Final Results

RNS Number : 6430Z

Maintel Holdings PLC

11 March 2013

 



Maintel Holdings Plc

Preliminary results for the year to 31 December 2012

Maintel Holdings Plc, the telecoms and data services company, announces preliminary results for the year to 31 December 2012. 

Financial highlights

Audited results for year ended 31 December:	2012	2011	Increase
Group revenue	£28.2m	£25.9m	9%
Adjusted[1] profit before tax	£4.97m	£3.95m	26%
Adjusted[2] earnings per share	35.1p	27.5p	28%
Final dividend proposed	7.3p	6.0p	22%
Dividend for the year	13.6p	10.6p	28%
Year end cash	£1.94m	£2.95m

Operational highlights

·      Operating gross margin % up in all 3 Divisions

·      Recurring revenues to £21.7m, 77% of total revenue

·      Group delivered a 4.5% organic growth in H2 year on year

·      19% improvement in engineer productivity levels year on year

Notes

[1] adjusted profit before tax is basic profit before tax of £1.405m (2011 - £3.084m), adjusted for intangibles amortisation and non-trading adjustments relating to the acquisition of the mobile business in October 2011 and the Redstone acquisition in 2010 shown in the business review

[2] adjusted earnings per share is basic earnings per share of 3.4p (2011 - 20.0p), adjusted for intangibles amortisation and the non-trading mobile business and Redstone adjustments 

For further information please contact:

Eddie Buxton, Chief Executive                                          020 7401 4601

Dale Todd, Finance Director                                              020 7401 0562

FinnCap
Charlotte Stranner (Corporate Finance)	020 7220 0500
Brian Patient (Corporate Broking)	020 7220 0500

Chairman's statement

I am happy to report that Maintel grew its revenues by 9% in 2012 to £28.2m (2011- £25.9m) resulting in a 26% increase in adjusted profits to £4.97m (2011 - £3.95m) which equates to adjusted earnings per share of 35.1p, a 28% increase on the previous year's figure of 27.5p. Our recurring revenue grew by 12% to £21.7m and now represents 77% of overall revenues up from 76% at the end of 2011.

Revenues from maintenance and equipment sales had a slow year overall but improved significantly in the second half; the network services division performed very satisfactorily, growing by 11% for the year with gross profits up 14% and margins improving from 28.4% to 28.9%. Our new mobile business, acquired in October 2011, produced in its first full year revenues of £2.94m and has integrated well into the broader business.

As reported in our interim results, the anticipated winding down of two substantial fixed term maintenance contracts caused attrition levels to run at a higher than usual level, especially in the first half. The second half saw this trend improve and a large new business win midway through the year meant that our maintenance base grew slightly at year-end compared with its 8% decline in 2011. We anticipate attrition to return to more modest levels in 2013 and are well positioned to facilitate customers' upgrading their equipment to newer technologies which require less engineering support. This shift has already helped our cost base in the maintenance division and should produce further benefits in 2013. Equipment sales also enjoyed a stronger second half with £3.66m of revenues, up from £2.78m in the first half leaving the year more or less flat with 2011. We entered the new year with good order visibility for equipment sales.

Maintel Mobile has performed satisfactorily and seen a pleasing rate of post-acquisition customer renewals. We were gratified to be awarded Platinum Dealer status by Vodafone in July. The cross selling opportunities that we expected in adding a mobile offering have made a promising start and we have actively managed the client base to replace smaller customers using fewer connections with larger, higher revenue customers. For the year the total number of connections managed by the company increased by 4% to 13,859.

Cash generation remained strong, with adjusted net cash flow from operating activities (as described in the Business review) up 48% to £3.678m. We ended the year with £1.9m in cash and no debt, having paid a further £3.3m in consideration for last year's mobile acquisition, Totility Ltd, leaving a final payment of £900,000 which was made at the beginning of 2013. The board proposes a final dividend of 7.3p, bringing the total payable for the year to 13.6p (2011: 6.0p and 10.6p), which will be paid on 25 April to shareholders on the register on 22 March.

We enter the new year optimistic that the economic environment will allow modest organic growth and vigilant for sensibly priced acquisitions that would add to our business.

I am grateful to all my colleagues for their hard work and enthusiasm that has contributed to Maintel's success in the past year and thank our shareholders for their continuing support.

J D S Booth

Chairman

8 March 2013

Business review

Results

Against a challenging market backdrop, 2012 has been another successful year for Maintel, with adjusted profits (as described below) of £4.970m (2011 - £3.946m), an increase of 26%, with a consequent increase in adjusted EPS of 28% to 35.1p (2011 - 27.5p).

Unadjusted profits were £1.405m in the year (2011 - £3.084m) and unadjusted EPS 3.4p (2011 - 20.0p), the main difference between the two figures being the expensing under accounting standards of contingent consideration payments relating to the acquisition of the mobile division in October 2011, together with the regular amortisation of intangible assets. 

Revenue increased by 9% over the previous year to £28.2m (2011 - £25.9m) with a strong showing from the mobile and network services divisions more than compensating for the slower year experienced by the maintenance and equipment division.  With the inclusion of a full year's revenue from the mobile division, total recurring revenue (maintenance, network services and mobile) increased by 12% in the year to £21.7m (77% of total revenues; 2011 - 76%).  Excluding the impact of the acquisition of the mobile division, the Group returned to healthy levels of year-on-year organic revenue growth in H2.

The Group's cash flows remained strong, with significant growth in adjusted (as described below) net cash flows from operating activities of £3.678m (2011 - £2.488m) in the period, aided by the growth in profits and strong working capital control. The Group ended the year with net cash of £1.941m despite a payment of £2.3m during the year to the vendors of the mobile division by way of contingent consideration.

	H1 2012	H2 2012	2012		2011	Increase/
	£000	£000	£000		£000	(decrease)
Revenue	13,490	14,681	28,171		25,914	9%
Profit before tax	195	1,210	1,405		3,084	(54)%
Add back customer relationship intangibles amortisation	370	361	731		491
Contingent consideration re Maintel Mobile treated as remuneration (note 6)	1,789	1,045	2,834		366
Non-trading accounting adjustments re Redstone acquisition (note 4)	-	-	-		(141)
Adjustment to Redstone contingent consideration (note 4)	-	-	-		67
Costs relating to the acquisition of Maintel Mobile	-	-	-		79
Adjusted profit before tax	2,354	2,616	4,970		3,946	26%
Basic earnings per share	(2.8)p	6.2p	3.4p		20.0p	(83)%
Diluted	(2.8)p	6.2p	3.4p		19.9p	(83)%
Adjusted earnings per share*	16.6p	18.5p	35.1p		27.5p	28%
Diluted	16.4p	18.3p	34.7p		27.4p	27%

* Adjusted profit after tax divided by weighted average number of shares (note 4).

Revenue analysis (£000)	2012	2011	Increase/ (decrease)
Maintenance related	12,246	12,948	(5)%
Equipment, installations and other	6,435	6,492	(1)%
Total maintenance and equipment division	18,681	19,440	(4)%
Network services division	6,730	6,036	11%
Mobile division	2,941	601	n/a*
Intercompany	(181)	(163)
Total Maintel Group	28,171	25,914	9%

* 2011 is for approximately 10 weeks only

Divisional performance is described further below.

Maintenance and equipment division

The maintenance and equipment division provides maintenance, service and support of office-based voice and data equipment across the UK on a contracted basis.  It also supplies and installs voice and data equipment to maintenance customers, both to our direct clients and into our partner customers.

 

The division's revenues recovered strongly in H2 to record only a 4% reduction in the year with a reduction in maintenance related revenue of 5% and in equipment sales by 1%. In the second half, equipment revenues in particular saw a strong rebound on H1 levels.

Maintenance

As highlighted previously, we saw two large short-term contracts wind down during the year so that the revenue associated with those customers was negligible by the end of 2012.  In addition, and as noted at the half year, we saw higher than usual customer attrition in H1, which was largely compensated by the winning of a major long-term contract that commenced 1 June and saw the year end maintenance base increase to £12.3m compared with £12.2m at the start of the year. This temporary dip in the base in H1 and the reduction in the base in 2011 (from £13.2m at the start of the year to £12.2m at the end) resulted in the lower maintenance revenue in the year.  Although we expect to lose a further two larger maintenance contracts in 2013 as the customers transition to alternative technology, we expect customer attrition levels to be materially improved versus the levels we experienced in 2012.

During 2012 we have seen a planned and significant shift by some larger customers from legacy PBX maintenance to the newer IP based technology maintenance with the awarding of four enterprise customer network contracts which include multi-media contact centre contracts and data. This is a trend we expect to continue into 2013.

Equipment sales

Equipment revenues decreased by 1% to £6.435m (2011 - £6.492m). After a weaker H1 sales performance, H2 saw a significant rebound with revenue of £3.657m (H1 2012 - £2.778m) during the period.

In line with general sector trends, we have seen some lengthening of sales cycles in the enterprise and public sectors. Despite this, with a strong pipeline of orders signed but not completed, we are entering 2013 with good levels of visibility for this division.

We have been awarded projects to consolidate and transform the communications infrastructure of two major public sector organisations and a hosted IP PBX contract utilising the latest virtualised server technology for a large multi-site commercial enterprise. Our consultancy and professional services work remains strong as our partner business continues to prosper.

The marginal increase in the sales and customer service headcount across the division shown below has arisen from an enhancement of the sales resource and an increase in customer service personnel to ensure adequate service is provided on some new contracts with higher service level agreements than normal.  The reduction in average engineer headcount is partly due to (i) a review undertaken in July 2011 resulting in H2 2011 redundancies, (ii) redundancies of resident engineers associated with the previously mentioned large short-term contracts that were lost during the year (iii) the increase in remote fault fix levels (where no engineer is required on site) as new technology is rolled out to our customer base improving engineer utilisation.

Headcount	Average 2012	Average 2011*	At 31 December 2012
Sales and customer service	53	52	55
Engineers	90	97	87

* excluding redundant Redstone employees

	2012	2011	Decrease
Division gross profit (£000)	7,017 (38%)	7,063 (36%)	(1)%

Margin for the maintenance and equipment division as a whole increased from 36.3% to 37.6%, with the headcount reductions and the business mix both playing their parts in this improvement. 

Given the application of common resource across both maintenance and equipment sales, it is not practical to quote definitive margin data on the separate business sectors; however management figures are used to monitor constituent elements internally.

Network services division

The network services division sells a portfolio of services which includes telephone line rental, inbound and outbound telephone calls, data connectivity, internet access and hosted IP telephony solutions.  These services complement those offered by the maintenance and equipment division.

Revenue analysis (£000)	2012	2011	Increase/ (decrease)
Call traffic	2,656	2,613	2%
Line rental	2,979	2,457	21%
Data services	799	660	21%
Other	296	306	(3)%
Total network services	6,730	6,036	11%

	2012	2011	Increase
Division gross profit (£000)	1,945 (29%)	1,713 (28%)	14%

Bucking the overall market trend, the Group has continued to see strong growth in its network services division. With further growth in H2, the division's revenue increased by £694,000, or 11%, in the year. The second half benefited from the signing of a large contract for both call traffic and leased line rental revenue and this should continue to benefit revenues in 2013.

Call minutes billed increased year on year, and despite continued pressure on rates including the reduction in mobile termination rates, overall call revenue also increased slightly. Within this call revenue figure, new business growth was strong and there were very low levels of attrition during the period, with no major customers terminating in the year. The trends of previous years continued, with a healthy increase in line rental revenues and the growth in data connectivity revenues, which delivered a 21% increase year on year and now constitute 12% of the division's total revenue.

With call rates continuing to fall, the strategic shift towards providing customers with data connectivity, VoIP services and inbound call services continues to be a focus for the division and 2012 showed significant progress being made in these areas. The focus here has been on IP based telephony, particularly SIP (Session Initiation Protocol) and our growing base of line rental customers which enables the transition from older PBX technology to hosted and other SIP technologies.

We have seen an increase in the number of new customers taking multiple products and existing customers being cross sold network services, particularly in the new SIP technology including a large charity and two established customers in the education sector.

Overall divisional gross margin increased from 28.4% to 28.9% during the year, through tight cost control and margin management particularly on the call traffic side of the business.

Mobile division

Maintel Mobile (the rebranded Totility acquisition) derives its revenues primarily from commissions received under its dealer agreements with Vodafone and O2, supplemented by revenue derived from ongoing customer monthly spend, with approximately 83% of connections at the end of 2012 under the Vodafone agreement and 17% under the O2 agreement.

Since it was acquired in October 2011, the mobile division has performed well. The focus in the period since acquisition has been on renewing existing customer contracts for the medium-term, whilst signing new customers where these have presented themselves, including a range of cross-sells to existing Maintel customers. One major cross sell during the year added over 600 connections to the base on its own.  Further success during the period came with Maintel Mobile being awarded the highest dealer status - Platinum - by Vodafone, and the division's largest O2 customer renewing its contract.

At 31 December 2012, the mobile division managed 13,859 (2011 - est13,387) connections, an increase of 472 (4%) in the period.  Whilst the number of customers has decreased year on year, this merely reflects the loss of some smaller customers with fewer connections on the managed base being replaced by larger, higher revenue customers with a greater number of total connections.

The results of the mobile division since acquisition have been as follows:

£000	2012	21 October to 31 December 2011
Revenue	2,941	601
Gross profit	1,602 (54%)	316 (53%)

	At 31 December 2012	At 31 December 2011	Increase/ (decrease)
Number of customers	1,042	1,164	(10)%
Number of connections	13,859	13,387	4%

In common with changes to terms with some of its other principal partners, one of the division's suppliers has announced that it plans to change its commercial arrangements such that commissions on new and re-signed connections are no longer to be received up front, to be replaced by anticipated higher commission levels spread over the lifetime of the customer contract. No firm date has been set for the new terms to take effect. Whilst in the near term such a change would impact short term revenues, profits and cash flow, over the course of the customer's lifetime it is anticipated that these changes would be more profitable to the Group.

As reported previously, the Group acquired 100% of the share capital of Totility Limited (since renamed Maintel Mobile Limited), a specialist UK mobile telecoms provider, on 21 October 2011, for an initial consideration of £2.8m and a further consideration of £1.0m representing the net asset value of the company at the date of acquisition, with further consideration of up to £4.0m payable dependent on its performance in the 12 months post-acquisition.  In order to allow greater flexibility in Maintel Mobile's commercial and operational dealings outside of the parameters set by the sale and purchase agreement, the Board concluded that an advance agreement of the amount due in respect of the additional consideration would be in the best interests of the Group and consequently agreed with the vendors a total additional consideration payment of £3.1m, of which £2.2m was paid on 31 October 2012 and £0.9m on 3 January 2013. Separately, a further payment of £0.1m was made on 10 July 2012 to the vendors under the terms of the sale and purchase agreement. As a result, the total consideration payable for the company was £7.0m including the net assets. 

The additional payment of £3.2m referred to above was conditional on the continued employment of one of the vendors of Maintel Mobile until 20 October 2012.  Under IFRS3 (Revised) this amount is charged to the income statement over the earnout period as employee costs, rather than being treated as deferred consideration on acquisition, with a consequent charge to the income statement of £2.834m in the period and £366,000 in 2011.

 

Administrative expenses, excluding intangibles amortisation and non-trading adjustments

Administrative expenses (£000)	2012	2011	Increase
Sales expenses	2,606	2,354	11%
Other administrative expenses (excluding intangibles amortisation, adjustment to acquisition consideration and accrued acquisition consideration)	2,837	2,612	9%
Total other administrative expenses	5,443	4,966	10%

Total other administrative expenses increased by £477,000 in the year, with a full year of Maintel Mobile costs being incurred, against approximately 10 weeks in 2011.  Other than this, administrative costs remained under tight control, with the main movement from 2011 relating to the legal fees incurred in that year in respect of the acquisition of Maintel Mobile.

Impairment and amortisation charges are discussed below.

The table below shows relevant headcount in relation to revenue.

	2012	2011*	Increase
Average Group headcount during the period	182	181	1%
Average sales and service headcount	69	61	13%
Average corporate and admin headcount	23	23	-%
Group revenue (£000)	28,171	25,914	9%

            * headcount figures exclude redundant Redstone employees in Q1 2011

Sales and service headcount has increased primarily due to the inclusion of Maintel Mobile employees for a full year and the enhancement of the sales resource and customer service personnel referred to earlier.

Interest

Net interest receivable reduced from £23,000 to £9,000 in 2012, with average cash balances being lower in 2012 due to the initial payment in respect of the Maintel Mobile acquisition in October 2011 and the subsequent earnout payment in October 2012, combined with the continuing low rates of interest achievable from acceptable financial institutions.

Taxation

The consolidated statement of comprehensive income shows a tax rate of 74% (2011 - 32%).  Each of the Group companies is taxed at 24.5% (2011 - 26.5%, with the exception of Maintel Mobile which was taxed at 26%).  Certain recurring expenses that are disallowable for tax raise the effective rate above this.  The rate is also inflated in the year by the adjustment for the £2.834m contingent consideration relating to the Maintel Mobile acquisition; excluding this the tax rate would be 24.6%.  In 2011 the rate was inflated by (a) the £67,000 adjustment to the Redstone consideration, (b) the £366,000 contingent consideration relating to the Maintel Mobile acquisition, and (c) the £79,000 costs of the Maintel Mobile acquisition not being tax-relievable, together with a proportion of the amortisation of the intangible relating to the District customer relationships.

Dividends

A final dividend for 2011 of 6.0p per share (£640,000 in total) was paid on 26 April 2012, and an interim dividend for 2012 of 6.3p (£672,000) was paid on 5 October 2012.

It is proposed to pay a final dividend of 7.3p in respect of 2012 on 25 April to shareholders on the register at the close of business on 22 March, representing a 22% increase on the 2011 final dividend. The corresponding ex-dividend date will be 20 March.  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 31 December 2012.

Consolidated statement of financial position

The consolidated statement of financial position remains sound, with £1.941m of cash (£900,000 of this payable to the Maintel Mobile vendors on 3 January 2013 as described above) and no debt at 31 December 2012.  

Adjusted net cash flows from operating activities grew significantly year on year, to £3.678m in 2012 (2011 - £2.488m) and cash at the year end amounted to £1.941m (2011 - £2.953m).  Cash flow movements are described later in the business review. 

Trade receivables have increased by £1.500m over the year, the main reason being the increased volume of business being conducted with a partner typically on 60 day credit terms. Prepayments have increased by £288,000 due largely to an increase in prepaid third party support contracts and accrued income relating to equipment installations spanning the year end of which there were more than in previous years.

The value of maintenance stock has reduced by £14,000 in the year, to £578,000, the net result of purchases, disposals and provisioning.  The value of stock held for resale has fallen from £130,000 to £114,000 reflecting different stages of invoicing and completion of the increased level of cross-period installations year to year.

Trade payables have increased by £1.332m since 31 December 2011, aided by delayed payments to three suppliers and higher payables due to the increased Q4 equipment sales levels.  Other tax and social security liability has increased by £98,000 largely due to the VAT liability on the higher Q4 invoicing than in 2011.

Accruals have fallen £506,000 year on year, with two prior year accruals associated with the Maintel Mobile acquisition - the £986,000 payment for net assets and the £366,000 accrual for contingent consideration -having been paid during the year. This more than exceeds the new accruals for the final £900,000 contingent consideration paid on 3 January 2013 having been established at 31 December 2012.

Deferred maintenance income has increased by £286,000, due mainly to the invoicing in mid-December of two larger new contracts.

The Group corporation tax liability reduced by £343,000 year on year, to £665,000, with the payment during the year of the accrued Maintel Mobile liability, that company previously not having to make payments on account. 

 

No significant expenditure has been required on plant and equipment during the period, with additions again broadly matching depreciation, the main expenditure having been on IT and routine office refurbishment.

Intangible assets

The Group has three intangible assets - (i) goodwill relating to the acquisition of Maintel Network Services Limited, (ii) an intangible asset represented by customer contracts and relationships acquired from District Holdings Limited, Callmaster Limited, Redstone and Maintel Mobile, (iii) goodwill relating to the District, Redstone and Maintel Mobile acquisitions. At 31 December 2011, a fourth intangible asset was recognised, being a licence for billing software which is now fully amortised; the software is now rented and is consequently treated as an operating lease. 

Goodwill of £1.026m (2011 - £1.026m) is carried in the consolidated statement of financial position, which is subject to an impairment test at each reporting date.  No impairment has been charged to the consolidated statement of comprehensive income in 2012 (2011 - £Nil). 

The intangible assets represented by purchased customer contracts and relationships were valued at £3.489m at 31 December 2012 (2011 - £4.220m).  These are subject to an amortisation charge of 17-20% of cost per annum in respect of maintenance contract relationships, and 14.2% per annum in respect of network services contracts and Maintel Mobile customer relationships, with £731,000 being amortised in 2012 (2011 - £491,000), the increase attributable to the Maintel Mobile customer relationships acquired in October 2011.

The billing software licence was amortised over a three year period.  The amortisation charge in the period was £11,000 (2011 - £32,000), leaving a carrying value of £Nil (2011 - £11,000) at year end.

Cash flow

At 31 December 2012 the Group had cash and bank balances of £1.941m (2011 - £2.953m), unrestricted other than £900,000 of this, representing the final payment due, on 3 January 2013, in respect of the acquisition of Maintel Mobile.

Adjusted cash generated from operating activities before tax grew significantly in the year to £5.180m (2012 - £3.314m), with £1.312m paid in dividends, £1.502m in corporation tax, and £3.286m on the Maintel Mobile acquisition and a net overall outflow of £1.012m in the year.

£2.3m was paid during the year in respect of contingent consideration relating to the acquisition of Maintel Mobile and under accounting rules this has been expensed in the income statement.  To arrive at a more meaningful measure of cash generated from operating activities, in the Chairman's statement and Business review this has been added back to the cash flows shown in the statement of cash flows as follows:

	Unadjusted	Adjusted
Cash generated from operating activities	£2.880m	£5.180m
Net cash flows from operating activities	£1.378m	£3.678m

The Group has no debt and invests its surplus cash with mainstream banking organisations.

The Group established a revolving credit facility of £1.5m in October 2011 with J D S Booth, the Group's chairman, however no monies have been drawn against this. Any amounts drawn would be unsecured, carry an interest rate of 6.5 per cent and be repayable by 30 June 2013.

Outlook

Whilst we do not expect the challenging market conditions to abate in the short term, we have made good progress during the year with the integration of mobile into our service offering and moving our business to newer technologies.  Alongside the recovery in H2 revenues and our return to organic growth during this period, we are cautiously optimistic about the year ahead.

Through the strengthening of our sales resource we are well placed to continue to take advantage of our strategy to realise the cross selling opportunity into our existing customer base. In addition, our partner business continues to expand and is now well balanced across a number of major partners and technologies.

We remain alert and well positioned to consider further acquisitions in a market that we anticipate will see further consolidation in 2013.

E Buxton

Chief Executive

8 March 2013

Maintel Holdings Plc

Consolidated statement of comprehensive income

for the year to 31 December 2012

		2012	2011
	note	£'000	£'000
Revenue	3	28,171	25,914
Cost of sales		17,756	16,931
Gross profit		10,415	8,983
Administrative expenses
Adjustment to contingent consideration	4	-	67
Contingent consideration treated as remuneration	6	2,834	366
Intangibles amortisation		742	523
Other administrative expenses		5,443	4,966
		9,019	5,922
Operating profit	3	1,396	3,061
Financial income		9	23
Profit before taxation		1,405	3,084
Taxation		1,043	977
Profit and total comprehensive income attributable to owners of the parent		362	2,107
Earnings per share
Basic	4	3.4p	20.0p
Diluted	4	3.4p	19.9p

 

 

Maintel Holdings Plc

Consolidated statement of financial position 

as at 31 December 2012

		2012	2011
		£'000	£'000
Non current assets
Intangible assets		4,515	5,257
Property, plant and equipment		216	224
		4,731	5,481
Current assets
Inventories		692	722
Trade and other receivables		5,793	4,019
Cash and cash equivalents		1,941	2,953
		8,426	7,694
Total assets		13,157	13,175
Current liabilities
Trade and other payables		9,203	7,827
Current tax liabilities		665	1,008
Total current liabilities		9,868	8,835
Non current liabilities
Deferred tax liability		581	697
Total net assets		2,708	3,643
Equity
Issued share capital		107	107
Share premium		1,028	1,013
Capital redemption reserve		31	31
Retained earnings		1,542	2,492
Total equity		2,708	3,643

Maintel Holdings Plc

Consolidated statement of changes in equity

for the year to 31 December 2012

	Share capital	Share premium	Capital redemption reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1 January 2011	105	628	31	1,350	2,114
Profit and total comprehensive income for the year	-	-	-	2,107	2,107
Dividend	-	-	-	(965)	(965)
Issue of new ordinary shares	2	385	-	-	387
At 31 December 2011	107	1,013	31	2,492	3,643
Profit and total comprehensive income for the year	-	-	-	362	362
Dividend	-	-	-	(1,312)	(1,312)
Issue of new ordinary shares	-	15	-	-	15
At 31 December 2012	107	1,028	31	1,542	2,708

Maintel Holdings Plc

Consolidated statement of cash flows

for the year to 31 December 2012

	2012	2011
	£'000	£'000
Operating activities
Profit before taxation	1,405	3,084
Adjustments for:
Intangibles amortisation	742	523
Depreciation charge	124	107
Loss on disposal of tangible fixed assets	-	15
Interest received	(9)	(23)
Operating cash flows before changes in working capital	2,262	3,706
Decrease in inventories	30	284
Increase in trade and other receivables	(1,774)	(109)
Increase/(decrease) in trade and other payables	2,362	(567)
Cash generated from operating activities	2,880	3,314
Tax paid	(1,502)	(826)
Net cash flows from operating activities	1,378	2,488
Investing activities
Purchase of plant and equipment	(116)	(125)
Purchase price in respect of business combination	(986)	(2,435)
Net cash acquired with subsidiary undertaking	-	1,508
	(986)	(927)
Interest received	9	23
Net cash flows from investing activities	(1,093)	(1,029)
Financing activities
Issue of new ordinary shares	15	-
Equity dividends paid	(1,312)	(965)
Net cash flows from financing activities	(1,297)	(965)
Net (decrease)/increase in cash and cash equivalents	(1,012)	494
Cash and cash equivalents at start of period	2,953	2,459
Cash and cash equivalents at end of period	1,941	2,953

Maintel Holdings Plc

Notes to the preliminary statement

1.   Basis of preparation

The financial information set out in these preliminary results does not constitute the company's statutory accounts for 2011 or 2012.

Statutory accounts for the years ended 31 December 2012 and 31 December 2011 have been reported on by the Independent Auditors.  The Independent Auditors' Report on the Annual Report and Financial Statements for 2012 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.

Statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies.  The statutory accounts for the year ended 31 December 2012 will be delivered to the Registrar in due course.

2.   Accounting policies

The financial information set out in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in this results announcement have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the period ended 31 December 2012.  The principal accounting policies adopted are unchanged from those used in the preparation of the statutory accounts for the period ended 31 December 2011.

3.   Segmental analysis

For management reporting purposes and operationally, the Group consists of three business segments: (i) telephone maintenance and equipment sales, (ii) telephone network services, and (iii) mobile services (this division having been acquired 21 October 2011).  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.

Year to 31 December 2012

		Maintenance and equipment		Network services		Mobile		Central/ inter- company		Total
		£'000		£'000		£'000		£'000		£'000
Revenue		18,681		6,730		2,941		(181)		28,171
Operating profit before customer relationship and software intangibles amortisation and adjustments		3,272		983		813		(96)		4,972
Customer relationship and software intangibles amortisation		(264)		(59)		-		(419)		(742)
Operating profit before adjustments		3,008		924		813		(515)		4,230
Contingent consideration treated as remuneration (note 6)		-		-		-		(2,834)		(2,834)
Operating profit		3,008		924		813		(3,349)		1,396
Interest income											9
Profit before taxation											1,405
Taxation											(1,043)
Profit after taxation											362

Revenue is wholly attributable to the principal activities of the Group and other than sales of £23,000 (2011 - £20,000) to other EU countries arises predominantly within the United Kingdom.

Maintenance and equipment revenue consists of maintenance related revenue of £12.246m and equipment, installation and other revenue of £6.435m (2011 - £12.948m and £6.492m).  Network services revenue consists of call traffic revenue of £2.656m, line rental revenue of £2.979m, data services revenue of £0.799m and other revenue of £0.296m (2011 - £2.613m, £2.457m, £0.660m and £0.306m).  Mobile revenue consists principally of commissions receivable from network operators.

Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent costs, £90,000 (2011 - £48,000) attributable to the Maintenance and equipment segment, £85,000 (2011 - £115,000) to the Network services segment and £6,000 (2011 - £Nil) to the Mobile division.

In 2012 the Maintenance and equipment division had one customer (2011 - One) which accounted for more than 10% of its revenue, totalling £3.184m (2011 - £5.021m).

	Maintenance and equipment	Network services	Mobile	Central/ inter- company	Total
	£'000	£'000	£'000	£'000	£'000
Other
Capital expenditure	113	-	2	-	115
Depreciation	121	-	3	-	124
Amortisation	264	59	-	419	742

Year to 31 December 2011

		Maintenance and equipment		Network services		Mobile		Central/ inter- company		Total
		£'000		£'000		£'000		£'000		£'000
Segment revenue before adjustment		19,299		6,036		601		(163)		25,773
Redstone deferred income less costs		141		-		-		-		141
Revenue		19,440		6,036		601		(163)		25,914
Operating profit before customer relationship and software intangibles amortisation and adjustments		3,008		793		171		(17)		3,955
Customer relationship and software intangibles amortisation		(273)		(80)		-		(170)		(523)
Operating profit before adjustments		2,735		713		171		(187)		3,432
Adjustment to contingent consideration (note 4)		-		-		-		(67)		(67)
Redstone deferred income less costs (note 4)		141		-		-		-		141
Contingent consideration treated as remuneration (note 6)		-		-		-		(366)		(366)
Costs relating to acquisition of Maintel Mobile		-		-		-		(79)		(79)
Operating profit		2,876		713		171		(699)		3,061
Interest income											23
Profit before taxation											3,084
Taxation											(977)
Profit after taxation											2,107

	Maintenance and equipment	Network services	Mobile	Central/ inter- company	Total
	£'000	£'000	£'000	£'000	£'000
Other
Capital expenditure	125	-	-	-	125
Depreciation	106	-	1	-	107
Amortisation	273	80	-	170	523

4.   Earnings per share

Earnings per share is calculated by dividing the profit after tax for the period by the weighted average number of shares in issue for the period, these figures being as follows:

	2012	2011
	£'000	£'000
Earnings used in basic and diluted EPS, being profit after tax	362	2,107
Adjustments: Amortisation of intangibles	731	491
Non-trading accounting adjustments re Redstone acquisition	-	(141)
Adjustment to contingent consideration on Redstone acquisition	-	67
Contingent consideration treated as remuneration (note 6)	2,834	366
Costs relating to the acquisition of Maintel Mobile	-	79
Tax relating to above adjustments	(185)	(76)
Adjusted earnings used in adjusted EPS	3,742	2,893
	2012	2011
	Number     (000s)	Number        (000s)
Weighted average number of ordinary shares of 1p each	10,671	10,521
Potentially dilutive shares	121	41
	10,792	10,562

Earnings per share
Basic	3.4p	20.0p
Basic and diluted	3.4p	19.9p
Adjusted - basic but after the adjustments in the table above	35.1p	27.5p
Adjusted - basic and diluted after the adjustments in the table above	34.7p	27.4p

The adjustments above have been made in order to provide a clearer picture of the trading performance of the Group.

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.

The two adjustments in 2011 relating to Redstone are adjustments to revenue and costs in respect of the acquisition of business and assets during 2010.

5.   Dividends

			2012		2011
			£'000		£'000
Dividends paid
Final 2010, paid 28 April 2011
- 4.6p per share		-				482
Interim 2011, paid 7 October 2011
- 4.6p per share		-				483
Final 2011, paid 26 April 2012
- 6.0p per share		640				-
Interim 2012, paid 5 October 2012
- 6.3p per share		672				-
			1,312			965

The directors propose the payment of a final dividend for 2012 of 7.3p (2011 - 6.0p) per ordinary share, payable on 25 April 2013 to shareholders on the register at 22 March 2013.  The cost of the proposed dividend, based on the number of shares in issue as at 8 March 2013, is £779,000 (2011 - £640,000).

6.   Acquisition of Maintel Mobile

As described in the Business review, a contingent payment of £3.2m was payable in respect of the acquisition of Maintel Mobile Limited in October 2011.

Under IFRS3 (Revised) this amount is charged to the income statement over the earnout period as employee costs, rather than being treated as deferred consideration on acquisition, with a consequent charge to the income statement of £2.834m in 2012 and £366,000 in 2011.

7.         The annual report and accounts will be posted to shareholders in due course and copies will also be available on the Group's web site www.maintel.co.ukand on request from the Company's registered office at 61 Webber Street, London SE1 0RF.

 

END

 

 

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