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April 7, 2015

UPDATE - AdePT Telecom signals generous divi hike as cash rolls in


Adept Telecom (LON:ADT) said underlying profits (EBITDA) in the year just finished will be up year-on-year and in line with market expectations.

The voice and data telecommunications solutions provider said EBITDA in the year to 31 March is expected to be up 14% year-on-year when the numbers are finally totted up.

Adjusted profit before tax is anticipated to be up year-on-year and in line with market expectations, but turnover, while it is expected to be up 6% on the previous year, is set to be slightly below market expectations.

House broker Northland Capital Partners is predicting adjusted EBITDA of £4.5mln and adjusted pre-tax profit of £4.2mln on turnover of £21.9mln. With debt falling faster than expected, the broker now expects net debt at the end of March 2016 will be £1.2mln, having previously forecast debt of £1.8mlm.

On the plus side, the company’s debt situation is improving a lot faster than the market had been expecting on the back of consistently strong cash flow.

The reduction in net borrowings in the year of £1.4mln to £1.6mln was well ahead of expectations, paving the way for a generous increase in the final dividend to 2.5p from 1.5p the year before, making the full-year pay-out of 4.75p 58% higher than the previous year’s dividend of 3.0p.

The dividend hike is in addition to the proposed buyback of up to 2.21mln shares – around 15% of the shares in issue - announced in December, 2014.

Northland Capital reiterated its ‘buy’ recommendation, saying sector leading margins and strong cash conversion of profits remain features of AdEPT’s business model.

“This has enabled the company to reduce debt and fund acquisitions, a progressive dividend policy and a limited share repurchase programme,” the broker said.

“FY [full-year] trading in line with expectations that were upgraded with the interims in November with a welcome beat at the net debt and the final DPS [dividend] lines – net debt/EBITDA now stands at 0.4x,” Northland noted.

“In spite of this strong track record, the scope for further acquisitions in the fragmented reseller market and organic progress in the Public Sector market, the shares continue to trade at an unwarranted discount to other listed non-network owning communications companies,” the broker argued.

Shares in AdePT were up 6.0% at 153.65p in lunch-time trading. @MasterMetals MasterMetals Blog

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