AIM-listed communications managed service provider AdEPT has reported a decent increase in sales and profits for its year-ending 31 March 2020 in an interim statement, but warned of operational cutbacks at the company going forward as a result of the pandemic. The government has confirmed that all of AdEPT's employees are key workers, to enable them to continue to manage communications contracts in the public and private sector.
Ian Fishwick (pictured), AdEPT chairman, said: “All our employees have moved seamlessly to working remotely using our Office 365, Microsoft Teams and Avaya IX technologies (AdEPT is an Avaya Diamond Partner).
“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.”
Turnover is roughly 45% public sector - across the NHS, education and government - and 55% commercial across thousands of customers.
As well as using Avaya unified communications and collaboration systems to support customers, the company says it has seen a “substantial uptake” in the solutions it provides around Microsoft Teams.
In addition, partner Pragma has worked with the firm to set up cloud telephony to facilitate home working for private sector customers and doctors’ surgeries, and Gamma has been used to rapidly increase internet-based call volume capabilities for customers.
Fishwick said the Kent-headquartered group has seen “another strong year” with further geographic expansion into Yorkshire. The acquisition of Advanced Computer Systems in Doncaster, South Yorkshire in April 2019 has “gone well”, and the previous acquisition of ETS in Wakefield, West Yorkshire has now been integrated into the Doncaster office.
He said sales and EBITDA will be “in line with market expectations”, with sales up 19% and EBITDA rising 13% year-on-year.
Net debt of £28m at year-end is £3m below market expectations, he said, primarily as a result of a share placing in February 2020.
The board has “in the interests of prudence” cancelled the £1.2m 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,” Fishwick said.
Following the escalation of the coronavirus crisis, the company conducted several “stress test scenarios” to understand the potential impact on 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,” Fishwick said.
AdEPT says it is now unlikely companies will place major contracts until stability returns and reduced order volumes are anticipated in the next nine months. Installation times will also increase as people are not on-site to commission and accept equipment, and credit collection periods will be extended in the next six months. There will also be a churn increase as “some customers shrink and others go out of business”.
But AdEPT says its 75% of recurring revenues, a mix of public and private sector business and minimal capital expenditure will help it stay operationally profitable.
Fishwick said: “We will use all the tools available to us to reduce cost and cash outflows where appropriate, including pausing any acquisition activity, a pay and recruitment freeze and a replacement of overtime payments with time off in lieu.”
The audited final results for the year are expected to be announced in July 2020.
