Adsure Services [AQSE:ADS] told investors last week that it is continuing to enjoy a favourable trading environment. This is underpinned by the ongoing reconfiguration of UK public services, the company said.
Adsure’s mandated assurance services support organisations with navigating a swiftly changing legislative landscape. This includes internal audit, anti-crime, security management and IT audit. The company sees roughly 85% recurring revenues with a typical contract length of 2-5 years.
Among the company’s clients at the NHS, UK emergency services and housing associations. This helps to reinforce revenues forecasts, with clear revenues projections 2-5 years into the future. UK Investor Magazine said in December the company was fast becoming a dividend hero and also called it the dividend king of the Aquis Stock Exchange after it hiked its interim dividend by a bumper 60%.
According to Kevin Limn, CEO of Adsure Services, the company’s principal trading subsidiary, called TIAA, “continues to offer an attractive alternative to mid-tier accountancy practices to the UK public sector.”
Public services in the UK are in a state of flux with significant reconfiguration of local government planned, the announcement of the abolition of NHS England and the further education sector facing significant financial challenges. This is increasing demand for Adsure’s services.
Unlike generalist accountancy firms, which often blend audit, tax, and advisory services, TIAA is exclusively focused on business assurance, reducing conflicts of interest and providing clients with a specialist service delivered by an experienced team.
Private sector contract wins
While Adsure Services continues to maintain its focus on public sector organisations, it has also announced a series of recent contract wins with a private sector rail joint venture. This reinforces Adsure’s strategic goal to provide existing services to clients in new markets.
The engagements cover advisory services that utilise Adsure Services’ existing service infrastructure and personnel, demonstrating its ability to secure business across different service categories and client types.
Adsure Services has a diverse portfolio of client contracts, with no single contract accounting for more than 5% of total revenue, reducing dependency on any one client or contract. The expansion into the private sector solidifies this approach through a multi-contract approach to delivering services.
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Cost management remains a priority
The company has made substantial progress in executing its strategic objectives. A modest increase in headcount has been implemented to support growth, while significant improvements in productivity have been achieved. Cost management remains a priority, with efficiencies gained across operations.
Adsure Services’ operating subsidiary had an increase of 83% of direct staff meeting or exceeding their utilisation target for the 2024/25 financial year, enabling it to also increase service delivery without materially adjusting the cost base.
The company is also busy to implementing its K10 Vision IT system, which will enhance service quality and operational efficiency. The system is currently going through specification settings and implementation phases, with promising initial results. Management said the company is confident full implementation will lead to incremental increases in operating margins when it is fully implemented later this year.
Robust demand for outsourcing of internal audit
Adsure says it continues to observe the increased demand for outsourcing internal audit and business assurance functions by government-funded organisations. The push to reduce operating costs means that more organisations will be looking to make savings by reducing internal headcount.
Management said it was encouraged by the potential to capitalise on the changing political and regulatory landscape as the new Labour government seeks to achieve efficiencies.
This potential growth in the scale of the market is something Adsure reckons it is well placed to capitalise upon, having significant experience in supporting organisations in making the transition from an in-house consortium model to full outsourcing, through its historic acquisitions of Parkhill Audit Agency and South Coast Audit, for example.
