TIDMADT
RNS Number : 7063G
AdEPT Telecom plc
03 July 2012
AdEPT Telecom plc
("AdEPT" or the "Company")
Final results for the year ended 31 March 2012
AdEPT (AIM: ADT), a leading UK independent provider of
award-winning telecommunications services for fixed line, mobile,
data connectivity and VoIP, announces its results for the year
ended 31 March 2012.
Financial Highlights
-- 9th consecutive year of increased underlying EBITDA at GBP3.65m (2011: GBP3.62m)
-- Underlying EBITA margin % increasing by 1.4% to 16.7% (2011: 15.3%)
-- Excellent cash generation with free cash flow, after interest, of GBP2.2m (2011: GBP2.1m)
-- Net debt reduction of GBP2.1m year-on-year (2011: GBP1.8m) to GBP5.3m (2011: GBP7.4m)
-- 58% increase to Profit Before Tax to GBP1.2m (2011: GBP0.8m)
-- 123% increase to Profit After Tax to GBP0.6m (2011: GBP0.3m)
-- 11% increase to adjusted Earnings Per Share to 11.35p (2011: 10.25p)
-- Maiden full year dividend of 0.5p per share paid to shareholders in April 2012
Operational Highlights
-- 38% increase to data connectivity revenues year-on-year
-- 20% increase to inbound call revenue year-on-year
-- 91% of revenue generated from customers taking more than one product or service (2011: 89%)
-- 35% of revenue generated from customers taking 3 or more products (2011: 28%)
-- 12% increase in ARPU as at March 2012 to GBP97.28 (2011: GBP86.71)
Commenting upon these results Chairman Roger Wilson said:
"AdEPT has delivered a ninth consecutive year of increased
EBITDA and continued to deliver consistent free cash flow
generation, resulting in further deleveraging and the payment of
the maiden dividend to shareholders in April 2012. Despite the
continuing uncertainty over the general direction of the economy,
the Board is confident that continued strong cash generation, and
further reductions in the level of debt in future, should support a
progressive dividend policy."
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
Northland Capital Partners Limited
Shane Gallwey 020 7796 8823
CHAIRMAN'S STATEMENT
Review of Operations
Despite difficult economic conditions I am pleased to report a
9(th) consecutive increase to underlying EBITDA.
The continued focus on larger customers, generally businesses of
25 to 1,000 employees, has enhanced our ability to benefit from
scale efficiencies and cross selling. The AdEPT Premier Customer
division, comprising the 200 largest customers spending more than
GBP1,000 per month, has grown during the year and now accounts for
approximately 46% of total revenue (2011: 39%).
Our reliance on variable monthly call charges has been reduced
further during the year, replacing them with fixed monthly line
rentals. The proportion of revenue derived from fixed monthly
charges now represents 57% of total revenue (2011: 54%).
AdEPT's continued strong cash flow generation resulted in
GBP2.2m of free cash flow after interest. This was used to fund a
GBP2.1m reduction in net borrowings, to GBP5.3m at 31 March
2012.
New products
AdEPT was originally established as 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.
The Company has broadened its product range further during the
year, particularly with regard to data connectivity, which has seen
38% year-on-year revenue growth. Data services, such as MPLS
networks, fibre broadband, bonded DSL, hosted and cloud telephony
have been added to the product portfolio.
The second half of the year saw the first revenues generated
from hosted and SIP solutions provided by the AdEPT VoIP for
Business product range. The service, powered by BT Wholesale,
includes 8 different ways of deploying VoIP for businesses. AdEPT
VoIP for Business provides SIP trunking and hosted voice
inter-working on a single BT network, with dual resilience offered
by two data centres in London. All VoIP services are managed via a
single web portal. The VoIP products offer comprehensive solutions
for every size of business: large and small sites as well as
homeworkers.
AdEPT has had continued success with 'cloud' or network-based
inbound call handling solutions. These are now being provided to a
number of major customers, which has resulted in a 20% year-on-year
increase in inbound call revenue.
Cross selling of products
A key strategy for the Company remains to sell more products to
new and existing customers to enhance customer retention and
stability. Product penetration has increased during the year; at
end of March 2012 35% of revenue was generated from customers
taking three or more products (2012: 28%).
In the Premier Customer division (those spending more than
GBP1,000 per month) we have seen further improvement in product
penetration. At end of March 2012 customers taking three or more
products increased to 68% (2011: 64%).
Employees
The improved profitability this year was made possible by the
continued hard work and focus of all employees at AdEPT. 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.
AdEPT is successfully making the transition from a traditional
fixed-line service provider to a complete communications
integrator, supplying next generation products and data solutions,
without any impact on profitability despite the recruitment of
staff with new skill sets. During the year 5 new employees were
recruited in next generation products and at 31 March 2012 20% of
employees were working within the data connectivity and next
generation product areas.
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.
Post balance sheet events
On 9 May 2012 the Company signed an agreement to acquire the
trade and assets of the fixed line telecommunications division of
Expanse (UK) Communications Limited. The acquisition is to be
funded from operating cash flow. The Company will continue to
evaluate strategic acquisitions which will add value to our
shareholders.
Outlook
The improved EBITDA and net debt reduction of GBP2.1m was
underpinned by focus on underlying profitability through improving
margins on customer contracts, operational efficiencies and tight
credit control. The further broadening of the product offering will
ensure that AdEPT can continue to provide complete communication
solutions for customers. The Board is confident that continued
strong cash generation, and further reductions in the level of debt
in future, will support a progressive dividend policy.
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. 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 customers.
Roger Wilson
Non-executive Chairman
FINANCIAL AND BUSINESS REVIEW
SUMMARY of three year financial performance:
Year ending March
2012 2011 2010
GBP'000 Year-on-Year GBP'000 Year-on-Year GBP'000
% %
-------------- --------- -------------- --------- -------------- ---------
Revenue 21,913 (8%) 23,734 (8)% 25,725
Gross margin 7,062 - 7,069 (11)% 7,767
EBITDA* 3,652 1% 3,624 0% 3,612
Net debt 5,339 7,365 9,215
-------------- --------- -------------- --------- -------------- ---------
* before non-recurring costs
REVENUE
Revenue by product area
Group revenue decreased by 7.7% to GBP21.9m (2011:
GBP23.7m):
-- Traditional fixed line revenues reduced to GBP17.8m (2011:
GBP20.1m), with this reduction driven by the impact of regulation
reducing mobile call rates combined with call volume reductions
which is a reflection of the continuing uncertain economic
environment. The Company's reliance on call revenues has been
reduced further with call revenue providing only 38.2% of total
revenue in March 2012 (2011: 42.1%).
-- Inbound and cloud based call revenue increased by 19.8%
during the year to GBP1.0m (2011: GBP0.8m). This arises from
network-based solutions developed for Premier Customers during the
year.
-- Data and broadband product revenues were up 38.4% to GBP2.5m
(2011: GBP1.8m), with increases to the number of data circuits and
connections in place. This significant increase reflects growth
from some earlier contract wins and the launch of several new
products including MPLS networks, bonded DSL and fibre
broadband.
-- The second half of the year ended March 2012 saw the first
revenues generated from hosted and SIP solutions provided by AdEPT
VoIP for Business, albeit at a relatively low level.
During the year AdEPT has continued its diversification from a
traditional fixed line service provider towards next generation
products. Total revenue generated from data, mobile, inbound and
other services represented 18.6% of total revenue in March 2012
(2011: 15.1%).
Fixed monthly revenue streams
The Company continues to focus on products delivering fixed
monthly revenue streams to reduce revenue volatility. The
proportion of revenue, which is fixed monthly values, increased to
57.0% of total revenue for the year ended March 2012 (2011: 53.9%)
following the continued focus on multi-product sales (calls, line
rental and data products) and the enhancement of the data
connectivity product portfolio.
Cross selling
The proportion of revenue generated from customers taking more
than one product or service has increased to 90.5% at March 2012
(2011: 89.3%) 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 68.3% at March 2012 (2011: 63.7%) which is driven by
the revenue growth in next generation and data connectivity
products.
Average spend per customer
The Company is continuing to focus on larger customers and
AdEPT's largest 200 customers account for approximately one third
of March 2012 revenue with the top 10 customers accounting for
15.0% of total revenue.
Average customer monthly spend for customers increased
year-on-year by 12.2% to GBP97.28 in March 2012 reflecting the
Company's success in gaining contracts with an increasing
proportion of higher spending multi-product and multi-site business
customers.
GROSS MARGIN
The regulatory impact of reduced mobile termination rates has
resulted in revenue pressure for traditional fixed line services;
however, gross margins have been maintained at an absolute level
through management of wholesale supply contracts. Gross margins for
data products were enhanced during the year through focus on
underlying profitability of customer contracts combined with the
negotiation of more competitive wholesale supply contracts.
Revenues and gross margins generated from other revenue streams
have reduced during the year due to competitive price pressure and
the impact of regulatory changes.
As the product mix has moved towards the relative lower margin
data and broadband revenue streams, this has provided downward
pressure on total gross margins. Future gross margin pressure is
anticipated as our product mix moves increasingly towards the
relative lower margin line rental, data connectivity and broadband
revenue streams.
EBITDA
EBITDA has increased for the ninth consecutive year since
AdEPT's inception in 2003 despite top line pressure. The Company
has focussed on the underlying profitability of customers and
revenue streams; as a result revenue reduction has been absorbed by
gross margin improvement and the operational efficiencies and costs
savings from managing larger customers.
FINANCE COSTS
Total interest costs have reduced by 34.0% to GBP606,882 arising
from a reduced level of net borrowings combined with the full year
impact of the renewal of the banking facilities during the previous
financial year on more favourable terms. Finance costs for the year
ended 31 March 2012 include GBP31,198 in relation to the fair value
of the interest rate swap as required by IAS 39 'Financial
Instruments'. This is not a reflection of an increase in the cost
of borrowing as the interest rate swap provides a fixed rate of
interest on borrowings.
PROFIT BEFORE TAX
This year the Company has recorded an GBP437,107 improvement to
profit before tax with a reported GBP1,189,505 (2011: GBP752,399).
This arises from gross margin improvement and operational
efficiency combined with the reduction in finance costs arising
from the significant reduction to net borrowings during the
year.
EARNINGS PER SHARE
Adjusted earnings per share, based on retained earnings adding
back amortisation and non-recurring costs (see Note 22), has
increased by 10.7% to 11.35p per share (2011: 10.25p).
SHARE CAPITAL REDUCTION
On 20 July 2011 the Company received court approval for a
conversion of the share premium account (of GBP7,965,381) into a
distributable reserve. The conversion had no effect on the number
of ordinary shares or the rights attached to the ordinary shares
and the market price of the shares has not been adjusted as a
result. The share premium account conversion was approved in order
to maximise the capital structure of the Company by creating
distributable reserves to facilitate the payment of dividends.
DIVIDEND PER SHARE
On the back of strong cash flow generation a maiden dividend of
0.5p per share was proposed at the interim date, which was paid to
shareholders on 20 April 2012. The dividend absorbed GBP105,337 of
shareholder funds (2011: GBPnil). The board constantly monitors
shareholder value and is confident that the continued strong cash
generation, and further reductions in the level of debt in future,
will support a progressive dividend policy.
CASH FLOW
Cash conversion
The Company benefits from an excellent cash generating operating
model, with EBITA turning into cash. Reported EBITA turned into net
cash from operating activities is 80.2% (2011: 92.2%) which is
lower than the comparative period due to higher corporation tax
payment for the year ended 31 March 2011. There was a net working
capital outflow of GBP0.7m during the year partly arising from the
reduction in trade payables following the reduction in direct costs
due to top line reductions.
Strong management of credit risk
The Company 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 31 days (2011: 30 days).
Increase in cash balances
After servicing its debt the Company achieved an increase in
cash and cash equivalents of GBP0.5m during the year.
CAPITAL EXPENDITURE
The Company has low capital requirements and therefore
expenditure on tangible assets is low at 0.1% of revenue (2011:
0.1%). Intangible asset additions were negligible during the year
(2011: GBP0.1m).
NET DEBT
A key strength of AdEPT is its consistent, proven ability to
generate strong free cash flow, which is supported by GBP5.5m
reduction to net borrowings within the last 3 years. As a result of
the Company's focus on underlying profitability and cash
conversion, free cash flow after bank interest of GBP2.2m was
generated during the year ended March 2012; with GBP2.1m being
applied to net debt reduction during the year. Net debt, which
comprises cash balances and bank borrowings, has therefore improved
to GBP5.3m (2011: GBP7.4m).
The Company's available banking facilities are described in Note
23 to the financial statements. The Company continues to manage its
exposure to interest rate risks arising from financing activities
through interest rate swap contracts.
KEY PERFORMANCE INDICATORS (KPIs)
The KPIs outlined below are intended to provide useful
information when interpreting the accounts.
Data,
Fixed mobile
line and other
services services Total
-------------------------- --------- ---------- -------
Year ended 31 March 2012
Revenue 19,206 2,707 21,913
Gross profit 6,176 886 7,062
Gross margin % 32.2% 32.7% 32.2%
Year ended 31 March 2011
Revenue 21,311 2,423 23,734
Gross profit 6,174 896 7,069
Gross margin % 29.0% 37.0% 29.8%
RESILIENT BUSINESS MODEL
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 the product range, particularly
with regard to data connectivity;
-- customers are spread across all industries; the top ten
customers account for approximately 15.0% of revenues;
-- trade suppliers and partners are all top tier suppliers,
providing confidence in the continuity and reliability of service
to customers;
-- 70.0% of the Company's customers pay by monthly direct debit,
reducing the Company's credit risk;
-- the Company has agreed banking facilities through to September 2013; and
-- with the level of cash generation forecast, the Board expects
the Company's net borrowing position to further improve over the
next twelve months.
John Swaite
Finance Director
STATEMENT OF COMPREHENSIVE INCOME
As restated
2012 2011
Note GBP'000 GBP'000
----------------------------------------------------------- ----- --------- ------------
Revenue 4 21,913 23,734
Cost of sales (14,851) (16,665)
----------------------------------------------------------- ----- --------- ------------
Gross profit 7,062 7,069
Administrative expenses (5,264) (5,397)
----------------------------------------------------------- ----- --------- ------------
Operating profit 1,798 1,672
----------------------------------------------------------- ----- --------- ------------
Total operating profit - analysed:
Operating profit before non-recurring costs, depreciation
and amortisation 3,651 3,624
Non-recurring costs - (256)
Share-based payments (21) (23)
Depreciation of tangible fixed assets (28) (53)
Impairment of intangible assets (116) (137)
Amortisation of intangible fixed assets (1,688) (1,483)
----------------------------------------------------------- ----- --------- ------------
Total operating profit 1,798 1,672
----------------------------------------------------------- ----- --------- ------------
Finance costs 7 (608) (920)
----------------------------------------------------------- ----- --------- ------------
Profit before income tax 1,190 752
Income tax expense 10 (603) (489)
----------------------------------------------------------- ----- --------- ------------
Profit for the year 587 263
Other comprehensive income - -
----------------------------------------------------------- ----- --------- ------------
Total comprehensive income for the year 587 263
----------------------------------------------------------- ----- --------- ------------
Total comprehensive income attributable to:
Equity holders 587 263
Earnings per share:
Basic earnings 24 2.79p 1.25p
Diluted earnings 24 2.42p 1.09p
----------------------------------------------------------- ----- --------- ------------
All amounts relate to continuing operations. Notes 1 to 26 form
part of these financial statements.
Gross profit has been restated for the year ended 31 March 2011.
Third party commissions payable of GBP1,441,486 have been
reclassified as cost of sales as they are considered to be directly
associated with the revenue generated.
STATEMENT OF FINANCIAL POSITION
31 March 31 March
2012 2011
Note GBP'000 GBP'000
---------------------------------------- ----- --------- ---------
Assets
Non-current assets
Intangible assets 12 15,347 17,054
Property, plant and equipment 13 39 50
Deferred income tax 14 128 354
---------------------------------------- ----- --------- ---------
15,514 17,458
Current assets
Inventories 15 12 -
Trade and other receivables 16 2,864 2,758
Cash and cash equivalents 1,869 1,361
---------------------------------------- ----- --------- ---------
4,745 4,119
---------------------------------------- ----- --------- ---------
Total assets 20,259 21,577
---------------------------------------- ----- --------- ---------
Current liabilities
Trade and other payables 17 3,473 3,957
Income tax 361 225
Short-term borrowings 1,206 1,456
---------------------------------------- ----- --------- ---------
5,040 5,638
Non-current liabilities
Long-term borrowings 18 6,001 7,270
Provisions for liabilities and charges 137 106
---------------------------------------- ----- --------- ---------
Total liabilities 11,178 13,014
---------------------------------------- ----- --------- ---------
Net assets 9,081 8,563
---------------------------------------- ----- --------- ---------
Equity attributable to equity holders
Share capital 19 2,107 2,107
Share premium - 7,965
Retained earnings 6,974 (1,509)
---------------------------------------- ----- --------- ---------
Total equity 9,081 8,563
---------------------------------------- ----- --------- ---------
The financial statements were approved and authorised for issue
by the Board on 3 July 2012 and signed on its behalf.
Ian Fishwick
Director
Notes 1 to 26 form part of these financial statements.
Registered number 4682431
STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders
---------------------------------------------------
Share
Share Share capital Retained Total
to
capital premium be issued earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- ---------- --------- --------
Equity at 1 April 2010 2,107 7,965 101 (1,902) 8,271
Profit for the year - - - 263 263
Deferred tax asset adjustment - - - 6 6
Share-based payments - - 23 - 23
--------------------------------- -------- -------- ---------- --------- --------
Net income/(expense) recognised
directly in equity 2,107 7,965 124 (1,633) 8,563
Equity at 1 April 2011 2,107 7,965 124 (1,633) 8,563
Profit for the year - - - 587 587
Share capital restructuring - (7,965) - 7,965 -
Dividend - - - (105) (105)
Deferred tax asset adjustment - - - 15 15
Share-based payments - - 21 - 21
--------------------------------- -------- -------- ---------- --------- --------
Net income recognised directly
in equity 2,107 - 145 6,829 9,081
--------------------------------- -------- -------- ---------- --------- --------
Equity at 31 March 2012 2,107 - 145 6,829 9,081
--------------------------------- -------- -------- ---------- --------- --------
Notes 1 to 26 form part of these financial statements.
STATEMENT OF CASHFLOWS
2012 2011
GBP'000 GBP'000
---------------------------------------------------------- -------- --------
Cash flows from operating activities
Profit before income tax 1,190 752
Depreciation and amortisation 1,832 1,673
Share-based payments 21 23
Loss on sale of fixed assets 1 -
Net finance costs 608 920
---------------------------------------------------------- -------- --------
Operating cash flows before movements in working capital 3,652 3,368
Increase/(decrease) in trade and other receivables (199) 29
Decrease in trade and other payables (567) (368)
---------------------------------------------------------- -------- --------
Cash generated from operations 2,886 3,029
Income taxes paid (224) (61)
---------------------------------------------------------- -------- --------
Net cash from operating activities 2,662 2,968
---------------------------------------------------------- -------- --------
Cash flows from investing activities
Interest paid (496) (878)
Purchase of intangible assets (97) (11)
Purchase of property, plant and equipment (18) (31)
---------------------------------------------------------- -------- --------
Net cash used in investing activities (611) (920)
Cash flows from financing activities
Repayment of borrowings (1,543) (1,886)
Increase of bank loan - 314
---------------------------------------------------------- -------- --------
Net cash from financing activities (1,543) (1,572)
---------------------------------------------------------- -------- --------
Net increase in cash and cash equivalents 508 476
Cash and cash equivalents at beginning of year 1,361 885
---------------------------------------------------------- -------- --------
Cash and cash equivalents at end of year 1,869 1,361
---------------------------------------------------------- -------- --------
Cash and cash equivalents:
Cash at bank and in hand 1,869 1,361
Bank overdrafts - -
---------------------------------------------------------- -------- --------
Cash and cash equivalents 1,869 1,361
---------------------------------------------------------- -------- --------
Notes 1 to 26 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 telecommunication 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 under the Companies Act,
domiciled in the UK and the registered office is located at One
London Wall, London EC2Y 5AB. The Company's shares are listed on
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 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. The 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
2011 and which are applicable to the Company, but which have not
been adopted early, are:
-- IFRIC14 (Amendment) "Prepayments of a Minimum Funding Requirement" effective January 2011
-- Revised IAS 24 "Related Party Disclosures" (issued 4 November 2009) effective January 2011
-- IFRS 7 "Amendments to Financial Instruments Disclosures" effective January 2011
-- IFRS 1 "Amendments to Severe Hyperinflation and Removal of
Fixed Dates for First-Time Adopters" effective July 2011
-- IAS 12 "Amendments to Deferred tax: Recovery of Underlying Assets" effective January 2012
-- IAS 1 (Amendment) "Presentation of Items of Other Comprehensive Income" effective July 2012
-- IAS 19 (Amendment) "Employee Benefits" effective January 2013
-- IAS 27 "Separate Financial Statements" effective January 2013
-- IAS 28 "Investments in Associates and Joint Ventures" effective January 2013
-- IFRS 10 "Consolidated Financial Statements" effective January 2013
-- IFRS 11 "Joint Arrangements" effective January 2013
-- IFRS 12 "Disclosure of Interests in Other Entities" effective January 2013
-- IFRS 13 "Fair Value Measurement" effective January 2013
-- IFRS 9 "Financial Instruments" effective January 2013
-- IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" effective January 2013
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 may result
in some changes in presentation of information within the Company's
financial statements.
The financial statements are presented in sterling which is the
Company's functional and presentation currency. The figures shown
in the financial statements are rounded to the nearest thousand
pounds.
Segmental reporting
The directors have considered the requirements of IFRS 8
"Operating Segments" and have concluded that the Company has two
segments. For further information see Note 4 of the financial
statements.
Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Company and can be reliably
measured.
Revenue from calls, which excludes value added tax and trade
discounts, is recognised in the income statement at the time the
call is made. Calls made in the year, but not billed by year end,
are accrued within receivables as accrued income.
Revenue from line rental is recognised in the month that the
charge relates to, commencing with a full month's charge in the
month of connection. Revenue and related costs from the sales of
mobile handsets are recognised at the date of supply or
connection.
Revenue arising from the provision of internet and other
services is recognised evenly over the periods in which the service
is provided to the customer.
Connection commissions received from mobile network operators
are recognised when the customer is connected to the mobile network
after providing for expected future clawbacks.
The whole of the revenue is attributable to the provision of
voice and data telecommunication services to both residential and
business customers. All revenue arose within the United
Kingdom.
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 (2011: 17 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 system - Three years straight line
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 improvements - The shorter of five years
and the remaining period of the lease
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
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 Notes 18 and 25, 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, which 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.
Key sources of estimation uncertainty are:
-- measuring the fair value of customer bases on acquisition;
-- subsequent impairment of customer bases; and
-- receivables.
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.
The main estimates used to measure the fair value of the
customer bases on acquisition and the conduct the impairment review
are:
-- the churn rate (turnover of customers);
-- discount rate; and
-- margins.
Churn rates are based upon actual historical churn rates.
The discount rate used to discount the cash flows is based upon
the Company's Weighted Average Cost of Capital (WACC), which is the
recommended discount rate suggested by International Financial
Reporting Standards and is a calculated figure.
Margins are based upon actual margins achieved in previous
years. The actual outcomes have been materially equivalent which is
supported by the relatively low impairment charges over the past
couple of years.
More details including carrying values are included in Note
12.
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.
Further information on the receivables allowance account is given
in Note 16.
4. Segmental information
IFRS 8 "Operating Segments" require identification on the basis
of internal reporting about components of the Company that are
regularly reviewed by the chief operating decision maker to
allocate resources to the segments and to assess their
performance.
The chief operating decision maker has been identified as the
Board. The Board reviews the Company's internal reporting in order
to assess performance and allocate resources. The operating
segments are fixed line services and data, mobile and other
services which are reported in a manner consistent with the
internal reporting to the Board. The Board assesses the performance
of the operating segments based on revenue, gross profit and
EBITDA.
As restated
Year ended 31 March 2012 Year ended 31 March 2011
----------------------------------------- -----------------------------------------
Data, Data,
Fixed mobile Fixed mobile
line and other Central line and other Central
services services costs Total services services costs Total
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
Revenue 17,828 4,085 - 21,913 20,145 3,589 - 23,734
Gross profit 5,735 1,327 - 7,062 5,705 1,364 - 7,069
Gross margin % 32.2% 32.5% - 32.2% 28.3% 38.0% - 29.8%
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
EBITDA 3,058 594 - 3,651 2,919 705 - 3,624
EBITDA % 17.2% 14.5% - 16.7% 14.5% 19.6% - 15.3%
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
Amortisation (1,804) - - (1,804) (1,620) - - (1,620)
Depreciation - - (28) (28) - - (53) (53)
Exceptional operating
costs - - - - - - (256) (256)
Share-based payments - - (21) (21) - - (23) (23)
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
Operating profit/(loss) 1,254 593 (49) 1,798 1,299 705 (332) 1,672
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
Finance costs (608) (608) - - (920) (920)
Income tax (603) (603) - - (489) (489)
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
Profit after tax 587 263
------------------------- --------- ---------- -------- -------- --------- ---------- -------- --------
The assets and liabilities relating to the above segments have
not been disclosed as they are not separately identifiable and are
not used by the chief operating decision maker to allocate
resources. All segments are in the UK and all revenue relates to
the UK.
Transactions with the largest customer of the Company are less
than 10% of total turnover and do not require disclosure for either
2011 or 2012.
5. Operating profit
The operating profit is stated after charging:
2012 2011
------------------------------------------------------------
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Amortisation of customer base, billing system and licence 1,804 1,620
Depreciation of tangible fixed assets:
- owned by the Company 28 53
Share option expense 21 23
Minimum operating lease payments:
- land and buildings 174 171
- motor vehicles and other equipment 38 36
----------------------------------------------------------- -------- --------
Included within the share option expense for the year is
GBP16,430 relating to the warrant instrument issued to Barclays
Bank plc: see Note 17.
6. Auditors' remuneration
2012 2011
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Fees payable to the Company's auditors for the audit of
the Company's annual financial statements 30 30
Fees payable to the Company's auditors and their associates
in respect of:
- other services relating to taxation 5 5
------------------------------------------------------------- -------- --------
7. Finance costs
2012 2011
GBP'000 GBP'000
------------------------------ -------- --------
On bank loans and overdrafts 498 702
Bank fees 79 112
Other interest payable 31 106
------------------------------ -------- --------
608 920
------------------------------ -------- --------
Included within interest is a charge of GBP31,198 which relates
to the movement in the fair value of the interest rate swap
liability as calculated in accordance with IAS 39.
8. Employee costs
Staff costs, including directors' remuneration, were as
follows:
2012 2011
GBP'000 GBP'000
----------------------- -------- --------
Wages and salaries 1,729 1,923
Social security costs 203 200
Share option expense 5 3
Other pension costs 14 14
----------------------- -------- --------
1,951 2,140
----------------------- -------- --------
8. Employee costs continued
The average monthly number of employees, including the
directors, during the year was as follows:
2012 2011
Number Number
------------------------- ------- -------
Non-executive directors 3 3
Administrative staff 43 52
------------------------- ------- -------
46 55
------------------------- ------- -------
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
Post-
employment
Short-term employee benefits benefits
----------------------------------- --------------
Salary
and fees Bonus
paid or paid or Other Pension Total Total
receivable receivable benefits contributions 2012 2011
GBP GBP GBP GBP GBP GBP
------------- ----------- ----------- --------- -------------- -------- --------
R Wilson 45,000 - 1,770 - 46,770 46,459
C Fishwick 14,489 - - - 14,489 15,000
D Lukic 15,000 - - - 15,000 15,000
I Fishwick 207,050 29,750 4,124 13,971 254,895 223,960
A Woodruffe 135,020 18,490 1,152 - 154,662 153,656
J Murphy 70,000 23,776 13,238 - 107,014 107,038
J Swaite 77,500 17,233 7,888 - 102,621 87,337
Total 564,059 89,249 28,172 13,971 695,451 648,450
------------- ----------- ----------- --------- -------------- -------- --------
During the year retirement benefits were accruing to one
director (2011: one) in respect of money purchase pension schemes.
The value of the Company's contributions paid to a money purchase
pension scheme in respect of the highest paid director amounted to
GBP13,971 (2011: GBP13,968).
The share option expense recognised during the year in respect
of the directors was GBP4,651 (2011: GBP2,881).
Directors' share options
Options Options
Option at 1 Awarded Options Options at 31 March Option
April
scheme 2011 in year exercised lapsed 2012 price Date of grant
------------- ------------ -------- -------- ---------- -------- ------------ ------- ---------------
6 December
I Fishwick EMI 510,638 - - - 510,638 30p 2010
6 December
I Fishwick Unapproved 89,362 - - - 89,362 30p 2010
I Fishwick Unapproved 152,160 - - - 152,160 30p 31 July 2003
A Woodruffe EMI 171,108 - - 171,108 - 42p 29 August 2004
A Woodruffe EMI 171,108 - - - 171,108 42p 5 June 2005
A Woodruffe EMI 187,952 - - - 187,952 42p 1 August 2008
A Woodruffe Unapproved 62,048 - - - 62,048 42p 1 August 2008
A Woodruffe EMI - 23,430 - - 23,430 40p 29 August 2011
A Woodruffe Unapproved - 176,570 - - 176,570 40p 29 August 2011
J Swaite EMI - 75,000 - - 75,000 40p 29 August 2011
J Murphy EMI - 75,000 - - 75,000 40p 29 August 2011
------------- ------------ -------- -------- ---------- -------- ------------ ------- ---------------
10. Income tax expense
2012 2011
GBP'000 GBP'000
------------------------------------------------ -------- --------
Current tax
UK corporation tax on profit for the year 362 225
Adjustments in respect of prior periods - -
------------------------------------------------ -------- --------
Total current tax 362 225
------------------------------------------------ -------- --------
Deferred tax
Origination and reversal of timing differences 241 264
Adjustments in respect of prior periods - -
------------------------------------------------ -------- --------
Total deferred tax (see Note 13) 241 264
------------------------------------------------ -------- --------
Total income tax expense 603 489
------------------------------------------------ -------- --------
Factors affecting tax charge for year
The relationship between expected tax expense based on the
effective tax rate of AdEPT at 26% (2011: 28%) and the tax expense
actually recognised in the income statement can be reconciled as
follows:
2012 2011
GBP'000 GBP'000
------------------------------------------------------- -------- --------
Profit before income tax 1,190 752
Tax rate 26% 28%
Expected tax charge 309 211
Expenses not deductible for tax purposes 15 8
Amortisation not deductible for tax purposes 276 258
Change in deferred tax rate 8 23
Adjustments to tax charge in respect of prior periods - -
Share options (4) -
Marginal relief (1) (11)
------------------------------------------------------- -------- --------
Actual tax expense net 603 489
------------------------------------------------------- -------- --------
There were no material factors that may affect future tax
charges.
11. Dividends
On 27 October 2011 the Directors approved a maiden dividend of
0.5p per Ordinary Share. This absorbed GBP105,337 of shareholders'
funds.
12. Intangible fixed assets
Computer Customer
Licence software base Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- --------- --------- --------
Cost
At 1 April 2010 26 846 26,668 27,540
Additions - 11 - 11
--------------------- -------- --------- --------- --------
At 1 April 2011 26 857 26,668 27,551
Additions - 92 5 97
--------------------- -------- --------- --------- --------
At 31 March 2012 26 949 26,673 27,648
--------------------- -------- --------- --------- --------
Amortisation
At 1 April 2010 10 696 8,171 8,877
Charge for the year 3 105 1,375 1,483
Impairment charge - - 137 137
--------------------- -------- --------- --------- --------
At 1 April 2011 13 801 9,683 10,497
Charge for the year 3 62 1,623 1,688
Impairment charge - - 116 116
--------------------- -------- --------- --------- --------
At 31 March 2012 16 863 11,422 12,301
--------------------- -------- --------- --------- --------
Net book value
At 31 March 2012 10 86 15,251 15,347
--------------------- -------- --------- --------- --------
At 31 March 2011 13 56 16,985 17,054
--------------------- -------- --------- --------- --------
Intangible assets are reviewed annually or more frequently if
events or changes in circumstances indicate that the carrying value
may be impaired. The net present value of cash flows for each
cash-generating unit is reviewed against the carrying value at the
balance sheet date. At the final reporting date of 31 March 2012
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 GBP116,421 (2011 - GBP137,737) and adjust the
economic lives of the respective cash-generating units
appropriately.
The Company has no internally generated intangible assets.
13. Property, plant and equipment
Short-term Fixtures
leasehold and Office
improvements fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------------- --------- ---------- --------
Cost
At 1 April 2010 7 122 509 638
Additions - 2 34 36
Disposals - - (244) (244)
--------------------- ------------- --------- ---------- --------
At 1 April 2011 7 124 299 430
Additions - 3 15 18
Disposals - - (105) (105)
--------------------- ------------- --------- ---------- --------
At 31 March 2012 7 127 209 343
--------------------- ------------- --------- ---------- --------
Depreciation
At 1 April 2010 7 109 450 566
Charge for the year - 14 39 53
Disposals - - (239) (239)
--------------------- ------------- --------- ---------- --------
At 1 April 2011 7 123 250 380
Charge for the year - 1 27 28
Disposals - - (104) (104)
--------------------- ------------- --------- ---------- --------
At 31 March 2012 7 124 173 304
--------------------- ------------- --------- ---------- --------
Net book value
At 31 March 2012 - 3 36 39
--------------------- ------------- --------- ---------- --------
At 31 March 2011 - 1 49 50
--------------------- ------------- --------- ---------- --------
14. Deferred taxation
2012 2011
GBP'000 GBP'000
------------------------------------------- -------- --------
At 1 April 2011 354 612
Income statement charge (241) (264)
Movement in deferred tax on share options 15 6
------------------------------------------- -------- --------
At 31 March 2012 128 354
------------------------------------------- -------- --------
The deferred tax asset is made up as follows:
2012 2011
GBP'000 GBP'000
------------------------------- -------- --------
Capital allowances 68 104
Derived financial liabilities 33 29
Share options 27 6
Tax losses - 215
------------------------------- -------- --------
128 354
------------------------------- -------- --------
15. Inventories
2012 2011
GBP'000 GBP'000
------------ -------- --------
Consumables 12 -
------------ -------- --------
There is no material difference between the replacement cost of
inventories and the amount stated above.
16 Trade and other receivables
2012 2011
GBP'000 GBP'000
-------------------------------- -------- --------
Trade receivables 2,263 2,290
Other receivables 7 7
Prepayments and accrued income 594 461
-------------------------------- -------- --------
2,864 2,758
-------------------------------- -------- --------
As at 31 March 2012, trade receivables of GBP165,851 (2011:
GBP237,560) were impaired and fully provided for. The ageing of the
trade receivables which are past due and not impaired are as
follows:
2012 2011
GBP'000 GBP'000
-------------- -------- --------
31-60 days 150 49
61-90 days 17 3
Over 90 days 50 68
-------------- -------- --------
217 120
-------------- -------- --------
Movement of the Company provision for impairment of trade
receivables is as follows:
GBP'000
-------------------------------------- --------
At 1 April 2010 283
Receivables written off during the
year as uncollectable (227)
Provision for receivables impairment
for the year 181
-------------------------------------- --------
At 1 April 2011 237
Receivables written off during the
year as uncollectable (190)
Provision for receivables impairment
for the year 118
-------------------------------------- --------
At 31 March 2012 165
-------------------------------------- --------
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 reviews the outstanding receivables and does
not consider that any further impairment is required. The other
assets classes within trade and other receivables do not contain
impaired assets.
17. Trade and other payables
2012 2011
GBP'000 GBP'000
--------------------------------------- -------- --------
Trade payables 2,212 2,601
Other taxes and social security costs 436 460
Other payables 183 96
Accruals and deferred income 642 800
--------------------------------------- -------- --------
3,473 3,957
--------------------------------------- -------- --------
18. Long-term borrowings
2012 2011
GBP'000 GBP'000
---------------------------- -------- --------
Between one and two years 4,206 1,206
Between two and five years 1,795 5,126
More than five years - 938
---------------------------- -------- --------
Bank loans 6,001 7,270
---------------------------- -------- --------
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
25.
Included within bank loans are arrangement fees amounting to
GBP123,975 (2011: GBP148,875) which are being released over the
term of the loan in accordance with IAS 39.
19. Share capital
2012 2011
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
---------------------------------------- -------- --------
On 20 July 2011 the High Court approved the order confirming
cancellation of the share premium account of the Company. The High
Court Order resulted in the creation of a new reserve of GBP7.965m
which the Company has credited to its profit and loss reserve.
Share options
At 31 March 2012, the following options and warrants over the
shares of AdEPT were in issue:
2012 2011
--------------------- ---------------------
Number Weighted Number Weighted
of shares average of shares average
under exercise under exercise
option price option price
--------------------------- ---------- --------- ---------- ---------
Outstanding at 1 April 3,029,782 42p 3,037,433 42p
Granted during the year 359,416 40p 600,000 30p
Forfeited during the year (171,108) 42p (607,651) 36p
Exercised during the year - - - -
--------------------------- ---------- --------- ---------- ---------
Outstanding at 31 March 3,218,090 42p 3,029,782 42p
--------------------------- ---------- --------- ---------- ---------
The weighted average fair values have been determined using the
Black-Scholes-Merton Pricing Model with the following assumptions
and inputs:
2012 2011
------------------------------------------------ ----------- -----------
Risk free interest rate 1.95-4.13% 1.95-4.13%
Expected volatility 20-83% 30-65%
Expected option life (years) 1.0-5.7 1.0-5.7
Expected dividend yield 0% 0%
Weighted average share price 42p 43p
Weighted average exercise price 43p 42p
Weighted average fair value of options granted 5p 5p
------------------------------------------------ ----------- -----------
Share options continued
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
IFRS 2 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
price option 31 March 31 March
(p) life (years) 2012 2011
------------------ --------- ------------- ---------- ----------
31 July 2003 29 5.7 152,160 152,160
29 August 2004 42 4.6 - 171,108
6 June 2005 42 3.6-4.8 171,108 171,108
14 February 2006 140 3.1-4.1 421,349 421,349
15 February 2006 140 1.25-2.25 59,196 59,196
1 August 2008 42 3.0 250,000 250,000
21 January 2009 12 3.0 1,214,277 1,204,861
6 December 2010 30 1.0 600,000 600,000
29 August 2011 40 3.0 350,000 -
------------------ --------- ------------- ---------- ----------
3,218,090 3,029,782
------------------ --------- ------------- ---------- ----------
During the year ended 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 2012 this entitled the holder to 1,214,277
shares. The weighted average fair value of this equity instrument
of GBP60,779 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 2012 was
47.75p and the range during the year was 21.1p.
20. Pension commitments
At 31 March 2012 there were no pension commitments (2011:
GBPNil).
21. Operating lease commitments
At 31 March 2012 the Company had lease commitments as
follows:
Land and buildings Other
--------------------- ------------------
2012 2011 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- --------- -------- --------
Within one year 153 153 38 38
Between two and five years 25 178 12 50
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 five years.
Other
The Company leases various office equipment and motor vehicles
under non-cancellable operating lease agreements. The lease terms
are three years.
The lease expenditure charged to the income statement during the
year is disclosed in Note 5.
22. Related party transactions
During the year CKR Holdings Limited and Rykesh Limited,
companies controlled by Chris 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
GBP85,000 (2011: GBP85,000). There was no balance owed to CKR
Holdings Limited or Rykesh Limited at the end of the year (2011:
GBPNil).
At the year-end dividends payable were owed to the following
directors:
2012 2011
C Fishwick 32,172 -
I Fishwick 5,670 -
R Wilson 3,941 -
D Lukic 463 -
J Swaite 56 -
A Woodruffe 17 -
------------ ------- -----
23. Capital commitments
At 31 March 2012 there were capital commitments of GBPnil (2011:
GBP34,000).
24. Earnings per share
Earnings per share is calculated on the basis of a profit of
GBP587,190 (2011: GBP263,500) divided by the weighted average
number of shares in issue for the year of 21,067,443 (2011:
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 24,285,533 (2011: 24,097,225).
An adjusted earnings per share is calculated by adding back
amortisation of intangible assets and non-recurring costs to
retained earnings, giving GBP2,391,792 (2011: GBP2,139,307). This
is divided by the same weighted average number of shares as
above.
2012 2011
GBP'000 GBP'000
------------------------------------------------------------- ----------- -----------
Earnings for the purposes of basic and diluted earnings
per share
Profit for the period attributable to equity holders 587 263
Amortisation 1,804 1,620
Non-recurring costs - 256
------------------------------------------------------------- ----------- -----------
Adjusted profit attributable to equity holders, adding
back amortisation and non-recurring costs 2,391 2,139
------------------------------------------------------------- ----------- -----------
Number of shares
Weighted average number of shares used for earnings
per share 21,067,443 21,067,443
Dilutive effect of share plans 3,218,090 3,029,782
------------------------------------------------------------- ----------- -----------
Diluted weighted average number of shares used to
calculate fully diluted earnings per share 24,285,533 24,097,225
------------------------------------------------------------- ----------- -----------
Earnings per share
Basic earnings per share 2.79p 1.25p
Fully diluted earnings per share 2.42p 1.09p
Adjusted earnings per share, after adding back amortisation
and non-recurring costs
Adjusted basic earnings per share 11.35p 10.15p
Adjusted fully diluted earnings per share 9.85p 8.88p
------------------------------------------------------------- ----------- -----------
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.
25. 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.
2012 2011
GBP'000 GBP'000
---------------------------------------- -------- --------
Financial assets
Cash 1,869 1,361
Trade and other receivables 2,270 2,297
Financial liabilities
Interest-bearing loans and borrowings:
Fixed rate borrowings 7,208 8,726
---------------------------------------- -------- --------
7,208 8,726
---------------------------------------- -------- --------
Amounts due for settlement
Within twelve months 1,206 1,456
After twelve months 6,002 7,270
---------------------------------------- -------- --------
7,208 8,726
---------------------------------------- -------- --------
The Facility A term loan bears interest at 2.25-3.5% over LIBOR,
dependent upon the EBITA ratchet, and is repayable by quarterly
instalments of GBP312,500, with the final repayment due on 30
September 2015. At the year end the amount outstanding in respect
of this facility was GBP4.332m.
The Facility B loan bears interest at 3.5% over LIBOR and is
repayable in full on the final repayment date of 30 September 2013.
At the year end the amount outstanding in respect of Facility B was
GBP3m.
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
As at 31 March 2012 the Company had no finance lease
obligations.
Sensitivity analysis
At 31 March 2012 it was estimated that a movement of 1% in
interest rates would impact the Company's profit before tax by
approximately GBP81,000. Given the interest rate swap instrument in
place, this impact on profit would be reduced should interest rates
rise above 2.96%.
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 2012, after taking into account the effect of interest rate
management, 100% of the Company's borrowings are at a fixed rate of
interest (2011: 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 31 March
2012 was GBP4,138,542 (2011: GBP3,658,001).
Loans and receivables
2012 2011
GBP'000 GBP'000
--------------------------- -------- --------
Trade receivables 2,262 2,290
Other receivables 7 7
Cash and cash equivalents 1,869 1,361
--------------------------- -------- --------
4,138 3,658
--------------------------- -------- --------
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 following table 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 years 2-5 years 5 years
Year ended 31 March 2012 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- ---------- ----------
Borrowings 1,206 4,206 1,795 -
Trade and other payables 2,212 - - -
-------------------------- -------- ---------- ---------- ----------
3,418 4,206 1,795 -
-------------------------- -------- ---------- ---------- ----------
Within More than
1 year 1-2 years 2-5 years 5 years
Year ended 31 March 2011 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- ---------- ---------- ----------
Borrowings 1,456 1,206 5,126 938
Trade and other payables 2,601 - - -
-------------------------- -------- ---------- ---------- ----------
4,057 1,206 5,126 938
-------------------------- -------- ---------- ---------- ----------
Currency risk
The Company's operations are handled entirely in sterling.
Capital risk management
The Company is subject to the risk that its capital structure
will not be sufficient to support the growth of the business. The
Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern in order to
provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce
the cost of capital. There were no changes to the Company's
approach to capital management during the year.
As part of the banking arrangements, the Company is required to
comply with certain covenants including net debt to adjusted EBITA,
interest cover and cash flow cover.
In order to maintain or adjust the capital structure, the
Company may return capital to shareholders, issue new shares or
sell assets to reduce debt.
26. Events after the balance sheet date
On 9 May 2012 the Company signed an agreement to acquire certain
trade and assets from Expanse (UK) Communications Limited. Initial
consideration of GBP400,000 has been paid in cash by the Company
with the balance of consideration being deferred until April and
October 2013. Total deferred consideration is estimated to be
GBP412,000; this amount is contingent and is dependent upon the
gross margin and remaining contractual term of the customer
contracts acquired as at 1 December 2012. Total consideration is
capped at GBP950,000. Acquisition related costs of GBP14,000 will
be recognised as an expense in the statement of comprehensive
income for the year ending 31 March 2013.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR RTMITMBAMBJT
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