Interim Results

Maintel Holdings PLC 07 September 2006 Maintel Holdings Plc Interim results for the six months to 30 June 2006 Maintel Holdings Plc, the telecoms services company, announces interim unaudited results for the six months to 30 June 2006. Financial highlights Turnover up 20% at Â£7.063m (2005: Â£5.901m), with underlying growth across the group, supplemented by Â£266,000 of the London Probation Board VoIP contract announced in February 2006 Voice and data division gross profit grown by 40% over 2005 H1 Earnings per share before amortisation of goodwill of 5.3p (2005: 5.0p); after amortisation, earnings per share were 5.1p (2005: 5.0p) Interim dividend proposed of 2.1p per share (2005: 1.5p) Cash balances at 30 June 2006 of Â£3.573m (31 December 2005: Â£3.625m) Operational highlights Enhanced network services portfolio has resulted in significant growth in the voice and data division Contracted maintenance revenues running at record levels, following the signing of a number of larger new contracts, and the acquisition of District Holdings Limited Significant VoIP equipment sales into existing customers including the London Probation Board project District Holdings Limited acquired in June 2006 for Â£1.060m cash, including transaction costs John Booth, Chairman, said: 'Our planned focus on top line sales is starting to show results with turnover increasing strongly. Continued investment in sales combined with the District acquisition will impact positively for the remainder of 2006' For further information please contact: Tim Mason, Chief Executive 020 7401 4601 Dale Todd, Finance Director 020 7401 0562 Chairman's statement Maintel's turnover grew strongly in the first half of 2006 thanks to our increased investment in sales capacity and a number of significant client wins. Growth was particularly strong in our voice and data business where turnover was up 60% thanks to an enhanced product and services portfolio and to the acquisition at the end of 2005 of Pinnacle Voice and Data Limited. We also completed in June the acquisition of a local competitor of our maintenance business, District Holdings Limited. We are confident that these developments will lead to continued growth in the second half of the year and position us well for the future. For the first half of the current year, Group turnover growth of 20% resulted in pre-goodwill earnings per share moving from 5.0p to 5.3p. Cash balances remain strong and we are comfortable that the recent acquisition has integrated quickly and will deliver in line with our expectations. Dividend In line with our policy of paying out around 40% of after-tax earnings as a dividend to our shareholders, and given our confidence in the second half outturn, we are proposing an interim dividend of 2.1p per share to be paid on 29 September 2006 to shareholders on record at 15 September 2006. J D S Booth Chairman 6 September 2006 Chief Executive's review Results I am pleased to be able to report that Maintel has shown strong growth, with revenues in the first half of 2006 up 20% on the equivalent period last year, at Â£7.1m, and earnings per share before goodwill amortisation of 5.3p against 5.0p in the first half of 2005. The strong revenue growth was led by an acceleration in the development of the voice and data division, whose revenues increased by Â£573,000, or 60%, compared with the first six months last year, together with a Â£517,000 (44%) increase in Maintel Europe equipment sales, including Â£266,000 of the London Probation Board ('LPB') contract announced earlier in the year. The District group, acquired in June 2006, contributed Â£78,000 of revenue and I expect it to strengthen both Group turnover and PBT in coming months. Before Â£16,000 amortisation of goodwill, profit before tax was in line with our expectations, increasing from Â£950,000 to Â£965,000, after a significant planned investment in sales resource in the first half from which we expect to see returns in the second half of the year. Cash balances fell slightly from 31 December 2005, to Â£3.6m, benefiting from first half profits and a large customer prepayment, but reduced by the purchase of District for a net cash consideration of Â£877,000, a Â£323,000 dividend and the re-purchase of shares for cancellation at a cost of Â£114,000. The Board anticipates that Group turnover will continue to increase in the second half, giving us confidence that we will meet expectations for the full year. The focus remains on developing the Group's maintenance base through organic growth and acquisition, leading to sales of additional products and services into our customer base. Maintel Europe The growth in the division's revenues - up 12% from the equivalent period last year, at Â£5.5m - came predominantly from VoIP equipment sales and installations as we upgrade many of our existing customers with new technology. A number of significant maintenance orders did not go live until later in the period, leaving maintenance revenues up only slightly on 2005. This profile has resulted in the maintenance-related recurring revenues of the division being Â£3.7m in the period (68% of the division's total revenues, compared with 75% in the equivalent period last year.) The benefits of first half signings will, of course, be seen in the second half of the year. Equipment sales increased again in the period, up Â£517,000 compared with the first half of 2005, around half of this growth coming from the LPB contract announced earlier in the year. It is expected that a further Â£860,000 of LPB revenue will be recognisable in the second half of 2006. As anticipated, although gross profit has increased, the gross margin percentage has reduced in the period due primarily to an increase in more labour-intensive work undertaken in the period, with an average 5 additional engineers employed compared with 2005, higher overtime costs and an increased use of contractors. From a Group perspective, the disproportionate growth in revenue from the voice and data division has also impacted gross margin percentage, as that division operates at lower gross margin than Maintel Europe. Central overheads remained tightly under control, though were increased by the additional sales resource noted earlier. Maintel's business model remains robust, providing a premium service to its increasing customer base and up-selling new technologies through our account management team. We continue to be a leader in enhanced fault management with a recent addition to provide customers with automated e-mail and text messaging with fault updates as and when required. Maintel Voice and Data Maintel Voice and Data's revenues have grown from Â£0.95m in the first half of 2005, to Â£1.15m in the second half, to Â£1.52m in the first half of 2006. As expected, this growth has come from a broadening of the division's product offerings - the division saw Â£125,000 of the increase from the second half last year coming from line rental, a revenue stream introduced later in 2005 and which continues to develop. The core call traffic business grew revenues by Â£105,000 in the same period, with the division's data services revenues also growing in the period. Also as expected, the division's gross margin as a percentage of revenue has reduced slightly with the addition of lower profit products, line rental margin being around half that of call traffic, for example. Gross profit was, however, up 40% over 2005 H1, at Â£456,000. However, the anticipated benefits of being able to offer a more comprehensive telecoms package are being seen, with more customers taking more than one service from Maintel. Again, costs remain closely monitored, though the revenue growth and spread of products has required additional sales and administrative resource to be added. Commission payments of around Â£45,000 have been saved in the period following the acquisition of Pinnacle - the previous recipient of these - in December 2005. District group The District group was acquired on 12 June 2006, for Â£1.060m including costs; Â£183,000 of cash was acquired with the group, so that the net cash cost was Â£877,000. The group operates in virtually identical markets to Maintel, but brings another product offering - Samsung - to the Maintel stable, and integration of District's operations into Maintel has been substantially completed. District's directors left the group on acquisition and the group's remaining property leases expire at the end of 2006, so significant cost savings are expected going forward from these and other synergies. The District acquisition will primarily provide a fresh base of over 400 established customers into which to sell additional services, whilst increasing the recurring revenue platform of the Group. In its last financial year, to 31 August 2005, the District group reported revenues of Â£1.636m and a profit before tax of Â£4,000. Balance sheet The balance sheet remains healthy. It is worth noting that a significant advance payment by a customer in the first half, together with the purchase - unpaid at 30 June - of equipment for that customer, has temporarily inflated stock, creditors and deferred income. As noted earlier, cash balances remained strong at the half year, at Â£3.6m. Goodwill increased by Â£965,000 on the acquisition of District, whilst Â£16,000 of the goodwill arising on last year's acquisition of Pinnacle was amortised in the period. I am very pleased with the continued hard work and dedication of all our employees and look forward to a successful second half of the year. Tim Mason Chief Executive 6 September 2006 Maintel Holdings Plc Consolidated profit and loss account for the six months to 30 June 2006 Unaudited Unaudited Audited six months to six months to year ended 30 June 2006 30 June 2005 31 Dec 2005 Â£'000 Â£'000 Â£'000 Turnover ------------------------- ---------- ---------- ---------- Existing operations 6,985 5,901 12,197 Acquisitions 78 - - ------------------------- ---------- ---------- ---------- 7,063 5,901 12,197 Cost of sales 4,305 3,414 7,188 ---------- ---------- ---------- Gross profit 2,758 2,487 5,009 Administrative expenses ------------------------- ---------- ---------- ---------- Goodwill amortisation 16 - - Other administrative expenses 1,871 1,609 3,256 ------------------------- ---------- ---------- ---------- 1,887 1,609 3,256 Operating profit ------------------------- ---------- ---------- ---------- Existing operations 843 878 1,753 Acquisitions 28 - - ------------------------- ---------- ---------- ---------- 871 878 1,753 Interest receivable 78 74 153 Interest payable and similar charges - (2) (2) ---------- ---------- ---------- Profit on ordinary activities 949 950 1,904 before taxation Taxation on profit on 285 285 577 ordinary activities ---------- ---------- ---------- Profit on ordinary activities 664 665 1,327 after taxation ========== ========== ========== Earnings per share Basic and diluted (note 3) 5.1p 5.0p 10.0p ========== ========== ========== Maintel Holdings Plc Consolidated balance sheet as at 30 June 2006 Unaudited Unaudited Audited 30 June 2006 30 June 2005 31 Dec 2005 Â£'000 Â£'000 Â£'000 Fixed assets Intangible assets 1,176 - 227 Tangible assets 287 282 240 ---------- ---------- ---------- 1,463 282 467 ---------- ---------- ---------- Current assets Stocks 1,332 653 585 Debtors 3,003 1,998 1,947 Cash at bank and in hand 3,573 3,380 3,625 ---------- ---------- ---------- 7,908 6,031 6,157 Creditors: amounts 3,265 1,941 2,085 falling due within one year ---------- ---------- ---------- Net current assets 4,643 4,090 4,072 Deferred income (4,231) (2,987) (2,891) ---------- ---------- ---------- Net assets 1,875 1,385 1,648 ========== ========== ========== Capital and reserves Called up share capital 128 135 129 Share premium 628 628 628 Capital redemption reserve 8 1 7 Profit and loss account 1,111 1,098 884 Treasury shares - (477) - ---------- ---------- ---------- Shareholders' funds 1,875 1,385 1,648 ========== ========== ========== Maintel Holdings Plc Consolidated cash flow statement for the six months to 30 June 2006 Unaudited Unaudited Audited six months six months year ended to 30 June to 30 June 31 Dec 2006 2005 2005 Â£'000 Â£'000 Â£'000 Reconciliation of operating profit to net cash inflow from operating activities Operating profit 871 878 1,753 Goodwill amortisation 16 - - Depreciation charge 65 80 143 (Increase)/decrease in stocks (615) (17) 51 (Increase)/decrease in debtors (782) 56 132 Increase/(decrease) in creditors 2,017 (346) (299) ---------- ---------- ---------- Net cash inflow from operating activities 1,572 651 1,780 ========== ========== ========== Cash flow statement --------------------- Net cash inflow from operating activities 1,572 651 1,780 Returns on investments and servicing of finance Net interest received 78 72 151 Taxation Corporation tax (305) (179) (494) Capital expenditure and financial investment Payments to acquire tangible fixed assets (83) (98) (119) Acquisitions and disposals ------------------------ ---------- ---------- ---------- Purchase of subsidiary undertaking (1,060) - (352) Net cash acquired with subsidiary undertaking 183 - 124 ------------------------ ---------- ---------- ---------- (877) - (228) Equity dividends paid (323) - (196) Financing Repurchase of own shares for cancellation (114) (477) (680) ---------- ---------- ---------- (Decrease)/increase in cash in the period (52) (31) 214 ========== ========== ========== Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash in the period (52) (31) 214 Net cash at start of period 3,625 3,411 3,411 ---------- ---------- ---------- Net cash at end of period 3,573 3,380 3,625 ========== ========== ========== Maintel Holdings Plc Notes to the interim report 1. Basis of preparation of interim financial information The financial information included in this report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information for the year ended 31 December 2005 has been extracted from the statutory accounts for that period, a copy of which has been delivered to the Registrar of Companies. The auditor's report on these statutory accounts was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The interim accounts for the six months to 30 June 2006 and 30 June 2005 are unaudited and have been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 31 December 2005. 2. Segmental analysis Unaudited Unaudited Audited six months to six months to year ended 30 June 2006 30 June 2005 31 Dec 2005 Â£'000 Â£'000 Â£'000 Turnover Telephone system maintenance 5,537 4,948 10,094 Telephone network services 1,526 953 2,103 ---------- ---------- ---------- 7,063 5,901 12,197 ========== ========== ========== Gross profit Telephone system maintenance 2,302 2,161 4,313 Telephone network services 456 326 696 ---------- ---------- ---------- 2,758 2,487 5,009 ========== ========== ========== Profit before taxation Telephone system maintenance 786 857 1,691 Telephone network services 179 93 213 Goodwill amortisation (16) - - ---------- ---------- ---------- 949 950 1,904 ========== ========== ========== 3. Earnings per share Earnings per share have been calculated using the weighted average number of shares in issue during the period. This and earnings, being profit after tax, are as follows. An adjusted earnings per share figure - excluding the amortisation of goodwill - is also shown in order to provide a clearer picture of the trading performance of the Group. Unaudited Unaudited Audited six months to six months to year ended 30 June 2006 30 June 2005 31 Dec 2005 Â£'000 Â£'000 Â£'000 Earnings used in basic and diluted EPS, being profit after tax 664 665 1,327 Goodwill amortisation 16 - - ---------- ---------- ---------- Adjusted earnings, being profit after tax, before goodwill amortisation 680 665 1,327 ========== ========== ========= Weighted average number of shares 12,930 13,409 13,232 ========== ========== ========== Adjusted basic and diluted 5.3p 5.0p 10.0p ========== ========== ========== The weighted average in 2006 has been adjusted for the purchase of the Company's shares noted below. 4. Repurchase of own shares for cancellation On 15 June 2006, and pursuant to the authority granted to it at its annual general meeting in April, the Company acquired 80,000 ordinary shares of 1p each, at a total cost of Â£114,000. These shares were then cancelled. 5. Dividends In accordance with FRS 21, the proposed interim dividend is not shown in the financial statements for the period under review as it had not been resolved to pay it as at 30 June 2006. No dividend was paid in the six months to 30 June 2005. Six months to Year ended 30 June 2006 31 Dec 2005 Â£'000 Â£'000 Dividends paid Interim 2005, paid 26 September 2005 - 1.5p per share 196 Final 2005, paid 24 April 2006 - 2.5p per share 323 ========== ========== 6. Acquisition On 12 June 2006 the Company acquired 100% of the issued share capital of District Holdings Limited. The consideration of Â£1,060,000, including Â£35,000 of professional costs and stamp duty, was fully satisfied in cash. Based on the provisional acquisition balance sheet, as amended for fair value adjustments, goodwill of Â£965,000 has been capitalised. No amortisation of goodwill on this acquisition has been expensed in the period due to the proximity of the acquisition date to the period end. 7. Statement of movement in reserves Capital Profit and loss redemption account reserve Â£'000 Â£'000 At 1 January 2006 7 884 Profit for the period - 664 Dividend - (323) In respect of purchase of own shares 1 - Appropriated in respect of purchase of own shares - (114) ---------- ---------- At 30 June 2006 8 1,111 ========== ========== Independent review report to Maintel Holdings Plc Introduction We have been instructed by the Company to review the financial information for the six months ended 30 June 2006 on pages 6 to 11. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. 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 the Alternative Investment Market 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. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market 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. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom by auditors of fully listed companies. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 2006. BDO STOY HAYWARD LLP Chartered Accountants London 6 September 2006 Ends This information is provided by RNS The company news service from the London Stock Exchange

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