annual report & accounts 2010
Maintel Holdings Plc
Chairman’s statement
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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
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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
finnCap Limited, 60 New Broad Street, London EC2M 1JJ
Registrars
Computershare Investor Services PLC, The Pavilions,
Bridgwater Road, Bristol BS99 6ZY & 0870 707 1182
2
Chairman’s statement
Chairman’s statement
Maintel Holdings’ revenues rose by 13% during 2010 to £22.0m (2009 – £19.4m) and adjusted profit
before tax by 14% to £3.046m (2009 – £2.675m) giving an increase in adjusted earnings per share of
15% to 20.3p (2009 – 17.7p).
Our maintenance base ended the year at a record £13.2m (2009 – £10.3m) having grown by 28%,
boosted by two substantial pieces of new business from our largest customer, a new partnership
with Westcon which brought in £600,000 of annualised revenues and the acquisition towards the
end of the year of a £2m maintenance base from Redstone which we believe will deliver significant
incremental earnings in the future. Equipment sales rebounded strongly from 2009 levels showing a
32% increase which included one very large order at lower than average margin but a good spread of
smaller projects which fulfilled our margin targets. Network services revenues increased only slightly
during the year, with call rates remaining highly competitive. However, line rental and data showed
promising returns and we continue to broaden our product offering to access new revenue streams.
Aside from organic growth which continues to be a priority, we remain vigilant for acquisitions that
fulfil our valuation criteria as industry consolidation continues apace. Equally we are always pleased
to work closely with a range of longstanding partners including some of the biggest companies in our
industry to whom we supply complementary services and we expect further growth in this area in the
year ahead as various new relationships bear fruit.
The Company continues to be strongly cash generative. We repurchased 295,000 shares during the
year, equivalent to 3% of the outstanding share capital, and following our acquisition in October of the
Redstone businesses for £1.6m net we ended the year with cash balances of £2.5m and no debt. We
are proposing a final dividend of 4.6p payable on 28 April 2011 to shareholders on the register at
25 March 2011.
It falls to me to thank on behalf of shareholders our loyal and energetic staff for their work and
commitment during the year and to wish them well for the challenges and opportunities ahead.
J D S Booth
Chairman
10 March 2011
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
3
Business review
Business review
Results
As anticipated in the half-year statement, revenue and profit improved further in the second half of the
year, reflecting the continued growth in the maintenance base and higher levels of equipment sales
derived from the base.
Adjusted profit before tax for the year was £3.046m, a 14% increase on 2009, with unadjusted profit
before tax increasing by 12% to £2.673m.
The Company repurchased 295,000 shares in the year (3% of the year end share capital), mostly in
Q3, and this, combined with the increased profitability, has enhanced adjusted EPS by 15% from 17.7p
in 2009 to 20.3p in 2010. Basic EPS increased by 13%, from 15.7p in 2009 to 17.8p in 2010.
Revenue
Profit before tax
Add back goodwill impairment and
customer relationship intangibles amortisation
Add back non-trading accounting
adjustments re Redstone acquisition
Adjusted profit before tax
Basic and diluted earnings per share
Adjusted basic and diluted earnings per share
H1 2010
£000
10,580
1,350
H2 2010
£000
11,428
1,323
2010
£000
2009
£000
22,008
19,394
2,673
2,382
132
171
303
293
-
1,482
9.0p
9.8p
70
1,564
8.8p
10.5p
70
3,046
17.8p
20.3p
-
2,675
15.7p
17.7p
Group revenues increased by £2.614m, or 13%, in the year. The two major new contracts from the
Group’s largest customer noted in the interim report were supplemented by 6 months’ revenue from a
partnership agreement with Westcon and continuing higher levels of equipment sales, including a large
supply and installation contract referred to at the half year.
Network services revenues increased marginally in the year, with low attrition being matched by low new
sales, the investment made in the division during the year having been less effective than anticipated.
At the end of June, the Group entered into a three year partnership agreement with Westcon
Convergence UK (the “Westcon partnership”) which effectively added approximately £600,000 of
annualised revenue and 1,400 customers to the maintenance base, with Maintel being the preferred
maintainer to any new customers Westcon signs. Under the agreement, a team of Avaya engineers
joined Maintel from Westcon, significantly accelerating our development of a product expertise which
gained dramatically in importance when Avaya acquired Nortel in 2009. While the cost of the engineers
means that the partnership adds more to our strategic strength than our short term profitability, it
provides instant access to a new market at negligible risk or cost. A consequential benefit has been
the ability to bring in house some previously outsourced Avaya contracts, reducing our third party
support costs.
In addition, the Group acquired certain business and assets from Redstone Converged Solutions
Limited and Marcom Communications Limited (a Redstone subsidiary) (together the “Redstone
acquisition”) at the end of October, for a net cash consideration of £1.6m. Approximately £1.7m
annualised of maintenance contracts were acquired as part of the agreement, and Maintel also agreed
to supply certain customers of Redstone with maintenance services for approximately £280,000 per
annum. After redundancies, a net 18 Redstone/Marcom employees were retained by Maintel. Due
to the acquired customers’ billing cycles, the Redstone acquisition is not expected to reach full cash
generation potential until Q3 2011. In 2010 it contributed, before redundancy costs, an approximate
£50,000 profit to Group results including £105,000 of deferred income net of deferred costs for which
no cash flows will be received by the Group; assuming no significant excess of attrition over new
sales in the acquired base, the acquisition should contribute progressively more to operating cash
flows during 2011 until peaking in Q3. A further £141,000 of deferred income less deferred costs will
be recognised in 2011. The Group incurred £222,000 in redundancy costs in 2010 in respect of the
acquisition, £175,000 of which is covered by an indemnity from Redstone. The £175,000 indemnity
has been treated as a deduction from consideration for the purposes of calculating goodwill, and the
£175,000 costs being expensed as incurred in 2010. The £175,000 indemnity, and the £105,000
4
Business review
Chairman’s statement
(continued)
Results (continued)
deferred income less costs adjustment noted above, have been added back in calculating adjusted
profit, as this represents a more accurate picture of underlying trading.
Recurring revenue (maintenance and network services) increased again in the year to £17.5m (79% of
total revenues) (2009 – £16.0m and 82%), providing good 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
2010
11,678
4,713
16,391
5,816
(199)
22,008
2009
10,289
3,572
13,861
5,703
(170)
19,394
Cash generated from operating activities continued to be strong, at £4.117m, in 2010 (2009 –
£2.917m). Cash balances were £2.459m at the year end (2009 – £2.506m) after the £1.6m net cash
cost of acquiring the Redstone base, dividend payments of £1.173m, £822,000 tax and the £487,000
cost of buying back shares. The Group has no debt.
Divisional performance is described further below.
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 by 18% in the year as shown in the table above, maintenance
related revenue growing by 13% and equipment sales by 32%.
Maintenance
Maintenance revenues increased by £1,389,000 in the year, with two significant orders from the
Group’s largest customer, one going live in February and the other in July. Revenues also benefited
from the commencement of the Westcon partnership (initially around £600,000 of annualised
maintenance revenues) at the end of June and the acquisition of the Redstone base (c£2m annualised
maintenance revenues) at the end of October, both of which are contributing maintenance revenues in
line with expectations. The maintenance base stood at a record of more than £13m at the year end.
As envisaged, we have received increasing levels of business during the year from our relationships
with larger integrators, and further relationships continue to be forged, whilst at the other end of the
scale the direct sales team continues to sign up traditional SME and larger customers, albeit at lower
levels than experienced historically, all of which helps provide a balance to the base.
It was noted at the half year that attrition was running slightly ahead of recent years, but this position
reversed in H2, so that the rate for the year was virtually identical to that of 2009.
Equipment sales
Following a drop in equipment sales revenue in 2009 attributed to the economic environment, this has
increased by £1,141,000 in the year, despite a conscious and continuing policy to generally avoid such
sales if they do not meet margin criteria. £622,000 of the increase, however, is attributable to a single
project which was low risk and at a lower than usual, but acceptable, margin and which has led to a
further £250,000 extension to that order in 2011. There were a number of medium-sized sales in the
year, but a large proportion of equipment sales is of low unit value and is a function of the increased size
of the maintenance base and which could reasonably be deemed recurring revenue. Overall equipment
sales margin percentage was below budget due to the large contract, but not significantly so.
The increase in the sales and customer service headcount shown below has primarily arisen from the
transfer to the Group of Redstone employees and the enhancement of resource to maintain a quality
service to the increased customer base. The increase in engineer headcount is in the main the result
of the acquisition of Avaya skills through the Westcon partnership and the Redstone acquisition.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
5
Business review
Business review
(continued)
Headcount
Average 2010
Average 2009
Sales and customer service*
Engineers*
* excluding redundant Redstone employees
49
86
44
79
At 31
December
2010
56
100
Division gross profit (£000)
2010
2009
6,496 (40%)
5,828 (42%)
The division’s gross profit margin dropped by 2 percentage points in the year, the equipment sales at
lower margin noted above being the main contributory factor, although the division was also affected
by a full year’s support charge from a manufacturer and by the effects of some renegotiated customer
contracts, in particular the framework agreement with the Group’s largest customer, although this
latter cost is also expected to result in improved contract security and greater exposure to new
business opportunities.
The percentage margin in the second half was also affected by the Westcon partnership agreement
and Redstone acquisitions, where low levels of profitability were expected initially post-completion,
but will improve in 2011 as the negative effects of deferred maintenance income not acquired unwind.
Net margin (operating profit as a percentage of revenue) from the division fell from 16.0% in 2009 to
14.4%, in sympathy with gross margin but partly due to the two Redstone accounting adjustments (the
inclusion of the £105,000 deferred income less deferred costs, and the £175,000 redundancy cost) which
increased revenue and administration costs; excluding these adjustments, net margin was 14.9%.
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.
Network services division
The network services division sells a portfolio of services which includes telephone line rental, inbound
and outbound telephone calls, data connectivity, Internet access and IP telephony solutions. These
services complement the services offered by the maintenance and equipment division.
Revenue analysis (£000)
Call traffic
Line rental
Data services
Other
Total network services
2010
2,690
2,282
594
250
5,816
2009
2,826
2,048
538
291
5,703
Division gross profit (£000)
1,545 (27%)
1,400 (25%)
The division’s revenue increased by £113,000 or 2% with the switch from call traffic to line rental
continuing the trend of the last few years, and data services revenues increasing by a further 10% in
the year.
The reduction in call traffic revenue is a consequence of reduced fixed line traffic volumes generally, a
continuing effect of the economic environment impacting on call volumes, the effects of cancellations
by some medium-sized customers in late 2009 and H1 2010 and reduced call minute rates. The
signing of a major line rental customer in mid-2009 has helped contribute to the increase in line rental
revenues and BT’s recently announced increase in its line rental estate is an encouraging indicator for
this revenue stream.
2010 has also seen increasing uptake in the division’s IP-based telephony solutions including SIP
trunking and hosted PBX solutions, which is a trend that we expect to continue alongside the more
traditional services.
6
Business review
Chairman’s statement
(continued)
Network services division (continued)
Although line rental revenues attract around half the margin of call traffic, the entire revenue increase
translated to margin increase due to year on year improvements in call traffic and data services
margins, as a result of improved buy-in rates and the continuing focus on improving processes and
rationalising suppliers.
Attrition in the division remained at its historically low levels during the year, although this was
balanced by a relatively subdued level of new sales, partially reflecting our focus on good margin, low
risk prospects in the current economic environment.
Administrative expenses, excluding goodwill impairment and intangibles
amortisation
Administrative expenses (£000)
Sales expenses
Other administrative expenses (excluding goodwill impairment,
intangibles amortisation and £175,000 Redstone
redundancy charge in 2010)
Redstone redundancy charge
Total other administrative expenses
2010
2,304
2,456
175
4,935
2009
2,080
2,356
-
4,436
Sales expenses increased by £224,000 or 11% in the year, as a senior sales person was recruited,
certain Redstone employees were retained and commissions were paid on increased revenues.
Administrative costs remain tightly controlled and rose by £100,000 or 4% in the year, £28,000 being
an increase in the holiday pay accrual arising from the increased employee numbers, and £26,000
being the costs of the Redstone acquisition.
Impairment and amortisation charges are discussed below.
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*
2010
165
58
21
2009
153
53
21
Group revenue (£000)
22,008
19,394
* excluding redundant Redstone employees
Interest
Net interest receivable increased from £12,000 to £29,000 in 2010, with average cash balances being
higher in 2010 despite share buybacks in September and the Redstone acquisition at the end of October.
Taxation
The consolidated statement of comprehensive income shows a tax rate of 28.6% (2009 – 28.8%). The
two main trading companies are taxed at 28.0% (2009 – 28.0%). Disallowables raise the effective rate
above this, as did an element of the goodwill impairment charge in 2009 which did not attract tax relief.
Dividends
A second interim dividend for 2009 of 4.1p per share (£441,000 in total) was paid on 25 March 2010,
together with a special interim dividend for 2009 of 2.9p per share (£312,000), and an interim dividend
for 2010 of 3.9p (£420,000) was paid on 1 October 2010.
It is proposed to pay a final dividend of 4.6p in respect of 2010 on 28 April to shareholders on the
register at the close of business on 25 March. The corresponding ex-dividend date will be 23 March.
In accordance with accounting standards, this dividend is not accounted for in the financial statements
for the period under review as it had not been committed as at 31 December 2010.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
7
Business review
Business review
(continued)
Consolidated statement of financial position
The consolidated statement of financial position remains sound, with £2.459m of cash and no debt,
facilitating continued growth from existing resources.
Trade receivables have increased by £459,000 over the year, with higher levels of billing in Q4 2010
compared with Q4 2009, including the effects of Westcon and Redstone billing. Trade payables have
increased by £399,000 largely due to the increase in cost of sale relating to equipment sales. These
factors, plus the NI/PAYE effect of increased staff levels have resulted in an increase in tax and social
security liability at the year end compared with the previous year.
The value of maintenance stock has increased by £17,000 in the year, to £621,000, due to the
acquisition of £95,000 of stock from Redstone, net of regular provisioning being applied. As part of
the agreement signed with Westcon, the Group took ownership of Avaya maintenance stock from
Westcon which, not being material, has been incorporated in the Group’s maintenance stock at nil
value. The value of stock held for resale has increased from £114,000 to £380,000 as a result of a
higher number of installations spanning the year end.
Deferred maintenance income has increased by £748,000, due to the increase in the maintenance
base over the year, including the effects of the Westcon partnership and Redstone acquisition
including £141,000 in respect of the performance obligation liability adjustment. Other deferred
income has increased by £204,000 mirroring the increase in stock arising from more installation
projects spanning the year end.
No significant expenditure has been required on plant and equipment during the period, with
additions broadly matching depreciation, and the spend in the year weighted to improving IT security
and resiliency.
Intangible assets
The Group has four intangible assets – (i) goodwill relating to the acquisition of Maintel Network
Services Limited, (ii) an intangible asset represented by customer contracts and relationships
acquired from District Holdings Limited, Callmaster Limited and Redstone, (iii) goodwill relating to the
District and Redstone acquisitions, and (iv) a licence for billing software.
£128,000 was added to Goodwill during the year, in respect of the Redstone acquisition. Goodwill
is subject to an impairment test at each reporting date. No impairment has been charged to the
consolidated statement of comprehensive income in 2010 (2009 – £30,000), and the carrying value is
£475,000 at 31 December 2010 (2009 – £347,000).
The intangible assets represented by purchased customer contracts and relationships were
supplemented by the addition of contracts valued at £1.448m arising from the Redstone acquisition
during the year. The intangible assets are subject to an amortisation charge of 17–20% of cost per
annum in respect of maintenance contract relationships and 14.2% per annum in respect of network
services contracts. £303,000 was amortised in 2010 (2009 – £263,000), leaving a carrying value of
£1.713m (2009 – £568,000).
The billing software is amortised over a three year period and is subject to an annual impairment
review. The amortisation charge in the period was £32,000, leaving a carrying value of £43,000 (2009
– £75,000).
Purchase of own shares
Further to the authority granted at the last two AGMs, the Company repurchased and cancelled 295,000
of its own shares during 2010, at prices between 140p and 165p each and a total cost of £487,000.
The share price at 31 December 2010 was 250p.
Cash flow
At 31 December 2010 the Group had cash and bank balances of £2.459m (2009 – £2.506m), all of it
unrestricted. Cash generated from operating activities in the year was £4.117m, out of which £1.173m
was paid in dividends, £487,000 on share buy backs, £822,000 in corporation tax and a net £1.6m on
the Redstone acquisition.
The Group has no debt and invests its surplus cash with mainstream banking organisations.
8
Business review
Chairman’s statement
(continued)
Principal risks
The directors consider that the principal risks to the Group relate to technological advance,
marketplace relationships and pricing strategies, and the ongoing 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 replacement 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.
VoIP technology is a potential threat to the reselling of call minutes with a particular type of customer.
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 2010. 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
have begun to reduce the percentage weighting, with the Redstone acquisition having the same effect
by increasing the size of the base.
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.
Outlook
While we see the 2011 economic environment remaining difficult as the government’s policy to reduce
the structural deficit continues to have an impact on company investment and cost reduction activity,
Maintel is well placed to continue its growth in this environment, with the maintenance and equipment
division expected to advance on a number of fronts during 2011, including the further development
of partner business, the development of the Westcon partnership and the Redstone base, and
progression into the Avaya marketplace capitalising on the investments in resource and critical mass
established during 2010.
The enhanced engineering skills gained from recent acquisitions, especially in the areas of IP and data
will allow Maintel to accelerate its growth in these areas to supplement its traditional maintenance
revenues.
The network services division is expected to see slower growth in the year, with the main focus being
on the maintenance and equipment division, although farming of the Westcon and Redstone bases is
expected to produce positive results.
The Group is therefore well positioned to make further progress during the current year.
E Buxton
Chief Executive
10 March 2011
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
9
Business review
Board of directors
Dale Todd, 52
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, 44
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, 52
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 chairman of the Link
Group which was acquired by ICAP plc in 2008.
Eddie Buxton, 50
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, 44
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 UK Corporate Governance 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 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 board meets regularly, normally monthly, and both reviews operations and assesses future strategy
for the two operating subsidiaries and for the Group as a whole. It operates to a schedule of matters
specifically reserved for its decision.
The Company’s articles of association require that Angus McCaffery 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.
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,
Angus McCaffery 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 13.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
11
Report on corporate governance
Business review
(continued)
Nomination committee
The nomination committee had two members during 2010, both non-executive, being John Booth,
chairman, and Nicholas Taylor. The committee meets as required under the terms of its remit, which
includes:
• reviewing the structure, size and composition of the board.
• identifying and nominating suitable candidates to fill vacancies on the board.
Board attendances
The following table shows attendance of the directors at meetings of the Board and the Audit
Committee during the year.
Number of
meetings in
the year
J Booth
E Buxton A McCaffery
N Taylor
D Todd
Board
Audit committee
16
2
14
2
16
2
15
2
15
2
16
2
Meetings of the Remuneration committee were held in December 2009 and January 2011.
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 as required.
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.
12
Report on corporate governance
Chairman’s statement
(continued)
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 17 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.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
13
Business review
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 2011 with increases of between 6.2% and 14.8% 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 and
other performance criteria.
(d) Share options
Eddie Buxton and Dale Todd have been granted share options, 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 2010 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
19
127
135
124
436
-
-
12
18
12
42
-
-
30
-
20
50
-
-
4
4
-
8
Total
2010 (1)
£000
31
19
173
157
156
536
Total
2009 (1,2)
£000
31
18
151
142
138
480
(1) Excluding social security costs in respect of the above amounting to £62,000 (2009 - £55,000).
(2) Including bonuses of £34,000, employer pension contributions of £6,000 and benefits of £40,000, so that salaries amounted to £400,000.
(3) Mr Buxton was appointed on 2 February 2009.
The directors are the only employees of the Company.
14
Report of the Remuneration committee
Chairman’s statement
(continued)
Directors’ interests in ordinary shares
The directors’ interests in the ordinary shares of the Company are shown in the directors’ report on
page 15.
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, with an exercise price of £1.00.
(b) an option over the number of shares (if any) that Mr Buxton acquired in the market during the
first year of his employment with the Company. Mr Buxton acquired no shares during the requisite
period and so this option lapsed during 2010.
(c) an option over 107,818 shares, which has vested, with an exercise price of £2.00.
(d) an option over 107,818 shares, 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, with an exercise price of 150.5p. The option vested 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 vested 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 10 March 2011.
N J Taylor
Chairman of the Remuneration committee
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
15
Report of the directors
Business review
for the year ended 31 December 2010
The directors present their annual report together with the audited financial statements for the year
ended 31 December 2010.
Principal activities
The principal activities of the Group are the provision of contracted maintenance services, the sale
and installation of telecommunications systems and the provision of fixed line, mobile and data
telecommunications services, predominantly to the enterprise business sector.
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 second interim dividend of 4.1p per ordinary share in respect
of the 2009 financial year, amounting to £441,000 (2009 – an equivalent final dividend of 3.1p and
£334,000 respectively), a special interim dividend in respect of 2009 of 2.9p per share, amounting
to £312,000, and an interim dividend in respect of 2010 of 3.9p per share, amounting to £420,000
(2009 – 3.1p and £334,000 respectively). The directors propose the payment of a final dividend in
respect of 2010 of 4.6p 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 2010 and their interests in the ordinary shares of
the Company at that date were as follows:
Number of 1p ordinary shares
2010
2009
Beneficial Non-beneficial
Beneficial Non-beneficial
2,756,717
-
2,755,380
-
1,998
64,921
-
52,152
2,167,436
-
2,166,232
12,590
4,748
61,329
62,171
11,329
3,544
-
47,823
48,608
J D S Booth
E Buxton
A J McCaffery
N J Taylor
W D Todd
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 purchased a net 1,747 shares in total. There were
no other changes in the directors’ shareholdings between 31 December 2010 and 10 March 2011.
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 19.
16
Report of the directors
Chairman’s statement
for the year ended 31 December 2010 (continued)
Substantial shareholders
In addition to the directors’ shareholdings, at 10 March 2011 the Company had been notified of the
following shareholdings of 3% or more in the ordinary share capital of the Company:
J A Spens
Herald Investment Trust plc
Octopus Investments Limited
Marlborough Special Situations Fund
T Wat
Number of
1p ordinary shares
% of issued
ordinary shares
1,573,100
760,000
631,920
532,500
380,203
15.0%
7.2%
6.0%
5.1%
3.6%
The Company’s mid-market share price at 31 December 2010 was 250p per share, and the high and
low prices during the year were 130p and 252.5p 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 295,000 of its own 1p ordinary shares during 2010, at prices between 140p and 165p each
at a total cost of £487,000, the directors considering that such purchases were in the best interests
of the shareholders. The purchases represent 2.8% of the Company’s issued share capital as at
31 December 2010. The existing authority is for the purchase of up to 1,616,191 shares and the
unutilised authority is in respect of 1,336,191 shares. A fresh authority, for the purchase of up to
1,571,971 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 17 of the financial
statements.
Donations
The Group made charitable contributions of £5,000 (2009 – £2,000) during the year. No contributions
were made to political organisations (2009 – £Nil).
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
17
Report of the directors
Business review
for the year ended 31 December 2010 (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 2010 was 38 days (2009 – 29 days). The Company’s average
creditor payment period at 31 December 2010 was 9 days (2009 – 27 days), these figures being
due to the irregular nature of the Company’s creditor payments.
Annual General Meeting
The Annual General Meeting of the Company will be held at its offices on 21st April 2011 at
10.45am. The notice convening the meeting is set out on pages 46 to 47 of this report.
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
10 March 2011
18
Chairman’s statement
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.
Maintel Holdings Plc
Annual report and financial
statements for the year ended
31 December 2010
www.maintel.co.uk
19
Independent auditor’s report
Business review
to the shareholders of Maintel Holdings Plc
We have audited the financial statements of Maintel Holdings Plc for the year ended 31 December
2010 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 consolidated 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 and express an opinion on 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
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm.
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 2010 and of the group’s profit for the year then ended;
• the consolidated 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.
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.
Anthony Perkins (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
10 March 2011
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 2010
Revenue
Cost of sales
Gross profit
Administrative expenses
Goodwill impairment
Intangibles amortisation
Other administrative expenses
Operating profit
Financial income
Profit before taxation
Taxation
Profit and total comprehensive income attributable to owners of the parent
Note
3
11
11
6
7
8
2010
£000
22,008
14,094
7,914
-
335
4,935
5,270
2,644
29
2,673
765
1,908
2009
£000
19,394
12,279
7,115
30
279
4,436
4,745
2,370
12
2,382
685
1,697
Earnings per share
Basic and diluted
10
17.8p
15.7p
The notes on pages 24 to 41 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
21
Consolidated statement of financial position
at 31 December 2010
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
2010
£000
1,001
3,561
2,459
11
13
14
15
16
18
19
20
20
20
2010
£000
2,231
202
2,433
7,021
9,454
6,971
366
7,337
3
2,114
105
628
31
1,350
2,114
2009
£000
718
2,956
2,506
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
The financial statements were approved and authorised for issue by the Board on 10 March 2011 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 2010
At 1 January 2009
Profit and total comprehensive income for year
Dividend
Share based payment credit
Movements in respect of purchase of own shares
At 31 December 2009
Profit and total comprehensive income for year
Dividend
Movements in respect of purchase of own shares
At 31 December 2010
Share
capital
£000
108
-
-
-
-
108
-
-
(3)
105
Share
premium
£000
628
-
-
-
-
628
-
-
-
628
Capital
redemption
reserve
£000
28
-
-
-
-
28
-
-
3
31
Retained
earnings
£000
90
1,697
(668)
13
(30)
1,102
1,908
(1,173)
(487)
1,350
Total
£000
854
1,697
(668)
13
(30)
1,866
1,908
(1,173)
(487)
2,114
The notes on pages 24 to 41 form part of these financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
23
Consolidated statement of cash flows
for the year ended 31 December 2010
Operating activities
Profit before taxation
Adjustments for:
Goodwill impairment
Intangibles amortisation
Share based payments
Depreciation charge
Interest received
Operating cash flows before changes in working capital
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(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
Purchase price in respect of business combination
Interest received
Net cash flows from investing activities
Financing activities
Repurchase of own shares for cancellation
Equity dividends paid
Net cash flows from financing activities
Net (decrease)/increase 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
2010
£000
2009
£000
2,673
2,382
-
335
-
101
(29)
3,080
(188)
(431)
1,656
4,117
(822)
3,295
(111)
-
(1,600)
29
30
279
13
103
(12)
2,795
18
208
(104)
2,917
(549)
2,368
(95)
(91)
-
12
(1,682)
(174)
(487)
(1,173)
(1,660)
(47)
2,506
2,459
(30)
(668)
(698)
1,496
1,010
2,506
24
Notes forming part of the financial statements
for the year ended 31 December 2010
1 General information
Maintel Holdings Plc is a public limited company incorporated and domiciled in the UK, whose shares are publicly traded on the Alternative
Investment Market (AIM). Its registered office and principal place of business is 61 Webber Street, London SE1 0RF.
2 Accounting policies
The principal policies adopted in the preparation of the consolidated financial statements 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. Interest income is recognised on an accruals basis.
(d) Intangible assets
Goodwill
Goodwill represents the excess of the cost of a business combination over the acquisition date fair value of the identifiable assets, liabilities
and contingent liabilities acquired.
For business combinations completed prior to 1 January 2010, cost comprises the fair value of assets given, plus any direct costs of
acquisition.
For business combinations completed on or after 1 January 2010, cost comprised the fair value of assets given. Contingent consideration
is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured
subsequently through profit or loss. For business combinations completed on or after 1 January 2010, direct costs of acquisition are
recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated 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 or six 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.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
25
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
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.
(f) Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation and any impairment in value. 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.
(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.
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.
26
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
2 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 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 and interpretations became effective during the year and in 2009, the only ones affecting these financial
statements being as follows:
• IFRS 3 (revised) “Business combinations” alters the treatment of deferred consideration and acquisition-related costs in respect of
acquisitions occurring after adoption of the standard. The adoption of the standard has reduced profits by £26,000 in the current year as
direct costs of acquisition have been classified in administrative expenses.
• IFRS improvement has been adopted in relation to non-disclosure of segment assets and liabilities under IFRS 8 as they are not reported
to the board.
There are no impending IFRSs that are expected to have a material effect on the Group’s financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
27
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
3 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 these headings. The businesses of each segment and a further analysis of revenue
are described under their respective headings in the Business review.
Segment revenue before adjustment
Redstone deferred income less costs
Revenue
Operating profit before customer relationship intangibles
amortisation and Redstone adjustments
Customer relationship intangibles amortisation
Operating profit before adjustments
Redstone redundancy costs
Redstone deferred income less costs
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
Maintenance
and
equipment
£000
16,286
105
16,391
2,491
(62)
2,429
(175)
105
2,359
Year ended 31 December 2010
Network
services
£000
5,816
-
5,816
540
(48)
492
-
-
492
Central/
intercompany
£000
(199)
-
(199)
(14)
(193)
(207)
-
-
(207)
Total
£000
21,903
105
22,008
3,017
(303)
2,714
(175)
105
2,644
29
2,673
(765)
1,908
Revenue is wholly attributable to the principal activities of the Group and other than sales of £10,000 to other EU countries arises
predominantly within the United Kingdom.
Maintenance and equipment revenue consists of maintenance related revenue of £11.678m and equipment, installation and other revenue
of £4.713m (2009 – £10.289m and £3.572m). Network services revenue consists of call traffic revenue of £2.690m, line rental revenue of
£2.282m and other revenue of £0.844m (2009 – £2.826m, £2.048m and £0.829m).
Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent costs, £48,000 attributable to
the Maintenance and equipment segment and £151,000 to the Network services segment.
In 2010 the Maintenance and equipment division had one customer (2009 – One) which accounted for more than 10% of its revenue,
totalling £5.201m (2009 – £2.876m).
Other
Capital expenditure
Depreciation
Amortisation and impairment
Maintenance
and
equipment
£000
111
101
62
Year ended 31 December 2010
Network
services
£000
Central/
intercompany
£000
-
-
80
-
-
193
Total
£000
111
101
335
28
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
3 Segment information (continued)
Revenue
Maintenance
and
equipment
£000
13,861
Operating profit before goodwill impairment and customer relationship
intangibles amortisation
2,233
Goodwill impairment and customer relationship intangibles amortisation
(22)
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
2,211
Year ended 31 December 2009
Network
services
£000
5,703
490
(64)
426
Central/
intercompany
£000
Total
£000
(170)
19,394
(44)
(223)
(267)
2,679
(309)
2,370
12
2,382
(685)
1,697
Revenue is wholly attributable to the principal activities of the Group and other than equipment sales of £51,000 to other EU countries
arises predominantly within the United Kingdom.
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.
Other
Capital expenditure
Depreciation
Amortisation and impairment
Maintenance
and
equipment
£000
Year ended 31 December 2009
Network
services
£000
Central/
intercompany
£000
95
103
22
91
-
64
-
-
223
Total
£000
186
103
309
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
29
4 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
2010
Number
2009
Number
21
58
86
165
2010
£000
7,665
856
143
8,664
21
53
79
153
2009
£000
6,906
774
127
7,807
The above numbers are exclusive of employees redundant (weighted average numbers 1, 1 and 2 respectively) following the Redstone
acquisition, and exclude the costs of redundancy.
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. Pension contributions totalling £26,000 (2009 – £24,000) were payable to the schemes at the year
end and are included in other payables.
5 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
2010
£000
527
8
535
169
4
173
2009
£000
486
6
492
149
2
151
The Group paid contributions into defined contribution personal pension schemes in respect of 2 (2009 – 2) directors during the year.
30
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
6 Operating profit
This has been arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Goodwill impairment charge
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
7 Financial income
Bank and other interest received
8 Taxation
UK corporation tax
Corporation tax on profits of the period
Deferred tax
Taxation on profit on ordinary activities
2010
£000
2009
£000
101
335
-
158
65
8
9
53
3
2010
£000
29
2010
£000
808
(43)
765
103
279
30
191
65
8
3
48
12
2009
£000
12
2009
£000
736
(51)
685
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% (2009 – 28%)
Effect of:
Expenses not deductible for tax purposes
Goodwill impairment
Share based payment expense not deductible
Adjustment in respect of prior period
2010
£000
2,673
749
20
(4)
-
-
2009
£000
2,382
667
8
5
4
1
765
685
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
31
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
9 Dividends paid on ordinary shares
Final 2008, paid 29 April 2009 – 3.1p per share
Interim 2009, paid 2 October 2009 – 3.1p per share
Second interim 2009, paid 25 March 2010 – 4.1p per share
Special interim 2009, paid 25 March 2010 – 2.9p per share
Interim 2010, paid 1 October 2010 – 3.9p per share
2010
£000
-
-
441
312
420
2009
£000
334
334
-
-
-
1,173
668
The directors propose the payment of a final dividend for 2010 of 4.6p (2009 – equivalent second interim dividend of 4.1p) per ordinary share,
payable on 28 April 2011 to shareholders on the register at 25 March 2011.
10 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, intangibles amortisation, non-trading accounting effects of the
Redstone acquisition, 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 non-trading accounting effects of the Redstone acquisition
Adjusted and diluted
2010
£000
1,908
265
2,173
Number
(000s)
10,693
25
2009
£000
1,697
215
1,912
Number
(000s)
10,790
8
10,718
10,798
17.8p
17.8p
20.3p
20.3p
15.7p
15.7p
17.7p
17.7p
The adjustment above in respect of goodwill impairment, intangibles amortisation, the non-trading accounting effects of the Redstone
acquisition and tax thereon has been made in order to provide a clearer picture of the trading performance of the Group.
During 2010 the Company repurchased and cancelled 295,000 of its ordinary shares, at prices between 140p and 165p each and a total
cost of £487,000, representing 2.8% of the Company’s issued share capital as at 31 December 2010.
In calculating diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. The Group has one category of potentially dilutive ordinary share, being those share options granted to
employees where the exercise price is less than the average price of the Company’s ordinary shares during the period.
32
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
11 Intangible assets
Cost
At 1 January 2009
Acquired in year
At 31 December 2009
Acquired in year
At 31 December 2010
Amortisation and impairment
At 1 January 2009
Amortisation in the year
Impairment in the year
At 31 December 2009
Amortisation in the year
At 31 December 2010
Net book value
At 31 December 2010
At 31 December 2009
Goodwill
£000
Customer
relationships
£000
Computer
Software
£000
664
-
664
128
792
287
-
30
317
-
317
475
347
1,413
-
1,413
1,448
2,861
582
263
-
845
303
1,148
1,713
568
-
91
91
-
91
-
16
-
16
32
48
43
75
Total
£000
2,077
91
2,168
1,576
3,744
869
279
30
1,178
335
1,513
2,231
990
On 29 October 2010 certain business and assets of Redstone Converged Services Limited and Marcom Communications Limited were
acquired at the following valuations:
Purchase consideration
Net consideration in cash
Indemnity received for redundancy costs
Net consideration
Assets and liabilities acquired
Customer contracts
Stock
Performance obligation liability
Goodwill
£000
(provisional)
1,600
(175)
1,425
1,448
95
(246)
1,297
128
The business and assets have been acquired in order to further enhance the Group’s maintenance base, and in particular its development of
its Avaya capabilities. The Group acquired no shares in either company as part of the acquisition.
The customer relationships are estimated to have a useful life of six years based on the directors’ experience of comparable contracts and
are therefore amortised over that period and are subject to an annual impairment review. The amortisation charge in 2010 is £40,222.
£105,000 of the revenue from the performance obligation liabilities (being the net of the liability to service customers for which the Group
has received no payment and equivalent deferred costs) has been included in revenue in 2010, and the remainder will be included in
2011. Certain of the figures above are provisional pending the nature and value of contracts being verified given the number of contracts
acquired, however any adjustments are not expected to be significant. Costs related to the Redstone acquisition amounted to £26,000.
It is impractical to estimate the results of the acquisition had it been effected on 1 January 2010 due to the lack of certain management
information for that period and the fact that the acquired business and assets formed only part of the entities from which they were
purchased. Post-acquisition it contributed, before redundancy costs, an approximate £50,000 profit to Group results including £105,000 of
deferred income net of deferred costs.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
33
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
A three year licence of billing software was purchased in 2009, 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 allocated to the cash generating units as follows:
Maintel Voice and Data Limited
Maintel Europe Limited
2010
£000
202
273
475
2009
£000
202
145
347
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 no charge in 2010 (2009 – £30,000).
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. There has been no impairment of the goodwill in 2010 (2009 – £Nil).
Goodwill of £128,000 arose on the Redstone acquisition in October 2010. This is assessed for impairment at the date of each consolidated
statement of financial position. There has been no impairment of the goodwill in 2010.
For the purposes of the impairment review of goodwill, the net present value of the projected future cash flows of the relevant cash
generating unit are compared with the carrying value. Projected operating margins for this purpose are based on a five year horizon and
3% rate of growth, and a discount rate of 10% is applied to the resultant projected cash flows; the discount rate is based on conventional
capital asset pricing model inputs.
12 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 2010 (continued)
13 Property, plant and equipment
Cost or valuation
At 1 January 2009
Additions
Disposals
At 31 December 2009
Additions
Disposals
At 31 December 2010
Depreciation
At 1 January 2009
Provided in year
Disposals
At 31 December 2009
Provided in year
Disposals
At 31 December 2010
Net book value
At 31 December 2010
At 31 December 2009
14 Inventories
Maintenance stock
Stock held for resale
Leasehold
improvements
£000
Office and
computer
equipment
£000
67
2
-
69
27
-
96
65
3
-
68
4
-
72
24
1
846
93
(91)
848
84
(76)
856
648
100
(91)
657
97
(76)
678
178
191
2010
£000
621
380
1,001
Total
£000
913
95
(91)
917
111
(76)
952
713
103
(91)
725
101
(76)
750
202
192
2009
£000
604
114
718
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
35
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
15 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
All amounts shown above fall due for payment within one year.
16 Trade and other payables
Trade payables
Other tax and social security
Accruals
Other payables
Deferred maintenance income
Other deferred income
2010
£000
2,349
184
1,028
3,561
2010
£000
1,264
1,011
636
28
3,700
332
6,971
2009
£000
1,890
72
994
2,956
2009
£000
865
627
471
26
2,952
128
5,069
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 2010 (continued)
17 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
2010
£000
2,349
2,459
184
4,992
2009
£000
1,890
2,506
72
4,468
Financial liabilities
measured at
amortised cost
2010
£000
1,264
28
1,292
2009
£000
865
26
891
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 £120,000
is provided at 31 December 2010 (2009 – £110,000). 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 2010 owed the Group
£191,000 including VAT (2009 – £486,000).
The movement on the provision is as follows:
Provision at start of year
Provision used
Additional provision made
Provision at end of year
2010
£000
110
(23)
33
120
2009
£000
99
(34)
45
110
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 2010
www.maintel.co.uk
37
Notes forming part of the financial statements
for the year ended 31 December 2010 (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
2010
£000
525
278
30
833
2009
£000
630
72
33
735
Cash and cash equivalents at 2010 and 2009 year ends represented short term deposits with LloydsTSB and Santander.
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 2010 was £Nil (2009 – £1,000). The Group therefore has
no exposure to currency risk.
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 (£29,000 in 2010, and £12,000 in 2009) is therefore dependent on those prevailing rates, which were at a historically low level
during 2009 and 2010.
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 may 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.
Typically returns to shareholders will be funded from retained profits, however in order to take advantage of the opportunities available to
it from time to time, 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 such opportunities and changing economic circumstances.
38
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
18 Deferred tax liability
At 1 January 2009
Charge/(credit) to consolidated statement of comprehensive income
At 31 December 2009
Charge/(credit) to consolidated statement of comprehensive income
At 31 December 2010
Property,
plant and
equipment
£000
(27)
7
(20)
14
(6)
Intangible
assets
£000
125
(58)
67
(58)
9
Total
£000
98
(51)
47
(44)
3
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 27% (2009 – 28%).
19 Share capital
Authorised
17,571,840 ordinary shares of 1p each
Allotted, called up and fully paid
10,486,800 (2009 – 10,781,800) ordinary shares of 1p each
2010
£000
176
105
2009
£000
176
108
Pursuant to the authority granted at the last two AGMs, the Company repurchased and cancelled 295,000 of its own 1p ordinary shares
during 2010, at prices between 140p and 165p each and a total cost of £487,000. The purchase represents 2.8% of the Company’s issued
share capital as at 31 December 2010.
20 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 final dividend in respect of 2010 of 4.6p per share; this dividend is not provided for in these
financial statements.
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
39
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
21 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.
22 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 13 describes the options granted over the Company’s ordinary shares.
In aggregate, options are outstanding over 2.76% 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 in 2009 arising from the granting of these options was £13,000
(2010 – Nil). 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
23 Operating leases
As at 31 December 2010, 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
2010
Land and
buildings
£000
155
196
351
2010
Other
£000
50
84
134
2009
Land and
buildings
£000
48
-
48
2009
Other
£000
29
-
29
The commitment relating to land and buildings is in respect of the Group’s London offices, the primary lease on which expires in September
2014 in normal circumstances, with a tenant’s break option in March 2013, at an annual rental of £139,550 to 31 March 2011 and £149,550
thereafter. The remaining commitment relates to contract hired motor vehicles, which are typically replaced on a 3 year rolling cycle.
40
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
24 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
2010
£000
978
16
-
994
2009
£000
812
13
13
838
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 A J McCaffery and Maybank Marketing, a company indirectly associated with A J McCaffery.
Transactions in 2010 and 2009 amounted in aggregate to less than £1,500 in each case.
The Group paid commissions in the year to J A Spens, a shareholder in the Company, amounting to £10,921 net of VAT (2009 – £11,789),
of which £31 (2009 – £1,545) 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 2010
www.maintel.co.uk
41
Notes forming part of the financial statements
for the year ended 31 December 2010 (continued)
25 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 11. These
estimates include the asset’s future cash flows and an appropriate discount to reflect the time value of money. The directors do not consider
that in the normal course of events there is a likelihood that an impairment charge would be required.
Fair value of intangible assets acquired in business combinations
The valuation of intangible and certain other assets and liabilities on their acquisition requires management estimates and judgements
similar to those used in assessing their impairment as described above.
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.
Receivables
Receivables are recognised to the extent that they are judged recoverable. The directors believe that the current provision for the
impairment of receivables is adequate based on their historic experience and current knowledge of customers and amounts due.
42
Maintel Holdings Plc Company balance sheet
at 31 December 2010 – 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
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
2010
£000
182
1,175
1,357
295
2010
£000
2,323
1,062
3,385
105
628
31
2,621
3,385
2009
£000
196
791
987
306
2009
£000
2,323
681
3,004
108
628
28
2,240
3,004
The financial statements were approved and authorised for issue by the Board on 10 March 2011 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 2010
www.maintel.co.uk
43
Notes forming part of the Company financial statements
at 31 December 2010
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 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 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 5 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 £2,041,000 (2009 –
£1,713,000).
4 Dividends paid on ordinary shares
Final 2008, paid 29 April 2009 – 3.1p per share
Interim 2009, paid 2 October 2009 – 3.1p per share
Second interim 2009, paid 25 March 2010 – 4.1p per share
Special interim 2009, paid 25 March 2010 – 2.9p per share
Interim 2010, paid 1 October 2010 – 3.9p per share
2010
£000
-
-
441
312
420
2009
£000
334
334
-
-
-
1,173
668
The directors propose the payment of a final dividend for 2010 of 4.6p (2009 – equivalent second interim dividend of 4.1p) per ordinary
share, payable on 28 April 2011 to shareholders on the register at 25 March 2011.
44
Notes forming part of the Company financial statements
at 31 December 2010 (continued)
Shares in
subsidiary
undertakings
£000
2,403
80
2,323
2010
£000
173
2
4
3
182
2010
£000
284
1
10
295
2009
£000
182
3
2
9
196
2009
£000
291
7
8
306
5 Investment in subsidiaries
Cost
At 31 December 2009 and 31 December 2010
Provision for impairment
At 31 December 2009 and 31 December 2010
Net book value
At 31 December 2009 and 31 December 2010
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.
7 Creditors
Amounts due to subsidiary undertakings
Trade creditors
Accruals and deferred income
Maintel Holdings Plc
Annual report and financial statements for the year ended 31 December 2010
www.maintel.co.uk
45
Notes forming part of the Company financial statements
at 31 December 2010 (continued)
8 Share capital
Authorised
17,571,840 ordinary shares of 1p each
Allotted, called up and fully paid
10,486,800 (2009 – 10,781,800) ordinary shares of 1p each
2010
£000
176
105
2009
£000
176
108
Pursuant to the authority granted at the last two AGMs, the Company repurchased and cancelled 295,000 of its own 1p ordinary shares
during 2010, at prices between 140p and 165p each and a total cost of £487,000. The purchase represents 2.8% of the Company’s
issued share capital as at 31 December 2010.
The Remuneration Committee’s report on page 13 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 2009
Profit for year
Dividends paid
Share based payment credit
Movements in respect of purchase of own shares
At 31 December 2009
Profit for year
Dividends paid
Movements in respect of purchase of own shares
Share
capital
£000
108
Share
premium
£000
628
-
-
-
-
108
–
–
(3)
-
-
-
-
628
–
–
–
At 31 December 2010
105
628
Capital
redemption
reserve
£000
28
-
-
-
-
28
–
–
3
31
Retained
earnings
£000
1,212
1,713
(668)
13
(30)
2,240
2,041
(1,173)
(487)
2,621
Total
£000
1,976
1,713
(668)
13
(30)
3,004
2,041
(1,173)
(487)
3,385
It is proposed to pay a final dividend for 2010, of 4.6p per share, on 28 April 2011; this dividend is not provided for in these financial
statements.
10 Related party transactions
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 21 April 2011, 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 2010, 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 2010.
3. To re–elect Mr A J McCaffery, 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 £34,956, 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
£10,486.
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 2010
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 1,571,971 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
25 March 2011
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 19 April 2011, 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 19 April 2011 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