TIDMADT
RNS Number : 5511H
AdEPT Technology Group PLC
07 April 2022
7 April 2022
The information contained within this announcement is deemed by
the Company to constitute inside information pursuant to Article 7
of EU Regulation 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 as amended.
ADEPT TECHNOLOGY GROUP PLC
("AdEPT" or the "Company" or the "Group")
Trading and Strategy Update and Online Investor Events
AdEPT (AIM: ADT), one of the UK's leading independent providers
of managed services for cloud, digital platforms, unified
communications, and connectivity solutions, is pleased to announce
a trading and strategy update.
The Board is pleased to report a strong finish to the financial
year ended 31 March 2022 ("FY22" or the "Period"), in terms of
order intake, and that it expects the Group revenue and adjusted
EBITDA for the Period to be broadly in line with current market
forecasts.
Following a strategic review of the business, undertaken during
the Period, the Board considers the Group to be ideally placed to
capitalise on its market position and focus on the organic growth
opportunities available.
The Group's audited Final Results for FY22 are expected to be
announced in July 2022.
Trading Update
This resilient FY22 performance has been delivered despite the
challenges which have arisen from the enduring pandemic, which
continued to impact during the Period, and in particular the
subsequent supply chain disruption caused by electronic chip
shortages, which delayed and continues to delay the delivery of
projects dependent on hardware.
We are delighted to report that the Group added over 100 new
customers in the Period with customer demand steadily gaining
momentum to deliver markedly stronger order intake in the last four
months of FY22. New customer wins demonstrate AdEPT's ability to
attract respected organisations, such as; the Multi-Academy Trust
the Co-op, Rolls Royce (won via a new partnership with Canon), the
TUC and fast-growing automated payment management provider,
Soldo.
The demand for the digitisation of organisations continues,
which is driving the success of AdEPT's cloud centric services,
with increasing revenues through the deployment of; managed
networks, Microsoft solutions, cloud communications and services
relating to cyber security.
During FY22, AdEPT used its senior debt facility to fund the
Datrix acquisition; and post the initial consideration payment we
have repaid GBP4.4m of the loan facility, leaving senior net debt
as at 31 March 2022 at GBP29.3m, which is above expectations. This
variance is largely attributable to:
a) One-off professional fees relating to an in-depth strategic
review;
b) The acceleration of Project Fusion which has enabled further,
earlier than originally anticipated, divisional consolidation
which resulted in one-off costs; and
c) The advance purchase of hardware, to reduce the impact of
inflation and minimize supply chain challenges on customer
projects.
The Datrix earnout is due to be paid post-year end and is
estimated at between GBP4-4.8m.
Strategic Review
During FY22, we undertook an in-depth strategic review with the
support of EY Parthenon, exploring; market requirements, customer
sentiment, our ability to capture market opportunity, operational
capability, and the richness of the AdEPT portfolio.
This extensive research revealed a number of reassuring data
points:
-- A large market: The UK Core Addressable Market (CAM(1)
) for AdEPT services is GBP11bn.
-- With fast growth: The high growth parts of this marketplace,
namely cloud services (c. 15% CAGR), are being fueled by
the growth in public cloud hosted Infrastructure as a Service
(IaaS), Software as a Service (SaaS), and cyber security
(CAGR of 9%).
The report highlighted six macro trends that are driving demand
for AdEPT's services:
-- Changing pattern of demand: The high growth in overall
Small to Medium Business (SMB) traffic and data usage, driven
by increased adoption of new, cloud-hosted services and
growing popularity of 'as a Service models' (XaaS), provides
upsell and wrap around service opportunities for AdEPT;
-- Covid-19 long-term impact: The increased proportion of
SMB employees adopting hybrid / remote working patterns
post COVID-19 will lead to sustained reliance on cloud and
collaboration tools to enable remote working for a distributed
workforce, driving Unified Communication (UC) / Voice over
Internet Protocol (VoIP) adoption, as well as adoption of
higher specification connectivity;
-- Convergence of Telecom and IT infrastructure capabilities:
There is a growing convergence of telecoms, IT services
and infrastructure, with data, voice and applications shifting
to the internet, creating convergence among different types
of providers and distribution channels and an opportunity
to cross-sell services;
-- Next gen technologies (FTTP, 5G): Large Internet Service
Providers (ISPs) and Alternative Network Providers (AltNets)
are rolling out Fibre to the Premise (FTTP) at an accelerated
pace, which drives revenue and margin as customers shift
to newer technologies; 5G is being rolled-out rapidly and
is expected to drive a surge in the sales of 5G-enabled
handsets and data network services;
-- Growing SMB segment: AdEPT has a great presence across
SMBs, a sector that has shown a strong rebound in company
birth rates post-recessions that will drive demand. SMBs
are the fastest growing segment of the IT services market,
as a result of increased outsourcing, and are expected to
bounce back as they did post the 2008-09 financial crisis;
and
-- BT/Openreach's announcement of PSTN / ISDN switch-off by
2025: This will accelerate the migration to VoIP as well
as drive higher demand for broadband connections as businesses
move to unified communications.
(1) CAM is defined as total UK spend by SMBs in the corporate
sector (<250 FTE) and all organisations in the public sector on
AdEPT's core product offerings (e.g., hosted cloud, voice and
connectivity but excludes non-core offerings like IaaS) in regions
of the country in which AdEPT has a strong presence (so, excludes
Scotland, North England and Northern Ireland)
This review provides a wealth of information and reflects
AdEPT's journey over recent years from; the creation of a firm
foundation, to the diversification into ICT through acquisition,
through to consolidation to bring core operational strength.
The strategy, resulting from this review, is to build upon the
following three pillars going forward, all with the express intent
of delivering stakeholder value.
a) Pillar one - Focus on organic growth. The Group's strategy
to date has been to consolidate a fragmented market through
debt-funded acquisitions. This enabled AdEPT to become a
fully capable, cloud centric, managed services business;
with a highly skilled workforce and the ability to wrap
solutions with consulting expertise to keep customers up
to date with the fast-changing market requirements.
The strategy review confirmed that, following the recent
successful acquisition of Datrix, AdEPT now has the capability
to capture a significant 'share of wallet' from our customers
due to our full portfolio of products and services, supported
by our strategic partners, delivered by the wealth of talent
within the business.
The Board is agreed that the Group is now ideally placed
to capitalise on its market position and focus on the organic
growth opportunities available.
b) Pillar two - Structure for success. With the recent removal
of all COVID restrictions across England, AdEPT has now
adopted a full-flex working model, powered by the One AdEPT
platform, delivered by Project Fusion. An initiative to
integrate a collection of commercially available off the
shelf systems (COTS) for use by all employees, who can now
take advantage of a single set of operational and financial
applications wherever they reside. This platform has created
a foundation for greater operational efficiency, cross-selling
and operational insight.
The success of One AdEPT has enabled AdEPT to accelerate
cost reductions arising from divisional and management consolidation,
with the AdEPT Group transitioning from five divisions at
the beginning of FY21 to two as we move into FY23 reflecting
our geographical and market focus: AdEPT North & Education,
and AdEPT South & Healthcare.
Meanwhile Datrix, acquired in April 2021, completes its
earnout period on the 31 March 2022 and is now fully integrated
into the AdEPT South & Healthcare Division.
c) Pillar three - Reduce gearing. The Group has a historically
low capital expenditure requirement and a proven ability
to generate free cash flow. The strategic objective of achieving
organic growth creates the opportunity to focus on decreasing
debt, with the plan to reduce the Group's EBITDA: Senior
Net Debt ratio to below 2x.
Performance of Datrix
Datrix has proven to be a great success, with the team securing
significant projects with organisations such as; Nottinghamshire
County Council, the Royal Surrey County Hospital, Public Health
England, Trident and Selwood Housing.
The solutions being deployed by this team encompass SD-WAN /
SASE(2) , a marketplace that widely respected analyst IDC expects
to grow through 2025 at a compound annual growth rate of 18.9%(3)
.
(2) SD-WAN is software defined wide area networks, that allows
highly effective and simply monitored deployments of networks,
whilst SASE is a cloud platform for providing security at the edge
of the network.
(3) IDC MarketScape: Worldwide SD-WAN Infrastructure 2021 -
Vendor Assessment
Director change - Non-Executive Director
The Board recognises the importance of, and is committed to,
ensuring that proper standards of sound Corporate Governance
operate throughout the Company. Accordingly, the Group is committed
to compliance with the provisions of the QCA Corporate Governance
Code published by the Quoted Companies Alliance.
As part of an ongoing review of AdEPT Board practices, the Board
acknowledges the guidance to retain Independent Non-Executive
Directors with an appropriate length of service.
As a consequence of this review, AdEPT announces the retirement
today of Roger Wilson as a Non-Executive Director from the Board.
Roger has been a valued member of the AdEPT Board for 19 years,
including in the role as Chairman for many years.
Ian Fishwick, Chairman of AdEPT, said:
"It has been an absolute delight to work with Roger for so many
years. He has been an integral part of the company and a mentor to
many of the Board during his time with AdEPT holding the post of
Chairman for many years. We wish Roger every success in his
retirement and thank him for his wise counsel and outstanding
contribution."
Environmental, Social and Governance ("ESG")
On 31 March 2022, the AdEPT team now totals 340. This talented
and diverse team, strengthened by the acquisition of Datrix, is
enabling us to achieve increasingly high levels of customer
satisfaction and product penetration.
AdEPT is committed to ensuring diversity, equity, and
inclusivity. We have a team from diverse backgrounds and genders,
and we continue to foster balance and promote equal opportunities.
This mix of skill sets, experience, and backgrounds enables us to
perform better.
We have recently undertaken our second Gender Pay Gap Report
which showed modest positive progress, however, like many
businesses in our sector, this highlights the challenges of hiring
women into senior roles. We will use the report and work with our
staff and stakeholders to shape policies that ensure an appropriate
gender balance.
AdEPT has a social conscience, and the Board is focused on
making the world a better place both for current generations and
those of the future. AdEPT has updated the inaugural 17-point plan
published during the Summer of 2021 and has made positive progress
in advancing our position across each of the three pillars of i)
Environmental Responsibility, ii) Social Responsibility, and iii)
Governance.
This updated plan can be found on our website:
Adept - Investor Relations Website
(adept-technology-group.co.uk)
Outlook
The macro environment of; inflationary pressures, the conflict
in the Ukraine, continued supply chain challenges and the
uncertainty of COVID cannot be ignored when considering the outlook
for AdEPT. Furthermore, there will be the unavoidable additional
operating cost of the 1.25% increase in National Insurance
Contributions due to the Health & Social Care levy.
However, AdEPT is an efficient and well invested business, and
the Board remains confident in the long-term market opportunity
presented by the growing demand for technology in all its
guises.
Our confidence is underpinned by; the Group's sales order
successes in the latter part of FY22, the breadth of capability now
within AdEPT following recent acquisitions, and the operational
strength created by Project Fusion and the One AdEPT platform.
Ian Fishwick, Chairman of AdEPT, said:
"Our strategy to consolidate the fragmented market in which we
operate has created a significant organisation serving many
customers. AdEPT is now a strong business with full capability and
is well placed to capitalise on the anticipated growth in its key
markets and capture increasing 'wallet share' in the ICT space.
I look forward to providing a further update on the Group's
progress in the Final Results in July 2022."
Phil Race, Chief Executive Officer of AdEPT, added:
"The UK is gradually emerging from the challenges of COVID and
the constraints of lockdown and has witnessed changes to working
patterns coupled with the demand for secure digital services in all
its guises. We cannot ignore the macro environmental challenges;
however, AdEPT anticipates that demand will rise as our prospects
and clients assess their long-term ICT requirements - the strategic
study undertaken during the period provides ample evidence of
demand for; implementing and integrating cloud-centric
technologies, streamlining contact centres, deploying new
high-speed resilient networks, and adopting secure ICT platforms,
which protect against a myriad of cyber threats.
With its comprehensive portfolio of capabilities, its extensive
and strong industry partnerships, a number of flagship references
from across the public and private sector, all underpinned by the
One AdEPT platform, AdEPT is well placed to benefit from these
accelerated strategic IT investments.
Our mission remains 'uniting technology, inspiring people'. We
are optimistic for the future of the technology market, and in turn
for the prospects of AdEPT and our highly talented team."
Investor Events
Investor Meet Company
Phil Race, CEO, and John Swaite, CFO, will host a Q&A
session on the Investor Meet Company platform at 1.30pm BST on 11
April 2022. Questions may be submitted in advance via the Investor
Meet Company dashboard until 9am on 10 April 2022 or at any time
during the live event.
Access to the event is free:
https://www.investormeetcompany.com/adept-technology-group-plc/register-investor
. Investors who already follow AdEPT on the Investor Meet Company
platform will be invited automatically.
Mello Monday
Chairman, Ian Fishwick will join Phil and John to present at
Mello Monday on the evening of 11 April 2022. Anyone wishing to
join the event, held on Zoom, should register in advance at:
https://us06web.zoom.us/webinar/register/WN_0MO6avB0SkeyCxtYHoZqKQ
Enquiries:
AdEPT Technology Group Plc
Ian Fishwick, Chairman Tel: 07720 555 050
Phil Race, Chief Executive Tel: 07798 575 338
John Swaite, Finance Director Tel: 01892 550 243
Singer Capital Markets (Nominated
Adviser & Broker)
Shaun Dobson / Rachel Hayes / William Tel: 020 7496 3000
Goode
Belvedere Communications
Cat Valentine Tel: 07715 769 078
Keeley Clarke Tel: 07967 816 525
adeptpr@belvederepr.com
About AdEPT:
AdEPT is one of the UK's leading independent providers of
managed services for cloud, digital platforms, unified
communications, and connectivity 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 Microsoft, Openreach, Cato, Extreme Networks,
Virgin Media, Avaya, Dell, and Apple.
AdEPT is listed on the London Stock Exchange (AIM: ADT). For
further information please visit: www.adept.co.uk.
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END
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