Annual Report & Accounts
Maintel Holdings Plc
2013
Contents
Directors, Company details and advisers
Annual Report & Accounts
Maintel Holdings Plc 2013
Directors, Company details and advisers
Chairman’s statement
Strategic Report
Board of directors
Report on corporate governance
Report of the Remuneration committee
Report of the directors
Statement of directors’ responsibilities
Independent auditors’ report
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
Notice of annual general meeting
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Directors
J D S Booth
E Buxton
A J McCaffery
K Stevens
W D Todd
N J Taylor
Chairman, Non-Executive Director
Chief Executive
Sales and Marketing Director
Operations Director
Finance Director
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
Tel: 0870 707 1182
3
Chairman’s statement
I am pleased to be able to report another satisfactory
year for the Maintel Group, with organic adjusted
profit before tax increasing by 1%, and the recently
acquired Datapoint companies contributing their
maiden profit.
Group revenues increased by 10% in the year, to
£31.1m (2012 - £28.2m), producing a 5% increase
in adjusted profits to £5.23m (2012 - £4.97m)
and adjusted earnings per share of 37.6p, a 7%
improvement on the 35.1p reported for 2012.
A highlight of the year was the acquisition in mid-
September of the UK and Ireland operations of the
Datapoint group for a consideration of £3.5m, paid in
cash and partly funded by borrowings. The aggregate
unaudited revenue of these companies in the year to
30 June 2013 was £15.8m, although it is envisaged
that revenues will be approximately £2.0m lower in
the current financial year due to lower levels of non-
recurring business and a degree of attrition.
The Datapoint acquisition brings with it new and
exciting skill sets which are allowing us to develop
our business in new sectors, including the contact
centre market where Maintel already has a
presence but Datapoint has a much greater depth of
knowledge and experience. It also has a significant
international customer base and an Irish office,
which will bring further opportunities to the Group.
Revenues from Maintel’s managed service and
maintenance and equipment sales division excluding
Datapoint were 4% down on 2012, partly due to
two delayed projects and the full year effects of the
high managed service attrition in 2012. Customers
transitioning to newer technologies, however, have
allowed further reductions in the cost base, so
that divisional margins excluding Datapoint were
maintained at 38% and gross profit was only £0.2m
down on 2012. With Datapoint’s contribution to the
division, revenues increased by £3.1m or 17% to
£21.8m.
The network services division once again showed
steady growth with revenues up 3% at £6.9m, gross
profit up 6% and margins improving again from 29%
to 30%.
The mobile division saw revenues of £2.6m in 2013,
a reduction of £0.3m, as the focus was on improving
margins – which increased from 54% to 63% – rather
than connection numbers. Nevertheless, new sales
during the year were below expectations and this
is being addressed in 2014 with the addition of new
sales resource.
Cash generation from trading remained strong with
adjusted net cash flow from operating activities (as
described in the Strategic report) of £2.6m despite
having paid £1.2m of exceptionally delayed supplier
payments from 2012. We ended the year with
£0.5m in cash. The Datapoint acquisition was partly
financed by way of a £3.0m loan, of which £2.75m
was outstanding at year end.
Given the Company’s strong cash generation, the
board intends over the next two years to increase
its dividend payout ratio to around 50% of adjusted
earnings per share which it considers will be more
in line with its peer group. We therefore propose to
pay a final dividend for 2013 of 9.0p, bringing the total
payable for the year to 15.7p (2012: 7.3p and 13.6p),
which will be paid on 24 April to shareholders on the
register on 21 March.
Our medium term focus is to realise the potential
of the Datapoint acquisition across a number of
fronts, but we will remain alert to value enhancing
acquisitions of businesses or customer bases as
these arise. We look forward to the coming year with
enthusiasm and confidence.
2013 has been particularly eventful for the Group
with the acquisition of Datapoint and I thank my
colleagues, longstanding and newly arrived, for their
dedication and hard work during the year.
J D S Booth
Chairman
7 March 2014
Annual Report & Accounts
Maintel Holdings Plc 2013
Strategic report
Results for the year
2013 was another year of solid performance for Maintel, with revenue increasing by 10% to £31.1m and
adjusted profits (as described below) by 5% to £5.232m (2012 – £4.970m), with a consequent increase in
adjusted EPS of 7% to 37.6p (2012 – 35.1p).
Unadjusted profits were £3.643m in the year (2012 – £1.405m) and unadjusted EPS 25.0p (2012 – 3.4p), the
2013 figure being impacted by the £691,000 costs of the acquisition of the Datapoint companies (described
below), and the 2012 figure by the expensing under accounting standards of contingent consideration
payments relating to the acquisition of the mobile division in October 2011. Both years experienced the regular
amortisation of intangible assets, the 2013 charge being higher with the addition of a charge in respect of
Datapoint.
Revenue increased by 10% over the previous year to £31.1m (2012 – £28.2m) with Datapoint’s £3.8m revenue
more than compensating for a £0.9m (3%) reduction in the base Maintel revenue. As in 2012, most of the
reduction was seen in the managed service and equipment division, in part due to the delay in earning revenue
from two material signed contracts. Revenues in the mobile division also reduced but this was the result of
an active policy of churning lower revenue customers, which translated into an increase in gross profit. The
network services division continued its steady growth in the year. The Datapoint business brings with it an
annualised contract base of c£8.2m, with £2.5m of this recognised in the period since acquisition, so that
total recurring revenue (managed services, network services and mobile) increased by 10% in the year from
£21.7m to £23.8m (77% of total revenues; 2012 – 77%).
Revenue
Profit before tax
Add back customer relationship intangibles
amortisation
Exceptional items relating to the acquisition of
Datapoint (note 11)
Contingent consideration re Maintel Mobile treated
as remuneration (note 12)
Adjusted profit before tax
Of which: Maintel^
Datapoint^
Basic earnings per share
Diluted
Adjusted earnings per share*
Diluted
^ Before management charges
H1 2013
£000
13,565
2,000
H2 2013
£000
2013
£000
17,559
31,124
1,643
3,643
2012
£000
28,171
1,405
Increase
10%
259%
359
539
898
731
-
-
2,359
2,359
-
2,359
14.4p
14.2p
16.9p
16.7p
691
691
-
-
2,873
2,668
205
2,873
10.6p
10.5p
20.7p
20.4p
-
5,232
5,027
205
5,232
25.0p
24.7p
37.6p
37.1p
2,834
4,970
4,970
-
4,970
3.4p
3.4p
35.1p
34.7p
5%
1%
5%
7%
7%
* Adjusted profit after tax divided by weighted average number of shares (note 10).
4
5
Strategic report (continued)
The Group’s cash flows remained robust, with adjusted (as explained on page 13) net cash flows from
operating activities of £2.554m (2012 - £3.678m) in the period, the main reduction from last year being due to
a £1.2m reversal of creditor payments deferred at 31 December 2012, paid in 2013. The Group ended the year
with cash of £544,000. The Group borrowed £3.0m during the year to finance the acquisition of the Datapoint
companies and £2.75m of this remained due at the year end.
Acquisition of the Datapoint companies
On 13 September 2013, the Group acquired Datapoint Customer Solutions Limited, Datapoint Global Services
Limited and Datapoint Communications Limited (“Datapoint”) for a consideration of £3.5m. This acquisition
represents a key component of the Group’s strategy to diversify its revenue base and significantly increase its
presence in new markets.
The Datapoint companies provide managed services in Unified Communications to a base of approximately
100 customers, with a particularly strong presence in the contact centre sector. Other services include
consulting, professional services and equipment sales. Whilst the core business acquired is UK and Ireland
based, some customers have subsidiary operations in other countries, whose service is coordinated from the
UK and Ireland operations.
Review of operations
The table below summarises the revenues of the three operational divisions of Maintel. The Datapoint results
are reviewed by the board as part of the managed services and equipment division and aggregate figures
will be reported in future periods, however they are stated separately in this report to show the organic
movements year on year.
Revenue analysis (£000)
Managed services related
Equipment, installations and other
Total managed services and
equipment division
Network services division
Mobile division
Intercompany
Total Maintel Group
2013
Maintel
2013
Datapoint
2013
Total
Increase/
(decrease)
2012
11,966
5,993
2,511
1,294
14,477
12,246
7,287
6,435
17,959
3,805
21,764
18,681
6,938
2,597
(175)
-
-
-
6,938
2,597
(175)
6,730
2,941
(181)
18%
13%
17%
3%
(12)%
27,319
3,805
31,124
28,171
10%
Divisional performance is described further below.
Managed services and equipment division
The managed services and equipment division provides the management, maintenance, service and support
of office-based voice and data equipment across the UK and Ireland on a contracted basis. It also supplies
and installs voice and data equipment to managed services customers, both to our direct clients and into
our partner customers. In previous reporting periods this division was referred to as the maintenance
and equipment division, however an increasing proportion of the division’s operations encompass the
management of customers’ systems and networks. This trend has been augmented by the inclusion of
Datapoint’s revenues within this division.
Excluding Datapoint the division’s revenues were £17.959m in 2013, a reduction of 4% in the year with
managed services related revenue down 2% and equipment sales down 7%. Both revenue streams were flat
in H2 2013 compared with H1 2013. H2 equipment sales were adversely affected by two large projects being
delayed by customers, though both of these will be fully installed during Q1 2014 and the pipeline for new
orders remains very healthy. Despite competitive pressure, gross margins were maintained at 38% prior to
inclusion of the lower margin Datapoint sales.
6
Annual Report & Accounts
Maintel Holdings Plc 2013
Managed services
(a) Maintel, excluding Datapoint
It was noted in the half year report that the transitioning of the customer base to newer IP technology was
altering the managed services business model, with a higher proportion of third party and vendor software
support contracts and network monitoring services resulting in the need for fewer lower skilled field
engineers. As a result, Maintel (excluding Datapoint) engineer productivity improved with engineer numbers
reducing from 87 at last year end to 79 at 31 December 2013.
It was noted at the half year that the higher than usual attrition rate of 2012 had resulted in a drop in
managed services revenue. Despite much reduced attrition levels in 2013 this was not fully compensated for
by new sales, and translated into a reduction in the annualised customer base from £12.3m at last year end,
to £11.9m at 31 December 2013 and a consequent reduction in managed service revenues of 2% from the
previous year.
(b) Datapoint
The Datapoint customer base had an annualised value of £8.2m at the year end. Synergies resulting from the
joint servicing of the Datapoint and Maintel bases include duplicated management, sub-contracted support
contracts which can be brought inhouse with the combined Group’s extended skillsets, cost savings from
joint purchasing and the termination in many cases of the parts replacement service currently outsourced by
Datapoint. Progress in realising these synergies has been in line with expectations and further cost savings
will be achieved over the course of 2014.
Equipment sales
(a) Maintel, excluding Datapoint report
The half year report noted that a significant project had been substantially completed in H1 2013, but had
reduced the divisional margin to 36%. The predicted improvement in H2 margin was achieved through an
increased weighting towards professional services projects, including the implementation of a large Avaya
data network, the upgrading of an IP telephony infrastructure across multiple sites and a significant contact
centre upgrade. H2 revenues were slightly ahead of H1 and divisional margins recovered such that gross
margin for the year as a whole matched the 38% achieved in 2012. We have recently won two significant
technology upgrade projects in the health and communications sectors involving multiple large contact
centres implementing our new video conferencing proposition across multiple sites, which is an encouraging
start to the new year.
(b) Datapoint
As with the base Maintel business, equipment, professional services and other revenues are derived from
Datapoint’s managed service customers almost as a matter of course, with £1.294m of such revenue earned
in the period since acquisition. The table below shows Datapoint having a lower gross profit percentage than
the base Maintel business, largely because of the more extensive use of sub-contracted support contracts
used by Datapoint. As noted above, these arrangements will be under review during 2014.
7
Strategic report (continued)
Headcount
Sales and customer service -
Maintel
Sales and customer service -
Datapoint*
Engineers - Maintel
Engineers - Datapoint*
* average since acquisition
Division gross profit (£000)
Maintel
Datapoint
Group
Average
2013
Average
2012
At 31 December
2013
53
11
84
49
53
-
90
-
52
9
79
48
2013
6,790 (38%)
1,254 (33%)
8,044 (37%)
2012
Increase/(decrease)
7,017 (38%)
-
7,017 (38%)
(3)%
-
15%
Given the application of common resource across both managed service and equipment sales, it is not
practical to quote definitive margin data on the separate business sectors; however management figures are
used to monitor constituent elements 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 hosted IP telephony solutions. These
services complement those offered by the managed service and equipment division and the mobile division.
Revenue analysis (£000)
Call traffic
Line rental
Data services
Other
Total network services
2013
2,586
3,179
809
364
6,938
2013
2012
2,656
2,979
799
296
6,730
2012
Division gross profit (£000)
2,055 (30%)
1,945 (29%)
Increase/(decrease)
(3)%
7%
1%
23%
3%
Increase
6%
The network services division has again shown steady growth, with revenues up 3% and gross profit up
6% on 2012.
Call minutes billed continued to increase year on year as new customers were signed and attrition remained
at its historically low levels. However, continued pressure on call rates, including the reduction in mobile
termination rates, resulted in call revenue reducing by 3%. 2013 was the final year of these regulatory
decreases in mobile termination rates which were initiated by Ofcom in 2011. Line rental revenues
continued to grow, increasing by 7% in the year with a full year’s revenues from a large contract signed
during 2012 outweighing the proactive transitioning of some larger customers from old technology to newer
SIP technology and consolidating their estates. Although data connectivity revenues were restricted to a
headline 1% increase, the 2012 revenue included a large one-off hardware sale, so that the underlying growth
rate excluding this contract was a healthier 9%. Within the other services category, both VoIP and inbound
services revenues showed particularly strong growth in the year.
Annual Report & Accounts
Maintel Holdings Plc 2013
We have seen a continued increase in the number of new customers taking multiple products and existing
customers being cross-sold network services, particularly in the maturing SIP technology for a range of
Enterprise and SME clients and with notable wins for our hosted telephony services in the latter part of the
year.
Each of the primary network services revenue streams saw an increase in margins during the year,
with overall divisional gross margin increasing from 29% to 30%, through tight cost control and margin
management particularly on the call traffic side of the business.
Mobile division
Maintel Mobile derives its revenues primarily from commissions received under its dealer agreements
with Vodafone and O2, supplemented by revenue derived from ongoing customer monthly spend, with
approximately 75% of connections at the end of 2013 under the Vodafone agreement and 25% under the O2
agreement.
£000
Revenue
Gross profit
2013
2,597
2012
2,941
1,640 (63%)
1,602 (54%)
Increase/ (decrease)
(12)%
2%
At 31 December 2013
At 31 December 2012
Decrease
Number of customers
Number of connections
952
13,178
1,042
13,859
(9)%
(5)%
Whilst revenue in 2013 was down 12% on 2012, margins increased from 54% to 63%, so that gross profit
increased by £38,000 or 2%. At 31 December 2013, the mobile division managed 13,178 (2012 - 13,859)
connections, a decrease of 5% in the period, as we have continued to focus on margin rather than numbers of
connections, proactively managing out many of the lower value customers from our base.
As noted in the half year report, revenue was affected by a mid term renewal cap imposed by one of our
network suppliers in the first quarter of the year, which temporarily limited our ability to re-sign customers
and so restricted this revenue stream.
With this restriction removed, H2 saw a creditable 12% improvement in revenue over H1, however new
connections in the year didn’t meet our expectations and this is a focus of our attention for 2014 and we have
recruited additional sales resource to support this.
We did see an increase in the volume of upsells and bolt-on packages into the base – which attract higher
margins – and this further supported the increase in the division’s gross profit compared to the previous year.
Cross-selling our mobile proposition into the customer base continues to gain traction and we signed two
higher value contracts late in H2 in the IT and commodities sectors including one that added 666 connections,
which started billing early in 2014.
As previously highlighted, one of our network suppliers has implemented changes to its commission
arrangements from August 2013 which over the course of two years from that date will result in a reduction
in recurring commissions from that supplier of approximately 10%.
8
9
Strategic report (continued)
Administrative expenses, excluding intangibles amortisation and non-trading adjustments
Administrative expenses (£000)
Sales expenses
Other administrative expenses (excluding intangibles
amortisation, exceptional expenses, and in 2012 an
adjustment to acquisition consideration)
Maintel excluding Datapoint
Datapoint administrative expenses
Total other administrative expenses
2013
2,408
2012
2,606
2,780
5,188
1,148
6,336
2,837
5,443
-
5,443
Increase/
(decrease)
(8)%
(2)%
(5)%
16%
Total other administrative expenses excluding Datapoint were reduced by £255,000 (5%) in the year, with a
saving from the departure in October 2012 of the vendor of the acquired mobile business, and a range of other
cost savings secured during the year. The Datapoint administrative expenses are shown above from the date
of acquisition.
The exceptional costs of £691,000 shown in the income statement relate to legal and professional fees
incurred in respect of the acquisition of the Datapoint companies and £120,000 of redundancy costs resulting
from the combining of certain operations following the acquisition.
The intangible amortisation charge increased in the year due to the charge applying to the Datapoint
intangible acquired during the year. Impairment and amortisation charges are discussed further below.
The table below shows relevant headcount in relation to revenue in respect of the Maintel (excluding
Datapoint) business.
Average Group headcount during the period
Average sales and service headcount
Average corporate and admin headcount
Group revenue excluding Datapoint (£000)
2013
176
69
23
2012
182
69
23
27,319
28,171
Increase/
(decrease)
(3)%
-%
-%
(3)%
The reduction in average Group headcount above resulted from redundancies in the engineering force, as
noted earlier.
Equivalent figures for Datapoint were:
Average Datapoint headcount since acquisition
Datapoint revenue since acquisition (£000)
2013
72
3,805
Datapoint’s higher revenue per head reflects its greater use of third party and manufacturer support
contracts, as noted earlier, reflecting the greater complexity of the services it provides.
Annual Report & Accounts
Maintel Holdings Plc 2013
Interest
Interest receivable reduced from £9,000 to £2,000 in 2013, with average cash balances being lower in 2013
as described below, combined with the continuing low rates of interest achievable from acceptable financial
institutions.
The Group recorded a £32,000 interest charge in 2013 (2012 - £Nil) on the borrowings secured to acquire the
Datapoint companies.
Taxation
The consolidated statement of comprehensive income shows a tax rate of 27% (2012 – 74%). Each of the
Group companies is taxed at 23.25% (2012 – 24.5%). Certain recurring expenses that are disallowable for
tax raise the effective rate above this, partly offsetting Datapoint profits which are free of tax due to brought
forward tax losses. The rate is inflated in the year by the £571,000 costs of the Datapoint acquisition not being
an allowable deduction for tax, and in 2012 by a disallowable adjustment for £2.834m contingent consideration
relating to the Maintel Mobile acquisition; excluding these the tax rate would be 23.2% in 2013 and 24.6% in
2012.
Dividends
A final dividend for 2012 of 7.3p per share (£779,000 in total) was paid on 25 April 2013, and an interim
dividend for 2013 of 6.7p (£715,000) was paid on 11 October 2013.
It is proposed to pay a final dividend of 9.0p in respect of 2013 on 24 April to shareholders on the register at
the close of business on 21 March, representing a 23% increase on the 2012 final dividend. The corresponding
ex-dividend date will be 19 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
2013.
The Business model section below describes the board’s dividend policy.
Consolidated statement of financial position
The consolidated statement of financial position remains sound, with £544,000 of cash at 31 December 2013
(2012 - £1.941m) and the £2.75m loan, £250,000 of the principal on the loan having been repaid in December
2013. Cash flow is described further below.
Trade receivables have increased by £1.724m in the year, the main reason being the inclusion of £1.187m of
Datapoint trade receivables at the date of acquisition, and the increase in that balance to £2.211m at the year
end due to the timing of invoicing of several larger customers. This is partly offset by Maintel’s improved
trade receivable position at the end of 2013, 2012 debtors having been artificially high due to back-billing.
Prepayments have increased by £1.445m, with the Datapoint acquisition accounting for £1.052m of this and
most of the rest being increased accrued income due to late crediting to the mobile division by network
services suppliers resulting in revenue being accrued.
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11
Annual Report & Accounts
Maintel Holdings Plc 2013
Strategic report (continued)
The value of maintenance stock has increased by £62,000 in the year, to £640,000, primarily due to the
maintenance stock acquired with Datapoint. The value of stock held for resale has increased from £114,000
to £205,000 reflecting different stages of invoicing and completion of cross-period installations year to year.
(c) In 2012, £2.3m was paid during the year in respect of contingent consideration relating to the acquisition
of Maintel Mobile and under accounting rules this was expensed in the income statement. This is also
adjusted below.
Trade payables have increased by only £398,000 since 31 December 2012, despite the addition of £1.294m of
Datapoint payables at acquisition, primarily due to the reversal of the December 2012 delay in paying £1.165m
to three suppliers for operational reasons, as highlighted in last year’s report.
In the Chairman’s statement and Strategic report these payments have been added back to the cash flows
shown in the statement of cash flows as follows, in order to give a more meaningful picture of the Group’s
operational cash flows:
Other tax and social security liability has increased by £389,000 largely due to the Datapoint liability acquired.
Accruals have increased by £615,000 year on year, with the accruals related to Datapoint being only partly
offset by the payment during the year of the final £900,000 Totility (now Maintel Mobile) consideration that was
accrued at 31 December 2012.
Deferred managed service income has increased by £2.908m, with £3.191m attributable to Datapoint at year
end, partly offset by a reduction in Maintel reflecting the slightly lower managed service base. Other deferred
revenue has increased by £539,000, £459,000 attributable to Datapoint.
No significant expenditure has been required on plant and equipment during the period, with the depreciation
charge including a £33,000 charge in respect of Datapoint; the main expenditure was as usual on IT and
routine office refurbishment.
Intangible assets
The Group has two intangible asset categories: (i) an intangible asset represented by customer contracts
and relationships acquired from District Holdings Limited, Callmaster Limited, Redstone, Maintel Mobile and
Datapoint, and (ii) goodwill relating to the Maintel Network Services, District, Redstone, Maintel Mobile and
Datapoint acquisitions.
Goodwill of £4.702m (2012 - £1.026m) is carried in the consolidated statement of financial position, which
is subject to an impairment test at each reporting date. The £3.676m increase in the year relates to the
acquisition of the Datapoint companies. No impairment has been charged to the consolidated statement of
comprehensive income in 2013 (2012 - £Nil).
The intangible assets represented by purchased customer contracts and relationships were valued at
£6.286m at 31 December 2013 (2012 - £3.489m). £3.695m of value was added in the year relating to the
acquisition of the Datapoint companies. The intangible assets are subject to an amortisation charge of 17-
20% of cost per annum in respect of managed service and maintenance contract relationships, and 14.2% per
annum in respect of network services contracts and Maintel Mobile customer relationships, with £898,000
being amortised in 2013 (2012 - £731,000), the increase attributable to the Datapoint customer relationships
acquired.
Cash flow
At 31 December 2013 the Group had cash and bank balances of £544,000 (2012 - £1.941m), all unrestricted
save for the charge held by Lloyds Bank over the assets of the Group generally.
Net cash flows from operating activities in 2013 at £963,000 (2012 - £1.378m) were affected by non-recurring
transactions, as they were in the previous year, as follows:
(a) At 31 December 2012, £900,000 was accrued in respect of the final payment due in respect of the
consideration payable for the acquisition of Maintel Mobile. In the 2013 cash flow statement, this is shown as
a working capital movement and is therefore adjusted below.
(b) The Group incurred an exceptional cost of £691,000 during 2013, £571,000 in respect of legal and
professional fees and £120,000 in respect of redundancy costs, both in relation to the Datapoint acquisition.
12
Cash generated from operating activities - 2013
- 2012
Net cash flows from operating activities - 2013
- 2012
Unadjusted
Adjusted
£2.111m
£2.880m
£0.963m
£1.378m
£3.702m
£5.180m
£2.554m
£3.678m
Adjusted cash generated from operating activities before tax reduced in the year to £3.702m (2012 – £5.180m),
primarily due to the payment of £1.165m of deferred supplier payments noted earlier. Unadjusted cash
generated from operations was £2.111m, with payment of £1.494m dividends, £1.148m in corporation tax, and
£3.497m on the Datapoint acquisition less a net £2.750m of associated loan financing, producing a net overall
outflow of £1.397m in the year (2012 – outflow of £1.012m).
The Group had no debt at 31 December 2012, but drew a loan from Lloyds Bank plc on 13 September 2013
to finance the acquisition of Datapoint; further details of the loan are given in note 19. At the same time, the
Group secured an overdraft facility of £1m with Lloyds. The Group invests its surplus cash with mainstream
banking organisations.
The Group established a revolving credit facility of £1.5m in October 2011 with J D S Booth, the Group’s
chairman, however no monies were drawn against this and the facility expired on 30 June 2013.
Business model and strategy
The Group’s objective is to maximise shareholder returns over the short, medium and long term through
the provision of telecoms-related products and services. Historically these services have been provided
predominantly in the UK, however with the acquisition of the UK and Ireland operations of the Datapoint group
in September 2013, the Group now also services a range of customers overseas.
The provision of these services is based around the Group’s managed services and equipment division.
Historically this division was known as the maintenance and equipment division, the bulk of its support
revenues deriving from a break-fix contract with customers. However the signing of an increasing number
of higher end customers requiring a more holistic, managed service, together with the acquisition of
the Datapoint companies, has seen the balance of revenues move more to a managed service, and the
maintenance element of the business has been renamed as such.
The provision of break-fix and managed services creates the opportunity to sell other services into clients,
primarily equipment and professional services, and the Group combines these revenue streams into a single
business unit. The Group operates two other business units – network services and mobile – whose services
are cross-sold into the managed services base and to external clients, mostly in the SME sector.
Organic growth in each business unit is targeted each financial year, and is supplemented by the acquisition
of complementary companies or client bases where clear shareholder value creation can be achieved.
Acquisitions may be funded out of cashflow, borrowings or the issue of shares, dependent on a range of
factors considered at the time.
13
Strategic report (continued)
Business model and strategy (continued)
The Group has historically paid dividends equivalent to approximately 40% of its adjusted earnings per
share. To reflect the Group’s confidence in future cash flows, the directors are of the view that this should be
increased to approximately 50% over the course of the next two years. To mark a transition to this policy, the
directors are proposing a final dividend of 9.0p for financial year 2013, which when combined with the interim
2013 dividend of 6.7p per share gives a full year dividend of 15.7p, equivalent to 42% of adjusted earnings per
share.
Principal risks and uncertainties
The directors consider that the principal risks to the Group relate to technological advance, marketplace
relationships and pricing strategies.
Telecommunications hardware has historically focused on a PBX core, which is gradually being replaced,
at least at the higher end, by hosted and cloud based IP 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 unified communications and contact
centre systems, and has had notable success with the transition to date. Managed service income from the
new technology can be reduced when compared to traditional telephony although this is mitigated through
reduced costs in delivering our service and promoting a managed service concept, retaining where possible
the resultant enhanced calls and lines revenue and up-selling high value new products such as network
monitoring, software assurance and mobile services. The acquisition of Datapoint, with its broader range of
associated business application skills in the unified communications contact centre high growth space, will
accelerate Maintel’s ability to drive new revenue streams.
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 to include SIP trunking and
hosted IP technology, which is gaining traction. In addition line rental and data revenues have continued to
grow significantly during 2013. 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 has a close partner relationship with O2/Telefonica and to a diminishing extent Vodafone
(incorporating Cable & Wireless Worldwide), such that these companies and their clients constitute a
significant share of its managed service base. The extent of the relationship with O2 has grown with the
acquisition of the Datapoint companies and the work they carry out for O2. Should the relationships be
terminated, the managed service base would reduce to that extent over time, necessitating a commensurate
reduction in costs. Partnerships with other integrators continue to be developed to reduce the percentage
weighting of business with these partners.
Maintel Mobile is a dealer for its suppliers, primarily Vodafone and O2, and is reliant on its relationships
with those companies. The Group more generally relies on its contracts with both suppliers and clients and,
beyond contractual status, maintains strong relationships with them at various levels of the business, as well
as striving to ensure that client expectations are met and, where possible, exceeded.
The Group’s managed service contracts have a natural finite life, and are subject to competitive attack, so that
there is an inevitable customer churn. The directors monitor the rate and causes of churn and implement
strategies with the objective of minimising attrition and growing the customer base organically and by way of
acquisition if cost effective.
The pricing of the network services and mobile divisions’ products and services can be affected by regulatory
bodies in the UK and the EU. The company is also potentially subject to new pricing strategies by both
competitors and suppliers, whether due to their own internal policies or in response to technological change.
The company mitigates these risks by assessing anticipated regulations and pricing strategies and amending
its own pricing policies accordingly.
14
Annual Report & Accounts
Maintel Holdings Plc 2013
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 ensures that there is continual investment
in external and internal training of employees, and monitors the compliance with both statutory regulation
and best practice with regard to gender, race, age and disability.
Periodic newsletters are distributed to employees, and a Group intranet is core to open communication
amongst employees; this continues to be developed.
The Company established a Share Incentive Plan in 2006, allowing employees and directors to invest tax
effectively in its shares, and so aligning employee interests with those of 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. A major consideration when
replacing company cars is their impact on the environment, a focus on the replacements during 2013 being
on energy saving technologies, with the new vehicles consequently attracting zero road tax. The Group also
makes use of in-house video-conferencing facilities to reduce the need for regional meetings. Maintel Europe
Limited has ISO14001:2004 accreditation for its environmental management systems.
Outlook
Overall, whilst competition levels remain high, we are seeing market conditions moderately improve with
businesses engaging in discussions to increase investment in their communications infrastructure.
We remain alert and well positioned to consider further acquisitions in a market that we anticipate will
see further consolidation. However our short-term focus will be on the integration and successful synergy
realisation from Datapoint and realising the opportunity it has brought to the Group to diversify our revenues
and significantly increase our presence in new markets.
15
Strategic report (continued)
Board of directors
Annual Report & Accounts
Maintel Holdings Plc 2013
Outlook (continued)
We remain cautiously optimistic in our outlook for the year ahead having started the new financial year on
track, with confidence that our investment in the Datapoint business will deliver clear cost benefits and
growth in due course. In the light of this outlook, the Board intends to increase the dividend pay out to
approximately 50% of adjusted earnings per share over the course of the next two years.
On behalf of the board
E Buxton
Chief Executive
7 March 2014
John Booth, 55, Non-executive chairman
John was appointed chairman of Maintel in 1996. He is also chairman of Integrated Asset Management plc.
He acts as a non-executive director of several other private companies and is a consultant to Herald Venture
Partners. John’s career has been spent in equity investment and broking where he has held various senior
positions including Head of Equities at Bankers Trust and co-founder and executive chairman until 2011 of the
Link Group which was acquired by ICAP plc in 2008.
Eddie Buxton, 53, Chief Executive
Eddie was appointed chief executive in 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, 47, 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. He is also a non-executive director of Nasstar Plc an AIM listed
cloud computing provider.
Dale Todd, 55, 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.
Kevin Stevens, 48, Operations Director
Kevin was appointed to the Board on 1 January 2014. He joined the Group in June 2010 and has been a
director of the main trading company, Maintel Europe Limited, since December 2011. He has worked in the
Communications and IT industry since 1981, holding senior operations and general management positions
with Genesis Telecommunications, Xpert Communications, Redstone and Westcon Convergence, with a focus
on improving business operations, process and customer service.
Nicholas Taylor, 47, Non-executive director
Nicholas has extensive experience of working with growing organisations, principally in the media and
communications industries. He has worked as a consultant and in-house, in both an executive and non-
executive capacity and has held senior positions in both private and public businesses and in the not for profit
sector. He is also non-executive Chairman of Linstock Communications, a public relations consultancy.
16
17
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. A description of the main governance policies and procedures
adopted by the Group is set out below.
Board of directors
The board includes two non-executives - John Booth, who is chairman, and Nicholas Taylor. Although it is not
considered necessary, given the Company’s size and stage of development, to seek a further non-executive,
the board is mindful of the potential benefits, and intends to recruit when a suitable candidate becomes
available.
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. During 2013 Hopton Hill Limited, a company owned by Nicholas
Taylor, provided consultancy support around the Datapoint acquisition; however, given the limited nature of
the engagement, the Board does not consider it to have compromised his independence.
The board also consists of four executive directors, of whom Eddie Buxton is Chief Executive, Angus
McCaffery is Sales and Marketing Director, Dale Todd is Finance Director and Kevin Stevens is Operations
Director. Reflecting the growth in the Group and its focus on technological developments, Mr Stevens was
appointed to the Board on 1 January 2014.
The directors’ biographies on page 17 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 six 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. Although not required to retire
this year in accordance with the articles, revised corporate governance guidance recommends that non-
executive directors with more than 9 years service are re-elected annually, and John Booth, having been a
director since 1996, also offers himself for re-election.
The Company has purchased insurance to cover its directors and officers against any costs they may incur in
defending themselves in any legal proceedings instigated against them as a direct result of duties carried out
on behalf of the Company.
The directors are able to seek independent professional advice as necessary, for the furtherance of their
duties, at the Company’s expense within designated financial limits.
The following committees deal with specific aspects of the Group’s affairs:
Audit committee
The audit committee is chaired by Nicholas Taylor with John Booth being the other member. The Board
is satisfied that for the year under review and thereafter Mr Taylor has adequate recent and relevant
commercial and financial knowledge and experience to chair the committee.
Annual Report & Accounts
Maintel Holdings Plc 2013
The remit of the committee is to:
• consider the continued appointment of the external auditors, and their fees and independence.
• liase with the external auditors in relation to the nature and scope of the audit.
• review the form and content of 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 to review the 6 monthly and annual financial statements
and at these meetings in 2013 Eddie Buxton, Dale Todd (who acts as secretary to the committee) and the
external auditors attended by invitation.
In 2013 it also formally met to review and update its remit and liased informally with the executive directors
in relation to published financial information and other audit-related matters. Nicholas Taylor met with the
external auditors in the absence of executive management.
The principal issues addressed by the Committee during the year were:
• The external auditors’ year-end report for 2012, the review of the Group’s preliminary results in 2013 and
the disclosures in the 2012 annual report.
• The external audit plan for the 2012 financial statements which included a review of the audit objectives,
scope, timetable and deliverables.
• The re-appointment of BDO LLP as external auditors, their independence and objectivity and their fee.
• Consideration of the external auditors’ observations on the internal financial controls arising from their
annual audit.
BDO LLP is retained to perform audit and audit-related work for the Group. The committee monitors
the nature and extent of non-audit work undertaken by the auditors, including reviewing the letter of
independence provided by the auditors annually which includes details of audit and non-audit work
undertaken. The committee is satisfied that there are adequate controls in place to ensure auditor
independence and objectivity. Details of audit and non-audit fees for the period under review are shown in
note 6 of the financial statements.
Remuneration committee
The remuneration committee is chaired by Nicholas Taylor, its other member being John Booth. The
committee meets at least once in respect of each financial year. The committee’s report to shareholders on
directors’ remuneration is set out on page 22.
18
19
Report on corporate governance (continued)
Nomination committee
The nomination committee had two members during 2013, both non-executive, being John Booth, chairman,
and Nicholas Taylor. The committee meets as required. It met once in 2013, to agree to recommend the
appointment of Kevin Stevens as a director, to consider the appointment of a third non-executive director and
to review and update its terms of reference, 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 the attendance of the directors at meetings of the board and the Remuneration and
Audit Committees during the year.
Number of
meetings
in the year
J Booth
E Buxton A McCaffery N Taylor D Todd
Board
Audit committee
Remuneration committee
14
3
3
14
3
3
14
2
-
12
-
-
14
3
3
14
2
-
Relationship with shareholders
The Chairman’s statement and the Strategic report on pages 4 to 16 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 on
page 66.
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.
Annual Report & Accounts
Maintel Holdings Plc 2013
Internal control
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.
The key operational functions of the Group are subject to processes established and externally audited under
ISO9001 and ISO27001, which the directors consider to be a valuable additional internal and external control
tool of the business.
Operating control
Each executive director has defined responsibility for specific aspects of the Group’s operations. The
executive directors, together with key senior executives, meet regularly to discuss day-to-day operational
matters.
Investment appraisal
Capital expenditure is controlled via the budgetary process, the budget being approved by the board.
Expenditure is approved as required by the chief executive.
Risk management
The board is responsible for identifying the major business risks faced by the Group and for determining the
appropriate course of action to manage these risks. The Group’s approach to financial risk management is
further explained in note 21 to the financial statements.
Going concern
The Group has a sound financial record including strong operating cash flows derived from a substantial
level of recurring revenue across a range of sectors and as a consequence and after making enquiries
and reviewing projections, 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.
20
21
Annual Report & Accounts
Maintel Holdings Plc 2013
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 and taking account of the directors’ evolving responsibilities.
Taking these factors into account, the remuneration of the non-executive directors also increased with effect
from 1 January 2014. The non-executives receive no payment or benefits other than their fees.
Directors remuneration
The remuneration of the directors in office at 31 December 2013 was as follows:
Salaries/fees
£000
Benefits
£000
Bonus
£000
Pension
contributions
£000
Total
2013(1)
£000
Total
2012(1, 2)
£000
34
20
140
160
138
492
-
-
12
19
12
43
-
-
36
20
30
86
-
-
4
4
-
8
34
20
192
203
180
629
34
20
189
193
170
606
J D S Booth
N J Taylor (3)
E Buxton
A J McCaffery
W D Todd
(1) Excluding social security costs in respect of the above amounting to £79,000 (2012 - £78,000).
(2) Including bonuses of £65,000, employer pension contributions of £8,000 and benefits of £43,000, so that salaries amounted to £490,000.
(3) In addition to his fees as a director stated above, the Company paid £44,000 plus £2,000 expenses to a company of which Mr Taylor is a
shareholder and director in respect of consultancy services provided to the Company during the year.
The directors are the only employees of the Company.
Directors’ interests in ordinary shares
The directors’ interests in the ordinary shares of the Company are shown in the directors’ report on page 25.
These include holdings under the Company’s Share Incentive Plan, to which all of the directors subscribe.
Report of the Remuneration committee
The remuneration committee’s remit is to measure the performance of, and determine remuneration policy
relating to directors and senior employees, and to support this responsibility it has access to professional and
other advice external to the Group. Taking these factors into account, it then makes recommendations to the
board.
The committee consists of the two non-executive directors, Nicholas Taylor (chairman of the committee) and
John Booth, and met three times during 2013, including one meeting to review its terms of reference.
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. In December 2013, recognising the increased
responsibilities arising from the acquisition of Datapoint, the committee reviewed the directors’ remuneration
in comparison with market rates for companies with similar attributes.
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.
As a result of the market review, the basic salary of the executive directors was increased with effect from 1
January 2014.
(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
The executive directors 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
Executive directors’ service agreements, which include details of remuneration, will be available for
inspection at the annual general meeting. Each executive director has a six month rolling service agreement.
22
23
Report of the Remuneration committee (continued)
Report of the directors for
the year ended 31 December 2013
Annual Report & Accounts
Maintel Holdings Plc 2013
Share options
On 18 May 2009 the directors of the Company approved the adoption of the Maintel Holdings Plc 2009 Option
Plan. The following options remain outstanding under the Plan:
Option holder
Number of shares
Date of grant
Option price
Expiry of option
Eddie Buxton
Eddie Buxton
Eddie Buxton
Dale Todd
Dale Todd
Dale Todd
Dale Todd
Dale Todd
All options have vested.
53,909
107,818
107,818
18 May 2009
18 May 2009
18 May 2009
100p
200p
300p
18 May 2019
18 May 2019
18 May 2019
10,000
10 September 2009
150.5p
10 September 2019
10,000
11 March 2011
20,000
21 December 2011
10,000
17 April 2013
10,000
19 December 2013
200p
265p
345p
525p
11 March 2021
21 December 2021
17 April 2023
19 December 2023
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements
in, share options during the year:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Outstanding at the end of the year
2013
Number
of options
309,545
20,000
-
329,545
2013
WAEP
220p
435p
-
233p
2012
Number
of options
319,545
-
(10,000)
309,545
2012
WAEP
218p
-
145p
220p
The Company’s mid-market share price at 31 December 2013 was 580.5p per share, and the high and low
prices during the year were 580.5p and 325p respectively.
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 and
directors 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. At 31
December 2013 there were 88,039 shares held by the SIP, representing 0.8% of the issued share capital of the
Company (2012 - 79,406 and 0.7%).
The Report of the Remuneration committee was approved by the board on 7 March 2014.
N J Taylor
Chairman of the Remuneration committee
The directors present their annual report together with the audited financial statements for the year
ended 31 December 2013.
Principal activities
The principal activities of the Group are the provision of contracted managed 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. In September 2013 the
Company acquired the UK and Ireland subsidiaries of the Datapoint group of companies, one of which is
registered in and operates from the Republic of Ireland.
Results and dividends
The consolidated statement of comprehensive income is set out on page 30 and shows the profit of the Group
for the year.
During the year the Company paid a final dividend of 7.3p per ordinary share in respect of the 2012 financial
year, amounting to £779,000 (2012 – 6.0p, amounting to £640,000), and an interim dividend in respect of 2013
of 6.7p per share, amounting to £715,000 (2012 – 6.3p and £672,000 respectively). The directors propose the
payment of a final dividend in respect of 2013 of 9.0p per share. The cost of the proposed dividend, based on
the number of shares in issue as at 7 March 2014, is £961,000.
Strategic report
A review of the business and future developments of the Group is set out in the Strategic report on pages
5 to 16.
Directors
The directors of the Company as at 31 December 2013 and their interests in the ordinary shares of the
Company at that date were as follows:
Number of 1p ordinary shares
2013
2012
Beneficial
Non-beneficial
Beneficial
Non-beneficial
2,759,015
3,756
-
2,758,272
84,283
3,204
2,054,509
-
2,053,845
14,759
6,821
80,280
14,062
81,218
16,157
-
76,202
-
72,344
73,249
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 has notified the Company of its holding of
760,000 1p ordinary shares in the Company; this is in addition to Mr Booth’s beneficial holding above.
Kevin Stevens was appointed to the Board on 1 January 2014 and on that date held 1,547 ordinary shares in
the Company and was beneficially interested in a further 436 shares.
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 800 shares in total, including 47 in respect
of Kevin Stevens. There were no other changes in the directors’ shareholdings between 31 December 2013
and 7 March 2014.
24
25
Report of the directors for
the year ended 31 December 2013 (continued)
Substantial shareholders
In addition to the directors’ shareholdings, at 7 March 2014 the Company had been notified of the following
shareholdings of 3% or more in the ordinary share capital of the Company:
J A Spens
Marlborough Fund Managers Ltd
Herald Investment Trust plc
Octopus Investments Limited
T Wat
Number of
1p ordinary
shares
% of issued
ordinary
shares
1,616,747
1,095,864
760,000
631,920
340,203
15.1%
10.3%
7.1%
5.9%
3.2%
Share capital
Details of the share capital of the Company are shown in note 22 of the financial statements.
No shares were issued or repurchased during the year.
The existing authority for the repurchase of the Company’s shares is for the purchase of up to 1,600,119
shares. A fresh authority, for the purchase of up to 1,600,119 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 21 of the financial statements.
Annual General Meeting
The Annual General Meeting of the company will be held at its offices on 17 April 2014 at 9.30am.
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
7 March 2014
26
Annual Report & Accounts
Maintel Holdings Plc 2013
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.
27
Annual Report & Accounts
Maintel Holdings Plc 2013
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the strategic report and 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
7 March 2014
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Independent auditors’ report to the
shareholders of Maintel Holdings Plc
We have audited the financial statements of Maintel Holdings Plc for the year ended 31 December 2013 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
Financial Reporting Council’s (FRC’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 FRC’s website at
www.frc.org.uk/auditscopeukprivate.
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 2013 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.
28
29
Consolidated statement of comprehensive
income for the year ended 31 December 2013
Consolidated statement of financial
position at 31 December 2013
Annual Report & Accounts
Maintel Holdings Plc 2013
Revenue
Cost of sales
Gross profit
Administrative expenses
Intangibles amortisation
Exceptional costs
Contingent consideration treated as remuneration
Other administrative expenses
Operating profit
Financial income
Financial expense
Profit before taxation
Taxation
Profit and total comprehensive income
attributable to owners of the parent
Earnings per share
Basic
Diluted
Note
3
13
11
12
6
7
7
8
10
10
2013
£000
31,124
19,526
11,598
898
691
-
6,336
7,925
2012
£000
28,171
17,756
10,415
742
-
2,834
5,443
9,019
3,673
1,396
2
(32)
9
-
3,643
1,405
978
1,043
2,665
362
25.0p
24.7p
3.4p
3.4p
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
Borrowings
Total net assets
Equity
Issued share capital
Share premium
Capital redemption reserve
Retained earnings
Total equity
2013
£000
2013
£000
2012
£000
2012
£000
Note
13
15
16
17
18
20
19
22
23
23
23
845
8,961
544
10,988
289
11,277
10,350
21,627
15,211
638
15,849
149
1,750
3,879
107
1,028
31
2,713
3,879
692
5,793
1,941
4,515
216
4,731
8,426
13,157
9,203
665
9,868
581
-
2,708
107
1,028
31
1,542
2,708
The notes on pages 34 to 59 form part of these financial statements.
The financial statements were approved and authorised for issue by the board on 7 March 2014 and
were signed on its behalf by:
W D Todd
Director
The notes on pages 34 to 59 form part of these financial statements.
30
31
Consolidated statement of changes in equity
for the year ended 31 December 2013
Consolidated statement of cash flows for the year
ended 31 December 2013
Annual Report & Accounts
Maintel Holdings Plc 2013
At 1 January 2012
Profit and total comprehensive
income for the year
Dividend
Issue of new ordinary shares
Share
capital
£000
107
Share
premium
£000
1,013
Capital
redemption
reserve
£000
Retained
earnings
£000
31
2,492
-
-
-
-
-
15
-
-
-
362
(1,312)
-
Total
£000
3,643
362
(1,312)
15
At 31 December 2012
107
1,028
31
1,542
2,708
Profit and total comprehensive
income for the year
Dividend
-
-
-
-
-
-
2,665
(1,494)
2,665
(1,494)
At 31 December 2013
107
1,028
31
2,713
3,879
The notes on pages 34 to 59 form part of these financial statements.
Operating activities
Profit before taxation
Adjustments for:
Intangibles amortisation
Depreciation charge
Interest receivable
Interest payable
2013
£000
3,643
898
135
(2)
32
2012
£000
1,405
742
124
(9)
-
Operating cash flows before changes in working capital
4,706
2,262
(Increase)/decrease in inventories
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
(36)
(1,253)
(1,306)
30
(1,774)
2,362
Cash generated from operating activities
2,111
2,880
Tax paid
Net cash flows from operating activities
Investing activities
Purchase of plant and equipment
Purchase price in respect of business combination
Net cash acquired with subsidiary undertaking
Interest receivable
Net cash flows from investing activities
Financing activities
Proceeds from borrowings
Repayment of borrowings
Interest payable
Issue of new ordinary shares
Equity dividends paid
Net cash flows from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at start of period
(1,148)
963
(89)
(3,500)
3
(3,497)
2
(3,584)
3,000
(250)
(32)
-
(1,494)
1,224
(1,397)
1,941
(1,502)
1,378
(116)
(986)
-
(986)
9
(1,093)
-
-
-
15
(1,312)
(1,297)
(1,012)
2,953
Cash and cash equivalents at end of period
544
1,941
The notes on pages 34 to 59 form part of these financial statements
32
33
Annual Report & Accounts
Maintel Holdings Plc 2013
Notes forming part of the financial statements
for the year ended 31 December 2013
General information
1
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.
Accounting policies
2
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 60.
(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.
2
Accounting policies (continued)
(d) Intangible assets
Goodwill
Goodwill represents the excess of the fair value of the consideration of a business combination over the
acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.
For business combinations completed on or after 1 January 2010, the fair value of the consideration
comprises 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 and carried at cost with any impairment in carrying value being
charged to the consolidated statement of comprehensive income.
Other intangible assets
Intangible assets are stated at cost, or fair value where acquired through a business combination, less
accumulated amortisation and consist of customer relationships. Where these assets have been acquired
through a business combination, the cost will be the fair value allocated in the acquisition accounting; where
they have been acquired other than through a business combination, the initial cost is the aggregate amount
paid and the fair value of any other consideration given to acquire the asset.
Customer relationships are amortised over their estimated useful lives of (i) five or six years in respect of
managed service contracts, (ii) seven years in respect of network services and mobile contracts.
Subsidiaries are all entities over which the Group has the power to govern their financial and operating
policies.
(e) Impairment of non-current assets
As permitted by IFRS 1, business combinations prior to 1 January 2006 have not been restated under an IFRS
basis.
(c) Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
can be reliably measured.
Revenue represents sales to customers at invoiced amounts and commissions receivable from suppliers,
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 managed
service contracts are deferred and released to the statement of comprehensive income on a straight
line basis over the period covered by the invoice. Connection commissions received from mobile network
operators are recognised (a) where commission is payable in advance, when the customer contract has been
accepted by the network operator and is therefore legally binding, less an allowance for expected future
clawbacks, and (b) where commission is payable on a monthly basis, in the month to which commission
relates. Interest income is recognised on an accruals basis.
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 through the
consolidated statement of comprehensive income.
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 consolidated statement of
comprehensive income and, in respect of goodwill impairments, are never reversed.
34
35
Annual Report & Accounts
Maintel Holdings Plc 2013
Notes forming part of the financial statements
for the year ended 31 December 2013
2
Accounting policies (continued)
(f) Property, plant and equipment
2
Accounting policies (continued)
(i) Taxation (continued)
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:
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:
Office and computer equipment
Motor vehicles
Leasehold improvements
25% straight line
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.
• 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.
(h) Cash and cash equivalents
Cash comprises cash in hand and deposits held at call with banks.
Cash and cash equivalents comprise cash balances and short term deposits with an original maturity of three
months or less.
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.
(i) Taxation
Trade and other payables are not interest bearing and are stated at their nominal amount.
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.
(k) Borrowings
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:
Interest bearing bank loans and overdrafts are initially recorded at the value of the amount received, net of
attributable transaction costs. Interest bearing borrowings are subsequently stated at amortised cost with
any difference between cost and redemption value being recognised in the income statement over the period
of the borrowing using the effective interest method.
• the initial recognition of goodwill;
(l) Operating leases
• 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 nor taxable profit; and
Rentals payable are charged to the consolidated statement of comprehensive income on a straight-line basis
over the term of the lease.
• 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.
(m) Employee benefits
A deferred tax asset is recognised only to the extent that it is more probable than not that future taxable
profits will be available against which the asset can be utilised.
Management judgment is used in determining the amount of deferred tax asset that can be recognised, based
upon the likely timing and level of future taxable profits together with future tax planning strategies.
The amount of the deferred tax asset or liability is measured on an undiscounted basis and 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.
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.
36
37
Notes forming part of the financial statements
for the year ended 31 December 2013
2
Accounting policies (continued)
(n) 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.
(o) Accounting standards issued
There are no IFRSs that are effective for the first time during the financial year that have a material effect on
the financial statements, nor are there any impending IFRSs that are expected to have a material effect on the
Group’s financial statements.
(p) Contingent consideration
Where payment of contingent consideration in respect of a business combination or acquisition of business
and assets is dependent on the continued employment by the Group of the seller(s), the estimated contingent
consideration is pro rated in accordance with the period of employment required of the seller and this amount
is expensed in the income statement.
(q) Foreign currency
The presentation currency of the Group is sterling. All Group companies have a functional currency of
sterling (other than Datapoint Communications Limited (“DCL”) which has a functional currency of the Euro)
consistent with the presentation currency of the Group’s financial statements. Transactions in currencies
other than sterling are recorded at the rates of exchange prevailing on the dates of the transactions.
On consolidation, the results of DCL are translated into sterling at rates approximating those ruling when
the transactions took place. All assets and liabilities of DCL, including goodwill arising on its acquisition, are
translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net
assets at opening rate and the results of DCL at actual rate were not material in the year and are recognised
in other comprehensive income.
Annual Report & Accounts
Maintel Holdings Plc 2013
3
Segment information
For management reporting purposes and operationally, the Group consists of three business segments:
(i) telecommunications managed service and equipment sales, (ii) telecommunications network services, and
(iii) mobile services. Each segment applies its respective resources across inter-related revenue streams
which are reviewed by management collectively under these headings. The businesses of each segment and
a further analysis of revenue are described under their respective headings in the Strategic report.
The Datapoint business is reported under the managed service and equipment segment as it is managed
and measured as part of that segment.
Year ended 31 December 2013
Managed service
and equipment
£000
Network
services
£000
Mobile
£000
Central/
inter-
company
£000
Total
£000
Revenue
21,764
6,938
2,597
(175)
31,124
Operating profit before customer
relationship intangibles amortisation
and exceptional expenses
3,246
1,101
931
(16)
5,262
Customer relationship intangibles
amortisation
(251)
(49)
Exceptional expenses
(120)
-
-
-
(598)
(898)
(571)
(691)
Operating profit
2,875
1,052
931
(1,185)
3,673
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
(30)
3,643
(978)
2,665
38
39
Annual Report & Accounts
Maintel Holdings Plc 2013
Notes forming part of the financial statements
for the year ended 31 December 2013
3
Segment information (continued)
3
Segment information (continued)
Year ended 31 December 2013 (continued)
Revenue is wholly attributable to the principal activities of the Group and other than sales of £973,000 to EU
countries and £151,000 to the rest of the world (2012 - £23,000 to EU countries), arises within the United
Kingdom.
Managed services and equipment revenue consists of managed services related revenue of £14.477m and
equipment, installation and other revenue of £7.287m (2012 - £12.246m and £6.435m). Network services
revenue consists of call traffic revenue of £2.586m, line rental revenue of £3.179m, data services revenue of
£0.809m and other revenue of £0.364m (2012 - £2.656m, £2.979m, £0.799m and £0.296m). Mobile revenue
consists principally of commissions receivable from network operators.
Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent
costs, £90,000 (2012 - £90,000) attributable to the managed services and equipment segment, £82,000 (2012 -
£85,000) to the network services segment and £3,000 (2012 - £6,000) to the mobile segment.
In 2013 the Group had two customers (2012 - One) which accounted for more than 10% of its revenue, one
accounting for £5.419m and the other £4.258m. The directors have noted that the value attributed to the
customer reported last year was incorrect and should have been reported as £4.224m.
The board does not regularly review the aggregate assets and liabilities of the Company and its segments and
accordingly an analysis of these is not provided.
Managed
service and
equipment
Network
services Mobile
Central/
inter-
company
£000
£000
£000
£000
89
133
251
-
-
49
-
2
-
-
-
598
Total
£000
89
135
898
Other
Capital expenditure
Depreciation
Amortisation
Year ended 31 December 2012
Managed service
and equipment
£000
Network
services
£000
Mobile
£000
Central/
inter-
company
£000
Total
£000
Revenue
18,681
6,730
2,941
(181)
28,171
Operating profit before customer
relationship and software
intangibles amortisation and
adjustments
Customer relationship and
software intangibles amortisation
Operating profit before
adjustments
Contingent consideration treated
as remuneration (note 12)
3,272
(264)
983
(59)
813
(96)
4,972
-
(419)
(742)
3,008
924
813
(515)
4,230
-
-
-
(2,834)
(2,834)
Operating profit
3,008
924
813
(3,349)
1,396
Interest (net)
Profit before taxation
Taxation
Profit and total comprehensive income for the period
9
1,405
(1,043)
362
Other
Capital expenditure
Depreciation
Amortisation
113
121
264
-
-
59
2
3
-
-
-
419
115
124
742
40
41
Notes forming part of the financial statements
for the year ended 31 December 2013
4
Employees
6
Operating profit
Annual Report & Accounts
Maintel Holdings Plc 2013
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
2013
2012
Number
Number
26
72
96
194
2013
£000
9,891
1,168
188
11,247
23
69
90
182
2012
£000
8,698
1,031
150
9,879
In addition to the above, the comprehensive income statement in 2012 included £2.834m of contingent
consideration in respect of the Maintel Mobile acquisition which was treated as a remuneration expense (see
note 12).
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
£41,000 (2012 - £25,000) 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
2013
£000
621
8
629
2013
£000
199
4
203
2012
£000
598
8
606
2012
£000
189
4
193
The Group paid contributions into defined contribution personal pension schemes in respect of 2 (2012 – 2)
directors during the year.
Further details of director remuneration are shown in the Remuneration committee report on page 22.
42
This has been arrived at after charging:
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Operating lease rentals
- property
- plant and machinery
Fees payable to the Company’s auditor for:
- the audit of the Company’s annual accounts
- due diligence
- audit of the Company’s subsidiaries pursuant to legislation
- audit-related assurance services
- tax compliance services
Foreign exchange gain
7
Financial income and expense
Interest receivable on bank deposits
Interest payable on bank loans
2013
£000
2012
£000
135
898
274
101
8
95
95
18
6
4
124
742
171
82
8
-
63
11
4
-
2013
£000
2012
£000
2
32
9
-
43
Notes forming part of the financial statements
for the year ended 31 December 2013
8
Taxation
10
Earnings per share
Annual Report & Accounts
Maintel Holdings Plc 2013
UK corporation tax
Corporation tax on profits of the period
Prior year adjustment
Deferred tax
Taxation on profit on ordinary activities
2013
£000
2012
£000
1,114
1,159
7
1,121
(143)
978
-
1,159
(116)
1,043
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
3,643
1,405
Profit at the standard rate of corporation tax in the UK of
23.25% (2012 – 24.5%)
Effect of:
Expenses not deductible for tax purposes
Capital allowances in excess of depreciation
No tax relief on contingent consideration treated as
remuneration (note 12)
Prior year adjustment
Other timing differences
9
Dividends paid on ordinary shares
Final 2011, paid 26 April 2012 – 6.0p per share
Interim 2012, paid 5 October 2012 – 6.3p per share
Final 2012, paid 25 April 2013 – 7.3p per share
Interim 2013, paid 11 October 2013 – 6.7p per share
847
141
(11)
-
7
(6)
978
2013
£000
-
-
779
715
345
11
-
694
-
(7)
1,043
2012
£000
640
672
-
-
1,494
1,312
The directors propose the payment of a final dividend for 2013 of 9.0p (2012 – 7.3p) per ordinary share, payable
on 24 April 2014 to shareholders on the register at 21 March 2014. The cost of the proposed dividend, based
on the number of shares in issue as at 7 March 2014, is £961,000 (2012 - £779,000).
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
Adjustments:
Amortisation of intangibles
Contingent consideration treated as remuneration (note 12)
Exceptional expenses (note 11)
Tax relating to above adjustments
Adjusted earnings used in adjusted EPS
Weighted average number of ordinary shares of 1p each
Potentially dilutive shares
Earnings per share
Basic
Basic and diluted
Adjusted – basic but after the adjustments in the table above
Adjusted – basic and diluted after the adjustments in the table above
2013
£000
2,665
898
-
691
(244)
4,010
2012
£000
362
731
2,834
-
(185)
3,742
Number
Number
(000s)
(000s)
10,675
125
10,800
10,671
121
10,792
25.0p
24.7p
37.6p
37.1p
3.4p
3.4p
35.1p
34.7p
The adjustments above have been made in order to provide a clearer picture of the trading performance of the
Group.
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.
44
45
Notes forming part of the financial statements
for the year ended 31 December 2013
11
Exceptional expenses
12
Business combinations (continued)
Annual Report & Accounts
Maintel Holdings Plc 2013
Legal and professional fees of £571,000 were incurred in relation to the acquisition of the Datapoint
companies in September 2013. Redundancy costs of £120,000 have been incurred as a result of synergies
achieved following the acquisition. These costs, totalling £691,000, have been shown as exceptional expenses
in the income statement as they are not normal operating expenses.
Business combinations
12
On 13 September 2013 the Company acquired the entire share capital of Datapoint Customer Solutions
Limited, Datapoint Global Services Limited and Datapoint Communications Limited at the following
provisional aggregate valuations:
Purchase consideration
Cash
Assets and liabilities acquired
Tangible fixed assets
Trade and other receivables
Cash
Trade and other payables
Customer relationships
Deferred tax on customer relationships
Deferred tax asset relating to historic tax losses
Total assets and liabilities acquired
Fair value adjustment (see below)
Net assets and liabilities acquired
Goodwill
Cash flows arising from the acquisition were as follows:
Purchase consideration settled in cash
Direct acquisition costs (note 11)
Cash balances acquired
£000
3,500
119
1,915
3
(6,314)
(4,277)
3,695
(776)
1,065
(293)
117
(176)
3,676
£000
(3,500)
(571)
3
(4,068)
The Datapoint companies were acquired to complement and extend the Group’s existing offerings of
telecommunications and data services and enable further cross-selling to and from other Group operations,
as further described in the Strategic report. The goodwill is attributable to the cross-selling opportunities and
cost synergies that are expected to be achieved from sharing the expertise and resource of Maintel with that
of Datapoint and vice versa.
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. A deferred tax liability of £776,000 has been recognised above which is being credited to
the income statement pro rata to the amortisation of the customer relationships. The amortisation charge in
2013 is £180,000.
The fair value adjustment relates to the inventories held by Datapoint at the date of acquisition, revalued to
their fair market value.
The Trade and other receivables are stated at gross valuation, no provisions being made against them.
Since their acquisition, the Datapoint companies have contributed the following to the results of the Group
before exceptional redundancy costs of £69,000 and management charges of £100,000:
Revenue
Profit before tax
£000
3,805
205
It would not be meaningful or practicable to estimate the revenue or profit of the Datapoint companies for
calendar year 2013, because prior to its acquisition by Maintel they were part of another group which levied
different intragroup charges, had a different management structure from that under Maintel’s ownership and
undertook a number of activities which have been terminated.
In 2012, £2.834m was expensed in the income statement in respect of contingent consideration relating to the
acquisition of Maintel Mobile.
46
47
Notes forming part of the financial statements
for the year ended 31 December 2013
13
Intangible assets
Cost
At 1 January 2012
Disposed of in the year
At 31 December 2012
Acquired in the year
At 31 December 2013
Amortisation and impairment
At 1 January 2012
Amortisation in the year
In respect of disposals in the year
At 31 December 2012
Amortisation in the year
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Goodwill
£000
Customer
relationships
Computer
software
£000
£000
1,343
-
1,343
3,676
5,019
317
-
-
317
-
317
4,702
1,026
5,859
-
5,859
3,695
9,554
1,639
731
-
2,370
898
3,268
6,286
3,489
91
(91)
-
-
-
80
11
(91)
-
-
-
-
-
Total
£000
7,293
(91)
7,202
7,371
14,573
2,036
742
(91)
2,687
898
3,585
10,988
4,515
Annual Report & Accounts
Maintel Holdings Plc 2013
Intangible assets (continued)
13
Amortisation charges for the year have been charged through administrative expenses in the statement of
comprehensive income.
Goodwill
The carrying value of goodwill is allocated to the cash generating units as follows:
Network services division
Managed service and equipment division
Mobile division
2013
£000
202
3,949
551
4,702
2012
£000
202
273
551
1,026
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 2013 (2012 - £Nil) and a carrying value of £202,000.
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 2013 (2012 - £Nil) and the carrying value is £145,000.
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 2013 (2012 - £Nil) and the carrying value is £128,000.
Goodwill of £551,000 arose on the Maintel Mobile acquisition in October 2011. This is assessed for
impairment at the date of each consolidated statement of financial position. There has been no impairment of
the goodwill in 2013 (2012 - £Nil) and the carrying value is £551,000.
Goodwill of £3.676m arose on the Datapoint acquisition in September 2013. This is assessed for impairment
at the date of each consolidated statement of financial position. There has been no impairment of the
goodwill in 2013 (2012 - £Nil) so the carrying value is £3.676m.
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, and with historical cash
flows for the cash generating unit. 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. Sensitivity analysis using
reasonable variations in the assumptions shows no indication of impairment.
£195,000 (gross) of the Goodwill in the balance sheet of Maintel Europe Limited is eligible for tax relief, with
relief being claimed against £10,000 of amortisation in 2013 (2012 - £10,000), leaving a net balance of £165,000
available for future tax relief.
Fully amortised intangibles with a combined cost of £1.074m relating to the District Holdings Limited and
Callmaster Limited acquisitions are included within intangibles and are still used within the business.
48
49
Notes forming part of the financial statements
for the year ended 31 December 2013
Subsidiaries
14
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
Maintel Mobile Limited (previously Totility Limited)
Datapoint Customer Solutions Limited
Datapoint Global Services Limited
Datapoint Communications Limited
Each company is wholly owned and, other than Datapoint Communications Limited which is incorporated in
the Republic of Ireland, is incorporated in England and Wales.
Annual Report & Accounts
Maintel Holdings Plc 2013
15
Property, plant and equipment
Leasehold
improvements
Office and
computer
equipment
Motor
Vehicles
£000
£000
£000
Cost or valuation
At 1 January 2012
Additions
Disposals
At 31 December 2012
Additions
On acquisition of Datapoint
Disposals
At 31 December 2013
Depreciation
At 1 January 2012
Provided in year
Disposals
At 31 December 2012
Provided in year
On acquisition of Datapoint
Disposals
At 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
137
23
-
160
7
325
-
492
87
25
-
112
33
312
-
457
37
48
908
93
(31)
970
82
956
(83)
1,925
734
99
(31)
802
97
886
(83)
1,702
221
168
-
-
-
-
-
64
-
64
-
-
-
-
5
28
-
33
31
-
Total
£000
1,045
116
(31)
1,130
89
1,345
(83)
2,481
821
124
(31)
914
135
1,226
(83)
2,192
289
216
50
51
Notes forming part of the financial statements
for the year ended 31 December 2013
16
Inventories
Maintenance stock
Stock held for resale
2013
£000
640
205
845
2012
£000
578
114
692
Cost of inventories recognised as an expense
3,829
4,144
Provisions of £48,000 were made against the maintenance stock in 2013, (2012 - £47,000), with no reversal
of provisions having been made in either year.
17
Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
All amounts shown above fall due for payment within one year.
18
Trade and other payables
Trade payables
Other tax and social security
Accruals
Other payables
Deferred managed service income
Other deferred income
Borrowings
2013
£000
5,721
10
3,230
8,961
2013
£000
2,819
1,325
2,233
575
6,688
571
1,000
2012
£000
3,997
11
1,785
5,793
2012
£000
2,421
936
1,618
416
3,780
32
-
15,211
9,203
Deferred managed service income relates to the unearned element of managed service 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.
Annual Report & Accounts
Maintel Holdings Plc 2013
19
Borrowings
Non-current bank loan - secured
Current bank loan - secured
2013
£000
1,750
1,000
2,750
2012
£000
-
-
-
The bank loan is secured by a fixed and floating charge over the assets of the Company and its subsidiaries.
Interest is payable at a variable rate of 3.05% per annum over LIBOR. The loan was drawn in September 2013
and is repayable in quarterly instalments over a 3 year period, the first instalment of £250,000 having been
paid in December 2013. The directors consider that there is no material difference between the book value
and fair value of the loan.
The Group has a £1.0m overdraft facility with Lloyds Bank plc which expires on 31 August 2014, which was not
drawn upon as at 31 December 2013.
20
Deferred taxation
Net liability at 1 January 2012
(Credit)/charge to consolidated
statement of comprehensive
income
Net liability at 31 December 2012
Liability established against
intangible assets acquired
during the year
Asset relating to Datapoint tax losses
Charge/(credit) to consolidated
statement of comprehensive
income
Net liability at 31 December 2013
Property,
plant and
equipment
£000
7
(8)
(1)
-
-
4
3
Intangible
assets
£000
705
(111)
594
776
-
Tax
losses
£000
-
-
-
-
(1,065)
Other
£000
(15)
3
(12)
Total
£000
697
(116)
581
-
-
776
(1,065)
(149)
1,221
-
(1,065)
2
(10)
(143)
149
The deferred tax liability represents (a) a liability established under IFRS on the recognition of an intangible
asset in relation to the Maintel Mobile and Datapoint acquisitions, and (b) the amount of depreciation provided
in the accounts in excess of the tax value of capital allowances claimed, and is calculated using the tax rates
at which the liabilities are expected to reverse.
52
53
Notes forming part of the financial statements
for the year ended 31 December 2013
Deferred taxation (continued)
20
The deferred tax asset predominantly relates to the anticipated use in the future of tax losses within the
Datapoint companies which were acquired during the year, based on estimates of those companies’ future
profitability and relevant tax rates. A change in tax rates in the future would increase or decrease the value of
this asset.
The asset relating to the use of tax losses is based on the directors’ judgment of a range of factors influencing
their anticipated use. A further undiscounted deferred tax asset of £2.5m (2012 - £Nil) relating to tax losses
has not been recognised on the grounds that there is insufficient evidence that the asset will be recoverable;
use of these unrecognised losses would be increased by the Datapoint companies making more than the
anticipated future profits and/or an increase in corporate tax rates.
Changes in tax rates and factors affecting the future tax charge
As a result of the Finance Bill 2013 enacted on 2 July 2013 the rate of income tax has been reduced to 21% for
periods beginning after 1 April 2014 and again to 20% for periods beginning after 1 April 2015. Accordingly,
deferred tax balances as at 31 December 2013 have been recognised at 21%, as they are expected to reverse
materially before 1 April 2015.
Financial instruments
21
The Group’s financial assets and liabilities mainly comprise cash, borrowings, 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
Secured bank loan
Loans and receivables
2013
£000
5,721
544
10
6,275
2012
£000
3,997
1,941
11
5,949
Financial liabilities measured at
amortised cost
2013
£000
2,819
575
1,000
4,394
2012
£000
2,421
416
-
2,837
Annual Report & Accounts
Maintel Holdings Plc 2013
Financial instruments (continued)
21
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.
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 other than cash was represented by the carrying value of trade
and other receivables, against which £149,000 is provided at 31 December 2013 (2012 - £136,000). 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 2013
owed the Group £2.3m including VAT (2012 - £1.8m).
The movement on the provision is as follows:
Provision at start of year
Provision used
Additional provision made
Provision at end of year
2013
£000
136
(44)
57
149
2012
£000
139
(60)
57
136
A debt is considered to be bad when it is deemed irrecoverable, for example when the debtor goes into
liquidation, or when a credit or partial credit is issued to the customer for goodwill or commercial reasons.
The Group had past due trade receivables not requiring impairment as follows:
Up to 30 days overdue
31-60 days overdue
More than 60 days overdue
2013
£000
1,653
161
(125)
1,689
2012
£000
1,289
302
(35)
1,556
Cash and cash equivalents at 2013 and 2012 year ends represented short term deposits with Lloyds Bank plc.
54
55
Annual Report & Accounts
Maintel Holdings Plc 2013
Notes forming part of the financial statements
for the year ended 31 December 2013
21
Financial instruments (continued)
22
Share capital
Foreign currency risk
The functional currency of all Group companies is Sterling apart from Datapoint Communications Limited,
one of the Datapoint companies acquired during 2013, which is registered in and operates from the Republic
of Ireland and whose functional currency is the Euro. The consolidation of the results of that company is
therefore affected by movements in the Euro/Sterling exchange rate. In addition, all Datapoint companies
invoice certain customers and are invoiced by certain suppliers in Euros or Dollars, and those transactions
are affected by exchange rate movements during the year.
Interest rate risk
The Group has historically had no borrowings, but borrowed £3.0m and secured a £1.0m overdraft facility to
finance the acquisition of the Datapoint companies. The interest rate charged is related to LIBOR and bank
rate respectively and would therefore change as those rates changed. If interest rates had been 0.5% higher/
lower since the loan was drawn in September 2013, and all other variables were held constant, the Group’s
profit for the year would have been £4,000 higher/lower due to the variable interest element on the loan.
The Group invests its surplus cash in short term bank deposits at prevailing rates of interest. The Group’s
interest income (£2,000 in 2013, and £9,000 in 2012) is therefore dependent on those prevailing rates, which
were at a historically low level during 2013 and 2012.
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 and this will continue to
be optimised where possible.
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
Other than £1.75m of the bank loan which is repayable between one and two years, 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.
Authorised
17,571,840 ordinary shares of 1p each
Allotted, called up and fully paid
10,674,578 (2012 - 10,674,578) ordinary shares of 1p each
2013
£000
2012
£000
176
107
176
107
Reserves
23
Share capital, share premium and retained earnings represent balances conventionally attributed to those
descriptions.
The capital redemption reserve represents the nominal value of ordinary shares repurchased and cancelled
by the Company and is undistributable in normal circumstances.
The Group having no regulatory capital or similar 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 2013 of 9.0p per share; this dividend is not
provided for in these financial statements.
Share Incentive Plan
24
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.
Share based payments
25
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 22 describes the options granted over the Company’s ordinary
shares.
In aggregate, options are outstanding over 3.1% 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.
56
57
Notes forming part of the financial statements
for the year ended 31 December 2013
26
Operating leases
As at 31 December 2013, the Group had future minimum rentals payable under non-cancellable operating
leases as set out below:
2013
Land and
buildings
£000
2012
Land and
buildings
£000
2013
Other
£000
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
534
317
851
82
168
250
164
118
282
2012
Other
£000
93
19
112
The commitment relating to land and buildings is in respect of the Group’s London, Dublin and Falkirk offices.
The remaining commitment relates to other property, contract hired motor vehicles (which are typically
replaced on a 3 year rolling cycle), and licencing of billing software.
27
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
2013
£000
1,132
20
1,152
2012
£000
1,164
19
1,183
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 2013 and 2012 amounted in aggregate to less than £1,500 in each case.
The Group traded during the year with The Imaginarium Studios Limited, a company in which J D S Booth
is a director and shareholder and N J Taylor was a director until April 2013. Imaginarium purchased
telecommunication services from the Group in the year amounting to £5,011 net of VAT (2012 - £6,181), of
which £348 (2012 - £376) was owed at the year end and is included in trade debtors.
Annual Report & Accounts
Maintel Holdings Plc 2013
Related party transactions (continued)
27
The Company paid fees of £44,000 plus £2,000 expenses to Hopton Hill Limited, a company of which N J Taylor
is a shareholder and director, in respect of consultancy services provided to the Company during the year in
relation to the acquisition of the Datapoint companies.
The Group paid commissions in the year to J A Spens, a shareholder in the Company, amounting to £10,141
net of VAT (2012 - £14,719), of which £Nil (2012 - £Nil) was owed at the year end. These commissions relate to
revenues earned by the Group following an introduction to a customer by Mr Spens.
The Group established a revolving credit facility of £1.5m in October 2011 with J D S Booth, the Group’s
chairman, however no monies were drawn against this and the facility expired on 30 June 2013.
Accounting estimates and judgements
28
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 13. 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. At 31
December 2013 the directors have also had to estimate the value of tax losses attributable to the Datapoint
companies that might be used against future profits, shown in notes 12 and 20, which involves estimating the
companies’ profitability and future tax rates.
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.
Business combination and asset purchase consideration
In certain circumstances, there may be a contingency to the consideration paid on the acquisition of a
company or business, and in such cases the directors have to use judgement on the likely outcome.
58
59
Company balance sheet at 31 December 2013 -
prepared under UK GAAP
Notes forming part of the Company financial statements
at 31 December 2013
Annual Report & Accounts
Maintel Holdings Plc 2013
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due
within one year
Net current liabilities
Non-current liabilities
Borrowings
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Note
2013
£000
2013
£000
2012
£000
193
12
205
2,398
5
6
7
8
9
10
10
10
821
3
824
3,372
12,831
(2,548)
(1,750)
8,533
107
1,028
31
7,367
8,533
2012
£000
9,331
(2,193)
-
7,138
107
1,028
31
5,972
7,138
The financial statements were approved and authorised for issue by the board on 7 March 2014 and were
signed on its behalf by:
W D Todd
Director
The notes on pages 61 to 65 form part of these financial statements.
Accounting policies
1
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.
(e) Contingent consideration
Where payment of contingent consideration in respect of a business combination or acquisition of business
and assets is dependent on the continued employment by the Company of the seller(s), the estimated
contingent consideration is pro rated in accordance with the period over which it is calculated.
Employees
2
The directors’ remuneration is shown in note 5 of the consolidated financial statements.
Profit for the financial period
3
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 £2,889,000 (2012 – £3,346,000).
60
61
Notes forming part of the Company financial statements
at 31 December 2013 (continued)
4
Dividends paid on ordinary shares
Final 2011, paid 26 April 2012 – 6.0p per share
Interim 2012, paid 5 October 2012 – 6.3p per share
Final 2012, paid 25 April 2013 – 7.3p per share
Interim 2013, paid 11 October 2013 – 6.7p per share
2013
£000
-
-
779
715
2012
£000
640
672
-
-
1,494
1,312
The directors propose the payment of a final dividend for 2013 of 9.0p (2012 – 7.3p) per ordinary share,
payable on 24 April 2014 to shareholders on the register at 21 March 2014.
5 Investment in subsidiaries
Cost
At 31 December 2012
Additions in the period
At 31 December 2013
Provision for impairment
At 31 December 2012 and 31 December 2013
Net book value
At 31 December 2013
At 31 December 2012
Shares in
subsidiary
undertakings
£000
9,411
3,500
12,911
80
12,831
9,331
Annual Report & Accounts
Maintel Holdings Plc 2013
Investment in subsidiaries (continued)
5
On 13 September 2013 the Company acquired the entire share capital of Datapoint Customer Solutions
Limited, Datapoint Global Services Limited and Datapoint Communications Limited (together “Datapoint”) for
a consideration of £3.5m, paid in cash.
The following were the principal subsidiary undertakings at the end of the year:
Maintel Europe Limited
Maintel Voice and Data Limited
Maintel Mobile Limited (previously Totility Limited)
Datapoint Customer Solutions Limited
Datapoint Global Services Limited
Datapoint Communications Limited
Each company is wholly owned and, other than Datapoint Communications Limited which is incorporated in
the Republic of Ireland, is 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
Borrowings
2013
£000
807
4
2
8
821
2013
£000
2,351
4
17
1,000
3,372
2012
£000
170
2
2
19
193
2012
£000
1,488
2
908
-
2,398
62
63
Notes forming part of the Company financial statements
at 31 December 2013 (continued)
8
Borrowings
Non-current bank loans - secured
Current bank loans - secured
2013
£000
1,750
1,000
2,750
2012
£000
-
-
-
The secured bank loan is secured by a fixed and floating charge over the assets of the Company and its
subsidiaries. Interest is payable at a variable rate of 3.05% per annum over LIBOR. The loan was drawn
in September 2013 and is repayable in quarterly instalments over a 3 year period, the first instalment of
£250,000 having been paid in December 2013. The directors consider that there is no material difference
between the book value and fair value of the loan.
The Company has a £1.0m overdraft facility with Lloyds Bank plc which expires on 31 August 2014, which was
not drawn upon as at 31 December 2013.
9
Share capital
2013
£000
2012
£000
Authorised
17,571,840 ordinary shares of 1p each
176
176
Allotted, called up and fully paid
10,674,578 (2012 - 10,674,578) ordinary shares of 1p each
107
107
The Remuneration Committee’s report on page 22 of the consolidated accounts of Maintel Holdings Plc
describes the options granted over the Company’s ordinary shares.
Annual Report & Accounts
Maintel Holdings Plc 2013
10
Reconciliation of movement in shareholders’ funds
At 1 January 2012
Profit for year
Dividends paid
Issue of new ordinary shares
At 31 December 2012
Profit for year
Dividends paid
Share
capital
£000
107
Share
premium
£000
1,013
-
-
-
107
-
-
-
-
15
1,028
-
-
At 31 December 2013
107
1,028
Capital
redemption
reserve
£000
31
-
-
-
31
-
-
31
Retained
earnings
£000
3,938
3,346
Total
£000
5,089
3,346
(1,312)
(1,312)
-
5,972
15
7,138
2,889
(1,494)
7,367
2,889
(1,494)
8,533
Related party transactions
11
The Company established a revolving credit facility of £1.5m in October 2011 with J D S Booth, the Group’s
chairman, however no monies were drawn against this and the facility expired on 30 June 2013.
Transactions with other Group companies have not been disclosed as permitted by FRS8, as the Group
companies are wholly owned.
Contingent liability
12
On the drawdown of the loan during the year, and the signing of the overdraft facility, the Company entered
into a cross guarantee with its subsidiary undertakings in favour of Lloyds Bank plc.
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65
Annual Report & Accounts
Maintel Holdings Plc 2013
8. 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 1,600,119 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
21 March 2014
Registered office
61 Webber St
London SE1 0RF
Notice of annual general meeting
(the following does not form 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 17 April 2014, at 9.30 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 2013,
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 2013.
3. To re-elect Mr A McCaffery who is retiring as a director in accordance with Article 92.1 of the
company’s Articles of Association and who, being eligible, offers himself for re-election.
4. To re-elect Mr J D S Booth who is retiring as a non-executive director in accordance with good
corporate governance practice, having been a director for more than nine years and who, being
eligible, offers himself for re-election.
5. 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 6 will be proposed as an
ordinary resolution and resolutions 7 and 8 as special resolutions:
6. That the directors be and are hereby generally and unconditionally authorised pursuant to Section
551 of the Companies Act 2006 (“the Act”) to exercise all powers of the Company to allot and to
make offers or agreements to allot relevant securities up to a maximum aggregate nominal amount of
£35,581, 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.
7. 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 £10,674.
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.
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67
Annual Report & Accounts
Maintel Holdings Plc 2013
Notice of annual general meeting (continued)
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 6.00 pm on 14
April 2014. 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 14 April
2014, 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 14 April
2014 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. Corporate
members are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on
proxies and corporate representatives – www.icsa.org.uk – for further details of this procedure. The guidance
includes a sample form of representation letter if the chairman is being appointed as described in (i) above.
68
69
61 Webber Street
London
SE1 0RF
09
www.maintel.co.uk