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UPDATE - AdEPT Telecom hails renewal from largest customer

Last updated: 09:43 04 Nov 2014 EST, First published: 10:43 04 Nov 2014 EST

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AdEPT Telecom (LON:ADT), one of the UK’s leaders in voice and data services, confirmed its largest customer has renewed for another three years.

The value of the contract with the unnamed business is put at £2.2mln. To put that into context, in the year to end-March 2014, AdEPT’s revenue totalled £20.8mln.

Chief executive Ian Fishwick told investors: "This is the third time that our largest customer has renewed their contract and it will extend our relationship to nine years.

“Our largest customer has over 400 sites across the UK and this renewal is great testament to the fantastic level of service that we offer our multiple site customers."

Speaking to Proactive Investors, Fishwick described the renewal as "incredibly good news" and said the fact of the renewal was almost more important than the actual money it will bring in, as it is a “huge testament to the quality of what we’ve been doing”.

Half-year from the company are due out next Tuesday (November 11) so he could not comment about current trading, but he did draw attention to the fact that a couple of major framework agreements in the public sector had also been renewed with AdEPT in the last few months.

“Frameworks are much more important to us than individual tenders,” Fishwick proclaimed, before going on to explain that frameworks essentially identify approved government procurement organisations that government agencies can buy from, without having to go through the hassle of putting a contract out for tender.

Last month AdEPT was awarded an extension to the public sector telecom framework it has with the Eastern Shires Purchasing Organisation (ESPO) to the end of October 2016.

AdEPT Telecom is also one of the few companies approved under a Joint Academic Network (better known as JANET, a kind of forerunner to the Internet) framework agreement to sell data connectivity and multi-site data network solutions to UK colleges and universities, and that framework was also recently renewed.

Fishwick said the renewals “set things solid in terms of strategy for the next two years”.

Shares in AdEPT were up 7.4% at 124p in mid-morning afternoon trade, but house broker Northland sees plenty more upside, and has a price target of 165p.

“The contract renewal is testament to the strength of AdEPT’s multi-site offering as well as the diversified nature of the business – the largest customer accounts for c. 3% of revenue,” Northland’s David Johnson noted.

“Shares have strengthened marginally off the recent lows but the current rating is very undemanding at 8.8x FY15 EPS [full year 2015 earnings per share] coupled with the support of the dividend (3.5% yield this year and 4.3% next). The discount to the rest of the sector has reopened in spite of consistently good performance with both acquisitions and organic growth in the Public Sector,” Johnson said, reiterating his ‘buy’ recommendation.

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