(formerly AdEPT GB Limited) March 2006 ANNUAL REPORT€¦ · Chairman's statement 1 - 2 Financial highlights 3 Finance Director’s report 4 - 5 ... Award winning Customer Service

AdEPT Telecom plc

(formerly AdEPT GB Limited)

March 2006ANNUAL REPORT

COMPANY REGISTRATION NO. 4682431

MISSION STATEMENT

“ One daywe will be widely acknowledged

as the most professional Telecom Resellerin the UK ”

OfficialTelecomPartner

of the

ProfessionalFootballersAssociation

INDEX TO THE ANNUAL REPORT

Page

Chairman's statement 1 - 2

Financial highlights 3

Finance Director’s report 4 - 5

Directors and advisors 6 - 7

Directors' report 8 - 10

Corporate governance 11

Auditors' report 12

Consolidated profit and loss account 13

Consolidated balance sheet 14

Company balance sheet 15

Consolidated cash flow statement 16

Notes forming part of the financial statements 17 - 29

Notice of AGM 30

March 2006 Annual Report - Page 1

we are ... faces not numbers ... and so are you

Chairman’sStatement

Roger WilsonChairman

It is with great pleasure that I announceour maiden annual results following thecompany's successful admission to theAlternative Investment Market ("AIM") inFebruary 2006.

For the year ended 31 March 2006 AdEPTTelecom plc ("AdEPT") delivered anotherstrong trading performance with turnoverincreasing by 33% to £11.5 million drivenby the acquisitions made during the year.

This led to EBITDA increasing nearlytwofold to £1.9 million reflecting our abilityto integrate the acquired businesseswithout significantly increasing our costbase.

At the time of our admission to AIM, wesuccessfully raised £8.2 million which wehave used to repay debt and fund theacquisitions.

AdEPT currently has positive cash balancesof £205k.

It is the board of director's ("the Board's"),intention to pay dividends in the future;however, we have paid an interim dividendpre flotation but have not declared a finaldividend for this financial year and will usethe surplus funds to further grow thebusiness.

Growth Strategy

AdEPT is ideally positioned to continue togrow rapidly through acquisition. Thebusiness was established to be aconsolidator of the highly fragmented UKfixed line reseller sector which is estimatedto include approximately 1,000 mostlysmaller telecom businesses.

To date AdEPT has acquired 13 competitorsand/or their customer bases of which thefour listed below were completed in theperiod under review:

1. Call Options July 20052. Talk Direct Aug 20053. Transglobal Feb 20064. Admiral Managed Networks

March 2006

Completion of these acquisitions wasparticularly pleasing given that we alsofloated AdEPT on AIM in February 2006.

In the current financial year, AdEPT hascompleted the acquisition of 10,000business customers from Fizz Telecom inMay 2006, making a total of threeacquisitions within four months of theflotation.

A critical part of our acquisition strategy isthe ability to integrate the acquiredcustomer bases into AdEPT's systemswithin 6 weeks. Each of the acquisitionsreferred to above were integrated withinthis timeframe. Rapid integration intoAdEPT's automated back office systemssignificantly enhances the profitability ofthe acquired customer bases.

Review of Operations

We are fast achieving our strategic aim ofmaking our customer base more stable bymoving away from lower spending, higherchurn residential customers to focus onsmall business customers.

In the year to 31 March 2006, 67% ofgroup revenues were derived from businesscustomers compared to 37% 12 monthsearlier. However looking at the full yearunderstates the extent of the changethroughout the year. This is bestdemonstrated by comparing March 2005with March 2006: Business revenues in

March 2005 were £372k (46% of the £808ktotal monthly sales).

In March 2006 Businessrevenue had risen to £1,345k(83% of the £1,620k totalmonthly sales).

This reversal of customer focus has beendriven by the recent acquisitions all ofwhich have been focused on businesscustomers. As AdEPT continues to makefurther acquisitions we expect this trend toaccelerate.

Business customershistorically churn lessfrequently than residentialcustomers.

This change in customer mix will thereforealso increase the stability of our customerbase.

Around 70% of our business customersnow take line rental and this has theimpact of both increasing revenue andreducing churn as customers are tied in onlong term contracts. Growing line rentalrevenues has been a key objective and weare delighted to report line rental revenuesincreased dramatically to £1.3 million compared to £43k in the prior year.

Award winning CustomerService

Our commitment to the highest standardsof customer service has been recognisedwith a number of awards in the year:

Winner Best Customer Service (any industry) in Kent 2005

Winner Best New Business in Kent 2005



Finalist UK Telecom Reseller of the Year 2006

As a company we are immensely proud ofthe track record we have created in arelatively short period of time. Our successis a result of the efforts of all ouremployees and on behalf of the Board Iwould like to take this opportunity to thankthem for all their hard work.

Non-Executive appointments

Since the year-end we have furtherstrengthened the Board of Directors withthe appointment of two more, highlyexperienced Non-Executive Directors - MarkPalios and Ted Williams.

Mark Palios was formerly Chief Executive ofthe Football Association; widely creditedwith the £800m financing of WembleyStadium.

Ted Williams was until recently anExecutive Director of Schroders and hasmanaged several billion pound funds over a28 year career in the City.

Outlook

Looking ahead, AdEPT will continue itsstrategy of acquiring businesses which willbe earnings enhancing. The currentfinancial year has started well with linerental and call revenues significantly aheadof last year.

We will benefit for the first time from thefull year impact of the four acquisitionsmade in 2005/6 along with revenues fromFizz Telecom's customer base acquired inMay 2006.

Our EBITDA has grown for 11 consecutivequarters. The outlook therefore looks verypositive with both revenue and profitabilityexpected to grow substantially.

Roger WilsonChairman

7 September 2006

Every call will be answered bya human being ...

We will never use robotic call trees, withpress 1 for this, press 2 for that, press 9for complete frustration



Financial highlightsTurnover

up 33 % to £11.5m (2005: £8.7m)

Earnings Before Interest, Tax, & Amortisation of goodwill(EBITA)

up 87% to £1.9m (2005: £1.0m)

Profit after tax*

up 92 % to £1.13m (2005: £0.59m)

Earnings per share*

up 82% to 7.09p (2005: 3.90p)

Gearing

At 31st March 2006 the company had no debt

*based on Profit after Tax add back amortisation of goodwill

33%

87%

92%

82%



FinanceDirector’sReport

Tim HollandFinance Director

REVENUE in 2006 increased by 33% to£11.5m (2005 £8.7m) with growth derivedfrom the 4 acquisitions completed duringthe year. There was a substantial changein the customer base and as a result, 67%of revenue was derived from businesscustomers. The introduction of line rentalin March 2005 has had a marked impactand now represents about 18% of thebusiness customer revenue.

GROSS MARGIN has increased to 40.4%(2005 34.8%) as we have negotiatedimproved rates from our network partners.This is particularly pleasing as grossmargins on line rental are lower than calls.

ADMINISTRATION COSTS haveincreased to £2.8m but remain at 24% ofrevenue. These costs will increase as aresult of our joining AIM and expanding theboard, however we will seek to continue toimprove our efficiency as demonstrated bythe increase in our sales per employee to£720k pa based upon the annual run-rate of March 2006 results (March 2005£421k).

We remain one of the lowest cost operatorsin the industry.

EBITA has increased to 15.1% of revenue(2005 10.6%) which demonstrates thestrength of the acquisition model and theefficiency of our systems enabling revenueand margins to grow faster than costs. This is the last year when you will seeEBITDA in our accounts, in future we willmove to concentrate on EBITA.

EARNINGS PER SHARE, based on profitafter tax add back amortisation of goodwill(see note 30) has increased by 82% to7.09p per share (2005 3.9p) showing thesubstantial increase to shareholder valueduring our 2006 year.

This should undoubtedly be regarded anexceptional increase and unlikely to be thenorm particularly as the size of acquisitionsbecome larger.

CASHFLOW is strong as the groupbenefits from an excellent operating cashmodel with net funds increasing by £0.9min the year to £0.6m at year end (2005(£0.3)m).

CAPITAL EXPENDITURE on tangibleassets is low at 1.5% of revenue with£6.5m (2005 £2.5m) invested in the 4acquisitions this year.

NET DEBT reduced by £1.8m (2005£1.3m). This was due to new deferredconsideration of £2.3m being partly offsetby payments of deferred consideration of£1.3m, the conversion of £1.9m of loans toequity on admission to AIM and an increasein cash of £0.9m.

This cash increase was the result of raising£7.1m net of expenses on our flotation toAIM, which paid down our borrowings.

Following the acquisition of Fizz Telecom inMay 06 the group drew down £3m of newborrowing from the new debt facility withBarclays Bank plc.

POST YEAR ENDThe business has grown rapidly since year-end with the acquisition of 10,000 businesscustomers from Fizz Telecom in May 2006.

Residential revenue is therefore expectedto represent a smaller proportion of sales in2006/7.

A key objective in the year will be tostrengthen the middle management teamin order to build a solid foundation to growthe business further.

£k Year to March2006

Year to March2005

Year to March2004

Sales 11,521 8,676 4,780

EBITA 1,744 924 319

Profit before tax add back Amortisation 1,413 715 140

FinanceDirector’sReportcontinued ...

Tim HollandFinance Director

7 September 2006



Key Performance Indicators

The Key Performance Indicators (KPI’s) outlined below are intended to provide useful information when interpreting the accounts. Wehave deliberately chosen to concentrate on the position as at the final month of the year; March 2006 as this gives you a good indicationof the start point for 2006/7. Please note that this analysis only includes those customers who received a bill; we only bill customers ifthey spend > £2.99 per month.

Key PerformanceIndicator

(all numbers are as atMarch 2006)

Residential Business Total

CUSTOMER NUMBERS

Customer numbers 22,644 8,051 30,695

REVENUE BY PRODUCT ANALYSIS

Line Rental 0.0% 14.3% 14.3%

Calls 17.0% 68.7% 85.7%

Total 17.0% 83.0% 100.0%

AVERAGE SPEND PER MONTH

Average spend per customer exc VAT £12.10 £167.18 £52.78



Directors &AdvisorsExecutive Directors

Ian Fishwick, MBA, ACMA aged45 (Managing Director)

Prior to founding AdEPT Telecom inFebruary 2003, Ian spent 15 years as aManaging Director in the telecom industry.From 1983 - 95 Ian rose through the ranksat Marconi Secure Systems including 2years as Financial Controller and 5 years asManaging Director. From 1996 to 2000 Ianwas a Managing Director at TelewestCommunications, managing Telewest NorthWest, Telewest London and South East,and Cable London. Ian was ManagingDirector of World Access (UK) Limited from2000 to 2001.

Tim Holland, BSc, ACA, aged 43(Finance Director)

Tim has 14 years experience in the telecomindustry, most recently as Finance Directorof EDF Customer Division, owners ofLondon Energy, SeeBoard Energy & SWEBEnergy until he joined AdEPT Telecom inOctober 2005. Tim has previously beenFinance Director at Aspect Internet, anInternet start up Company, and atTelewest. Tim qualified as an accountant atPrice Waterhouse, which was followed by aperiod at BT Corporate Finance.

Amanda Woodruffe, aged 43(Operations Director)

Amanda has held a wide variety ofCustomer Operations roles for majorcompanies. At BT she was a customerservice trouble-shooter, winning theChairman's Award for Quality. Amandaworked with Ian Fishwick on the cablemergers of Kent, Essex & London beforetaking on a national role at Telewest. Shewas a key member of the team that set up

the discount airlines GO & Hapag LloydExpress. Her consultancy assignmentshave been worldwide for companies suchas Sonera (mobile), and BoStream(broadband in Sweden). Amanda alsoworked as a consultant at EdExcel followingthe highly-publicised A-level fiasco in 2002.EdExcel went on to become 'bestexamination board' in 2003.

Christopher Riggs, aged 44(Sales Director)

Chris has 16 years experience in thetelecom industry. He has held a variety ofpositions from direct sales through todirector level positions. Chris has had highlevel involvement in several projects,including the cabling and supply oftelecommunications services to the CanaryWharf development. Chris has helddirectorships at 2 major telecomcompanies, (NETnet, Unitel) and was particularly successful in turning around aloss making sales organisation at NETnetcreating annual sales exceeding £120 million.

Non-Executive Directors

Roger Wilson, BA Hons, DMSaged 54 (Non-executive Chairman)

Roger has worked in the telecom industryfor the past 17 years. Roger was the firstManaging Director for TelewestCommunications' residential consumerbusiness in the UK from January 1997 untilMarch 1998. Roger spent 3 years betweenJune 1998 and April 2001 in Polandestablishing a telecom business forAmerican investors. Roger was ManagingDirector of ECTA, the European CompetitiveTelecommunications Association untilJanuary 2006. Roger is a member of the Company's remunerationand audit committees.

Dusan Lukic, aged 44 (Non-executive Director)

Dusan Lukic (also known as Dusko Lukic)has worked for 20 years as an institutional

stockbroker covering UK and ContinentalEuropean equity markets with City firmssuch as Wood Mackenzie, SalomonBrothers, Schroder Securities and latterly,at Cazenove. At Cazenove, Dusko was thedirector responsible for Pan European equity sales to German institutions. During2004 Dusko augmented his stock marketexperience by working at Eurovestech PLC,an AIM-quoted private equity investmentcompany and since April 2005 he has beenemployed by Millpath Limited which acts asinvestment adviser to DraganflyInvestments Ltd, an AIM quoted investmentcompany. Dusko is a member of theCompany’s remuneration and audit committees.

Mark Palios, aged 53 (Non-executive Director)

Mark is a highly experienced businessleader who during his 17 years as a Partnerat PricewaterhouseCoopers has builtextensive relationships with the City andfinancial institutions. A charteredaccountant, Mark rose to become a SeniorPartner at PricewaterhouseCoopers, whereamongst other roles he was the UK leaderfor the Business Regeneration practice.Mark is perhaps best known for his time asCEO of The Football Association. He iscredited with saving The FA from a severefinancial crisis and undertaking anorganisational and financial restructuringthat enabled The FA to manage its risksaround the Wembley project and continueto invest in the national sport.

Edward John Williams, aged 49(Non-executive Director)

Edward brings to AdEPT almost 30 years ofexperience in the financial sector. Edward isa leading financial figure having recentlyretired from Schroders as an ExecutiveDirector, where he was responsible forsubstantial pension funds. He has alsomanaged funds for St James's Place.Edward began his leading city career atPrudential as an equity analyst in 1978and, in 1981, became an equity fundmanager and specialised in themanagement of institutional funds and unittrusts.



Directors &Advisors continued ...

DIRECTORS

Ian FishwickRoger Wilson

DIRECTORS APPOINTED IN THE YEAR

Tim Holland (27/01/06)Amanda Woodruffe (27/01/06)Christopher Riggs (27/01/06)Dusko Lukic (27/01/06)Mark Palios (02/05/06)Edward Williams (18/07/06)

COMPANY SECRETARY

Secretarial Solutions Limited

COMPANY REGISTRATION NO.

4682431

REGISTERED OFFICE

One London WallLondon EC2Y 5AB

AUDITORS

Horwath Clark Whitehill LLPChartered Accountants & Registered AuditorsLonsdale House 7-9 Lonsdale GardensTunbridge Wells Kent TN1 1NU

BROKER

Teather & Greenwood LimitedBeaufort House, 15 St Botolph St, London EC3A 7QR

FINANCIAL PUBLIC RELATIONS

Cardew Group12 Suffolk Street, London SW1Y 4HG

NOMINATED ADVISER

Strand Partners Limited26 Mount Row, London W1K 3SQ

SOLICITORS

Maclay Murray & Spens, LondonOne London Wall, London EC2Y 5AB

REGISTRARS

Computershare Investor Services PLCPO Box 82, The Pavillions, Bridgewater Rd,Bristol BS99 7NH

Tel 0870 889 3192

BANKERS

Barclays Bank plc1 Churchill Place, London E14 5HP

We will always give our fullname ...

So that you know exactly who you aretalking to



DirectorsReport

Ian FishwickManaging Director

The directors present their report and thefinancial statements for the year ended 31March 2006.

STATEMENT OF DIRECTORS'RESPONSIBILITIES

The directors are responsible for preparingthe Annual Report and the financialstatements in accordance with applicablelaw and United Kingdom GenerallyAccepted Accounting Practice.

Company law requires the directors toprepare financial statements for eachfinancial year which give a true and fairview of the state of affairs of the companyand group and of the profit or loss of thegroup for that period. In preparing thosefinancial statements, the directors arerequired to:

- select suitable accounting policiesand then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business.

The directors are responsible for keepingproper accounting records which disclosewith reasonable accuracy at any time thefinancial position of the company andgroup and to enable them to ensure thatthe financial statements comply with theCompanies Act 1985.

They are also responsible for safeguardingthe assets of the company and group andhence for taking reasonable steps for theprevention and detection of fraud and otherirregularities.

In determining how amounts are presentedwithin items in the profit and loss accountand balance sheet, the directors have hadregard to the substance of the reportedtransaction or arrangement, in accordancewith generally accepted accountingprinciples or practice.

So far as each of the directors is aware atthe time the report is approved:

- there is no relevant audit information of which the company's auditors are unaware, and

- the directors have taken all stepsthat they ought to have taken to make themselves aware of any relevant audit information and toestablish that the auditors are aware of that information.

PRINCIPAL ACTIVITIESREVIEW OF BUSINESS

The principal activity of the group is theprovision of voice telephone services toboth domestic and business customers.

The company re- registered as a publiclimited company and changed its name toAdEPT Telecom plc on 24 January 2006.

REVIEW OF BUSINESS

A review of the business is contained in thechairman's statement on page 1.

RESULTS AND DIVIDENDS

The profit for the year, after taxation,amounted to £184,802 (2005 £114,660).A dividend of £115,965 (2005 £nil) waspaid to ordinary shareholders during theyear. A dividend of £224,379 (2005£224,643) was paid to the holders of theredeemable cumulative convertiblepreference shares ("the PreferenceShares") during the year. In accordancewith Financial Reporting Standard Number25 ("FRS 25"), the Preference Sharedividend has been disclosed within interestpayable, and the 2005 balance sheetrestated to be on a comparable basis.

The directors do not recommend thepayment of a final dividend.

DIRECTORS

The directors who served during the yearand their beneficial interests in thecompany's issued share capital were:

Ordinary shares of10p each 2006 2005

Roger Wilson 1,431,600 96,000

Alex Birchall(resigned27/01/06)

- -

Ian Fishwick 1,134,000 94,500

Tim Holland 4,859 -

Amanda Woodruffe - -

Christopher Riggs - -

Dusko Lukic - -



DirectorsReportcontinued ...

DETAILS OF THE DIRECTORSSHARE OPTIONS...

in the company are listed in note 16 to thefinancial statements. None of the shareoptions were exercised in the year.

POLITICAL AND CHARITABLECONTRIBUTIONS

During the year the group made charitabledonations of £8,548 (2005 £801). Nopolitical donations were made during thecurrent or previous financial year.

COMPANY'S POLICY FOR PAYMENT OF CREDITORS

The group does not follow any code orstatement on payment practice, but thepolicy of the group is to abide by suchpayment terms as are agreed withsuppliers within the terms of supply. By 31March 2006 there were 66 (2005 94)days' purchases outstanding, calculated ona ratio of trade creditors to total purchases.

KEY PERFORMANCE INDICATORS

A review of Key Performance Indicators isincluded in the Finance Director’s Report.

SUBSTANTIAL INTERESTS

At 31 March 2006 there were the followingsubstantial interests (3% or more) in thecompany's ordinary share capital.

Croyde Limited, Codium Limited andBittium Limited are all controlled by J FWorthytrust Limited which holds all theshares in those companies under anominee agreement to the order ofChristopher Fishwick, Ian Fishwick'sbrother.

The general partner for each of Mach IILimited Partnership and Mach CapitalLimited Partnership is Aureus CapitalPartners Limited.

% Holding in ordinary share capital 31 March 2006

Croyde Limited 13.6%

Codium Limited 9.3%

Mach II Limited Partnership 8.2%

Roger Wilson 6.8%

HSBC Global Custody Nominee (UK) Limited 6.6%

Richard Blakesley 5.7%

Oathall Plc 5.5%

Ian Fishwick 5.4%

Mach Capital Limited Partnership 4.9%

Capita Trust Company Limited 4.6%

Vidacos Nominees Limited 3.8%

Giltspur Nominees Limited 3.5%

Joseph Banks 3.3%

Bittium Limited 2.2%



Directors Report continued ...

SHARE OPTIONS

The following options over the OrdinaryShares of the Company are outstanding:

FINANCIAL CALENDAR

Annual General meeting4th October 2006

2007 Interim results announcementDecember 2006

2007 final results announcementJune 2007

AUDITORS

A resolution to reappoint Horwath ClarkWhitehill LLP as auditors will be proposedat the annual general meeting.

By order of the board

Director7 September 2006

Name Share Option SchemeNumber of OrdinaryShares subject to

options

Date ofgrant

Exerciseprice per share Exercise period

Ian Fishwick Unapproved Option Scheme 152,160 31/07/03 £0.30 31/07/06 - 31/07/13

Ian Fishwick EMI Option Scheme 300,000 28/12/03 £0.30 28/12/04 – 27/12/10

Ian Fishwick EMI Option Scheme 300,000 28/12/03 £0.30 28/12/05 – 27/12/10

Chris Riggs EMI Option Scheme 85,548 29/08/04 £0.42 01/07/05 – 28/08/11




Amanda Woodruffe EMI Option Scheme 85,548 29/08/04 £0.42 01/07/05 – 28/08/11




Tim Holland EMI Option Scheme 71,428 13/12/06 £1.40 01/10/06 – 12/02/13

Tim Holland Unapproved Option Scheme 99,680 13/02/06 £1.40 01/10/06 – 12/02/13

Tim Holland Unapproved Option Scheme 171,108 13/02/06 £1.40 01/10/07 – 12/02/13



CorporateGovernanceThe Board recognises the importance ofsound corporate governance and intends tocomply in so far as practicable with theQuoted Companies Alliance's CorporateGovernance Guidelines for AIMcompanies. The guidelines recommend thatthe AIM company should have at least twoindependent non executive directors.

The Board considers that one of the existing non executive directors, RogerWilson, is not independent for the purposesof these guidelines due to his level ofshareholding in the company, and thatDusko Lukic was the only independent nonexecutive director. After the year end, twoindependent non executive directors wereappointed, Mark Palios (2nd May 2006) andEdward Williams (18th July 2006).

The Board

Following the listing on AIM in February2006, the board comprised of 4 executivedirectors and two non executive directors.The board meets regularly throughout theyear and has a formal schedule of mattersspecifically reserved for its decision. Thisschedule is included in the corporategovernance document available on thecompany's web site at www.adept-telecom.co.uk under theinvestor relations section.

If required, the directors are entitiled totake independent legal advice and if theboard is informed in advance, the cost ofthe advice will be reimbursed by thecompany. The company secretary'sservices are available to all members of theboard.

Board appointments

The company does not have a nominationcommittee which is not in compliance withthe combined code. Any decision toappoint further directors to the board is adecision taken by the whole board andwhere necessary new board members willbe provided with appropriate training inrespect of their role and responsibilities as

a public company director.

Going concern

Based on the normal business planning andcontrol procedures the Directors have areasonable expectation that the group hasadequate resources to continue inoperational existence for the foreseeablefuture. For this reason the Directorscontinue to adopt the going concern basisin preparing the accounts.

An audit committee, consisting ofRoger Wilson and Dusko Lukic, has beenestablished and has been in operation fromthe date of admission to AIM. The auditcommittee determines the application ofthe financial reporting and internal controland risk management procedures and thescope, quality and results of the externalaudit.

A remuneration committee,consisting of Roger Wilson and DuskoLukic, has also been in operation followingadmission to AIM. It reviews theperformance of the executive directors andconsiders bonus and share option schemes.None of the executive directors take part indiscussions concerning their remuneration.

Relations with shareholders

The company has a regular dialogue withinstitutional shareholders andcommunication with shareholders is given ahigh priority. The board welcomes theattendance of individual shareholders atgeneral meetings and the opportunity toaddress any questions they may have.Thenotice of the annual general meeting willbe sent to shareholders at least 23 daysbefore the meeting. The proxies for andagainst each resolution are announced atthe meetings. Shareholders are encouragedto view the group's web site at www.adept-telecom.co.uk which includeslinks to the company share price, formalannouncements, corporate governance andfinancial statements.

Internal control and riskassessment

The directors are responsible for riskassessment and systems of internal control.Although no system of internal control can

provide absolute assurance against materialmisstatement or loss, the group's systemsare designed to provide the directors withreasonable assurance that problems areidentified on a timely basis and dealt withappropriately. The key features of thegroup's system of internal control are:

- A management structure with clearly defined responsibilities and authority limits;

- A comprehensive system of reporting financial results to the board. Towards the end of each financial year, detailed budgets are prepared for the following year. Re-forecasts are prepared on a regular basis during the year, for example reflecting an additional acquisition. The actual results are compared to budget and/or re-forecasts as appropriate;

- A regular review of staff skills, identifying & providing training

- A regular review of operational performance by the executive directors, including sales and customer service;

- Appraisal and authorisation of capital expenditure;

- Approval of significant contracts;and

- Review of the risks faced by the group.

Employee involvement & disabled employees

The group aims to improve theperformance of the organisation throughthe development of its employees. Theirinvolvement is encouraged by means ofteam working, team briefings, consultativecommittees and working parties. Thegroup is committed to equality ofemployment and its policies reflect adisregard of factors such as disability in theselection and development of employees.

Ian Fishwick, Director



AuditorsReportIndependent Auditors’ ReportTo The Shareholders of AdEPTTelecom plc

We have audited the group and parentcompany financial statements (“the finan-cial statements”) of AdEPT Telecom plc forthe year ended 31 March 2006 which com-prise the Group Profit and Loss Account,the Group and Company Balance Sheets,the Group Cash Flow Statement and therelated notes. These financial statementshave been prepared in accordance with theaccounting policies set out therein.

This report is made solely to the company'smembers, as a body, in accordance withSection 235 of the Companies Act 1985.Our audit work has been undertaken sothat we might state to the company'smembers those matters we are required tostate to them in an auditor's report and forno other purpose.

To the fullest extent permitted by law, wedo not accept or assume responsibility toanyone other than the company and thecompany's members as a body, for ouraudit work, for this report, or for theopinions we have formed.

Respective Responsibilities ofDirectors and Auditors

As described in the Statement of Directors’Responsibilities the company’s directors areresponsible for the preparation of the finan-cial statements in accordance with applica-ble law and United Kingdom AccountingStandards (United Kingdom GenerallyAccepted Accounting Practice).

Our responsibility is to audit the financialstatements in accordance with relevantlegal and regulatory requirements andInternational Standards on Auditing (UKand Ireland).

We report to you our opinion as to whetherthe financial statements give a true and fairview, the financial statements are properly

prepared in accordance with the CompaniesAct 1985 and the information given in theDirectors’ Report is consistent with thefinancial statements. We also report to youif, in our opinion, the company has not keptproper accounting records, if we have notreceived all the information and explana-tions we require for our audit, or if infor-mation specified by law regarding directors'remuneration and other transactions is notdisclosed.

We read other information contained in theAnnual Report, and consider whether it isconsistent with the audited financialstatements.

This other information comprises of theStatement on Corporate Governance. Weconsider the implications for our report ifwe become aware of any apparent misstatements or material inconsistencieswith the financial statements. Our responsibilities do not extend to any otherinformation beyond that referred to in thisparagraph.

Basis of Audit Opinion

We conducted our audit in accordance withInternational Standards on Auditing (UKand Ireland) issued by the AuditingPractices Board.

An audit includes examination, on a testbasis, of evidence relevant to the amountsand disclosures in the financial statements.

It also includes an assessment of thesignificant estimates and judgments madeby the directors in the preparation of thefinancial statements, and of whether theaccounting policies are appropriate to thegroup's and company's circumstances,consistently applied and adequatelydisclosed.

We planned and performed our audit so asto obtain all the information andexplanations which we considerednecessary in order to provide us withsufficient evidence to give reasonableassurance that the financial statements arefree from material misstatement, whethercaused by fraud or other irregularity orerror.

In forming our opinion we also evaluatedthe overall adequacy of the presentation of

information in the financial statements.

Opinion

In our opinion:

- the financial statements give atrue and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the group's and parent company's affairs as at 31 March 2006 and of the group's profit forthe year then ended; and

- the financial statements have been properly prepared in accordance with the Companies Act 1985.

- the information provided in the directors’ report is consistent withthe financial statements.

Horwath Clark Whitehill LLP

Chartered AccountantsRegistered AuditorsLonsdale House7-9 Lonsdale GardensTunbridge WellsKent TN1 1NU

7 September 2006



ConsolidatedProfit & LossAccountFor the year ended 31 March 2006

All amounts relate to continuing operations.

There were no recognised gains and lossesfor 2006 or 2005 other than those includedin the profit and loss account.

Following the adoption of FRS 25, thePreference Shares have been reclassified asdebt falling due after more than one yearin the prior year and all dividends paid on

the Preference Shares have beenreclassified as interest payable in the prioryear as disclosed in note 6 to the financialstatements.

Details of acquisitions are set out in note29.

The notes on pages 17 to 29 form part ofthese financial statements.

As restated2006 2005

Note £ £

TURNOVER 1 & 2, 29 11,520,855 8,676,499

Cost of Sales (6,864,629) (5,658,295)

GROSS PROFIT 4,656,226 3,018,204

Admin Expenses (2,792,206) (2,019,631)

EBITDA 1,864,020 998,573

Depreciation (120,579) (75,047)

Amortisation of Goodwill (944,211) (479,072)

OPERATING PROFIT 3 799,230 444,454

Interest receivable 4,351 16,381

Interest payable 6 (334,292) (224,700)

PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 469,289 236,135

Tax on profit on ordinary activities 7 (284,487) (121,475)

PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 184,802 114,660

Dividends 8 (115,965) -

RETAINED PROFIT FOR THE FINANCIAL YEAR 17 68,837 114,660

EARNINGS PER SHARE

Basic earnings per share 30 1.16 pence 0.75 pence

Diluted earnings per share 30 1.04 pence 0.71 pence

ConsolidatedBalanceSheet as at 31 March 06

The financial statements were approved bythe Board and signed on its behalf on 7September 2006.

IAN FISHWICK,Director

The notes on pages 17 to 29 form part ofthese financial statements



As restated2006 2006 2005 2005

Note £ £ £ £

FIXED ASSETS

Intangible Assets 9 11,174,175 4,585,380

Tangible Assets 10 223,577 167,030

Investments -

11,397,752 4,752,410

CURRENT ASSETS

Debtors 12 3,336,684 1,434,464

Cash at bank & in hand 579,816 160,090

3,916,500 1,594,554

Creditors - amounts falling due within 1 year 13 (5,042,960) (3,304,657)

NET CURRENT LIABILITIES (1,126,460) (1,710,103)

TOTAL ASSETS LESS CURRENT LIABILITIES 10,271,292 3,042,307

Creditors - amounts falling due after 1 year 14 - (1,870,593)

NET ASSETS 10,271,292 1,171,714

CAPITAL & RESERVES

Called up Share Capital 16 2,106,744 64,425

Share Premium Account 17 7,975,680 987,258

Profit & Loss Account 17 188,868 120,031

SHAREHOLDERS FUNDS - ALL EQUITY 18 10,271,292 1,171,714



CompanyBalanceSheet as at 31 March 06

The financial statements were approved bythe Board and signed on its behalf on 7September 2006.

IAN FISHWICK,Director

The notes on pages 17 to 29 form part ofthese financial statements.

As restated2006 2006 2005 2005

Note £ £ £ £

FIXED ASSETS

Intangible Assets 9 11,174,175 4,585,380

Tangible Assets 10 223,577 167,030

Investments 11 - 1,002

11,397,752 4,753,412

CURRENT ASSETS

Debtors 12 3,577,796 1,434,462

Cash at bank & in hand 338,602 160,090

3,916,398 1,594,552

Creditors - amounts falling due within 1 year 13 (5,250,443) (3,305,657)

NET CURRENT LIABILITIES (1,334,045) (1,711,105)

TOTAL ASSETS LESS CURRENT LIABILITIES 10,063,707 3,042,307

Creditors - amounts falling due after 1 year 14 - (1,870,593)

NET ASSETS 10,063,707 1,171,714

CAPITAL & RESERVES

Called up Share Capital 16 2,106,744 64,425

Share Premium Account 17 7,975,680 987,258

Profit & Loss Account 17 (18,717) 120,031

SHAREHOLDERS FUNDS - ALL EQUITY 18 10,063,707 1,171,714




Note £ £

Net cash flow from operating activities 19 1,252,753 1,690,930

Returns on investments and servicing of finance 20 (506,708) (208,319)

Taxation (158,900) (43,266)

Capital expenditure and financial investment 20 (6,655,983) (2,629,513)

Equity dividends paid (115,965) -

CASH OUTFLOW BEFORE FINANCING (6,184,803) (1,190,168)

Financing 20 7,106,109 54,040

INCREASE/(DECREASE) IN CASH IN THE YEAR 921,306 (1,136,128)

Reconciliation of Net Cash Flow toMovement in Net Funds / Debt For year ended 31 March 2006


Note £ £

Increase/(decrease) in cash in the year 921,306 (1,136,128)

Cash flow from decrease/(increase) in debt & invoice discounting 54,040 (54,040)

Deferred consideration outflow 1,293,118 252,000

CHANGE IN NET DEBT RESULTING FROM CASH FLOWS 2,268,464 (938,168)

Deferred consideration (2,347,466) (400,000)

Preference share conversion to equity shares 1,870,593 -

MOVEMENT IN NET DEBT IN THE YEAR 1,791,591 (1,338,168)

Net debt at 1 April 2005 (2,721,743) (1,383,575)

NET DEBT AT 31 MARCH 2006 21 (930,152) (2,721,743)

Consolidated Cash Flow StatementThe notes on pages 17 to 29 form part of these financial statements



1. ACCOUNTING POLICIES

1.1 Basis of preparation of financial statements

The financial statements have beenprepared under the historical costconvention and in accordance withapplicable United Kingdom accountingstandards.

1.2 Basis of consolidation

The financial statements consolidate theaccounts of AdEPT and all of its subsidiaryundertakings (the 'Subsidiaries').The results of the Subsidiaries acquiredduring the year are included from theeffective date of acquisition.

Under Section 230 of the Companies Act1985 the company is exempt from therequirement to present its own profit andloss account. The (loss)/profit for thefinancial period, before dividends payable,dealt with in the financial statements of theholding company, which have beenapproved by the Board, was (£22,783)(2005 £114,660).

1.3 Investments

Shares in the Subsidiaries are valued atcost less provision for permanentimpairment.

1.4 Turnover

Turnover comprises of both invoiced anduninvoiced amounts for services suppliedby the group during the year, exclusive ofValue Added Tax and trade discounts.

1.5 Intangible fixed assets and amortisation

Goodwill is stated at cost, less amortisationand any provision for impairment. The costof goodwill is the difference betweenamounts paid on the acquisition of abusiness and the fair value of theidentifiable assets and liabilities. It isamortised to the profit and loss over itsestimated economic life.

The average estimated useful economic lifehas been estimated at 9 years and hasbeen capped at 10 years.

Included with intangible fixed assets is alicence which is being amortised over itslife of 10 years.

1.6 Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost,less depreciation. Depreciation is providedon all tangible fixed assets at ratescalculated to write off the cost, lessestimated residual value of each asset, overits expected useful life on the followingbases:

Short term leasehold improvements5 years straight line

Fixtures and fittings 3 years straight lineOffice equipment 3 years straight lineComputer software 3 years straight line

1.7 Operating leases

Rentals under operating leases, wheresubstantially all of the benefits and risks ofownership remain with the lessor, arecharged to the profit and loss account on astraight line basis, even if payments are notmade on such a basis.

1.8 Taxation

UK corporation tax is provided for amountsexpected to be paid (or received) using taxrates and laws that have been enacted orsubstantially enacted at the balance sheetdate.

Deferred tax is recognised in respect of alltiming differences that have originated butnot reversed at the balance sheet date,where transactions or events have occuredat that date that will result in an obligationto pay more tax in future or a right to payless tax in future, except for gains on dis-posal of fixed assets which will be rolledover into replacement assets. Timingdifferences are differences between thegroup's taxable profits and its results statedin the financial statements that arise fromthe inclusion of gains and losses in taxrecognised in the financial statements.

Deferred tax is measured at the averagetax rates that are expected to apply in theperiods in which the timing differences areexpected to reverse based upon tax ratesand laws that have been enacted orsubstantially enacted at the balance sheetdate. Deferred tax is measured on a non

discounted basis. Deferred tax assets arerecognised to the extent that it is morelikely than not that they will be recovered.

1.9 Pensions

The group contributes to personal pensionplans. The charge to the profit and lossaccount in respect of pension costs is theamount payable in the year.

1.10 Capital instruments

The costs incurred directly in connectionwith the issue of debt instruments arecharged to the profit and loss account on astraight line basis over the life of the debtinstrument.

2. TURNOVER

The whole of the turnover is attributable tothe provision of voice telephone services toboth domestic and business customers.Thedirectors regard the group as having a single business segment.

All turnover arose within the UnitedKingdom.

3. OPERATING PROFIT

Operating profit is stated after charging:

Auditors' fees for the Company were£35,000 (2005:£24,700)

2006£

2005£

Amortisation of goodwill 944,211 479,072

Depreciation of tangible fixed assets 120,579 75,047

Auditors remuneration 35,000 24,700

Loss on disposal oftangible fixed assets 201 nil

Rentals - operatingleases land & building 77,465 77,465

Rentals - operatingleases: other 1,344 nil



Remuneration paid to the auditor for nonaudit services amounted to £161,900 (2005£3,000) of which £4,400 (2005 £3,000)related to taxation services and £157,500(2005 £nil) related to corporate financeservices which has been charged to theshare premium account.

4. STAFF COSTS

Staff costs, including directors'remuneration, were as follows:

The average monthly number ofemployees, including the directors, duringthe year was as follows:

5. DIRECTORS' EMOLUMENTS

During the year retirement benefits wereaccruing to 1 director (2005 1) in respectof money purchase pension schemes.The highest paid director receivedremuneration of £234,350 (2005£192,975).

The value of the group's contributions paidto a money purchase pension scheme inrespect of the highest paid directoramounted to £10,500 (2005 £9,913).

Details regarding the share options of thedirectors who held office at 31 March 2006in AdEPT are disclosed in note 16 to thefinancial statements.

6. INTEREST PAYABLE& SIMILAR CHARGES

In accordance with FRS 25 the dividendspaid on the Preference Shares have beenreclassified as interest in the prior year.

2006£

2005£

Wages & Salaries 1,141,605 788,071

Social security costs 129,142 86,981

Other pension costs 10,500 9,913

Total 1,281,247 884,965

2006 2005

Non ExecutiveDirectors 2 2

Full time staff 23 17

Total 25 19

2006 2005

Emoluments 606,021 272,403

Group pension contributions tomoney purchaseschemes

10,500 9,913

2006£

Asrestated

2005£

On bank loans &overdrafts 23,090 57

On other loans 30,417 nil

Preference sharedividend 224,379 224,643

Bank fees 54,165 nil

Other interest payable 2,241 nil

Total 334,292 224,700



7. TAXATION

Factors affecting tax charge for year

The tax assessed for the year is higherthan the standard rate of corporation tax inthe UK applicable to the group (30%). Thedifferences are explained in the table opposite:

There were no material factors that mayaffect future tax charges.

Factors affecting tax charge for year ...

8. DIVIDENDS

On 14 February 2006 a dividend of 18pence per ordinary share was paid to allshareholders on the register of membersat 10 February 2006.

9. INTANGIBLE FIXEDASSETS

*A retrospective adjustment in accordancewith FRS 7 'Fair values in acquisitionaccounting' was made in relation to the fairvalue of the consideration paid for the prioryear acquisitions. An adjustment in respectof amortisation was made accordingly, asdirected by FRS 7, which has beenrecognised in the current year's profit andloss account.

2006£

Asrestated

2005£

Profit on ordinaryactivities before tax 469,289 236,135

Corporation tax at30% on above 140,787 70,841

Effect of expenses notdeductible for taxpurposes

20,728 74,571

Effect of Amortisationnot deductible for taxpurposes

106,952 6,228

Depreciation for period in excess ofCapital Allowances

3,312 1,760

Movement in generalprovisions 15,280 19,136

Adjustments to taxcharge in respect ofprior periods

18,448 (5,458)

Ineligible depreciationof fixed assets nil 806

Marginal relief (2,427) (25,360)

Current tax charge foryear 303,080 142,524

2006£

Asrestated

2005£

Total dividends paid 115,965 nil

GROUP &COMPANY

Lic-ence

£

Goodwill

£

Total

£

COST

At 1/4/05 nil 5,199,462 5,199,462

Additions 23,400 7,402,367 7,425,767

Retrospective adjustment * nil 107,239 107,239

At 31/3/06 23,400 12,709,068 12,732,468

AMORTISATION

At 1/4/05 nil 614,082 614,082

Charge for the year 1,170 865,472 866,642

Impairmentcharge nil 77,569 77,569

At 31/3/06 1,170 1,557,123 1,558,293

NET BOOK VALUE

At 31/3/06 22,230 11,151,945 11,174,175

At 1/4/05 nil 4,585,380 4,585,380

2006£

Asrestated

2005£

Analysis of tax charge in year - Currrent Tax

UK Corporation Taxon profits of year 284,632 147,982

Adjustments inrespect of prior period 18,448 (5,458)

Total Current Tax 303,080 142,524

Analysis of tax charge in year - Deferred Tax

Origination & reversalof timing differences (18,593) (21,049)

Total deferred tax(see note 15) (18,593) (21,049)

Total tax on profit onordinary activities 284,487 121,475



10. TANGIBLE FIXED ASSETS

COST £

At 1st April 2005

Short term leasehold 7,117

Fixtures & Fittings 32,010

Office Equipment 118,726

Computer Software 126,449

Total 284,302

Additions

Short term leasehold nil




Total 179,400

Disposals


Fixtures & Fittings (396)

Office Equipment (2,871)

Computer Software nil

Total (3,267)

At 31st March 2006





Total 460,435

DEPRECIATION £

At 1st April 2005





Total 117,272

Charge for the Year





Total 120,579

On Disposals


Fixtures & Fittings (330)

Office Equipment (663)

Computer Software nil

Total (993)

At 31st March 2006





Total 236,858

NET BOOK VALUE £

At 1st April 2005





Total 167,030

At 31st March 2006





Total 223,577

GROUP & COMPANY



11. FIXED ASSET INVESTMENTS

Details of the principal Subsidiaries aredisclosed in note 27 to the financial statements.

12. DEBTORS Included within other debtors is a rentdeposit of £60,000 (2005 £60,000). Thelandlord, MCL Property InvestmentsLimited, has a rent deposit deed securedagainst this deposit for all monies due orbecoming due from the company to thechargee under the terms of the instrumentcreating the charge.

A separate designated interest bearingdeposit account has been opened in thename of the landlord with Coutts & Co inwhich the rental deposit has been placed.

Included within prepayments are deferred finance costs of £176,765 (2005£nil) in relation to the issue of debt instruments in the year.

Shares inGroup

Undertakings

Total£

Company£

At 1st April2005 1,002 1,002

Additions 7,197,324 7,197,324

Amounts written off (7,198,326) (7,198,326)

At 31st March2006 nil nil

GROUP 2006£

2005£

DUE AFTER MORE THAN ONE YEAR

Other debtors 127,650 92,400

DUE WITHIN ONE YEAR

Trade debtors 2,805,306 1,245,113

Amounts owed bygroup undertakings nil nil


Prepayments &accrued income 355,236 49,451

Deferred tax asset(note 15) 39,902 21,309

Total 3,336,684 1,434,464

COMPANY 2006£

2005£

DUE AFTER MORE THAN ONE YEAR


DUE WITHIN ONE YEAR

Trade debtors 2,805,306 1,245,112

Amounts owed bygroup undertakings 241,114 nil


Prepayments &accrued income 355,234 49,450

Deferred tax asset(note 15) 39,902 21,309

Total 3,577,796 1,434,462



13. CREDITORSAmounts falling due within one year

Included within bank loans and overdraftsis an amount of £nil (2005 £54,040) inrelation to the balance on the invoicediscounting facility. This was secured uponthe underlying trade debtors.

The bank overdraft is repayable ondemand. Interest is charged at 1.75 percent. above the bank's base rate. The bankhas a debenture incorporating a fixed andfloating charge over the undertaking and allproperty and assets present and futureincluding goodwill, book debts, uncalledcapital, buildings, fixtures, fixed plant andmachinery.

Included within accruals is deferredconsideration of £1,509,968 (2005455,620) in respect of the subsidiariesacquired in the current and prior years.

14. CREDITORSAmounts falling due after more than one year

In accordance with FRS 25, the PreferenceShares have been reclassified as debtfalling due after more than one year in theprior year. The Preference Shares had aninterest rate of 12 per cent.

Immediately prior to the group's admissionto AIM on 15 February 2006 the PreferenceShares were converted to ordinary shares.

15. DEFERRED TAXATION

The deferred tax asset is made up as follows:

GROUP 2006£

2005£

Bank loans & overdrafts nil 555,620

Trade creditors 2,831,298 1,704,070

Amounts owed togroup undertakings nil nil

Corporation tax 286,704 142,524

Social security &other taxes 54,157 67,886

Other creditors 8,379 4,410

Accruals &deferred income 1,862,422 830,147

Total 5,042,960 3,304,657

COMPANY 2006£

2005£

Bank loans & overdrafts nil 555,620

Trade creditors 2,831,298 1,704,070

Amounts owed togroup undertakings 296,120 1,000

Corporation tax 198,167 142,524

Social security &other taxes 54,157 67,886

Other creditors 8,279 4,410

Accruals &deferred income 1,862,422 830,147

Total 5,250,443 3,305,657

GROUP 2006£

As restated

2005£

Cumulativeredeemable preference shares

nil 1,870,593

COMPANY 2006£

As restated

2005£

Cumulativeredeemable preference shares

nil 1,870,593

GROUP 2006£

2005£

At 1st April 2005 nil 260

Provision for theyear 39,902 21,049

At 31st March 2006 39,902 21,309

COMPANY 2006£

2005£

At 1st April 2005 nil 260

Provision for theyear 39,902 21,049

At 31st March 2006 39,902 21,309

GROUP 2006£

2005£

Accelerated capitalallowances (2,858) (6,171)

Other timing differences 42,760 27,480

Total 39,902 21,309

COMPANY 2006£

2005£

Accelerated capitalallowances (2,858) (6,171)

Other timing differences 42,760 27,480

Total 39,902 21,309



16. SHARE CAPITAL

On 28 November 2005 the authorisedshare capital of the company was increasedto £6,500,000 by the creation of55,000,000 ordinary shares of 10p each.

The existing 623,275 12 per cent.Preference Shares in issue were convertedto ordinary shares immediately prior to thegroup's admission to AIM on 15 February2006. The nominal value and premium onthese shares are disclosed within sharecapital and share premium reserves in thecurrent year and within creditors due inmore than one year in the prior year, inaccordance with the requirements of FRS25.

Immediately prior to admission on 15February 2006, an aggregate of 13,942,775ordinary shares were issued to the holdersof existing ordinary shares by way of abonus issue.

On 15-16 February 2006, following theadmission to AIM, the company made thefollowing issues of ordinary shares:

Share Options & Warrants

A list of all share options held by directorsis included in the Directors Report.

At 31 March 2006, in addition to theoptions held by directors, the followingoptions and warrants over the shares ofAdEPT were in issue:

Others:-

The mid market price of the ordinaryshares on 31 March 2006 was 204.5p andthe range during the period from admissionto AIM was 150p to 204.5p.

None of the share options were exercisedin the current or preceding year.

The details of the share based paymentsmade during the year are detailed below:

Strand Partners Limited, the company'snominated advisor in relation to the placingand Admission to AIM, were issued 71,429Ordinary shares on 14/02/2006 as paymentof £100,000, which satisfied 50% of thetotal fees payable. This represents a priceof £1.40 per share which is equivalent tothe market value at the date of Admissionto AIM.

2006£

Asrestated

2005£

Authorised65,000,000ordinary sharesof 10p each

6,500,000 1,000,000

Allotted, calledup & fully paid21,067,443ordinary sharesof 10p each

2,106,744 64,425

Date of issue 15 Feb 2006

Ordinary sharesissued 3,571,427

Nominal value pershare 10p

Total nominal value £357,143

Total consideration £5,000,000

Date of issue 16 Feb 2006

Ordinary sharesissued 2,285,716

Nominal value pershare 10p

Total nominal value £228,572

Total consideration £3,200,000

Employees who are not directors

Share option scheme EMI

No. of ordinary sharessubject to option 87,445

Date of grant 15 Feb 2006

Exercise price per share £1.40

Exercise period 16/02/07 -14/02/13

Share option scheme EMI





Strand Partners

Share option scheme Warrants





Teather & Greenwood

Share option scheme Warrants







AdEPT employees were issued 5,712Ordinary shares on 14/02/2006 in equalproportions as payment of wages in lieu of£8,000. This represents a price of £1.40per share which is equivalent to the marketvalue at the date of Admission to AIM.

In addition 2,859 Ordinary shares on14/02/2006 were issued and held in trustfor future employees to be issued as partof the EMI share option plan. Thisrepresented a share payment of £4,000 or£1.40 per share.

Tim Holland, a director of the company wasissued 2,000 Ordinary shares on14/02/2006 as payment of wages of£2,800. This translates as £1.40 per share,the market value of the shares.

178,571 shares were issued to Alex Birchallon 14/02/2006, a former director of thecompany as settlement of a loan of£250,000 provided by him to the company.This is equivalent to £1.40 per share, themarket value of the shares.

17. RESERVES 18. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS

GROUP

Share premiumaccount

£

Profit &loss

account£

At 1st April 2005 987,258 120,031

Profit retained forthe year - 68,837

Premium onshares issued during the year

8,028,273 -

Share issueexpenses (1,039,851) -

At 31st March2006 7,975,680 188,868

COMPANY

Share premiumaccount

£

Profit &loss

account£

At 1st April 2005 987,258 120,031

Profit retained forthe year - (138,748)

Premium onshares issued during the year

8,028,273 -

Share issueexpenses (1,039,851) -

At 31st March2006 7,975,680 (18,717)

GROUP 2006£

2005£

Profit for the year 184,802 114,660

Dividends (115,965) -

Retained profit 68,837 114,660

Shares issued during the year 2,042,319 -

Share premium onissued shares (netof expenses)

6,988,422 -

Movement in theyear 9,099,578 114,660

Opening shareholders funds 1,171,714 1,057,054

Closing shareholders funds 10,271,292 1,171,714

COMPANY 2006£

2005£

Profit for the year (22,783) 114,660

Dividends (115,965) -

Retained profit (138,748) 114,660

Shares issued during the year 2,042,319 -

Share premium onissued shares (netof expenses)

6,988,422 -

Movement in theyear 8,891,993 114,660

Opening shareholders funds 1,171,714 1,057,054

Closing shareholders funds 10,063,707 1,171,714



19. NET CASH FLOW FROM OPERATING ACTIVITIES

20. ANALYSIS OF CASHFLOWS for headings netted in the cash flow statement

2006£

2005£

Operating profit 799,230 444,454

Amortisation ofintangible assets 944,211 479,072

Depreciation oftangible assets 120,579 75,047

Loss on disposalof tangible assets 201 nil

Increase indebtors (1,706,863) (230,691)

Increase in creditors 1,095,395 923,048

Net cash inflowfrom operations 1,252,753 1,690,930

2006£

2005£

Returns on investments & servicing of financing

Interestreceived 4,351 16,381

Interest paid (511,059) (224,700)

Net cash outflow (506,708) (208,319)

Capital expenditure & financial investment

Purchase ofintangible fixedassets

(6,478,656) (2,523,767)

Purchase oftangible fixedassets

(179,400) (105,746)

Sale of tangiblefixed assets 2,073 nil

Net cash outflow (6,655,983) (2,629,513)

Financing

Issue of ordinary shares 8,200,000 nil

Expenses ofshare issues (1,039,851) nil

Invoice discounting nil 54,040

Repayment ofinvoice discounting

(54,040) nil

Shareholderloans 250,000 nil

Repayment ofshareholderloans

(250,000) nil

Net cash inflow 7,106,109 54,040



21. ANALYSIS OF CHANGES IN NET DEBT

22. PENSION COMMITMENTS

At 31 March 2006 there were no pensioncommitments (2005: £Nil).

23. OPERATING LEASE COMMITMENTS

At 31 March 2006 the group and companyhad annual commitments under non- cancellable operating leases as follows:-

24. RELATED PARTY TRANSACTIONS

There were no related party transactionsduring the year.

25. EVENTS AFTER THEBALANCE SHEET DATE

In May 2006 AdEPT purchased the entireshare capital of Fizz Telecom Limited. Thisacquisition has resulted in an increase of10,000 business customers post year end.

On 09/05/06 share options were issued tocertain employees under the EMI shareoption plan over 8,084 ordinary shares withan excercise period from 09/05/07 to09/05/14 and an exercise price of £1.99

On 09/05/06 share options were issued tocertain employees under the EMI shareoption plan over 8,084 ordinary shares withan excercise period from 09/05/08 to09/05/15 and an exercise price of £1.99

1st April 2005

£

Cash flow

£

Other non-cashchanges

£

31st March 2006

£

Cash

Cash at bank & in hand 160,090 419,726 nil 579,816

Bank overdraft (501,580) 501,580 nil nil

Net cash (341,490) 921,306 nil 579,816

Debt

Deferred consideration (455,620) 1,293,118 (2,347,466) (1,509,968)

Invoice discounting (54,040) 54,040 nil nil

Preference shares (1,870,593) nil 1,870,593 nil

Net debt (2,721,743) 2,268,464 (476,873) (930,152)

Land & Buildings 2006£

As restated

2005£

Expiry date between2 & 5 years 77,465 105,348

Other 2006£

As restated

2005£

Expiry date between2 & 5 years 4,033 nil



26. ACQUISITIONS

During the year AdEPT made the followingacquisitions:

The fair value tables in respect of theseacquisitions can be summarised as follows:

27. PRINCIPAL SUBSIDIARIES

Principal subsidiaries (all registered inEngland & Wales)

The business and assets of Subsidiaries arehived up to AdEPT immediately after acquisition, with the exception ofTransglobal Telecommunications Limitedwhere the business and assets were hivedup on 31 March 2006. After the hive up,the Subsidiaries become inactive.

28. CAPITAL COMMITMENTS

At 31 March 2006 there were no capitalcommitments (2005: £Nil).

29. ANALYSIS OF ACQUISITIONS DURING THE YEAR

During the the year the group made 4acquisitions (2005 3).

Following acquisition the customers arefully integrated into a single billing and customer service platform.

Whilst turnover can be separately identifiedby acquisition, cost cannot. Calls are routedacross various network suppliers and theoverhead base services all of our customers.

The analysis of turnover by existing andacquired businesses is therefore as follows:-

Name Method Dateacquired

Call Options UKLimited

Sharepurchase July 2005

Talk Direct Limited Trade &assets Aug 2005

TransglobalTelecommunicationsLimited

Sharepurchase Feb 2006

Admiral ManagedNetwork ServicesLimited

Sharepurchase Mar 2006

Sales Revenue 2006 2005

Existing businesses as atMarch 2005

8,476,836 5,377,800

Business acquiredin the year toMarch 2006

3,044,019 3,298,699

Total Sales 11,520,855 8,676,499Satisfied by :

31st March2006

£

31stMarch2005

£

Cash 4,927,087 1,343,675

Deferred consideration 2,253,540 1,302,059

Acquisition costs 221,738 173,794

Goodwill 7,402,365 2,819,528

Name

% share-holding ofordinaryshares

Status

TransglobalTelecommunicationsLimited

100 Non-trading

ConnaughtTelecommunicationsLimited

100 Non-trading

Call Options UKLimited 100 Non-

trading

Admiral ManagedNetwork ServicesLimited

100 Non-trading

ConnectacomNetwork SolutionsLimited

100 Non-trading



30. EARNINGS PER SHARE

Earnings per share is calculated on thebasis of profit of £184,802 (2005£114,660) divided by the weighted averagenumber of shares in issue for the year of15,916,367 (2005 15,210,300).

The weighted average number of shareshas been adjusted to reflect the conversionof the Preference Shares into ordinaryshares and the bonus issue of 13,942,775ordinary shares prior to admission to AIM.

The diluted earnings per share is calculatedon the assumption all options areexcerised, Preference Shares are convertedand the bonus issue had taken place.

This would give rise to a total weightedaverage number of ordinary shares in issuefor the period of 17,686,094 (200516,164,530).

A more realistic representation of EarningsPer Share is to add back Amortisation ofgoodwill (as a non-cash cost) to Profit onOrdinary Activities after tax, being£1,129,013 (2005 £593,732).

This is divided by the same number ofweighted shares as above.

Earnings per share calculations ... 31. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS

AdEPT finances the group's operationsthrough long term bank facilities. The mainpurpose of these instruments is to financeAdEPT's operations and acquisitions.

The numerical disclosures in this note dealwith financial assets and liabilities asdefined in FRS 13 “Derivatives and otherfinancial instruments: disclosures”.

As permitted by FRS 13, short term debtorsand creditors have been excluded from thedisclosures other than currency disclosures.

Maturity profile

AdEPT's borrowing at the beginning andend of each year and details of the interestrate cost are detailed in note 13 to thefinancial statements.

As at 31 March 2006 AdEPT had financialassets which were part of its financingarrangements of £579,816 (2005£160,090).

AdEPT has various borrowing facilities available to it. The undrawn committedfacilities available at the year end, inrespect of which all conditions precedenthad been met at that date were as follows:

Basic Diluted

Year ended 31st March 2006

Profit after tax preamortisation 1,129,013 1,129,013

Profit after tax 184,802 184,802

EPS - based onProfit after tax preamortisation

7.09p 6.38p

Earnings pershare - based onProfit after tax

1.16p 1.04p

Weighted Average Number of Shares

For basic Earningsper Share 15,916,367

Exercise of shareoptions 1,769,727

Fully diluted 17,686,094

Year ended 31st March 2005

Profit after tax preamortisation 593,732 593,732

Profit after tax 114,660 114,660

EPS - based onProfit after tax preamortisation

3.90p 3.67p

Earnings pershare - based onProfit after tax

0.75p 0.71p

Weighted Average Number of Shares

For basic Earningsper Share 15,210,300

Exercise of shareoptions 954,230

Fully diluted 16,164,530

Expiry in : 2006£

2005£

One year or less 1,000,000 500,000

More than oneyear but notmore than two

nil nil

More than twoyears 5,000,000 nil

Total 6,000,000 500,000



Interest rate profile

The interest rate profile of AdEPT's financialliabilities was as follows:

As at 31 March 2006 the weighted averageinterest rate on AdEPT's sterling fixed ratefinancial instruments was approximatelynil% (2005: 12%) and the weighted average period for which it was fixed wasnil months (2005: 75 months).

The weighted average period on AdEPT'ssterling financial liabilities on which nointerest is paid is 12 months (2005: 12months).

The benchmark rate for determininginterest payments on AdEPT's sterling floating rate financial liabilities is the bank'sbase rate.

Currency profile

AdEPT's operations are handled entirely insterling.

Fair values

The directors believe that the carryingvalue of AdEPT's financial assets and liabilities at each year end is their fairvalue.

Gains and losses on hedges

There are no unrecognised gains andlosses arising on hedges at either year end.

All Sterling £ Total£

FloatingRate

£

Fixed Rate

£

NoInterest

£

As at 31st March 2005

Bank ovedraft 501,580 501,580 nil nil

Invoice discounting 54,040 54,040 nil nil

Deferred consideration 455,620 nil nil 455,620

Preference shares 1,870,593 nil 1,870,593 nil

Total 2,881,833 555,620 1,870,593 455,620

As at 31st March 2006

Bank ovedraft nil nil nil nil

Invoice discounting nil nil nil nil

Deferred consideration 1,509,968 nil nil 1,509,968

Preference shares nil nil nil nil

Total 1,509,968 nil nil 1,509,968



NOTICE OF ANNUAL GENERAL MEETING

ADEPT TELECOM PLC(Registered No. 4682431)

Notice is given that the annual generalmeeting of AdEPT Telecom Plc ("theCompany") will be held at One LondonWall, London EC2Y 5AB at 10 am on4 October 2006 to consider and, if thoughtfit, to pass the following resolutions ofwhich 1 to 10 will be proposed as ordinaryresolutions and resolution 11 will beproposed as a special resolution:

1. To receive and adopt the Company'saccounts for the year ended 31 March 2005together with the auditors' report on thoseaccounts. [Please see Note 1 below].

2. To receive and adopt the Company'saccounts for the year ended 31 March 2006together with the auditors' report on thoseaccounts.

3. To reappoint Timothy Mark Holland as adirector of the Company who was appointed since the last annual generalmeeting of the Company in accordancewith the Company's Articles of Association.

4. To reappoint Dusko Lukic as a director ofthe Company who was appointed since thelast annual general meeting of theCompany in accordance with theCompany's Articles of Association.

5. To reappoint Christopher Edwin Riggs asa director of the Company who wasappointed since the last annual generalmeeting of the Company in accordancewith the Company's Articles of Association.

6. To reappoint Amanda Woodruffe as adirector of the Company who was appointed since the last annual generalmeeting of the Company in accordancewith the Company's Articles of Association.

7. To reappoint Edward John Williams as adirector of the Company who was appointed since the last annual generalmeeting of the Company in accordancewith the Company's Articles of Association.

8. To reappoint Ian Fishwick as a directorof the Company who retires from office inaccordance with the Company's Articles ofAssociation.

9. To reappoint Horwarth Clark WhitehillLLP as auditors to hold office from the conclusion of the meeting to the conclusionof the next meeting at which the accountsare laid before the company at a remuneration to be determined by thedirectors.

10. That the Directors are hereby generallyand unconditionally authorised for the purpose of Section 80 of the CompaniesAct 1985 (the Act) to exercise all the powers of the Company to allot relevantsecurities (as defined in Section 80(2) ofthe Act) up to an aggregate nominalamount of £702,248.10 comprising7,022,481 Ordinary shares of 10p each,representing one third of the Company'spresent issued share capital, provided thatthis authority shall expire (unless previouslyrenewed varied or revoked by the Companyin general meeting) on the date of theAnnual General Meeting of the Company in2007 (the 'Section 80 period') save that theCompany may prior to expiry of the Section80 period make an offer or agreementwhich would or might require relevantsecurities to be allotted after the Section 80period and the Directors may allot relevantsecurities in pursuance of such an offer oragreement as if the authority conferred bythis resolution had not expired.

11. That the Directors are hereby empowered to allot equity securities forcash (within the meaning of Section 94 ofthe Companies Act 1985 (the Act)) pursuant to Section 95 of the Act subject totheir being duly authorised under Section80 of the Act, as if Sub-Section 89(1) ofthe Act did not apply to any such allotmentand at any time prior to the expiry of thepower hereby conferred to make an offeror agreement which would or might requireequity securities as aforesaid to be allotted

after the expiry of such power providedthat such power shall expire on the date ofthe annual General Meeting of theCompany to be held in 2007 only in respectof equity securities as aforesaid up to anaggregate amount of £210,674.43 representing 10 per cent of the presentissued share capital.

Registered office:

One London Wall, London, EC2Y 5AB

BY ORDER OF THE BOARD

AdEPT Telecom Plc

Company Secretary Secretarial Solutions Limited

11 September 2006

NOTES:

1. The Company's accounts for the yearended 31 March 2005 together with theauditors' report on those accounts havebeen filed at Companies House and areavailable on the Company's web site:www.adept-telecom.co.uk. Copies are alsoavailable upon request to the CompanySecretary at the Company's registeredoffice shown above.

2. A member entitled to attend and vote atthe meeting is entitled to appoint a proxyor proxies to attend and, on a poll, voteinstead of him/her. A proxy need not be amember of the Company.

3. A form of proxy is provided with thisnotice and instructions for its use shown onthe form.

4. The following documents will be available for inspection during normal business hours on any weekday (public holidays excepted) at the registered officeof the Company from the date of thisnotice until the date of the Meeting, and atthe Meeting from 15 minutes prior to itscommencement and until it ends:

(a) copies of Director's service contracts with the Company

(b) the Register of Directors' interests in the share capital of the Company.

AdEPT Telecom Head Office77 Mount EphraimTunbridge WellsKentTN4 8BS

Documents

(formerly AdEPT GB Limited) March 2006 ANNUAL REPORT€¦ · Chairman's statement 1 - 2 Financial highlights 3 Finance Director’s report 4 - 5 ... Award winning Customer Service