annual report & accounts 2008
Maintel Holdings Plc
1
Business review
Directors, Company details and advisers
Directors
J D S Booth
Chairman, Non-Executive Director
E Buxton
Chief Executive
A J McCaffery Sales and Marketing Director
W D Todd
Finance Director
N J Taylor
Non-Executive Director
Secretary and registered office
W D Todd, 61 Webber Street, London SE1 0RF
Company number
3181729
Auditors
BDO Stoy Hayward LLP, 55 Baker Street, London W1U 7EU
Nominated broker and nominated adviser
KBC Peel Hunt Ltd, 111 Old Broad Street, London EC2N 1PH
Registrars
Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZY. & 0870 707 1182
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50
Directors, Company details and advisers
Chairman’s statement
Business review
Board of directors
Report on corporate governance
Report of the Remuneration committee
Report of the directors
Statement of directors’ responsibilities
Independent auditor’s report
Consolidated income statement
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated cash flow statement
Notes forming part of the financial statements
Balance sheet of Maintel Holdings Plc
Notes forming part of the balance sheet of Maintel Holdings Plc
Notice of annual general meeting
2
Chairman’s statement
Chairman’s statement
3
Business review
Business review
Maintel’s revenue in 2008 was £19.4m, showing only marginal growth on 2007 (£19.3m),
and Group profit before tax fell to £1.59m (2007 - £1.98m). This figure represents basic
earnings per share of 9.2p (2007 - 11.1p) and adjusted earnings per share (as defined in
the business review) of 12.1p (2007 - 13.1p).
In spite of slow overall revenue growth the addition of three significant new maintenance
clients and comparatively high retention of our existing base enabled the Group’s
recurring revenues to grow by 10% to £14.8m so that they now comprise 76% of total
revenue, a satisfactory ratio in difficult economic times. Our network services business
also turned in a very respectable performance with turnover growth of 21% to £5.7m and
gross profit increasing by 14%. Non-recurring revenue represented by equipment sales
slowed markedly during the year for two main reasons; first, that we chose to avoid lower
margin customer sales (as we previously indicated we would) in order to restore margins
and second, conditions in the economy reduced our customers’ discretionary spend on
equipment.
We have adjusted our cost base to match the lower revenue stream from equipment sales
by reducing sales and engineering personnel during the year and further at the start of
2009. The costs associated with this restructuring amount to £225,000, £114,000 of which
fell in 2008. As a result of these exercises, we believe our business is now well positioned
for the challenging economic conditions ahead.
The fall in stock market valuations has enabled us to repurchase and cancel a substantial
amount of our equity - 1,565,000 shares or 14.5% of the number outstanding at the
end of 2008 - during the year. This has seemed a better use of the Group’s surplus cash
than bank deposits in a period where yields are so low. We remain committed to our
progressive dividend policy and are proposing a final dividend for the year of 3.1p (2007 -
3.0p) giving a total of 5.6p for the year (2007 – 5.5p). This will be payable on 29 April 2009
to shareholders on the register at 27 March 2009.
Since year end Tim Mason has retired as Chief Executive Officer and I would like here
to express thanks on behalf of the Board and all shareholders for the energy and
commitment that he has brought to this role over a number of years. After a thorough
search process for Tim’s successor we announced Eddie Buxton’s appointment early in
2009. Eddie brings long and varied experience of the telecoms industry to us having
worked in senior positions at Cable and Wireless, NTL and Centrica Telecoms and was
most recently Managing Director of Redstone plc’s telecoms division.
I would like finally to express the Board’s gratitude to our loyal and hardworking staff for
continuing to build and manage Maintel’s business in the current challenging economic
environment and market conditions.
J D S Booth
Chairman
13 March 2009
Results
In line with our projections in the interim report, the second half of 2008 saw an increase
in maintenance revenues, fewer low margin equipment sales and a reduction in payroll
costs, with the result that second half profits improved significantly.
Revenue
Profit before tax
H1 2008
£000
H2 2008
£000
2008
£000
9,777
9,638
19,415
621
968 1,589
Add back goodwill impairment,
intangibles amortisation and
one-off professional fees
Adjusted profit before tax
Basic and diluted earnings per share
Adjusted earnings per share*
190
811
3.5p
4.7p
242
1,210
5.7p
7.4p
432
2,021
9.2p
12.1p
* Adjusted profit after tax divided by weighted average number of shares
2007
£000
19,329
1,979
324
2,303
11.1p
13.1p
The conscious avoidance of lower margin equipment sales previously highlighted, together
with the effects of the economic environment reducing customers’ discretionary spend
on equipment, resulted in relatively static revenues overall, despite the healthy increase
in maintenance and network services revenues. Recurring revenue (maintenance and
network services) increased markedly to £14.8m (76% of total revenues) in 2008 (2007 –
£13.4m and 69%), providing increased stability in uncertain times.
The significant year on year decline in equipment sales has caused overall revenue to be
flat and the cost of bringing down headcount in line with the reduced level of revenues,
£114,000 for the year, has contributed to a drop in adjusted profit before tax from
£2.303m to £2.021m, or 9.2p per share (2007 - 11.1p) and a drop in adjusted earnings per
share from 13.1p to 12.1p.
The Company repurchased 1,565,000 shares during the year, the bulk of them in October.
This will produce a significant earnings per share benefit in 2009.
Revenue analysis (£000)
Maintenance related
Equipment, installations and other
Total maintenance and equipment division
Network services division
Intercompany
Total Maintel Group
2008
9,157
4,702
13,859
5,678
(122)
19,415
2007
8,756
5,979
14,735
4,682
(88)
19,329
Cash flow from operating activities continues to be strong, at £1.391m in 2008 (2007
- £1.103m), and cash balances remained healthy at £1.010m (2007 - £2.109m) after
spending £1.782m on repurchasing shares and dividend payments of £664,000.
Divisional performance is described further below.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
4
Business review
Chairman’s statement
(continued)
5
Business review
Business review
(continued)
Maintenance and equipment division
The maintenance and equipment division provides maintenance, service and support
of office-based voice and data equipment across the UK on a contracted basis. It also
supplies and installs voice and data equipment to maintenance customers.
The division’s revenues fell from £14.7m in 2007 to £13.9m in 2008, as shown in the table
above.
The lower level of equipment sales is due partly to a conscious decision to avoid very low
margin business and partly to a reduction in demand, doubtless a function of the general
economic downturn. Maintenance revenues, however, increased by a net £400,000, or 5%.
Three major new signings in the first half are particularly worth highlighting:
• a five year contract for Tesco’s administrative sites
• a contract to maintain the majority of the sites of a major high street retailer
• a contract with Davis Langdon LLP covering 20 sites nationwide
Together these will contribute more than £700,000 of recurring revenue per annum.
The first two contracts are a product of our growing relationship with Cable and Wireless
who awarded us a contract to provide solution design, installation and maintenance services
for Mitel and Nortel products, and maintenance for Siemens products across the UK.
The annual value of the maintenance base at the end of the year was at a record high of
almost £9.2m, with noticeably lower levels of attrition being experienced in 2008 than in
recent years. Virtually all of the major contracts that came up for renewal during the year
have been re-signed.
The reduced levels of equipment sales during the year led to a commensurate reduction
in sales headcount as shown below. The decline in installation work also led us to reduce
engineering headcount, as can be seen more clearly from the year end figures.
Headcount
Average 2008
Average 2007
Sales and customer service
Engineers
49
84
59
86
At 31 December
2008
46
80
In January 2009, prevailing economic conditions caused us to review headcount further
and 11 redundancies were made, giving an annualised saving of around £400,000.
Division gross profit (£000)
5,017 (36%)
5,403 (37%)
2008
2007
The division’s gross profit fell slightly, by 0.5%, after taking into account redundancy-
related costs in 2008. 2009 gross profit will benefit further from these mid-year cost
reductions, and from the additional redundancies in January 2009.
Net margin (operating profit as a percentage of revenue) from the division reduced in line
with gross margin, but remained strong at 10.3% (2007 – 11.4%), the division’s overheads
remaining tightly controlled during the year, but adversely affected by redundancy-related
costs and an increase in property costs.
Given the application of common resource across both maintenance and equipment
sales, it is not practical to quote definitive margin data on the separate business sectors;
however management figures are used to monitor results internally.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
Network services division
The network services division re-sells a portfolio of products providing the
interconnectivity between customers and their staff and offices as well as the outside
world. This includes call minutes, line rental, ADSL/Broadband, Wide area IP networking
and non-geographic numbers.
Revenue analysis (£000)
Call traffic
Line rental
Other
Total network services
2008
3,405
1,645
628
5,678
2007
3,120
1,185
377
4,682
Division gross profit (£000)
1,406 (25%)
1,232 (26%)
All revenue streams continued to grow steadily during the year, call traffic up 9%, line
rental up 39% and other revenues including data services up 67%. Overall divisional
revenue increased by 21% to £5.7m, with the gross margin percentage falling slightly due
to the business mix - line rental attracting a lower margin than call traffic, for example.
The previously highlighted cancellation by one of our larger customers has taken time
to be implemented, but the effects were finally seen in Q4 2008 and all but a nominal
amount of revenue from that customer ceased by the end of 2008.
A further large customer cancelled in H2 2008 and has subsequently ceased to trade due
to the economic environment. A new, similar sized customer was signed in December
2008, which is anticipated to substantially maintain the division’s revenue run rate
and growth. Other than those two customers, attrition in the division remained at its
historically low levels, which is gratifying, particularly when considered alongside the low
attrition in the maintenance division.
Sales and administrative costs continue to be closely controlled, though naturally
increased in 2008 to support the revenue growth. Further specialist sales resource is
being sought to deliver the division’s growth aspirations.
Administrative expenses, excluding goodwill impairment and
intangibles amortisation
Administrative expenses (£000)
Sales expenses
Other administrative expenses
(excluding goodwill impairment and
intangible amortisation)
Total other administrative expenses
2008
2,114
2,302
4,416
2007
2,290
2,115
4,405
Administrative expenses increased by only £11,000 in the year. The reduction in sales
expenses reflected the reduction in the headcount and lower commissions arising
from the lower levels of equipment sales. Other administrative expenses increased by
£187,000 (9%), as a result of factors including the increase in network services staff to
support its growth, a rent review and the rental of some additional space at the Group’s
London offices.
6
Business review
Chairman’s statement
(continued)
7
Business review
Business review
(continued)
Administrative expenses, excluding goodwill impairment and
intangibles amortisation (continued)
Average Group headcount during the period
Average sales and service headcount
Average corporate and admin headcount
2008
162
58
20
2007
171
65
20
Group revenue (£000)
19,415
19,329
Interest
Net interest receivable has fallen from £115,000 to £68,000 in 2008, due to lower market
interest rates and lower cash balances due to share buybacks. It is anticipated that the
effect of the share buybacks will more than compensate for the reduced earnings per
share effect of lower interest income.
Taxation
The income statement shows a tax rate of 31.2% (2007 – 30.1%). The two main trading
companies are taxed at 28.5%, so that with disallowables the effective rate is above this,
increased further by an element of the goodwill impairment charge which does not attract
tax relief. The 2007 rate benefited from the effect on deferred tax of the reduction in the
rate of corporation tax from 30% to 28%, and from the use of the remaining £15,000 of
tax losses acquired on the purchase of District Holdings Limited.
Dividends
A final dividend for 2007 of 3.0p per share (£364,000 in total) was paid on 30 April 2008,
and an interim 2008 dividend of 2.5p per share (£300,000) was paid on 10 October 2008.
It is proposed to pay a final dividend of 3.1p in respect of 2008, subject to shareholder
approval at the AGM, and payable on 29 April to shareholders on the register at the close
of business on 27 March. In accordance with accounting standards, this dividend is not
accounted for in the financial statements for the period under review as it had not been
committed to pay it as at 31 December 2008.
Balance sheet
The balance sheet remains solid, with £1.0m of cash and no debt, facilitating continued
growth from existing resources.
Both trade receivables and trade payables have reduced significantly since 31 December
2007 mainly due to the reduction in equipment sales and to two major maintenance
customers being invoiced on terms more favourable than the Group’s standard annually
in advance, the latter factor also helping to explain the reduction in deferred maintenance
income at the end of 2008.
The value of maintenance stock has increased by £76,000 in the year, to £675,000, mainly
due to the purchase of additional parts for new systems both for general maintenance and
as on-site spares for a major contract, whilst the value of stock held for resale has fallen
from £230,000 to £61,000 as a result of the much reduced equipment sales in 2008.
No significant expenditure has been required on plant and equipment during the period.
The deferred tax liability arises from the application of IFRS, whereby a liability of
£290,000 was created on the recognition of the intangible asset relating to District. This
is released broadly in parallel with the amortisation of the intangible and is partially offset
by deferred tax assets.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
Intangible assets
The Group has three intangible assets – goodwill arising on the acquisition of Maintel
Network Services Limited (previously Pinnacle Voice and Data Limited) and an intangible
asset represented by customer contracts and relationships acquired from District Holdings
Limited and Callmaster, together with goodwill relating to the District acquisition.
The Maintel Network Services goodwill is subject to an impairment test at each reporting
date. Impairment of £62,000 has been charged to the income statement in 2008 (2007
- £18,000), and the carrying value is £232,000 at that date. The 2008 charge is largely a
result of the cancellation of a major customer referred to above.
The intangible assets represented by purchased customer contracts and relationships are
subject to an amortisation charge of 20% of cost per annum in respect of maintenance
contract relationships and 14.2% per annum in respect of network services contracts,
£263,000 having been amortised in 2008 (2007 - £222,000), leaving a carrying value of
£831,000. These assets are also subject to an impairment test each year, however no
charge has been required at 31 December 2007 or 2008.
The goodwill relating to the District acquisition is subject to an impairment test at each
reporting date, and has been subject to an impairment charge of £58,000 in 2008 (2007 -
£58,000), leaving a carrying value of £145,000.
Purchase of own shares
Further to the authority granted at the last and penultimate AGMs, the Company
repurchased and cancelled 1,565,000 of its own shares during 2008, at a weighted
average price of 113p, and a total cost of £1,782,000.
The share price at 31 December 2008 was 83.5p.
Cash flow
At 31 December 2008 the Group had cash and bank balances of £1.010m (2007 -
£2.109m), all of it unrestricted. Net cash inflow from operating activities in the year was
£1.391m, £1.782m was used to buy back shares in the Company, £664,000 was paid in
dividends, and £638,000 corporation tax was paid.
The Group has no debt and invests its surplus cash with mainstream UK banking
organisations.
Principal risks
The directors consider that the principal risks to the Group relate to technological
advance, marketplace relationships and pricing strategies, and the potential implications
of the current economic environment.
Telecommunications hardware has historically focused on a PBX core, which is gradually
being replaced, at least at the higher end, by Voice over Internet Protocol (VoIP)
capabilities. Customers’ acceptance of the new technologies moves at varying rates,
however, so that legacy systems will continue to be serviced for some time to come.
Maintel continues to address the technological shift by positioning itself to sell and
maintain the new breed of telephone system, and has had notable success with this
transition to date. Maintenance income from this new technology can be reduced when
compared to traditional telephony although every effort is made to counter this effect
through reduced costs in delivering our service and by retaining the resultant enhanced
calls and lines revenue.
VoIP technology is also a potential threat to the reselling of call minutes. In practice,
however, this technology is proving slow to be adopted, largely due to performance issues
which are an important consideration for Maintel’s business customers. Recognising the
potential risk, however, the Group is ensuring that it expands its product portfolio with,
for example, line rental continuing to grow significantly during 2008. The development of
VoIP is constantly monitored so that the Group may take advantage of profitable business
models as and when they appear, such as our sales of SIP trunking and hosted technology.
8
Business review
Chairman’s statement
(continued)
9
Business review
Business review
(continued)
Outlook
The deepening of the recession in Q3 and Q4 2008 and its continuing effect on equipment
sales has unfortunately led to a further round of redundancies in early 2009, with the
consequent cost reductions being noticeable from Q2 2009, amounting to an annualised
£400,000 on top of a full year’s benefit from the mid-year 2008 redundancies. Other than
a handful of previously committed increases, employees did not receive customary salary
increases at the start of 2009 and no director’s remuneration was increased. Conversely,
the bulk of maintenance revenues continue to attract an industry inflation-related annual
uplift. In addition, 2009 will see a full year’s revenue from the major H1 2008 maintenance
signings noted above and a further £150,000 contract which commenced on 1 January
2009.
In summary, our reduced cost structure combined with the expected further increase in
maintenance revenues puts the Group on a firm footing for 2009.
E Buxton
Chief Executive
13 March 2009
Principal risks (continued)
The Group is potentially subject to new pricing strategies by both competitors and
suppliers, whether due to their own internal policies, in response to technological change
or, in the case of call minutes and line rentals, potential regulatory change. The directors
monitor margins closely and take action where appropriate.
The Group has a symbiotic relationship with Cable & Wireless, such that C&W constitutes
around 10% of its maintenance base. Should this relationship be terminated, the
maintenance base would reduce to that extent over time, necessitating a commensurate
reduction in costs.
The Group maintains and provides equipment from a range of manufacturers, and relies
on the support and continued supply of parts from those suppliers or intermediaries.
Should that cease to be forthcoming, in some cases there may be a reduction in service
the Group is able to supply to its customers. However this risk is spread due to the range
of systems maintained.
The Group’s maintenance contracts have a natural finite life, and are subject to
competitive attack, so that there is an inevitable customer churn. The directors monitor
the rate and causes of churn and implement strategies with the objective of minimising
attrition and growing the customer base organically and by way of acquisition.
The current exceptional economic environment has impacted negatively on the Group’s
revenues, largely due to the curtailment in discretionary spend by some of the Group’s
customers, which has had a negative effect particularly on equipment sales. These
conditions may persist and, indeed, may worsen, although the Group has already reduced
its cost base to reflect reduced revenues and will continue to monitor costs accordingly.
The economic environment may also cause an increased number of the Group’s customers
to be unable to meet their financial obligations and/or to seek to delay payment beyond
agreed terms. The Group carefully assesses the creditworthiness of prospects and
insures its network services debt where necessary and possible; a significant proportion
of the Group’s revenue relates to maintenance charges paid in advance, to which no credit
risk attaches.
Nortel
A significant proportion of the Group’s business is associated with products supplied by
Nortel. Certain Nortel subsidiaries in the US filed for Chapter 11 bankruptcy protection
in January 2009 with certain other Nortel companies following analogous routes in other
countries.
Nortel had $10bn revenues worldwide in 2007 and has announced that it will continue to
focus on serving its customers.
The directors consider that the only impact on the Group in the short to medium term is
the possible postponement of the purchase of Nortel equipment pending resolution of its
financial issues, but that this is unlikely to have a significant effect on the Group given
the lower levels of equipment sales being budgeted due to the economic climate, and the
ability of the Group to offer alternative manufacturers’ systems to customers.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
10
Chairman’s statement
Board of directors
11
Business review
Report on corporate governance
Dale Todd, 50
Finance director
Dale qualified as a chartered accountant
with Thomson McLintock (now KPMG) in
1982 and joined the Group in March 2002.
Prior to this he held positions as group
finance director at Rolfe & Nolan Plc, Best
International Group Plc and HS Publishing
Group Ltd.
Nicholas Taylor, 42
Non-executive director
Nicholas has extensive experience of
working with growing companies, in both
an executive and non-executive capacity.
A former management consultant, he
joined Luther Pendragon Limited, a
communications consultancy, in 1995,
where he rose to become Managing
Partner, before leaving in 2000 to become
Chief Executive of WPP subsidiary Metro
Broadcast Limited. After two years in the
not-for profit sector, as a director of the
Royal Institute of British Architects, he
is currently Chief Operating Officer of EU
affairs consultancy, G Plus Limited.
John Booth, 50
Non-executive chairman
John was appointed chairman of Maintel in
1996. He is also chairman of Integrated
Asset Management plc, a non-executive
director of several other private companies
and consultant to Herald Venture Partners.
Prior to becoming Chairman John spent
his career in equities investment and
broking, holding various senior positions
in the industry. He is currently executive
chairman of the Link Group which was
acquired by ICAP plc in 2008.
Eddie Buxton, 48
Chief executive
Eddie was appointed chief executive on
2 February 2009, having previously been
managing director of the telecoms division
of Redstone plc. Eddie has worked in
telecoms since 1995 including senior roles
with Cable and Wireless, NTL and Centrica
Telecommunications.
Angus McCaffery, 42
Sales and marketing director
Angus has 20 years experience in the
telecommunications market, and co-
founded Maintel Europe in 1991, being
appointed sales director of Maintel Holdings
in 1996. His role with the Group has been
to develop its sales, marketing and product
strategy.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
As a company listed on the Alternative
Investment Market of the London Stock
Exchange, Maintel Holdings Plc is not
required to comply with the Financial
Reporting Council Combined Code (“the
Code”). However, the board of directors
recognises the importance of, and is
committed to, ensuring that proper
standards of corporate governance operate
throughout the Group and has taken
steps to comply with it insofar as it can be
applied practically, given the size of the
Group and the nature of its operations.
The directors have applied the principles
and provisions of the Code in the following
manner:
Board of directors
The board includes two non-executives -
John Booth, who is chairman, and Nicholas
Taylor. It is not considered necessary,
given the Company’s size and stage of
development, to actively seek a further
non-executive director at this stage.
Other than in respect of their shareholdings
in the Company, both non-executive
directors are independent of management
and are free from any business or other
relationship which could materially interfere
with the exercise of their independent
judgement.
The board also consists of three executive
directors, of whom Eddie Buxton is Chief
Executive (Tim Mason having resigned as
Chief Executive on 2 February 2009, on
which date Eddie Buxton was appointed),
Angus McCaffery is Sales and Marketing
Director and Dale Todd is Finance Director.
The directors’ biographies on page 10
demonstrate the range and depth of
experience they bring to the Group.
The board meets regularly, normally
monthly, and both reviews operations
and assesses future strategy for the two
operating subsidiaries and for the Group
as a whole. It operates to a schedule
of matters specifically reserved for its
decision.
The Company’s articles of association
require that John Booth and Nicholas Taylor
retire by rotation at the forthcoming annual
general meeting; both offer themselves for
re-election at the meeting. Eddie Buxton,
having been appointed since the last annual
general meeting, is also required to retire
at the next annual general meeting, and
also offers himself for re-election.
The Company has purchased insurance
to cover its directors and officers against
any costs they may incur in defending
themselves in any legal proceedings
instigated against them as a direct result
of duties carried out on behalf of the
Company.
The directors are able to seek independent
professional advice as necessary, for
the furtherance of their duties, at the
Company’s expense within designated
financial limits.
The following committees deal with specific
aspects of the Group’s affairs:
Audit committee
The audit committee is chaired by Nicholas
Taylor with John Booth being the other
member. Eddie Buxton (Tim Mason
during 2008) and Dale Todd (who acts
as secretary to the committee) attend
meetings by invitation, as do the external
auditors.
The remit of the committee is to:
• consider the continued appointment of
the external auditors, and their fees.
• liaise with the external auditors in
relation to the nature and scope of the
audit.
• review the financial statements and any
other financial announcements issued by
the Company.
• review any comments and
recommendations received from the
external auditors.
• review the Company’s statements on
internal control systems and the policies
and process for identifying and assessing
business risks and the management of
those risks by the Company.
The audit committee convenes at least
twice a year.
Remuneration committee
The remuneration committee is chaired by
Nicholas Taylor, its other member being
John Booth. The committee meets at least
once a year. The committee’s report to
shareholders on directors’ remuneration is
set out on page 14.
12
Report on corporate governance
Chairman’s statement
(continued)
13
Report on corporate governance
Business review
(continued)
Going concern
The Group’s business activities, together
with factors likely to affect its future
development, performance and position,
the financial position of the Group and
its cash flows are set out in the Business
review on pages 3 to 9. In addition, note 16
to the financial statements includes details
of the Group’s policies and processes
for managing its capital, its financial risk
management objectives, details of its
financial instruments and its exposure to
credit and liquidity risk.
The Group has sound financial resources
and a substantial level of recurring
revenue across a range of sectors and as a
consequence the directors believe that the
Group is well placed to manage its business
risks successfully despite the current
uncertain economic outlook.
After making enquiries, the directors have
a reasonable expectation that the Company
and the Group have adequate resources
to continue in operational existence for
the foreseeable future. Accordingly, they
continue to adopt the going concern basis
in preparing the financial statements.
monthly financial reports of the Group’s
performance compared to the budget,
with explanations of significant variances.
Monthly cash flow forecasts are provided
to the board, as are budget reforecasts if
deemed appropriate.
The executive directors monitor key
performance indicators on a monthly basis,
management of these being delegated to
the Group’s senior management.
The board undertakes a rolling review of
known and potential risks, and addresses
newly identified risks as they arise, with
controls put in place to minimise their
potential effect on the Group.
Operating control
Each executive director has defined
responsibility for specific aspects of
the Group’s operations. The executive
directors, together with key senior
executives, meet regularly to discuss day-
to-day operational matters.
Investment appraisal
Capital expenditure is controlled via the
budgetary process, the budget being
approved by the board. Expenditure
is approved as required by the chief
executive.
Risk management
The board is responsible for identifying the
major business risks faced by the Group
and for determining the appropriate course
of action to manage these risks.
Compliance statement
Although not subject to the Code given
its AIM-listed status, the board considers
that, where relevant, it has adhered to the
principles of the Code throughout the year,
with the exception of not having a third
non-executive director.
Nomination committee
The nomination committee had three
members during 2008, the majority
being non-executive, being John Booth,
chairman, Nicholas Taylor and Tim Mason.
Tim Mason retired from the Board on 2
February and has not as yet been replaced
on the committee. The committee meets
as required under the terms of its remit,
having met twice formally, in addition to a
number of informal meetings, during 2008
in relation to the search, recruitment and
appointment of Eddie Buxton.
The committee’s remit includes:
• regularly reviewing the structure, size
and composition of the board.
• identifying and nominating suitable
candidates to fill vacancies on the board.
Relationship with shareholders
The chairman’s statement and the
business review on pages 2 to 9 include a
detailed review of the business and future
developments.
The directors meet with institutional
and other shareholders when possible,
usually following the announcement of the
Company’s results, to keep them informed
about the performance and objectives of
the business.
The annual general meeting provides
a further forum for shareholders to
communicate with the board. Details of
resolutions to be proposed at the annual
general meeting are set out in the notice of
meeting.
Internal control
The board is ultimately responsible for the
Group’s systems of internal control, and
for reviewing their effectiveness. Such
systems can provide reasonable, but
not absolute, assurance against material
misstatement or loss. The Board believes
that the Group has internal control systems
in place appropriate to the size and nature
of its business.
The directors do not consider that an
internal audit function is required, given the
size and nature of the business at this time.
This situation is reviewed annually.
The Group maintains a comprehensive
process of financial reporting. The annual
budget is reviewed and approved by the
board before being formally adopted,
following which the board receives at least
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
14
Chairman’s statement
Report of the Remuneration committee
15
Report of the remuneration committee
Business review
(continued)
Directors’ remuneration
J D S Booth
N J Taylor
T T Mason
A J McCaffery
W D Todd
Salaries/
fees
£000
31
18
120
115
118
402
Benefits
Pension
Contributions
£000
-
£000
-
-
17
17
-
4
4
11
-
45
8
Total
2008(1)
£000
31
18
141
136
129
455
Total
2007(1,2)
£000
30
18
135
128
122
433
(1) Social security costs in respect of the above amounted to £52,000 (2007 - £50,000).
(2) Including employer pension contributions of £7,000 and benefits of £42,000, so that salaries amounted to £384,000.
The directors are the only employees of the Company.
Directors’ interests in ordinary shares
The directors’ interests in the ordinary shares of the Company are shown in the directors’
report on page 16.
Share Incentive Plan
In 2006 the Company established the Maintel Holdings Plc Share Incentive Plan (“SIP”).
The SIP is open to all employees with at least 6 months’ continuous service with a Group
company, and allows employees to subscribe for existing shares in the Company at open
market price out of their gross salary. The employees own the shares from the date of
purchase, but must continue to be employed by a Group company and hold their shares
within the SIP for 5 years to benefit from the full tax benefits of the plan.
The Report of the Remuneration committee was approved by the Board on 13 March 2009.
N J Taylor
Chairman of the Remuneration committee
The committee consists of the two non-executive directors, Nicholas Taylor (chairman of
the committee) and John Booth.
The committee’s remit is to measure the performance of, and determine remuneration
policy relating to directors and certain senior employees.
The committee consults with the chief executive with regard to his proposals and
has access to professional and other advice external to the Group, then makes
recommendations to the board.
Remuneration policy
The Group’s executive director remuneration policy is designed to attract and retain
directors of the calibre required to maintain the Group’s position in its marketplace.
The executive director remuneration package consists of up to four elements:
(a) Basic salary
An executive director’s basic salary is determined by the remuneration committee at
the beginning of each year. In deciding appropriate levels the committee considers the
relative responsibilities of each of the directors.
Basic salaries were reviewed in January 2009 and in line with substantially all other Group
employees, no increase in salary was awarded at that date.
Executive directors’ service agreements, which include details of remuneration, will be
available for inspection at the annual general meeting.
(b) Pension contributions and other benefits
Executive directors are entitled to employer pension contributions of 3% of basic salary, or
additional salary in lieu thereof.
They also receive a car allowance and membership of private health, permanent health
and life assurance schemes.
(c) Bonus
Eddie Buxton will receive a bonus, subject to certain criteria, dependant on the
performance of the Group. The details of this arrangement have not yet been confirmed.
(d) Share options
Eddie Buxton will be eligible for an award of share options in due course; an option
scheme is being established with the quantum of award and performance criteria yet to be
confirmed.
Directors’ service agreements
Each executive director has a six month rolling service agreement, Eddie Buxton being
subject to a one month notice period in the first six months of his employment with the
Group.
Non-executive directors
Each of the non-executive directors has a three month rolling contract.
The remuneration of the non-executive directors is determined by the executive directors,
and is based upon the level of fees paid at comparable companies. The non-executives
receive no payment or benefits other than their fees.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
16
Report of the directors
Chairman’s statement
for the year ended 31 December 2008
17
Report of the directors
Business review
for the year ended 31 December 2008 (continued)
The directors present their report together with the audited financial statements for the
year ended 31 December 2008.
Principal activities
The principal activities of the Group are the provision of contracted maintenance services
to, and the sale of, fixed line telecommunications systems, the resale of voice and data
minutes, line rentals and other telecommunications products.
Results and dividends
The consolidated income statement is set out on page 22 and shows the profit of the
Group for the year.
During the year the Company paid a final dividend of 3.0p per ordinary share in respect of
the 2007 financial year, amounting to £364,000 (2007 – 2.9p and £361,000 respectively)
and an interim dividend in respect of 2008 of 2.5p per share, amounting to £300,000
(2007 – 2.5p and £311,000 respectively). The directors recommend the payment of a final
dividend in respect of 2008 of 3.1p per share.
Business review
A review of the business and future developments is set out in the Business review on
pages 3 to 9.
Directors
The directors of the Company and their interests in the ordinary shares of the Company at
the year end were as follows:
Number of 1p ordinary shares
2008
2007
Beneficial Non-beneficial Beneficial Non-beneficial
J D S Booth
2,751,745
-
2,750,781
-
T T Mason (resigned 2 February 2009*) 1,045,862
28,016
2,045,862 13,373
A J McCaffery
2,162,688
-
2,162,688
-
N J Taylor
W D Todd
7,747
27,269
7,716 12,657
- 28,016
-
13,373
* Mr Mason has since disposed of 765,862 shares, including 680,203 to Mr T Wat, whose interest is noted below as a Substantial
Shareholder. Mr Mason retains an indirect interest in these 680,203 shares.
J D S Booth is a shareholder in Herald Investment Trust plc which holds 760,000 1p
ordinary shares in the Company.
E Buxton was appointed a director on 2 February 2009 and held no shares beneficially
between that date and 13 March 2009.
The non-beneficial holdings above relate to holdings of the Share Incentive Plan, of which
the respective directors are trustees. E Buxton was appointed a trustee of the Plan on
T Mason’s resignation, and accordingly had a non-beneficial interest in the Plan’s 32,130
shares at 13 March 2009.
Since the year end, the Share Incentive Plan has acquired a net 4,114 shares in total.
There were no other changes in the directors’ shareholdings between 31 December 2008
and 13 March 2009.
The Company has purchased insurance to cover its directors and officers against any
costs they may incur in defending themselves in any legal proceedings instigated against
them as a direct result of duties carried out on behalf of the Company.
Details of the changes in the Company’s share capital during the year are given in note 18.
Substantial shareholders
In addition to the directors’ shareholdings, at 13 March 2009 the Company had been
notified of the following shareholdings of 3% or more in the ordinary share capital of the
Company:
J A Spens
Octopus Investments Limited
Herald Investment Trust plc
T Wat
Marlborough Special Situations Fund
Number of
1p ordinary shares
% of issued
ordinary shares
1,557,330
811,810
760,000
680,203
465,000
14.4%
7.5%
7.0%
6.3%
4.3%
The Company’s mid-market share price at 31 December 2008 was 83.5p per share, and
the high and low prices during the year were 167p and 83.5p respectively.
Employees
Maintel’s success is dependent on the knowledge, experience and motivation of
its employees, and so on the attraction and retention of those staff. The Group’s
management monitors the compliance with both statutory regulation and best practice
with regard to gender, race, age and disability.
A Group intranet is core to open communication amongst employees, and this continues to
be developed.
The Company established a Share Incentive Plan in 2006, allowing employees to invest
tax effectively in its shares, and so aligning employee interests with shareholders. Under
the plan, shares are acquired by employees out of pre-tax salary, with ownership vesting
at that time, and are held by trustees on behalf of the employees. The plan is therefore
separate from the assets of the Group.
Environment
The Group acknowledges its responsibilities to environmental matters and where
practicable adopts environmentally sound policies in its working practices, such
as recycling paper and packaging waste and using specialist recyclers of scrap
telecommunications and IT equipment. Maintel Europe Limited has ISO 14001:2004
accreditation for its environmental management systems.
Purchase of own shares
Pursuant to the authority granted at the last and penultimate AGMs, the Company
repurchased and cancelled 1,565,000 of its own 1p ordinary shares during 2008, at prices
between 94p and 161.5p each at a total cost of £1,782,000, the directors considering that
such purchases were in the best interests of the shareholders. The purchases represent
14.5% of the Company’s issued share capital as at 31 December 2008. The existing
authority is for the purchase of up to 1,820,805 shares, and the unutilised authority is in
respect of 495,805 shares. A fresh authority, in the amount of 1,622,187 shares, will be
sought at the forthcoming annual general meeting.
Financial instruments
Details of the use of financial instruments by the Group are contained in note 16 of the
financial statements.
Donations
The Group made charitable contributions of £nil (2007 – £nil) during the year. No
contributions were made to political organisations (2007 - £nil).
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
18
Report of the directors
Chairman’s statement
for the year ended 31 December 2008 (continued)
19
Business review
Statement of directors’ responsibilities
Creditor payment policy
The Group policy for suppliers is to fix terms of payment when agreeing the terms
of transactions, and to comply with those contractual arrangements. The Group’s
average creditor payment period at 31 December 2008 was 37 days (2007 – 53 days).
The Company’s average creditor payment period at 31 December 2008 was 83 days
(2007 – 6 days), these figures being due to the irregular nature of the Company’s
creditor payments.
Articles of Association
The law in relation to companies is currently undergoing a number of changes
following the introduction of new companies legislation in the United Kingdom under
the Companies Act 2006 (“2006 Act”). The changes are being implemented in stages,
with some parts already in force and the final parts due to be implemented in October
2009. Some of the changes will apply automatically to the Company, whilst others will
require the Company to take specific steps to take advantage of, or exclude, as the
case may be, the effect of the changes.
In order to accommodate all the proposed changes to the Company’s existing articles
of association (“Existing Articles”) to reflect certain provisions of the 2006 Act which
are currently in force, your Board is proposing that new articles of association (“New
Articles”) are adopted. Accordingly, resolution 11 in the notice of meeting is a special
resolution relating to the adoption of the New Articles. Since it is expected that the
2006 Act will not be fully in force until October 2009, there may be further changes
to be made to the New Articles at the Company’s annual general meeting in 2010.
The proposed principal changes to be made to the Existing Articles at the Company’s
annual general meeting are detailed in the Appendix on page 53 of this Annual Report.
The proposed New Articles are available for inspection at the Company’s registered
office from the date of the notice of meeting until the close of the annual general
meeting.
Recommendation
Your board considers resolution 11 to be in the best interests of the Company and its
members as a whole and is most likely to promote the success of the Company for the
benefit of its members as a whole. Accordingly, your board unanimously recommends
that shareholders should vote in favour of resolution 11 to be proposed at the annual
general meeting, as they intend to do in respect of their own beneficial shareholdings
amounting to 4,922,180 ordinary shares.
Auditors
All of the current directors have taken all the steps that they ought to have taken to
make themselves aware of any information needed by the Company’s auditors for the
purposes of their audit and to ensure that the auditors are aware of that information.
The directors are not aware of any relevant audit information of which the auditors are
unaware.
A resolution proposing the re-appointment of BDO Stoy Hayward LLP as auditors of the
Company will be proposed at the forthcoming annual general meeting.
On behalf of the Board
E Buxton
Director
13 March 2009
Directors’ responsibilities
The directors are responsible for keeping proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Group, for safeguarding
the assets of the Company, for taking reasonable steps for the prevention and detection
of fraud and other irregularities and for the preparation of a Directors’ Report which
complies with the requirements of the Companies Act 1985.
The directors are responsible for preparing the annual report and the financial statements
in accordance with the Companies Act 1985. The directors are also required to prepare
financial statements for the Group in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs) and the rules of the London Stock
Exchange for companies trading securities on the Alternative Investment Market. The
directors have chosen to prepare financial statements for the Company in accordance
with UK Generally Accepted Accounting Practice.
Group financial statements
International Accounting Standard 1 requires that financial statements present fairly for
each financial year the Group’s financial position, financial performance and cash flows.
This requires the faithful representation of the effects of transactions, other events
and conditions in accordance with the definitions and recognition criteria for assets,
liabilities, income and expenses set out in the International Accounting Standards Board’s
‘Framework for the preparation and presentation of financial statements’. In virtually
all circumstances, a fair presentation will be achieved by compliance with all applicable
IFRSs. A fair presentation also requires the Directors to:
• consistently select and apply appropriate accounting policies;
• present information, including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs
is insufficient to enable users to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and financial performance.
Parent company financial statements
Company law requires the directors to prepare financial statements for each financial
year which give a true and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period. In preparing these financial statements, the
directors are required to:
• select suitable accounting policies and then apply them consistently;
• prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business;
• make judgements and estimates that are reasonable and prudent; and
• state whether applicable accounting standards have been followed, subject to any
material departures disclosed and explained in the financial statements.
Financial statements are published on the Group’s website in accordance with legislation
in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance
and integrity of the Group’s website is the responsibility of the directors. The directors’
responsibility also extends to the ongoing integrity of the financial statements contained
therein.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
20
Independent auditor’s report
Chairman’s statement
to the shareholders of Maintel Holdings Plc
21
Independent auditor’s report
Business review
to the shareholders of Maintel Holdings Plc (continued)
Opinion
In our opinion:
• the group financial statements give a true and fair view, in accordance with IFRSs as
adopted by the European Union, of the state of the group’s affairs as at 31 December
2008 and of its profit for the year then ended;
• the parent company financial statements give a true and fair view, in accordance with
United Kingdom Generally Accepted Accounting Practice, of the state of the parent
company’s affairs as at 31 December 2008;
• the financial statements have been properly prepared in accordance with the Companies
Act 1985; and
• the information given in the directors’ report is consistent with the financial statements.
BDO STOY HAYWARD LLP
Chartered Accountants
and Registered Auditors
London
13 March 2009
We have audited the group and parent company financial statements (the ‘’financial
statements’’) of Maintel Holdings Plc for the year ended 31 December 2008 which
comprise the consolidated income statement, the consolidated and company balance
sheets, consolidated statement of changes in equity, the consolidated cash flow
statement, and the related notes. These financial statements have been prepared under
the accounting policies set out therein.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and group financial
statements in accordance with applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and for preparing the parent
company financial statements in accordance with applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set
out in the statement of directors’ responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair
view and have been properly prepared in accordance with the Companies Act 1985 and
whether the information given in the directors’ report is consistent with those financial
statements. We also report to you if, in our opinion, the company has not kept proper
accounting records, if we have not received all the information and explanations we
require for our audit, or if information specified by law regarding directors’ remuneration
and other transactions is not disclosed.
We read other information contained in the annual report, and consider whether it is
consistent with the audited financial statements. This other information comprises only
the directors’ report, the chairman’s statement, the business review, the report of the
remuneration committee and the report on corporate governance. We consider the
implications for our report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements. Our responsibilities do not extend to any
other information.
Our report has been prepared pursuant to the requirements of the Companies Act 1985
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
the Companies Act 1985 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.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgments made by the
directors in the preparation of the financial statements, and of whether the accounting
policies are appropriate to the group’s and company’s circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations
which we considered necessary in order to provide us with sufficient evidence to give
reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial
statements.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2008
www.maintel.co.uk
22
Consolidated income statement
for the year ended 31 December 2008
23
Consolidated balance sheet
at 31 December 2008
Revenue
Cost of sales
Gross profit
Administrative expenses
Goodwill impairment
Intangibles amortisation
Other administrative expenses
Operating profit
Financial income
Financial charges
Profit before taxation
Taxation
Profit after taxation attributable to equity holders of the parent
Earnings per share
Basic and diluted
The notes on pages 26 to 45 form part of these financial statements.
Note
2
10
10
5
6
6
7
9
2008
£000
19,415
13,095
6,320
120
263
4,416
4,799
1,521
69
(1)
1,589
495
1,094
2007
£000
19,329
12,762
6,567
76
222
4,405
4,703
1,864
115
-
1,979
595
1,384
9.2p
11.1p
Non current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Total current liabilities
Non current liabilities
Deferred tax liability
Total net assets
Equity
Issued share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
Note
2008
£000
736
3,164
1,010
10
12
13
14
15
17
18
19
19
19
2008
£000
1,208
200
1,408
4,910
6,318
5,173
193
5,366
98
854
108
628
28
90
854
2007
£000
829
3,928
2,109
2007
£000
1,591
208
1,799
6,866
8,665
6,025
295
6,320
139
2,206
124
628
12
1,442
2,206
The financial statements were approved and authorised for issue by the Board on 13 March 2009 and were signed on its
behalf by:
W D Todd
Director
The notes on pages 26 to 45 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
24
Consolidated statement of changes in equity
for the year ended 31 December 2008
25
Consolidated cash flow statement
for the year ended 31 December 2008
Operating activities
Profit before taxation
Adjustments for:
Goodwill impairment
Intangibles amortisation
Depreciation charge
Interest received
Other interest paid
Loss on disposal of plant and equipment
Operating cash flows before changes in working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operating activities
Tax paid
Net cash flows from operating activities
Investing activities
Purchase of plant and equipment
Proceeds from disposal of plant and equipment
Purchase of base of customer relationships
Interest received
Net cash flows from investing activities
Financing activities
Other interest paid
Repurchase of own shares for cancellation
Equity dividends paid
Net cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at start of period
Cash and cash equivalents at end of period
The notes on pages 26 to 45 form part of these financial statements
2008
£000
2007
£000
1,589
1,979
120
263
118
(69)
1
2
2,024
93
764
(852)
2,029
(638)
1,391
(115)
3
-
69
(43)
(1)
(1,782)
(664)
(2,447)
(1,099)
2,109
1,010
76
222
136
(115)
-
-
2,298
(124)
(1,067)
755
1,862
(759)
1,103
(106)
-
(448)
115
(439)
-
(117)
(672)
(789)
(125)
2,234
2,109
At 1 January 2007
Profit for year*
Dividend
Movements in respect of
purchase of own shares
At 31 December 2007
Profit for year*
Dividend
Movements in respect of
purchase of own shares
At 31 December 2008
Share
capital
£000
124
Share
premium
£000
628
-
-
-
124
-
-
(16)
108
-
-
-
628
-
-
-
Capital
redemption
reserve
£000
12
-
-
-
12
-
-
Retained
earnings
£000
847
1,384
(672)
Total
£000
1,611
1,384
(672)
(117)
(117)
1,442
2,206
1,094
(664)
1,094
(664)
16
(1,782)
(1,782)
628
28
90
854
* Total recognised income and expenses for the year are the same as the profit for the year shown above.
The notes on pages 26 to 45 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
26
Notes forming part of the financial statements
for the year ended 31 December 2008
27
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
1 Accounting policies
The consolidated financial statements have been prepared under the historical cost convention, and the principal policies
adopted in their preparation are as follows:
(a) Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and Interpretations (collectively IFRS) issued by the International Accounting Standards
Board (IASB) as adopted by the European Union (“adopted IFRSs”), and with those parts of the Companies Act 1985
applicable to companies preparing their accounts in accordance with adopted IFRSs. The Company has elected to prepare its
parent company financial statements in accordance with UK GAAP and these are presented on page 46.
(b) Basis of consolidation
The financial statements consolidate the results of Maintel Holdings Plc and each of its subsidiaries (the “Group”). The results
of subsidiaries acquired are included within the consolidated income statement and balance sheet from the effective date of
acquisition, applying uniform accounting policies pursuant to IAS 27 “Consolidated and separate financial statements”. The
results of disposed subsidiaries are included in the consolidated income statement up to the effective date of disposal. All
intra-group transactions and balances are eliminated on consolidation. Acquisitions are accounted for using the acquisition
method of accounting.
Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies.
(c) Revenue
Revenue represents sales to customers at invoiced amounts less value added tax. Revenue from sales of equipment,
chargeable works carried out and network services, is recognised when the goods or services are provided. Amounts
invoiced in advance in respect of maintenance contracts are deferred and released to the income statement on a straight
line basis over the period covered by the invoice. Revenue and profit on long term supply and/or installation contracts is
recognised dependent on the stage of and costs to completion of each contract.
(d) Intangible assets
Goodwill
Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets,
liabilities and contingent liabilities. Cost comprises the fair value of assets given, liabilities assumed and equity instruments
issued, plus any direct costs of acquisition. Goodwill is capitalised as an intangible asset, with any impairment in carrying
value being charged to the income statement.
1 Accounting policies (continued)
(d) Intangible assets (continued)
Other intangible assets
Intangible assets are stated at cost less accumulated amortisation and consist of customer relationships. Where these assets
have been acquired through a business combination, the cost will be the fair value allocated in the acquisition accounting;
where they have been acquired other than through a business combination, the initial cost is the aggregate amount paid and
the fair value of any other consideration given to acquire the asset.
Customer relationships are amortised over their estimated useful lives of (i) five years in respect of maintenance contracts,
and (ii) seven years in respect of network services contracts.
Impairment of goodwill and other intangible assets
Impairment tests on goodwill are undertaken annually on 31 December. Customer relationships and other assets are subject
to impairment tests whenever events or changes in circumstances indicate the carrying amount may not be recoverable.
Where the carrying value of an asset exceeds its recoverable amount (being the higher of value in use and fair value less
costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the
asset’s cash-generating unit (being the lowest group of assets in which the asset belongs for which there are separately
identifiable cash flows). Goodwill is allocated on initial recognition to each of the Group’s cash-generating units that are
expected to benefit from the synergies of the combination giving rise to goodwill.
Impairment charges are included in the administrative expenses line item in the income statement.
(e) Property, plant and equipment
Property, plant and equipment is stated at historic cost, less accumulated depreciation. Depreciation is provided to write off
the cost, less estimated residual values, of all tangible fixed assets over their expected useful lives, at the following rates:
Property, plant and machinery
Office and computer equipment
Motor vehicles
Leasehold improvements
-
-
-
-
over the life of the lease to third parties
25% straight line
25% straight line
over the remaining period of the lease
(f) Inventories
Inventories comprise (i) maintenance stock, being replacement parts held to service customers’ telecommunications
systems, and (ii) work in progress, being stock purchased for customer orders which has not been installed at the end of the
financial period. Inventories are valued at the lower of cost and net realisable value.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term deposits with an original maturity of three months or less.
Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management procedures are
also included as a component of cash and cash equivalents for the purposes of the cash flow statement.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
28
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
29
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
1 Accounting policies (continued)
(h) Taxation
1 Accounting policies (continued)
(l) Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are
appropriately authorised and are no longer at the discretion of the Company. Proposed but unpaid dividends that do not meet
these criteria are disclosed in the notes to the financial statements.
(m) Accounting standards issued but not adopted
The following new standards and interpretations, which have been issued by the IASB and IFRIC, are effective for future
periods and have not been adopted early in these financial statements. The directors do not anticipate that the adoption of
these standards and interpretations will have a material accounting impact on the Group’s financial statements in the period
of initial application although they may result in certain presentational changes.
Standard or Interpretation
Amendment to IAS 23 Borrowing Costs
Amendment to IFRS 2 Share-based Payment: Vesting
Conditions and Cancellations
Amendments to IAS 1 Presentation of Financial Statements –
revised presentation
Amendments to IAS32 and IAS1 Puttable Instruments and
obligations arising on liquidation
IFRS 8 Operating Segments
Improvements to IFRSs
Amendments to IFRS 1 and IAS 27 Cost of an Investment in a
subsidiary, jointly-controlled entity or associate
Revised IFRS 3 Business Combinations
Amendments to IAS 27 Consolidated and Separate Financial
Statements
Amendment to IAS 39 Financial Instruments: Recognition and
Measurement: Eligible Hedged Items
IFRIC 13 Customer Loyalty Programmes
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfer of Assets from Customers
Effective for periods
beginning
Endorsed for
use in the EU
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 January 2009
1 July 2009
1 July 2009
1 July 2009
1 July 2008
1 January 2009
1 October 2008
1 July 2009
1 July 2009
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
Yes
No
No
No
No
Current tax is the expected tax payable on the taxable income for the year, together with any adjustments to tax payable in
respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes, except for
differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the
transaction affects neither accounting or taxable profit; and
• investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable
that the difference will not reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised.
The amount of the deferred tax asset or liability is determined using tax rates that have been enacted or substantively
enacted by the balance sheet date and are expected to apply when the deferred tax assets/liabilities are recovered/settled.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or
liabilities are expected to be settled or recovered.
(i) Financial assets and liabilities
The Group’s financial assets and liabilities mainly comprise cash, trade and other receivables and trade and other payables.
The Group’s policy is, and has been throughout the year, not to trade in financial instruments.
Cash comprises cash in hand and deposits held at call with banks.
Trade and other receivables are not interest bearing and are stated at their nominal value as reduced by appropriate
allowances for irrecoverable amounts or additional costs required to effect recovery.
Trade and other payables are not interest bearing and are stated at their nominal amount.
(j) Operating leases
Annual rentals payable are charged to the income statement on a straight-line basis over the term of the lease.
Annual rentals receivable from third parties are credited to the income statement on a straight line basis over the term of the
lease. This income is included in revenue.
(k) Employee benefits
The Group contributes to a number of defined contribution pension schemes in respect of certain of its employees; the Group
does not contribute and has not contributed to any defined benefit pension schemes. The amount charged in the income
statement represents the employer contributions payable to the schemes in respect of the financial period. The assets of the
schemes are held separately from those of the Group in independently administered funds.
The cost of all short term employee benefits is recognised during the period the employee service is rendered.
Holiday pay is expensed in the period in which it accrues.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
30
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
31
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
2 Segment information
2 Segment information (continued)
For management reporting purposes, the Group consists of two business segments: (i) telephone maintenance and
equipment sales, and (ii) telephone network services.
Maintenance
and
equipment
£000
14,735
Year ended 31 December 2007
Network
services
£000
4,682
Central/
intercompany
£000
Total
£000
(88)
19,329
Revenue
Included in telephone system maintenance turnover above is £97,000 of leasing income.
Other than equipment sales of £39,000 to EU countries, revenue is wholly attributable to the principal activities of the Group
and arises predominantly within the United Kingdom.
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit after taxation
Balance sheet
Assets
Liabilities
Total
Other
1,680
477
(293)
1,864
115
1,979
(595)
1,384
6,007
1,485
(5,276)
(1,342)
731
143
1,173
159
1,332
8,665
(6,459)
2,206
Capital expenditure
Depreciation
Amortisation and impairment
106
136
9
-
-
20
-
-
269
106
136
298
Revenue
Maintenance
and
equipment
£000
13,859
Year ended 31 December 2008
Network
services
£000
5,678
Central/
intercompany
£000
Total
£000
(122)
19,415
Included in telephone system maintenance turnover above is £8,000 of leasing income.
Other than equipment sales of £34,000 to EU countries, revenue is wholly attributable to the principal activities of the Group
and arises predominantly within the United Kingdom.
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit after taxation
Balance sheet
Assets
Liabilities
Total
Other
Capital expenditure
Depreciation
Amortisation and impairment
1,433
472
(384)
4,594
(4,462)
132
1,308
(1,158)
150
115
118
22
-
-
48
416
156
572
-
-
313
1,521
68
1,589
(495)
1,094
6,318
(5,464)
854
115
118
383
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
32
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
33
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
3 Employees
5 Operating profit
The average number of employees, including directors, during the year was:
Corporate and administration
Sales and customer service
Technical and engineering
Staff costs, including directors, consist of:
Wages and salaries
Social security costs
Pension costs
2008
Number
2007
Number
20
58
84
162
7,050
794
120
7,964
20
65
86
171
6,728
768
129
7,625
The Group makes contributions to defined contribution personal pension schemes for employees and directors. The assets of
the schemes are separate from those of the Group. The pension cost charge represents contributions payable by the Group
to the schemes and amounted to £120,000 (2007 - £129,000). Contributions totalling £22,000 (2007 - £21,000) were
payable to the schemes at the year end and are included in creditors.
4 Directors’ remuneration
The remuneration of the Company directors is as follows:
Directors’ emoluments
Pension contributions
Included in the above is the remuneration of the highest paid director as follows:
Directors’ emoluments
Pension contributions
2008
£000
447
8
455
137
4
141
2007
£000
426
7
433
131
4
135
The Group paid contributions into defined contribution personal pension schemes in respect of 2 (2007 – 2) directors during
the year.
This has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Goodwill impairment charge
Loss on disposal of plant and equipment
Operating lease rentals
- property
- plant and machinery
Auditors’ remuneration
- audit services – Company
- other services relating to taxation – Group
- other services relating to audit of subsidiary undertakings - Group
- other services – Group
Leasing income
6 Financial income and expense
Finance income
Bank interest received
Finance expense
Other interest payable
7 Taxation
UK corporation tax
Corporation tax on profits of the period
Deferred tax
Taxation on profit on ordinary activities
2008
£000
2007
£000
118
263
120
2
183
115
7
6
51
25
(8)
2008
£000
69
1
2008
£000
536
(41)
495
136
222
76
-
161
135
7
18
47
15
(97)
2007
£000
115
-
2007
£000
673
(78)
595
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
34
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
35
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
7 Taxation (continued)
9 Earnings per share
The differences between the total tax shown above and the amount calculated by applying the standard rate of UK
corporation tax to the profit before tax are as follows:
Earnings per share is calculated by dividing the profit after tax for the period by the weighted average number of shares in
issue for the period, these figures being as follows:
Profit on ordinary activities before tax
Profit on ordinary activities at the standard rate of corporation
tax in the UK of 28.5% (2007 – 30%)
Effect of:
Expenses not deductible for tax purposes
Depreciation in excess of capital allowances
Goodwill impairment
Use of trading losses brought forward
Change in tax rate affecting deferred tax liability
8 Dividends paid on ordinary shares
Final 2006, paid 25 April 2007 – 2.9p per share
Interim 2007, paid 5 October 2007 – 2.5p per share
Final 2007, paid 30 April 2008 – 3.0p per share
Interim 2008, paid 10 October 2008 – 2.5p per share
2008
£000
1,589
2007
£000
1,979
453
11
- 2
31
-
-
495
2008
£000
-
-
364
300
664
594
11
23
(15)
(20)
595
2007
£000
361
311
-
-
672
Weighted average number of ordinary shares of 1p each
Earnings used in basic and diluted EPS, being profit after tax
Goodwill impairment and intangibles amortisation, less tax thereon
One-off professional costs, less tax thereon
Adjusted earnings
Earnings per share
Basic and diluted
2008
Number
(000s)
11,832
2007
Number
(000s)
12,452
£000
1,094
305
35
1,434
£000
1,384
231
18
1,633
9.2p
11.1p
Adjusted – as above but excluding goodwill impairment, intangibles
amortisation and one-off professional costs, less tax thereon
12.1p
13.1p
The adjustment above in respect of goodwill impairment, intangibles amortisation, one-off professional costs and tax
thereon has been made in order to provide a clearer picture of the trading performance of the Group.
The one-off professional costs relate primarily to the recruitment of Mr Buxton (2007 - £25,000 before tax relating to the
cost of strategic advice).
During 2008 the Company repurchased and cancelled 1,565,000 of its ordinary shares, at prices between 94p and 161.5p
each at a total cost of £1,782,000, representing 14.5% of the Company’s issued share capital as at 31 December 2008.
The directors recommend the payment of a final dividend for 2008 of 3.1p (2007 – 3.0p) per ordinary share, payable on 29 April
2009 to shareholders on the register at 27 March 2009, subject to approval by shareholders at the Annual General Meeting.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
36
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
37
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
10 Intangible assets
10 Intangible assets (continued)
Cost
At 1 January 2007
Acquisition of customer relationships
At 31 December 2007 and 31 December 2008
Amortisation and impairment
At 1 January 2007
Amortisation in the year
Impairment in the year
At 31 December 2007
Amortisation in the year
Impairment in the year
At 31 December 2008
Net book value
At 31 December 2008
At 31 December 2007
Goodwill
£000
Customer
relationships
£000
Total
£000
1,629
448
2,077
965
448
1,413
97
188
222
-
319
263
-
582
222
76
486
263
120
869
664
-
664
91
-
76
167
-
120
287
377
497
831
1,094
1,208
1,591
Amortisation and impairment charges for the year have been charged through administrative expenses in the consolidated
income statement.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
The carrying value of goodwill, calculated on a value in use basis, is allocated to cash generating units as follows:
Pinnacle Voice and Data Limited (now incorporated in Maintel Voice and Data Limited)
District Holdings Limited (now incorporated in
Maintel Europe Limited and Maintel Voice and Data Limited)
2008
£000
232
145
377
2007
£000
294
203
497
Goodwill of £227,000 arising on the acquisition of Pinnacle Voice and Data Limited (since renamed Maintel Network Solutions
Limited) in December 2005 was capitalised at 31 December 2005, as was the related deferred payment of £147,000 in 2006,
the aggregate being subject to an annual impairment review which has resulted in an impairment charge of £18,000 in 2007
and £62,000 in 2008, due to the termination of certain contracts acquired.
Goodwill of £290,000 arose on the acquisition of District Holdings Limited in June 2006. This is assessed for impairment at
each balance sheet date based on value in use calculations, being the projected future discounted cash flows arising from the
acquisition, compared with the carrying value of the goodwill. The impairment of the goodwill has been £58,000 in 2007 and
£58,000 in 2008.
The acquisition of District customer relationships was valued at £965,000. These relationships are estimated to have a useful
life of 5 years and are therefore amortised over that period and subject to annual impairment review. The 2007 amortisation
charge is therefore £193,000 and the 2008 charge £193,000.
The Group acquired a base of customer relationships from Callmaster Limited on 1 August 2007, for a consideration,
including costs, of £448,000. These relationships are estimated to have a useful life of five (maintenance contracts) or seven
(network services contracts) years and are therefore amortised over those periods and subject to annual impairment review.
The 2007 amortisation charge is £29,000 and the 2008 charge £70,000.
For the purposes of the impairment review of goodwill, the net present value of the projected future cash flows of the
cash generating unit are compared with the carrying value. Projected operating margins for this purpose are based on
current trends, and a discount rate of 15.6% is applied to the resultant projected cash flows; the discount rate is based on
conventional capital asset pricing model inputs.
11 Subsidiaries
The Group consists of Maintel Holdings Plc and its subsidiary undertakings, including several which did not trade during
the year. The following were the principal subsidiary undertakings at the end of the year and each has been included in the
consolidated financial statements:
Maintel Europe Limited
Maintel Voice and Data Limited
Each is wholly owned and incorporated in England and Wales.
38
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
39
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
12 Property, plant and equipment
Leasehold
improvements
£000
Plant and
machinery
£000
Office and
computer
equipment
£000
Motor
vehicles
£000
Cost or valuation
At 1 January 2007
Additions
Disposals
At 31 December 2007
Additions
Disposals
At 31 December 2008
Depreciation
At 1 January 2007
Provided in year
Disposals
At 31 December 2007
Provided in year
Disposals
At 31 December 2008
Net book value
At 31 December 2008
At 31 December 2007
64
-
-
64
3
-
67
64
-
-
64
1
-
65
2
-
89
-
(45)
44
-
(44)
-
86
3
(45)
44
-
(44)
-
-
-
808
99
(73)
834
112
(100)
846
573
132
(73)
632
116
(100)
648
198
202
-
7
-
7
-
(7)
-
-
1
-
1
1
(2)
-
-
6
Total
£000
961
106
(118)
949
115
(151)
913
723
136
(118)
741
118
(146)
713
200
208
13 Inventories
Maintenance stock
Stock held for resale
14 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
All amounts shown above fall due for payment within one year.
15 Trade and other payables
Trade payables
Other tax and social security
Accruals
Other payables
Deferred maintenance income
Other deferred income
2008
£000
675
61
736
2008
£000
2,262
17
885
3,164
2008
£000
1,182
641
428
24
2,852
46
5,173
2007
£000
599
230
829
2007
£000
2,965
14
949
3,928
2007
£000
1,686
671
565
27
3,020
56
6,025
Deferred maintenance income relates to the unearned element of maintenance revenue that has been invoiced but not yet
recognised in the income statement. Other deferred income relates to other amounts invoiced but not yet recognised in the
income statement.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
40
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
41
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
16 Financial instruments
The Group’s financial assets and liabilities mainly comprise cash, trade and other receivables and trade and other payables,
with smaller balances being recorded as other debtors and other creditors. The Group’s policy is, and has been throughout
the year, not to trade in financial instruments.
16 Financial instruments (continued)
The movement on the provision is as follows:
Current financial assets
Trade receivables
Cash and cash equivalents
Other receivables
Current financial liabilities
Trade payables
Other payables
Loans and receivables
2008
£000
2,262
1,010
17
3,289
2007
£000
2,965
2,109
14
5,088
Financial liabilities
measured at
amortised cost
2008
£000
1,182
24
1,206
2007
£000
1,686
27
1,713
The maximum credit risk for each of the above is the carrying value stated above. The main risks arising from the Group’s
operations are credit risk, currency risk and interest rate risk, however other risks are also considered below.
Credit risk
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis and with increased
rigour in light of the current economic climate. Credit evaluations are performed on customers as deemed necessary based
on, inter alia, the nature of the prospect and size of order. The Group does not require collateral in respect of financial
assets.
At the balance sheet date there were no significant concentrations of credit risk, the largest exposure represented by the
carrying value of each financial asset in the balance sheet, principally trade and other receivables, against which £99,000
is provided at 31 December 2008 (2007 - £112,000). The provision represents an estimate of potential bad debt, goodwill
credits and additional costs to be incurred in respect of the year end trade receivables, a review having been undertaken of
each such year end receivable. The largest individual debtor included in trade and other receivables at 31 December 2008
owed the Group £286,000 including VAT (2007 - £234,000).
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
Provision at start of year
Provision used
Additional provision made
Provision at end of year
2008
£000
112
(34)
21
99
2007
£000
100
(7)
19
112
A debt is considered to be bad when it is deemed irrecoverable, for example when the debtor goes into liquidation, or when
a credit or partial credit is issued to the customer for goodwill or commercial reasons.
The Group had past due trade receivables as follows:
Up to 30 days overdue
31-60 days overdue
More than 60 days overdue
2008
£000
947
195
114
1,256
2007
£000
1,004
334
93
1,431
Cash and cash equivalents at 2008 and 2007 year ends represented short term deposits with LloydsTSB and Abbey.
Foreign currency risk
The principal functional currency of the Group is Sterling. The Group engages in minimal foreign currency transactions, and
maintains a Euro bank account to facilitate these. The balance of the account at 31 December 2008 was £1,000 (2007 –
£33,000). The Group’s exposure to currency risk is therefore not significant.
Interest rate risk
The Group has no borrowings, and invests its surplus cash in short term bank deposits at prevailing rates of interest. The
Group’s interest income (£69,000 in 2008, and £115,000 in 2007) is therefore dependent on those prevailing rates.
Liquidity risk
The Group’s main financial liabilities are trade payables, which fall due and are typically paid in accordance with their
contractual terms which are typically 30 days; payment of these is dependent on the Group’s liquidity, which in turn is
dependent on management of the Group’s working capital. The directors are conscious of the likelihood that pressures will
be exerted on working capital as a result of the current economic environment however these will be minimised wherever
possible, including by way of additional credit checking of prospective customers and tighter monitoring of debtors.
Market risk
As noted above, the interest earned on short term deposits is dependent on the prevailing rates of interest from time to
time.
Fair value
All of the Group’s financial instruments are due to mature within one year and are subject to normal commercial credit and
interest rate risk.
There is no significant difference between the carrying amounts shown in the balance sheet and the fair values of the
Group’s financial instruments.
42
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
43
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
17 Deferred tax liability
20 Share Incentive Plan
At 1 January 2007
Adjustment on change in tax rates
(Credit)/charge to income statement
At 31 December 2007
Charge/(credit) to income statement
At 31 December 2008
Property,
plant and
equipment
£000
Intangible
assets
£000
(29)
-
(1)
(30)
3
(27)
261
(20)
(58)
183
(58)
125
Other
£000
(15)
-
1
(14)
14
-
Total
£000
217
(20)
(58)
139
(41)
98
The deferred tax liability represents (a) a liability established under IFRS on the recognition of an intangible asset in relation
to the District acquisition net of (b) an asset represented by the tax value of depreciation provided in the accounts in excess
of capital allowances claimed, and is calculated using a tax rate of 28% (2007: 28%).
18 Share capital
Authorised
17,571,840 ordinary shares of 1p each
Alloted, called up and fully paid
10,821,800 (2007 - 12,386,800) ordinary shares of 1p each
2008
£000
176
108
2007
£000
176
124
Pursuant to the authority granted at the last and penultimate AGMs, the Company repurchased and cancelled 1,565,000
of its own 1p ordinary shares during 2008, at prices between 94p and 161.5p each at a total cost of £1,782,000. The
purchases represent 14.5% of the Company’s issued share capital as at 31 December 2008.
19 Reserves
The capital redemption reserve represents the nominal value of ordinary shares repurchased and cancelled by the Company
and is undistributable in normal circumstances.
Share capital, share premium and retained earnings represent balances conventionally attributed to those descriptions.
The Group having no borrowings or regulatory capital requirements, its primary capital management focus is on maximising
earnings per share and therefore shareholder return.
Subject to shareholder approval at the forthcoming AGM, it is proposed to pay a final dividend for 2008 of 3.1p per share;
this dividend is not provided for in these financial statements.
The Company established the Maintel Holdings Plc Share Incentive Plan (“SIP”) in 2006. The SIP is open to all employees
with at least 6 months’ continuous service with a Group company, and allows employees to subscribe for existing shares
in the Company out of their gross salary. The shares are bought by the SIP on the open market. The employees own the
shares from the date of purchase, but must continue to be employed by a Group company and hold their shares within the
SIP for 5 years to benefit from the full tax benefits of the plan.
21 Operating leases
As at 31 December 2008, the Group had future minimum rentals payable under non-cancellable operating leases as set out
below:
The total future minimum lease payments
are due as follow:
Not later than one year
Later than one year and not later than five years
2008
Land and
buildings
£000
2008
Other
£000
2007
Land and
buildings
£000
191
48
239
37
4
41
173
217
390
2007
Other
£000
90
50
140
The commitment relating to land and buildings is in respect of the Group’s London offices, the lease on which expires in
normal circumstances in March 2010, and the remaining commitment relates to contract hired motor vehicles, which are
typically replaced on a 3 year rolling cycle.
22 Contingent liabilities
In last year’s financial statements, the Group reported notification of two separate potential legal claims against it, the
estimated amount of each claim being £30,000. The directors consider the Group to be practically and contractually
protected from any liability and no correspondence has been received from the claimants in the last year. Accordingly, no
provision has been made in the accounts for either, and in the absence of further correspondence, these will not be reported
in future financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
44
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
45
Notes forming part of the financial statements
for the year ended 31 December 2008 (continued)
23 Related party transactions
Transactions with key management personnel
24 Accounting estimates and judgements (continued)
Long term contracts
The Group has a related party relationship with its directors and executive officers. The remuneration of the individual
directors is disclosed in the Remuneration report. The remuneration of the directors and other key members of management
during the year was as follows:
At each reporting date the Group has customer projects which are partially complete. Estimates are made of the stage
of completion of these projects and a proportion of the project’s revenue and cost is recognised in the period’s financial
statements. The time scales and costs to completion may differ from those estimates.
Short term employment benefits
Contributions to defined contribution pension scheme
2008
£000
784
14
798
2007
£000
714
13
727
Business combinations
The acquisition of customer relationships from Callmaster Limited and WGTS Limited in 2007 have been adjudged not to
be business combinations. The accounting treatment had they been adjudged business combinations would not have been
materially different, and there would be no resultant effect on profit after tax reported in the income statement.
Contingent liabilities
On 3 October 2008, the Company purchased 750,000 shares from Tim Mason, a director of the Company, at a price of 103p
per share. The Directors obtained independent professional advice confirming this to be a fair price.
An assessment has been made of the outcome and potential cost of the two claims referred to in note 22. It is considered
that any divergence from those estimates is unlikely to be significant.
Transactions between the Company and its subsidiary undertakings
Inventory valuation
Where inventories are valued at net realisable value, parts which are not individually priced to market rates are subject to
provisioning. Such provisioning may prove to be over or understated, however any divergence from the estimates used is
unlikely to be significant in aggregate.
Transactions between Group companies are not disclosed as they have been eliminated on consolidation.
Other transactions
The Group traded during the year with Maybank Marketing, a company indirectly associated with A J McCaffery. Purchases
during the year amounted to £19,694 (2007 - £9,675) net of VAT, of which £133 (2007 - £1,590) was owed at the year end
and is included within trade creditors. Sales during the year amounted to £89 (2007 - £109), of which £Nil (2007 - £Nil) was
owed at the year end.
The Group provided services to A J McCaffery during the year amounting to £993 (2007 - £1,005) net of VAT, of which £Nil
(2007 - £Nil) was owed at the year end.
The Group paid commissions in the year to J A Spens, a shareholder in the Company, amounting to £17,099 net of VAT
(2007 - £46,258), of which £263 (2007 - £4,709) was owed at the year end and is included in trade creditors.
24 Accounting estimates and judgements
In the process of applying the Group’s accounting policies, management has made various estimates, assumptions and
judgements, with those likely to contain the greatest degree of uncertainty being summarised below.
Impairment
The Group assesses at each reporting date whether there is an indication that its intangible assets may be impaired. In
undertaking such an impairment review, estimates are required in determining an asset’s recoverable amount; those used
are shown in note 10. These estimates include the asset’s future cash flows and an appropriate discount to reflect the time
value of money. The effect on the impairment charge in the income statement of assuming a year’s longer and a year’s
shorter customer contract length compared with the assumed five (maintenance contracts) and seven years (network
services contracts) is as follows:
Maintenance contracts
One year longer contract length
One year shorter contract length
Network services contracts
One year longer contract length
One year shorter contract length
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
Increase/(decrease)
in impairment charge
2008
£000
Nil
119
2007
£000
Nil
Nil
(29)
34
(18)
31
46
Maintel Holdings Plc Company balance sheet
at 31 December 2008 - prepared under UK GAAP
47
Notes forming part of the Company financial statements
for the year ended 31 December 2008
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due
within one year
Net current (liabilities)/assets
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Note
5
6
7
8
9
9
9
2008
£000
205
510
715
1,062
2008
£000
2,323
7
(347)
1,976
108
628
28
1,212
1,976
2007
£000
449
456
222
2007
£000
2,323
234
2,557
124
628
12
1,793
2,557
1 Accounting policies
The principal accounting policies are summarised below; they have been applied consistently throughout the year and the
preceding year.
(a) Basis of preparation
The Company has elected to prepare its parent company accounts in accordance with UK GAAP.
The financial statements of the Company are presented as required by the Companies Act 1985. As permitted by that Act,
the financial statements have been prepared in accordance with applicable accounting standards in the United Kingdom and
on the historical cost basis.
Under section 230 (4) of the Companies Act the Company is exempt from the requirement to present its own profit and loss
account.
The Company has taken advantage of the exemption contained in FRS8 and has not disclosed transactions or balances with
entities which form part of the Group.
(b) Investments
Investments in subsidiary undertakings are stated at cost unless, in the opinion of the directors, there has been impairment
to their value, in which case they are written down to their recoverable amount.
The Company uses the cost method of accounting, which is a method of accounting for an investment whereby the
investment is recognised at cost. The investor recognises income from the investment only to the extent that the investor
receives distributions from accumulated profits of the investee arising after the date of acquisition. Distributions received in
excess of such profits are regarded as a recovery of investment and are recognised as a reduction of the cost of investment.
The financial statements were approved and authorised for issue by the Board on 13 March 2009 and were signed on its
behalf by:
(c) Cash
Cash comprises cash balances and short term deposits with an original maturity of three months or less.
W D Todd
Director
The notes on pages 47 to 49 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
(d) Taxation
Current tax is the expected tax payable on the taxable income for the year, together with any adjustments to tax payable in
respect of previous years.
(e) Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are
appropriately authorised and are no longer at the discretion of the Company. Proposed but unpaid dividends that do not
meet these criteria are disclosed in the notes to the accounts.
2 Employees
The only employees of the Company were the directors. The average number employed during the year was 5 (2007 – 5).
The directors’ remuneration is shown in note 4 of the consolidated financial statements.
3 Profit for the financial period
The Company has taken advantage of the exemption under S230 of the Companies Act 1985 and has not presented its own
profit and loss account in these financial statements. The profit for the year of the Company, after tax and before dividends
paid, was £1,865,000 (2007 – £1,207,000).
48
Notes forming part of the Company financial statements
for the year ended 31 December 2008 (continued)
49
Notes forming part of the Company financial statements
for the year ended 31 December 2008 (continued)
4 Dividends paid on ordinary shares
7 Creditors
Final 2006, paid 25 April 2007 – 2.9p per share
Interim 2007, paid 5 October 2007 – 2.5p per share
Final 2007, paid 30 April 2008 – 3.0p per share
Interim 2008, paid 10 October 2008 – 2.5p per share
2008
£000
-
-
364
300
664
2007
£000
361
311
-
-
672
The directors recommend the payment of a final dividend for 2008 of 3.1p (2007 – 3.0p) per ordinary share, payable
on 29 April 2009 to shareholders on the register at 27 March 2009, subject to approval by shareholders at the Annual
General Meeting.
5 Investment in subsidiaries
Cost
At 31 December 2007 and 31 December 2008
Provision for impairment
At 31 December 2007 and 31 December 2008
Net book value
At 31 December 2007 and 31 December 2008
The following were the principal subsidiary undertakings at the end of the year:
Maintel Europe Limited
Maintel Voice and Data Limited
Each is wholly owned and incorporated in England and Wales.
6 Debtors
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Corporation tax recoverable
All amounts shown under debtors fall due for payment within one year.
Shares in
subsidiary
undertakings
£000
2,403
80
2,323
2008
£000
165
10
11
19
205
2007
£000
-
1
1
5
7
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
Amounts due to subsidiary undertakings
Trade creditors
Accruals and deferred income
8 Share capital
Authorised
17,571,840 ordinary shares of 1p each
Allotted, called up and fully paid
2008
£000
1,027
27
8
1,062
2008
£000
2007
£000
214
1
7
222
2007
£000
176
176
10,821,800 (2007 - 12,386,800) ordinary shares of 1p each
108
124
Pursuant to the authority granted at the last and penultimate AGMs, the Company repurchased and cancelled 1,565,000
of its own 1p ordinary shares during 2008, at prices between 94p and 161.5p each at a total cost of £1,782,000. The
purchases represent 14.5% of the Company’s issued share capital as at 31 December 2008.
9 Capital and reserves
At 1 January 2007
Profit for year*
Dividend in specie received from
subsidiary undertakings
Capital contribution
Dividends paid
Movements in respect of
purchase of own shares
At 31 December 2007
Profit for year*
Dividends paid
Movements in respect of
purchase of own shares
At 31 December 2008
Share
capital
£000
124
-
-
-
-
-
124
-
-
(16)
108
Share
premium
£000
628
Capital
redemption
reserve
£000
12
Retained
earnings
£000
1,375
-
-
-
-
-
628
-
-
-
628
-
1,207
-
-
-
-
12
-
-
16
28
285
(285)
(672)
(117)
1,793
1,865
(664)
(1,782)
1,212
Total
£000
2,139
1,207
285
(285)
(672)
(117)
2,557
1,865
(664)
(1,782)
1,976
* Total recognised income and expenses for the year are the same as the profit for the year.
The dividend in specie and capital contribution in 2007 relate to assets and liabilities transferred from the District group of
companies to Maintel Europe Limited, via Maintel Holdings Plc.
Subject to shareholder approval at the forthcoming AGM, it is proposed to pay a final dividend for 2008 of 3.1p per share;
this dividend is not provided for in these financial statements.
10 Related party transactions
On 3 October 2008, the Company purchased 750,000 shares from Tim Mason, a director of the Company, at a price of
103p per share. The Directors obtained independent professional advice confirming this to be a fair price.
Transactions with other Group companies have not been disclosed as permitted by FRS8, as the Group companies are
wholly owned.
50
Notice of annual general meeting
not forming part of the statutory financial statements
51
Notice of annual general meeting
(continued)
Notice is hereby given that the annual general meeting of Maintel Holdings Plc (“the Company”) will be held at its offices at
61 Webber Street, London SE1 0RF, on 23 April 2009, at 10.45 am, for the following purposes:
Ordinary business
To consider and, if thought fit, to pass the following resolutions which will be proposed as ordinary resolutions:
1. To receive and adopt the financial statements of the Company for the year ended 31 December 2008, together with the
Report of the directors and the Independent auditors report thereon.
2. To declare and approve the payment of the proposed final dividend of 3.1 pence per ordinary share for the financial year
ended 31 December 2008, on 29 April 2009, to shareholders on the register at 27 March 2009.
3. To approve the report of the Remuneration committee for the year ended 31 December 2008.
4. To re-elect Mr J D S Booth, who retires by rotation, as a director of the Company.
5. To re-elect Mr N J Taylor, who retires by rotation, as a director of the Company.
6. To re-elect Mr E Buxton, who has been appointed since the last annual general meeting, as a director of the Company.
7. To re-appoint BDO Stoy Hayward LLP as auditors of the Company to hold office from the conclusion of the meeting to the
conclusion of the next meeting at which accounts are laid before the Company, and to authorise the directors to agree
their remuneration.
Special business
To consider and, if thought fit, to pass the following resolutions, of which resolution 8 will be proposed as an ordinary
resolution and resolutions 9 to 11 as special resolutions:
8. That the directors be and are hereby generally and unconditionally authorised pursuant to Section 80 of the Companies
Act 1985 (as amended) (“the Act”) to exercise all powers of the Company to allot and to make offers or agreements to
allot relevant securities (as defined in Section 80 (2) of the Act) up to a maximum aggregate nominal amount of £36,072,
provided that this authority shall expire at the conclusion of the next annual general meeting of the Company or 15
months after the passing of this resolution (if earlier) unless renewed or extended prior to such time, except that the
Company may before such expiry make an offer or agreement which would or might require the relevant securities to
be allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if
the authority conferred hereby had not expired. This authority is in substitution for all subsisting authorities to the extent
unused.
9. That, subject to the passing of the previous resolution, the directors be and are hereby empowered pursuant to Section
95 of the Act to allot equity securities as defined in Section 94 of the Act for cash as if Section 89 (1) of the Act did not
apply to any such allotment, provided that this power shall be limited:
(a) to the allotment of equity securities in connection with a rights issue or other pre-emptive issue in favour of
shareholders; and
(b) to the allotment (otherwise than pursuant to sub-paragraph (a) above) of equity securities up to an aggregate
nominal value of £10,821.
This power shall expire at the conclusion of the next annual general meeting of the Company or 15 months after the
passing of this resolution (if earlier) unless renewed or extended prior to such time except that the Company may before
such expiry make an offer or agreement which would or might require the relevant securities to be allotted after such
expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the power conferred
hereby had not expired.
10. That the Company is, pursuant to Section 166 of the Act, hereby generally and unconditionally authorised to make
market purchases (within the meaning of Section 163 (3) of the Act) of up to a maximum of 1,622,187 ordinary shares of
1p each in its capital (representing 14.99% of the Company’s current issued ordinary share capital), provided that:
(a) the minimum price, exclusive of any expenses, which may be paid for an ordinary share is 1p;
(b) the maximum price, exclusive of any expenses, which may be paid for each ordinary share is not more than 5%
above the average published market value for an ordinary share as derived from the London Stock Exchange Alternative
Investment Market for the five business days immediately preceding the day on which such share is contracted to be
purchased; and
(c) the authority shall expire at the conclusion of the next annual general meeting of the Company or 15 months after the
passing of this resolution (if earlier), except in relation to the purchase of any ordinary shares the contract for which was
concluded before the date of expiry of the authority and which would or might be completed wholly or partly after such
date.
11. That the Articles of Association in the form produced to the annual general meeting and initialled by the chairman of the
meeting be adopted as the Articles of Association of the Company, in substitution for and to the exclusion of, the existing
Articles of Association.
By order of the Board
W D Todd
Company Secretary
27 March 2009
Registered office
61 Webber St
London SE1 0RF
Notes
1. A member of the Company entitled to attend and vote at the meeting may appoint one or more proxies to attend, speak
and vote at the meeting instead of him/her. A proxy need not be a member of the Company. A member of the Company
may appoint more than one proxy provided each proxy is appointed to exercise the rights attached to different shares. A
member may not appoint more than one proxy to exercise the rights attached to any one share. Appointment of a proxy
will not preclude a member from attending and voting at the meeting. A form of proxy is enclosed which you are invited
to complete and return. To be effective, it must be completed and be received at the offices of the Company’s Registrar
not later than 48 hours before the time fixed for the meeting. Completion and return of the form of proxy will not preclude
shareholders from attending and voting in person at the meeting.
2. The Company, pursuant to Regulation 41 of the Uncertified Securities Regulations 2001, specifies that only those
shareholders registered in the register of members of the Company as at 6.00 pm on 21 April 2009, shall be entitled to
attend or vote at the aforesaid general meeting in respect of the number of shares registered in their name at that time
(or in the event that the meeting is adjourned, 48 hours before the time of the adjourned meeting). Changes to entries
on the relevant register of securities after 6.00 pm on 21 April 2009 shall be disregarded in determining the rights of any
person to attend and vote at the meeting.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
52
Notice of annual general meeting
(continued)
53
Appendix
3. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the
Explanatory note of principal changes to the Company’s Articles of Association
meeting so that (i) if a corporate member has appointed the chairman of the meeting as its corporate representative
with instructions to vote on a poll in accordance with the directions of all of the other corporate representatives for that
member at the meeting, then on a poll those corporate representatives will give voting directions to the chairman and
the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if
more than one corporate representative for the same corporate member attends the meeting but the corporate member
has not appointed the chairman of the meeting as its corporate representative, a designated corporate representative
will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate
representatives will give voting directions to that designated corporate representative. Corporate members are referred to
the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives
– www.icsa.org.uk – for further details of this procedure. The guidance includes a sample form of representation letter if
the chairman is being appointed as described in (i) above.
4. Copies of the existing Articles of Association of the Company and the proposed amended Articles of Association and all
directors’ service contracts, will be available for inspection at the Company’s registered office from the date of this notice
to (and including) the date of the meeting during normal business hours on any day (Saturdays, Sundays and public
holidays excepted) and will also be available at the meeting for at least 15 minutes before the meeting until its conclusion.
This summary sets out the principal differences between the Existing Articles and the proposed New Articles (both defined
on page 18 of the annual report). The differences set out in paragraphs 1 to 7 are recommended as a result of the
implementation of the 2006 Act (as defined on page 18 of the annual report).
1. Directors’ conflicts of interests
The 2006 Act sets out directors’ general duties. The provisions largely codify the existing law, but with some changes.
Under the 2006 Act, a director must avoid a situation where he has, or can have, a direct or indirect interest that
conflicts, or possibly may conflict with the Company’s interests, or otherwise ensure that such conflict is approved by
shareholders in general meeting. This requirement is very broad and could apply, for example, if a director becomes a
director of another company or a trustee of another organisation. The 2006 Act allows directors of public companies to
authorise conflicts and potential conflicts of other directors where the articles of association contain a provision to this
effect.
It is therefore proposed that the New Articles will have an effective provision which will give the directors authority to
approve such conflicts of interest. There are safeguards which will apply when directors decide whether to authorise
a conflict or potential conflict. First, only independent directors (i.e. those who have no interest in the matter being
considered) will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way
they consider, in good faith, will be most likely to promote the Company’s success. The independent directors will be able
to impose limits or conditions, as they consider appropriate, when giving an authorisation.
The New Articles also contain provisions to ensure that a director must not impart confidential information in respect
of the matter which gives rise to a conflict of interest or potential conflict of interest, if under a duty of confidentiality
to another company. The New Articles also contain provisions stating that a director need not participate in board
discussions or consider board papers in respect of the matter which gives rise to a conflict of interest or potential conflict
of interest. These provisions will only apply where the position giving rise to the potential conflict has previously been
authorised by the directors in accordance with the 2006 Act.
2. Electronic communications
The Company does not at present communicate electronically with shareholders, however, we would like to be able
to take full advantage of the freedom to use electronic communications with our shareholders in the future. This will
potentially enable us to reduce costs, reduce the environmental impact of our business and generally enhance the level
and quality of our communications with shareholders.
There is currently provision in the Existing Articles reflecting the provisions of the Companies Act 1985 which
allowed the Company to use electronic communications in certain contexts, for instance, to send annual accounts
and notices of meeting to shareholders. The new provisions in the 2006 Act apply more generally to all types of
company communications made pursuant to the 2006 Act. In order for the Company to implement the new electronic
communications regime, in the 2006 Act, shareholders must approve the sending and supplying of all documentation
electronically pursuant to the 2006 Act by making the relevant amendments to the Existing Articles.
The authority and amendments to the Existing Articles will not of themselves force either the Company or any individual
shareholders to send or receive any notices, documents or information (including annual accounts and admission
documents) by electronic means. They will, however, allow the Company to approach shareholders in the future for their
individual agreement to use electronic mail and/or publication on its website for Company communications.
3. Shareholder meetings
The New Articles reflect the fact that the 2006 Act does not contain any references to extraordinary general meetings
of shareholders. Under the 2006 Act, any meeting other than an annual general meeting is simply classified as a general
meeting.
The provisions in the Existing Articles dealing with the convening of general meetings and length of notice required to
convene general meetings have now been amended to conform to new provisions in the 2006 Act. In particular, a general
meeting to consider a special resolution can be convened on 14 days clear notice whereas previously, 21 clear days
notice was required.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
54
4. Proxies
Appendix
(continued)
55
The 2006 Act now provides that shareholders can appoint multiple proxies. Proxies can also now speak at general
meetings. The 2006 Act also provides that proxies shall have the same right to vote on a show of hands as shareholders.
The New Articles therefore contain amendments to reflect these provisions.
5. Transfers of shares
The 2006 Act provides that if the directors refuse to register a transfer, then in addition to sending the purported
transferee notice of refusal, the directors must also give reasons for the refusal and any further information about such
reasons that the purported transferee may reasonably request. The Existing Articles have therefore been amended in
this regard.
6. Directors indemnities
The 2006 Act now provides that a company which is a trustee of an occupational pension scheme can now indemnify a
director against liability incurred in connection with the company’s activities as trustee of the scheme. The New Articles
have therefore been amended to reflect this change.
7. Auditors’ indemnity
The reference to the indemnification and purchase of insurance for auditors has also been removed in the New Articles,
in line with best practice.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2008
www.maintel.co.uk
Maintel, 61 Webber Street, London SE1 0RF www.maintel.co.uk