TIDMMAI
RNS Number : 2882Q
Maintel Holdings PLC
11 September 2017
Maintel Holdings Plc
("Maintel", the "Company" or the "Group")
Interim results for the six months to 30 June 2017
Maintel Holdings Plc, the leading systems integrator and managed
services provider, is pleased to announce its interim results for
the six months to 30 June 2017.
The reported results for the period include a full six month
contribution from Azzurri Communications Limited ("Azzurri"), the
acquisition of which completed on 4 May 2016. Azzurri contributed
two months to the first half of 2016.
Financial highlights
-- Group revenue increased 68% to GBP63.8m (H1 2016: GBP38.1m)
([1],) with recurring revenue at 73% (H1 2016: 75%)
-- Group gross profit increased 50% to GBP19.6m (H1 2016: GBP13.1m)
-- Group adjusted EBITDA increased 62% to GBP7.1m (H1 2016: GBP4.4m)
-- Adjusted earnings per share([2]) increased 44% to 38.2p (H1 2016: 26.6p)
-- Period end net debt of GBP24.2m([3])
-- Progressive dividend policy reiterated:
o Interim dividend per share proposed of 14.7p (H1 2016:
13.4p)
o Full year 2017 dividend to grow 10% year on year in line with
existing guidance
Operational highlights
-- The integration of Azzurri is almost complete, with
annualised synergies in the period moderately ahead of those
expected at the time of the transaction
-- Increased investment in our ICON cloud platforms - ICON
Contact, ICON Communicate and ICON Secure - generated strong
growth, with a 55% increase in the number of seats active in ICON
Communicate alone. We expect to make further incremental investment
across ICON during H2
-- Managed Services and Technology performance negatively
affected by delays to customer installations, as a result of Avaya
taking longer than anticipated to come out of Chapter 11
-- Acquisition of Intrinsic Technology Ltd ("Intrinsic"), a
leading Cisco Gold Partner, in August, post period end, for total
consideration of GBP5.25 million
Key Financial Information
Unaudited results for 6
months ended 30 June: 2017 2016 Increase
Group revenue GBP63.8m GBP38.1m 68%
Adjusted profit before tax([4]) GBP6.3m GBP3.9m 62%
Adjusted earnings per share([2]) 38.2p 26.6p 44%
Interim dividend per share
proposed 14.7p 13.4p 10%
Commenting on the Group's results, Eddie Buxton, CEO, said:
"The performance in the first six months of the year reflects
mixed trading across the Group. Whilst we were undoubtedly affected
by the prolonged issues at Avaya, we saw very strong growth on our
ICON platform as well as noticeable progress with our mid-market
and larger public sector customers, through our new business and
public sector teams. The integration of Azzurri continued at pace
and I am delighted to say that this is now nearly complete, with
synergies moderately ahead of where we expected them to be at the
time of completion.
Whilst we do not anticipate material improvement from our Avaya
base in the second half, we do expect to see continued rapid growth
in our ICON cloud platforms. As such we intend to further increase
investment across the cloud portfolio.The second half of the year
will benefit from five months contribution from Intrinsic and I am
very optimistic about its contribution over time given its
Cisco-led skill set.
Reflecting our confidence in the underlying cash flow of the
Group and its longer term prospects, Maintel proposes to pay an
interim dividend of 14.7p, representing a 10% increase on the 2016
interim dividend."
Notes
[1] H1 2016 includes 2 months of Azzurri which was acquired on 4
May 2016.
[2] Adjusted earnings per share is basic earnings per share of
18.2p (H1 2016: loss of 8.2p), adjusted for intangibles
amortisation, exceptional costs and deferred tax charges related to
loss reliefs from previous acquisitions of Datapoint and Azzurri
(note 3). The weighted average number of shares in the period
increased to 14.2m (H1 2016:12.0m) arising from the equity raise in
May 2016 to support the Azzurri acquisition.
[3] Interest bearing debt (excluding issue costs of debt) minus
cash.
[4] Adjusted profit before tax of GBP6.3m (H1 2016: GBP3.9m) is
basic profit before tax, adjusted for intangibles amortisation and
exceptional costs.
For further information please contact:
Eddie Buxton, Chief Executive 020 7401 4601
Mark Townsend, Chief Financial
Officer 020 7401 4663
finnCap
Jonny Franklin-Adams / Emily
Watts (Corporate Finance)
Stephen Norcross (Corporate
Broking) 020 7220 0500
Chairman's statement
Group revenue for the 6 month period ending 30 June 2017
increased by 68%, compared with H1 2016, to GBP63.8m and adjusted
profit before tax increased by 62% to GBP6.3m (H1 2016: GBP3.9m).
Adjusted earnings per share (EPS) increased by 44% to 38.2p (H1
2016: 26.6p). H1 2017 trading incorporates a full 6 months'
activity from the Azzurri business acquired in May 2016. Recurring
contracted revenue made up 73% of H1 2017 turnover (H1 2016:
75%).
The overall gross margin of the Group during the period was 31%
(H1 2016: 34%), primarily driven by the inclusion of a full six
months of the lower margin Azzurri business.
Trading in the period was affected by softness in our managed
services and technology division, as we saw delays in investment
decisions by our larger Avaya customers, following Avaya entering
Chapter 11 in January 2017. Whilst the issues with Avaya were
beyond our control, the nervousness from customers is
understandable from what has been a protracted process, and we are
therefore pleased to report that following a hearing on 25th
August, the U.S. Bankruptcy Court approved a Scheduling Order,
supported by Avaya's major creditor groups, that sets the company's
Confirmation Hearing for 15th November. Shortly after this, Avaya
is expected to emerge from Chapter 11.
During the period, Maintel has delivered very pleasing growth in
its ICON cloud platforms, and as a result has proactively increased
its investment across the cloud portfolio as the transition to a
managed services provider continues. We have seen very encouraging
results to date, with ICON Communicate, our managed cloud unified
communication service, seeing 55% growth in contracted seats in H1
2017 from 31 December 2016. The average number of seats per
customer is increasing and some of our larger customers are
contracting to move their services into our managed cloud platform
on multi-year contracts. Sales on ICON Secure and ICON Contact, our
cloud based network security and contact centre propositions, have
also delivered strong growth during the period and an increasing
pipeline of opportunities.
This accelerated growth has driven increased investment in
expanding capacity and support for the ICON platform as we prepare
to bring these customers on board. While it is leading to longer
term quality recurring revenue streams, it has had some impact on
shorter term project revenues for these specific larger customers
as they move off-premise into the cloud. Given the levels of demand
we are seeing in this space, we expect additional investment and
further strong growth in the second half.
The restructure of our mobile offering is now largely complete,
reducing our presence in the small business space and resulting in
a refocus of activity in line with the other product propositions
targeting the mid-market. As a result, the customer base and the
number of connections have reduced by 55% and 21% respectively
since H1 2016.
New customer wins in the public sector have been strong on the
Crown Commercial Service Network Services framework agreement
(RM1045) with Maintel securing approximately GBP5m of awards on
this framework in the period, with particular success coming from
NHS trusts.
In August 2017, the Group completed the acquisition of Intrinsic
Technology Ltd on a cash-free, debt-free basis for a total
consideration of GBP5.25m payable in cash. As a leading Cisco Gold
Partner, Intrinsic widens Maintel's product reach which enhances
our already strong capability in LAN networking and the fast
growing network security sectors. Intrinsic also adds a strong
mid-market and enterprise customer base to the Group, particularly
in the public sector. In addition the acquisition brings
cross-selling opportunities to offer Maintel's existing product
portfolio to Intrinsic customers, in particular our ICON suite of
cloud managed services, and Cisco capability to Maintel's existing
customers. Intrinsic is expected to break even at the EBITDA level
for the remainder of our current financial year and with identified
synergies is expected to generate positive EBITDA and be earnings
enhancing for Maintel shareholders in the financial year to 31
December 2018.
Net debt was GBP24.2m at period end, an increase of GBP4.1m from
31 December 2016. Much of this was due to the expected unwind from
strong trading in H2 last year, whilst the reduced upfront project
billing and additional investment driven by our success in our ICON
services also had an impact. Excluding the acquisition cost of
Intrinsic described above, we expect cash flow to improve
materially in the second half of the current financial year.
Reflecting our confidence in the underlying cash flow of the
group and its longer term prospects, Maintel will pay an interim
dividend of 14.7p, representing a 10% increase on the 2016 interim
dividend, equivalent to 38% of adjusted earnings per share. This is
in line with our existing progressive dividend policy.
Finally, I would like to welcome our new colleagues from
Intrinsic to the Group and thank all our staff for their hard work
and commitment during the first half of 2017.
J D S Booth
Chairman
8 September 2017
Business review
Results for the 6 month period to 30 June 2017
The Group has delivered an increase in revenue of 68% to
GBP63.8m (H1 2016: GBP38.1m) in the period and a 62% increase in
adjusted profit before tax (as described below) to GBP6.3m (H1
2016: GBP3.9m).
The period benefited from six months' contribution from the
Azzurri acquisition, which was completed in May 2016, compared to
only two months' contribution in the comparative period last
year.
Adjusted earnings per share (EPS) increased by 44% to 38.2p (H1
2016: 26.6p) based on an increased weighted average number of
shares in the period of 14,197,059 (H1 2016: 11,992,977) following
an equity raise in May 2016 to support the Azzurri acquisition.
On an unadjusted basis, the Group generated a profit before tax
of GBP3.2m (H1 2016: loss of GBP0.7m) and generated an earnings per
share of 18.2p (H1 2016: loss of 8.2p). This includes GBP0.2m of
exceptional costs relating to restructuring activities (H1 2016:
GBP2.8m mainly in respect of the Azzurri acquisition) and
intangibles amortisation of GBP2.9m (H1 2016: GBP1.8m).
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000 Increase
Revenue 63,826 38,060 108,296 68%
--------- --------- ---------- ---------
Profit / (loss)
before tax 3,216 (696) 2,107
Add back intangibles
amortisation 2,898 1,752 4,733
Exceptional items
(H1 2016: mainly
relating to the
acquisition of
Azzurri; note 6) 150 2,806 4,240
Adjusted profit
before tax 6,264 3,862 11,080 62%
--------- --------- ---------- ---------
Adjusted EBITDA(a) 7,067 4,352 12,598 62%
--------- --------- ---------- ---------
Basic (loss) /
earnings per share 18.2p (8.2p) 16.0p
Diluted 17.9p (8.2p) 15.8p
--------- --------- ---------- ---------
Adjusted earnings
per share(b) 38.2p 26.6p 78.0p 44%
Diluted 37.5p 26.1p 76.8p 44%
--------- --------- ---------- ---------
(a) Excluding the exceptional costs in the table above (note
4)
(b) Adjusted profit after tax divided by weighted average number
of shares (note 3)
Acquisition of Intrinsic
Maintel acquired Intrinsic Technology Ltd ("Intrinsic") on 1(st)
August 2017 on a cash-free, debt-free basis for a consideration of
GBP5.25 million payable in cash.
The acquisition of Intrinsic makes compelling strategic and
financial logic. As one of the UK's leading Cisco Gold Partners it
significantly enhances Maintel's already strong capability in LAN
networking and the fast growing network security sector.
Intrinsic's customers are predominantly medium to large
enterprises and it has a strong presence in public sector
organisations particularly in the NHS, local authority and
education sectors.
The acquisition brings significant mutual cross-sell
opportunities to offer Maintel's existing portfolio to Intrinsic's
customers, in particular our ICON suite of cloud and managed
services where we have already gained some traction and Cisco
services to Maintel's existing and new customers.
Intrinsic is expected to break even at the EBITDA level for the
remainder of Maintel's current financial year and with identified
synergies, to generate positive EBITDA and be earnings enhancing
for Maintel shareholders in the financial year to 31 December
2018.
The acquisition was funded by an extension to, and draw-down
under, the Company's existing Revolving Credit Facility with RBS
(the "RCF"). The RCF, originally secured in April 2016 has been
increased by GBP6 million to GBP42 million.
Review of operations
The following table shows the performance of the three operating
segments of the Group. The H1 2016 results include two months'
contribution from Azzurri. On 1 January 2017, as part of the
corporate restructuring of the Group, the Azzurri trading entity
was hived up into Maintel Europe Ltd so that for FY 2017 the UK
operations are managed and controlled as one entity.
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
Revenue analysis GBP000 GBP000 GBP000 Increase
Managed services
related 18,932 14,146 34,630 34%
Technology(c) 17,040 9,636 29,479 77%
------------------ --------- --------- ---------- ---------
Managed services
and technology
division 35,972 23,782 64,109 51%
Network services
division 24,268 11,658 37,395 108%
Mobile division 3,586 2,710 6,947 32%
Intercompany - (90) (155)
------------------ --------- --------- ---------- ---------
Total Group 63,826 38,060 108,296 68%
================== ========= ========= ========== =========
(c) Technology includes revenues from hardware, software,
professional services and other sales
Managed services and technology division
The managed services and technology division provides the
management, maintenance, service and support of unified
communications, contact centres and local area networking
technology both on customer premises and from the cloud, across the
UK and internationally, on a contracted basis. It also supplies and
installs the same technology, together with providing professional
and consultancy services, to our direct clients and through our
partner relationships.
Revenue in this division increased by 51% to GBP36m, with
managed services related revenue up 34% compared with H1 2016 and
technology up 77%; both significantly boosted by a full 6 months'
contribution from Azzurri.
Trading in the period was adversely affected by delays in
investment decisions by our larger Avaya customers, as Avaya
entered Chapter 11 in January 2017. While the latest news is more
positive, with Avaya expected to exit Chapter 11 after its court
Confirmation Hearing on 15 November, it has been a long protracted
process and therefore we do not anticipate material improvement
from our Avaya base in the second half.
Gross margin at 30% (H1 2016: 36%) was impacted by the inclusion
of a full 6 months' trading from the lower margin Azzurri business.
Gross margin is expected to recover in the second half of the year
following recent contract wins at an improved gross margin
percentage.
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000 Increase
Divisional revenue 35,972 23,782 64,109 51%
Divisional gross
profit 10,942 8,544 21,408 28%
Gross margin (%) 30% 36% 33%
==================== ========= ========= ========== =========
Managed services
Maintel continued to see a reduction in the legacy maintenance
base in the period, as the Group's focus continues to shift towards
winning larger, managed service contracts with newer technology and
a wider suite of supporting services.
There were some exciting new wins in the first half, including a
large contact centre contract in the financial sector, a national
charity, a large NHS trust and a multi-national technology
company.
The pipeline for new managed services opportunities continues to
grow.
Technology
As highlighted above, the Avaya Chapter 11 process has
negatively impacted business especially from larger customers who
have delayed investment decisions pending the outcome of the
process. This impact is expected to extend into the second half and
we anticipate improvements in FY 2018.
We continue to see our presence on the public sector framework
drive a significant number of new sales, particularly in healthcare
and local government. We have won nine new contracts on the
framework in H1 2017, the largest being a contract with an NHS
Trust worth GBP1.6m to transform their entire unified
communications estate.
Our new business team has also seen increasing success with a
number of new names contracting in the period, including a leading
car manufacturer, a household goods manufacturer and a utility
company.
As previously highlighted, we are seeing the impact of
cloud-based opportunities on equipment sales and we see this trend
continuing, as large scale projects move off-premise into the
cloud.
Network services division
The network services division sells a portfolio of connectivity
and communications services including managed MPLS networks,
security as a service, internet access services, SIP, ISDN and PSTN
telephony services, inbound call routing services, inbound and
outbound telephone calls and hosted IP telephony solutions. These
services complement the on-premise and cloud solutions offered by
the managed service and technology division and the mobile
division's services.
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000 Increase
Call traffic 3,377 2,374 6,690 42%
Line rental 6,253 3,470 10,093 80%
Data connectivity
services 14,431 5,738 20,282 151%
Other 207 76 330 172%
------------------- --------- --------- ---------- ---------
Total division 24,268 11,658 37,395 108%
Division gross
profit 7,000 3,197 10,257 119%
Gross margin (%) 29% 27% 27%
=================== ========= ========= ========== =========
Network services revenue increased by 108% year on year, driven
by a six month contribution from the Azzurri acquisition.
Gross margins in the division increased to 29% (H1 2016: 27%) as
we benefited from improved supplier terms and the managed reduction
in lower margin legacy contracts, particularly in fixed calls and
lines.
In H1 2017 there was an acceleration of growth in our ICON cloud
platform, with a number of our larger customers contracting to move
on to the ICON platform. In particular, ICON Communicate, our
managed cloud unified communication service, saw contracted seats
grow by 55% in the period with a total contract value of
approximately GBP11.0m. While this is leading to longer term,
quality recurring revenue streams, it has had some impact on
shorter term project revenues for these specific larger customers
as they move off-premise into the cloud.
The trend towards larger customers adopting cloud services is
continuing, with the number of seats per new customer win averaging
2,500. It has been particularity pleasing to see 100% of customers
which have reached the end of their initial term, renew its
service.
We have also seen strong early adoption of ICON Secure, our
cloud-based network security proposition launched in H2 2016,
during the period, contributing to an increased pipeline of
opportunities.
The success of our ICON platforms has necessitated increased
investment in expanding the capacity and support for the ICON
portfolio as we prepare to bring these customers on-board. In
addition, we have increased the investment in our in-house Security
Operations Centre (SOC), new services and the infrastructure team.
As our confidence in our ICON suite of services increases, we
expect further incremental investment in the platform and services
encouraging strong growth in the second half.
Mobile division
Maintel mobile derives its revenue primarily from commissions
received under its dealer agreements with O2 and Vodafone and from
value added services such as mobile fleet management and mobile
device management.
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000 Increase
Revenue 3,586 2,710 6,947 32%
Gross profit 1,664 1,440 3,385 16%
Gross margin (%) 46% 53% 49%
================== ========= ========= ========== =========
At 30 At 30 At 31
June June December
2017 2016 2016 Decrease
Number of customers 1,340 2,965 2,476 (55%)
Number of connections 46,926 59,643 51,935 (21%)
======================= ======== ======== ========== ===========
Revenue in the mobile division increased by 32% over the
previous year due to the inclusion of the larger Azzurri mobile
base, contributing 6 months' trading compared to only 2 months in
H1 2016.
As highlighted in the 2016 annual report, as part of integrating
Azzurri, the Group undertook a strategic review of its mobile
business, resulting in the decision to reduce its presence in the
small business space. This reduced the Group's exposure to mobile
and re-focuses our sales activity in line with the other product
propositions in the target mid-market sector.
This activity is now complete and as a result, the customer base
and number of connections have reduced by 55% and 21% respectively.
O2 remains our largest network partner with 83% of connections.
Gross margin reduced to 46% (H1 2016: 53%). However, on an
adjusted basis removing one off contributions received in H1 2016
for divesting the small customer base, the underlying gross margin
has remained broadly the same.
The launch of Maintel's managed service proposition is gaining
traction, with three of our largest mobile customers contracting to
this service, which offers full end to end management of their
mobile estates.
New customer additions in the period included a large aviation
company and a significant national retailer supported by an
established refocus to larger customers.
Administrative expenses, excluding intangibles amortisation,
management recharges and non-trading adjustments
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000 Increase
Sales expenses 6,592 4,572 12,056 44%
Administrative
expenses 6,375 4,445 11,008 43%
Other administrative
expenses 12,967 9,017 23,064 44%
====================== ========= ========= =========== =========
Total administrative expenses increased by 44% to GBP13.0m
driven in the main by a full six month inclusion of Azzurri.
Annualised savings of GBP5.0m had already been delivered as at 31
December 2016, as Azzurri has been integrated into the Group, ahead
of the GBP4.6m of annualised synergies identified at the time of
the transaction.
The Group's headcount as at 30 June 2017 was 631 (30 June 2016:
727), a reduction of 13%, driven by implementation of the
integration plan since the acquisition of Azzurri in May 2016.
Property costs were also lower in H1 2017, as we started to see
the benefits associated with a lease assignment to a new tenant and
the subsequent sub-let of a much reduced space at our Weybridge
site.
As we progress further with our integration plan, total
administration costs will continue to be tightly controlled and we
expect to deliver further cost savings in H2 2017.
The exceptional costs of GBP0.2m (H1 2016: GBP2.8m) shown in the
income statement relate primarily to staff restructuring costs of
GBP0.5m offset by a credit release of GBP0.3m associated with an
old payable no longer required. H1 2016 costs of GBP2.8m related in
the main to the legal and professional fees arising from the
acquisition of Azzurri.
The intangibles amortisation charge increased in the period to
GBP2.9m (H1 2016: GBP1.8m) due to a full six month charge
associated with the Azzurri intangible, Azzurri having been
acquired in May 2016. Impairment and amortisation charges are
discussed further below.
Foreign exchange
The Group's reporting currency is sterling; however it trades in
other currencies, notably the euro, and has assets and liabilities
in those currencies. The euro rate moved from EUR1.17 = GBP1 at 31
December 2016 to EUR1.14 = GBP1 at 30 June 2017 and the US Dollar
rate moved from $1.24 = GBP1 at 31 December 2016 to $1.30 = GBP1 at
30 June 2017. The effect of this and other movements in the period
was a gain to the income statement of GBP81,000 (H1 2016:
GBP92,000), which is included in other administrative expenses.
The exchange difference arising on the retranslation at the
reporting date of the equity of the Group's Irish subsidiary, whose
functional currency is the euro, is recorded in the translation
reserve as a separate component of equity, being a charge of
GBP2,000 in the period (H1 2016 charge: GBP37,000).
Interest
The increase in the net interest charge to GBP452,000 (H1 2016:
GBP295,000) resulted from the additional borrowings taken on to
finance the Azzurri acquisition, with net borrowings excluding
issue costs of debt increasing to GBP24.2m at 30 June 2017 (30 June
2016: GBP27.1m) from a year end 2016 balance of GBP20.1m.
Taxation
The consolidated statement of comprehensive income shows a tax
rate of 19.7% with tax of GBP0.6m on a profit before tax of GBP3.2m
(H1 2016 tax charge of GBP0.3m on a loss of GBP0.7m) for the
reasons described below.
Each of the Group companies is taxed at 19.25%, with the
exception of Maintel International Limited, which is taxed at 12.5%
(H1 2016: 20%; 12.5%). Certain expenses that are disallowable for
tax raise the underlying effective rate above this, and in H1 2016
form the predominant reason why a tax charge was incurred on that
period's loss.
The tax charge in the period includes a deferred tax charge
relating to historic tax losses of the Datapoint companies, which
are available for Group relief. However, a tax asset in respect of
the historic losses is charged to the income statement as the
losses are used. This deferred tax charge in the period was GBP0.3m
(H1 2016: GBP0.2m).
The tax charge in the period also includes a deferred tax charge
relating to historic capital allowances from Azzurri. A deferred
tax asset was created in relation to the brought forward capital
allowances and is charged to the income statement as the capital
allowances are used. This deferred tax charge in the period
amounted to GBP0.2m (H1 2016: GBP0.3m).
Dividends and adjusted earnings per share
An interim dividend for 2016 of 13.4p (GBP1.9m) was paid on 12
October 2016 and a final dividend for 2016 of 17.4p per share
(GBP2.5m) was paid on 18 May 2017, taking the total dividend paid
in respect of 2016 to 30.8p per share.
As previously highlighted, it is the board's intention to
increase the total 2017 dividend pence per share by 10% over 2016
total dividend pence per share.
As a result, the board will pay an interim dividend of 14.7p in
respect of 2017 on 5 October to shareholders on the register at the
close of business on 22 September, which equates to a pay-out ratio
as a percentage of adjusted earnings of 38%. The corresponding
ex-dividend date will be 21 September. In accordance with
accounting standards, this dividend is not accounted for in the
financial statements for the period under review, as it had not
been committed as at 30 June 2017.
Consolidated statement of financial position
Net assets increased marginally by GBP0.2m to GBP28.5m from 31
December 2016.
Intangible assets are GBP2.9m less than at year end, driven by a
full 6 month Azzurri amortisation charge in the period.
The value of property, plant and equipment is GBP0.3m less than
at 31 December 2016 driven by modest additions of GBP0.2m offset by
the write-off of leasehold improvements associated with the
Weybridge office sublet of GBP0.1m and by depreciation in the
period of GBP0.4m.
Inventories have reduced by GBP0.9m to GBP4.0m at 30 June 2017,
through a reduction in stock held for resale of GBP0.7m associated
with 2 large projects at year end 2016 which were delivered in H1
2017. Maintenance service stock reduced slightly by GBP0.2m due
mainly to the results of regular revaluation.
Trade and other receivables have reduced by GBP0.3m in the
period, the main elements being (a) a decrease in trade receivables
of GBP2.3m as a result of the high level of orders booked and
invoiced in Q4 2016, along with the phasing of managed service
invoices spanning the year end which were settled in Q1 2017 and
(b) an increase in prepayments and accrued income of GBP2.0m due to
several projects in progress at 30 June 2017 and a reduction in
milestone payment invoices associated with 3 large projects at year
end 2016.
Trade and other payables amounted to GBP40.8m, a reduction of
GBP9.3m from year end 2016.The main drivers being:
(a) Lower VAT liability of GBP1.4m, due to the high level of Q4
2016 customer invoicing;
(b) Deferred managed service income reduced by GBP3.0m,
predominantly due to a lower managed service base driven by the
expected loss of 1 significant legacy customer;
(c) Trade payables and cost accruals reduced by GBP2.7m relating
to the unwinding of liabilities associated with the large projects
won in Q4 2016. An additional GBP2.0m reduction in payables related
to several items covering (i) RCF interest for Q4 2016 paid post
year end (GBP0.3m); (ii) a reduction in bonus accrual (GBP0.4m);
(iii) settlement of a dilapidation provision associated with the
Weybridge property (GBP0.3m); (iv) release of an old payable not
required (GBP0.3m); (v) refund of a customer overpayment (GBP0.4m);
and (vi) others of GBP0.3m.
Corporation tax liabilities have increased by GBP0.8m to
GBP1.3m, reflecting the estimated liability associated with the
profits derived from H1 2017 trading activities. As a consequence
of the hive up of Datapoint's UK businesses into Maintel Europe in
Q4 2016, the Group is currently accounting for relief of the
historic Datapoint losses on a streamed basis against the profits
of the trade that was transferred from the previous Datapoint UK
businesses.
The deferred tax liability has decreased by GBP0.1m in the first
half to GBP1.9m.The movement is driven by a GBP0.6m credit to the
income statement in relation to the intangibles amortisation,
partially offset by charges relating to Datapoint and Azzurri
historical tax losses and capital allowances respectively of
GBP0.5m in aggregate.
Intangible assets
The Group has two intangible asset categories: (i) an intangible
asset represented by customer contracts and relationships, brand
value, product platforms and software acquired from third party
companies, and (ii) goodwill relating to historic acquisitions.
The intangible assets represented by purchased customer
contracts and relationships, brand value, product platforms and
software were carried at GBP24.1m at the period end (H1 2016:
GBP27.0m). The intangible assets are subject to an average
amortisation charge of 18% of cost per annum in respect of the
managed service and technology division, 13% per annum in respect
of the network services division and 16% per annum in respect of
the mobile customer relationships, with GBP2.9m being amortised in
H1 2017 (H1 2016: GBP1.8m), the increase being attributable to a
full 6 months' charge relating to the Azzurri intangibles acquired
in May 2016.
There is no change to the value of Goodwill of GBP36.1m (2016:
GBP36.1m) and no impairment has been charged to the consolidated
statement of comprehensive income in H1 2017 (H1 2016: GBPnil).
Cash flow
The Group had net debt (excluding issue costs of debt) of
GBP24.2m at 30 June 2017, compared with GBP20.1m at 31 December
2016. An explanation of the GBP4.1m increase is set out below.
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000
Cash (consumed by) / generated
from operating activities
before acquisition costs (801) 3,826 13,339
Taxation (5) (231) (236)
Capital expenditure less
proceeds of sale (172) (250) (570)
Finance cost (net) (627) (295) (625)
--------- --------- ----------
Free cashflow (1,605) 3,050 11,908
Dividends (2,470) (1,777) (3,679)
Acquisition (net of cash
acquired) - (45,433) (45,433)
Acquisition costs paid - (2,514) (2,515)
Proceeds from borrowings - 31,000 31,000
Repayments of borrowings (6,000) (6,000) (6,000)
Issue of new ordinary shares - 24,000 24,000
Share issue costs - (781) (781)
Issue costs of debt - (348) (360)
--------- --------- ----------
(Decrease) / increase in
cash and cash equivalents (10,075) 1,197 8,140
Cash and cash equivalents
at start of period 10,884 2,784 2,784
Exchange differences (2) (37) (40)
--------- --------- ----------
Cash and cash equivalents
at end of period 807 3,944 10,884
Bank borrowings (25,000) (31,000) (31,000)
--------- --------- ----------
Net debt excluding issue
costs of debt (24,193) (27,056) (20,116)
Adjusted EBITDA (note 4) 7,067 4,352 12,598
========= ========= ==========
The operating cash flow before changes in working capital shown
in the consolidated statement of cash flows amounted to GBP7.2m (H1
2016: GBP1.6m). The effects of the positive cash timing benefits
from a strong trading performance in Q4 2016, which unwound in H1
2017, combined with strong growth in our ICON cloud product
offering, leading to a reduction in upfront project billing,
contributed to a working capital outflow of GBP8.0m during the
period. As a result, GBP0.8m of cash was consumed from operating
activities (H1 2016: generation of GBP3.8m).
A more detailed explanation of the working capital movements is
included in the analysis of the consolidated statement of financial
position.
The finance cost (net) of GBP0.6m includes GBP0.3m of interest
relating to Q4 2016 which was taken post year end 2016.
In managing the Group's funding costs we have used surplus cash
to reduce our utilised facility by GBP6.0m in the period, leaving a
cash and cash equivalents balance of GBP0.8m at 30 June 2017 (31
December 2016: GBP10.9m).
Including the settlement of the final dividend for 2016
amounting to GBP2.5m, the net effect when combined with a negative
free cash flow of GBP1.6m, is an increase in the net debt of
GBP4.1m to GBP24.2m.
Property
As reported at the end of last year, as part of management's
review and consolidation of its property locations, in March 2017
the lease of the Weybridge property was assigned to a new tenant
and Maintel has sub-let a much reduced space. The estimated saving
over the remaining term of the lease is approximately GBP1.0m of
which GBP0.4m will benefit the FY 2017 results. We expect to see a
cash benefit in H2 2017, as the H1 2017 savings were more than
offset by the settlement of agreed dilapidations on assignation of
the new lease.
Post period end events
Post the period end, and as announced on 1 August 2017, the
Group completed the acquisition of Intrinsic Technology Ltd
("Intrinsic") for GBP5.25m. The acquisition will increase the
Group's LAN capability and provide further diversification of
Maintel's product and service offering. Intrinsic's Cisco Gold
Partner status is highly beneficial to the Group, providing
significant cross-sell opportunities into Maintel's existing
customer base.
Outlook
Performance in the first half of the year reflected strong
growth in our cloud-based offering, offset by some pressure on our
managed services and technology division as a result of the ongoing
issues faced by Avaya in the period. It is expected that both of
these trends will continue into the second half.
In relation to the pressure on managed services and technology
revenues, it is anticipated that larger customers in particular
will continue to delay investment decisions in relation to Avaya
installations, until as expected Avaya exits Chapter 11 at the end
of 2017. Growth in take up of our ICON portfolio is expected to
continue to accelerate, and as a result we anticipate making
further incremental investment in this area through the second half
in order to support delivery against the pipeline of long term,
high recurring revenue contracts.
Second half revenues will be positively impacted by the
contribution from Intrinsic, with significant cross-sell
opportunities already identified where we have already gained some
traction, with the Cisco Gold Partner status being of particular
benefit to Maintel.
We expect cash flows to improve significantly in the second half
and remain confident in the Group's ability to maintain its
progressive dividend policy, including 10% dividend growth for FY
2017.
On behalf of the board
E Buxton
Chief Executive
8 September 2017
Maintel Holdings Plc
Consolidated statement of comprehensive income
for the 6 months ended 30 June 2017
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000
Note (unaudited) (unaudited) (audited)
Revenue 2 63,826 38,060 108,296
Cost of sales (44,220) (24,961) (73,383)
------------ ------------ ----------
Gross profit 19,606 13,099 34,913
Other operating income 77 75 151
Administrative expenses
------------------------------ ----- ------------ ------------ ----------
Intangibles amortisation (2,898) (1,752) (4,733)
Exceptional costs 6 (150) (2,806) (4,240)
Other administrative
expenses (12,967) (9,017) (23,064)
------------------------------ ----- ------------ ------------ ----------
(16,015) (13,575) (32,037)
Operating profit / (loss) 3,668 (401) 3,027
Finance income 2 3 3
Financial expense (454) (298) (923)
Profit / (loss) before
taxation 3,216 (696) 2,107
Taxation expense (633) (290) (13)
------------ ------------ ----------
Profit / (loss) for
the period and attributable
to owners of the parent 2,583 (986) 2,094
Other comprehensive
expense for the period
Exchange differences
on translation of foreign
operations (2) (37) (40)
------------ ------------ ----------
Total comprehensive
profit / (loss) for
the period 2,581 (1,023) 2,054
============ ============ ==========
Profit / (loss) per
share
Basic 3 18.2p (8.2p) 16.0p
Diluted 3 17.9p (8.2p) 15.8p
============ ============ ==========
Maintel Holdings Plc
Consolidated statement of financial position
at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Note (unaudited) (unaudited) (audited)
Non current assets
Intangible assets 60,255 64,402 63,152
Property, plant and
equipment 2,957 3,631 3,293
63,212 68,033 66,445
------------ ------------ -------------
Current assets
Inventories 4,030 2,704 4,882
Trade and other receivables 29,097 35,539 29,371
Cash and cash equivalents 807 3,944 10,884
------------ ------------ -------------
33,934 42,187 45,137
------------ ------------ -------------
Total assets 97,146 110,220 111,582
Current liabilities
Trade and other payables 40,760 49,555 50,096
Current tax liabilities 1,281 116 527
Total current liabilities 42,041 49,671 50,623
Non current liabilities
Deferred tax liability 1,896 2,894 2,020
Borrowings 7 24,724 30,652 30,688
------------ ------------ -------------
Total net assets 28,485 27,003 28,251
============ ============ =============
Equity
Issued share capital 142 142 142
Share premium 24,354 24,354 24,354
Other reserves 77 82 79
Retained earnings 3,912 2,425 3,676
Total equity 28,485 27,003 28,251
============ ============ =============
Maintel Holdings Plc
Consolidated statement of changes in equity
for the 6 months ended 30 June 2017 (unaudited)
Share Other Retained
capital Share reserves earnings Total
premium
GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2016 108 1,169 119 5,164 6,560
Loss for the period - - - (986) (986)
Other comprehensive
income:
foreign currency
translation differences - - (37) - (37)
-------------------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
loss for the period - - (37) (986) (1,023)
Dividend - - - (1,777) (1,777)
Issue of new ordinary
shares 34 23,966 - - 24,000
Share issue costs - (781) - - (781)
Grant of share
options - - - 24 24
--------------------------
At 30 June 2016 142 24,354 82 2,425 27,003
Profit for the
period - - - 3,080 3,080
Other comprehensive
income:
foreign currency
translation differences - - (3) - (3)
-------------------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income for the
period - - (3) 3,080 3,077
Dividend - - - (1,902) (1,902)
Grant of share
options - - - 73 73
-------------------------- ---------- ---------- -----------
At 31 December
2016 142 24,354 79 3,676 28,251
Profit for the
period - - - 2,583 2,583
Other comprehensive
income:
foreign currency
translation differences - - (2) - (2)
-------------------------- ---------- ---------- ----------- ----------- --------
Total comprehensive
income for the
period - - (2) 2,583 2,581
Dividend - - - (2,470) (2,470)
Grant of share
options - - - 123 123
At 30 June 2017 142 24,354 77 3,912 28,485
========================== ========== ========== =========== =========== ========
Maintel Holdings Plc
Consolidated statement of cash flows
for the 6 months ended 30 June 2017
6 months 6 months Year
to 30 to 30 June to 31
June 2016 December
2017 2016
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Operating activities
Profit / (loss) before taxation 3,216 (696) 2,107
Adjustments for:
Intangibles amortisation 2,898 1,752 4,733
Share based payment charge 123 24 97
Depreciation charge 351 195 598
Loss on disposal of property, 157 - -
plant and equipment
Interest received (2) (3) (3)
Interest expense 454 298 923
Operating cash flows before
changes in working capital 7,197 1,570 8,455
Decrease / (increase) in inventories 853 22 (949)
Decrease / (increase) in trade
and other receivables 274 (3,971) 990
(Decrease) / increase in trade
and other payables (9,125) 3,691 2,328
------------ ------------ ----------
Cash (used by) / generated
from operating activities
(see sub analysis below) (801) 1,312 10,824
Cash generated from operating
activities excluding exceptional
costs (651) 3,826 15,064
Exceptional cost - redundancy
and other costs (150) - (1,725)
------------ ------------ ----------
Cash generated from operating
activities excluding acquisition
legal and professional costs (801) 3,826 13,339
Exceptional cost - acquisition
legal and professional costs - (2,514) (2,515)
------------ ------------ ----------
Cash generated from operating
activities (801) 1,312 10,824
-------------------------------------- ------------ ------------ ----------
Tax paid (5) (231) (236)
------------ ------------ ----------
Net cash flows (used by) /
generated from operating activities (806) 1,081 10,588
------------ ------------ ----------
Investing activities
Purchase of plant and equipment (172) (250) (438)
Purchase of software - - (132)
Purchase price in respect
of business combination - (47,028) (47,028)
Net cash acquired with subsidiary
undertaking - 1,595 1,595
- (45,433) (45,433)
Interest received 2 3 3
Net cash flows used by investing
activities (170) (45,680) (46,000)
------------ ------------ ----------
Financing activities
Proceeds from borrowings - 31,000 31,000
Repayment of borrowings (6,000) (6,000) (6,000)
Interest paid (629) (298) (628)
Issue of new ordinary shares - 24,000 24,000
Share issue costs - (781) (781)
Issue costs of debt - (348) (360)
Equity dividends paid (2,470) (1,777) (3,679)
Net cash flows from financing
activities (9,099) 45,796 43,552
--------- -------- --------
Net (decrease) / increase
in cash and cash equivalents (10,075) 1,197 8,140
Cash and cash equivalents
at start of period 10,884 2,784 2,784
Exchange differences (2) (37) (40)
--------- -------- --------
Cash and cash equivalents
at end of period 807 3,944 10,884
========= ======== ========
Maintel Holdings Plc
Notes to the interim financial information
1. Basis of preparation
The financial information in these interim results is that of
the holding company and all of its subsidiaries (the Group). It has
been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards as
adopted for use in the EU (IFRSs) but does not include all of the
disclosures that would be required under IFRSs. The accounting
policies applied by the Group in this financial information are the
same as those applied by the Group in its financial statements for
the year ended 31 December 2016 and are those which will form the
basis of the 2017 financial statements.
A number of amendments to and interpretations of existing
standards have become effective for periods beginning on 1 January
2017, but no new standards; none of these is expected to materially
affect the Group during financial year 2017.
The Group notes IFRS15 Revenue from Contracts with Customers
which is to be adopted for all accounting periods beginning on or
after 1 January 2018. At this time, it remains not practical to
provide a reasonable estimate in relation to the effect of IFRS 15
until a detailed review has been completed. During the half-year,
the Group commenced assessing the impact of IFRS 15 on the Group's
revenue streams and its initial analysis on some key changes under
IFRS 15 which may be relevant to the group include:
- Mobile business: Connection commission revenues received from
mobile network operators on fixed line revenues are currently
spread over the course of the customer contract. Under IFRS 15 the
group's mobile contracts with customers include a number of
performance obligations. Typically these include an obligation to
provide a hardware fund to the end users. Revenue recognition under
IFRS 15 is likely to be at a point in time which is different to
the current treatment.
- Contracts with customers which include both supply of
technology goods and installation services may in substance
represent one performance obligation under IFRS 15 and result in
revenue recognition at a point in time which is different to the
current treatment whereby the supply of goods and professional
services are treated as separate sale arrangements.
- Finance costs on upfront payments from customers: Deferred
revenue is currently recognised within liabilities when customers
are invoiced by the group in advance of services being provided.
Under IFRS 15, there may be a requirement to recognise a finance
cost in connection with payments received up front from customers
ahead of services being provided.
Further detailed analysis needs to be performed during H2 2017
on each of the above matters, as well as the group's other revenue
streams in assessing the impact of any changes to revenue
recognition policies to the transfer of control concept under IFRS
15.
The Group's results are not materially affected by seasonal
variations.
The comparative financial information presented herein for the
year ended 31 December 2016 does not constitute full statutory
accounts for that period. The Group's annual report and accounts
for the year ended 31 December 2016 have been delivered to the
Registrar of Companies. The Group's independent auditor's report on
those statutory accounts was unqualified, did not draw attention to
any matters by way of emphasis, and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006.
The financial information for the half-years ended 30 June 2017
and 30 June 2016 is unaudited but has been subject to a review in
accordance with International Standard on Review Engagements (UK
and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity".
In preparing the interim financial statements the directors have
considered the Group's financial projections, borrowing facilities
and other relevant financial matters, and the board is satisfied
that there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the directors continue to adopt the going
concern basis in preparing the financial statements.
2. Segmental information
For management reporting purposes and operationally, the Group
consists of three business segments: (i) telecommunications managed
service and technology sales, (ii) telecommunications network
services, and (iii) mobile services. Each segment applies its
respective resources across inter-related revenue streams which are
reviewed by management collectively under these headings. The
businesses of each segment and a further analysis of revenue are
described under their respective headings in the business
review.
The chief operating decision maker has been identified as the
board, which assesses the performance of the operating segments
based on revenue and gross profit.
Six months to 30 June 2017 (unaudited)
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 35,972 24,268 3,586 - 63,826
============ =========== ========= ========= =========
Gross profit 10,942 7,000 1,664 - 19,606
------------ ----------- --------- ---------
Other operating
income 77
Other administrative
expenses (12,967)
Intangibles amortisation (2,898)
Exceptional costs (150)
---------
Operating profit 3,668
Interest (net) (452)
---------
Profit before taxation 3,216
Taxation expense (633)
Profit after taxation 2,583
=========
Further analysis of revenue streams is shown in the business
review.
The board does not regularly review the aggregate assets and
liabilities of its segments and accordingly, an analysis of these
is not provided.
Intercompany trading consists of telecommunications services,
and recharges of sales, engineering and rent costs, GBPNil (H1
2016: GBP46,000) attributable to the managed service and technology
segment, GBPNil (H1 2016: GBP41,000) to the network services
segment and GBPNil (H1 2016: GBP3,000) to the mobile segment.
Managed Central/
service Network inter-
and technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Intangibles amortisation - - - 2,898 2,898
Exceptional costs 150 - - - 150
================ ========== ========= ========= =======
Six months to 30 June 2016 (unaudited)
Managed Central/
service Network inter-
and technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 23,782 11,658 2,710 (90) 38,060
================ =========== ========= ========= =========
Gross profit 8,544 3,197 1,440 (82) 13,099
---------------- ----------- --------- ---------
Other operating
income 75
Other administrative
expenses (9,017)
Intangibles amortisation (1,752)
Exceptional costs (2,806)
---------
Operating loss (401)
Interest (net) (295)
---------
Loss before taxation (696)
Taxation expense (290)
Loss after taxation (986)
=========
Managed Central/
service Network inter-
and technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Intangibles amortisation 111 - - 1,641 1,752
Exceptional costs 319 - - 2,487 2,806
================ =========== ======== ========= =======
Year ended 31 December 2016 (audited)
Managed Central/
service Network inter-
and technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 64,109 37,395 6,947 (155) 108,296
================ =========== ========= ========= =========
Gross profit 21,408 10,257 3,385 (137) 34,913
---------------- ----------- --------- ---------
Other operating
income 151
Other administrative
expenses (23,064)
Intangibles amortisation (4,733)
Exceptional costs (4,240)
---------
Operating profit 3,027
Interest (net) (920)
---------
Profit before taxation 2,107
Taxation expense (13)
Profit after taxation 2,094
=========
Managed Central/
service Network inter-
and technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Intangibles amortisation 191 - - 4,542 4,733
Exceptional costs 2,305 - 76 1,859 4,240
================ =========== ======== ========= =======
Revenue is wholly attributable to the principal activities of
the Group and other than sales of GBP8.8m to EU countries and
GBP1.0m to the rest of the world, arises within the United
Kingdom.
Intercompany trading consists of telecommunications services,
and recharges of sales, engineering and rent costs, GBP0.1m
attributable to the managed service and technology segment, GBP0.1m
to the network services segment and immaterial amounts to the
mobile segment.
3. Earnings per share
Earnings per share is calculated by dividing the profit / (loss)
after tax for the period by the weighted average number of shares
in issue for the period, these figures being as follows:
6 months 6 months Year
to 30 to 30 to 31
June 2017 June 2016 December
2016
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Earnings used in basic and
diluted EPS, being profit
/ (loss) after tax 2,583 (986) 2,094
Adjustments: Amortisation
of intangibles 2,898 1,752 4,733
Exceptional costs (note 6) 150 2,806 4,240
Tax relating to above adjustments (665) (934) (1,333)
Deferred tax charge on Datapoint
profits 262 239 504
Increase in deferred tax asset
in respect of Datapoint losses - - (500)
Deferred tax charge on utilisation
of Azzurri tax losses - - 642
Deferred tax charge on Azzurri
capital allowances 194 311 100
Decrease in deferred tax liability
of intangible assets - - (275)
------------ ------------ ----------
Adjusted earnings used in
adjusted EPS 5,422 3,188 10,205
============ ============ ==========
The adjustments above have been made in order to provide a
clearer picture of the trading performance of the Group.
Datapoint has brought forward historic tax losses, which the
Group will benefit from in respect of its 2017 taxable profits. On
acquisition and subsequently in 2016, a deferred tax asset was
recognised in respect of its tax losses, and a deferred tax charge
has been recognised in the income statement in respect of the
period's profits. As this does not reflect the reality and benefit
to the Group of the non-taxable profits, the deferred tax charge is
adjusted above.
Azzurri has brought forward historic tax capital allowances,
which the Group will benefit from in respect of its 2017 taxable
profits. On the acquisition of Azzurri, a deferred tax asset was
acquired in respect of its capital allowances, and a deferred tax
charge has been recognised in the income statement in respect of
the period's profits. As this does not reflect the reality and
benefit to the Group of the non-taxable profits, the deferred tax
charge is adjusted above.
6 months 6 months Year
to 30 to 30 to 31
June June 2016 December
2017 2016
Number Number Number
(000s) (000s) (000s)
Weighted average number of
ordinary shares of 1p each 14,197 11,993 13,092
Potentially dilutive shares 263 200 204
--------- ----------- ----------
14,460 12,193 13,296
========= =========== ==========
Profit / (loss) per share
Basic 18.2p (8.2p) 16.0p
Diluted 17.9p (8.2p) 15.8p
Adjusted - basic after the
adjustments in the table above 38.2p 26.6p 78.0p
Adjusted - diluted after the
adjustments in the table above 37.5p 26.1p 76.8p
====== ======= ======
In calculating diluted earnings per share, the weighted average
number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares. The Group has one
category of potentially dilutive ordinary share, being those share
options granted to employees where the exercise price is less than
the average price of the Company's ordinary shares during the
period.
4. Earnings before interest, tax, depreciation and amortisation (EBITDA)
The following table shows the calculation of EBITDA and adjusted
EBITDA:
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Profit / (loss) before tax 3,216 (696) 2,107
Net interest payable 452 295 920
Depreciation of property,
plant and equipment 351 195 598
Amortisation of intangibles 2,898 1,752 4,733
------------ ------------ ----------
EBITDA 6,917 1,546 8,358
Exceptional costs (note 6) 150 2,806 4,240
Adjusted EBITDA 7,067 4,352 12,598
============ ============ ==========
5. Dividends
6 months 6 months Year
to 30 to 30 to 31
June June December
2017 2016 2016
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Dividends paid
Second interim 2015, paid
5 April 2016
- 16.5p per share - 1,777 1,777
Interim 2016, paid 12 October
2016
- 13.4p per share - - 1,902
Final 2016, paid 18 May 2017
- 17.4p per share 2,470 - -
2,470 1,777 3,679
============ ============ ==========
The directors propose the payment of an interim dividend for
2017 of 14.7p (2016: 13.4p) per ordinary share, payable on 5
October 2017 to shareholders on the register at 22 September 2017.
The cost of the proposed dividend, based on the number of shares in
issue as at 8 September 2017, is GBP2.1m (2016: GBP1.9m).
6. Exceptional costs
On 4 May 2016, the Company acquired the entire issued share
capital of Warden Holdco Limited whose principal trading entity was
Azzurri Communications Limited. Legal and professional costs of
GBP2.5m were incurred by Maintel in 2016 in relation to the
acquisition, together with redundancy costs of GBP1.3m as a result
of synergies achieved pre and post-acquisition and other costs of
GBP0.4m. Further redundancy costs of GBP0.5m were incurred in H1
2017 offset by a credit release associated with an old payable no
longer required of GBP0.3m, resulting in a net cost of GBP0.2m
being expensed. These costs have been treated as exceptional in the
income statement as they are not normal operating expenses and are
non-recurring costs.
7. Borrowings
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Non-current bank loan - secured 24,724 30,652 30,688
============ ============ ============
On 8 April 2016 the Group entered into new facilities with the
Royal Bank of Scotland plc to support the acquisition of Azzurri.
These consist of a revolving credit facility totalling GBP36.0m in
committed funds on a reducing basis for a five year term (with an
option to borrow up to a further GBP20.0m in uncommitted accordion
facilities) and replaced the Company's previous term and revolving
credit facilities with Lloyds Bank plc which were fully repaid and
terminated. During the periods to 30(th) June 2016 and 31 December
2016, amounts drawn down on the facilities totalled GBP31.0m.
During the period to 30 June 2017, the group made repayments of
GBP6.0m.
Under the terms of the facility agreement, the committed funds
reduce to GBP31.0m on the three year anniversary, and to GBP26.0m
on the four year anniversary from the date of signing.
The non-current bank loan above is stated net of unamortised
issue costs of debt of GBP0.3m (30 June 2016: GBP0.3m; 31 December
2016: GBP0.3m).
8. Post balance sheet event.
On 1 August 2017, the acquisition of the entire share capital of
Intrinsic Technology Limited was completed for a consideration of
GBP5.25m on a cash-free, debt-free basis. The acquisition was
funded by an extension to, and draw-down under, the Company's
existing revolving credit facility with the Royal Bank of Scotland
plc (the "RCF"). The RCF has been increased by GBP6m to GBP42m.
INDEPENT REVIEW REPORT TO MAINTEL HOLDINGS PLC
Introduction
We have been engaged by the company to review the financial
information in the interim results for the six months ended 30 June
2017 which comprises the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
consolidated statement of changes in equity, the consolidated
statement of cash flows, and explanatory notes ("the financial
information").
We have read the other information contained in the interim
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the financial information.
Directors' responsibilities
The interim results, including the financial information
contained therein, are the responsibility of and have been approved
by the directors. The directors are responsible for preparing the
interim results in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the financial information in the interim results based on our
review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the financial information in the interim
results for the six months ended 30 June 2017 is not prepared, in
all material respects, in accordance with the rules of the London
Stock Exchange for companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
London
United Kingdom
8 September 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QVLFBDKFFBBF
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