TIDMADT
RNS Number : 4977I
AdEPT Technology Group PLC
02 April 2020
AdEPT Technology Group PLC
("AdEPT" or the "Company" together with its subsidiaries the
"AdEPT Group")
Trading and Coronavirus update
AdEPT (AIM: ADT), one of the UK's leading independent providers
of managed services for IT, unified communications, connectivity
and voice solutions, today announces a trading update for the year
ended 31 March 2020, ahead of the audited final results which are
expected to be announced in July 2020.
Ian Fishwick, Chairman commented:
The Government has named all AdEPT employees as key workers
The Government has declared our employees as key workers. In
effect, IT and Telecommunications support has become a '4(th)
Utility Service' in our nationwide attempt to keep Government,
education and the economy going in this time of Coronavirus
national crisis.
All our employees have moved seamlessly to working remotely
using our Office 365, Microsoft Teams and Avaya IX technologies, a
benefit of 'Project Fusion'.
As expected, call volumes to our support teams increased by 85%
over the last few weeks as people get used to working at home with
technology that is new to many of them, whilst doctors and schools
have been required to work in very different ways. We anticipate
this will quickly fall over the next few weeks. We are pleased to
report that we are receiving numerous plaudits from customers large
and small and would like to thank the AdEPT team for their
adaptability, hard work and long hours.
Transitioning customers to a new world of remote working and
schooling
Our turnover is roughly 45% public sector - across the NHS,
education and Government, and 55% commercial, of which there are
thousands of customers.
In respect of education, AdEPT are working closely with London
Grid for Learning (LGfL), other Education Authorities, academies
and independent schools. We are proud to have played a key role in
the transition of approximately 3,300 schools and over 100
universities and colleges to remote schooling.
In respect of the health sector, our new Kent Health and Social
Care Network has performed excellently. Our data networks are
supporting over 30 NHS Trusts and many large hospitals such as
Great Ormond Street. The NHS and the private sector will be working
ever more closely over the next few months and we continue to
support approximately 70% of the private hospitals in London with
both unified communications and data networks. Our IP voice service
supports hundreds of GP practices, all of whom are dealing with a
rapid change to remote working.
Central and Local Government are working effectively together,
and we are supplying voice and data services to key central
Government departments and over 100 local Councils.
In respect of our commercial customers many have transitioned
effectively to homeworking, we have seen a surge in demand for
laptops to provide technology in the home, a need to set up
networks and a requirement to change permissions so that people can
access systems remotely. However, with all of this change we are
warning companies about the potential cyber security threats from
homeworking as anecdotally we are seeing an increase in phishing
attacks.
Working closely with partners
During these testing times it has only re-enforced our long-held
view that strong partnerships are instrumental to the success of
AdEPT. We have been working closely with all our key partners to
address the challenges presented to us. As examples:
-- LGfL we have accelerated Freedom2 Roam that enables Schools
to work remotely, a service used by over 200,000 teachers and
900,000 pupils, which has been praised by one School as "probably
been the biggest single godsend".
-- Avaya we have been able to provide free licences to help customers work remotely.
-- Microsoft Teams we have seen a substantial uptake, to facilitate video conferencing.
-- Pragma has worked with us to set up cloud telephony to
facilitate home working for private sector customers and doctors'
surgeries, and;
-- Gamma has rapidly increased Internet Protocol (IP)
internet-based call volume capabilities for our customers.
Trading Update, cash, net debt and liquidity
The Group has seen another strong year with further geographic
expansion into Yorkshire. The acquisition of Advanced Computer
Systems in Doncaster in April 2019 has gone well and our previous
acquisition of ETS in Wakefield has now been integrated into the
Doncaster office.
We anticipate that:
-- Sales and EBITDA* will be in line with market expectations of
a 19% and 13% rise year-on-year respectively
-- Our cash position at year end was GBP12m. Our revolving
credit facility contains sufficient liquidity to operate
effectively under all scenarios we have modelled.
-- Net debt of GBP28m at year end is GBP3m below market
expectations; primarily as a result of the share placing in
February 2020 offset by several public sector organisations
extending credit collection across year end absorbing more than
GBP0.5m working capital.
-- The Board has in the interests of prudence resolved to cancel
the GBP1.2m interim dividend due for payment in April 2020.
-- Given the current economic uncertainty due to Covid-19, it is
possible that we may not pay a final dividend in respect of the
year ending 31 March 2020. The Board will review the position with
the finalisation of the results for the year ending 31 March
2020.
* Earnings before interest, tax, depreciation, amortisation and
excluding one off acquisition and restructuring costs and share
based payments
Stress Testing our Financial Model
Immediately following the escalation of the Coronavirus crisis,
we have conducted several stress test scenarios to understand the
potential impact on our sales revenue, profitability and cash
position over the coming year. Our stress tests assume that the
next six months will see the most significant impact after which
the Covid-19 outbreak will start to be under control.
Of course, these are early days, so we will constantly monitor
the realism of this assumption. Our general approach is one of
prudence and caution.
We have identified the following key variables and have modelled
the following variances:
Variable Coronavirus Impact
New order volumes it is unlikely companies will order major
contracts until such time stability returns
and reduced order volumes are anticipated
in the next 9 months
-------------------------------------------------
Installation times increase as people are not on-site to commission
and accept equipment
-------------------------------------------------
Credit collection are extended in the next 6 months
periods
-------------------------------------------------
Churn increases as some customers shrink and others
sadly go out of business
-------------------------------------------------
Under the stress test scenario the business remains profitable
and cash generative. This demonstrates the strength of our business
model with approximately 75% recurring revenues, a mix of public
and private sector business, and minimal capital expenditure.
We will use all the tools available to us to reduce cost and
cash outflows where appropriate. These include, but are not limited
to:
-- Cancellation of the interim dividend payment
-- Pausing any acquisition activity
-- A pay and recruitment freeze
-- Replacement of overtime payments with time in lieu to be taken when activity quietens down
These stress tests do not assume any direct Government support,
but we will seek to use any schemes that are available. For
example, the Government has announced that there will be no VAT
payments in the next quarter, but this must be caught up by the end
of the 2020/21 tax year. The impact of this is to move
approximately GBP1.3m of VAT payment from Q1 to Q4 for the
financial year ending March 2021.
Given the ongoing uncertainty regarding the duration of the
Covid-19 outbreak, the Board is unable to provide guidance for the
year ending 31 March 2021 at this time.
Revolving Credit Facility Covenants
We have an excellent relationship with both of our senior
lending providers and have had positive discussions with them about
the current economic challenges resulting from Covid-19. Our
discussions have been encouraging and early indications suggest
they would agree to a covenant waiver or extension, if
required.
Board Appointment
Roger Wilson had originally planned to retire from the Board at
the end of March 2020. He has agreed to postpone his retirement for
six months.
We are pleased to announce that our Chief Operating Officer,
Andy Lovett, has been appointed to the Board with immediate
effect.
Andy joined AdEPT as COO in June 2019. He has significant
experience in running the operational side of businesses spanning;
software development, IT outsource, and mission critical client
projects. Andy has a wealth of highly relevant skills having
previously worked in senior roles for Banking software company DPR
and global outsourcer Xchanging.
The following details in relation to the appointment of Paul
Andrew Lovett, aged 49, are disclosed in accordance with Schedule
2(g) of the AIM Rules:
Current directorships Past directorships held within
the last five years
None San Residential Properties Limited
-----------------------------------
Andy has 100,000 options over ordinary shares in the Company at
an exercise price of 355 pence. These options were issued under the
Company's Unapproved Share Option Scheme 2019.
There are no other disclosures in accordance with Schedule 2(g)
of the AIM Rules.
Life after the virus
We are convinced that we are well-positioned to survive the
economic challenges of the Coronavirus.
This crisis has revealed the critical nature of communications,
technology and the reliance on high performance and reliable
networks. In the near term (post Covid-19) we hope to show that our
IT and unified communications managed services are critical to the
survival of any organisation and need to be up-to-date and
performant.
We doubt that the world of work will return completely to 'as it
was before', indeed we anticipate a 'new normal' where remote
working is more prevalent - increasing the dependence on effective,
unified communication, highly resilient networks and cloud
technology. This is what we do, it's our mission "uniting
technology, inspiring people". In conclusion, we expect to be well
placed to address the changed demands that arise.
We will give another trading update with the final results for
the year ended 31 March 2020 which are expected to be announced in
July 2020.
Ian Fishwick, Chairman
Enquiries:
AdEPT Technology Group Plc
Ian Fishwick, Chairman 07720 555 050
Phil Race, Chief Executive 07798 575 338
John Swaite, Finance Director 01892 550 243
Cantor Fitzgerald Europe
Nominated Adviser & Broker
Phil Davies / Will Goode 020 7894 7000
About AdEPT Technology Group plc:
AdEPT Technology Group plc is one of the UK's leading
independent providers of managed services for IT, unified
communications, connectivity and voice solutions. AdEPT's tailored
services are used by thousands of customers across the UK and are
brought together through the strategic relationships with tier-1
suppliers such as Openreach, Vodafone, Virgin Media, Avaya,
Microsoft, Dell and Apple.
AdEPT is listed on the London Stock Exchange (Ticker: ADT). For
further information please visit: www.adept.co.uk
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END
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