AdEPT Technology trades in line in first quarter

Managed IT services provider AdEPT reported a “positive start” to the year on Thursday, with current trading in line with its expectations.

The AIM-traded firm, which was holding its annual general meeting, said organic growth had delivered improvements in recurring revenues for cloud-centric services both ahead of the first quarter of 2021, and also the fourth quarter, which saw more normal business activity following the disruption caused by the Covid-19 pandemic.

Revenues in one-off services were also ahead of the first quarter of 2021, with demand for technology products returning.

“We are also seeing an encouraging trend of repeated business from existing clients for their one-off purchases,” the board said in its statement.

“The well documented supply issues caused by the global chip shortage has the potential to delay the delivery of some products and associated services, but we are working closely with our partners to mitigate supply chain delays where possible.

“Given the Covid-19-driven focus on working from home during the first half of 2021, the increased decline in traditional telephony revenues is as expected and is unlikely to stabilise until employees return more fully to onsite working.”

That area now accounted for 12% of the group's total revenues, reflecting its strategy to grow in other products and services to mitigate the decline in the area.

Cash generation in the first quarter of the 2022 financial year was “strong”, with the group generating £2.5m of operating cash flow, representing cash conversion of 96%.

Strong cash flows and the group's new banking facility, signed in March, were employed to fund the acquisition of Datrix in April.

Net cash outflow in the quarter was £7.5m, and following those movements, the net debt at the end of the first quarter stood at £32.0m, widening from £25.6m at the end of the 2021 financial year.

“AdEPT's primary focus remains the delivery of strong organic growth, harnessing the overall market shift to cloud centric solutions,” the board said of its outlook.

“In parallel, we will seek opportunities to consolidate the fragmented ICT market further, through complementary acquisitions which generate strong levels of recurring revenue and margin.

“The board is pleased to report a positive start to the year with the group trading in line with its expectations in the first four months of the financial year ending 31 March.”

AdEPT’s directors said their priority for the next six months would be to pay down debt, adding that they would review the firm’s dividend policy at year-end.

The company was planning to announce its half-year results for the six months ending 30 September in mid-November.

At 1220 BST, shares in AdEPT Technology Group were down 1.08% at 283.9p.