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Annual
Report &
Accounts 2017
Maintel Holdings Plc
Maintel Holdings
160 Blackfriars Road
Plc
London
SE1 8EZ
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Directors, Company details and advisers
Directors
E Buxton
S D Legg
J D S Booth
Chairman, non-executive director
Chief executive
Group sales and marketing director
A J McCaffery Director
A P Nabavi
Non-executive director
K Stevens
N J Taylor
Non-executive director
M V Townsend Chief financial officer
Secretary and registered office
Group integration and transformation director
W D Todd,
160 Blackfriars Road,
London SE1 8EZ
Company number
3181729
Auditors
BDO LLP,
55 Baker Street,
London W1U 7EU
finnCap Limited,
60 New Broad Street,
London EC2M 1JJ
Registrars
The Pavilions,
Bridgwater Road,
Bristol BS99 6ZY
Tel: 0370 707 1182
Computershare Investor Services Plc,
Nominated broker and nominated adviser
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Maintel Holdings Plc 79 Report and Accounts 2017
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At Maintel, we help businesses
become more competitive in the
digital economy with effortless
communications solutions.
We work with organisations to
make teams more effective and
efficient with digital workplace
technology, improve customer
relationships with customer
experience technology and
connect employees and
customers to applications and
data through secured
connectivity.
“The acquisition of Intrinsic enhances
Maintel’s already strong capability in
data networking and the fast-growing
network security sector, and we are
already seeing encouraging cross-sell
into our existing customer base.”
Eddie Buxton
Maintel CEO
Maintel Holdings Plc 1 Report and Accounts 2017
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Our cloud and managed
services help organisations
achieve real business
transformation, delivering
compelling customer
experiences online, in the
contact centre and in-store to
drive customer acquisition
and retention.
Maintel Holdings Plc 2 Report and Accounts 2017
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Highlights
ADJUSTED PROFIT
BEFORE TAX[3]
£10.9m
(2)%
2016: £11.1m
FULL YEAR DIVIDEND
PER SHARE
33.8p
10%
2016: 30.8p
GROUP REVENUES
£133.1m
23%
2016: £108.3m[1]
ADJUSTED EARNINGS
PER SHARE[2]
66.7p
(14)%
2016: 78.0p
Notes
[1] 2016 includes 8 months of Azzurri, which was acquired on 4 May 2016.
[2] Adjusted earnings per share is basic earnings per share of 21.7p (2016: 16.0p),
adjusted for intangibles amortisation, exceptional costs and deferred tax charges
related to loss reliefs from previous acquisitions of Datapoint and Azzurri (note 11).
The weighted average number of shares in the period increased to 14.2m
(2016: 13.1m) arising from the equity raise in May 2016 to support the Azzurri
acquisition.
[3] Adjusted profit before tax of £10.9m (2016: £11.1m) is basic profit before tax,
adjusted for intangibles amortisation and exceptional costs.
Contents
Strategic report
Chairman’s statement
Maintel overview
Business review
Corporate governance
Board of directors
Report on corporate
governance
Report of the remuneration
committee
Report of the directors
Statement of directors’
responsibilities
Financial statements
Independent auditor’s
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
consolidated financial
statements
Maintel Holdings Plc -
Company balance sheet
Maintel Holdings Plc -
Company reconciliation of
movement in shareholders’
funds
Notes forming part of the
Company financial
statements
Directors, Company
details and advisers
4
6
10
23
25
29
34
37
38
43
44
45
46
48
72
73
74
79
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Strategic report
Chairman’s statement
“The Group has made pleasing progress in
the period on its transition to a cloud and
managed services provider in the mid-market
and enterprise space and, as a result, has
entered 2018 well placed to capitalise on
future growth opportunities.”
J D S Booth
Chairman
The Group delivered revenue growth
of 23% in 2017, with revenues
increasing to £133.1m, underpinned
by a full twelve months’ contribution
from Azzurri and five months’
contribution from Intrinsic, the business
we acquired in August 2017. Excluding
Intrinsic, but including the full twelve
months contribution from Azzurri, the
Group’s core business grew by 15%
year on year in a highly competitive
market.
Adjusted profit before tax decreased
by 2% to £10.9m (2016: £11.1m) and
adjusted EPS decreased by 14% to
66.7p (2016: 78.0p) reflecting the
increase in shares outstanding
following the Azzurri acquisition.
Recurring contracted revenue made
up 71% of 2017 revenues (2016: 73%)
including the contribution from Intrinsic
which has a lower level of recurring
revenues than the Group overall.
The Group has made pleasing
progress in the period on its transition
to a cloud and managed services
provider in the mid-market and
enterprise space and, as a result, has
entered 2018 well placed to capitalise
on future growth opportunities. In the
period, the Group continued to invest
in key growth areas, such as our cloud
proposition, and focused on
diversification of the product offering,
through the acquisition of Intrinsic,
which brings key strategic benefits.
Managed service and technology
revenues increased by 24% year on
year to £79.4m, with managed
services revenue up 20% and
technology revenue up 29%, both
benefiting from the contribution from
Intrinsic. The underlying Maintel
business, excluding Intrinsic, grew by
11% to £71.1m (2016: £64.1m)
reflecting a full year’s contribution
from Azzurri.
Group gross profit increased by £1.7m
compared with 2016. Excluding
Intrinsic, gross profit remained flat year
on year, with gross margins declining
by 3% to 30%. This reduction was
driven by three main factors: the
impact of three large low gross margin
contracts won in 2016 but recognised
to revenue in 2017, the increased mix
of lower gross margin public sector
business in the year and the reduction
in very high margin legacy
maintenance business, particularly
Maintel Holdings Plc 4 Report and Accounts 2017
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Revenue
Growth
with revenues increasing
to £133.1m (2016: £108.3m)
Increased
Dividend
an increase of 10%
year on year
High Growth
in Cloud
Services
ICON contracted seats
increase c.80% year on year
one previously highlighted customer
that left in early 2017.
Network services revenue increased
by 25% year on year (23% excluding
Intrinsic) driven by the full year
contribution from Azzurri. Revenue
from legacy fixed line calls fell by 8%
reflecting the overall market decline
and Maintel’s sales focus on growing
cloud and managed services. Data
revenues increased by 38% year on
year driven by the high growth of our
ICON cloud suite of services, demand
for which continues to grow, in
particular ICON Communicate, our
unified communication service, which
delivered growth of c.80% in
contracted seats over the previous
year.
Mobile revenue was flat at £6.9m
delivering gross profit of £3.3m with
margins broadly unchanged.
The board proposes to pay a final
dividend of 19.1p per share, resulting
in a total ordinary dividend for the
year of 33.8p per share (2016: 30.8p
per share), an increase of 10% year
on year.
We remain committed to maximising
shareholders’ returns whilst reducing
net debt and maintaining a strong
balance sheet. Moving forward it is
our intention to return to a dividend
payout ratio of at least 40% of
adjusted net income. Based on our
confident outlook for the business,
we expect that the total dividend
paid annually will remain progressive
in absolute terms.
As a result of the major acquisitions
completed in the last two years, the
Group has undergone significant
transformation and now employs
more than 600 highly qualified
professionals. The successful
integration of these acquisitions,
in sometimes challenging market
conditions, was made possible by the
hard work and focus of our excellent
team. I want to thank them on behalf
of shareholders and the Board for last
year’s achievements, which leave us
well positioned for the year ahead.
J D S Booth
Chairman
16 March 2018
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Strategic report
Maintel overview
Main Head
Maintel is a cloud and managed
services company with a focus on
communications. Maintel helps its
customers to improve their businesses
through digital transformation by:
1. Enabling their organisations to be
more effective and efficient through
the use of digital workplace
technology;
2. Improving their relationships with
customers by deploying customer
experience technology; and
3. Connecting their employees and
customers to their applications and
their data through secured
connectivity.
This is delivered by providing a range
of cloud and on-premise technology
offers, complemented by
consultancy, professional and
managed services.
Maintel helps businesses to be competitive in the digital economy.
Maintel’s digital workplace offering includes unified communications (“UC”), meeting
technology, collaboration services, mobile devices and services, document
management and digital print management.
Maintel helps businesses deliver compelling customer experiences online, in the contact
centre and in-store; helping them to improve customer acquisition and retention.
Maintel’s customer experience is centred around omnichannel contact centre
technology, self-service channels and analytics.
Maintel securely connects businesses to their employees, customers, applications and
data, whether they are in an office location, on the road, at home or in the cloud.
Maintel’s connectivity portfolio covers wide and local area networking, public and
private cloud access and security products and services.
ICON
ICON is Maintel’s strategic delivery
platform for cloud services, and the
business is increasingly transitioning its
customer base from on-premises
telephony platforms to cloud
delivered via the ICON platform. A key
differentiator for the Group, Maintel’s
ICON offer comprises a broad range
of cloud connected and managed
services, the key services being:
• ICON Connect – Next generation,
cloud-optimised managed wide-
area network service
• ICON Secure – Network security
as-a-service
• ICON Communicate – Unified
communications as a service
• ICON Contact – Contact centre
as-a-service
• ICON Mobilise – Mobile device and
application management
as-a-service.
ICON represents a significant revenue
stream for Maintel and is increasing as
a part of the overall product mix.
Currently over 50% of our near-term
major project pipeline is for ICON
services. Revenue generated from the
ICON platform is of high quality, 100%
recurring and provides the Group with
a long-term client base.
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Main Head
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Partner strategy
Maintel partners with leading vendors
across its portfolio, always aiming to
be in the highest category of partner
accreditation for strategic parts of the
portfolio.
The Group continues to review its
partner strategy as technology
changes and markets evolve, but
always seeks to partner with more than
one vendor in any given technology to
ensure independence and
appropriate choice for customers.
Key partners across the main product
areas are:
r
t
S
Digital workplace
Customer experience
Secured connectivity
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Strategic report
Maintel overview continued
Go-to-market strategy
Direct business
Maintel’s direct sales team is focussed
on UK public and private sector
organisations, typically with between
250 and 10,000 employees. The
strategy is threefold for this team:
1. Commercial and enterprise
customer development – Maintel
has an enviable customer base in
the UK mid-market and enterprise
space, and there is considerable
opportunity to develop this base,
increase product penetration, and
migrate existing customers to next
generation technology such as
cloud delivery. There are teams
focussed solely on existing
customers, and there is considerable
opportunity for growth in this
segment.
2. Commercial and enterprise new
customer acquisition – Maintel has a
new business sales team focussed
on “new logo” customer acquisition.
The customer development team
then oversees project delivery and
completion.
3. Public sector – Maintel has a strong
presence in the UK public sector,
with a particular focus on primary
healthcare trusts, local authorities,
tertiary education, government
agencies and social housing. There
are two teams entirely focussed on
this market – one responsible for
new customer acquisition, and one
focussed on customer
development. Customer acquisition
is via both a variety of public sector
procurement frameworks and
traditional proposal/contract.
Indirect business
Relationships with channel partners,
predominantly national and global
systems integrators and
telecommunications services
providers, allow the provision of
Maintel’s full set of products and
services more widely, both in the UK
and internationally. Typically, this
business focusses on the enterprise
market of 5,000 employee
organisations and above, although
there is some wider historic managed
service business predominantly
providing on-site and remote support
services on legacy unified
communications (UC), contact centre
and networking equipment. Maintel
Partner Services has a dedicated
channel management team,
reporting to an independent sales
director to avoid channel conflict.
Business development
strategy
Organic growth
Following a period of consolidation
and integration throughout 2016 and
2017 after the acquisitions of Azzurri
Communications and Intrinsic
Technology, the focus is now on an
increase in organic growth, both
through new customer acquisition and
through increasing product
penetration in the existing customer
base.
The significant growth in ICON
delivered during 2017 will continue
through 2018 and beyond as
organisations embrace cloud. As a
result, the ICON platform grows in
importance, and Maintel continues to
invest in the platform to support that
growth. The Group has appointed a
cloud services director to deliver that
investment and to direct the Group’s
evolution towards an increasingly
cloud-delivered set of products and
services. 2018 will see the biggest
investment in the platform to date
with increased capex aimed not just
at capacity increases, but also at
performance optimisation, increasing
automation and enhancing the
product offers.
M&A
Having made two major acquisitions in
recent years, which together more
than trebled the size of the business,
Maintel now operates at a significant
scale. The Group will continue to
consider selective acquisitions, where
appropriate, to drive shareholder
value and to continue to develop the
business to maintain its competitive
positioning; however, the primary
focus of any near-term acquisitions will
be on enhancing capability and
diversifying product offering.
Product & service strategy
Maintel continues to aim to be a
market leader, both in new product
and service offerings and in its existing
portfolio.
Digital workplace
Maintel anticipates a continuation of
the significant growth seen to date in
the number of contracted seats on its
ICON Communicate platform. The
platform now offers managed
communications services from Avaya
(both Aura and IP Office), Mitel and
Microsoft and all four platforms are
expected to show substantial growth
during 2018 and beyond. The addition
of Avaya Aura to the ICON
Communicate portfolio is expected to
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Main Head
be particularly significant in terms of
seat count growth, with many existing
and new customers looking to migrate
their current environments into the
cloud.
In addition to traditional UC and
collaboration tools, Maintel expects to
deliver an increasing number of
meeting tools, collaboration devices
and broader team collaboration
software.
Mobility remains a key component of
Maintel’s portfolio, with an increased
focus on managed mobility services
and the support of collaboration
services on mobile devices.
Customer experience
Omnichannel customer experience
technology is a key focus for many
Maintel customers, whether deployed
as public cloud, private cloud or
on-premise technology. Maintel has a
strong practice in workforce
optimisation and the use of analytics
to improve customer journeys and to
provide insight into company and
product performance.
Maintel will invest significantly in its
own multichannel contact centre
platform, Callmedia, while continuing
to partner with global leaders in the
customer experience sector, such as
Avaya, Genesys, Verint and NICE.
Maintel has also made significant
investment in its professional services
capability around customer
interaction automation, an area
identified for continued development,
and in integration skills around the
new Avaya portfolio.
Although contact centre technology
has trailed UC in cloud adoption, the
customer experience pipeline is
increasingly for cloud-based delivery.
Secured connectivity
With the acquisition of Intrinsic
Technology in August 2017, Maintel
has significantly bolstered its capability
in local area networking, both wired
and wireless. Combined with Maintel’s
existing capability in that space, and
with the significant capability and
customer base for wide area networks
based on Maintel’s ICON Connect
service, Maintel now has a managed
connectivity offer across all areas of
connectivity and network security.
Developments in 2017 included the
addition of on-net public-cloud
connectivity to providers such as
Microsoft Azure and AWS, and in early
2018, Maintel will launch a Software
Defined WAN (SD-WAN) capability
within ICON Connect.
ICON Secure, Maintel’s security
as-a-service offer, has also been
improved with additional capabilities
and products from the Intrinsic
acquisition, and security is increasingly
a core competence.
Maintel will continue to develop the
connectivity offerings to keep pace
with the increased demands of cloud
access, high bandwidth services and
to support the growth of Internet of
Things (IoT) projects.
People strategy
As a cloud and managed services
company, the acquisition,
development and retention of talent is
imperative. During 2017, Maintel
appointed a Chief people officer to
define and deliver its people strategy
in line with the Group culture and
values, which were developed and re-
launched during the year. These
reflect how the people, the teams
and the corporate entity behave, and
the culture the Group wants to
develop and nurture.
We play it straight
Honesty,
transparency
and integrity in
our dealings with
each other, our
partners and our
customers.
We enjoy what
we do and work
as at team
We are pioneering
We are empowered,
and accept accountability
We are agile
and flexible
We constantly
learn and grow
Enjoying being at
work, being serious
without taking
ourselves too
seriously. Valuing
each and every
individual, while
putting what’s
right for the
team first.
Being courageous
and resourceful,
developing our
business by
improving those of
our customers,
anticipating
change and
challenging the
status quo.
Doing what’s right
and taking
responsibility. Being
accountable for our
targets, actions and
commitments.
Flexible and agile
people, processes
and services – able
to adapt quickly.
Always learning –
never standing
still.
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Strategic report
Business review
Results for the year
During the year, Maintel has
continued its transition from a
traditional telecoms service provider
towards a cloud and managed
services provider. The acquisition of
Intrinsic on August 1 2017 further
strengthens the Group’s product
portfolio in data networking and
network security through the addition
of Cisco expertise. Maintel is now one
of the UK’s leading Cisco Gold
Partners.
Reported numbers for the year include
a full 12 months’ contribution from
Azzurri, compared to eight months’
contribution in the prior year, and five
months contribution from Intrinsic,
acquired in August 2017.
Group revenues increased by 23% to
£133.1m (2016: £108.3m) with adjusted
EBITDA of £12.5m down 1% (2016:
£12.6m). Adjusted profit before tax
decreased by 2% to £10.9m (2016:
£11.1m). Adjusted earnings per share
(EPS) decreased by 14% to 66.7p
(2016: 78.0p), in part due to the
increased number of shares in issue
following the issue of new shares in
2016 as part of the Azzurri transaction.
The proportion of Maintel revenue
being generated from recurring
products and services (being all
revenue excluding one-off projects)
remained high at 71% of total
revenue, with a marginal reduction on
the prior year (2016: 73%) as a result of
the contribution from Intrinsic, which
has a higher proportion of project
based, non-recurring revenue.
On an unadjusted basis, profit before
tax increased by 67% to £3.5 m (2016:
£2.1m) and basic EPS by 36% to 21.7p
(2016: 16.0p). This includes £1.5m of
exceptional costs associated with the
Intrinsic acquisition and related
restructuring activities (2016: £4.2m
relating to the Azzurri acquisition), and
intangibles amortisation of £5.9m
(2016: £4.7m), the increase in the latter
due mainly to the acquired Intrinsic
intangible assets and a 12 month
charge relating to the Azzurri acquired
intangible assets.
2017
£000
2016
£000
Increase/
(decrease)
133,079
108,296
Revenue
Profit before tax
Add back intangibles amortisation
Exceptional items mainly relating to the acquisition of Intrinsic
(2016: Azzurri) and associated restructuring activities
Adjusted profit before tax
Adjusted EBITDA(a)
Of which(b): Maintel
Intrinsic
Basic earnings per share
Diluted
Adjusted earnings per share(c)
Diluted
(a) Adjusted profit before tax after adding back net finance expense and depreciation
(b) After management charges
(c) Adjusted profit after tax divided by weighted average number of shares (note 11)
3,516
5,892
1,454
10,862
12,524
12,246
278
21.7p
21.3p
66.7p
65.5p
2,107
4,733
4,240
11,080
12,598
12,598
–
23%
67%
–
–
(2)%
(1)%
(3)%
–
16.0p 36%
15.8p 35%
78.0p
76.8p
(14)%
(15)%
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Cash performance
The Group generated net cash flows
from operating activities of £4.4m
(2016: £10.6m).
As detailed in the interim results, cash
flow in the first half was negatively
impacted by the unwind from strong
trading in H2 last year, and also by the
success of our ICON service offering,
which resulted in both reduced
upfront project billing and a need for
capital investment in additional
capacity.
As anticipated cash flow improved
materially in the second half, with
cash conversion(d) in the second half
of 96%. The net outflow in working
capital because of the unwind in H1
detailed above, resulted in cash
conversion(d) at 35% for the full year
(2016: 84%).
Acquisition of Intrinsic
Maintel acquired Intrinsic Technology
Ltd (“Intrinsic”) on 1 August 2017 on a
cash-free, debt-free basis for a
consideration of £5.25m, reduced to
£4.90m through price adjustment
mechanisms, payable in cash. The
acquisition was funded by an
extension to, and draw-down under,
the Company's existing Revolving
Credit Facility with the Royal Bank of
Scotland Plc (the “RCF”). The RCF,
originally secured in April 2016, has
been increased by £6 million to
£42 million.
The acquisition of Intrinsic makes
compelling strategic and financial
logic. As one of the UK’s leading Cisco
Gold Partners it significantly enhances
Maintel’s already strong capability in
LAN networking and the fast growing
network security sector. In addition, as
a top-level Avaya Diamond Partner
Intrinsic will further strengthen Maintel’s
managed service base.
Intrinsic’s customers are predominantly
medium to large enterprises and it has
a strong presence in public sector
organisations, particularly in the NHS,
local authorities, education and blue
light services that enhances Maintel’s
growth in the public sector.
The acquisition brings significant
mutual cross-sell opportunities, both in
terms of offering Maintel’s existing
portfolio to Intrinsic’s customers, in
particular our ICON suite of cloud and
managed services and in terms of
Intrinsic’s Cisco services to Maintel’s
customer base. We are pleased with
the performance of the business in the
period since acquisition, with good
cross-sell opportunities already being
realised. Cisco cross-sell business since
acquisition is c. £2.0m, including a
£0.5m technology project with a local
authority customer and a £0.4m
managed service contract with a
large property services customer.
Annualised synergies of £2.0m were
identified at the time of the
acquisition, which have been realised
in full within the period and we expect
Intrinsic to contribute positive EBITDA
and be earnings enhancing in the
financial year to 31 December 2018.
(d) Being net cash flows from operating activities as a % of adjusted EBITDA
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Strategic report
Business review continued
Review of operations
The following table shows the
performance of the three operating
segments of the Group. The 2017
results include a full 12 months’
contribution from Azzurri compared to
eight months’ contribution in 2016. On
1 January 2017, as part of the
corporate restructuring of the Group,
the Azzurri trading entity was hived up
into Maintel Europe Ltd so that for 2017
the UK operations were managed and
controlled as one entity.
Excluding Intrinsic, Maintel generated
£124.1m of revenue, an increase of
15% over the previous year.
Revenue analysis
Maintel (excluding Intrinsic)
Managed services related
Technology(e)
Managed services and technology division
Network services division
Mobile division
Intercompany
2017
£000
2016
£000
Increase/
(decrease)
37,129
33,950
71,079
46,111
6,898
–
34,630
29,479
64,109
37,395
6,947
(155)
Total Maintel (excluding Intrinsic)
124,088
108,296
Intrinsic(f)
Managed services related
Technology(e)
Managed services and technology division
Network services division
Mobile division
Total Intrinsic
Total Maintel Group
Managed services related
Technology(e)
Managed services and technology division
Network services division
Mobile division
Intercompany
Total Maintel Group
4,311
3,996
8,307
684
–
8,991
41,440
37,946
79,386
46,795
6,898
–
–
–
–
–
–
–
34,630
29,479
64,109
37,395
6,947
(155)
133,079
108,296
7%
15%
11%
23%
(1)%
(100)%
15%
–
–
–
–
–
–
20%
29%
24%
25%
(1)%
(100)%
23%
(e)
Technology includes revenues from hardware, software, professional services and other sales.
(f)
Intrinsic was acquired on 1 August 2017, and therefore 5 months’ of its financial performance has been recognised post-acquisition.
Gross margin for the Group reduced to 29% from 32% in 2016, driven by the reduction in gross margin in the managed
services and technology division, as detailed below, and five months’ contribution from the lower gross margin Intrinsic
operations. Excluding Intrinsic, gross margin was 30%.
The level of recurring revenue decreased to 71% (2016: 73%), as a result of the inclusion of Intrinsic. Intrinsic’s standalone
business was 56% recurring in the period since acquisition.
Detailed divisional performance is described further below.
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Managed services and technology division
Maintel (excluding Intrinsic)
Divisional revenue
Division gross profit
Gross margin (%)
Intrinsic
Divisional revenue
Division gross profit
Gross margin (%)
Total Maintel Group
Divisional revenue
Division gross profit
Gross margin (%)
2017
£000
71,079
21,353
30%
8,307
1,759
21%
79,386
23,112
29%
2016
£000
64,109
21,408
33%
–
–
–
64,109
21,408
33%
Increase
11%
–
–
–
–
–
24%
8%
–
The managed services and
technology division provides the
management, maintenance, service
and support of unified
communications, contact centres and
local area networking technology
both on customer premises and in the
cloud, across the UK and
internationally, on a contracted basis.
It also supplies and installs project-
based technology, professional and
consultancy services, to our direct
clients and through our partner
relationships.
Revenue in this division increased by
24% to £79m with Intrinsic contributing
£8m. Excluding Intrinsic, growth was
11%, with managed services related
revenue up 7% year on year and
technology up 15%, both revenue
streams boosted by a full 12 months’
contribution from Azzurri.
Group gross profit increased by £1.7m
compared with 2016. Excluding
Intrinsic, gross profit remained flat year
on year, but with gross margins
declining by 3% to 30% compared to
33% in 2016. The gross margin decline
was driven by three main factors: the
impact of three large low gross margin
contracts won in 2016 but recognised
to revenue in 2017; the increased mix
of lower gross margin public sector
business in the year; and the reduction
in very high margin legacy
maintenance business, particularly
one previously highlighted customer
that left in early 2017.
Technology sales in the period were
adversely affected by the previously
highlighted delays in customer
projects. Technology revenues in the
second half were 15% lower than the
same period in the prior year, which
was a particularly strong comparator
period due to several large contracts
falling into the second half of 2016. This
masked a strong performance from
our new public sector team, with
Maintel winning 24 new contracts on
the public sector network services
framework in 2017, particularly in the
NHS sector.
An increasing number of public sector
organisations are contracting services
on our cloud platform. The acquisition
of Intrinsic, which has a particularly
strong footprint in the public sector,
further strengthens our position in this
area.
As previously explained, we are seeing
some negative impact on the level of in
year technology sales as our customers
look to move large scale projects off-
premises and into the cloud.
In the year, Maintel continued to see
a reduction in the legacy break/fix
maintenance base, as the Group’s
focus continues to shift towards
winning larger, multi-year managed
service contracts with newer
technology and a wider suite of
supporting products including
software support, network monitoring
and productivity services. This newer
technology and the move to cloud
services reduces the need for a large
field based engineering team and
Maintel’s business model and
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Strategic report
Business review continued
organisation structure will continue to
evolve to address this change in
technology.
At 31 December 2017, the managed
service base including Intrinsic stood
at £41.5m up c.15% on 2016.
The near term sales pipeline is strong
and we are particularly pleased to
note that Avaya, our core vendor, has
become a listed business with a strong
product strategy focusing on cloud
services. Q1 20I8 has seen a significant
increase in our Avaya project pipeline
and Maintel looks forward to working
closely with Avaya on these
opportunities.
Network services division
The network services division sells a
portfolio of connectivity and
communications services, including
managed MPLS networks, security as a
service, internet access services, SIP
telephony services, inbound and
outbound telephone calls and hosted
IP telephony solutions. These services
complement the on-premise and
cloud solutions offered by the
managed service and technology
division and the mobile division’s
services.
Maintel (excluding Intrinsic)
Call traffic
Line rental
Data connectivity services
Other
Total division
Division gross profit
Gross margin (%)
Intrinsic
Call traffic
Line rental
Data connectivity services
Other
Total division
Division gross profit
Gross margin (%)
Total Maintel Group
Call traffic
Line rental
Data connectivity services
Other
Total division
Division gross profit
Gross margin (%)
2017
£000
6,173
11,495
28,042
401
46,111
12,286
27%
–
–
684
–
684
110
16%
6,173
11,495
28,726
401
46,795
12,396
26%
2016
£000
Increase/
(decrease)
6,690
10,093
20,282
330
37,395
10,257
27%
–
–
–
–
–
–
–
6,690
10,093
20,282
330
37,395
10,257
27%
(8)%
14%
38%
22%
23%
20%
–
–
–
–
–
–
–
–
(8)%
14%
42%
22%
25%
21%
–
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Network services revenues increased
by 25% year on year. Excluding
Intrinsic, growth was 23%. Divisional
gross margin decreased by 1% to 26%,
but excluding Intrinsic was unchanged
at 27% (2016: 27%).
Traditional call traffic revenues
decreased 8% to £6.2m (2016: £6.7m),
which is a reflection of the overall
market decline of call traffic, and a
shift in the sales focus of the Group to
meet the higher demand for cloud
and managed services. During the
year, a large low margin customer
contract was not renewed and this
customer has now migrated away.
The Group continues to migrate
customers proactively to the
replacement SIP based service. During
the year, the number of SIP lines has
increased by 3% overall. In 2018, we
expect to see accelerated growth of
SIP channels as we move more
customers onto our cloud platform.
Data connectivity revenues increased
by 38% over the previous year, driven
by the high growth of our ICON cloud
suite of services. We have previously
highlighted the quicker than expected
migration away of two large legacy
WAN customers (not on the ICON
platform) in the second half of the
year, which had a material impact on
Maintel’s performance in this division.
The growth of our ICON cloud services
continued throughout the year,
particularly ICON Communicate, our
unified communications service, which
delivered growth of c.80% in
contracted seats over the previous
year. The trend of larger customers
moving to the cloud accelerated,
with a major utility company moving
its Avaya enterprise unified
communications and contact centre
services onto the ICON platform. This
customer will also benefit from moving
to ICON Secure, our cloud-based
network security proposition that
continues to gain traction.
Over 50% of our near term sales
prospect pipeline of unified
communications and contact centre
opportunities are cloud-based, a
significant increase over the previous
period.
As highlighted previously, the Group
continued to invest in the ICON
platform throughout the year to
ensure it is well positioned to capitalise
on the significant opportunity for ICON
cloud services. As part of this focus,
the Group has appointed a cloud
services director, reporting to the CEO,
and increased the size of the cloud
services team, to drive the expansion
and delivery of our cloud platform
and services. Planned new
developments include our Software
Defined WAN (SD-WAN) product,
currently being trialled, a cloud -based
payment card industry compliant
secure payment product (PCI) to be
launched shortly with a major
insurance company, health and social
care network (HSCN)
connectivity/compliance and
enhanced automation across all
elements of the ICON platform to
speed up customer on-boarding,
reporting and the end-to -end
customer experience.
Mobile division
Maintel mobile derives its revenue
primarily from commissions received
under its dealer agreements with
Vodafone and O2 and from value
added services such as mobile fleet
management and mobile device
management.
Maintel (excluding Intrinsic)(g)
Revenue
Gross profit
Gross margin (%)
Total Maintel Group
Number of customers
Number of connections
(g)
Intrinsic had £Nil of mobile revenues in 2017.
2017
£000
6,898
3,281
48%
2016
£000
6,947
3,385
49%
1,516
42,108
2,476
51,935
Decrease
(1)%
(3)%
–
(39)%
(19)%
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Strategic report
Business review continued
As highlighted in the 2016 annual
report, as part of integrating Azzurri,
the Group undertook a strategic
review of its mobile business, resulting
in the decision to reduce its presence
in the small business space. This
reduces the Group’s exposure to
mobile and re-focuses our sales
activity in line with the other product
propositions in the target mid-market
sector.
This activity is now complete and as a
result, the customer base and number
of connections have reduced by 39%
and 19% respectively.
Following this process, mobile
revenues have now stabilised with only
a small decrease of 1% over the
previous year to £6.9m (2016: £6.9m).
The average number of handsets per
customer has increased by c.30%, as
the Group’s focus has successfully
moved towards the mid-market
sector.
Gross profit of £3.3m was delivered,
with gross margin reducing slightly to
48% from 49% in 2016. However, on an
adjusted basis removing one off
contributions received in 2016 for
divesting the small customer base, the
underlying gross margin has remained
broadly flat.
Our sales focus is on cross-selling into
our existing customer base, and with
fewer than 20% of our customers
currently taking our mobile offer, this
remains a significant opportunity, with
the acquisition of Intrinsic offering
further cross-selling opportunities.
O2 remains our largest network
partner with 84% of connections being
on their network.
During 2018, it is planned to launch a
wholesale proposition to complement
our dealer arrangements, allowing
increased flexibility on customer tariffs,
and opening up opportunities not
currently available to the Group.
Other operating income
Other operating income of £155,000
(2016: £151,000) constitutes a full year
rental income from the sub-letting of a
part of the Group’s London premises.
The sub-lease runs until November
2020 with a break option in
December 2018.
Administrative expenses, excluding intangibles amortisation and exceptional expenses
Administrative expenses(h)
Maintel (excluding Intrinsic)
Maintel sales expenses
Maintel other administrative expenses
Maintel (excluding Intrinsic) total administrative expenses
Intrinsic
Intrinsic sales expenses
Intrinsic other administrative expenses
Intrinsic total administrative expenses
Total Maintel Group
Total sales expenses
Total other administrative expenses
Total administrative expenses
(h) Excluding intangibles amortisation, management recharges and exceptional expenses.
2017
£000
13,363
12,317
25,680
996
507
1,503
14,359
12,824
27,183
2016
£000
12,056
11,008
23,064
–
–
–
12,056
11,008
23,064
Increase
11%
12%
11%
–
–
–
19%
16%
18%
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Some of Intrinsic’s inherited costs are
now shared across the Group, with the
above figures reflecting the costs in
respect of the entity to which they are
contracted, rather than the entity
which obtains the benefit, and as such
are indicative only, with a view to
showing the control that continues to
be exercised over administrative
expenses and the more significant
movements.
Total administrative expenses for the
Group increased to £27.2 m (2016:
£23.1m). Excluding Intrinsic, Maintel’s
costs are 11% higher at £25.7m from
£23.1m in 2016 driven in the main by
twelve months inclusion of Azzurri. Total
administrative expenses as a
percentage of total revenue have
reduced to 20% from 21% in 2016.
Annualised savings of £5.0m had
already been delivered as at 31
December 2016, as Azzurri was
integrated into the Group, ahead of
the £4.6m of annualised synergies
identified at the time of the
transaction.
In addition, as part of the integration of
Intrinsic and an ongoing review of
operational efficiencies a further £3.0m
of annualised savings were delivered in
Q4 2017 from the Group’s total
overhead base.
The Group’s headcount as at
31 December 2017 was 670
(31 December 2016: 655), reflecting a
reduction of 12% after taking into
account Intrinsic’s headcount of 103 at
the date of its acquisition.
Property costs in 2017 were reduced by
£0.4m from the lease assignment to a
new tenant and the subsequent sub-let
of space at our Weybridge site.
Costs relating to accounting for share
options increased to £0.3m (2016:
£0.1m).
As we progress further with our
integration plan, total administration
costs will continue to be tightly
controlled and we expect to deliver
further cost savings in H1 2018.
Exceptional costs
A breakdown of the exceptional costs
of £1.5m (2016: £4.2m) shown in the
income statement is provided in
note 12. The main elements are legal
and professional fees associated with
the acquisition of Intrinsic (£0.3m) and
staff related restructuring costs
associated with the integration of the
Intrinsic business and the ongoing
review of the Group’s operating cost
base (£1.1m).
Intangibles amortisation
The intangibles amortisation charge
increased in the year due to a full
year’s charge in respect of Azzurri
compared to eight months in 2016 and
five months’ charge relating to Intrinsic.
Impairment and amortisation charges
are discussed further below.
Foreign exchange
The Group’s reporting currency is
Sterling; however, it trades in other
currencies, notably the Euro, and has
assets and liabilities in those currencies.
The Euro rate moved from €1.17 = £1 at
31 December 2016 to €1.13 = £1 at
31 December 2017 and the US Dollar
rate moved from $1.24 = £1 at
31 December 2016 to $1.36 = £1 at
30 December 2017. The effect of this
and other movements in the period
was a net gain to the income
statement of £149,000 (2016: £33,000
gain), which is included in other
administrative expenses.
The exchange difference arising on the
retranslation at the reporting date of
the equity of the Group’s Irish
subsidiary, whose functional currency is
the Euro, is recorded in the translation
reserve as a separate component of
equity, being a charge of £9,000 in the
period (2016: £40,000).
Interest
The Group recorded a net interest
charge of £0.9m in the year, in line with
2016.
Taxation
The consolidated statement of
comprehensive income shows a tax
rate of 12.3% with a tax charge of
£0.4m (2016: £13,000) on a profit before
tax of £3.5m (2016: £2.1m) for the
reasons described below.
Each of the Group companies is taxed
at 19.25%, with the exception of
Maintel International Limited, which is
taxed at 12.5% (2016: 20%; 12.5%)
respectively. Certain expenses that are
disallowable for tax raise the underlying
effective rate above this.
The tax charge in the period benefitted
from a deferred tax credit of £0.5m,
reflecting an increase in the deferred
tax asset based on the directors’
assessment that more tax losses, arising
originally from the Datapoint
acquisition, are likely to be useable in
the future. This was offset by a deferred
tax charge of £0.2m associated with
the creation of an intangible asset
relating to software licences.
This is described further in note 21.
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Strategic report
Business review continued
Dividends and adjusted
earnings per share
A final dividend for 2016 of 17.4p per
share (£2.5m in total) was paid on
18 May 2017. An interim dividend for
2017 of 14.7p (£2.1m) was paid on
5 October 2017. The board is pleased
to confirm an increase in the full year
dividend of 10% for the financial year
ending 31 December 2017, resulting in
a final dividend of 19.1p per share
being proposed. This would take the
total dividend payment for 2017 to
33.8p.
In accordance with accounting
standards, the final dividend is not
accounted for in the financial
statements for the period under review,
as it had not been committed as at
31 December 2017.
Consolidated statement of
financial position
Net assets, including Intrinsic,
decreased by £1.1m in the year to
£27.1m at 31 December 2017
(31 December 2016: £28.2m) due to
the comprehensive income earned in
the period and grant of share options
offset by dividends paid.
Intangible assets valued at £67.5m,
increased by £4.3m, driven by
intangibles arising on the acquisition of
Intrinsic (see note 14) and software
licences purchased, offset by the
amortisation charge in the year of
£5.9m (2016: £4.7m).
The net book value of property, plant
and equipment decreased by £1.8m
to £1.5m (2016: £3.3m). This was
primarily driven by the reclassification
of the Burnley freehold property,
valued at £1.5m, to current assets as a
result of the decision taken to market
the property for sale (see note 17 for
further details). The additional £0.3m
decrease was the net effect of
additions of £0.4m, including acquired
assets from Intrinsic of £0.2m, offset by
the depreciation charge of £0.7m.
Trade receivables increased by £1.6m
in the year to £19.0m, with £1.1m
attributable to Intrinsic. Excluding
Intrinsic, the increase of £0.5m is due to
the net effect of a number of phasing
differences in both technology and
managed service invoicing spanning
the year-end.
Prepayments and accrued income
increased by £5.4m to £17.0m.
Excluding Intrinsic, the increase was
£2.2m, most of this being driven by:
(a) higher level of accrued income
(£0.9m), associated with one large
project; (b) increase in prepaid costs
relating to hardware funds from the
mobile business (£0.3m); and (c) lower
level of revenue deferrals (£1.0m),
driven by a fewer number of large
scale projects at year end 2017
compared to year end 2016.
Assets held for resale of £1.5m relates to
the freehold property in Burnley,
following the decision to market the
property for sale (see note 17).
Inventories are valued at £3.3m,
a decrease of £1.6m in the year,
notwithstanding Intrinsic contributing
£0.1m. The value of stock held for
resale reduced by £1.4m due to the
timing of customer deliveries, with
some large projects at year-end 2016
not being replicated at year-end 2017.
Maintenance service stock reduced by
£0.2m due mainly to the results of
regular revaluation.
Trade payables increased by £3.6m in
the year to £13.5m (2016: £9.9m).
Excluding Intrinsic, trade payables
have increased by £1.5m with a
number of different supplier and
delivery timing factors affecting the
balance.
Other tax and social security liability
has decreased by £1.2m,
notwithstanding a £0.7m increase
attributable to Intrinsic. Excluding
Intrinsic, the other tax and social liability
for Maintel decreased by £1.9m. This
was due to a lower VAT liability
because of reduced Q4 customer
invoicing in 2017 compared to 2016
and the unwinding of timing
differences on VAT payments due to a
change in Group registration in FY
2016.
Accruals are £6.7m (2016: £8.5m) and
excluding Intrinsic have decreased by
£1.8m year on year. The decrease is
attributable to a combination of a
higher level of accrued costs
associated with several large projects
in progress at 2016 year-end (£1.8m),
bank interest (£0.2m), and others
£0.2m.
Other payables are £3.4m compared
to £3.6m in 2016, a decrease of £0.2m,
primarily due to a reduced level of
hardware funds and cash advances of
£0.1m, linked to the mobile business,
offset by others of £0.1m.
Deferred managed service income
increased to £19.2m, with £4.1m
attributable to Intrinsic. Excluding
Intrinsic the balance has decreased by
£0.9m, in the main due to invoice
timing differences driven in particular
by one large legacy customer that left
early in Q1 2017.
Other deferred income amounted to
£4.8m, but excluding Intrinsic
decreased by £2.0m due to the
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unwinding of two significant legacy
WAN contracts in Q4 2017.
Corporation tax liabilities increased by
£0.9m to £1.4m (2016: £0.5m), reflecting
the estimated liability associated with
the profits derived from FY 2017 trading
activities offset by the utilisation of its
historical tax losses and unused capital
allowances. Due to the hive up of
Datapoint’s UK businesses into Maintel
Europe in Q4 2016, the Group is
currently accounting for relief of the
historic Datapoint losses on a streamed
basis against the profits of the trade
that was transferred from the previous
Datapoint UK businesses.
Non current other payables are £1.5m
(2016: £0.9m) an increase of £0.6m due
to increase in intangible licences.
The deferred tax liability increased by
£0.2m to £2.2m (2016: £2.0m). This is
partly due to the creation of a deferred
tax liability of £1.1m associated with the
intangibles acquired, offset by an asset
of £0.2m associated with unused
capital allowances of Intrinsic. The
remaining movement of £0.7m is due
to: (a) £0.8m application of deferred
tax assets relating to historic losses and
capital allowances and (b) £0.1m
relating to purchase of licences, offset
by credits : (a) a £1.1m intangibles
amortisation charge, and (b) a £0.5m
relating to an additional asset
established in relation to the projected
use of historic Datapoint losses.
Intangible assets
The Group has two intangible asset
categories: (i) an intangible asset
represented by customer contracts
and relationships, brand value, product
platforms and software acquired from
third party companies, and (ii) goodwill
relating to historic acquisitions.
Property
Following the acquisition of Intrinsic, the
Group benefits from three additional
property leases for office and
warehouse premises located in
Haydock, with lease terms to 2020 and
2022 respectively, at a combined
annual rental of £0.2m.
The intangible assets represented by
purchased customer contracts and
relationships, brand value, product
platforms and software were carried at
£27.8m at the period end (2016:
£27.0m). The intangible assets are
subject to an average amortisation
charge of 18% of cost per annum in
respect of the managed service and
technology division, 13% per annum in
respect of the network services division
and 16% per annum in respect of the
mobile customer relationships, with
£5.9m being amortised in 2017 (2016:
£4.7m), the increase being attributable
to a full 12 months’ charge relating to
the Azzurri intangibles acquired in May
2016 and five months’ charge relating
to the Intrinsic intangibles acquired in
August 2017.
Goodwill of £39.7m (2016: £36.1m) is
carried in the consolidated statement
of financial position, which is subject to
an impairment test at each reporting
date. The increase of £3.5m is because
of the Intrinsic acquisition. No
impairment has been charged to the
consolidated statement of
comprehensive income in 2017
(2016: £Nil).
As part of management’s ongoing
review and consolidation of its existing
property locations, the following
changes have been made in 2017:
(a) In March 2017, the lease of the
Weybridge property was assigned
to a new tenant and Maintel has
sub-let a much-reduced space. The
estimated saving over the remaining
term of the lease is approximately
£1.0m, of which £0.4m benefited the
2017 results.
(b) In Q4 2017, the Group terminated
property leases associated with its
Thatcham and Manchester
premises, generating annualised
savings of £0.1m. Dilapidation costs
of £0.1m were incurred on exit from
the Thatcham office.
(c) A review was undertaken of the
Burnley freehold property, which
identified significant repairs to be
incurred in the future, resulting in a
decision to market the property,
consolidate the warehousing
requirements in Haydock and to
lease more modern alternative
office premises.
On 23 February 2018, a sale of the
freehold property was successfully
concluded for £1.5m and the premises
leased back for up to 12 months whilst
new offices are sought.
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Strategic report
Business review continued
Cash flow
The Group had net debt of £27.7m, excluding issue costs of debt, at 31 December 2017 (31 December 2016: £20.1m),
equating to a net debt: adjusted EBITDA ratio of 2.2x (2016: 1.6x).
An explanation of the £7.6m increase in net debt is provided below.
Cash generated from operating activities before acquisition costs
Taxation
Capital expenditure less proceeds of sale
Finance cost (net)
Free cashflow
Dividends paid
Acquisition (net of cash acquired)
Acquisition costs paid
Proceeds from borrowings
Repayments of borrowings
Issue of new ordinary shares
Share issue costs
Issue costs of debt
(Decrease)/increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences
Cash and cash equivalents at end of period
Bank borrowings
Net debt excluding issue costs of debt
Adjusted EBITDA
2017
£000
4,900
(211)
(1,482)
(986)
2,221
(4,557)
(4,895)
(273)
9,000
(9,000)
–
–
(60)
(7,564)
10,884
(9)
3,311
(31,000)
(27,689)
12,524
2016
£000
13,339
(236)
(570)
(625)
11,908
(3,679)
(45,433)
(2,515)
31,000
(6,000)
24,000
(781)
(360)
8,140
2,784
(40)
10,884
(31,000)
(20,116)
12,598
The Group generated £4.9m of cash
from operating activities (excluding
acquisition costs of £0.3m), and
operating cash flow before changes in
working capital of £11.5m (2016: £8.5m).
As reported at H1 2017, the effects of
the positive cash timing benefits from
a strong trading performance in Q4
2016, which unwound in H1 2017,
combined with strong growth in our
ICON cloud product offering, leading
to a reduction in upfront project billing,
contributed to a working capital
outflow of £6.9m in the year.
35% (2016: 84%). This was despite a
strong H2 2017 cash performance
which produced a strong cash
conversion rate of 96% based on an H2
adjusted EBITDA of £5.5m and a net
cash flow from operating activities of
£5.2m.
The Group incurred exceptional costs
of £1.5m during 2017 (2016: £4.2m),
primarily covering acquisition,
restructuring and redundancy costs
associated with the acquisition of
Intrinsic and an ongoing review of the
Group’s operating cost base.
As a result, conversion of operating
cash flow from adjusted EBITDA was
Capital expenditure of £1.5m was
comprised of intangibles relating to
software licences of £0.9m and
capitalised Callmedia project costs of
£0.2m plus tangible assets of £0.4m.
A more detailed explanation of the
working capital movements is included
in the analysis of the consolidated
statement of financial position.
The net finance cost of £1.0m includes
£0.3m of interest relating to Q4 2016,
which was paid post year-end 2016.
In managing the Group’s funding
costs, we have used surplus cash to
reduce our utilised facility by £9.0m in
the period, leaving a cash and cash
equivalents balance of £3.3m at year-
end (2016: £10.9m).
Maintel Holdings Plc 20 Report and Accounts 2017
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Including the payment of dividends in
2017 amounting to £4.6m and
acquisition costs of £5.2m, the net
effect when combined with a free
cash flow of £2.2m, is an increase in the
net debt position of £7.6m, to £27.7m.
Further details of the Group’s revolving
credit and overdraft facilities are given
in note 22.
IFRS 15 – Revenue from
contracts with customers
and IFRS 9 Financial
instruments
IFRS 15 is required to be adopted for all
accounting periods beginning on or
after 1 January 2018. During H2 2017,
the Group carried out a detailed
assessment of the impact that
adoption of IFRS 15 may have on the
Group’s revenue streams. If IFRS 15 was
adopted for the current reporting
period, reported revenue and profit
before tax would be reduced by £6.3m
and £2.2m respectively. IFRS 15 will
have no impact on the cash position of
the Group.
IFRS 9 is required to be adopted for all
accounting periods beginning on or
after 1 January 2018.
A detailed explanation of the impact
of both IFRS 15 and 9 on the Group’s
accounting policies is provided in
note 2 (s).
Principal risks and
uncertainties
The directors consider that the principal
risks to the Group relate to
technological advance, marketplace
relationships, pricing strategies and
integration risk. Some risks may be
unknown to the Group and others may
be more, or less, material than currently
envisaged by the directors, and so the
following may not give a
comprehensive view of all the risks and
uncertainties affecting the business.
Telecommunications hardware
continues to be replaced by
telecommunications software offering
services that extend the traditional PBX
capability towards unified
communications and collaboration.
This continues a trend that started
15 years ago with the transition from
proprietary signalling to the use of
existing IP networks, and the trend is
now underway for customers to
transition their traditional on-premises
deployments to hosted and cloud
services.
Maintel is well positioned to capitalise
on that change, having invested in the
skills of its people and in adding
capability through a number of
acquisitions in recent years. In
particular, the acquisition of Azzurri in
2016 brought with it strong capability in
unified communications as-a-service,
cloud and managed services.
Offering these cloud services places a
responsibility on the Group to ensure
the continuous operations of the
platforms from which they are
delivered. Investment during the
previous year in additional data centre
and network capacity now means that
the whole of the ICON platform is fully
resilient and capable of withstanding
catastrophic failure in any of the core
data centres. During 2018, the Group
will further invest in the platform,
providing additional redundancy. The
platform, and the networks that
support it, are monitored 24/7 by the in-
house network operations centre for
rapid response to any outage.
Maintel has also invested in its product
development function, under the
direction of the chief technology and
strategy officer, to ensure that the
product portfolio is competitively
positioned and anticipates
technological change. Product
roadmaps and initiatives are regularly
discussed with analyst houses to test
assumptions with respected third
parties, and maintain strong networks
with the consultant and vendor
communities.
The Group has also sought to protect its
high levels of recurring revenues by
offering increasingly differentiated and
value added services to its clients,
enabling them to transfer responsibility
for the management of their core
communications platforms to Maintel,
including the inherent risk. The Group
has developed a comprehensive set of
managed service offers including
managed cyber security, PCI
compliance and system and mobile
fleet management that ensure its
service offerings remain relevant and
compelling.
In telecommunications, regulation plays
a key role in the setting of prices and
tariffs, particularly in the mobile area. To
that end, the Group has reduced its
dependency on revenue from mobile
voice and data services, replacing it
with cloud and managed service
revenues. In addition to regulatory
activity, fixed and mobile pricing and
margins can also be impacted by the
activities of both competitors and
suppliers. These are mitigated by
assessing anticipated regulatory and
technology change, and its impact on
pricing strategies, amending the
Group’s own pricing policies
accordingly. Multiple supplier
relationships are also maintained across
both the fixed and mobile sector, to
ensure continued access to competitive
services. In telecommunications, the
transition from traditional PSTN and ISDN
services towards SIP continues, a
migration considered to increase value
for the Group.
Maintel Holdings Plc 21 Report and Accounts 2017
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Strategic report
Business review continued
The Group has a number of key vendor
relationships in both network services,
unified communications, contact
centre and connectivity. The failure of
one of these businesses, or the
acquisition of a key partner by a
competitor which then significantly re-
positions that partner’s strategy, would
represent a risk to the Group. These key
partner relationships are reviewed
monthly under the direction of the
chief technology and strategy officer,
and the Group maintains key senior
relationships with all these businesses to
ensure there is early indication of any
prospective change.
The Group has close partner
relationships with organisations such as
O2/Telefonica, such that these
companies and their clients constitute
a significant share of its managed
service base. Should these relationships
be terminated, the managed service
base would reduce to that extent over
a period, necessitating a
commensurate reduction in costs.
Partnerships with other integrators
continue to be developed to reduce
the percentage weighting of business
with these partners.
The Group’s managed service
contracts have a natural finite life, and
are subject to competitive attack, so
that there is 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 Group has stated that it will
acquire suitable companies, which fit
certain criteria, and recognises that
there is a risk of operational
disturbance in the course of integrating
acquired companies into the Group’s
existing operations. The Group
mitigates this risk by way of due
diligence and detailed planning
involving senior management, drawing
on the experience of previous
acquisitions.
Outlook
Following the challenges faced in 2017,
notably prolonged delays with several
large projects, the Group has entered
2018 well placed to capitalise on future
growth opportunities. We have had a
promising start to the year and we
continue to see a strong sales pipeline,
particularly on the Avaya product
portfolio and our suite of ICON cloud
services. The Group has invested in core
growth areas within the business, such
as our successful cloud offering, and
completed the acquisition of Intrinsic,
which brings key strategic benefits.
Our ICON suite of cloud services
continues to grow strongly,
underpinning our transformation to a
cloud and managed services provider
in the mid-market and enterprise space.
The integration of Intrinsic is largely
completed and on track to deliver the
planned synergies for the Group. As a
Cisco Gold Partner, Intrinsic enhances
Maintel’s product portfolio, particularly
in LAN network security, offering our
customers access to a broader range
of products and services, and we have
seen encouraging levels of cross-selling
into the customer base.
The first few weeks of the year have
seen Maintel continue its strong
performance in the public sector, with
several contracts being awarded.
As indicated earlier, we have returned
to a dividend policy based on a pay-
out ratio of at least 40% of adjusted net
income. Our confidence in the business
leads us to expect that the annual
dividend will remain progressive in
absolute terms.
On behalf of the board
E Buxton
Chief executive
16 March 2018
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Board of directors
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John Booth
Non-executive chairman
Date of appointment
Annette Nabavi
Senior independent
non-executive director
Nicholas Taylor
Independent
non-executive director
Eddie Buxton
Chief executive
7 June 1996 30 June 2014 1 January 2006 2 February 2009
Previous experience
John’s career has been spent
in equity investment and
broking where he has held a
number of senior positions
including Head of Equities at
Bankers Trust and Co-Founder
and Executive chairman of
the Link Group, acquired by
ICAP Plc in 2008. He has
extensive venture capital
experience and holds a
number of non-executive
directorships in investment
management also chairing
The London Theatre
Company and Natilik Ltd. He
is a trustee of several charities
and also serves on their
investment committees.
External appointments
John chairs or acts as a
non-executive director of
several private companies in
investment management,
telecoms and media and is
a consultant to Herald
Venture Partners.
Annette’s earlier career was
spent in strategy consulting
and banking. She has held
the positions of Global Head
of Business Development at
ING Barings, Managing
director of XchangePoint
Holdings Ltd and she was a
Senior Partner at the PA
Consulting Group where she
focussed on strategy and
marketing in the TMT sector.
Nick has extensive experience
of working with growing
organisations, principally in
the media and
communications industries.
Having started his career as a
management consultant
working for a US strategy
boutique, he went on to hold
a number of senior positions –
including both CFO and CEO
– spanning private and
quoted businesses as well as
the not-for-profit sector.
Eddie has over 20 years’
experience in the
telecommunications sector.
He joined Maintel from
Redstone Plc where he was
Managing Director of the
telecoms division. Prior to that
Eddie was Business Customer
Director at Centrica
Telecommunications (Onetel)
which was successfully sold in
2005 to Carphone Warehouse,
and held sales director roles at
NTL and Cable & Wireless.
None
Nick undertakes a variety of
consultancy work through his
company, Hopton Hill, and is
non-executive chairman of
Focus Group, a telecoms
business, and a non-executive
director of Zinc Media Plc.
Annette is a non-executive
director on the boards of IPSE,
the Association of
Independent Professionals
and the Self Employed, and
Gemserv Ltd, a director of
Women in Telecoms &
Technology (WiTT) Ltd and a
member of the Advisory
Board of the National Science
and Media Museum. Annette
also undertakes corporate
finance advisory work with
AHV Associates LLP.
Board committees
Nomination – Chairman
Audit
Remuneration
Remuneration – Chairman
Audit
Audit – Chairman
Nomination
Remuneration
None
Maintel Holdings Plc 23 Report and Accounts 2017
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Corporate governance
Board of directors continued
Angus McCaffery
Director
Date of appointment
Kevin Stevens
Group integration and
transformation director
Stuart Legg
Group sales and
marketing director
Mark Townsend CA
Chief financial officer
7 June 1996 1 January 2014 7 April 2016 7 April 2016
Previous experience
Angus co-founded Maintel in
1991 and was the Group Sales
and Marketing Director until
this role was assumed by
Stuart Legg in late 2014. He
now focuses on finding larger
organic and inorganic
opportunities as well as
maintaining relationships
with our larger partners and
the overall development
of Maintel.
Stuart has over 23 years’
experience in the
telecommunications industry,
focussing on delivering
applications for Nortel, Cisco
and Avaya portfolios. He was
part of the senior
management team who sold
Mettoni to Enghouse in 2010
and was a board member of
Proximity prior to its acquisition
by the Company in 2014.
Kevin 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, efficiencies,
process and customer
service.
Mark is a Chartered
Accountant having qualified
with Price Waterhouse (now
PWC) in 1988. He has
extensive operational and
commercial experience
across FMCG, retail,
construction and rental
sectors. Previously he was
Group finance director at
Livingston Ltd. During his time
there, he assisted in a
successful sale of the business
to a PE-backed acquirer. Prior
to Livingston he was Group
finance director at Brogan
Group for five years and has
held senior finance positions
with Oriflame Cosmetics SA
and Pitney Bowes Ltd.
External appointments
None
None
None
None
Board committees
None
None
None
None
Maintel Holdings Plc 24 Report and Accounts 2017
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Report on corporate governance
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significant capital expenditure and
contracts, external financial reporting,
dividend and treasury policies, overall
systems of internal controls and risk
management, remuneration and
governance, along with any
significant proposed changes to
business operations or to the structure
or capital of the Company.
The full schedule of matters reserved
for the board’s decision is available
from the company secretary.
During the year, the Chairman also
held meetings with the other
non-executive directors in the
absence of the executive directors,
and with the CEO in the absence of
the other non-executive directors.
Mrs Nabavi and Mr Taylor also met in
the absence of the Chairman.
The directors are required by the
Company’s articles to retire on a
three-year rotational basis, and are
required to stand for reappointment
by shareholders at the annual general
meeting. Although not required to
retire this year in accordance with the
articles, corporate governance
guidance recommends that non-
executive directors with more than
nine years’ service are re-elected
annually, and John Booth and
Nicholas Taylor, having been directors
since 1996 and 2006 respectively, offer
themselves for re-election. The board’s
view is that both directors bring a
valuable external contribution to the
board, remain independent and
effectively challenge as well as
support the executive directors.
The board’s overriding objective is to
produce long-term value for its
shareholders.
The directors recognise the
importance of sound corporate
governance in achieving that
objective and have developed
governance policies appropriate for
the size of the Group, with reference
to the main provisions of the
Corporate Governance Code for
Small and Mid-Size Quoted
Companies published by the Quoted
Companies Alliance (“the QCA
Code”). Whilst the QCA Code has not
been adopted in its entirety at this
time, the directors note the recently
announced change to the AIM Rules
requiring that, from 28 September
2018, all AIM-listed companies must
adopt a recognised code of
corporate governance and include
on their websites details of how they
have complied with it together with
reasons for any non-compliance.
A description of the main governance
policies and procedures adopted by
the Group is set out below.
Board of directors
The Group is led by an effective board
which comprises five executive
directors and three non-executive
directors, the latter being John Booth,
who is chairman, Annette Nabavi and
Nicholas Taylor. The chairman is
responsible for the effective running of
the board, which reviews its
effectiveness on an ongoing basis. The
Chief executive is ultimately
responsible for all operational matters
and the financial performance of the
Group. Mrs Nabavi is the senior
independent director.
Other than in respect of Mr Booth’s
and Mr Taylor’s shareholdings in the
Company, the 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
2016 and 2017 Anchusa Consulting
Limited, a company owned by
Mrs Nabavi, and Hopton Hill Limited, a
company owned by Mr Taylor,
provided consultancy support related
to the acquisitions of Azzurri and
Intrinsic; however, given the limited
nature of these engagements, the
board does not consider it to have
compromised their independence.
The board is satisfied that the broad
range and depth of the executive
and non-executive experience of
each of the non-executive directors
underpins their individual strength of
character and ability to exercise
independent judgement and apply
unbiased rigour to board decisions. It is
also satisfied that they commit
sufficient time to the fulfilment of their
duties as directors of the Company.
The executive directors are Eddie
Buxton who is Chief executive officer,
Stuart Legg (Group sales and
marketing director), Kevin Stevens
(Group integration and transformation
director), Mark Townsend (Chief
financial officer) and Angus
McCaffery who has responsibility for
Business Development.
The directors’ biographies on pages 23
and 24 demonstrate the experience
they bring to the Group.
The board meets regularly, normally
monthly, and both reviews operations
and assesses future strategy for the
operating activities and for the Group
as a whole. It operates to a schedule
of matters specifically reserved for its
decision. This schedule requires that
specific matters are referred to the
board for consideration and approval,
including those relating to the overall
leadership and management of the
Group, budgets, strategy,
performance against objectives,
Maintel Holdings Plc 25 Report and Accounts 2017
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Corporate governance
Report on corporate governance
continued
In accordance with its articles, the
Company provides an indemnity in
respect of all of the Company’s
directors in respect of all losses arising
out of or in connection with the
execution of their powers, duties and
responsibilities as directors. The Group
also maintained insurance cover
during the year for its directors and
officers and those of subsidiary
companies under a directors’ and
officers’ liability insurance policy
against liabilities that may be incurred
by them while carrying out their duties.
In each case, the directors remain
liable in the event of their negligence,
default, breach of duty or breach
of trust.
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 board committees deal
with specific aspects of the Group’s
affairs, reporting their deliberations
and conclusions to the board as
appropriate:
Audit and Risk committee
Membership of the Audit and
Risk committee is restricted to
non-executive directors and
comprises Nicholas Taylor (Chairman),
John Booth and Annette Nabavi.
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, it also considers that
Mrs Nabavi and Mr Booth have such
knowledge and experience.
The remit of the committee includes:
• considering the continued
appointment of the external
auditors, and their fees, terms of
engagement and independence,
including the appointment of the
auditors to undertake non-audit
work;
• liaising with the external auditors in
relation to the nature and scope of
the audit;
• reviewing the form and content of
the financial statements and any
other financial announcements
issued by the Group, including
consideration of significant issues,
judgements, policies and
disclosures;
• reviewing any comments and
recommendations received from
the external auditors and
considering any other matters which
might have a financial impact on
the Group;
• reviewing the Group’s risk
management reporting processes
that identify, report and monitor
corporate level risks and considering
annually the requirement for an
internal audit function;
• reviewing the Group’s statements
on internal control systems and risk
management processes.
The Audit and Risk committee
convened twice during 2017, to
review the half-year and annual
financial statements. Attendees at
committee meetings held in 2017
included the Chief financial officer,
Chief executive officer, Group
financial controller and
representatives of the external
auditors. All of these attended at the
invitation of the chairman of the
committee to facilitate the conduct of
the meetings.
In 2017, it also liaised informally with
the executive directors in relation to
published financial information, the
Azzurri and Intrinsic acquisitions and
other audit-related matters. Nicholas
Taylor also met separately with the
external auditors during the year in the
absence of executive management.
The principal issues addressed by the
committee during the year were:
• the external auditors’ year-end
report for 2016, the review of the
Group’s 2016 results and the
disclosures in the 2016 annual report;
• the announcement of the half-year
results and interim trading update;
• the external audit plan for the 2017
financial statements, which included
a review of the audit objectives,
scope, timetable and deliverables;
• accounting matters and
compliance with IFRS 3 (Business
combinations) associated with the
acquisitions of Azzurri and Intrinsic;
• Initial assessment of the implications
of IFRS 15 (Revenue from contracts
with customers);
• assessment of the carrying value of
intangible assets in the light of the
Group’s 2016 results;
• the re-appointment of BDO LLP as
external auditors, their independence
and objectivity and their fees;
• consideration of the external
auditors’ observations on the
internal financial controls arising
from their annual audit;
• overseeing the establishment of a
more formal risk reporting process,
regularly reviewing its output and its
operation.
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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 7 of the
financial statements.
Remuneration committee
Annette Nabavi is chair of the
Remuneration committee, its other
members being John Booth and
Nicholas Taylor. The committee met
three times during the year. The
committee’s report to shareholders on
directors’ remuneration is set out on
page 29.
Nomination committee
The Nomination committee had two
members during 2017, both
non-executive, being John Booth,
chairman, and Nicholas Taylor.
Annette Nabavi, the senior
independent director, was appointed
to the committee on 28 February 2018
to provide it with further depth. The
committee’s terms of reference
include:
• reviewing the structure, size and
composition of the board; and
• identifying and nominating suitable
candidates to fill vacancies on the
board.
The committee meets as required and
met once in 2017, Eddie Buxton also
attending the meeting by invitation, to
consider the reappointment of
Annette Nabavi as a non-executive
director following the expiry of her
fixed term appointment; the
reappointment was agreed, on a
continuing basis subject to three
months’ notice.
The Nomination committee regularly
informally assesses the structure of the
board and its performance and is
satisfied that the present board is
suitably diverse and well balanced to
deliver the Company’s current
strategic goals. The board
acknowledges that some directors
have served for many years, but
considers that this brings valuable
experience and teamwork to the
board. It also acknowledges that John
Booth (the non-executive chairman)
and Angus McCaffery (executive
director) have significant
shareholdings in the Company, but
considers that this aligns their interests
with those of shareholders as a whole.
Board attendances
The following table shows the attendance of the directors at meetings of the board and the Audit and Risk,
Remuneration and Nomination committees during the year.
Number of meetings in the year
Board
Audit & risk Remuneration
committee
committee
Nomination
committee
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J Booth
E Buxton
S Legg
A McCaffery
A Nabavi
K Stevens
N Taylor
M Townsend
20
20
18
16
20
20
20
19
2
–
–
–
2
–
2
–
3
–
–
–
3
–
3
–
1
–
–
–
–
–
1
–
In addition to the regular monthly
meetings, additional meetings were
held during the year relating to the
acquisition of Intrinsic, the transfer of
Intrinsic’s share capital to Maintel
Europe Limited and amendments to
banking arrangements.
Conflicts of interest
The Group has established procedures
for the disclosure and review of any
conflicts, or potential conflicts, of
interest which the directors may have
and for the authorisation of such
conflict matters by the board. The
board considers that these
procedures are operating effectively.
Relationship with
shareholders
The Strategic report on pages 4 to 22,
incorporating the Chairman’s
statement, includes a detailed review
of the business and future
developments.
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Corporate governance
Report on corporate governance
continued
Bribery Act 2010
The board performs an ongoing
assessment of the risk environment
and maintains a framework to ensure
that the Group trades in compliance
with the UK Bribery Act 2010.
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 officer. The
board reviews acquisitions and
significant unbudgeted capital
expenditure as they arise.
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 reviewing
cash balances, borrowing facilities
and projected cash flows, 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.
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 Group’s results, to keep them
informed about the performance and
objectives of the business. Annette
Nabavi also attended certain
shareholder meetings during 2017,
representing the non-executive
directors, to better understand the
shareholders’ views and to ensure
there is an independent channel to
the board, should that be necessary.
The annual general meeting provides
a further forum for shareholders to
communicate with the board. Details
of resolutions to be proposed at the
annual general meeting are set out in
the notice of meeting.
Internal control
The board is ultimately responsible for
the Group’s systems of internal control,
and for reviewing their effectiveness.
Such systems can provide reasonable,
but not absolute, assurance against
material misstatement or loss. The
board believes that the Group has
internal control systems in place
appropriate to the size and nature of
its business.
The 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 key operational functions of the
Group are subject to processes
established and externally audited
under ISO9001, ISO20000, ISO18001
and ISO27001, which the directors
consider to be a valuable additional
internal and external control tool of
the 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.
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 – both
informally and at monthly operational
board meetings – to discuss
operational matters.
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. It reviews a
dynamic risk report at each board
meeting, the process behind which is
monitored by the Audit and Risk
committee. The Group’s approach to
financial risk management is further
explained in note 23 to the financial
statements.
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Report of the remuneration committee
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Scope of the report
The remuneration report summarises
the remuneration committee’s
activities during the year, the
outcomes for directors’
remuneration and the Group’s
remuneration policy. The report also
describes how the Group applies the
principles of good corporate
governance in relation to directors’
remuneration.
The remuneration
committee
The remuneration committee is
appointed by the board and
comprises only non-executive
directors. The committee meets at
least annually to determine, on behalf
of the board, the framework of
executive remuneration.
During the year, the membership of
the committee comprised three
non-executive directors, Annette
Nabavi (chairman), John Booth and
Nicholas Taylor.
The board approves the committee’s
terms of reference. These are
available for inspection from the
Company secretary. The members of
this committee do not have any
conflicts from cross-directorships that
relate to the business of the
committee. The members do not have
any day-to-day involvement in the
running of the Group.
The Remuneration committee’s remit is
to review and determine the broad
policy regarding remuneration of the
executive directors and of any
management receiving an annual
remuneration, excluding commission,
of more than £150,000. In the case of
the executive directors, it is to
determine the entire individual
remuneration and incentive
packages, including the setting and
monitoring of any bonus or share
scheme performance conditions. To
support this responsibility it has access
to professional and other advice
external to the Group. Considering
these factors, it then makes
recommendations to the board.
During the year, the committee met
on three occasions.
To assist the work of the committee,
the views of the Chief executive
officer are also invited where
appropriate. However, he does not
participate in any decision related to
his own remuneration.
Remuneration policy
The Group is committed to the
governing objective of maximising
shareholder value over time. Each
year the remuneration framework and
the packages of the directors are
reviewed to ensure they continue to
achieve this objective.
The Group operates in large
competitive markets with areas of
significant growth potential. The
Group’s executive director
remuneration policy is designed to
attract and retain directors of the
calibre required to maintain the
Group’s position in its marketplace.
The key features of remuneration and the policy for each element of the packages for executive directors are shown in
the table below:
Element of
remuneration Purpose and link to strategy
Policy and approach
Base salary
To pay a competitive
sustainable level of fixed
remuneration, taking into
account experience and
personal contribution to the
Group’s strategy. Intended to
attract and retain the talent
(management and technical)
required to execute the
strategy.
Reviewed annually by the committee in January. Salary increases will
normally be in line with pay review levels across the whole Group.
However, reference is also made to changes in role and responsibility.
Reference is also made to comparisons with companies of similar size
and complexity.
Benefits
These complement an
executive’s basic salary and
are designed to ensure the
well-being of employees.
Benefits comprise pension contribution (typically 3% of basic salary
except in the case of Mark Townsend who receives a fixed sum of
£10,000 per annum), car allowance, and membership of private
health, permanent health and life assurance schemes.
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Corporate governance
Report of the remuneration committee
continued
Element of
remuneration Purpose and link to strategy
Policy and approach
Bonus
A cash bonus designed to
incentivise specific short-
term goals and objectives,
both financial and non-
financial.
Goals and objectives are set individually with a significant weight
being put on meeting annual budget in terms of both revenue and
adjusted EBITDA targets. Other objectives include KPIs designed to
increase the overall productivity of the Group and KPIs focussed on
ensuring the Group’s move to cloud-based solutions is achieved.
Long term
incentive plan
(LTIP)
To encourage and reward
delivery of the Group’s
long-term growth objectives
and provide alignment with
shareholders through the use
of share based incentives.
For Stuart Legg, the majority of his bonus derives from his sales
commission. The commission payments were based on the
achievement of gross profit for the Group as a whole. Stuart was also
targeted with a small variable bonus of up to £10,000, in addition to
his sales commission, based on the achievement of revenue and
adjusted EBITDA targets for the Group.
Apart from Stuart Legg, whose commission was set at a maximum of 94%
of base salary, executive directors’ bonuses are set at between 20% and
35% of base salary. All the KPIs and financial targets have to be met for an
executive director to receive a full bonus.
All share-based incentives offered to executive directors have
three-year retention schedules. Grants made under the Company
share option plan (CSOP) are at market price at the date of grant.
Grants made so far under the LTIP are provided as zero cost options
with strict performance conditions based mainly on the achievement
of EPS growth and upper quartile valuation metrics. Vesting is also
subject to continuing employment. New LTIP grants will use
performance conditions of adjusted EPS growth as before, but
substitute share price growth for upper quartile valuation because of
the issues around suitable comparators.
When granting options, the committee takes into account the
potential value that will be created under the performance
conditions attached to the grant. At the discretion of the
Remuneration committee, payments may be made to participants on
the exercise of share options (other than a market value option)
equivalent to the value of dividends declared since the date of grant
on the number of shares they acquire.
The remuneration committee considers that the levels of bonus and LTIP payable are sufficient, but not excessive, to
motivate the directors whilst being proportionate to the value created for the benefit of shareholders.
Eddie Buxton, Mark Townsend, Stuart Legg, Kevin Stevens, Rufus Grig and James Stevenson 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.
Non-executive directors
The non-executive directors each have a contract terminable on three months’ notice.
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 was reviewed on 1 February 2018. The non-executives receive
no payment or benefits other than their fees and associated auto-enrolment pension contributions, although Mrs Nabavi
and Mr Taylor were beneficiaries of consultancy fees during the year and in 2016, as described below.
Maintel Holdings Plc 30 Report and Accounts 2017
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Directors remuneration
The remuneration of the directors in office during the year was as follows:
Salaries/
fees Benefits
Bonus[5]
Pension
contributions
Total
2017[1]
Total
2016[1,2]
Non-executive directors
J D S Booth 47 –
A P Nabavi[3] 35 –
N J Taylor[4] 35 –
Executive directors
E Buxton 231 16
S Legg 298 11
A J McCaffery 92 22
K Stevens 154 11
W D Todd – –
M Townsend 169 15
1,061 75
–
–
–
–
–
–
–
–
–
–
–
–
–
7
5
3
5
–
10
30
47
35
35
254
314
117
170
–
194
42
30
31
272
235
210
186
50
152
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1,166
1,208
(1) Excluding social security costs in respect of the above amounting to £145,000 (2016: £152,000).
[2]
[3]
[4]
Total 2016 remuneration of £1,208,000 includes bonuses of £150,000, employer pension contributions of £27,000 and benefits of £66,000, so that salaries amounted to
£965,000.
In addition to her fees as a director stated above, the Company paid £4,000 (2016: £57,000) to a company of which Mrs Nabavi is a shareholder and director in
respect of consultancy services provided to the Company during the year.
In addition to his fees as a director stated above, the Company paid £7,000 (2016: £61,000) to a company of which Mr Taylor is a shareholder and director in respect
of consultancy services provided to the Company during the year.
[5] No bonus was paid to any executive director in respect of 2017 performance except commissions paid to Stuart Legg, which are included in his salary.
Directors’ interests in ordinary shares
The directors’ interests in the ordinary shares of the Company are shown in the report of the directors on page 34.
These include the holdings of all executive directors under the Company’s Share Incentive Plan.
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
Eddie Buxton
Eddie Buxton
Dale Todd
Dale Todd
Kevin Stevens
Number of shares
Date of grant
Option price
Expiry of option
107,818
107,818
10,000
10,000
10,000
18 May 2009
18 May 2009
17 April 2013
19 December 2013
29 May 2014
200p
300p
345p
525p
530p
18 May 2019
18 May 2019
17 April 2023
19 December 2023
29 May 2024
All options above have vested.
Maintel Holdings Plc 31 Report and Accounts 2017
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Corporate governance
Report of the remuneration committee
continued
On 20 August 2015, the directors of the Company approved the adoption of the Maintel 2015 Long-Term Incentive Plan.
The following options remain outstanding under the Plan:
Option holder
Number of shares
Date of grant
Normal vesting date
Option price
Expiry of option
As CSOP options
Eddie Buxton
Stuart Legg
Kevin Stevens
Mark Townsend
3,409
3,409
3,409
3,409
27 April 2016
27 April 2019
27 April 2016
27 April 2019
27 April 2016
27 April 2019
27 April 2016
27 April 2019
880p
880p
880p
880p
27 April 2026
27 April 2026
27 April 2026
27 April 2026
These options are not subject to any performance conditions.
25,000
15,000
15,000
Subject to performance conditions
Stuart Legg[1]
Kevin Stevens[2]
Mark Townsend[3]
Eddie Buxton[4]
Rufus Grig[5]
Stuart Legg[1]
Kevin Stevens[6]
James Stevenson[7]
Mark Townsend[3]
10,000
15,000
25,000
8,000
8,000
5,000
27 April 2016
27 April 2019
27 April 2016
27 April 2019
27 April 2016
27 April 2019
10 April 2017
10 April 2020
10 April 2017
10 April 2020
10 April 2017
10 April 2020
10 April 2017
10 April 2020
10 April 2017
10 April 2020
10 April 2017
10 April 2020
1p
1p
1p
1p
1p
1p
1p
1p
1p
27 April 2026
27 April 2026
27 April 2026
10 April 2027
10 April 2027
10 April 2027
10 April 2027
10 April 2027
10 April 2027
[1]
[2]
[3]
[4]
[5]
[6]
Full vesting for the LTIP grants made to Stuart Legg are subject to three performance conditions being satisfied: (a) a minimum EPS growth in the period before the
option vests, (b) The Company’s EV/EBITDA ratio being in excess of its peer group for the majority of the six months prior to the option vesting, and (c) achievement of
the Group sales target as set in the budget agreed by the board each year. The sales target condition attaching to the options granted on 27 April 2016 was
achieved and in respect of those granted on 10 April 2017 was partially achieved.
In the case of Kevin Stevens, full vesting is subject to the achievement of a minimum level of synergies following the acquisition of Azzurri, which has been achieved,
so that these options will vest in full on 27 April 2019.
In the case of Mark Townsend, full vesting is subject to two performance conditions being satisfied: (a) a minimum EPS growth in the period before the option vests,
and (b) the Company’s EV/EBITDA ratio being in excess of its peer group for the majority of the six months prior to the option vesting.
In the case of Eddie Buxton, full vesting is subject to two performance conditions being satisfied: (a) a minimum EPS growth in the period before the option vests, and
(b) the Company’s EV/EBITDA ratio being in excess of its peer group for the majority of the six months prior to the option vesting.
In the case of Rufus Grig, full vesting is subject to two performance conditions being satisfied: (a) a minimum EPS growth in the period before the option vests, and (b)
achievement of a defined growth in the number of users of the Group’s cloud services.
In the case of Kevin Stevens, full vesting is subject to three performance conditions being satisfied: (a) a minimum EPS growth in the period before the option vests, (b)
the Company’s EV/EBITDA ratio being in excess of its peer group for the majority of the six months prior to the option vesting, and (c) delivery of defined
transformation projects during 2017. The transformation project target for 2017 has been partially achieved.
[7]
In the case of James Stevenson, full vesting is subject to two performance conditions being satisfied: (a) a minimum EPS growth in the period before the option vests,
and (b) progressive improvement in defined SLAs in the period before the option vests.
If the performance conditions are not fully satisfied at the end of the vesting date, then the options will vest
proportionately against the achievement of certain threshold criteria; any portion that has not vested as a
consequence of the performance conditions not being satisfied in full or on a threshold basis will lapse.
Maintel Holdings Plc 32 Report and Accounts 2017
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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
Outstanding at the end of the year
2017
Number
of options
314,272
71,000
385,272
2017
WAEP
254p
1p
208p
2016
Number
of options
245,636
68,636
314,272
2016
WAEP
276p
176p
254p
The Company’s mid-market share price at 31 December 2017 was 630p per share, and the high and low prices during
the year were 1040p and 615p respectively.
Share Incentive Plan
In 2006, the Company established the Maintel Holdings Plc Share Incentive Plan (“SIP”), which was updated in 2016. The
SIP is open to all employees with at least six months’ continuous service with a Group company, and allows employees
and executive directors to subscribe for existing shares in the Company at open market price out of their gross salary. The
subscribers 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 2017, there were
65,564 shares held by the SIP, representing 0.5% of the issued share capital of the Company (2016: 62,151 and 0.4%).
The report of the remuneration committee was approved by the board on 16 March 2018.
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A P Nabavi
Chair of the remuneration committee
Maintel Holdings Plc 33 Report and Accounts 2017
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Corporate governance
Report of the directors
The directors present their annual report together with the audited financial statements for the year ended
31 December 2017.
Results and dividends
The consolidated statement of comprehensive income is set out on page 43 and shows the profit of the Group for the year.
During the year the Company paid a final dividend of 17.4p per ordinary share in respect of the 2016 financial year,
amounting to £2.5m (2016: a second interim dividend of 16.5p, amounting to £1.8m), and an interim dividend in respect
of 2017 of 14.7p per share, amounting to £2.1m (2016: 13.4p and £1.9m respectively). A final dividend for 2017 is
proposed of 19.1p per share with a payment date of 11 May 2018.
Directors
The directors of the Company during the year and their interests in the ordinary shares of the Company at 31 December
2017 were as follows:
J D S Booth
E Buxton
S D Legg
A J McCaffery
A P Nabavi
K Stevens
N J Taylor
M V Townsend
Number of 1p ordinary shares
2017
Beneficial
3,332,123
5,178
321
2,199,454
198
3,220
16,315
214
2017
Non-
beneficial
4,000
60,386
–
–
–
–
65,564
–
2016
Beneficial
3,332,123
4,813
130
2,198,959
198
2,939
16,315
208
2016
Non-
beneficial
4,000
57,338
–
–
–
–
62,151
–
John Booth is a shareholder in Herald Investment Trust Plc, which has an interest in 804,217 1p ordinary shares in the
Company; this is in addition to Mr Booth’s beneficial holding above.
John Booth also holds 4,000 non-beneficial shares which are held in a charitable foundation of which he is a trustee.
The other 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 acquired a net increased holding of 1,092 shares in total, including 64
in respect of S Legg and 65 in respect of K Stevens. There were no other changes in the directors’ shareholdings
between 31 December 2017 and 16 March 2018.
Substantial shareholders
In addition to the directors’ shareholdings, at 16 March 2018 the Company had been notified of the following
shareholdings of 3% or more in the ordinary share capital of the Company:
Hargreave Hale Ltd
J A Spens
Herald Investment Trust Plc
Number of
1p ordinary
shares
2,295,649
2,088,314
804,217
% of issued
ordinary
shares
16.2%
14.7%
5.7%
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The telecoms industry in general
employs significantly more men than
women and so Maintel is therefore
representative of the talent pool that it
can select from. The board accepts
that it needs to play its part in
attracting more women into both the
sector more broadly and into specific
careers such as engineering and sales,
which are generally well paid but are
predominantly chosen by men, and it
is committed to doing this.
The Group also has a significantly
higher number of men than women in
senior roles; in fact, the board itself is
representative of this with only one
female director. To alter this balance
across the Group, the board
acknowledges that it must have more
women being promoted up through
the organisation and an increase in
the underlying talent pool will help it to
do this.
The number of apprentices entering
the industry is male dominated and,
whilst Maintel does have some female
success stories in this area, it needs to
support schools and colleges to
encourage both male and female
students into future apprenticeship
schemes; clearly, this will help to
balance the gender split of the talent
pools in the future.
Share capital
Details of the share capital of the
Company are shown in note 24 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 2,128,139
shares. A fresh authority, for the
purchase of up to 2,128,139 shares, will
be sought at the forthcoming annual
general meeting.
Employees
Maintel’s success is dependent on the
knowledge, experience and
motivation of its employees, and the
ability to attract and retain those staff.
The Group offers competitive
compensation packages, including
bonus structures where appropriate,
to align employee interest with that of
the Group. The Group’s management
ensures that there is continual
investment in external and internal
training of employees, and monitors
compliance with both statutory
regulation and best practice with
regard to equal opportunities.
The Group gives full and fair
consideration to applications for
employment from disabled persons,
having regard to their particular
aptitudes and abilities and to their
training and career development. This
includes, where applicable and
possible, the retraining and retention
of staff who become disabled during
their employment.
The Group runs an apprenticeship
programme into which it has
continued to recruit apprentices
during 2017. The value of this
programme has been recognised
across the business where apprentices
have successfully transitioned into
permanent roles.
A weekly update is emailed to
employees covering various aspects
of the Group and its employees, and
a Group intranet is core to open
communication amongst employees;
this continues to be developed.
An employee forum – Maintel Matters,
consisting of employees from across
the business – exists, to promote two-
way communication between the
board and employees, and its mode
of operation continually develops. This
communication is supplemented by
the use of regular employee surveys,
with action taken on the results where
practicable.
The Company established a Share
Incentive Plan in 2006, allowing
employees and executive 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.
The Group has recently published its
first Gender Pay Gap report, the key
results of which are shown below,
together with the board’s observations
on them:
• The mean hourly pay difference was
31%.
• The median hourly pay difference
was 39%.
• The source data was collected on
5 April 2017; at that date, the Group
employed 430 men and 170
women. This highlights that the
gender pay gap of 31% is likely to be
because of the gender diversity of
the organisation itself and the types
of roles, which women currently take
in Maintel’s sector, which is heavily
non-technical.
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Corporate governance
Report of the directors continued
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
16 March 2018
Future developments
Refer to outlook section of the
Strategic report on page 22.
Financial instruments
Details of the use of financial
instruments by the Group are
contained in note 23 of the financial
statements.
Annual General Meeting
The Annual General Meeting of the
Company will be held at its London
offices on 8 May at 10.00 am.
The Company’s Articles include a
provision allowing the Company to
issue scrip dividends to shareholders as
an elected alternative to cash
dividends, provided shareholders
have previously approved this by
ordinary resolution, for a given period
of up to five years following the
passing of such a resolution. In order to
provide the Company with this
flexibility without having to call a
separate general meeting, the AGM
notice of meeting includes a
resolution that would permit the
Company to offer, alongside a cash
dividend, an alternative scrip dividend
facility, for a period of three years
following the date of the AGM. The
board has no present intention of
offering this facility, but believes that it
would be beneficial to have this
option available to it.
Environment
The Group acknowledges its
responsibilities for 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. The
Group also makes use of in-house
video-conferencing facilities to
reduce the need for regional
meetings and operates flexible
working practices where possible,
reducing the environmental impact of
commuting. The Group has
ISO14001:2004 accreditation for its
environmental management systems.
Modern Slavery Act policy
The Modern Slavery Act became law
in 2015. The Act consolidates slavery
and trafficking offences and
introduces tough penalties and
sentencing for breaches of the Act.
The Group has a zero-tolerance
approach to modern slavery and will
not knowingly support or deal with any
business which is involved in slavery
and/or human trafficking.
This policy reflects our commitment to
maintaining ethical practices in all of
our supply chains and across all of our
business, and as part of this
commitment we are undertaking
various steps to help us manage the
risks outlined by this legislation. These
steps are detailed in our modern
slavery statement and, as required by
the act, are published annually on our
website at maintel.co.uk.
Maintel Holdings Plc 36 Report and Accounts 2017
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Statement of directors’ responsibilities
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.
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Directors’ responsibilities
The directors are responsible for
preparing the annual report and
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
(FRS101 in the case of the Parent
company), subject to any material
departures disclosed and explained
in the financial statements; and
• 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.
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Financial statements
Independent auditor’s report
Independent auditor’s
report to the members of
Maintel Holdings Plc
Opinion
We have audited the financial
statements of Maintel Holdings Plc
(the ‘parent company’) and its
subsidiaries (the ‘group’) for the year
ended 31 December 2017 which
comprise the consolidated statement
of comprehensive income, the
consolidated statement of financial
position, the consolidated statement
of changes in equity, the consolidated
statement of cashflows, the company
balance sheet, the company
reconciliation of movements in
shareholders’ funds and notes to
the financial statements, including
a summary of significant accounting
policies.
The financial reporting framework that
has been applied in the preparation
of the group financial statements is
applicable law and International
Financial Reporting Standards (IFRSs)
as adopted by the European Union.
The financial reporting framework that
has been applied in the preparation
of the parent company financial
statements is applicable law and
United Kingdom Accounting
Standards (United Kingdom Generally
Accepted Accounting Practice).
Use of our report
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.
Conclusions relating to going
concern
We have nothing to report in respect
of the following matters in relation to
which the ISAs (UK) require us to report
to you where:
• the directors’ use of the going
concern basis of accounting in the
preparation of the financial
statements is not appropriate; or
• the directors have not disclosed in
the financial statements any
identified material uncertainties that
may cast significant doubt about
the group’s or the parent
company’s ability to continue to
adopt the going concern basis of
accounting for a period of at least
12 months from the date when the
financial statements are authorised
for issue.
In our opinion:
• the financial statements give a
true and fair view of the state of
the group’s and of the parent
company’s affairs as at
31 December 2017 and of the
group’s profit for the year
then ended;
• the group financial statements have
been properly prepared in
accordance with IFRSs as adopted
by the European Union;
• the parent company 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.
Basis for opinion
We conducted our audit in
accordance with International
Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our
responsibilities under those standards
are further described in the Auditor’s
responsibilities for the audit of the
financial statements section of our
report. We are independent of the
parent company and the group in
accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, including the FRC’s Ethical
Standard as applied to listed entities,
and we have fulfilled our other ethical
responsibilities in accordance with
these requirements. We believe that
the audit evidence we have obtained
is sufficient and appropriate to
provide a basis for our opinion.
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Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Matter
How we addressed the matter in our audit
Revenue recognition for managed services and
technology sales
The Group has a number of revenue streams. Details of
the accounting policies applied during the period are
given in note 2 (c) to the financial statements.
Management make certain judgements in relation to
revenue recognition for managed services and
technology sales and the treatment of contractual
arrangements entered into by trading entities in the group.
These include determining as at the reporting date:
• whether risks and rewards of ownership have
transferred to the customer for the supply of hardware
and software, and
• an estimate of the stage of completion for each
project in progress.
We assessed whether the revenue recognition policies
adopted by the Group comply with IFRSs as adopted by the
European Union and industry standard practices. The relevant
IFRS is International Accounting Standard 18 Revenue.
In relation to managed services and technology revenues,
we reviewed a sample of contracts to assess whether the
revenue had been recognised in accordance with the
Group’s accounting policy, whether it was recognised
appropriately from a timing perspective and whether any
other terms within the contract had any material
accounting or disclosure implications.
In making our assessment of compliance with the Group’s
accounting policy we tested whether hardware and
software had been delivered to the customer.
There is a potential risk that revenue is recorded
incorrectly from a timing perspective and that revenue is
inappropriately recognised.
To determine the stage of completion we considered how
many hours had been incurred against budgeted hours,
and the achievement of milestones.
Acquisition accounting
As detailed in note 13 to the financial statements, the
Group acquired Intrinsic Technology Ltd (“Intrinsic”)
during the year.
Consequently, management had to exercise
judgement in considering the fair value of the assets
and liabilities acquired.
Management recognised on acquisition a separately
identifiable intangible asset in respect of customer
relationships, exercising judgment in estimating its
fair value.
There is a risk that this estimate may be materially
misstated.
The judgements and estimates in this area include:
• underlying cash flow projections,
• discount rates applied, and
• long-term growth rates.
We challenged the assumptions underpinning the significant
judgements and estimates made by management in the
assessment of the fair value of the separately identifiable
intangible asset acquired by comparison to industry data
and our knowledge of the business.
In addition, with the assistance of our valuations specialists,
we reviewed the methodology deployed.
We also considered the completeness of the separately
identifiable intangible assets with reference to our
understanding of the business and the key reasons for
executing the transaction from the acquirer’s perspective.
Maintel Holdings Plc 39 Report and Accounts 2017
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Financial statements
Independent auditor’s report
continued
Matter
How we addressed the matter in our audit
Goodwill and intangible asset impairment risk
In accordance with IAS 36 and as detailed in the
accounting policies (note 2 (k)), goodwill is tested for
impairment annually, and customer relationships and
other intangible assets with finite lives are tested for
impairment whenever an indicator of impairment arises.
Management performed impairment reviews over all
goodwill and intangible assets at 31 December 2017.
Impairment reviews require significant judgement from
management and are inherently based on assumptions
in respect of future profitability.
The value in use of the goodwill and intangible assets
for each of the Group’s three cash generating units
(managed services and technology, Network services
and Mobile) was assessed as being higher than their
carrying value at the reporting date.
Management concluded that the goodwill and
intangible assets were not impaired at the reporting
date.
We considered whether there were any indications of
impairment in respect of intangible assets.
We reviewed the integrity of the impairment models
prepared by management and challenged the
appropriateness of the key inputs and assumptions used in
them, by comparison to industry data, historic trading, and
macro-economic factors. The key inputs and assumptions
are forecast growth rates, operating cash flows and the
discount rate.
Our audit procedures relating to the review of operating
cash flows included, amongst other procedures, comparing
the forecasts to recent financial performance and budgets
approved by the Board.
We also performed sensitivity analysis over the key valuation
inputs.
Our application of materiality
We apply the concept of materiality
both in planning and performing our
audit, and in evaluating the effect of
misstatements. For planning, we
consider materiality to be the
magnitude by which misstatements,
including omissions, could influence
the economic decisions of reasonable
users that are taken on the basis of the
financial statements. In order to
reduce to an appropriately low level
the probability that any misstatements
exceed materiality, we use a lower
materiality level, performance
materiality, to determine the extent of
testing needed. Importantly,
misstatements below these levels will
not necessarily be evaluated as
immaterial as we also take account of
the nature of identified misstatements,
and the particular circumstances of
their occurrence, when evaluating
their effect on the financial statements
as a whole.
Level of materiality applied and
rationale
We consider adjusted profit before tax
(profit before tax, exceptional items
and amortisation) to be the critical
performance measure for the Group.
Using this benchmark, we set
materiality at £516,000 (2016 –
£625,000) which represents 5% of
adjusted profit before tax (2016 – 5%
of Earnings before interest, tax,
exceptional items, depreciation and
amortisation). Our materiality level is
lower than the previous year reflecting
the change in benchmark to adjusted
profit before tax in the current year.
We set parent company materiality at
£438,600 (2016 – £460,000) which is
group component materiality.
Performance materiality
The application of materiality at the
individual account or balance level is
set at an amount to reduce to an
appropriately low level the probability
that the aggregate of uncorrected
and undetected misstatements
exceeds materiality.
On the basis of our risk assessment
together with the Group’s overall
control environment, our judgement
was that overall performance
materiality for the Group should be
75%. As such, performance financial
statement materiality was set at
£387,000 (2016 – £468,750).
Performance materiality for the parent
company was set at 75% of
materiality, being £328,000 (2016 –
£345,000).
Component materiality
We set materiality for each
component of the Group based on a
percentage of materiality dependent
on the size and our assessment of the
risk of material misstatement of that
component. Component materiality
ranged from £400,000 to £438,600.
Maintel Holdings Plc 40 Report and Accounts 2017
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In connection with our audit of the
financial statements, our responsibility
is to read the other information and, in
doing so, consider whether the other
information is materially inconsistent
with the financial statements or our
knowledge obtained in the audit or
otherwise appears to be materially
misstated. If we identify such material
inconsistencies or apparent material
misstatements, we are required to
determine whether there is a material
misstatement in the financial
statements or a material misstatement
of the other information. If, based on
the work we have performed, we
conclude that there is a material
misstatement of this other information;
we are required to report that fact.
We have nothing to report in this
regard.
Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion, based on the work
undertaken in the course of the audit:
• 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; and
• the strategic report and the
directors’ report have been
prepared in accordance with
applicable legal requirements.
Matters on which we are
required to report by exception
In the light of the knowledge and
understanding of the group and the
parent company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the strategic report or
the directors’ report.
We have nothing to report in respect
of the following matters in relation to
which the Companies Act 2006
requires us to report to you if, in our
opinion:
• adequate accounting records have
not been kept, 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.
Responsibilities of directors
As explained more fully in the
directors’ responsibilities statement set
out on page 37, the directors are
responsible for the preparation of the
financial statements and for being
satisfied that they give a true and fair
view, and for such internal control as
the directors determine is necessary to
enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error.
In preparing the financial statements,
the directors are responsible for
assessing the group’s and the parent
company’s ability to continue as a
going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the
directors either intend to liquidate the
group or the parent company or to
cease operations, or have no realistic
alternative but to do so.
Reporting Threshold
We agreed with the Audit Committee
that we would report to them all audit
differences individually in excess of
£25,800 (2016 – £31,250). We also
agreed to report audit differences
below those thresholds that, in our view,
warranted reporting on qualitative
grounds. For the parent company we
agreed to report all differences in
excess of £21,930 (2016 – £23,000).
An overview of the scope of our
audit
All of the Group’s Revenue (100%),
Total Assets (100%) and Adjusted profit
before tax (100%) were subject to full
scope audits. All trading entities in the
group, including the company and its
wholly owned subsidiaries Maintel
Europe Limited ("MEL"), Maintel
International Limited (“MIL”) and
Intrinsic Technology Limited (“Intrinsic”)
were subject to full scope audits.
The Group audit team performed the
audits of Maintel Holdings Plc (both
the Company and Consolidated
Entity), MEL and MIL. The audit of
Intrinsic was performed by a
component auditor who is not a
member of the BDO network.
Detailed instructions were issued and
discussed with the component
auditor, and these covered the
significant risks to be addressed by the
component auditor. The Group audit
team was actively involved in
directing the audit strategy of the
Intrinsic audit, reviewed in detail the
findings and considered the impact of
these upon the Group audit opinion.
Other information
The directors are responsible for the
other information. The other information
comprises the information included in
the annual report, other than the
financial statements and our auditor’s
report thereon. Our opinion on the
financial statements does not cover the
other information and, except to the
extent otherwise explicitly stated in our
report, we do not express any form of
assurance conclusion thereon.
Maintel Holdings Plc 41 Report and Accounts 2017
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Financial statements
Independent auditor’s report
continued
Auditor’s responsibilities for the
audit of the financial statements
Our objectives are to obtain
reasonable assurance about whether
the financial statements as a whole
are free from material misstatement,
whether due to fraud or error, and to
issue an auditor’s report that includes
our opinion. Reasonable assurance is
a high level of assurance, but is not a
guarantee that an audit conducted in
accordance with ISAs (UK) will always
detect a material misstatement when
it exists.
Misstatements can arise from fraud or
error and are considered material if,
individually or in the aggregate, they
could reasonably be expected to
influence the economic decisions of
users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on the
Financial Reporting Council’s website
at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
Julian Frost
(senior statutory auditor)
For and on behalf of BDO LLP,
statutory auditor
London
United Kingdom
16 March 2018
Maintel Holdings Plc 42 Report and Accounts 2017
BDO LLP is a limited liability
partnership registered in England
and Wales (with registered number OC305127).
248066 Maintel pp043-pp047.qxp 06/04/2018 17:12 Page 43
Consolidated statement of comprehensive income
for the year ended 31 December 2017
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Intangibles amortisation
Exceptional costs
Other administrative expenses
Operating profit
Financial expense (net)
Profit before taxation
Taxation expense
Profit for the period
Other comprehensive expense for the period
Exchange differences on translation of foreign operations
Total comprehensive income for the period
Earnings per share
Basic
Diluted
The notes on pages 48 to 71 form part of these consolidated financial statements.
Note
4
14
12
7
8
9
11
11
2017
£000
133,079
(94,290)
38,789
155
(5,892)
(1,454)
(27,183)
(34,529)
4,415
(899)
3,516
(434)
3,082
(9)
3,073
21.7p
21.3p
2016
£000
108,296
(73,383)
34,913
151
(4,733)
(4,240)
(23,064)
(32,037)
3,027
(920)
2,107
(13)
2,094
(40)
2,054
16.0p
15.8p
Maintel Holdings Plc 43 Report and Accounts 2017
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Financial statements
Consolidated statement of financial position
at 31 December 2017
2017
Note £000
Non current assets
Intangible assets 14
Property, plant and equipment 16
2017
£000
67,495
1,471
68,966
Current assets
Inventories 18 3,251
Asset held for sale 17 1,500
Trade and other receivables 19 37,257
Cash and cash equivalents 3,311
Total current assets
Total assets
45,319
114,285
Current liabilities
Trade and other payables* 20 51,367
Current tax liabilities 1,426
2016
£000
4,882
–
29,371
10,884
49,153
527
2016
£000
63,152
3,293
66,445
45,137
111,582
Total current liabilities
52,793
49,680
Non-current liabilities
Other payables* 20 1,462
Deferred tax liability 21 2,260
Borrowings 22 30,707
Total non-current liabilities
Total liabilities
Total net assets
Equity
Issued share capital 24
Share premium 25
Other reserves 25
Retained earnings 25
Total equity
*
Comparative restated (See note 20)
34,429
87,222
27,063
142
24,354
70
2,497
27,063
943
2,020
30,688
33,651
83,331
28,251
142
24,354
79
3,676
28,251
The consolidated financial statements were approved and authorised for issue by the board on 16 March 2018 and
were signed on its behalf by:
M Townsend
Director
The notes on pages 48 to 71 form part of these consolidated financial statements.
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Consolidated statement of changes in equity
for the year ended 31 December 2017
Share Share
capital premium
Note £000 £000
Other
reserves
£000
Retained
earnings
£000
At 1 January 2016 108 1,169
Profit for the period – –
Other comprehensive income:
Foreign currency translation differences – –
Total comprehensive income for the period – –
Dividend 10 – –
Issue of new ordinary shares 24 34 23,966
Share issue costs – (781)
Grant of share options – –
At 31 December 2016 142 24,354
Profit for the period – –
Other comprehensive income:
Foreign currency translation differences – –
Total comprehensive income for the period – –
Dividend 10 – –
Grant of share options – –
At 31 December 2017 142 24,354
The notes on pages 48 to 71 form part of these consolidated financial statements.
119
–
(40)
(40)
–
–
–
–
79
–
(9)
(9)
–
–
70
Total
£000
6,560
2,094
(40)
2,054
(3,679)
24,000
(781)
97
28,251
3,082
5,164
2,094
–
2,094
(3,679)
–
–
97
3,676
3,082
–
(9)
3,082
3,073
(4,557)
(4,557)
296
2,497
296
27,063
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Financial statements
Consolidated statement of cash flows
for the year ended 31 December 2017
Operating activities
Profit before taxation
Adjustments for:
Intangibles amortisation
Share based payment charge
Loss on sale of property, plant and equipment
Depreciation charge
Interest received
Interest payable
Operating cash flows before changes in working capital
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operating activities (see sub analysis below)
Cash generated from operating activities excluding exceptional costs and non cash credits
Exceptional cost – excluding acquisition legal and professional costs below (note 12)
Cash generated from operating activities excluding acquisition legal and professional costs
Exceptional cost – acquisition legal and professional costs
Cash generated from operating activities
Tax paid
Net cash flows from operating activities
Investing activities
Purchase of plant and equipment
Purchase of software
Purchase price in respect of business combination
Net cash acquired with subsidiary undertaking
Interest received
Net cash flows from investing activities
Financing activities
Proceeds from borrowings
Repayment of borrowings
Interest paid
Issue of new ordinary shares
Share issue costs
Issue costs of debt
Equity dividends paid
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of period
Exchange differences
Cash and cash equivalents at end of period
2017
£000
2016
£000
3,516
2,107
5,892
4,733
296
156
763
–
899
11,522
1,762
(550)
(8,107)
4,627
6,185
(1,285)
4,900
(273)
4,627
(211)
4,416
(393)
(1,089)
(4,906)
97
–
598
(3)
923
8,455
(949)
990
2,328
10,824
15,064
(1,725)
13,339
(2,515)
10,824
(236)
10,588
(438)
(132)
(47,028)
11
1,595
(4,895)
(45,433)
–
3
(6,377)
(46,000)
9,000
(9,000)
(986)
–
–
(60)
(4,557)
(5,603)
(7,564)
10,884
(9)
31,000
(6,000)
(628)
24,000
(781)
(360)
(3,679)
43,552
8,140
2,784
(40)
3,311
10,884
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Consolidated statement of cash flows continued
for the year ended 31 December 2017
The following cash and non-cash movements have occurred during the year in relation to financing activities from
non current liabilities.
Reconciliation of liabilities from financing activities
Non-current loans and borrowings (Note 22)
At 1 January 2017
Cash flows
Non cash movements (Amortised debt issue costs)
At 31 December 2017
The notes on pages 48 to 71 form part of these consolidated financial statements.
£000
30,688
–
19
30,707
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Financial statements
Notes forming part of the consolidated
financial statements
for the year ended 31 December 2017
1 General information
Maintel Holdings Plc is a public limited company
incorporated and domiciled in the UK, whose shares are
publicly traded on the Alternative Investment Market
(AIM). Its registered office and principal place of business is
160 Blackfriars Road, London SE1 8EZ.
2 Accounting policies
The principal policies adopted in the preparation of the
consolidated financial statements are as follows:
(a) Basis of preparation
The consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards, International Accounting Standards
and Interpretations (collectively IFRS) issued by the
International Accounting Standards Board (IASB) as
adopted by the European Union (“adopted IFRSs”),
IFRIC interpretations and with those parts of the
Companies Act 2006 applicable to companies preparing
their accounts in accordance with adopted IFRSs.
(b) Basis of consolidation
The consolidated financial statements present the results of
the Company and its subsidiaries (“the Group”) as if they
formed a single entity. Intercompany transactions and
balances between Group companies are therefore
eliminated in full.
Where the Company has control over an investee, it is
classified as a subsidiary. The Company controls an
investee if all three of the following elements are present:
power over the investee, exposure to variable returns from
the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed
whenever facts and circumstances indicate that there
may be a change in any of these elements of control.
The consolidated financial statements incorporate the
results of business combinations using the acquisition
method. In the consolidated statement of financial
position, the acquiree’s identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair
values at the acquisition date. The acquisition related costs
are included in the consolidated statement of
comprehensive income on an accruals basis. The results of
acquired operations are included in the consolidated
statement of comprehensive income from the date on
which control is obtained.
(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.
Managed services and technology
Amounts invoiced in advance in respect of managed
service contracts are deferred and released to the
consolidated statement of comprehensive income on a
straight line basis over the period covered by the invoice.
Technology revenues from the supply of hardware and
software are recognised at the time the risks and rewards
of ownership pass to the customer. Professional services
revenues are recognised based on an estimate of stage of
completion for each project at the reporting date. The
estimate is derived by the application of judgement and
tracked progress of work performed on each project at
the reporting date relative to the total value of
each project.
Network services
Revenues for network services are comprised of call traffic,
line rentals and data services, which are recognised on an
accruals basis, for services provided up to the reporting
date. Amounts invoiced in advance relating to periods
after the reporting date are deferred and recognised as
deferred income.
Mobile
Connection commission received from the mobile network
operators on fixed line revenues are spread over the
course of the customer contract term.
Customer overspend and bonus payments are recognised
monthly; these are also payable by the network operators
on a monthly basis.
(d) Operating leases
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an “operating
lease”), the total rentals payable under the lease are
charged to the consolidated statement of comprehensive
income on a straight-line basis over the lease term. The
aggregate benefit of lease incentives is recognised as a
reduction of the rental expense over the lease term on a
straight-line basis.
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Rentals receivable under operating leases are credited to
the consolidated statement of comprehensive income on
a straight-line basis over the term of the lease. The
aggregate cost of lease incentives offered is recognised as
a reduction of the rental income over the lease term on a
straight-line basis.
(e) Employee benefits
The Group contributes to a number of defined contribution
pension schemes in respect of certain of its employees,
including those established under auto-enrolment
legislation. The amount charged in the consolidated
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.
(f) Redundancy costs
Redundancy costs are those costs incurred from the date
of communication of the restructuring decision and the at
risk consultation process has been started with the relevant
employee or group of employees affected.
(g) Interest
Interest income and expense is recognised using the
effective interest rate basis.
(h) Taxation
Current tax is the expected tax payable on the taxable
income for the year, together with any adjustments to tax
payable in respect of previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation
purposes, except for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a
transaction which is not a business combination and at
the time of the transaction affects neither accounting
nor taxable profit; and
• investments in subsidiaries where the Group is able to
control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the
foreseeable future.
A deferred tax asset is recognised only to the extent that it
is probable that future taxable profits and taxable
temporary differences will be available against which the
asset can be utilised.
Management judgement 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.
Deferred tax assets and liabilities are offset when the
Group has a legally enforceable right to offset current tax
assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority on
either:
• the same taxable Group company; or
• different Group entities which intend either to settle
current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously,
in each future period in which significant amounts of
deferred tax assets or liabilities are expected to be
settled or recovered.
(i) 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 consolidated financial statements.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
2 Accounting policies continued
(j) 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; the fair value
of the consideration comprises the fair value of assets
given. 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.
Customer relationships
Customer relationships are stated at fair value where
acquired through a business combination, less
accumulated amortisation.
Customer relationships are amortised over their estimated
useful lives of (i) six years to eight years in respect of
managed service contracts, and (ii) seven years or eight
years in respect of network services and mobile contracts.
Product platform
The product platform is stated at fair value where acquired
through a business combination less accumulated
amortisation.
The product platform is amortised over its estimated useful
life of eight years.
Brand
Brands are stated at fair value where acquired a business
combination less accumulated amortisation.
Brands are amortised over their estimated useful lives eight
years in respect of the ICON brand.
Software (Microsoft licences and Callmedia)
Software is stated at cost less accumulated amortisation.
Where these assets have been acquired through a
business combination, the cost is the fair value allocated in
the acquisition accounting.
Software is amortised over its estimated useful life of
(i) three years in respect of the Microsoft licences, (ii) five
years in respect of the Callmedia software.
(k) Impairment of non current assets
Impairment tests on goodwill are undertaken annually on
31 December. Customer relationships and other assets are
subject to impairment tests whenever events or changes in
circumstances indicate the carrying amount may not be
recoverable. Where the carrying value of an asset
exceeds its recoverable amount (being the higher of value
in use and fair value less costs to sell), the asset is written
down accordingly in the administrative expenses line in the
consolidated statement of comprehensive income and, in
respect of goodwill impairments, the impairment is never
reversed.
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.
(l) Property, plant and equipment
Property, plant and equipment is stated at cost, less
accumulated depreciation and any impairment in value.
Depreciation is provided to write off the cost, less
estimated residual values, of all tangible fixed assets, other
than freehold land, over their expected useful lives, at the
following rates:
Office and computer equipment
Motor vehicles
Leasehold improvements
Freehold building
25% straight-line
25% straight-line
over the remaining
period of the lease
2.5% straight-line
Property, plant and equipment acquired in a business
combination is initially recognised at its fair value.
(m) 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.
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(n) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and
short term deposits with an original maturity of three
months or less, held for meeting short-term commitments.
(o) Financial assets and liabilities
The Group’s financial assets and liabilities mainly comprise
cash, borrowings, trade and other receivables and trade
and other payables.
Trade and other receivables are not interest bearing and
are stated at their amortised cost as reduced by
appropriate allowances for irrecoverable amounts or
additional costs required to effect recovery.
Trade and other payables are not interest bearing and are
stated at their amortised cost.
(p) Borrowings
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 consolidated statement of
comprehensive income over the period of the borrowing
using the effective interest method.
(q) Assets held for sale
Assets are classified as held for sale as a current asset from
the date the Group has a clear plan to dispose of the asset
and its sale is considered highly probable within a period of
twelve months. Assets held for sale are stated at the lower
of carrying value at the date the asset is designated as
held for sale and fair value less costs of sale.
(r) Foreign currency
The presentation currency of the Group is Sterling. All
Group companies have a functional currency of Sterling
(other than Maintel International Limited (“MIL”) which has
a functional currency of the Euro) consistent with the
presentation currency of the Group’s consolidated
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 MIL are translated into
Sterling at rates approximating those ruling when the
transactions took place. All assets and liabilities of MIL,
including goodwill arising on its acquisition, are translated
at the rate ruling at the reporting date. Exchange
differences on retranslation of the foreign subsidiary are
recognised in other comprehensive income and
accumulated in a translation reserve.
(s) Accounting standards issued
There are no new IFRSs that are effective for the first time
during the financial year that have a material effect on
recognition and measurement in the consolidated
financial statements.
However, the Group notes IFRS15 Revenue from Contracts
with Customers and IFRS9 Financial instruments, both of
which are to be adopted for accounting periods
beginning on or after 1 January 2018 and will be adopted
by the Group in 2018. The Company’s interim accounts for
the period to 30 June 2018 will be prepared in accordance
with both IFRS 15 and IFRS 9.
IFRS 15 Revenue from Contracts with Customers
The Group has completed its assessment of the impact
that IFRS 15 has on the Group’s revenue streams, taking
into account the move from the recognition of revenue on
the transfer of risks and rewards to the transfer of control.
An analysis on the key changes under IFRS 15, which will be
relevant to the group, include:
• Certain contracts with customers, which include both
supply of technology goods and installation services,
represent one performance obligation under IFRS 15 and
result in revenue recognition at a point in time, which is
different to the current treatment whereby the supply of
goods and professional services are treated as separate
sale arrangements. In relation to these contracts, the
group performs a significant integration service which
results in the technology goods and integration service
being one performance obligation under IFRS 15. Under
IAS 18, the installation was judged to be separable as it
was possible for a customer to obtain equipment and kit
from one party and obtain installation services from
another.
• Mobile business: connection commission revenues
received from mobile network operators on fixed line
revenues are currently spread over the term of the
customer contract. Under IFRS 15 the Group’s mobile
contracts with customers include a number of
performance obligations. Typically, these include an
obligation to provide a hardware fund to the end users.
Revenue recognition under IFRS 15 for the supply of
handsets and other hardware kit under these contracts
will be at a point in time when the hardware goods are
delivered to the customer. This is different to the current
treatment of spreading the associated revenue over the
course of the customer contract.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
2 Accounting policies continued
Adoption of IFRS 15 is expected to have a material impact
on the Group’s 2017 results, the company is currently
estimating a reduction in revenue and profit before tax of
£6.3m and £2.2m respectively from the amounts reported
in the 2017 financial statements. In addition, opening
reserves at 1 January 2017 are expected to be £1.1m lower
than the amount reported in the 2017 financial statements.
These amounts are based on the Company applying the
retrospective method in transitioning to IFRS 15. Certain
practical expedients have also been applied which
include:
a) Contracts which begin and end within the same annual
reporting period or which were completed contracts at
1 January 2017 have not been restated; and
b) For all contract modifications executed prior to
1 January 2017, the Group has applied hindsight and
accounted for the contracts under IFRS 15 applying the
terms in place as at 1 January 2017.
IFRS 9 Financial instruments
This IFRS will require the Group to review the amount of
credit loss associated with its trade receivables based on
forward looking estimates that take into account current
and forecast credit conditions as opposed to relying on
past historical default rates. In assessing the financial
impact of IFRS 9 on trade receivables, the Group has
carried out a detailed review of its customer base under
the Simplified Approach applying a provision matrix based
on number of days past due to measure lifetime expected
credit losses and after taking into account customer
sectors with different credit risk profiles and current and
forecast trading conditions. As a result of this review it is
expected that the adoption of IFRS 9 will lead to a higher
level of impairment provisions being recognised against
trade receivables in the future.
a reasonable estimate in relation to the effect of IFRS16
until a detailed review has been completed.
3 Accounting estimates and judgements
In the process of applying the Group’s accounting policies,
management has made various estimates, assumptions
and judgements, with those likely to contain the greatest
degree of uncertainty being summarised below.
Deferred tax asset relating to brought forward losses
At 31 December 2017, the directors have had to assess the
validity of the carrying value of tax losses attributable to
the Datapoint UK companies that might be used against
future profits, shown in note 21, which involves estimating
the profitability for the Datapoint businesses, which are
now reported within Maintel Europe Ltd. The company
recognises the deferred tax asset for Datapoint tax losses
on a streamed basis against forecast future taxable profits,
which are expected to be generated by the former
Datapoint businesses.
4 Segment information
Year ended 31 December 2017
For management reporting purposes and operationally,
the Group consists of three business segments:
(i) telecommunications managed service and technology
sales, (ii) telecommunications network services, and
(iii) mobile services. Each segment applies its respective
resources across inter-related revenue streams, which are
reviewed by management collectively under these
headings. The businesses of each segment and a further
analysis of revenue are described under their respective
headings in the strategic report.
The chief operating decision maker has been identified as
the board, which assesses the performance of the
operating segments based on revenue and gross profit.
The impact on the Group’s opening reserves at
1 January 2018 and trade receivables for these additional
provisions’ is expected to be a reduction of £0.2m from the
amount reported in the 2017 financial statements. These
amounts are based on applying the retrospective method
applying an initial application date of 1 January 2018.
In presenting the segment information below for 2017, the
operating segments for Intrinsic Technology have been
aggregated with the respective operating segments for
Maintel on the basis the segments have similar economic
characteristics and the segments are similar in nature of
products and services provided to customers.
The Group also notes IFRS16 Leases, which takes effect and
will be adopted in 2019. Details of the Group’s operating
lease commitments are disclosed in note 28. This IFRS will
require the Group to recognise the leases on its premises as
both an asset and a rental commitment in its consolidated
statement of financial position. It is not practical to provide
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Revenue
Gross profit
Other operating income
Total administrative expenses
Intangibles amortisation
Exceptional costs
Operating profit
Interest (net)
Profit before taxation
Taxation expense
Profit after taxation
Managed
service and
technology
£000
79,386
23,112
Network
services
£000
46,795
12,396
Central/
inter-
company
£000
–
–
Mobile
£000
6,898
3,281
Total
£000
133,079
38,789
155
(27,183)
(5,892)
(1,454)
4,415
(899)
3,516
(434)
3,082
Revenue is wholly attributable to the principal activities of the Group and other than sales of £8.6m to EU countries and
£1.8m to the rest of the world (2016: £8.8m to EU countries, and £1.0m to the rest of the world), arises within the United
Kingdom.
Intercompany trading consists of telecommunications services, and recharges of sales, engineering and rent costs, £Nil
(2016: £0.1m) attributable to the managed services and technology segment, £Nil (2016: £0.1m) to the network services
segment and immaterial amounts to the mobile segment in each year.
In 2017 the Group had no customer (2016: None) which accounted for more than 10% of its revenue.
The board does not regularly review the aggregate assets and liabilities of its segments and accordingly an analysis of
these is not provided.
Other
Intangibles amortisation
Exceptional costs
Managed
service and
technology
£000
Network
services
£000
Mobile
£000
Central/
inter-
company
£000
Total
£000
–
(1,454)
–
–
–
–
(5,892)
–
(5,892)
(1,454)
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
4 Segment information continued
Year ended 31 December 2016
Revenue
Gross profit
Other operating income
Total administrative expenses
Intangibles amortisation
Exceptional costs
Operating profit
Interest (net)
Profit before taxation
Taxation
Profit after taxation
Other
Intangibles amortisation
Exceptional costs
5 Employees
Managed
service and
technology
£000
64,109
21,408
Network
services
£000
37,395
10,257
Central/
inter-
company
£000
(155)
(137)
Mobile
£000
6,947
3,385
Managed
service and
technology
£000
Network
services
£000
Mobile
£000
Central/
inter-
company
£000
191
2,305
–
–
–
76
4,542
1,859
Total
£000
108,296
34,913
151
(23,064)
(4,733)
(4,240)
3,027
(920)
2,107
(13)
2,094
Total
£000
4,733
4,240
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
2017
Number
2016
Number
101
253
298
652
100
199
249
548
£000
£000
33,502
28,565
3,913
799
3,252
600
38,214
32,417
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 £138,000 (2016: £143,000)
were payable to the schemes at the year-end and are included in other payables.
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6 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
2017
£000
1,136
30
1,166
2017
£000
309
5
314
2016
£000
1,181
27
1,208
2016
£000
266
6
272
The Group paid contributions into defined contribution personal pension schemes in respect of 7 directors during the
year, 3 of whom were auto-enrolled at minimal contribution levels, and 1 was on both (2016: 2, 1 auto-enrolled).
Further details of director remuneration are shown in the Remuneration committee report on page 29.
7 Operating profit
This has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible fixed assets
Operating lease rentals payable:
property
plant and machinery
Operating lease rentals receivable – property
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor for other services:
due diligence and other acquisition costs
audit of the Company’s subsidiaries pursuant to legislation
audit-related assurance services
tax compliance services
Fees payable to other auditors
Foreign exchange movement
Loss on sale of property plant and equipment
8 Financial income and expense
Interest receivable on bank deposits
Interest payable on bank loans
2017
£000
763
5,892
1,101
402
(155)
14
149
192
35
18
29
(149)
156
2017
£000
–
899
2016
£000
598
4,733
982
377
(151)
16
434
229
58
44
–
(33)
–
2016
£000
3
923
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
9 Taxation
UK corporation tax
Corporation tax on profits of the period
Prior year adjustment
Deferred tax (note 21)
Taxation on profit on ordinary activities
2017
£000
1,108
–
1,108
(674)
434
2016
£000
512
(5)
507
(494)
13
The standard rate of corporation tax in the UK for the period was 19.25%, and therefore the Group’s UK subsidiaries are
taxed at that rate. Reductions in rate to 19% with effect from 1 April 2017 and 17% from 1 April 2020 were substantively
enacted on 15 September 2017 and the projected effect of these reductions on the unwinding of deferred tax liabilities
has been credited to the income statement at £Nil (2016: £275,000). The differences between the total tax shown above
and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax are as follows:
Profit before tax
Profit at the standard rate of corporation tax in the UK of 19.25% (2016: 20%)
Effect of:
Expenses not deductible for tax purposes, net of reversals
Capital allowances less than/(in excess of) depreciation
Effects of change in tax rates
Effects of overseas tax rates
Prior year adjustment
Increase in deferred tax asset relating to Datapoint tax losses (note 21)
Decrease in deferred tax liability relating to intangible assets (note 21)
Increase in deferred tax liability relating to intangible assets
10 Dividends paid on ordinary shares
Second interim 2015, paid 5 April 2016 – 16.5p per share
Interim 2016, paid 12 October 2016 – 13.4p per share
Final 2016, paid 18 May 2017 – 17.4p per share
Interim 2017, paid 5 October 2017 – 14.7p per share
2017
£000
3,516
677
57
44
6
(14)
–
(500)
–
164
434
2017
£000
–
–
2,470
2,087
4,557
2016
£000
2,107
421
510
(26)
(120)
(2)
5
(500)
(275)
–
13
2016
£000
1,777
1,902
–
–
3,679
The directors propose the payment of a final dividend for 2017 of 19.1p (2016: 17.4p) per ordinary share, payable on
11 May 2018 to shareholders on the register at 3 April 2018. The cost of the proposed dividend, based on the number of
shares in issue as at 16 March 2018, is £2,712,000 (2016: £2,470,000).
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11 Earnings per share
Earnings per share is calculated by dividing the profit after tax for the period by the weighted average number of shares
in issue for the period, these figures being as follows:
Earnings used in basic and diluted EPS, being profit after tax
Adjustments:
Intangibles amortisation (note 14)
Exceptional costs (note 12)
Tax relating to above adjustments
Deferred tax charge on utilisation of Datapoint tax losses
Increase in deferred tax asset in respect to Datapoint tax losses
Deferred tax charge on utilisation of Azzurri tax losses
Deferred tax charge on Azzurri profits
Increase/(decrease) in deferred tax liability of intangible assets
Adjusted earnings used in adjusted EPS
2017
£000
3,082
5,892
1,454
2016
£000
2,094
4,733
4,240
(1,411)
(1,333)
392
(500)
–
403
164
504
(500)
642
100
(275)
9,476
10,205
Datapoint has brought forward historic tax losses, which the Group will benefit from in respect of its 2017 taxable profits.
On acquisition a deferred tax asset was recognised in respect of a proportion of its tax losses, and a deferred tax charge
of £392,000 was calculated on a streamed basis and was recognised in the income statement for 2017 (2016: £504,000).
As this does not reflect the reality and benefit to the Group of the non-taxable profits, the deferred tax charge is
adjusted above. An increase of £500,000 in the deferred tax asset relating to Datapoint useable losses was reflected in
the income statement and similarly adjusted for above.
Azzurri has brought forward capital allowances and on acquisition, a deferred tax asset was acquired in respect of its
capital allowances. A deferred tax charge of £403,000 has been recognised in the income statement in respect of the
period’s profits. As this does not reflect the reality and benefit to the Group of the non-taxable profits, the deferred tax
charge is adjusted above.
An increase of £164,000 in the deferred tax liability relating to intangible assets was reflected in the income statement in
2017 and similarly adjusted for above.
Weighted average number of ordinary shares of 1p each
Potentially dilutive shares
Earnings per share
Basic
Diluted
Adjusted – basic but after the adjustments in the table above
Adjusted – diluted after the adjustments in the table above
2017
Number
(000s)
2016
Number
(000s)
14,197
13,092
275
204
14,472
13,296
21.7p
21.3p
66.7p
65.5p
16.0p
15.8p
78.0p
76.8p
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.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
12 Exceptional costs
Most of the exceptional costs incurred in the year were related to the acquisition and integration of the Intrinsic business
and the reorganisation of the Group’s operational structure, covering associated legal and professional fees,
redundancy costs, integration project costs and corporate restructuring fees. These and the other costs analysed below
have been shown as exceptional costs in the income statement as they are not normal operating expenses:
Property-related legal and professional costs
Acquisition and restructuring related redundancy costs
Cost of rebrand
Legal and professional fees relating to Azzurri integration
Legal and professional fees relating to the acquisition of Azzurri
Legal and professional fees relating to Intrinsic integration
Legal and professional fees relating to the acquisition of Intrinsic
Impairment of freehold property
Net effect of release of provisions relating to Azzurri
Other legal and professional costs
2017
£000
83
1,138
–
–
–
60
273
17
(121)
4
1,454
2016
£000
13
1,433
19
260
2,515
–
–
–
–
–
4,240
13 Business combinations
On 1 August 2017, the Company acquired the entire share capital of Intrinsic Technology Limited at the following
provisional fair value amounts:
Purchase consideration
Cash
Assets and liabilities acquired
Tangible fixed assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Intangible assets
Customer relationships
Deferred tax asset
Deferred tax liability on intangible assets
Net assets and liabilities acquired
Goodwill
Cash flows arising from the acquisition were as follows:
Purchase consideration settled in cash
Direct acquisition costs (note 12)
Cash balances acquired
£000
4,906
220
130
7,317
11
(11,005)
(3,327)
5,600
160
(1,073)
1,360
3,546
4,906
(273)
11
4,644
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Maintel acquired Intrinsic Technology Ltd (“Intrinsic”) on 1 August 2017 on a cash-free, debt-free basis for a
consideration of £5.25m, reduced to £4.9m through price adjustment mechanisms, payable in cash.
Intrinsic, as one of the UK’s leading Cisco Gold Partners significantly enhances Maintel’s already strong capability in LAN
networking and the fast growing network security sector. Its acquisition will complement and extend further 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 workforce of the acquired
business, cross selling opportunities and cost synergies that are expected to be achieved from sharing the expertise and
resource of Maintel with that of Intrinsic and vice versa .
The acquisition was funded by an extension to, and draw-down under, the Company’s existing Revolving Credit Facility
with the Royal Bank of Scotland Plc (the “RCF”). The RCF, originally secured in April 2016 has been increased by £6 million
to £42 million.
The customer relationships are estimated to have a useful life of eight years based on the directors’ experience of
comparable intangibles, and are therefore amortised over this period.
A deferred tax liability of £1.1m has been recognised above which is being credited to the income statement pro rata
to the amortisation of the intangibles. The Intrinsic related amortisation charge in 2017 is £0.3m.
Since its acquisition, Intrinsic has contributed the following to the results of the Group before management charges of
£0.1m:
Revenue
Loss before tax
£000
8,991
(21)
Intrinsic’s revenue for the period 1 January 2017 to 31 December 2017 was £25.1m and its loss before tax, exceptional
items and interest costs was (£0.2m)
The Group incurred £0.3m of third party costs related to this acquisition. These costs are included in administrative
expenses in the consolidated statement of comprehensive income.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
13 Business combinations continued
On 4 May 2016 the Company acquired the entire share capital of Azzurri at the following provisional fair value amounts:
Purchase consideration
Cash
Assets and liabilities acquired
Tangible fixed assets
Inventories
Trade and other receivables
Cash
Trade and other payables
Intangible assets
Customer relationships
Software
ICON brand
Azzurri brand
Product platform
Deferred tax asset
Deferred tax liability on intangible assets
Net assets and liabilities acquired
Goodwill
Cash flows arising from the acquisition were as follows:
Purchase consideration settled in cash
Direct acquisition costs (note 12)
Cash balances acquired
2016
£000
47,028
2,778
2,635
19,321
1,595
(27,242)
(913)
16,030
2,550
3,278
202
1,299
2,639
(4,319)
20,766
26,262
(47,028)
(2,515)
1,595
(47,948)
Azzurri was acquired to complement and extend the Group’s existing offerings of telecommunications and data
services and enable further cross-selling to and from other Group operations, as further described in the strategic report.
The goodwill is attributable to the workforce of the acquired business, cross-selling opportunities and cost synergies that
are expected to be achieved from sharing the expertise and resource of Maintel with that of Azzurri and vice versa.
The acquisition of Azzurri Communications Limited was effected by the acquisition of its parent company, Warden
Holdco Limited for a purchase consideration of £47.0m. Warden Holdco Limited is the ultimate holding company of
Azzurri Communications Limited and its subsidiaries. Warden Midco Limited, Azzurri Holdings Limited and Azzurri Capital
Limited are intermediate holding companies of Azzurri Communications Limited and its subsidiaries.
The business was acquired for a cash consideration of £1, together with procurement of its senior debt facilities, loan
notes, and acquisition related fees of £20.5m, £24.0m, and £2.5m respectively. These acquired liabilities were settled
immediately following acquisition, and therefore formed part of the aggregate purchase consideration of £47.0m.
The purchase consideration quoted in the admission document for the Azzurri acquisition was £48.5m, but this was
reduced to £47.0m through price adjustment mechanisms.
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The customer relationships, software, brand and product platforms are estimated to have a useful life of one to eight
years based on the directors’ experience of comparable intangibles and are therefore amortised over those periods
and are subject to an annual impairment review.
A deferred tax liability of £4.3m has been recognised above which is being credited to the income statement pro rata
to the amortisation of the intangibles. The Azzurri related amortisation charge in 2016 is £2.5m.
The trade and other receivables are stated net of impairment allowances of £0.8m, which were the company’s best
estimate of cash flows not collected.
In 2016, Azzurri contributed the following to the results of the Group before management charges of £1.1m:
Revenue
Profit before tax
2016
£000
57,783
2,506
Azzurri’s revenue for the period 1 January 2016 to 31 December 2016 was £86.0m and before management charges, its
profit before tax, including amortisation, exceptional and pre acquisition debt costs was £0.4m.
The Group incurred £2.5m of third party costs related to this acquisition. These costs are included in administrative
expenses in the consolidated statement of comprehensive income.
14 Intangible assets
Cost
At 1 January 2016
Acquired in the year
Additions
At 31 December 2016
Acquired in the year
Additions
At 31 December 2017
Amortisation and Impairment
At 1 January 2016
Amortisation in the year
At 31 December 2016
Amortisation in the year
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Customer
Goodwill relationships
£000
£000
Brands
£000
Product
platform
£000
Software
£000
Total
£000
10,172
26,262
–
36,434
3,546
–
15,252
16,030
–
31,282
5,600
–
–
–
3,480
1,299
–
–
3,480
1,299
–
–
–
–
39,980
36,882
3,480
1,299
317
–
317
–
317
39,663
36,117
6,975
3,631
10,606
4,439
15,045
21,837
20,676
–
408
408
477
885
–
108
108
162
270
2,595
3,072
1,029
1,191
–
2,550
132
2,682
–
1,089
3,771
–
586
586
814
1,400
2,371
2,096
25,424
49,621
132
75,177
9,146
1,089
85,412
7,292
4,733
12,025
5,892
17,917
67,495
63,152
Amortisation charges for the year have been charged through administrative expenses in the statement of
comprehensive income.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
14 Intangible assets continued
Goodwill
The carrying value of goodwill is allocated to the cash generating units as follows:
Network services division
Managed service and technology division
Mobile division
2017
£000
21,134
15,222
3,307
39,663
2016
£000
21,134
11,676
3,307
36,117
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 of the net assets for that unit; where the recoverable
amount of the cash generating unit is less than the carrying amount of the net assets, an impairment loss is recognised.
Projected operating margins for this purpose are based on a five-year horizon which use the approved budget amounts
for year 1 and 3% rate of growth thereafter, and a pre-tax discount rate of 14% is applied to the resultant projected cash
flows. For the comparative period, the same assumptions were used. The Group’s impairment assessment at
31 December 2017 indicates that there is significant headroom for each unit.
The discount rate is based on conventional capital asset pricing model inputs and varies to reflect the relative risk
profiles of the relevant cash generating units. Sensitivity analysis using reasonable variations in the assumptions shows no
indication of impairment.
Fully amortised intangibles with a combined cost of £3.1m (2016: £2.9m) relating to the District Holdings Limited,
Callmaster Limited and Redstone acquisitions are included within intangibles and are still used within the business.
15 Subsidiaries
The Company owns investments in several subsidiaries including several which did not trade during the year. The
following were the principal subsidiary undertakings at the end of the year:
Maintel Europe Limited
Maintel International Limited
Intrinsic Technology Limited (acquired on 1 August 2018)
Both Maintel Europe Limited and Intrinsic Technology Limited provide goods and services in the managed services and
technology and network services sectors. Maintel Europe Limited is the sole provider of the Group’s mobile services.
Maintel International Limited provides goods and services in the managed services and technology sector.
The acquisition of Azzurri Communications Limited was effected by the acquisition of its parent company, Warden
Holdco Limited on 4 May 2016. Warden Holdco Limited is the ultimate holding company of Azzurri Communications
Limited and its subsidiaries. Warden Midco Limited, Azzurri Holdings Limited and Azzurri Capital Limited are intermediate
holding companies of Azzurri Communications Limited and its subsidiaries. Azzurri Communications Limited was hived up
into Maintel Europe Limited on 1 January 2017.All these companies were active in 2017 but were not trading.
In addition the following subsidiaries of the Company were dormant as at 31 December 2017:
Maintel Finance Limited District Holdings Limited
Maintel Network Solutions Limited Unified Group Limited
Unified Professional Services Limited Unified Networks Services Limited
Proximity Communications Limited (hived up Maintel Voice and Data Limited (hived up into
into Maintel Europe Limited on 1 January 2016) Maintel Europe Limited on 1 October 2016)
Datapoint Customer Solutions Limited (hived up Datapoint Global Services Limited (hived up into
into Maintel Europe Limited on 1 October 2016) Maintel Europe Limited on 1 October 2016)
Maintel Mobile Limited (hived up into
Azzurri Communications Limited on 1 October 2016)
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The following subsidiaries of the Company were dormant and were in the process of being dissolved as at
31 December 2017:
Unified Professional Services Limited Unified Group Limited
(dissolved on 6 February 2018) (dissolved on 6 February 2018)
Unified Network Services Limited Proximity Communications Limited
(dissolved 20 February 2018)
Each subsidiary company is wholly owned and, other than Maintel International Limited, is incorporated in England and
Wales. Maintel International Limited is incorporated in the Republic of Ireland.
Each subsidiary, other than Maintel International Limited, has the same registered address as the parent. The registered
address of Maintel International Limited is 9 Clanwilliam Square, Grand Canal Quay, Dublin 2, Ireland.
16 Property, plant and equipment
Freehold
Leasehold
building Improvements
£000
£000
Office and
computer
equipment
£000
Motor
vehicles
£000
Cost or valuation
At 1 January 2016
Additions
On acquisition of Azzurri
Exchange differences
At 31 December 2016
Transfer
Additions
On acquisition of Intrinsic
Disposals
–
–
1,768
–
1,768
(36)
–
–
–
Transfer to assets held for sale
(1,732)
Exchange differences
At 31 December 2017
Depreciation
At 1 January 2016
On acquisition of Azzurri
Provided in year
At 31 December 2016
Transfer
On acquisition of Intrinsic
Provided in year
Transfer to assets held for sale
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
–
–
–
147
17
164
26
–
24
(214)
–
–
1,604
414
18
1,128
2
1,562
–
6
229
–
–
2
1,469
420
5,562
–
7,451
(21)
387
1,847
(156)
–
–
1,799
9,508
72
825
119
1,016
–
199
54
–
1,269
530
547
1,140
4,708
461
6,309
(83)
1,657
685
–
8,568
940
1,142
47
–
–
–
47
–
–
–
–
–
–
47
46
–
1
47
–
–
–
–
47
–
–
Total
£000
1,930
438
8,458
2
10,828
(57)
393
2,076
(156)
(1,732)
2
11,354
1,257
5,680
598
7,535
(57)
1,856
763
(214)
9,883
1,471
3,293
Following a decision to market the freehold property for sale in December 2017, this asset was reclassified from tangible
fixed assets to assets held for sale within current assets, (see note 17).
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
17 Assets Held for Sale
On 1 December 2017, the board announced its intention to market the group’s freehold property in Burnley for sale. The
sale was concluded on 23 February 2018 and has accordingly been disclosed as a post-balance sheet event (note 30).
The criteria required to recognise a non-current asset held for sale, as disclosed in Note 2, were all met on the
announcement date above.
Transfer from Property, Plant and Equipment on 1 December 2017
Fair value adjustment – impairment charge through profit and loss
Closing value at 31/12/2017 – at fair value
2017
£000
1,518
(18)
1,500
The fair value was obtained from an independent property valuation firm. Standard property valuation techniques were
used, which include consideration of the property location and size, current property market conditions, and
comparable property sales. Management considers this to be a level 3 fair value assessment in terms of the IFRS 13 Fair
Value Measurement hierarchy.
18 Inventories
Maintenance stock
Stock held for resale
Cost of inventories recognised as an expense
Provisions of £460,000 were made against the maintenance stock in 2017 (2016: £542,000).
19 Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
All amounts shown above fall due for payment within one year.
20 Trade and other payables
Current trade and other payables
Trade payables
Other tax and social security
Accruals
Other payables
Provision for dilapidations and deferred rent incentive
Deferred managed service income
Other deferred income
2017
£000
1,746
1,505
3,251
2016
£000
1,970
2,912
4,882
21,491
17,274
2017
£000
19,018
1,277
16,962
37,257
2017
£000
13,491
3,505
6,662
3,417
283
19,234
4,775
51,367
2016
£000
17,383
388
11,600
29,371
Restated
2016
£000
9,909
4,658
8,463
3,616
483
16,012
6,012
49,153
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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.
Non current other payables
Provision for dilapidations and deferred rent incentive
Intangible licences payables
Advanced mobile commissions
2017
£000
833
561
68
1,462
Restated
2016
£000
789
–
154
943
During the current year the comparatives for the provision for dilapidations, deferred rent incentive and advanced
mobile commissions payable were restated to show the correct proportion of the liability between current and non
current. The effect of the changes were to decrease current liabilities by £943,000 for 2016 and to increase non current
other payables by £943,000 for 2016.
21 Deferred taxation
Net liability at 1 January 2016
Liability established against intangible assets
acquired during the year
Asset acquired with Azzurri
Charge/(credit) to consolidated statement
of comprehensive income
Credit to consolidated statement of
comprehensive income in respect of
anticipated further use of tax losses
Credit to consolidated statement of
comprehensive income in respect of
revaluation of liability against intangible assets
Liability established against intangible assets
acquired during the year
Asset established against fixed assets
acquired in the year
Charge/(credit) to consolidated statement
of comprehensive income
Credit to consolidated statement of
comprehensive income in respect of
anticipated further use of tax losses
Net liability at 31 December 2017
Property,
plant and
equipment
£000
89
–
(1,997)
Intangible
assets
£000
1,704
4,319
–
Tax
losses
£000
(953)
–
(642)
85
(948)
1,146
–
(500)
–
–
(275)
4,800
–
1,073
(160)
–
–
(949)
–
–
403
(968)
392
–
(1,580)
–
4,905
(500)
(1,057)
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Other
£000
(6)
–
–
(2)
–
–
(8)
–
–
–
–
(8)
Total
£000
834
4,319
(2,639)
281
(500)
(275)
2,020
1,073
(160)
(173)
(500)
2,260
Net liability at 31 December 2016
(1,823)
The deferred tax liability represents a liability established under IFRS on the recognition of an intangible asset in relation to
the Maintel Mobile, Datapoint, Proximity, Azzurri and Intrinsic acquisitions.
The deferred tax asset relates to (a) the anticipated use in the future of tax losses within the Datapoint companies which
were acquired in 2013, based on estimates of those companies’ future profitability and relevant tax rates, and (b) the
amount of the tax value of capital allowances claimed below depreciation provided in the accounts at the reporting
date, and is calculated using the tax rates at which the liabilities are expected to reverse.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
21 Deferred taxation continued
The tax losses used to date for Datapoint are in excess of those envisaged at the time of acquisition, and the directors
have therefore increased the deferred tax asset by £0.5m in the year to reflect their expectation that more tax losses will
be used in the future. 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’ judgement of a range of factors influencing their
anticipated use. A further undiscounted deferred tax asset of £0.8m (2016: £1.2m) relating to tax losses has not been
recognised because there is insufficient evidence that the asset will be recoverable; should the Datapoint business
generate higher profits than the anticipated future profits and/or an increase in corporate tax rates occur, these would
increase use of these unrecognised losses.
Changes in tax rates and factors affecting the future tax charge
As described in note 9, the corporation tax rate reduced from 20% to 19% with effect from 1 April 2017 and will reduce to
17% from 1 April 2020. The deferred tax liability balance at 31 December 2017 has been calculated on the basis that the
associated assets and liabilities will unwind at the rate prevailing at the time of the amortisation charge. Based on their
projected rate of unwinding and applying the reduced future rates would result in a decreased deferred tax charge in
the consolidated statement of comprehensive income for the year, and an adjustment of £Nil (2016: £275,000) to
revalue the liability was credited to the income statement.
22 Borrowings
Non-current bank loan – secured
Current bank loan – secured
2017
£000
2016
£000
30,707
30,688
–
–
30,707
30,688
On 8 April 2016, the Group entered into new facilities with the Royal Bank of Scotland Plc to support the acquisition of
Azzurri. These consisted of a revolving credit facility totalling £36.0m (the “RCF”) in committed funds on a reducing basis
for a five year term (with an option to borrow up to a further £20.0m in uncommitted accordion facilities).
On 1 August 2017, the acquisition of the entire share capital of Intrinsic Technology Limited was completed for a
consideration of £4.9m on a cash-free, debt-free basis. The acquisition was funded by an extension to, and drawdown
under, the Company’s existing RCF with the Royal Bank of Scotland Plc. As a result, the RCF has been increased by
£6.0m to £42.0m.
Under the terms of the facility agreement, the committed funds reduce to £31.0m on the three year anniversary, and to
£26.0m on the four year anniversary from the date of signing.
The non current bank loan above is stated net of unamortised issue costs of debt of £0.3m (31 December 2016: £0.3m).
The facilities are secured by a fixed and floating charge over the assets of the Company and its subsidiaries. Interest is
payable on amounts drawn on the revolving credit facility and overdraft facility at a covenant-depending tiered rate of
1.70 % to 2.85% per annum over LIBOR, with a reduced rate payable on undrawn facility.
Covenants based on adjusted EBITDA to net finance charges, net debt to EBITDA and operating cashflow to debt
service ratios are tested on a quarterly basis. The company was in compliance with its covenants ratios tests for
31 December 2017.
The directors consider that there is no material difference between the book value and fair value of the loan.
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23 Financial instruments
The Group’s financial assets and liabilities mainly comprise cash, borrowings, trade and other receivables and trade and
other payables.
Loans and receivables
Current financial assets
Trade receivables
Cash and cash equivalents
Other receivables
2017
£000
2016
£000
19,018
3,311
1,277
17,383
10,884
388
23,606
28,655
Financial liabilities
measured at
amortised cost
Non current financial liabilities
Other payables
Secured bank loan
Current financial liabilities
Trade payables
Other payables
Accruals
2017
£000
2016
£000
629
30,707
31,336
13,491
3,417
6,662
154
30,842
30,966
9,909
3,616
8,463
23,570
21,988
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 was represented by the carrying value of trade and other receivables,
against which £337,000 is provided at 31 December 2017 (2016: £416,000). The provision represents an estimate of
potential bad debt 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 2017 owed
the Group £1.0m including VAT (2016: £3.1m). The Group’s customers are spread across a broad range of sectors and
consequently it is not otherwise exposed to significant concentrations of credit risk on its trade receivables.
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
23 Financial instruments continued
The movement on the provision is as follows:
Provision at start of year
Acquired provision of Azzurri
Acquired provision of Intrinsic
Provision used
Provision reversed
Provision at end of year
2017
£000
416
–
70
(66)
(83)
337
2016
£000
157
766
–
(442)
(65)
416
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
2017
£000
2,947
787
139
2016
£000
2,258
148
15
3,873
2,421
Cash and cash equivalents at 2017 year-end are represented by cash and short term deposits, primarily with Royal Bank
of Scotland Plc and HSBC Bank Plc. The equivalent at 2016 year-end was only with Royal Bank of Scotland Plc.
Foreign currency risk
The functional currency of all Group companies is Sterling apart from Maintel International Limited, 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, some Group
companies transact with certain customers and suppliers in Euros or dollars, and those transactions are affected by
exchange rate movements during the year but are not deemed material in a Group context.
Interest rate risk
The Group had borrowings of £31.0m at 31 December 2017 (2016: £31.0m), together with a £5.0m overdraft facility (2016:
£5.0m). The interest rate charged is related to LIBOR and bank rate respectively and will therefore change as those rates
change. If interest rates had been 0.5% higher/lower during 2017, and all other variables were held constant, the
Group’s profit for the year would have been £190,000 (2016: £139,000) higher/lower due to the variable interest element
on the loan.
The Group expects to be in a net borrowing position in the immediate future, and received £ Nil interest during the year
(2016: £3,000).
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. This risk is
managed by balancing the Group’s cash balances, banking facilities and reserve borrowing facilities in the light of
projected operational and strategic requirements.
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The following table details the contractual maturity of financial liabilities based on the dates the liabilities are due to be
settled:
Financial liabilities:
0 to 6
months
£000
6 to 12
months
£000
Trade payables 13,491
Other payables 3,180
Accruals 6,522
Borrowings (including future interest) 520
At 31 December 2017 23,713
–
237
140
520
897
0 to 6
months
£000
6 to 12
months
£000
Trade payables 9,909
Other payables 3,336
Accruals 8,259
Borrowings (including future interest) 454
At 31 December 2016 21,958
–
280
204
445
929
2 to 5
Years
£000
–
629
–
32,379
33,008
2 to 5
Years
£000
–
154
–
33,400
33,554
Total
£000
13,491
4,046
6,662
33,419
57,618
Total
£000
9,909
3,770
8,463
34,299
56,441
Market risk
As noted above, the interest payable on borrowings is dependent on the prevailing rates of interest from time to time.
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, translation reserve 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.
24 Share capital
Allotted, called up and fully paid
2017
Number
2016
Number
Ordinary shares of 1p each 14,197,059
14,197,059
2017
£000
142
2016
£000
142
The Company adopted new Articles on 27 April 2016, which dispensed with the need for the Company to have an
authorised share capital.
No shares were issued in the year (2016: 3,428,572). No shares were repurchased during the year (2016: Nil).
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Financial statements
Notes forming part of the consolidated
financial statements continued
for the year ended 31 December 2017
25 Reserves
Share premium, translation reserve, 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 2017 of 19.1p per share; this dividend is not provided
for in these financial statements.
26 Share Incentive Plan
The Company established the Maintel Holdings Plc Share Incentive Plan (SIP) in 2006, which was updated in 2016. The SIP is
open to all employees and executive directors with at least six months’ continuous service with a Group company, and
allows them 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 and directors 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 five years to benefit from the full tax benefits of the plan.
27 Share based payments
On 18 May 2009 the directors of the Company approved the adoption of the Maintel Holdings Plc 2009 Option Plan and
on 20 August 2015 they approved the Maintel 2015 long-term Incentive Plan.
The Remuneration committee’s report on page 29 describes the options granted over the Company’s ordinary shares.
In aggregate, options are outstanding over 2.7% 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.
28 Operating leases
As at 31 December, the Group had future minimum rentals payable under non-cancellable operating leases as set
out below:
2017
Land and
buildings
£000
2017
Other
£000
2016
Land and
buildings
£000
The total future minimum lease payments are due as follow:
Not later than one year 1,110
Later than one year and not later than five years 3,297
Later than five years 1,479
5,886
222
234
–
456
1,194
3,326
2,071
6,591
2016
Other
£000
253
68
–
321
The commitment relating to land and buildings is in respect of the Group’s London, Dublin, Weybridge, Aldridge,
Haydock and Fareham offices and Haydock warehouse facility. The remaining commitment relates to contract hired
motor vehicles (which are typically replaced on a 3 year rolling cycle), office equipment, datacentre space rental,
licencing of billing software and office supplies.
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Part of the London premises has been sublet, with future minimum rentals receivable under non-cancellable operating
leases as set out below:
The total future minimum lease payments are due as follow:
Not later than one year
Later than one year and not later than five years
29 Related party transactions
Transactions with key management personnel
2017
Land and
buildings
£000
2016
Land and
buildings
£000
155
–
155
145
155
300
The Group has a related party relationship with its directors and executive officers. The remuneration of the individual
directors is disclosed in the Remuneration committee 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 schemes
2017
£000
1,787
50
1,837
2016
£000
1,679
37
1,716
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Other transactions
The Group did not trade in the year with E Buxton or K Stevens (2016: less than £1,200 in aggregate in each case). The
Group traded in the year with A J McCaffery, transactions in 2017 and 2016 amount in aggregate to less than £1,200.
In 2017, the Company paid fees of £7,000 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 relating to the acquisition of Intrinsic (2016: acquisition
of Azzurri; £61,000). In 2017, the Group provided telecommunications services to Focus 4 U Limited and to Zinc Media Group
Plc, companies of which N J Taylor is a director, amounting to £9,000 in both cases. (2016: £Nil).
The Company paid fees of £4,000 to Anchusa Consulting Limited, a company of which A P Nabavi is a shareholder and
director, in respect of consultancy services provided to the Company relating to the acquisition of Intrinsic (2016: acquisition
of Azzurri ; £57,000).
30 Post balance sheet events
On 1 January 2018, as part of the integration of Intrinsic Technology Limited, its business and assets were hived up into
Maintel Europe Limited.
On 23 February 2018, the sale of the freehold property in Burnley was completed for £1.5m.
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Financial statements
Company balance sheet
at 31 December 2017 – prepared under FRS101
2017
Note £000
2017
£000
2016
£000
Fixed assets
Investment in subsidiaries 4
54,466
Current assets
Debtors 5 9,690
Cash at bank and in hand 359
10,049
Creditors: amounts falling due within one year
Creditors 6 1,222
Borrowings 7 –
Net current assets
8,827
Creditors: amounts falling due after one year
Borrowings 7
Total assets less current liabilities
Capital and reserves
Called up share capital 8
Share premium
Capital redemption reserve
Profit and loss account
Shareholders’ funds
30,707
32,586
142
24,354
31
8,059
32,586
10,298
1,499
11,797
630
–
2016
£000
49,560
11,167
30,688
30,039
142
24,354
31
5,512
30,039
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 £6.8m (2016: £0.7m). The auditors’ remuneration for audit services to the Company in the year was
£14,000 (2016: £16,000).
The Company financial statements were approved and authorised for issue by the board on 16 March 2018 and were
signed on its behalf by:
M Townsend
Director
The notes on pages 74 to 78 form part of these financial statements.
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Reconciliation of movement in shareholders’ funds
for the year ended 31 December 2017 – prepared under FRS101
Capital
Share Share redemption
reserve
capital premium
£000
Note £000 £000
Profit
and loss
account
£000
At 1 January 2016 108 1,169
Profit and total comprehensive
income for year – –
Dividends paid – –
Issue of new ordinary shares 34 23,966
Share issue costs – (781)
Grant of share options – –
At 31 December 2016 142 24,354
Profit and total comprehensive
income for year – –
Dividends paid 3 – –
Grant of share options – –
At 31 December 2017 142 24,354
The notes on pages 74 to 78 form part of these financial statements.
Total
£000
9,690
712
(3,679)
24,000
(781)
97
31
8,382
712
(3,679)
–
–
97
–
–
–
–
–
31
–
–
–
31
5,512
30,039
6,808
6,808
(4,557)
(4,557)
296
8,059
296
32,586
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Financial statements
Notes forming part of the Company
financial statements
at 31 December 2017
1 Accounting policies
The Company financial statements have been prepared in accordance with Financial Reporting Standard 101
Reduced Disclosure Framework with effect from 1 January 2014.
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.
(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.
(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) Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of disclosure exemptions conferred by FRS101.
Therefore these financial statements do not include:
• certain comparative information as otherwise required by EU endorsed IFRS;
• certain disclosures regarding the Company's capital;
• a statement of cash flows;
• the effect of future accounting standards not yet adopted;
• the disclosure of the remuneration of key management personnel; and
• disclosure of related party transactions with other wholly owned members of the Group headed by Maintel Holdings Plc.
In addition, and in accordance with FRS101 further disclosure exemptions have been adopted because equivalent
disclosures are included in the consolidated financial statements of Maintel Holdings Plc. These financial statements do
not include certain disclosures in respect of:
• share based payments;
• impairment of assets.
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(f) Judgements and key areas of estimation uncertainty
The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. In the future, actual experience may differ from these estimates and
assumptions. The principal use of estimates and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year relates to the potential impairment of the
carrying value of investments.
The Company assesses at each reporting date whether there is an indication that its investments 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 14 of the consolidated accounts. These estimates include the asset’s future cash flows and an
appropriate discount to reflect the time value of money. The range of estimates reflects the relative risk profiles of the
relevant cash generating units.
2 Employees
Staff costs, including directors, consist of:
Wages and salaries
Social security costs
Pension costs
The average number of employees, including directors, during the year was:
2017
£000
1,269
162
34
2016
£000
1,181
152
27
1,465
1,360
2017
Number
2016
Number
9
9
3 Dividends paid on ordinary shares
Details of dividends paid and payable are shown in note 10 of the consolidated financial statements.
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Financial statements
Notes forming part of the Company
financial statements continued
at 31 December 2017
4 Investment in subsidiaries
At 1 January 2016 24,905
Additions 47,028
Shares in
subsidiary
undertakings
£000
Intercompany disposals
At 31 December 2016
Additions
At 31 December 2017
Provision for impairment
At 1 January 2016
Intercompany disposals during 2016
At 31 December 2017 and 31 December 2016
Net book value
At 31 December 2017
(22,293)
49,640
4,906
54,546
2,680
(2,600)
80
54,466
At 31 December 2016 49,560
On 1 August 2017 the Company acquired the entire share capital of Intrinsic Technology Limited, for a gross
consideration of £4.9m, paid in cash.
Details of the Company’s subsidiaries are shown in note 15 of the consolidated financial statements.
5 Debtors
Amounts owed by subsidiary undertakings
Other tax and social security
Prepayments and accrued income
Corporation tax recoverable
All amounts shown under debtors fall due for payment within one year.
6 Creditors
Amounts due to subsidiary undertakings
Trade creditors
Accruals and deferred income
2017
£000
9,125
127
16
422
2016
£000
9,993
46
55
204
9,690
10,298
2017
£000
1067
56
99
1,222
2016
£000
294
41
295
630
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7 Borrowings
Non-current bank loans – secured
Current bank loans – secured
2017
£000
2016
£000
30,707
30,688
–
–
30,707
30,688
On 8 April 2016 the Group entered into new facilities with the Royal Bank of Scotland Plc to support the acquisition of
Azzurri. These consisted of a revolving credit facility totalling £36.0m (the “RCF”) in committed funds on a reducing basis
for a five year term (with an option to borrow up to a further £20.0m in uncommitted accordion facilities).
On 1 August 2017, the acquisition of the entire share capital of Intrinsic Technology Limited was completed for a
consideration of £4.9m on a cash-free, debt-free basis. The acquisition was funded by an extension to, and draw-down
under, the Company’s existing RCF with the Royal Bank of Scotland Plc. As a result the RCF has been increased by £6m
to £42m.
Under the terms of the facility agreement, the committed funds reduce to £31.0m on the three year anniversary, and to
£26.0m on the four year anniversary from the date of signing.
The non current bank loan above is stated net of unamortised issue costs of debt of £0.3m (31 December 2016: £0.3m).
The facilities are secured by a fixed and floating charge over the assets of the Company and its subsidiaries. Interest is
payable on amounts drawn on the revolving credit facility and overdraft facility at a covenant-depending tiered rate of
1.70 % to 2.85% per annum over LIBOR, with a reduced rate payable on undrawn facility.
Covenants based on adjusted EBITDA to net finance charges, net debt to EBITDA and operating cashflow to debt
service ratios are tested on a quarterly basis. The company was in compliance with its covenants ratios tests for
31 December 2017.
The directors consider that there is no material difference between the book value and fair value of the loan.
8 Share capital
Allotted, called up and fully paid
2017
Number
2016
Number
Ordinary shares of 1p each 14,197,059
14,197,059
2017
£000
142
2016
£000
142
The Company adopted new Articles on 27 April 2016, which dispensed with the need for the Company to have an
authorised share capital.
No shares were issued in the year (2016: 3,428,572). No shares were repurchased during the year (2016: Nil).
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Financial statements
Notes forming part of the Company
financial statements continued
at 31 December 2017
9 Related party transactions
Transactions with other Group companies have not been disclosed as permitted by FRS101, as the Group companies
are wholly owned.
10 Contingent liabilities
As security on the Group’s loan and overdraft facilities, the Company has entered into a cross guarantee with its
subsidiary undertakings in favour of Royal Bank of Scotland Plc. At 31 December 2017 each subsidiary undertaking had a
net positive cash balance.
The Company has entered into an agreement with Maintel Europe Limited, guaranteeing the performance by Maintel
Europe Limited of its obligations under the lease on its London premises.
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Directors, Company details and advisers
Directors
J D S Booth
E Buxton
S D Legg
Chairman, non-executive director
Chief executive
Group sales and marketing director
A J McCaffery Director
A P Nabavi
Non-executive director
K Stevens
N J Taylor
Group integration and transformation director
Non-executive director
M V Townsend Chief financial officer
Secretary and registered office
W D Todd,
160 Blackfriars Road,
London SE1 8EZ
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: 0370 707 1182
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Annual
Report &
Accounts 2017
Maintel Holdings Plc
Maintel Holdings
Plc
160 Blackfriars Road
London
SE1 8EZ
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