TIDMADT
RNS Number : 2092W
AdEPT Telecom plc
16 November 2010
AdEPT Telecom Plc
("AdEPT" or the "Company")
Interim results for the 6 months ended 30 September 2010
AdEPT, a leading independent provider of award-winning telecommunications voice
and data services for fixed line and mobile networks, announces its results for
the 6 months ended 30 September 2010.
Highlights
Financial
· Underlying EBITDA increased by 2.7% to GBP1.93 million (2009: GBP1.88
million)
· Underlying EBITDA margin increased to 16.0% (2009: 14.5%)
· Free cash flow before interest of GBP1.11 million generated (2009:
GBP0.67 million)
· 93.9% of reported EBITA converted into cash generated from operating
activities (2009: 76.3%)
· Net debt reduced by GBP2.08 million in the last 12 months to GBP8.16
million (2009: GBP10.23 million)
· Net debt reduced by GBP1.05 million since year end (March 2010: GBP9.21
million)
· Profit before tax of GBP0.14 million (2009: loss of GBP0.22 million)
· Reported operating profit increased by 68.2% to GBP0.74 million (2009:
GBP0.44 million)
· Adjusted EPS increased by 11.5% to 5.41p (2009: 4.85p)
Operational
· Data product revenues increased by 21.4% to GBP0.61 million (2009:
GBP0.50 million)
· Non-fixed line division now accounts for 8.6% of total revenue (2009:
5.7%)
· Underlying operating costs reduced to 20.1% of revenue (2009: 22.6%)
· Customer cash collection periods maintained at 29 days (2009: 29 days)
Chairman's Statement
A key strength of AdEPT is its consistent and proven ability to generate strong
operational cash flow. Despite the challenging economic conditions the Company
has continued to be highly cash generative, with GBP1.11 million of free cash
flow, funding GBP1.05 million reduction in net debt since March 2010. AdEPT has
reduced net borrowings by GBP3.84 million since the peak net debt following the
Telecom Direct acquisition.The net debt reduction is underpinned by focus on
underlying profitability, improving margins on customer contracts, operational
efficiencies and tight credit control.
Lower economic activity continues to be reflected in reduced call volumes and
this period revenues reflect a lower entry point against the comparative period.
Our exposure to variable call volumes has been reduced with the proportion of
revenue generated from calls reduced to 46.0% from 52.9% in the comparative
period.
Business review
AdEPT is increasingly seen as one of the UK's leading suppliers to multi-site
customers and this has been further demonstrated by the following notable
contract wins in the last 6 months:
· a new 36 month contract to supply a national electronic games operator
with a voice and data network of 450 sites with a contract value estimated in
excess of GBP800,000. The contract involves the deployment of a nationwide data
network with Ethernet central connectivity and a complex inbound and outbound
solution based on our 21st Century Network feature set.
· a new 36 month contract to supply a nationwide chain of c750 pubs with
Wi-Fi connectivity, with an estimated contract value of over GBP700,000.
· a new 24 month contract to supply a district council with a complex 10
site voice and data solution, with an estimated contract value in excess of
GBP200,000.
· a new 24 month contract to supply the leading publisher of journals and
magazines to the public sector, with an estimated contract value in excess of
GBP200,000.
· a new 36 month contract to supply 150 shops of a nationwide charity with
a multi-site multi-product solution.
Additionally, in the March 2010 statement we announced that under a framework
agreement with one of the UK's largest data network providers, the Joint
Academic Network (JaNET), AdEPT had been authorised as one of only 20 companies
to sell data products to UK universities and colleges. I am pleased to report
that AdEPT has had several contract successes under this framework agreement
during the period since March 2010.
Our position as an independent, best of breed supplier means that we can take
advantage of the roll-out of 21st century networks by a range of carriers in the
UK. We continue to expand our product portfolio particularly in the data and
VoIP arenas:
· We have added data services such as Ethernet high speed access (up to
1Gigabit speeds) and MPLS networks; and
· We have signed a supply agreement with BT Wholesale to sell what we
believe are the most advanced business-grade VoIP services in the UK. Hosted IP
for smaller sites and SIP trunks for larger sites are integrated into a single
platform managed via a web portal. The second half year will see the start of
customer trials.
We firmly believe in increasing the number of products sold to each customer and
our concentration on cross-sell has seen the proportion of our revenue generated
by customers taking three or more of our products rise from 20.1% last year to
27.2% in this period.
The Company continues to focus on winning and retaining larger customers. The
Premier Customer division, comprising the largest 200 customers with recurring
monthly spend greater than GBP1,000, now accounts for more than 36.8% of total
revenue (2009: 30.3%). Within the Premier Customer division customers taking
three or more products account for 66.3% (2009: 49.6%).
Strong cost control and operational efficiency associated with managing the
larger customers has resulted in operating expenditures falling from 22.9% of
revenue at September 2009 to 20.1% in the current period.
Financing
Shortly after the end of the interim period the Company signed a new credit
agreement with Barclays Bank plc. The new credit agreement provides a
longer-term financing package, combined with lower interest charges of
approximately GBP115,000 per annum, greater operational flexibility and bank
covenants which are appropriate for the future development of the Company. The
maximum amount of the credit facility is reduced to GBP11.125 million, of which
approximately GBP2.0 million was undrawn at 31 October 2010.
Outlook
The past year has seen the Company rightly focus on efficiency improvement,
underlying profitability and cash flow conversion which has enabled GBP2.08
million reduction in net borrowings during the last 12 months. These remain key
objectives for the Company during the second half of the year. In addition, the
expansion of the product portfolio is anticipated to provide the Company with
further opportunities in the future period.
Roger Wilson
16 November 2010
Enquiries:
AdEPT Telecom
Roger Wilson, Chairman 07786 111535
Ian Fishwick, Chief Executive 01892 500225
John Swaite, Finance Director 01892 550243
Northland Capital Partners Limited
Shane Gallwey: 020 7492 4750
Katie Shelton: 020 7492 4750
Charles Vaughan: 020 7492 4750
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| | | Six months ended |
+---------------------------------------------+------+-----------------------+
| | | 30 | 30 |
| | | September | September |
+---------------------------------------------+------+-----------+-----------+
| | | 2010 | 2009 |
+---------------------------------------------+------+-----------+-----------+
| |Note | GBP'000 | GBP'000 |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| REVENUE | | 12,090 | 13,008 |
+---------------------------------------------+------+-----------+-----------+
| Cost of sales | | (7,751) | (8,195) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| GROSS PROFIT | | 4,339 | 4,813 |
+---------------------------------------------+------+-----------+-----------+
| Administrative expenses | | (3,598) | (4,371) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| OPERATING PROFIT | | 741 | 442 |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Total operating profit - analysed: | | | |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Operating profit before non-recurring | | | |
| costs, amortisation | | | |
+---------------------------------------------+------+-----------+-----------+
| depreciation and amortisation | | 1,932 | 1,881 |
+---------------------------------------------+------+-----------+-----------+
| Non-recurring costs | | (255) | (266) |
+---------------------------------------------+------+-----------+-----------+
| Share based payments | | (11) | (11) |
+---------------------------------------------+------+-----------+-----------+
| Depreciation of tangible fixed assets | | (36) | (54) |
+---------------------------------------------+------+-----------+-----------+
| Amortisation of intangible fixed assets | | (889) | (1,108) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Total operating profit | | 741 | 442 |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Finance costs | | (598) | (664) |
+---------------------------------------------+------+-----------+-----------+
| Finance income | | - | - |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| PROFIT/(LOSS) BEFORE INCOME TAX | | 143 | (222) |
+---------------------------------------------+------+-----------+-----------+
| Income tax expense | | (137) | (130) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| TOTAL COMPREHENSIVE INCOME FOR THE PERIOD | | 6 | (352) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Attributable to: | | | |
+---------------------------------------------+------+-----------+-----------+
| Equity holders | | 6 | (352) |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Earnings per share | | | |
+---------------------------------------------+------+-----------+-----------+
| Basic earnings per share (pence) | 3 | 0.03p | (1.67)p |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Diluted earnings per share (pence) | 3 | 0.03p | N/a |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Adjusted earnings per share, after adding | | | |
| back | | | |
+---------------------------------------------+------+-----------+-----------+
| amortisation and non-recurring costs | | | |
+---------------------------------------------+------+-----------+-----------+
| Basic earnings per share (pence) | 3 | 5.46p | 4.85p |
+---------------------------------------------+------+-----------+-----------+
| | | | |
+---------------------------------------------+------+-----------+-----------+
| Diluted earnings per share (pence) | 3 | 4.77p | 4.25p |
+---------------------------------------------+------+-----------+-----------+
UNAUDITED STATEMENT OF FINANCIAL POSITION
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| | | 30 | 30 | 31 |
| | | September | September | March |
+-------------------------------------+----+-----------+-----------+---------+
| | | 2010 | 2009 | 2010 |
+-------------------------------------+----+-----------+-----------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| ASSETS | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Non-current assets | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Intangible assets | | 17,773 | 19,517 | 18,663 |
+-------------------------------------+----+-----------+-----------+---------+
| Property, plant and equipment | | 59 | 93 | 72 |
+-------------------------------------+----+-----------+-----------+---------+
| Deferred income tax | | 576 | 738 | 612 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| | | 18,408 | 20,348 | 19,347 |
+-------------------------------------+----+-----------+-----------+---------+
| Current assets | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Trade and other receivables | | 2,746 | 2,994 | 2,901 |
+-------------------------------------+----+-----------+-----------+---------+
| Income tax receivable | | - | - | - |
+-------------------------------------+----+-----------+-----------+---------+
| Cash and cash equivalents | | 1,029 | 607 | 885 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| | | 3,775 | 3,601 | 3,786 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Total assets | | 22,183 | 23,949 | 23,133 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| LIABILITIES | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Current liabilities | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Trade and other payables | | 4,550 | 4,774 | 4,702 |
+-------------------------------------+----+-----------+-----------+---------+
| Short term borrowings | | 1,478 | 1,579 | 1,478 |
+-------------------------------------+----+-----------+-----------+---------+
| Income tax | | 160 | 76 | 60 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| | | 6,188 | 6,429 | 6,240 |
+-------------------------------------+----+-----------+-----------+---------+
| Non-current liabilities | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Long term borrowings | | 7,707 | 9,259 | 8,622 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Total liabilities | | 13,895 | 15,688 | 14,862 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Net assets | | 8,288 | 8,261 | 8,271 |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| SHAREHOLDERS' EQUITY | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Share capital | | 2,107 | 2,107 | 2,107 |
+-------------------------------------+----+-----------+-----------+---------+
| Share premium | | 7,965 | 7,965 | 7,965 |
+-------------------------------------+----+-----------+-----------+---------+
| Retained earnings | | (1,784) | (1,811) | (1,801) |
+-------------------------------------+----+-----------+-----------+---------+
| | | | | |
+-------------------------------------+----+-----------+-----------+---------+
| Total equity | | 8,288 | 8,261 | 8,271 |
+-------------------------------------+----+-----------+-----------+---------+
UNAUDITED STATEMENT OF CHANGES IN EQUITY
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| | Attributable to equity holders |
| | of parent |
+----------------------------------+--------------------------------------------------+
| | | | 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 2009 | 2,107 | 7,965 | 87 | (1,557) | 8,602 |
+----------------------------------+---------+---------+---------+----------+---------+
| Loss for six months ended 30 | - | - | | (352) | (352) |
| September 2009 | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Share based payments | - | - | 11 | | 11 |
+----------------------------------+---------+---------+---------+----------+---------+
| Share options lapsed during the | | | (8) | 8 | - |
| year | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Total comprehensive income for | | | | | |
| the six | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| months to 30 September 2009 | - | - | 3 | (344) | (341) |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Balance at 30 September 2009 | 2,107 | 7,965 | 90 | (1,901) | 8,261 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Loss for six months ended 31 | - | - | | (3) | (3) |
| March 2010 | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Share based payments | - | - | 13 | | 13 |
+----------------------------------+---------+---------+---------+----------+---------+
| Share options lapsed during the | | | (2) | 2 | - |
| year | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Total comprehensive income for | | | | | |
| the six | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| months to 31 March 2010 | - | - | 11 | (1) | 10 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Balance at 31 March 2010 | 2,107 | 7,965 | 101 | (1,902) | 8,271 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Profit for six months ended 30 | - | - | | 6 | 6 |
| September 2010 | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Share based payments | - | - | 11 | | 11 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Total comprehensive income for | | | | | |
| the six | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| months to 30 September 2010 | - | - | 11 | 6 | 17 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
| Balance at 30 September 2010 | 2,107 | 7,965 | 112 | (1,896) | 8,288 |
+----------------------------------+---------+---------+---------+----------+---------+
| | | | | | |
+----------------------------------+---------+---------+---------+----------+---------+
UNAUDITED STATEMENT OF CASH FLOWS
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| | | Six months ended | Year |
| | | | ended |
+-----------------------------------------+---+-----------------------+---------+
| | | 30 | 30 | 31 |
| | | September | September | March |
+-----------------------------------------+---+-----------+-----------+---------+
| | | 2010 | 2009 | 2010 |
+-----------------------------------------+---+-----------+-----------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash flows from operating activities | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Adjusted profit before income tax | | 398 | 44 | 212 |
+-----------------------------------------+---+-----------+-----------+---------+
| Non-recurring costs | | (255) | (266) | (326) |
+-----------------------------------------+---+-----------+-----------+---------+
| Depreciation and amortisation | | 925 | 1,162 | 2,082 |
+-----------------------------------------+---+-----------+-----------+---------+
| Share based payments | | 11 | 12 | 24 |
+-----------------------------------------+---+-----------+-----------+---------+
| Net finance costs | | 598 | 664 | 1,293 |
+-----------------------------------------+---+-----------+-----------+---------+
| (Decrease)/increase in trade and other | | (45) | 26 | (81) |
| receivables | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Decrease in trade and other payables | | (102) | (460) | (478) |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash generated from operations | | 1,530 | 1,182 | 2,726 |
+-----------------------------------------+---+-----------+-----------+---------+
| Income taxes received | | - | 58 | 57 |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Net cash from operating activities | | 1,530 | 1,240 | 2,783 |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash flows from investing activities | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Interest paid | | (398) | (466) | (895) |
+-----------------------------------------+---+-----------+-----------+---------+
| Purchase of intangible assets | | - | (94) | (112) |
+-----------------------------------------+---+-----------+-----------+---------+
| Purchase of property, plant and | | (23) | (12) | (39) |
| equipment | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Net cash used in investing activities | | (421) | (572) | (1,046) |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash flows from financing activities | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Repayment of finance leases | | - | (5) | (6) |
+-----------------------------------------+---+-----------+-----------+---------+
| Repayment of borrowings | | (965) | (789) | (1,579) |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Net cash used in financing activities | | (965) | (794) | (1,585) |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Net increase/(decrease) in cash and | | 144 | (126) | 152 |
| cash equivalents | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash and cash equivalents at beginning | | 885 | 733 | 733 |
| of period/year | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash and cash equivalents at end of | | 1,029 | 607 | 885 |
| period/year | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash at bank and in hand | | 1,029 | 607 | 885 |
+-----------------------------------------+---+-----------+-----------+---------+
| Bank overdrafts | | - | - | - |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
| Cash and cash equivalents | | 1,029 | 607 | 885 |
+-----------------------------------------+---+-----------+-----------+---------+
| | | | | |
+-----------------------------------------+---+-----------+-----------+---------+
ACCOUNTING POLICIES
1 Nature of operations and general information
AdEPT Telecom plc is one of the UK's leading independent comms integrators with
award winning customer service. The Company supplies best of breed products
from every major network in the UK, tailored to suit the customer. 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, which are
supplied to thousands of business and residential customers across the UK.
AdEPT Telecom plc is incorporated and domiciled in the UK. The Company's shares
are listed on AIM of the London Stock Exchange.
The financial information set out in this interim report which has not been
audited, does not constitute statutory accounts as defined in Part 15 of the
Companies Act 2006. The Company's statutory financial statements for the year
ended 31 March 2010, prepared under International Financial Reporting Standards,
have been filed with the Registrar of Companies. The auditor's report on those
financial statements was unqualified and did not contain a statement under
Section 495 (4) of the Companies Act 2006.
2 Basis of preparation and summary of significant accounting policies
Basis of preparation
The interim consolidated 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 and in
particular Interim Financial Reporting.
The interim consolidated financial statements have been prepared under the
historical cost convention and on the same basis as the most recent annual
financial statements prepared to 31 March 2010. The measurement bases and
principal accounting policies of the Company are set out below.
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 usage relates. Revenue from mobile
commissions is recognised when the customers are connected to the relevant
network.
Intangible 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.
Intangible fixed assets continue to be subject to an impairment review on the
first anniversary after acquisition, when appropriate lives are selected.
The intangible asset "customer base" is amortised to the income statement over
its estimated economic life. The average estimated useful economic life of all
the acquisitions has been estimated at 17 years (2009: 14 years). The
amortisation charge in the income statement for the 6 months ended 30 September
2010 includes impairment charges of GBP137,737.
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 bases:
+---------------------------+---+------------------------------+
| Customer management | - | three years straight line |
| system | | |
+---------------------------+---+------------------------------+
| Other licences | - | contract licence period |
+---------------------------+---+------------------------------+
Property plant and equipment
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 bases:
+---------------------------+---+-------------------------------+
| Short term leasehold | - | five years straight line |
| improvements | | |
+---------------------------+---+-------------------------------+
| Fixtures and fittings | - | three years straight line |
+---------------------------+---+-------------------------------+
| Office equipment | - | three years straight line |
+---------------------------+---+-------------------------------+
| Computer software | - | three 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 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 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.
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 30 September 2010, after taking into
account the effect of interest rate swaps, 100% of the Company's borrowings are
at a fixed rate of interest (2009: 100%).
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 30 September 2010 was GBP3,296,377 (2009:
GBP3,601,121).
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.
Currency risk
AdEPT's operations are handled entirely in sterling.
Significant accounting judgements and estimates
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 goodwill is impaired at least on 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.
· 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.
3 Earnings per share
+----------------------------------------+------------+------------+------------+
| | Six months ended | Year |
| | | ended |
+----------------------------------------+-------------------------+------------+
| | 30 | 30 | 31 |
| | September | September | March |
+----------------------------------------+------------+------------+------------+
| | 2010 | 2009 | 2010 |
+----------------------------------------+------------+------------+------------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Earnings for the purposes of basic and | | | |
| diluted | | | |
+----------------------------------------+------------+------------+------------+
| earnings per share | | | |
+----------------------------------------+------------+------------+------------+
| Profit/(loss) for the period | | | |
| attributable to equity holders | | | |
+----------------------------------------+------------+------------+------------+
| of the parent | 6 | (352) | (355) |
+----------------------------------------+------------+------------+------------+
| Amortisation | 889 | 1,108 | 1,981 |
+----------------------------------------+------------+------------+------------+
| Non-recurring costs | 255 | 266 | 326 |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Adjusted profit attributable to equity | | | |
| holders of the | | | |
+----------------------------------------+------------+------------+------------+
| parent, adding back amortisation and | 1,150 | 1,022 | 1,952 |
| non-recurring costs | | | |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Number of shares | | | |
+----------------------------------------+------------+------------+------------+
| Weighted average number of shares used | | | |
| for earnings | | | |
+----------------------------------------+------------+------------+------------+
| per share | 21,067,443 | 21,067,443 | 21,067,443 |
+----------------------------------------+------------+------------+------------+
| Dilutive effect of share plans | 3,037,433 | 2,955,084 | 3,037,433 |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Diluted weighted average number of | | | |
| shares used to | | | |
+----------------------------------------+------------+------------+------------+
| calculate fully diluted earnings per | 24,104,876 | 24,022,527 | 24,104,876 |
| share | | | |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Earnings per share | | | |
+----------------------------------------+------------+------------+------------+
| Basic earnings per share (pence) | 0.03p | (1.67)p | (1.68)p |
+----------------------------------------+------------+------------+------------+
| Fully diluted earnings per share | 0.03p | N/a | N/a |
| (pence) | | | |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
| Adjusted earnings per share, after | | | |
| adding back | | | |
+----------------------------------------+------------+------------+------------+
| amortisation and non-recurring costs | | | |
+----------------------------------------+------------+------------+------------+
| Adjusted basic earnings per share | 5.46p | 4.85p | 9.27p |
| (pence) | | | |
+----------------------------------------+------------+------------+------------+
| Adjusted fully diluted earnings per | 4.77p | 4.25p | 8.10p |
| share (pence) | | | |
+----------------------------------------+------------+------------+------------+
| | | | |
+----------------------------------------+------------+------------+------------+
Earnings per share is calculated by dividing the profit attributable to equity
holders of the Company by the weighted average number of ordinary shares in
issue.
Adjusted earnings per share is calculated by dividing the profit attributable to
equity holders of the Company (after adding back amortisation) by the weighted
average number of ordinary shares in issue.
Fully diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares by existing share options, assuming dilution through
conversion of all existing options. The adjustment for the dilutive effect of
share options in the six months ended 30 September 2009 and year to 31 March
2010 has not been reflected in the calculation of the diluted loss per shares as
the effect would be anti-dilutive.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR KKPDKABDDADD
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