TIDMMAI
RNS Number : 1238K
Maintel Holdings PLC
19 September 2016
Maintel Holdings Plc
("Maintel", the "Company" or the "Group")
Interim results for the 6 months to 30 June 2016
Maintel Holdings Plc, the leading systems integrator and managed
services provider, is pleased to announce its interim results for
the 6 month period to 30 June 2016.
Highlights
-- Group revenue increased 54% to GBP38.1m (H1 2015: GBP24.8m),
including GBP15.4m contribution from Azzurri([1])
-- Increase in recurring revenue to 75% (H1 2015: 71%)
-- Group gross profit increased 38% to GBP13.1m (H1 2015: GBP9.5m)
-- Group adjusted EBITDA increased 23% to GBP4.4m (H1 2015:
GBP3.6m), including GBP1.7m contribution from Azzurri
-- Adjusted earnings per share([2]) at 26.6p (H1 2015: 27.4p)
-- Robust cash performance, with underlying cash conversion ([3]) of 88%
-- Net debt ([4]) of GBP27.1m, better than board expectations
-- Strong order backlog for H2, on track to meet full year profit expectations
-- Progressive dividend policy reiterated:
o Interim dividend per share at 13.4p (H1 2015: 12.8p)
o Full year 2016 dividend to grow 5% year on year, with 10%
growth for FY17
-- Acquisition of Azzurri remains on track to be earnings enhancing in this financial year
Operational Highlights
-- Transformational acquisition of Azzurri completed 4 May 2016
-- Pleasing performance post-acquisition with notable contract
wins and delivery of synergy plan on track
Key Financial Information
Unaudited results for 6 Increase/
months ended 30 June: 2016 2015 (decrease)
Group revenue GBP38.1m GBP24.8m 54%
Adjusted profit before tax([5]) GBP3.9m GBP3.3m 17%
Adjusted earnings per share([1]) 26.6p 27.4p (3%)
Interim dividend per share
proposed 13.4p 12.8p 5%
Commenting on the Group's results, Eddie Buxton, CEO, said:
"The highlight of the period was the acquisition of Azzurri
which was transformational for Maintel, adding significantly to our
offering both in terms of products and services, specifically in
the highly profitable growth areas of managed and cloud based
services, and also its highly complementary customer base.
Excluding Azzurri, trading in the underlying Maintel business
was slower than expected due to delays in the timing of four large
contracts. All of these contracts closed successfully at the end of
Q2 2016 and as such we enter the second half with a strong order
book as well as a full pipeline of opportunities. Our growth
prospects remain positive and we are confident of delivering a
profit performance for the year in line with market
expectations."
Notes
[1] Azzurri Communications Limited (Azzurri) is the principal
trading operation for Warden Holdco Limited, which was acquired on
4 May 2016 (note 5).
[2] Adjusted earnings per share is basic (loss)/earnings per
share of (8.2p) (H1 2015: 16.8p), adjusted for intangibles
amortisation, exceptional costs relating to the acquisition of
Azzurri (H1 2015: Proximity) and deferred tax charges on Datapoint
and Azzurri profits (note 3). The weighted average number of shares
in the period increased to 12.0m (H1 2015:10.7m) arising from the
equity raise in May 2016 to support the Azzurri acquisition.
[3] Cash conversion is adjusted EBITDA to operating cash flow
excluding acquisition costs.
[4] Interest bearing debt (excluding issue costs of debt) minus
cash.
[5] Adjusted profit before tax of GBP3.9m (H1 2015: GBP3.3m) is
basic profit before tax, adjusted for intangibles amortisation and
the Azzurri exceptional costs (H1 2015: Proximity).
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 020 7220 0500
Chairman's statement
I am pleased to be able to report a satisfactory set of results
for the period, with reported revenue having increased by 54%,
compared with H1 2015, to GBP38.1m and adjusted profit before tax
increasing by 17% to GBP3.9m (H1 2015: GBP3.3m), incorporating 2
months' contribution from the Azzurri business acquired in May
2016. Adjusted earnings per share (EPS) decreased by 3% to 26.6p
(H1 2015: 27.4p) as a result of the additional shares issued to
support the Azzurri acquisition.
The overall gross margin of the Group slightly declined to 34%
(H1 2015: 38%). This reduction is due to the inclusion of the lower
margin Azzurri business, with a small decrease in the underlying
business due to the lower contribution of higher margin
professional services to the mix, which we expect to recover in H2
assisted by the large backlog of orders.
Recurring contracted revenue made up 75% of H1 2016 revenues (H1
2015: 71%; FY 2015: 69%) including the contribution from Azzurri
which, as anticipated, brought a higher level of recurring revenue
to the Group (Azzurri standalone business is 79% recurring).
Revenues in the managed services and technology division
increased by 24% to GBP23.8m, with managed services related revenue
up 18% compared with H1 2015 and technology (equipment sales) up
34%, including the contribution from Azzurri. The historic Maintel
business showed an 8% decrease, due to four large multi-year
contracts only being signed at the end of Q2. This is expected to
have a positive impact on the division's growth in H2. The pipeline
here remains strong and in particular we are seeing an increase in
public sector opportunities.
The network services division showed an encouraging 173% growth
in revenue to GBP11.7m (H1 2015: GBP4.3m) driven by a significant
contribution from Azzurri, in particular in data revenues.
Excluding Azzurri, divisional gross margin increased by 2% to 28%.
Maintel's underlying revenues declined by 2%, after excluding a
one-off equipment sale in H1 2015, performing better than the
market trend.
The mobile division's revenue increased 90% to GBP2.7m (H1 2015:
1.4m). Maintel's historic mobile division saw a reduction in
revenue of 17% over the previous year, due partly to the changes in
roaming charges but mainly due to the reduction in small business
customer acquisition and retention. We have taken the decision to
reduce our presence in the small business space and refocus
activity in line with the other product propositions targeting the
mid-market sector.
As part of this review, the Group closed the Azzurri small
business mobile operation in East Kilbride and is in the process of
migrating these customers from the base. While the combined Group
will continue to benefit from real scale in mobile, our exposure is
expected to be under 9% of Group turnover moving forward.
In May 2016, the Group completed the transformational
acquisition of Azzurri for an enterprise value of GBP48.5m. In
order to fund this, the Group secured banking facilities of
GBP36.0m and issued GBP24m of new equity.
Azzurri brings additional scale, a wider product capability and
a large and complementary customer base to the Maintel Group. The
combined Group now has a comprehensive and compelling services
portfolio including managed, data and cloud based services. Our
offering will also allow customers to choose public or private
hosted cloud services and will accelerate the shift in business mix
to these high growth areas of the market. The early signs are
positive, with year on year growth of 83% in our hosted unified
communications offering and two further new contracts signed in Q2,
which have added an additional 4,500 hosted seats onto our
platform.
The integration of Azzurri is progressing very well, with the
Group on track to achieve synergies of GBP1.9m in the current year
and the GBP4.6m of annualised synergies from 2017 forecast at the
time of the acquisition. The combined business will be integrated
onto a common set of systems in early October 2016.
We ended the first half of the financial year with a healthy
backlog of signed projects and enter the second half with a strong
pipeline. Trading conditions remain good although there is evidence
of sales cycles for larger customers becoming longer.
The Group continues to deliver strong cash generation with 88%
of adjusted EBITDA converting to cash in the period and net debt
standing at GBP27.1m at period-end, slightly ahead of board
expectations. The Board proposes to pay an interim dividend of
13.4p, representing a 5% growth on the 2015 interim dividend,
equivalent to 50% of adjusted earnings per share.
I would like to welcome new colleagues from Azzurri to the Group
and thank all our staff for their hard work and commitment during
the first half of 2016. It is also a pleasure to welcome new
investors and thank them and our existing shareholders for their
support.
J D S Booth
Chairman
16 September 2016
Business review
Results for the year
The first half of 2016 has seen an increase in revenue of 54% to
GBP38.1m (H1 2015: GBP24.8m) and adjusted profit before tax (as
described below) of 17% to GBP3.9m (H1 2015: GBP3.3m).
The period benefited from two months' contribution from Azzurri
(see note 5), which was acquired in May 2016 and therefore made no
contribution to the comparative period last year.
Adjusted earnings per share (EPS) decreased by 3% to 26.6p (H1
2015: 27.4p) based on an increased weighted average number of
shares in the period of 11,992,977 (H1 2105: 10,739,299) following
an equity raise in May 2016 to support the Azzurri acquisition. The
acquisition of Azzurri remains on track to be earnings enhancing
this financial year.
On an unadjusted basis, the Company generated a loss before tax
of GBP0.7m (H1 2015: profit of GBP2.1m), equivalent to a loss per
share of 8.2p (H1 2015: earnings of 16.8p). This includes GBP2.8m
of exceptional costs associated with the Azzurri acquisition and
related restructuring activities (H1 2015: GBP0.1m in respect of
the Proximity acquisition) and intangibles amortisation of GBP1.8m
(H1 2015: GBP1.1m), the increase in the latter due to the acquired
Azzurri intangible.
6 months 6 months Year
to 30 to 30 to 31
June June December Increase/
2016 2015 2015
GBP000 GBP000 GBP000 (decrease)
Revenue 38,060 24,750 50,623 54%
--------- --------- ---------- ------------
(Loss)/profit before
tax (696) 2,094 4,151
Add back intangibles
amortisation 1,752 1,118 2,235
Exceptional items
mainly relating
to the acquisition
of Azzurri (H1
2015: Proximity) 2,806 98 884
Adjusted profit
before tax 3,862 3,310 7,270 17%
--------- --------- ---------- ------------
Adjusted EBITDA(a) 4,352 3,552 7,725 23%
--------- --------- ---------- ------------
Of which(b) : Maintel 2,634 3,552 7,725 (26%)
Azzurri 1,718 - -
Basic (loss)/earnings
per share (8.2p) 16.8p 38.0p
Diluted (8.2p) 16.6p 37.5p
--------- --------- ---------- ------------
Adjusted earnings
per share(c) 26.6p 27.4p 60.3p (3%)
Diluted 26.1p 27.0p 59.5p (3%)
--------- --------- ---------- ------------
(a) Excluding the exceptional costs (note 4)
(b) After management charges
(c) Adjusted profit after tax divided by weighted average number
of shares (note 3)
Azzurri
Maintel completed the acquisition of Azzurri on 4 May 2016 for
an aggregate cash consideration of GBP1 and with a commitment that
the Company procure the repayment of Azzurri's then existing senior
debt and other indebtedness immediately following completion. This
equated to an enterprise value for Azzurri of GBP48.5m.
Azzurri was a transformational acquisition for Maintel,
providing additional scale and product capability, with an
attractive customer base. The combined Group now has a
comprehensive and compelling services portfolio including managed,
data and cloud based services. The enlarged Group offering will
also allow customers to choose public or private hosted cloud
services and will accelerate the shift in business mix to these
high growth areas of the market.
Since acquisition the business has been performing well with
some notable new customer wins, particularly with ICON Communicate,
Azzurri's hosted unified communications proposition. Recent major
wins include a large insurance company with 3,000 seats, a large
charity with 1,600 seats and an expansion of the relationship with
a major housing association. There has been an 83% increase in
UCaaS seats on the ICON platform in the past twelve months.
We are continuing Azzurri's investment in the ICON platform;
Microsoft's Skype for Business product has been added to Mitel's
unified communications offering, and we will be launching an
Avaya-based service before the year end, providing support for
three of the recognised leading vendors in the Unified
Communications market. We have also invested in increasing both the
capacity and resilience of the platform, and gained certification
to enable us to offer fully PCI compliant services, allowing us to
offer a significant advantage for any organisation processing card
payments.
The integration of Azzurri is on track and progressing well; the
senior management team is in place, the sales team has been
integrated and reorganised; and the back office re-organisation,
including moving onto one set of systems across the Group, will
have been completed by the end of the year. The anticipated 2016
in-year and 2017 annualised synergies of GBP1.9m and GBP4.6m
respectively are in line with previously stated objectives.
As part of the integration planning, the board has undertaken a
strategic review of its mobile business, resulting in the decision
to reduce its exposure in the SME space. As a result Azzurri's East
Kilbride operation was closed in May 2016. Consequently, the
ongoing exposure to mobile is expected to account for under 9% of
Group turnover.
As a consequence of the acquisition, significant legal and
professional fees have been incurred, amounting to GBP2.5m. In
addition, as part of the integration process, there have been a
number of redundancies across the Group in H1. The cost of these
redundancies along with other synergy related costs amounted to
GBP0.3m. Both these costs have been disclosed as an exceptional
item in the income statement. Further exceptional costs associated
with the integration will be incurred in H2 but with cost savings
thereafter.
Review of operations
The following table shows the performance of the three operating
segments of the Group. The 2016 half year numbers include two
months' contribution from Azzurri.
6 months 6 months Year
to 30 to 30 to 31
June June December
Revenue analysis 2016 2015 2015 Increase/
GBP000 GBP000 GBP000 (decrease)
Maintel (excluding
Azzurri)
Managed services
related 11,238 12,005 23,900 (6%)
Technology(d) 6,408 7,175 15,714 (11%)
---------------------------- --------- --------- ---------- -----------
Managed services
and technology
division 17,646 19,180 39,614 (8%)
Network services
division 3,960 4,267 8,383 (7%)
Mobile division 1,187 1,430 2,815 (17%)
---------------------------- --------- --------- ---------- -----------
Total Maintel (excluding
Azzurri) 22,793 24,877 50,812 (8%)
---------------------------- --------- --------- ---------- -----------
Azzurri(e)
Managed services
related 2,908 - - -
Technology(d) 3,228 - - -
---------------------------- --------- --------- ---------- -----------
Managed services
and technology
division 6,136 - - -
Network services
division 7,698 - - -
Mobile division 1,523 - - -
---------------------------- --------- --------- ---------- -----------
Total Azzurri 15,357 - - -
---------------------------- --------- --------- ---------- -----------
Total Maintel Group
Managed services
related 14,146 12,005 23,900 18%
Technology(d) 9,636 7,175 15,714 34%
----------------------- ------- ------- ------- ------
Managed services
and technology
division 23,782 19,180 39,614 24%
Network services
division 11,658 4,267 8,383 173%
Mobile division 2,710 1,430 2,815 90%
Intercompany (90) (127) (189) (29%)
----------------------- ------- ------- ------- ------
Total Maintel Group 38,060 24,750 50,623 54%
----------------------- ------- ------- ------- ------
(d) Technology includes revenues from hardware, software,
professional services and other sales
(e) Azzurri was acquired on 4 May 2016, and therefore an
estimated two months' of its financial performance has been
considered post- acquisition
Excluding Azzurri, the Group experienced lower trading activity
than expected in H1, with four major sales contracts taking longer
to close than anticipated. All were closed at the end of Q2 and
have contributed to our strong H2 order book.
Three of the contracts are multi-year managed services contracts
with a total value of over GBP11.0m. While these contract wins have
had no impact on H1 revenues they will have a significant positive
impact on H2 results.
Recurring contracted revenue made up 75% of H1 2016 revenues (H1
2015: 71%) including the 2 months' contribution from Azzurri which,
as anticipated, brought a higher level of recurring revenue to the
Group (Azzurri standalone business is 79% recurring in the period
since acquisition).
Overall gross margin for the Group reduced to 34% (H1 2015: 38%)
driven by the lower margin contribution from Azzurri in this
period.
Detailed divisional performance is described further below.
Managed services and technology division
The managed services and technology division provides the
management, maintenance, service and support of both on premise and
off premise voice and data equipment across the UK and
internationally, on a contracted basis. It also supplies and
installs voice and data equipment together with providing
professional services, both to our direct clients and through our
partner relationships.
Revenues in this division increased by 24% to GBP23.8m, with
managed services related revenue up 18% compared with H1 2015 and
technology (equipment and professional services sales) up 34%, both
significantly boosted by the contribution from Azzurri. The
underlying Maintel business excluding Azzurri declined by 8%, with
managed services related revenue reducing by 6% and technology
revenue by 11%, due to the timing of new contracts completing, as
detailed above.
The division's sales pipeline remains strong in both private and
public sectors and we are starting to see significant growth in the
hosted/cloud opportunities as a proportion of the pipeline.
6 months 6 months Year
to 30 to 30 to 31
June June December
2016 2015 2015 Increase/
GBP000 GBP000 GBP000 (decrease)
Maintel (excluding
Azzurri)
Divisional revenue 17,646 19,180 39,614 (8%)
Division gross
profit 6,666 7,749 15,749 (14%)
Gross margin (%) 38% 40% 40%
-------------------- --------- --------- ---------- ------------
Azzurri
Divisional revenue 6,136 - - -
Division gross -
profit 1,878 - -
Gross margin (%) 31% - -
-------------------- --------- --------- ---------- ------------
Total Maintel Group
Divisional revenue 23,782 19,180 39,614 24%
Division gross
profit 8,544 7,749 15,749 10%
Gross margin (%) 36% 40% 40%
--------------------- ------- ------- ------- ----
Managed services
Excluding Azzurri, revenue declined by 6% due to the delay in
signing the previously highlighted large contracts which completed
during June. As a result the managed service base grew to GBP26m, a
6% increase over December 2015; this will have a significant
benefit to H2 results.
H1 2016 continued to see a reduction in the legacy maintenance
base as the Group focuses on winning larger managed service
contracts with newer technology and a wider suite of services to
support these contracts.
The pipeline for new managed services opportunities is growing;
however, the greater complexity of these opportunities has resulted
in a lengthening of sales cycles and the on-boarding process
compared to traditional maintenance contracts.
Technology
Excluding Azzurri, the first half of 2016 was soft for
technology sales which held back headline revenue growth year on
year in this area.
As with managed services, the backlog of sales moving into H2 is
healthy, with a GBP0.9m project to upgrade a data network for a
public sector client and a GBP1.8m contract for a large
construction group, being delivered in August/September.
The public sector framework is providing a significant source of
new opportunities particularly in healthcare and local government.
We are, however, starting to see some impact of cloud based
opportunities on equipment sales and we see this trend continuing,
and we are well placed with Azzurri's ICON platform to take
advantage of this.
Network services division
The network services division sells a portfolio of services
which includes telephone line rental, inbound and outbound
telephone calls, data connectivity, internet access and hosted IP
telephony solutions. These services complement those offered by the
managed service and technology division and the mobile
division.
6 months 6 months Year
to 30 to 30 to 31
June June December
2016 2015 2015 Increase/
GBP000 GBP000 GBP000 (decrease)
Maintel (excluding
Azzurri)(f)
Call traffic 1,242 1,288 2,589 (4%)
Line rental 1,441 1,655 3,185 (13%)
Data connectivity
services 1,265 1,309 2,566 (3%)
Other 12 15 43 (20%)
----------- --------- ---------- ------------
Total division 3,960 4,267 8,383 (7%)
Division gross
profit 1,095 1,121 2,284 (2%)
Gross margin (%) 28% 26% 27%
-------------------- ----------- --------- ---------- ------------
Azzurri
Call traffic 1,132 - - -
Line rental 2,029 - - -
Data connectivity
services 4,473 - - -
Other 64 - - -
------- ------ ------ -----
Total division 7,698 - - -
Division gross
profit 2,102 - - -
Gross margin (%) 27% - - -
--------------------- ------- ------ ------ -----
Total Maintel Group
Call traffic 2,374 1,288 2,589 84%
Line rental 3,470 1,655 3,185 110%
Data connectivity
services 5,738 1,309 2,566 338%
Other 76 15 43 407%
------- ------ ------ -----
Total division 11,658 4,267 8,383 173%
Division gross
profit 3,197 1,121 2,284 185%
Gross margin (%) 27% 26% 27%
--------------------- ------- ------ ------ -----
(f) VoIP of GBP214,000 (30 June 2015: GBP161,000; 31 December
2015: GBP370,000) and Inbound calls of GBP90,000 (30 June 2015:
GBP89,000; 31 December 2015: GBP182,000) have been reclassified
from Other to Data connectivity services and Call traffic
respectively.
Network services revenues increased by 173% year on year, driven
by the contribution from Azzurri.
Excluding Azzurri, Maintel revenues declined by 7%, but
excluding a one off GBP235,000 equipment sale associated with a WAN
optimisation project in H1 2015, underlying revenue only declined
by 2%. Divisional gross margin increased by 2% to 28% partly due to
the H1 2015 equipment sale being at low margin.
Call minutes revenue was 4% down on the prior year driven by a
major customer re-signing at lower volumes as they implement a
Skype for Business roll out, which also impacted legacy line rental
revenue. Call revenue has been more resilient than expected given
the combination of the market reduction in call volumes, regulatory
price reductions and bundled free minute packages.
Legacy line rental revenues decreased by 13%, impacted by a
combination of the above and our continued pro-active transitioning
of customers onto newer SIP based voice technology, which has seen
year on year growth of 33%.
As we continue to see this move away from legacy calls and lines
services to newer data and SIP technology, our underlying data
services revenue has grown by a healthy 18% year on year, excluding
the one off project installation in H1 2015 previously noted.
Moving forward, the acquisition of Azzurri strengthens our
position in this sector with ICON Connect, our Data Network
proposition.
Mobile division
Maintel Mobile derives its revenues primarily from commissions
received under its dealer agreements with Vodafone and O(2) ,
whilst Azzurri derives most of its revenues from dealer agreements
with O(2) .
6 months 6 months Year
to 30 to 30 to 31
June June December Increase/
2016 2015 2015
GBP000 GBP000 GBP000 (decrease)
Maintel (excluding
Azzurri)
Revenue 1,187 1,430 2,815 (17%)
Gross profit 581 694 1,196 (16%)
Gross margin (%) 49% 49% 42%
-------------------- --------- --------- ---------- ------------
Azzurri
Revenue 1,523 - - -
Gross profit 859 - - -
Gross margin (%) 56% - - -
-------------------- --------- --------- ---------- ------------
Total Maintel Group
Revenue 2,710 1,430 2,815 90%
Gross profit 1,440 694 1,196 107%
Gross margin (%) 53% 49% 42%
--------------------- ------ ------ ------ -----
At 30 At 30 At 31
June June December Increase/
2016 2015 2015 (decrease)
Maintel (excluding
Azzurri)
Number of customers 773 770 830 -%
Number of connections 11,643 12,662 12,011 (8%)
Azzurri
Number of customers 2,192 - - -
Number of connections 48,000 - - -
Total Maintel Group
Number of customers 2,965 770 830 285%
Number of connections 59,643 12,662 12,011 371%
Excluding Azzurri, the Mobile division saw a reduction in
revenue of 17% over the previous year due partly to the changes in
roaming charges but mainly due to the reduction in small business
customer acquisition and retention as the Group refocused its
investment into other areas of higher growth potential.
Gross margins of 49% were maintained at similar levels to H1
2015.
As highlighted earlier in the report, as part of integrating
Azzurri, the Group has undertaken a strategic review of its mobile
business, resulting in the decision to reduce its presence in the
small business space. This reduces the exposure of mobile for the
Group and re-focuses our sales activity in line with the other
product propositions in the target mid-market sector. As a result,
the ongoing exposure to mobile is expected to reduce to under 9% of
Group turnover.
As part of this review, the Group closed the Azzurri small
business mobile operation in East Kilbride and is in the process of
removing these customers from the Azzurri base.
The combined Group will continue to benefit from real scale in
mobile as well as Azzurri's greater experience and well-defined
mobile managed service wrap that is attractive 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
2016 2015 2015 Increase/
Administrative
expenses(g) GBP000 GBP000 GBP000 (decrease)
Maintel (excluding
Azzurri)
Maintel sales expenses 2,958 3,077 6,323 (4%)
Maintel other administrative
expenses 3,011 2,956 5,207 2%
--------- --------- ----------- -----------
Maintel excluding
Azzurri total administrative
expenses 5,969 6,033 11,530 (1%)
------------------------------- --------- --------- ----------- -----------
Azzurri
Azzurri sales expenses 1,614 - -
Azzurri other administrative
expenses 1,434 - -
--------- --------- ----------- -----------
Azzurri total administrative
expenses 3,048 - -
------------------------------- --------- --------- ----------- -----------
Total Maintel Group
Total sales expenses 4,572 3,077 6,323 49%
Total other administrative
expenses 4,445 2,956 5,207 50%
Total administrative
expenses 9,017 6,033 11,530 49%
(g) Excluding intangibles amortisation, management
recharges and exceptional expenses.
Total administrative expenses increased by 49% to GBP9.0m.
Excluding Azzurri, Maintel's costs are down 1% on last year at
GBP6.0m, with lower underlying sales costs and headcount
compensating for inflation increases. In addition, property costs
are lower year on year, as a result of the office moves in H2 2015
which included the consolidation of two offices (Brentford and
Webber Street) into our current Blackfriars HQ and the move to
cheaper Dublin premises.
Following the Azzurri acquisition, headcount as at 30 June 2016
for the Group now stands at 727 (30 June 2015: 282).
As we progress with our integration plan, total administration
costs will continue to be tightly controlled and we will deliver
further cost savings in H2 in line with the integration plan
produced at the time of the transaction.
The exceptional costs of GBP2.8m (H1 2015: GBP0.1m) shown in the
income statement primarily relate to the legal and professional
fees from the acquisition of Azzurri of GBP2.5m and redundancy
costs incurred resulting from the acquisition and integration of
GBP0.3m (H1 2015: Proximity of GBP0.1m).
The intangibles amortisation charge increased in the period due
to the 2 month charge resulting from the Azzurri acquisition.
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 EUR1.36 = GBP1 at 31
December 2015 to EUR1.21 = GBP1 at 30 June 2016. The effect of this
and other movements in the period was a gain to the income
statement of GBP92,000 (H1 2015 charge: GBP100,000), 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 GBP37,000 in the
period (H1 2015: GBP54,000).
Interest
The increase in the net interest charge to GBP295,000 (H1 2015:
GBP139,000) resulted from the additional borrowings taken on to
finance the Azzurri acquisition, with net borrowings excluding
issue costs of debt increasing to GBP27.1m at 30 June 2016 (30 June
2015: GBP8.8m) from a year end 2015 balance of GBP3.2m.
Taxation
The effective tax charge for H1 2016 was GBP290,000 against the
loss of GBP696,000 (H1 2015 tax charge: GBP287,000), for the
reasons described below. Each of the Group companies is taxed at
20%, with the exception of Maintel International Limited, which is
taxed at 12.5% (H1 2015: 20.25%; 12.5%). Certain expenses that are
disallowable for tax raise the underlying effective rate above
this, and form the predominant reason why a tax charge was incurred
on the period's loss.
The tax charge in the period was adversely impacted due to
certain acquisition related costs deemed disallowable which
amounted to GBP497,000. This was offset by the tax charge
benefiting from some adjustments, including (a) relief claimed on
certain 2015 costs which were deemed disallowed in that period but
are now allowed following further investigation (GBP26,000), and
(b) the difference in the rate at which deferred tax on the
amortisation of the intangibles is released (GBP21,000).
The tax charge in the period includes a deferred tax charge
relating to the tax losses of the Datapoint companies, whereby they
do not currently pay corporation tax on their profits, but 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 GBP237,000 (H1 2015: GBP179,000).
The tax charge in the period also includes a deferred tax charge
relating to the Azzurri profits, whereby they do not currently pay
corporation tax on their profits, but a tax asset in respect of the
historic capital allowances is charged to the income statement as
the capital allowances are used. This deferred tax charge in the
period was GBP311,000 in relation to the brought forward capital
allowances.
Dividends and adjusted earnings per share
An interim dividend for 2015 of 12.8p (GBP1.4m) was paid on 7
October 2015 and a final dividend for 2015 of 16.5p per share
(GBP1.8m) was paid on 5 April 2016, taking the total dividend
declared in 2015 to 29.3 pence per share.
As previously highlighted, it is the board's intention to
increase the dividend pence per share by 5% over 2015 total
dividend pence per share and then growing progressively year on
year by 10% for 2017.
As a result, the board proposes to pay an interim dividend of
13.4p in respect of 2016 on 12 October to shareholders on the
register at the close of business on 30 September, which equates to
a pay-out ratio as a percentage of adjusted earnings of 50%. The
corresponding ex-dividend date will be 29 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 2016.
Consolidated statement of financial position
Net assets increased by GBP20.4m to GBP27.0m from 31 December
2015 due to the inclusion of the acquired balance sheet of
Azzurri.
Intangible assets at GBP64.4m, have increased by GBP46.3m from
31 December 2015, driven by intangibles arising on the acquisition
of Azzurri (see note 5).
The value of property, plant and equipment has increased by
GBP3.0m to GBP3.6m from 31 December 2015. This includes a freehold
property valued at GBP1.6m and plant and equipment and leasehold
improvements of GBP1.3m resulting from the acquisition of Azzurri.
Post-acquisition, Azzurri incurred GBP0.2m of expenditure relating
to the ICON platform and expanding capacity in its data centre
infrastructure. Maintel incurred minimal capital expenditure in H1
2016 with its tangible asset value in line with the year end 2015
balance at GBP0.7m.
Trade and other receivables increased by GBP24.5m in the period
to GBP35.5m with GBP21.2m attributable to Azzurri. Excluding
Azzurri, Maintel trade and other receivables increased by GBP3.3m,
the main elements being (a) an increase in trade receivables driven
by two orders for equipment and licences amounting to GBP3.5m, both
of which were settled in August, offsetting the impact of a high
level of seasonal renewals at the end of 2015 and (b) higher
prepaid support costs covering several contracts signed in H1
2016.
Inventories are valued at GBP2.7m at 30 June, an increase of
GBP1.4m from 31 December 2015, with Azzurri contributing GBP1.5m.
Excluding Azzurri, Maintel inventories have reduced marginally by
GBP0.1m compared to year end 2015 to GBP1.2m, as a result of strong
control over the levels of managed service stock; there was little
movement in the stock held for resale.
Trade and other payables amounted to GBP49.6m, an increase of
GBP29.3m in the period. Excluding Azzurri, trade and other payables
were at GBP19.8m reflecting a GBP0.6m reduction when compared to
the year end 2015 value of GBP20.3m. The main drivers were the
weighting of customer contract renewals to H2 2015 so that a higher
level of deferred income is carried at December than at June,
together with a lower VAT liability caused by lower equipment sales
and the impact of acquisition costs. These were offset by an
increase in trade payables and accruals due to the impact of the
remaining acquisition costs settled in July, vendor costs
associated with a large equipment deal in June and accrued bank
interest.
Corporation tax liabilities have reduced by GBP0.1m due to lower
profits emanating from Maintel's trading activities in H1 2016. As
noted in the Taxation section above, no corporation tax provision
has been made for Azzurri's profit contribution since acquisition,
as there are sufficient brought forward capital allowances to
offset any corporation tax provision required.
The deferred tax liability has increased by GBP2.1m in the first
half to GBP2.9m resulting from (a) the creation of a deferred tax
liability of GBP4.3m associated with the Azzurri intangibles of
GBP23.2m and (b) the deferred tax adjustment related to the
Datapoint and Azzurri historical tax losses and capital allowances
respectively of GBP0.6m in aggregate offset by (a) a deferred tax
asset of GBP2.5m resulting from the acquisition of Azzurri (see
note 5), and (b) the unwinding of intangibles amortisation related
deferred tax liabilities from Azzurri and previous acquisitions of
GBP0.3m.
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 those acquisitions.
The intangible assets represented by purchased customer
contracts and relationships, brand value, product platforms and
software were carried at GBP29.7m at the period end (31 December
2015: GBP8.3m). 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 GBP1.8m being amortised in
H1 2016 (H1 2015: GBP1.1m), the increase being attributable to the
Azzurri intangibles acquired in May 2016.
Goodwill of GBP34.7m (31 December 2015: GBP9.9m) increased by
GBP24.8m as a result of the Azzurri acquisition. No impairment has
been charged to the consolidated statement of comprehensive income
in H1 2016 (H1 2015: GBPnil).
Cash flow
The Group had net debt (excluding issue costs of debt) of
GBP27.1m at 30 June 2016, compared with GBP3.2m at 31 December
2015, and an explanation of the GBP23.9m increase is set out
below.
6 months 6 months Year
to 30 to 30 to 31
June June December
2016 2015 2015
GBP000 GBP000 GBP000
Cash generated from/(consumed
by) operating activities
before acquisition costs 3,826 (113) 7,829
Taxation (231) (761) (1,048)
Capital expenditure less
proceeds of sale (250) (49) (554)
Finance cost (net) (295) (139) (264)
--------- --------- ----------
Free cashflow 3,050 (1,062) 5,963
Dividends (1,777) (1,243) (2,621)
Acquisition (net of cash (45,433) - -
acquired)
Acquisition costs paid (2,514) - -
Proceeds from borrowings 31,000 - -
Repayments of borrowings (6,000) (800) (4,000)
Issue of new ordinary shares 24,000 54 54
Share issue costs (781) - -
Issue costs of debt (348) - -
--------- --------- ----------
Increase/(decrease) in
cash and cash equivalents 1,197 (3,051) (604)
Cash and cash equivalents
at start of period 2,784 3,347 3,347
Exchange differences (37) 54 41
--------- --------- ----------
Cash and cash equivalents
at end of period 3,944 350 2,784
Bank borrowings (31,000) (9,200) (6,000)
--------- --------- ----------
Net debt excluding issue
costs of debt (27,056) (8,850) (3,216)
Adjusted EBITDA (note 4) 4,352 3,552 7,725
The Group generated GBP3.8m of cash from operating activities
excluding acquisition costs, with a GBP0.3m negative working
capital impact in the period, compared with GBP0.1m consumed in the
comparative period. This was underpinned by a high cash conversion
rate of 88% of adjusted EBITDA to operating cash flow excluding
acquisition costs.
The net effect of the equity raised and new borrowing facilities
associated with the acquisition of Azzurri together with repaying
existing borrowing facilities, acquisition related costs and
settlement of the 2015 final dividend consumed GBP1.9m in cash and
cash equivalents.
The increase in the net debt position compared with December
2015 is a result of the borrowings acquired in May 2016 to fund the
acquisition of Azzurri (see note 8).
Outlook
Notwithstanding the softer than anticipated trading in the
Maintel business excluding Azzurri, the first half was a very
positive period for Maintel as a Group. The highlight of the period
was the acquisition of Azzurri, which in the two months' since
completion performed well and in line with expectations, including
the signing of several substantial contracts which have contributed
to our order backlog for the second half. Our integration plan is
on track, with significant further cost savings to be made in the
second half. As stated at the time of the acquisition of Azzurri,
we expect the acquisition to be earnings enhancing this financial
year.
In the underlying Maintel business, the signing of the four
delayed contracts at the end of Q2 will have a positive impact on
growth in H2 and we enter the second half with a strong order book
and a full pipeline of opportunities.
With our service offering now broader and more attractive than
previously, we can expect a greater proportion of opportunities to
be successfully converted, albeit that with larger customers, multi
service contracts are more complex, resulting in longer sales
cycles.
We therefore remain confident for the second half of the
financial year, and of delivering a profit outcome for the full
year in line with the market expectations.
The Group continues to deliver good cash generation and the
focus is on maintaining a progressive dividend policy whilst
simultaneously reducing the debt levels, in line with the board's
target of 2x adjusted EBITDA by the end of the financial year.
On behalf of the board
E Buxton
Chief Executive
16 September 2016
Maintel Holdings Plc
Consolidated statement of comprehensive income
for the 6 months ended 30 June 2016 (unaudited)
6 months 6 months Year
to 30 to 30 to 31
June June December
2016 2015 2015
note GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Revenue 2 38,060 24,750 50,623
Cost of sales (24,961) (15,268) (31,571)
------------ ------------ -----------
Gross profit 13,099 9,482 19,052
Other operating income 75 - 12
Administrative expenses
---------------------------- ----- ------------ ------------ -----------
Intangibles amortisation (1,752) (1,118) (2,235)
Exceptional costs 7 (2,806) (98) (884)
Other administrative
expenses (9,017) (6,033) (11,530)
---------------------------- ----- ------------ ------------ -----------
(13,575) (7,249) (14,649)
Operating (loss)/profit (401) 2,233 4,415
Finance income 3 - 1
Financial expense (298) (139) (265)
(Loss)/profit before
taxation (696) 2,094 4,151
Taxation expense (290) (287) (69)
------------ ------------ -----------
(Loss)/profit for the
period and attributable
to owners of the parent (986) 1,807 4,082
Other comprehensive
(expense)/income for
the period
Exchange differences
on translation of foreign
operations (37) 54 41
------------ ------------ -----------
Total comprehensive
(loss)/income for the
period (1,023) 1,861 4,123
============ ============ ===========
(Loss)/earnings per
share
Basic 3 (8.2p) 16.8p 38.0p
Diluted 3 (8.2p) 16.6p 37.5p
============ ============ ===========
Maintel Holdings Plc
Consolidated statement of financial position
at 30 June 2016 (unaudited)
30 June 30 June 31 December
2016 2015 2015
Note GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Non current assets
Intangible assets 64,402 19,249 18,132
Property, plant and
equipment 3,631 262 673
68,033 19,511 18,805
------------ ------------ ------------
Current assets
Inventories 2,704 1,386 1,298
Trade and other receivables 35,539 12,578 11,040
Cash and cash equivalents 3,944 350 2,784
------------ ------------ ------------
42,187 14,314 15,122
------------ ------------ ------------
Total assets 110,220 33,825 33,927
Current liabilities
Trade and other payables 49,555 17,353 20,276
Current tax liabilities 116 396 257
Borrowings 8 - 2,000 2,000
Total current liabilities 49,671 19,749 22,533
Non current liabilities
Deferred tax liability 2,894 1,200 834
Borrowings 8 30,652 7,200 4,000
------------ ------------ ------------
Total net assets 27,003 5,676 6,560
============ ============ ============
Equity
Issued share capital 142 108 108
Share premium 24,354 1,169 1,169
Capital redemption reserve 31 31 31
Share based remuneration 24 - -
reserve
Translation reserve 51 101 88
Retained earnings 2,401 4,267 5,164
Total equity 27,003 5,676 6,560
============ ============ ============
Maintel Holdings Plc
Consolidated statement of changes in equity
for the 6 months ended 30 June 2016 (unaudited)
Share Capital Translation Share Retained
capital Share redemption reserve based earnings Total
premium reserve remuneration
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January
2015 107 1,116 31 47 - 3,703 5,004
Profit for
the period - - - - - 1,807 1,807
Other comprehensive
income:
foreign currency
translation
differences - - - 54 - - 54
--------------------- ---------- ---------- ------------ ------------- -------------- ----------- ---------
Total comprehensive
income for
the period - - - 54 - 1,807 1,861
Dividend - - - - - (1,243) (1,243)
Issue of
new ordinary
shares 1 53 - - - - 54
At 30 June
2015 108 1,169 31 101 - 4,267 5,676
Profit for
the period - - - - - 2,275 2,275
Other comprehensive
income:
foreign currency
translation
differences - - - (13) - - (13)
--------------------- ---------- ---------- ------------ ------------- -------------- ----------- ---------
Total comprehensive
income for
the period - - - (13) - 2,275 2,262
Dividend - - - - - (1,378) (1,378)
At 31 December
2015 108 1,169 31 88 - 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 31 51 24 2,401 27,003
Maintel Holdings Plc
Consolidated statement of cash flows
for the 6 months ended 30 June 2016 (unaudited)
6 months 6 months Year
to 30 to 30 June to 31
June 2015 December
2016 2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Operating activities
(Loss)/profit before taxation (696) 2,094 4,151
Adjustments for:
Intangibles amortisation 1,752 1,118 2,235
Share based payment charge 24 - -
(Loss)/profit on sale of fixed
asset - (2) 4
Depreciation charge 195 103 191
Interest received (3) - (1)
Interest payable 298 139 265
Operating cash flows before
changes in working capital 1,570 3,452 6,845
Decrease in inventories 22 50 138
(Increase)/decrease in trade
and other receivables (3,971) (159) 1,379
Increase/(decrease) in trade
and other payables 3,691 (3,456) (533)
------------ ------------ ----------
Cash generated from/(consumed
by) operating activities (see
sub analysis below) 1,312 (113) 7,829
Cash generated from/(consumed
by) operating activities excluding
acquisition costs 3,826 (113) 7,829
Exceptional cost - acquisition
costs (2,514) - -
------------ ------------ ----------
Cash generated from/(consumed
by) operating activities 1,312 (113) 7,829
------------------------------------- ------------ ------------ ----------
Tax paid (231) (761) (1,048)
------------ ------------ ----------
Net cash flows from operating
activities 1,081 (874) 6,781
------------ ------------ ----------
Investing activities
Purchase of plant and equipment (250) (51) (554)
Proceeds from disposal of - 2 -
plant and equipment
------------------------------------- ------------ ------------ ----------
Purchase price in respect (47,028) - -
of business combination
Net cash acquired with subsidiary
undertaking 1,595
(45,433) - -
Interest received 3 - 1
Net cash flows from investing
activities (45,680) (49) (553)
------------ ------------ ----------
Financing activities
Proceeds from borrowings 31,000 - -
Repayment of borrowings (6,000) (800) (4000)
Interest payable (298) (139) (265)
Issue of new ordinary shares 24,000 54 54
Share issue costs (781) - -
Issue costs of debt (348) - -
Equity dividends paid (1,777) (1,243) (2,621)
Net cash flows from financing
activities 45,796 (2,128) (6,832)
------------ ------------ ----------
Net increase/(decrease) in
cash and cash equivalents 1,197 (3,051) (604)
Cash and cash equivalents
at start of period 2,784 3,347 3,347
Exchange differences (37) 54 41
------------ ------------ ----------
Cash and cash equivalents
at end of period 3,944 350 2,784
============ ============ ==========
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. Except for the
revised revenue recognition policy adopted in the Mobile segment,
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 2015 and are
those which will form the basis of the 2016 financial
statements.
From 1 January 2016, the Group has reviewed its Mobile revenue
recognition policy, and concluded to change its policy relating to
the recognition of advance commissions received from network
operators. There is no material difference in the financial
statements as a result of adopting the new revenue recognition
policy.
A number of amendments to and interpretations of existing
standards have become effective for periods beginning on 1 January
2016, but no new standards; none of these is expected to materially
affect the Group.
The Group's results are not materially affected by seasonal
variations.
The comparative financial information presented herein for the
year ended 31 December 2015 does not constitute full statutory
accounts for that period. The Group's annual report and accounts
for the year ended 31 December 2015 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 2016
and 30 June 2015 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 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
Total 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)
========
Further analysis of revenue streams is shown in the business
review.
Intercompany trading consists of telecommunications services,
and recharges of sales, engineering and rent costs, GBP46,000 (H1
2015: GBP86,000) attributable to the managed service and technology
segment, GBP41,000 (H1 2015: GBP38,000) to the network services
segment and GBP3,000 (H1 2015: GBP3,000) to the mobile segment.
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Other
Intangibles amortisation 111 - - 1,641 1,752
Exceptional costs 319 - - 2,487 2,806
============ =========== ======== ========= =======
Six months to 30 June 2015 (unaudited)
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 19,180 4,267 1,430 (127) 24,750
============ =========== ========= ========= =========
Gross profit 7,749 1,121 694 (82) 9,482
------------ ----------- --------- ---------
Total administrative
expenses (6,033)
Intangibles amortisation (1,118)
Exceptional costs (98)
---------
Operating profit 2,233
Interest (net) (139)
---------
Profit before taxation 2,094
Taxation expense (287)
Profit after taxation 1,807
=========
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Other
Intangibles amortisation 126 - - 992 1,118
Exceptional costs 98 - - - 98
============ =========== ======== ========= =======
Year ended 31 December 2015 (audited)
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Revenue 39,614 8,383 2,815 (189) 50,623
============ =========== ========= ========= =========
Gross profit 15,749 2,284 1,196 (177) 19,052
------------ ----------- --------- ---------
Other operating
income 12
Total administrative
expenses (11,530)
Intangibles amortisation (2,235)
Exceptional costs (884)
---------
Operating profit 4,415
Interest (net) (264)
---------
Profit before taxation 4,151
Taxation (69)
Profit after taxation 4,082
=========
Managed
service Central/
and Network inter-
technology services Mobile company Total
GBP000 GBP000 GBP000 GBP000 GBP000
Other
Intangibles amortisation 251 - - 1,984 2,235
Exceptional costs 884 - - - 884
============ =========== ======== ========= =======
Revenue is wholly attributable to the principal activities of
the Group and other than sales of GBP4,282,000 to EU countries and
GBP966,000 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, GBP90,000
attributable to the managed service and technology segment,
GBP93,000 to the network services segment and GBP6,000 to the
mobile segment.
3. Earnings per share
Earnings per share is calculated by dividing the (loss)/profit
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 June December
2016 2015 2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Earnings used in basic and
diluted EPS, being (loss)/profit
after tax (986) 1,807 4,082
Adjustments: Amortisation
of intangibles 1,752 1,118 2,235
Exceptional costs (note 7) 2,806 98 884
Tax relating to above adjustments (934) (264) (666)
Deferred tax charge on Datapoint
profits 239 179 451
Deferred tax charge on Azzurri 311 - -
profits
Increase in deferred tax
asset - - (500)
Adjusted earnings used in
adjusted EPS 3,188 2,938 6,486
------------ ------------ ----------------
The adjustments above have been made in order to provide a
clearer picture of the trading performance of the Group.
Datapoint has brought forward tax losses, so that it will pay no
tax in respect of its 2016 profits. On acquisition and subsequently
in 2015, however, 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 tax capital allowances, so that it
will pay no tax in respect of its 2016 profits. On acquisition, 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 December
2016 2015 2015
Number Number Number
(000s) (000s) (000s)
Weighted average number of
ordinary shares of 1p each 11,993 10,739 10,754
Potentially dilutive shares 200 140 145
---------- ---------- -----------
12,193 10,879 10,899
========== ========== ===========
(Loss)/profit per share
Basic (8.2p) 16.8p 38.0p
Basic and diluted (8.2p) 16.6p 37.5p
Adjusted - basic after the
adjustments in the table
above 26.6p 27.4p 60.3p
Adjusted - basic and diluted
after the adjustments in
the table above 26.1p 27.0p 59.5p
======== ======== ======
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
2016 2015 2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
(Loss)/Profit before tax (696) 2,094 4,151
Net interest payable 295 139 264
Depreciation of property,
plant and equipment 195 103 191
Amortisation of customer
relationship intangibles 1,752 1,118 2,235
------------ ------------ ----------
EBITDA 1,546 3,454 6,841
Exceptional costs 2,806 98 884
Adjusted EBITDA 4,352 3,552 7,725
============ ============ ==========
5. Business combinations
On 4 May 2016 the Company acquired the entire share capital of
Azzurri at the following provisional fair value amounts:
GBP000
Purchase consideration
Cash 47,028
________
Assets and liabilities acquired
Tangible fixed assets 2,903
Inventories 1,428
Trade and other receivables 20,528
Cash 1,595
Trade and other payables (25,588)
________
866
Intangible assets
Customer relationships 16,030
Software 2,369
Brand 3,480
Product platform 1,299
Deferred tax asset 2,459
Deferred tax liability on Intangible assets (4,319)
________
Net assets and liabilities acquired 22,184
________
Goodwill 24,844
________
Cash flows arising from the acquisition GBP000
were as follows:
Purchase consideration settled in cash (47,028)
Direct acquisition costs (note 7) (2,514)
Cash balances acquired 1,595
________
(47,947)
________
Azzurri was acquired to complement and extend the Group's
existing offerings of telecommunications and data services and
enable further cross-selling to and from other Group operations, as
further described in the business review. The goodwill is
attributable to the workforce of the acquired business,
cross-selling opportunities and cost synergies that are expected to
be achieved from sharing the expertise and resource of Maintel with
that of Azzurri and vice versa.
The acquisition of Azzurri Communications Limited was effected
by the acquisition of its parent company, Warden Holdco Limited for
a purchase consideration of GBP47.0m. Warden Holdco Limited and
Warden Midco Limited are the holding company and intermediate
holding company of Azzurri Communications Limited and its
subsidiaries.
The business was acquired for a cash consideration of GBP1,
together with procurement of its senior debt facilities, loan
notes, and acquisition related fees of GBP20.5m, GBP24.0m, and
GBP2.5m respectively. These acquired liabilities were settled
immediately following acquisition, and therefore formed part of the
aggregate purchase consideration of GBP47.0m.
The purchase consideration quoted in the admission document for
the Azzurri acquisition was GBP48.5m, but this was reduced to
GBP47.0m through price adjustment mechanisms.
The customer relationships, software, brand and product
platforms are estimated to have a useful life of one to eight years
based on the directors' experience of comparable intangibles and
are therefore amortised over those periods and are subject to an
annual impairment review.
A deferred tax liability of GBP4.3m has been recognised above
which is being credited to the income statement pro rata to the
amortisation of the intangibles. The Azzurri related amortisation
charge in 2016 is GBP0.5m.
The trade and other receivables are stated net of
impairment.
Since its acquisition, Azzurri has contributed the following to
the results of the Group before management charges of GBP0.2m:
GBP000
Revenue 15,357
________
Profit before tax 1,116
________
Azzurri's revenue for the period 1 January 2016 to 30 June 2016
was GBP43.6m and before management charges, its loss before tax,
including exceptional and pre acquisition debt costs was
GBP2.5m.
The Group incurred GBP2.5m of third party costs related to this
acquisition. These costs are included in administrative expenses in
the consolidated statement of comprehensive income.
6. Dividends
6 months 6 months Year
to 30 to 30 to 31
June June December
2016 2015 2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Dividends paid
Final 2014, paid 1 May 2015
- 11.6p per share - 1,243 1,243
Interim 2015, paid 7 October
2015 - 12.8p per share - - 1,378
Final 2015, paid 5 April 1,777 - -
2016 - 16.5p per share
1,777 1,243 2,621
============ ============ ==========
The directors propose the payment of an interim dividend for
2016 of 13.4p (2015: 12.8p) per ordinary share, payable on 12
October 2016 to shareholders on the register at 30 September 2016.
The cost of the proposed dividend, based on the number of shares in
issue as at 15 September 2016, is GBP1.9m (2015: GBP1.4m).
7. Exceptional costs
On 4 May 2016 the Company acquired the entire issued share
capital of Warden Holdco Limited whose principal trading entity is
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 GBP0.3m as a result
of synergies achieved pre and post-acquisition. H1 2015 redundancy
costs of GBP0.1m related to the acquisition of Proximity. These
costs have been treated as exceptional in the income statement as
they are not normal operating expenses.
8. Borrowings
30 June 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
(unaudited) (unaudited) (audited)
Current bank loan - secured - 2,000 2,000
Non-current bank loan - secured 30,652 7,200 4,000
30,652 9,200 6,000
============ ============ ============
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 existing term and revolving
credit facilities with Lloyds Bank plc which were fully repaid and
terminated.
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.
Non-current bank loan above is stated net of unamortised issue
costs of debt of GBP0.3m.
Independent 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
2016 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.
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 condensed set of financial statements.
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 Auditing Practices Board 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 Ireland) 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 2016 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
16 September 2016
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 EQLFFQKFEBBV
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September 19, 2016 02:00 ET (06:00 GMT)
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