------------------------------------------+---------+---------+
| | 2010 | 2009 |
+----------------------------------------------------+---------+---------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Finance lease liabilities - minimum lease | | |
| payments: | | |
+----------------------------------------------------+---------+---------+
| No later than 1 year | - | 6 |
+----------------------------------------------------+---------+---------+
| Later than 1 years and no later than 5 years | - | - |
+----------------------------------------------------+---------+---------+
| Later than 5 years | - | - |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Future finance charges on finance leases | - | - |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| Present value of finance lease liabilities | - | 6 |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| The present value of finance lease liabilities is | | |
| as follows: | | |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| No later than one year | - | 6 |
+----------------------------------------------------+---------+---------+
| Later than 1 years and no later than 5 years | - | - |
+----------------------------------------------------+---------+---------+
| Later than 5 years | - | - |
+----------------------------------------------------+---------+---------+
| | | |
+----------------------------------------------------+---------+---------+
| | - | 6 |
+----------------------------------------------------+---------+---------+
The Company had a certain amount of its property, plant and equipment under
finance lease. For the year ended 31 March 2010 the average effective borrowing
rate was 8.0%. Interest rates are fixed at the contract dates. All leases are
on a fixed repayment basis and no arrangements have been entered into for
contingent rental payments. All lease obligations are denominated in sterling.
Finance lease liabilities are secured upon the underlying assets.
Sensitivity analysis
At 31 March 2010 it is estimated that a movement of one percentage point in
interest rates would impact the Company's profit before tax by approximately
GBP120,000. Given the interest rate hedge in place, this impact on profit would
be reduced should interest rates rise above 3.77%.
Interest rate risk
The Company's policy is to manage its interest cost using a mix of fixed and
variable rate debts. The Company's policy is to keep at least 75% of its
borrowings at fixed rates of interest. At 31 March 2010, after taking into
account the effect of interest rate management, 100% of the Company's borrowings
are at a fixed rate of interest (2009: 62.4%).
Credit risk
Credit risk associated with cash balances and derivative financial instruments
is managed by transacting with financial institutions with high quality credit
ratings. Accordingly the Company's associated credit risk is deemed to be
limited.
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at 31 March 2010 was GBP3,339,297(2009:
GBP3,369,207).
Loans and receivables
+----------------------------------------------------+----------+----------+
| | 2010 | 2009 |
+----------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------------+----------+----------+
| | | |
+----------------------------------------------------+----------+----------+
| Trade receivables | 2,446 | 2,628 |
+----------------------------------------------------+----------+----------+
| Other receivables | 8 | 8 |
+----------------------------------------------------+----------+----------+
| Cash and cash equivalents | 885 | 733 |
+----------------------------------------------------+----------+----------+
| | | |
+----------------------------------------------------+----------+----------+
| | 3,339 | 3,369 |
+----------------------------------------------------+----------+----------+
| | | |
+----------------------------------------------------+----------+----------+
Credit risk refers to the risk that the counterparty will default on its
contractual obligations resulting in financial loss to the Company. The Company
has adopted a policy of only dealing with creditworthy counterparties and this
policy has been implemented by requiring staff to carry out appropriate credit
checks on customers before sales commence.
Trade receivables consist of a large number of customers, spread across diverse
industries across the United Kingdom. Ongoing credit evaluation is performed on
the financial condition of accounts receivable. The Company does not have any
significant credit risk exposure to any single counterparty or any Company of
counterparties having similar characteristics. The Company defines
counterparties as having similar characteristics if they are connected parties.
Liquidity risk
The Company has an appropriate liquidity risk management framework for the
management of the Company's short, medium and long-term funding and liquidity
risk management requirements. The Company manages liquidity risk by maintaining
adequate banking facilities and reserve borrowing facilities through cash flow
forecasting, acquisition planning and monitoring working capital and capital
expenditure requirements on an ongoing basis.
The table below analyses the Company's financial liabilities into relevant
maturity Groupings based on the remaining period at the balance sheet dated to
the contractual maturity date. The amounts disclosed in the table are the
contracted undiscounted cash flows. Discounting is not required as this has no
material effect on the financial statements.
Amortised cost
+--------------------------------+----------+----------+----------+----------+
| | Within | | | More |
| | | | | than |
+--------------------------------+----------+----------+----------+----------+
| | 1 year | 1-2 | 2-5 | 5 years |
| | | years | years | |
+--------------------------------+----------+----------+----------+----------+
| Year ended 31 March 2010 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
| Borrowings | 1,477 | 8,622 | - | - |
+--------------------------------+----------+----------+----------+----------+
| Finance leases | - | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| Trade and other payables | 2,807 | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
| | 4,284 | 8,622 | - | - |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
| | Within | | | More |
| | | | | than |
+--------------------------------+----------+----------+----------+----------+
| | 1 year | 1-2 | 2-5 | 5 years |
| | | years | years | |
+--------------------------------+----------+----------+----------+----------+
| Year ended 31 March 2009 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
| Borrowings | 1,474 | 1,474 | 8,629 | - |
+--------------------------------+----------+----------+----------+----------+
| Finance leases | 6 | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| Trade and other payables | 3,442 | - | - | - |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
| | 4,922 | 1,474 | 8,629 | - |
+--------------------------------+----------+----------+----------+----------+
| | | | | |
+--------------------------------+----------+----------+----------+----------+
Currency risk
The Company's operations are handled entirely in sterling.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RAMFTMBTMBJM
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