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MAI Maintel Holdings Plc

245.00
15.00 (6.52%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Maintel Holdings Plc LSE:MAI London Ordinary Share GB00B046YG73 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  15.00 6.52% 245.00 240.00 250.00 245.00 230.00 230.00 3,112 16:05:35
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Tele & Telegraph Apparatus 91.04M -4.36M -0.3036 -8.07 35.19M

Maintel Holdings PLC Interim Results (2882Q)

11/09/2017 7:00am

UK Regulatory


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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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September 11, 2017 02:00 ET (06:00 GMT)

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