My review of yesterday's interim results:

AdEPT Telecom (Market capitalisation; £26.5m, 120p and 3.5% of JIC Portfolio): interim results for the six months ended 30th September show a 11.3% jump in revenue to £11.3m, a 12.7% increase in EBITDA to £2.4m, a 13.9% increase in adjusted pre-tax profits to £2.2m and a 12.2% increase in adjusted earnings per share to 8.38p. It generated £2.2m of free cash flow, up 29.1% from 2013,  and reduced net debt by £0.7m to £3.2m despite spending £2.1m on acquisitions; £1.8m for Bluecherry Telecom, (which added £0.6m revenue and £0.15m profit), and £0.3m deferred consideration for Bluebell Telecom and £0.3m on dividends. Overall gearing was reduced to 29% from 38%. Lastly it increased the interim dividend by 50% and looks to be on course to pay its broker's target of 4.5p for the full year. On the outlook and dividend it says “this has been an excellent 6 months with improved results in all key areas. We continue to be highly cash generative and there is considerable scope for a progressive dividend policy whilst continuing to identify and integrate earnings-enhancing acquisitions."

Revenue split is now 26.3% from calls, down from 31.2% in 2013, which has seen pricing pressure in recent years due to lower volumes and regulatory changes. It is however still a decent margin area requiring no cap-ex and the regulatory environment for the next three years is expected to be more benign. Lines account for 46.9%, up from 45.6%, and whereas lines traditionally just carried calls they are now increasingly used for broadband, IP-CCTV, Alarms, PDQ machines and Faxes. Lastly network solutions, a higher margin, added value part of the business, accounted for 26.8% of revenue, up from 23.2% driven by demand for next generation services.

It has had great success on the new business front especially in the public sector where in October, the ESPO Framework was extended for two years under which it is the sole approved supplier of calls, lines, broadband, fibre broadband, super-fast internet access and SIP to the Public Sector and registered charities nationwide. In July the JANET framework was extended for four years where it is one of a small number of companies approved to sell data connectivity to UK Colleges and Universities. They must be doing something right to gain extensions to both these framework agreements. The importance of these frameworks can be seen in its new business wins…

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