Half Yearly Report

AdEPT Telecom plc

("AdEPT" or the "Company")

Interim results for the 6 months ended 30 September 2014

AdEPT, one of the UK's leading independent providers of award-winning landline voice and data connectivity telecommunications services, VoIP and mobile networks, announces its results for the 6 months ended 30 September 2014.

Highlights

· Total revenue increased by 11.3% to £11.3 million (2013: £10.2 million)

· EBITDA increased by 12.7% to £2.36 million (2013: £2.09 million)

· EBITDA margin increased to 20.8% (2013: 20.6%)

· Adjusted profit before tax increased by 13.9% to £2.2 million (2013: £1.9 million)

· Adjusted EPS increased by 12.2% to 8.38p (2013: 7.47p)

· Interim dividend increased by 50% to 2.25p per share (2013: 1.50p)

· Free cash flow increased by 29.1% to £2.2 million (2013: £1.7 million)

· Gearing down to 29% (2013: 38%)

· Net debt, after £2.1m acquisition payments, reduced by £0.7 million in the last 12 months to £3.2 million (2013: £3.9 million)

· Next generation services revenue increased by 29.0% to £3.0 million (2013: £2.4 million)

Business review

Total revenue increased by 11.3% through a combination of organic new contract wins, particularly in the public sector, and acquisitions. AdEPT is continuing to successfully make the transition from a traditional fixed line service provider to a complete communications integrator offering best of breed products from all major UK networks. Revenue from next generation services, including data connectivity, network solutions and cloud-based contact centre solutions increased by 29.0% to 26.8% of total revenue for the six months ended 30 September 2014 (September 2013: 23.2%). The demand for faster data connectivity speeds has continued and this is being achieved through a wider data connectivity service offering, including 10Gb, 40Gb and 100Gb Optical Spectrum Services (OSEA) data connectivity solutions under the Ja.Net framework for universities and colleges.

AdEPT has had continued success in the public sector space during the period winning a number of new contracts with councils within the public sector. Over the last 18 months AdEPT has been successful in gaining new contracts with more than 20 councils as a result of its various public sector framework agreements. In July 2014, the Company renewed the Ja.net framework agreement under which AdEPT is one of only a small number of companies approved to sell data connectivity and networks to UK universities and colleges. Shortly after the period end, in October 2014, the Eastern Shires Purchasing Organisation awarded AdEPT a two year extension to its sole supplier Telecom Framework to local government for calls, lines, broadband, super-fast broadband (fibre), data connectivity and SIP trunks. AdEPT is also an approved supplier under the Telephony Services Framework by Crown Commercial Service, the purchasing arm of the Cabinet Office. Approved supplier status under these framework agreements gives the Company authority to provide services to both local and central government bodies.

Financing

Free cash flow (cash generated from operations after interest) amounted to £2.2 million, representing an increase of 29.1% (September 2013: £1.7 million). £1.8 million of available funds was used to fund the initial cash consideration for the acquisition the issued share capital of Bluecherry Telecom Limited on 8 April 2014. These interim results include a full 6 month contribution from the acquisition of the entire issued share capital of Bluecherry Telecom Limited (further details are included in Note 6). In addition, a further £0.3 million was used to fund part of the deferred consideration in relation to the acquisition of certain trade and assets from Bluebell Telecom Limited which was announced on 6 August 2013.

Net debt and gearing

Net borrowings have been reduced by £0.7 million during the last 12 months, despite £2.1 million acquisition payments. Net borrowings at 30 September 2014 were £3.2 million (September 2013: £3.9 million).

This resulted in a reduction in gearing to 29% (September 2013: 38%).

Profit before and after tax

Adjusted profit before tax (adding back non-cash amortisation) increased by 13.9% to £2.2 million (September 2013: £1.9 million) arising entirely from the improved operating profit. Reported profit after tax increased by 11.9% to £0.8 million (2013: £0.7 million).

Earnings per share

Adjusted (basic) earnings per share has increased 12.2% to 8.38p for the six months ended 30 September 2014 (September 2013: 7.47p) as a result of the £0.27 million increase to EBITDA.

Dividends

The Directors have declared an interim dividend of 2.25p per Ordinary Share in respect of the year ending 31 March 2015, an increase of 50% over interim dividend for the comparative period (September 2013: 1.50p). This will absorb approximately £0.50 million of shareholders' funds (September 2013: £0.32 million). It is proposed by the Directors that this dividend will be paid on 10 April 2015 to shareholders who are on the register of members on the record date of 20 March 2015. Subject to the audited results for the year ending 31 March 2015, it is the intention of the Board to look to propose a final dividend with the March 2015 final results.

Strong free cash flow generation has continued since the end of the period, so there continues to be considerable scope for the Board to continue its progressive future dividend policy.

Outlook

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.

Roger Wilson

Chairman

11 November 2014

Enquiries:

AdEPT Telecom

Roger Wilson, Chairman 07786 111535

Ian Fishwick, Chief Executive 01892 550225

John Swaite, Finance Director 01892 550243

Northland Capital Partners Limited 020 7382 1100

Nominated Adviser

Edward Hutton/Lauren Kettle

Broking

John Howes/Alice Lane

UNAUDITED STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED STATEMENT OF FINANCIAL POSITION

UNAUDITED STATEMENT OF CHANGES IN EQUITY

UNAUDITED STATEMENT OF CASH FLOWS

ACCOUNTING POLICIES

1 Basis of preparation

The financial information set out in this interim report which has not been audited, does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006. The Company's statutory financial statements for the year ended 31 March 2014, prepared under International Financial Reporting Standards, were approved by the board of directors on 7 July 2014 and have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified, did not contain any emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the EU. Comparatives for the year ended 31 March 2014 have been extracted from the audited statutory accounts.

2 Accounting policies

The same accounting policies, presentation and methods of computation are followed in this interim report as were applied in the preparation of the Company's annual financial statements for the year ended 31 March 2014.

3 Earnings per share

Earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue.

Adjusted earnings per share is calculated by dividing the profit attributable to equity holders of the Company (after adding back amortisation) by the weighted average number of ordinary shares in issue.

Fully diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares by existing share options, assuming dilution through conversion of all existing options.

4 Segmental information

The chief operating decision maker has been identified as the Board. The Board reviews the Company's internal reporting in order to assess performance and allocate resources. The operating segments are fixed line services and next generation services, which incorporates cloud-based contact centre solutions, data connectivity, mobile and VoIP services, these are reported in a manner consistent with the internal reporting to the Board. The Board assesses the performance of the operating segments based on revenue, gross profit and EBITDA.

The assets and liabilities relating to the above segments have not been disclosed as they are not separately identifiable and are not used by the chief operating decision maker to allocate resources. All segments are in the UK and all revenue relates to the UK. Transactions with the largest customer of the Company comprise less than 10% of total turnover and do not require disclosure for either 2014 or 2015.

5 Share options

Details of the share options outstanding during the period are as follows:

The weighted average fair values have been determined using the Black-Scholes-Merton Pricing Model with the following assumptions and inputs:

The expected average volatility was determined by reviewing the last 65 historical fluctuations in the share price prior to the grant date of each share instrument. An expected take up of 100% has been applied to each share instrument. Expected dividend yield is estimated at 2.0% which is based upon the actual dividend yield for the period ended 30 September 2014. It does not bear any relation to the future dividend policy of AdEPT Telecom plc.

The mid-market price of the ordinary shares on 30 September 2014 was 119p and the range during the period was 35p.

The share option expense recognised during the period in the statement of comprehensive income was (£2,462) (September 2013: £4,494).

6 Business combinations

On 8 April 2014 the Company acquired the entire issued share capital of Bluecherry Telecom Limited for an initial cash consideration of £1.8m plus the value of the net assets at completion (£0.25m and being represented by cash). Further consideration of between £0.2m and £0.75m will be payable, also in cash, dependent upon performance of the contracts acquired during the year ending 30 April 2015. Bluecherry Telecom Limited, based in Milton Keynes, was a supplier of fixed line calls, line rental and data connectivity products to small and medium-sized businesses. The acquisition forms part of the Company's strategy as the acquired customer base complements that of AdEPT and provides cross-selling opportunities.

Management of the customer contracts was transferred to AdEPT's office in Tunbridge Wells, Kent during April 2014. Acquisition related costs of £21,228 have been recognised as an expense in the statement of comprehensive income for the period ended 30 September 2014. Bluecherry Telecom Limited contributed revenue and profit (after acquisition and financing costs) of £0.6 million and £0.15 million respectively in the statement of comprehensive income for the period ended 30 September 2014. A fair value of £2.1 million in relation to the customer contracts for the acquired business has been recognised as intangible asset additions in the period ended 30 September 2014. No other assets or liabilities were acquired.