annual report & accounts 2009
Maintel Holdings Plc
Chairman’s statement
Page
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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
Page
20
21
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42
43
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes forming part of the financial statements
Balance sheet of Maintel Holdings Plc
Notes forming part of the balance sheet of
Maintel Holdings Plc
46
Notice of annual general meeting
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 LLP, 55 Baker Street, London W1U 7EU
Nominated broker and nominated adviser
JMFinn Capital Markets Limited, 4 Coleman Street, London EC2R 5TA
Registrars
Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZY & 0870 707 1182
2
Chairman’s statement
Chairman’s statement
Maintel’s revenue was unchanged in 2009 at £19.4m (2008 - £19.4m). However better margins
derived from our cost reduction efforts of late 2008 and early 2009, combined with a healthier
revenue mix caused profit before tax for the year to increase to £2.4m (2008 - £1.6m).
Our core maintenance business, with its high level of recurring revenues, grew from £9.2m in 2008
to £10.3m in 2009. This was the result of good contract renewal rates, new client signings arising
from our continuing strong relationship with Cable & Wireless Worldwide and our increasing number
of partnerships with other large players in the telecoms industry, and lower than historic attrition
rates. Equipment sales were lower, at £3.6m for the year, down from £4.7m in 2008, as we continued
not to chase low margin business at a time of sluggish economic activity. We expect the current level
of sales to provide a stable base for growth as economic conditions improve. For 2009 the shift from
equipment installation to maintenance support has enabled us to utilise our engineering resource
with greater efficiency.
Network services revenues were also affected by a slow economy and were only marginally ahead for
the year. A closer look at this part of the business shows that revenues from two large clients lost,
flagged in our 2008 report were only replaced in the second half of 2009 so the outlook for 2010 is
more positive, especially as we began the new year by further increasing the sales resource in this
area of our business. Business call rates are still competitive however and network solutions remains
an area of lower margin for the Group.
Basic earnings per share grew to 15.7p (2008 - 9.2p) and adjusted earnings per share, as defined
in the business review, grew to 17.7p (2008 - 12.1p). Shareholders will remember that we took
advantage of the fall in stock market valuations to repurchase and cancel a substantial amount of
our equity towards the end of 2008 and we have purchased for cancellation a more modest amount,
40,000 shares, in 2009. We remain committed to our progressive dividend policy and a second
interim dividend for 2009 of 4.1p takes our total for the year to 7.2p, in line with our target pay out
ratio of 40% (2008 – 5.6p). We ended the year with a good pipeline of business and prospects and
a debt-free consolidated statement of financial position with cash reserves of £2.5m. With interest
rates remaining low and in view of this comfortable cash position, the Board has declared a one off
special interim dividend of 2.9p to be paid alongside the second interim dividend. This will be payable
on 25 March 2010 to shareholders on the register at 12 March 2010.
We remain vigilant for acquisitions that represent good value as consolidation continues in our
industry; the stability of the Company as we enter 2010 puts us in a good position to integrate new
business whether organic or acquired.
I would like finally to express the Board’s thanks to our loyal and hardworking staff for their energy
and commitment to the Company.
J D S Booth
Chairman
3 March 2010
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
3
Business review
Business review
Results
As anticipated in the half-year statement, revenue and profit improved in the second half of the year,
primarily as a result of new maintenance contracts and the effect of the cost reductions implemented
in the first half of 2009.
Adjusted profit before tax for the year was £2.675m, a 32% increase on 2008, with unadjusted profit
before tax increasing by 50% to £2.382m.
The Company repurchased 1,150,000 shares in Q4 2008 and this, combined with the increased
profitability, has enhanced EPS by 46% from 12.1p (adjusted diluted) in 2008 to 17.7p in 2009. Basic
diluted EPS increased by 71%, from 9.2p in 2008 to 15.7p in 2009.
Revenue
Profit before tax
H1 2009
£000
9,401
967
H2 2009
£000
9,993
1,415
Add back goodwill impairment
and intangibles amortisation
(and one-off professional fees in 2008)
Adjusted profit before tax
Basic and diluted earnings per share
161
1,128
6.3p
Adjusted basic and diluted earnings per share 7.5p
132
1,547
9.4p
10.2p
2009
£000
19,394
2,382
293
2,675
15.7p
17.7p
2008
£000
19,415
1,589
432
2,021
9.2p
12.1p
Overall, revenues fell marginally in the year, with the two major new contracts announced during
the year performing well and contributing to a £1.132m increase in maintenance revenues over
2008. 2010 will see a full year’s revenue from these contracts, as well as revenue from several other
significant contracts already signed with the same partner.
The increase in maintenance revenues helped compensate for the £1.130m reduction in equipment
sales, the result of the subdued economic environment combined with the continuation of our strategy
of avoiding low margin business. Equipment sales in the first half of the year were virtually identical to
those in the second and are projected to continue at similar levels in the short to medium term.
Network services revenues increased marginally in the year, with the two major contracts lost in 2008
having been successfully replaced. The second half of 2009 showed encouraging growth over the
first, giving confidence in further development of the division in 2010.
Recurring revenue (maintenance and network services) increased again in the year to £16.0m
(82% of total revenues) (2008 – £14.8m and 76%), providing additional visibility of revenues
notwithstanding the effects of attrition.
Revenue analysis (£000)
Maintenance related
Equipment, installations and other
Total maintenance and equipment division
Network services division
Intercompany
Total Maintel Group
2009
10,289
3,572
13,861
5,703
(170)
19,394
2008
9,157
4,702
13,859
5,678
(122)
19,415
Net cash flow from operating activities continues to be strong, at £2.368m in 2009 (2008 - £1.391m),
with cash balances increasing to £2.506m at the year end (2008 - £1.010m) after dividend payments
of £668,000. The Group has no debt.
Divisional performance is described further below.
4
Business review
Chairman’s statement
(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 increased slightly in the year as shown in the table above, with a reduction
in equipment sales to what are now considered to be sustainable levels in the current environment
being offset by an increase in maintenance revenues.
The latter increased by £1.132m (12%) in the year, primarily as a result of the continuing relationship
with Cable & Wireless Worldwide, which has contributed further business in 2010. In addition,
virtually all of the major contracts that came up for renewal during the year have been re-signed,
with the attrition percentage remaining below historical averages.
In light of the successful relationship developed with Cable & Wireless Worldwide, partnerships with
other integrators were developed during the year and began contributing to revenues, and others
are being developed. These relationships provide a ready source of typically high value contracts
with relatively low levels of associated sales cost. The traditional direct sales model does, of course,
continue to be operated in parallel, ensuring that the Group is not overly dependent on any one or a
particular group of partners.
The continuing reduced levels of equipment sales at the end of 2008 and beginning of 2009 resulted
in a further reduction in headcount early in H1 2009 as shown below, at a cost of £123,000 in the
first half.
Headcount
Sales and customer service
Average 2009
44
Average 2008
49
Engineers
79
84
2009
At 31 December
2009
45
77
2008
Division gross profit (£000)
5,828 (42%)
5,017 (36%)
The division’s gross profit improved significantly in 2009, a combination of the mid-2008 and
early-2009 cost reductions and the change in sales mix from equipment sales – with its associated
purchase costs – to maintenance sales.
Net margin (operating profit as a percentage of revenue) from the division improved almost in line
with gross margin, from 10.3% in 2008, to 16.0%, the division’s overheads continuing to be tightly
controlled during the year.
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 2009
www.maintel.co.uk
5
Business review
Business review
(continued)
Network services division
The network services division sells a portfolio of products providing connectivity between customers’
own offices, remote staff and the outside world. This includes inbound and outbound telephone call
services, line rental, broadband, data networks and mobile services.
Revenue analysis (£000)
Call traffic
Line rental
Other
Total network services
2009
2,826
2,048
829
5,703
2008
3,405
1,645
628
5,678
Division gross profit (£000)
1,400 (25%)
1,406 (25%)
Revenue increased slightly during the year, with the two large losses in late 2008 – caused by the
acquisition of one client and the withdrawal from its market of another - being successfully replaced
with new revenues.
The mix of revenue has altered significantly during the year, as the call-traffic dominant customers
lost in late 2008 have been replaced by more line rental weighted business in 2009, including one
particular large estate connected around the middle of 2009. Call traffic revenues have also reduced
as a result of the recession, with Ofcom reporting a drop in UK call traffic year on year.
Line rental revenues are more solid, being less affected by seasonality and general economic activity,
however they attract lower margins than call traffic. Overall gross profit has been maintained at
the previous year’s level, however, partly as a result of increased margins earned from both call
traffic and line rental business because of lower buy-in costs, but also as a result of new, lower cost,
connection procedures and the lower margins attached to the business lost. In particular better line
rental margins were achieved in the second half of 2009 as a result of consolidating lines with BT
openreach.
Within Other revenue, data services increased by 29% in the year to £537,000, becoming a
significant product offering, and sales of our IP based telephony services such as SIP trunking and
hosted telephone services products are growing.
Aside from the two major customers which cancelled in 2008, attrition in the division remained at
its historically low levels, providing a solid base from which to enter 2010. The H2 2009 network
services profit was 18% up on the first half and two more large contracts were signed in Q4 2009.
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
2009
2,080
2,372
4,452
2008
2,114
2,302
4,416
6
Business review
Chairman’s statement
(continued)
Administrative expenses, excluding goodwill impairment and intangibles
amortisation (continued)
Sales and administrative costs continue to be closely controlled and rose by less than 1% in the year.
The table below shows relevant headcount in relation to revenue.
Average Group headcount during the period
Average sales and service headcount
Average corporate and admin headcount
2009
153
53
21
2008
162
58
20
Group revenue (£000)
19,394
19,415
Interest
Net interest receivable fell from £68,000 to £12,000 in 2009. The share buybacks in late 2008 and in
March 2009 reduced the Group’s cash reserves significantly at the time and, together with the poor
rates of interest achievable on low risk deposits, this has resulted in minimal interest income in the
period.
Taxation
The consolidated statement of comprehensive income shows a tax rate of 28.8% (2008 – 31.2%).
The two main trading companies are taxed at 28.0% (2008 – 28.5%). Disallowables raise the
effective rate above this, as does an element of the goodwill impairment charge which does not
attract tax relief. This last factor reduced in 2009 helping to lower the effective rate compared to the
previous year.
Dividends
A final dividend for 2008 of 3.1p per share (£334,000 in total) was paid on 29 April 2009, and an
interim 2009 dividend of 3.1p per share (£334,000) was paid on 2 October 2009.
It is proposed to pay a second interim dividend of 4.1p in respect of 2009, together with a one off
special interim dividend of 2.9p, payable on 25 March to shareholders on the register at the close of
business on 12 March. In accordance with accounting standards, these dividends are not accounted
for in the financial statements for the period under review as they had not been committed as at
31 December 2009.
Consolidated statement of financial position
The consolidated statement of financial position remains sound, with £2.5m of cash and no debt,
facilitating continued growth from existing resources.
Trade receivables and trade payables have reduced by £372,000 and £317,000 respectively since
31 December 2008 partly due to the reduction in equipment sales and good collections in December
2009.
The value of maintenance stock has reduced by £71,000 in the year, to £604,000, due to minimal
purchases of additional parts in the year following two years of significant investment, whilst normal
half yearly provisioning has continued to be applied. The value of stock held for resale has increased
from £61,000 to £114,000 as a result of more installations spanning the year end.
Deferred income has increased by £182,000, mostly due to the increase in maintenance revenues
and deposits taken, although the increase has been curtailed by a major customer being invoiced on
terms more favourable than the Group’s standard annually in advance.
No significant expenditure has been required on plant and equipment during the period, with
additions broadly matching depreciation.
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 the acquisition of the District group in
2006.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
7
Business review
Business review
(continued)
Intangible assets
The Group has three intangible assets: goodwill arising on the acquisition of Maintel Network
Services Limited, an intangible asset represented by customer contracts and relationships
acquired from District Holdings Limited and Callmaster Limited, and goodwill relating to the District
acquisition.
The Maintel Network Services goodwill is subject to an impairment test at each reporting date.
Impairment of £30,000 has been charged to the consolidated statement of comprehensive income in
2009 (2008 - £62,000), and the carrying value is £202,000 at 31 December 2009.
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 was amortised in 2009 (2008 -
£263,000), leaving a carrying value of £568,000. These assets are also subject to an impairment test
each year, however no additional charge was required at 31 December 2009 or 2008.
The goodwill relating to the District acquisition is subject to an impairment test at each reporting
date, and has not been subject to an impairment charge in 2009 (2008 - £58,000), leaving a carrying
value of £145,000.
Purchase of own shares
Further to the authority granted at the last two AGMs, the Company repurchased and cancelled
40,000 of its own shares during 2009, at a price of 76p, and a total cost of £30,000.
The share price at 31 December 2009 was 145p.
Cash flow
At 31 December 2009 the Group had cash and bank balances of £2.506m (2008 - £1.010m), all of
it unrestricted. Cash generated from operating activities in the year was £2.917m, out of which
£668,000 was paid in dividends, and £549,000 in corporation tax.
The Group has no debt and invests its surplus cash with mainstream 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 sells and maintains the new breed of
telephone system (IPPBX), and has had notable success with the transition to date. Maintenance
income from the 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.
Certain customers are gradually adopting VoIP technology which has a potential threat to the
reselling of call minutes. Recognising this potential risk, the Group has expanded its product portfolio
with, for example, the launch of SIP trunking and hosted IP technology. In addition line rental
revenues have continued to grow significantly during 2009. The development of VoIP is constantly
monitored so that the Group may take advantage of profitable business models as and when they
appear.
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 Worldwide, such that Cable &
Wireless Worldwide constitutes a significant share 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. Partnerships with other integrators are being developed which are
expected to reduce this share.
8
Business review
Chairman’s statement
(continued)
Principal risks (continued)
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 if cost effective.
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 its sales pipeline and costs closely.
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 will insure its network services debt
where deemed 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 previously supplied by
Nortel.
Nortel has been acquired by Avaya, which has indicated that certain Nortel products will be
discontinued in the medium term. 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 and the
purchase of equipment from alternative manufacturers. 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. The directors
have plans to grow the Group’s Avaya capabilities further in response to Nortel’s acquisition.
Outlook
With a number of larger maintenance orders taken during 2009 contributing a full year’s revenue
in 2010, together with both maintenance and equipment orders ahead of target so far in 2010, the
maintenance and equipment division has had a promising start to the year. The network services
division is also seeing growth though at a slower rate, however investment has been made in
additional sales resource which is expected to have a positive impact from the middle of the year.
With costs remaining tightly controlled, we are confident of making further progress during 2010.
E Buxton
Chief Executive
3 March 2010
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
9
Business review
Board of directors
Dale Todd, 51
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, 43
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, 51
Non-executive chairman
John was appointed chairman of Maintel in
1996. He is also chairman of Integrated Asset
Management plc and Jazz FM. He acts as a
non-executive director of several other private
companies and as a 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, 49
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, 43
Sales and marketing director
Angus has over 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.
10
Chairman’s statement
Report on corporate governance
As a company listed on the Alternative
Investment Market of the London Stock
Exchange, Maintel Holdings Plc is not required to
comply with the 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, Angus McCaffery is Sales and
Marketing Director and Dale Todd is Finance
Director.
The directors’ biographies on page 9
demonstrate the range and depth of experience
they bring to the Group.
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 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 12.
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.
Nomination committee
The nomination committee had two members
during 2009, both non-executive, being John
Booth, chairman, and Nicholas Taylor. The
committee meets as required under the terms of
its remit, which includes:
The Company’s articles of association require
that Dale Todd retires by rotation at the
forthcoming annual general meeting and he
offers himself for re-election at the meeting.
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.
• 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 3 to 8 include a detailed review
of the business and future developments.
In addition to regular financial reporting,
significant matters relating to trading or
development of the business are released
to the market by way of Stock Exchange
announcements.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
11
Report on corporate governance
Business review
(continued)
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 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. The Group’s approach to
financial risk management is further explained in
note 16 to the financial statements.
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.
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 8.
The Group has sound financial resources and
a substantial level of recurring revenue across
a range of sectors and as a consequence and
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.
12
Chairman’s statement
Report 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, and has access to professional and other advice external
to the Group. Taking these factors into account, it 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 2010 with increases of between 1.4% and 7.1% being
awarded.
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 and Dale Todd are eligible to receive bonuses, dependant on Group profitability.
(d) Share options
Eddie Buxton and Dale Todd were granted share options during 2009, details of which are shown below.
Directors’ service agreements
Each executive director has a six month rolling service agreement.
Non-executive directors
Each of the non-executive directors has a three month rolling contract.
The remuneration of the non-executive directors is agreed 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.
Directors’ remuneration
The remuneration of the directors in office at 31 December 2009 was as follows:
Salaries/
fees
£000
Benefits
£000
Pension
Bonus contributions
£000
£000
J D S Booth
N J Taylor
E Buxton(3)
A J McCaffery
W D Todd
31
18
115
121
115
400
-
-
11
17
12
40
-
-
23
-
11
34
-
-
2
4
-
6
Total
2009 (1)
£000
31
18
151
142
138
480
Total
2008 (1,2)
£000
31
18
-
136
129
314
(1) Social security costs in respect of the above amounted to £55,000 (2008 - £36,000).
(2) Including employer pension contributions of £4,000 and benefits of £29,000, so that salaries amounted to £281,000.
(3) Mr Buxton was appointed on 2 February 2009.
The directors are the only employees of the Company.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
13
Report of the remuneration committee
Business review
(continued)
Directors’ interests in ordinary shares
The directors’ interests in the ordinary shares of the Company are shown in the directors’ report on
page 14.
Share options
On 18 May 2009 the directors of the Company approved the adoption of the Maintel Holdings Plc
2009 Option Plan.
On the same date, the directors granted to Eddie Buxton, the Company’s Chief Executive Officer:
(a) an option over 53,909 shares, which has vested and equates to 0.5% of the issued share capital
of the Company, with an exercise price of £1.00.
(b) an option over the number of shares (if any) that Mr Buxton acquires in the market during
the first year of his employment with the Company, with an exercise price of the higher of (a) the
prevailing market price at the time of purchase by Mr Buxton, and (b) £1, up to a maximum of
107,818 shares, which equates to 1.0% of the issued share capital of the Company. Mr Buxton
acquired no shares during the requisite period and so this option has now lapsed.
(c) an option over 107,818 shares, which equates to 1.0% of the issued share capital of the Company,
with an exercise price of £2.00. This option will vest and may be exercised after 18 months’
continuous employment with the Company or, if earlier, from the first date after 18 May 2009 that
the mid market price of the Company’s ordinary shares is £2.00.
(d) an option over 107,818 shares, which equates to 1.0% of the issued share capital of the
Company, with an exercise price of £3.00. This option will vest and may be exercised after 3 years’
continuous employment with the Company or, if earlier, from the first date after 18 May 2009 that
the mid market price of the Company’s ordinary shares is £3.00.
In each case, the option expires on 18 May 2019.
On 10 September 2009 the directors granted to Dale Todd, the Company’s Finance Director, an
option over 10,000 shares, which equates to 0.09% of the issued share capital of the Company,
with an exercise price of 150.5p. The option vests and may be exercised from the date of grant, and
expires on 10 September 2019.
On 23 December 2009 the directors granted to Dale Todd an option over a further 10,000 shares,
with an exercise price of 145p. The option vests and may be exercised from the date of grant, and
expires on 23 December 2019.
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 3 March 2010.
N J Taylor
Chairman of the Remuneration committee
14
Report of the directors
Chairman’s statement
for the year ended 31 December 2009
The directors present their annual report together with the audited financial statements for the year
ended 31 December 2009.
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 provision of fixed line and mobile call services,
line rentals, broadband, data networks and other telecommunications products.
Results and dividends
The consolidated statement of comprehensive income is set out on page 20 and shows the profit of
the Group for the year.
During the year the Company paid a final dividend of 3.1p per ordinary share in respect of the 2008
financial year, amounting to £334,000 (2008 – 3.0p and £364,000 respectively) and an interim
dividend in respect of 2009 of 3.1p per share, amounting to £334,000 (2008 – 2.5p and £300,000
respectively). The directors propose the payment of a second interim dividend in respect of 2009 of
4.1p per share together with a one off special interim dividend of 2.9p per share.
Business review
A review of the business and future developments of the Group is set out in the Business review on
pages 3 to 8.
Directors
The directors of the Company as at 31 December 2009 and their interests in the ordinary shares of
the Company at that date were as follows:
Number of 1p ordinary shares
2009
2008
Beneficial Non-beneficial
Beneficial Non-beneficial
J D S Booth
2,755,380
-
2,751,745
E Buxton (appointed 2 February 2009*)
-
52,152
-
A J McCaffery
N J Taylor
W D Todd
2,166,232
-
2,162,688
11,329
3,544
47,823
48,608
7,747
-
-
-
-
27,269
28,016
* Mr Buxton held no shares at the date of appointment
J D S Booth is a shareholder in Herald Investment Trust plc which holds 760,000 1p ordinary shares
in the Company; this is in addition to Mr Booth’s beneficial holding above.
The non-beneficial holdings above relate to holdings of the Share Incentive Plan, of which the
respective directors are trustees.
Since the year end, the Share Incentive Plan has sold a net 723 shares in total. There were no other
changes in the directors’ shareholdings between 31 December 2009 and 3 March 2010.
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.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
15
Report of the directors
Business review
for the year ended 31 December 2009 (continued)
Substantial shareholders
In addition to the directors’ shareholdings, at 3 March 2010 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
1,562,330
811,810
760,000
680,203
465,000
14.5%
7.5%
7.0%
6.3%
4.3%
The Company’s mid-market share price at 31 December 2009 was 145p per share, and the high and
low prices during the year were 156p and 77.5p 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 40,000 of its own 1p ordinary shares during 2009, at a price of 76p each at a total
cost of £30,000, the directors considering that such purchases were in the best interests of the
shareholders. The purchases represent 0.4% of the Company’s issued share capital as at
31 December 2009. The existing authority is for the purchase of up to 1,622,187 shares, none of
which has been utilised since being approved. A fresh authority, in the amount of 1,616,191 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 (2008 – £nil) during the year. No contributions were
made to political organisations (2008 - £nil).
16
Report of the directors
Chairman’s statement
for the year ended 31 December 2009 (continued)
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 2009 was 29 days (2008 – 37 days). The Company’s average
creditor payment period at 31 December 2009 was 27 days (2008 – 83 days), these figures being
due to the irregular nature of the Company’s creditor payments.
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 LLP as auditors of the Company will be
proposed at the forthcoming annual general meeting.
On behalf of the Board
E Buxton
Director
3 March 2010
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
17
Business review
Statement of directors’ responsibilities
Directors’ responsibilities
The directors are responsible for preparing the annual report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under
that law the directors have elected to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union and the
Company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). Under company law the
directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group
for that period. The directors are also required to prepare financial statements in accordance
with the rules of the London Stock Exchange for companies trading securities on the Alternative
Investment Market.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European
Union, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the Company’s transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the financial statements comply
with the requirements of the Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made
available on a website. Financial statements are published on the Company’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 Company’s website is the responsibility of the directors. The directors’ responsibility also
extends to the ongoing integrity of the financial statements contained therein.
18
Independent auditor’s report
Chairman’s statement
to the shareholders of Maintel Holdings Plc
We have audited the financial statements of Maintel Holdings Plc for the year ended 31 December
2009 which comprise the consolidated statement of financial position and company balance sheet,
the consolidated statement of comprehensive income, the consolidated statement of cash flows,
the consolidated statement of changes in equity and the related notes. The financial reporting
framework that has been applied in the preparation of the group financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in preparation of the parent company financial
statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with chapter 3 of
part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the group’s and the parent company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and the parent
company’s affairs as at 31 December 2009 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
• the parent company’s financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2009
www.maintel.co.uk
19
Independent auditor’s report
Business review
to the shareholders of Maintel Holdings Plc (continued)
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the directors’ report for the financial year for which the
financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and
returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Scott McNaughton
For and on behalf of BDO LLP, statutory auditor
London
3 March 2010
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
20
Consolidated statement of comprehensive income
for the year ended 31 December 2009
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 and total comprehensive income attributable to owners of the parent
Earnings per share
Basic and diluted
The notes on pages 24 to 41 form part of these financial statements.
Note
2
10
10
5
6
6
7
9
2009
£000
19,394
12,279
7,115
30
263
4,452
4,745
2,370
12
-
2,382
685
1,697
2008
£000
19,415
13,095
6,320
120
263
4,416
4,799
1,521
69
(1)
1,589
495
1,094
15.7p
9.2p
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
21
Consolidated statement of financial position
at 31 December 2009
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
2009
£000
718
2,956
2,506
10
12
13
14
15
17
18
19
19
19
2009
£000
990
192
1,182
6,180
7,362
5,069
380
5,449
47
1,866
108
628
28
1,102
1,866
2008
£000
736
3,164
1,010
2008
£000
1,208
200
1,408
4,910
6,318
5,173
193
5,366
98
854
108
628
28
90
854
The financial statements were approved and authorised for issue by the Board on 3 March 2010 and were signed on its behalf by:
W D Todd
Director
The notes on pages 24 to 41 form part of these financial statements.
22
Consolidated statement of changes in equity
for the year ended 31 December 2009
At 1 January 2008
Profit and total comprehensive income for year
Dividend
Movements in respect of purchase of own shares
At 31 December 2008
Profit and total comprehensive income for year
Dividend
Share based payment credit
Movements in respect of purchase of own shares
Share
capital
£000
124
Share
premium
£000
628
-
-
(16)
108
-
-
-
-
-
-
-
628
-
-
-
-
At 31 December 2009
108
628
The notes on pages 24 to 41 form part of these financial statements.
Capital
redemption
reserve
£000
12
-
-
16
28
-
-
-
-
28
Retained
earnings
£000
1,442
1,094
(664)
(1,782)
90
1,697
(668)
13
(30)
1,102
Total
£000
2,206
1,094
(664)
(1,782)
854
1,697
(668)
13
(30)
1,866
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
23
Consolidated statement of cash flows
for the year ended 31 December 2009
Operating activities
Profit before taxation
Adjustments for:
Goodwill impairment
Intangibles amortisation
Share based payments
Depreciation charge
Interest received
Other interest paid
Loss on disposal of plant and equipment
Operating cash flows before changes in working capital
Decrease in inventories
Decrease in trade and other receivables
Decrease 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
Purchase of software licence
Proceeds from disposal of plant and equipment
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 24 to 41 form part of these financial statements
2009
£000
2008
£000
2,382
1,589
30
279
13
103
(12)
-
-
2,795
18
208
(104)
2,917
(549)
2,368
(95)
(91)
-
12
(174)
-
(30)
(668)
(698)
1,496
1,010
2,506
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
24
Notes forming part of the financial statements
for the year ended 31 December 2009
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 2006 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 42.
(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 statement of comprehensive income and consolidated statement of financial position from
the effective date of acquisition. Uniform accounting policies are adopted in each subsidiary for the purposes of consolidation. The results
of disposed subsidiaries are included in the statement of comprehensive income 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.
As permitted by IFRS 1, business combinations prior to 1 January 2006 have not been restated under an IFRS basis.
(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 statement of comprehensive income 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 acquired, 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 statement of
comprehensive income.
Other intangible assets
Intangible assets are stated at cost less accumulated amortisation and consist of customer relationships and software licences. 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. Software licences are amortised over the three year period of the licence.
(e) Impairment of non-current 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 statement of comprehensive income and, in respect of
goodwill impairments, are never reversed.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
25
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
(f) Property, plant and equipment
Property, plant and equipment is stated at 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:
Office and computer equipment
Leasehold improvements
25% straight line
over the remaining period of the lease
(g) Inventories
Inventories comprise (i) maintenance stock, being replacement parts held to service customers’ telecommunications systems, and (ii) stock
held for resale, 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.
(h) 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 statement of cash flows.
(i) 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.
Deferred tax is provided using the 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 date
of the consolidated statement of financial position 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.
(j) 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.
(k) Operating leases
Annual rentals payable are charged to the consolidated statement of comprehensive income on a straight line basis over the term of the
lease.
Annual rentals receivable from third parties are credited to the statement of comprehensive income on a straight line basis over the term of
the lease. This income is included in revenue.
26
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
1 Accounting policies (continued)
(l) 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 statement of comprehensive
income 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.
(m) Dividends
Dividends unpaid at the reporting 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.
(n) Accounting standards issued
A number of accounting standards became effective during the year, the only one affecting the Group being IAS 1 (revised) “Presentation of
financial statements”, resulting in revised titles for the Group’s primary financial statements.
Of the new standards and interpretations issued by the IASB and IFRIC effective for future periods, only IFRS 3 (revised) is considered
likely to affect the Group.
IFRS 3 (revised) “Business combinations” (effective from 1 July 2009) alters the treatment of deferred consideration and acquisition-related
costs in respect of acquisitions occurring after adoption of the standard. It has not been adopted early in these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
27
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
2 Segment information
For management reporting purposes and operationally, the Group consists of two business segments: (i) telephone maintenance and
equipment sales, and (ii) telephone network services. Each segment applies its respective resources across inter-related revenue streams
which are reviewed by management collectively under the following headings.
Revenue
Maintenance
and
equipment
£000
13,861
Year ended 31 December 2009
Network
services
£000
5,703
Central/
intercompany
£000
Total
£000
(170)
19,394
Other than sales of £51,000 to EU countries, revenue is wholly attributable to the principal activities of the Group and arises predominantly
within the United Kingdom.
Maintenance and equipment revenue consists of maintenance related revenue of £10.289m and equipment, installation and other revenue
of £3.572m (2008 - £9.157m and £4.702m). Network services revenue consists of call traffic revenue of £2.826m, line rental revenue of
£2.048m and other revenue of £0.829m (2008 - £3.405m, £1.645m and £0.628m).
Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent costs, £69,000 attributable to
the Maintenance and equipment segment and £101,000 to the Network services segment.
In 2009 the Group had one customer (2008 – None) which accounted for more than 10% of its revenue, totalling £2.876m.
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
Statement of financial position
Assets
Liabilities
Total
All assets and liabilities are located in the UK.
Other
Capital expenditure
Depreciation
Amortisation and impairment
2,211
426
(267)
4,955
(4,732)
223
1,156
(948)
208
95
103
22
91
-
64
1,251
184
1,435
-
-
223
2,370
12
2,382
(685)
1,697
7,362
(5,496)
1,866
186
103
309
28
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
2 Segment information (continued)
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
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.
Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent costs, £67,000 attributable to
the Maintenance and equipment segment and £55,000 to the Network services segment.
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
Statement of financial position
Assets
Liabilities
Total
All assets and liabilities are located in the UK.
Other
Capital expenditure
Depreciation
Amortisation and impairment
One-off professional fees
1,433
472
(384)
4,594
(4,462)
132
1,308
(1,158)
150
115
118
22
-
-
-
48
-
416
156
572
-
-
313
49
1,521
68
1,589
(495)
1,094
6,318
(5,464)
854
115
118
383
49
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
29
3 Employees
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
2009
Number
2008
Number
21
53
79
153
2009
£000
6,906
774
127
7,807
20
58
84
162
2008
£000
7,050
794
120
7,964
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 £127,000 (2008 - £120,000). Contributions totalling £24,000 (2008 - £22,000) were payable to the schemes at the year end
and are included in creditors.
4 Directors’ remuneration
The remuneration of the Company directors was as follows:
Directors’ emoluments
Pension contributions
Included in the above is the remuneration of the highest paid director as follows:
Directors’ emoluments
Pension contributions
2009
£000
486
6
492
149
2
151
2008
£000
447
8
455
137
4
141
The Group paid contributions into defined contribution personal pension schemes in respect of 2 (2008 – 2) directors during the year.
30
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
5 Operating profit
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 and other 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
2009
£000
2008
£000
103
279
30
-
191
65
8
3
48
12
(3)
2009
£000
12
-
2009
£000
736
(51)
685
118
263
120
2
183
115
7
6
51
25
(8)
2008
£000
69
1
2008
£000
536
(41)
495
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:
Profit before tax
Profit at the standard rate of corporation tax in the UK of 28.0% (2008 – 28.5%)
Effect of:
Expenses not deductible for tax purposes
Goodwill impairment
Share based payment expense not deductible
Adjustment in respect of prior period
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
2009
£000
2,382
667
8
5
4
1
685
2008
£000
1,589
453
11
31
-
-
495
31
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
8 Dividends paid on ordinary shares
Final 2007, paid 30 April 2008 – 3.0p per share
Interim 2008, paid 10 October 2008 – 2.5p per share
Final 2008, paid 29 April 2009 – 3.1p per share
Interim 2009, paid 2 October 2009 – 3.1p per share
2009
£000
-
-
334
334
668
2008
£000
364
300
-
-
664
The directors propose the payment of a second interim dividend for 2009 of 4.1p (2008 – equivalent final dividend of 3.1p) per ordinary share,
together with a one off special interim dividend of 2.9p per share, payable on 25 March 2010 to shareholders on the register at 12 March 2010.
9 Earnings per share
Earnings per share is calculated by dividing the profit after tax for the period by the weighted average number of shares in issue for the
period, these figures being as follows:
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
Weighted average number of ordinary shares of 1p each
Potentially dilutive shares
Earnings per share
Basic
Basic and diluted
Adjusted – as above but excluding goodwill impairment, intangibles
amortisation and one-off professional costs, less tax thereon
Adjusted and diluted
2009
£000
1,697
215
-
1,912
Number
(000s)
10,790
8
2008
£000
1,094
305
35
1,434
Number
(000s)
11,832
-
10,798
11,832
15.7p
15.7p
17.7p
17.7p
9.2p
9.2p
12.1p
12.1p
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.
During 2009 the Company repurchased and cancelled 40,000 of its ordinary shares, at a price of 76p each and a total cost of £30,000,
representing 0.4% of the Company’s issued share capital as at 31 December 2009.
In calculating diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The Group has one category of potential ordinary share, being those share options granted to employees
where the exercise price is less than the average price of the Company’s ordinary shares during the period.
32
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
10 Intangible assets
Cost
At 1 January 2008 and 31 December 2008
Acquired in year
At 31 December 2009
Amortisation and impairment
At 1 January 2008
Amortisation in the year
Impairment in the year
At 31 December 2008
Amortisation in the year
Impairment in the year
At 31 December 2009
Net book value
At 31 December 2009
At 31 December 2008
Goodwill
£000
Customer
relationships
£000
Computer
Software
£000
664
-
664
167
-
120
287
-
30
317
347
377
1,413
-
1,413
319
263
-
582
263
-
845
568
831
-
91
91
-
-
-
-
16
-
16
75
-
Total
£000
2,077
91
2,168
486
263
120
869
279
30
1,178
990
1,208
A three year licence of billing software was purchased in the year, at a cost of £91,000. The licence is amortised over this period and is
subject to an annual impairment review.
Amortisation and impairment charges for the year have been charged through administrative expenses in the statement of comprehensive
income.
The carrying value of goodwill is 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)
2009
£000
202
145
347
2008
£000
232
145
377
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
33
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
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 £30,000 in 2009 (2008 - £62,000), 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 the date of each
consolidated statement of financial position 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. There has been no impairment of the goodwill in 2009 (2008 - £58,000).
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 2009 amortisation charge is therefore £193,000
(2008 - £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 2009 amortisation charge is £70,000
(2008 - £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.
34
Notes forming part of the financial statements
for the year ended 31 December 2009 (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 2008
Additions
Disposals
At 31 December 2008
Additions
Disposals
At 31 December 2009
Depreciation
At 1 January 2008
Provided in year
Disposals
At 31 December 2008
Provided in year
Disposals
At 31 December 2009
Net book value
At 31 December 2009
At 31 December 2008
13 Inventories
Maintenance stock
Stock held for resale
64
3
-
67
2
-
69
64
1
-
65
3
-
68
1
2
44
-
(44)
-
-
-
-
44
-
(44)
-
-
-
-
-
-
834
112
(100)
846
93
(91)
848
632
116
(100)
648
100
(91)
657
191
198
7
-
(7)
-
-
-
-
1
1
(2)
-
-
-
-
-
-
2009
£000
604
114
718
Total
£000
949
115
(151)
913
95
(91)
917
741
118
(146)
713
103
(91)
725
192
200
2008
£000
675
61
736
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
35
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
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
2009
£000
1,890
72
994
2,956
2009
£000
865
627
471
26
2,952
128
5,069
2008
£000
2,262
17
885
3,164
2008
£000
1,182
641
428
24
2,852
46
5,173
Deferred maintenance income relates to the unearned element of maintenance revenue that has been invoiced but not yet recognised in
the consolidated statement of comprehensive income. Other deferred income relates to other amounts invoiced but not yet recognised in
the consolidated statement of comprehensive income.
36
Notes forming part of the financial statements
for the year ended 31 December 2009 (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.
Current financial assets
Trade receivables
Cash and cash equivalents
Other receivables
Current financial liabilities
Trade payables
Other payables
Loans and receivables
2009
£000
1,890
2,506
72
4,468
2008
£000
2,262
1,010
17
3,289
Financial liabilities
measured at
amortised cost
2009
£000
865
26
891
2008
£000
1,182
24
1,206
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 reporting date, the largest exposure was represented by the carrying value of trade and other receivables, against which £110,000
is provided at 31 December 2009 (2008 - £99,000). The provision represents an estimate of potential bad debt, goodwill credits and
additional costs to completion 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 receivable included in trade and other receivables at 31 December 2009 owed the Group
£486,000 including VAT (2008 - £286,000).
The movement on the provision is as follows:
Provision at start of year
Provision used
Additional provision made
Provision at end of year
2009
£000
99
(34)
45
110
2008
£000
112
(34)
21
99
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.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
37
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
The Group had past due trade receivables not requiring impairment as follows:
Up to 30 days overdue
31-60 days overdue
More than 60 days overdue
2009
£000
630
72
33
735
2008
£000
947
195
114
1,256
Cash and cash equivalents at 2009 and 2008 year ends represented short term deposits with LloydsTSB and Abbey.
Foreign currency risk
The functional currency of all Group companies 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 2009 was £1,000 (2008 – £1,000). 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 (£12,000 in 2009, and £69,000 in 2008) is therefore dependent on those prevailing rates, which were at a historically low level
during 2009.
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 continue to be exerted on working capital as a
result of the current economic environment however these have been, and will continue to 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 consolidated statement of financial position and the fair values
of the Group’s financial instruments.
Capital risk management
The Group’s objective when managing capital is to safeguard its ability to continue as a going concern in order to provide returns to
shareholders. Capital comprises all components of equity – share capital, capital redemption reserve, share premium and retained earnings.
In order to maintain or adjust the capital structure, the Group will consider the appropriateness of issuing shares, repurchasing shares,
amending its dividend policy and borrowing, as is deemed appropriate in the light of changing economic circumstances.
38
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
17 Deferred tax liability
Property,
plant and
equipment
£000
Intangible
assets
£000
At 1 January 2008
Charge/(credit) to consolidated statement of comprehensive income
At 31 December 2008
Charge/(credit) to consolidated statement of comprehensive income
At 31 December 2009
(30)
3
(27)
7
(20)
183
(58)
125
(58)
67
Other
£000
(14)
14
-
-
-
Total
£000
139
(41)
98
(51)
47
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% (2008: 28%).
18 Share capital
Authorised
17,571,840 ordinary shares of 1p each
Allotted, called up and fully paid
10,781,800 (2008 - 10,821,800) ordinary shares of 1p each
2009
£000
176
108
2008
£000
176
108
Pursuant to the authority granted at the last two AGMs, the Company repurchased and cancelled 40,000 of its own 1p ordinary shares
during 2009, at a price of 76p each and a total cost of £30,000. The purchase represents 0.4% of the Company’s issued share capital as at
31 December 2009.
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.
The directors propose the payment of a second interim dividend in respect of 2009 of 4.1p per share together with a one off special interim
dividend of 2.9p per share; these dividends are not provided for in these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
39
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
20 Share Incentive Plan
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 Share based payments
On 18 May 2009 the directors of the Company approved the adoption of the Maintel Holdings Plc 2009 Option Plan.
The Remuneration Committee’s report on page 12 describes the options granted over the Company’s ordinary shares during the year.
In aggregate, options are outstanding over 2.69% of the current issued share capital. The number of shares under option and the vesting
and exercise prices may be adjusted at the discretion of the Remuneration Committee in the event of a variation in the issued share capital
of the Company.
The total charge to the consolidated statement of comprehensive income arising from the granting of these options is £13,000. The fair
value of the options was calculated using a combination of the Black Scholes and Monte-Carlo models, using the following inputs:
Volatility
Dividend yield
Risk free rate
Vesting period
Expected life
Exercise price
Share price
19.3%
5.71%
2.61%-2.90%
0-2.71 years
5-6.36 years
£1.00-£3.00
98p
Fair value of options at measurement date
0.08p-8.03p
22 Operating leases
As at 31 December 2009, 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
2009
Land and
buildings
£000
48
-
48
2009
Other
£000
29
-
29
2008
Land and
buildings
£000
191
48
239
2008
Other
£000
37
4
41
The commitment relating to land and buildings is in respect of the Group’s London offices, the current 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. The office lease has been renewed in 2010 for a term of 4½ years in normal circumstances, at a rental of £139,550 in
year one and £149,550 thereafter.
40
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
23 Related party transactions
Transactions with key management personnel
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:
Short term employment benefits
Contributions to defined contribution pension scheme
Share based payments
2009
£000
812
13
13
838
2008
£000
784
14
-
798
On 3 October 2008, the Company purchased 750,000 shares from Tim Mason, a director of the Company at that time, at a price of 103p
per share. The Directors obtained independent professional advice confirming this to be a fair price.
Transactions between the Company and its subsidiary undertakings
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 £1,318 (2008 - £19,694) net of VAT, of which £128 (2008 - £133) was owed at the year end and is included within trade
creditors. Sales during the year amounted to £43 (2008 - £89), of which £5 (2008 - £Nil) was owed at the year end.
The Group provided services to A J McCaffery during the year amounting to £734 (2008 - £993) net of VAT, of which £Nil (2008 - £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 £11,789 net of VAT (2008 - £17,099),
of which £1,545 (2008 - £263) was owed at the year end and is included in trade creditors.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
41
Notes forming part of the financial statements
for the year ended 31 December 2009 (continued)
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 consolidated statement of comprehensive income 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
Long term contracts
Increase/(decrease)
in impairment charge
2009
£000
Nil
159
Nil
Nil
2008
£000
Nil
119
Nil
Nil
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. At 31 December 2008 and 2009, there were no significant contracts in progress, and
so no sensitivity analysis is provided at these dates.
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.
42
Maintel Holdings Plc Company balance sheet
at 31 December 2009 - prepared under UK GAAP
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due
within one year
Net current assets/(liabilities)
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
2009
£000
196
791
987
306
2009
£000
2,323
681
3,004
108
628
28
2,240
3,004
2008
£000
205
510
715
1,062
2008
£000
2,323
(347)
1,976
108
628
28
1,212
1,976
The financial statements were approved and authorised for issue by the Board on 3 March 2010 and were signed on its behalf by:
W D Todd
Director
The notes on pages 43 to 45 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
43
Notes forming part of the Company financial statements
for the year ended 31 December 2009
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 2006. 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.
(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.
(c) 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.
(d) 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 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 S408 of the Companies Act 2006 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 £1,713,000 (2008 –
£1,865,000).
4 Dividends paid on ordinary shares
Final 2007, paid 30 April 2008 – 3.0p per share
Interim 2008, paid 10 October 2008 – 2.5p per share
Final 2008, paid 29 April 2009 – 3.1p per share
Interim 2009, paid 2 October 2009 – 3.1p per share
2009
£000
-
-
334
334
668
2008
£000
364
300
-
-
664
The directors propose the payment of a second interim dividend for 2009 of 4.1p (2008 – equivalent final dividend of 3.1p) per ordinary
share, together with a one off special interim dividend of 2.9p per share, payable on 25 March 2010 to shareholders on the register at
12 March 2010.
44
Notes forming part of the Company financial statements
for the year ended 31 December 2009 (continued)
5 Investment in subsidiaries
Cost
At 31 December 2008 and 31 December 2009
Provision for impairment
At 31 December 2008 and 31 December 2009
Net book value
At 31 December 2008 and 31 December 2009
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
2009
£000
182
3
2
9
196
2008
£000
165
10
11
19
205
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
45
Notes forming part of the Company financial statements
for the year ended 31 December 2009 (continued)
7 Creditors
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
2009
£000
291
7
8 8
2008
£000
1,027
27
306
1,062
2009
£000
2008
£000
176
176
10,781,800 (2008 - 10,821,800) ordinary shares of 1p each
108
108
Pursuant to the authority granted at the last two AGMs, the Company repurchased and cancelled 40,000 of its own 1p ordinary shares
during 2009, at a price of 76p each and a total cost of £30,000. The purchase represents 0.4% of the Company’s issued share capital
as at 31 December 2009.
The Remuneration Committee’s report on page 12 of the consolidated accounts of Maintel Holdings Plc describes the options granted
over the Company’s ordinary shares during the year.
9 Reconciliation of movement in shareholders’ funds
At 1 January 2008
Profit for year
Dividends paid
Movements in respect of purchase of own shares
At 31 December 2008
Profit for year
Dividends paid
Share based payment credit
Movements in respect of purchase of own shares
At 31 December 2009
Share
capital
£000
124
-
-
(16)
108
-
-
-
-
108
Share
premium
£000
628
-
-
-
628
-
-
-
-
628
Capital
redemption
reserve
£000
12
-
-
16
28
-
-
-
-
28
Retained
earnings
£000
1,793
1,865
(664)
(1,782)
1,212
1,713
(668)
13
(30)
Total
£000
2,557
1,865
(664)
(1,782)
1,976
1,713
(668)
13
(30)
2,240
3,004
It is proposed to pay a second interim dividend for 2009, of 4.1p per share, together with a one off special interim dividend of 2.9p per
share, on 25 March 2010; these dividends are 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 that time, 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.
46
Notice of annual general meeting
(not forming part of the statutory financial statements)
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 22 April 2010, 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 2009, together with the Report of the
directors and the Independent auditors report thereon.
2. To approve the report of the Remuneration committee for the year ended 31 December 2009.
3. To re-elect Mr W D Todd, who retires by rotation, as a director of the Company.
4. To re-appoint BDO 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 5 will be proposed as an ordinary resolution and
resolutions 6 and 7 as special resolutions:
5. That the directors be and are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006
(“the Act”) to exercise all powers of the Company to allot and to make offers or agreements to allot relevant securities up to a
maximum aggregate nominal amount of £35,938, 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.
6. That, subject to the passing of the previous resolution, the directors be and are hereby empowered pursuant to Section 570 of the Act
to allot equity securities as defined in Section 560 of the Act for cash as if Section 561 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
£10,781.
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.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2009
www.maintel.co.uk
47
Notice of annual general meeting
(continued)
7. That the Company is, pursuant to Section 701 of the Act, hereby generally and unconditionally authorised to make market purchases
(within the meaning of Section 693) of up to a maximum of 1,616,191 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.
By order of the Board
W D Todd
Company Secretary
18 March 2010
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 20 April 2010, 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 20 April 2010 shall be disregarded in determining the rights of any person to attend and vote at the meeting.
3.
In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the 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.
Maintel, 61 Webber Street, London SE1 0RF www.maintel.co.uk