Maintel Regulatory News (MAI)

13 Mar 2006 07:01

Maintel Holdings PLC13 March 2006 Maintel Holdings Plc Preliminary results for the year ended 31 December 2005 Maintel Holdings Plc, the telecoms services company, announces preliminaryresults for the year ended 31 December 2005. Financial highlights Turnover up 6% to £12.197m (2004: £11.542m) Profit before tax up 21% to £1.904m (2004: £1.574m before float costs) Earnings per share up 22% to 10.0p (2004: 8.2p before float costs) Interim dividend of 1.5p per share paid in September; final dividend of 2.5p pershare proposed Cash balances at year-end of £3.625m (2004: £3.411m), after share buy-backscosting £680,000 and dividend payments of £196,000 Operational highlights Healthy new maintenance contract wins including large multisite corporations,NHS Trusts and Public Sector clients Maintel Voice and Data had an encouraging end to the year with a significantincrease in new contracts signed in the last quarter of 2005 compared to thelast quarter of 2004 with notable increases in wholesale line rental andbroadband supply Awarded a Nortel PSC+ support contract giving direct access to Nortel supportteams Solid growth in supply and support of VoIP products, and hardware sales intoexisting customers is up 18% on 2004. A £2.8m contract was received in February2006 from the London Probation Board For further information please contact: Tim Mason, Chief Executive 020 7401 4601Dale Todd, Finance Director 020 7401 0562 Chairman's statement Summary of performance Maintel ends its first full year as a listed company in good heart. I am pleasedto report an increase in pre-tax profits of 21% and earnings per share growth of22% from 8.2p to 10.0p; these figures are adjusted to take into account floatcosts incurred in 2004, without which adjustment profit before tax growth was51% and earnings per share growth 69%. Both our major divisions, maintenance and voice and data, grew turnover by 6% in2005. This growth was achieved against tough pricing competition on themaintenance side and reflects the commitment of our sales team and continuinginvestment in customer retention strategies. In the voice and data division weflagged at the end of last year the loss of two very large customers. The growthin this division in the face of these losses is satisfactory and it is good toreport that sales momentum ended the year strong with our product offeringbroadening out. Our acquisition of Pinnacle Voice and Data towards the end of2005 should further enhance this part of our business in the new year. As thesenumbers suggest, Maintel continues to manage its cost base in a disciplined wayand exploit the economies of scale of a healthy growing business. For the year as a whole, the Group generated revenues of £12.2m (2004 - £11.5m)and pre-tax profits of £1.904m (2004 - £1.574m pre-flotation expenses). TheGroup's balance sheet again strengthened with net assets increasing from£1,197,000 to £1,648,000. An interim dividend of £196,000 was paid in Septemberand 580,000 shares were repurchased during the year for a consideration of£680,000. We ended the year with cash balances totalling £3.6m (2004 - £3.4m).In line with our policy outlined last year of paying out approximately 40% ofpost-tax earnings as a dividend to our shareholders, we are proposing a finaldividend for the year of 2.5p a share. Future prospects I anticipate a year of stronger top line growth in 2006 for a variety ofreasons. Our first year of public listing has brought enhanced relationshipswith a number of bigger players in our sector and we expect to benefit fromthese in the period ahead. While pricing remains competitive in the maintenancebusiness, our tendering activity is brisk and to a broad range of prospects inboth public and private sectors. We have started 2006 on a strong note whichunderpins our outlook for the current year. The visibility that over 7,000 customers gives us tells us that new technologiesin our industry are adopted at very different paces. Our engineering base isconstantly trained to keep in step with our clients' needs and considerableinvestment goes into keeping our staff among the best qualified in our industry.We are confident in our ability to service the latest as well as legacyequipment efficiently and cost effectively. We have also invested in greater sales capacity in 2005, especially in our voiceand data network services business, and the outlook here is strong as we go into2006. I would like to thank our non-executive director, Dr Bill Madden for hiscontribution to Maintel over the years and wish him well in his retirement. I ampleased to welcome Nicholas Taylor as his successor. Nicholas brings substantialknowledge of growing companies and corporate governance, as well as hisexperience as a senior executive at WPP and RIBA. Finally, we owe a great deal to the commitment, integrity and loyalty of ourstaff. On behalf of the Board and shareholders I offer them our thanks. J D S BoothChairman 10 March 2006 Chief Executive's review I am very pleased to report that Maintel has achieved continued progress in itsfirst full year as a listed company, profit before tax increasing by 21% (51%including float costs in 2004) to £1.9m, and earnings per share by 22%, from8.2p (adjusted for float costs in 2004) to 10.0p. The Group's revenues continued to grow, with equipment sales, including VoIP,showing particularly strong expansion. The voice and data division recoveredwell from the loss of two major customers at the end of 2004 with revenue in Q42005 up by 32% over Q1. Group revenues consequently increased by 6%, to£12.197m. Cash flow also continued to be strong, increasing by £214,000, after payment ofa £196,000 dividend, the use of £680,000 to buy back shares in the Company andpayment in 2005 of £193,000 of the costs relating to the AIM listing in December2004. Cash balances at the year end were £3.6m. Maintel Europe The division grew its revenue by 6% in the year, to £10.2m. The value of themaintenance base remained stable during 2005, with growth coming from robustequipment sales - up 18% on 2004 - following an increase in equipment salesresource and a notable increase in the provision of new systems to some of ourlarger customers. The second half of 2005 proved particularly successful with anincreased aggregate turnover of 4% over the first half of the year. Maintenance revenues, the bulk of which are underpinned by at least annualcontracts, amounted to £7.4m (2004 - £7.3m) representing 73% (2004 - 75%) of thedivision's total revenues. Gross margin remained healthy, at 43% (2004 - 42%), with net margin increasingto 16.9% (2004 - 13.4%). The net margin improvement during the year has been achieved largely throughimproved utilisation, whilst cost increases have in the main been kept toinflationary levels. The increase in a number of subcontract support costs hasbeen noticeable, and is being managed where possible by acquiring additionalskills in-house. Maintel Europe's core business remains the provision of telecoms maintenanceservices, together with the sale of related products and services primarily tothe company's maintenance base. The year, however, saw a conscious move by the company into the convergingmarket of IT, with the training of an increasing number of our engineers in newskills and the recruitment of engineers who bring that knowledge base. Whilst werecognise that convergence is occurring, and are benefiting particularly fromthe new VoIP equipment requirements of our client base, the transition is beingmade at noticeably varying rates, with many customers clearly satisfied thatlegacy equipment currently remains more financially appropriate for them thanthe adoption of new technology in a market which continues to evolve at a rapidrate. It is therefore our strategy to continue to develop our capabilities ofleading edge technology, whilst retaining the ability to service our oldertechnology customer base. 2005 also saw the further opening up of the Nortel market in the UK, previouslycontrolled by BT. We have been increasingly successful in this area, and areinvesting in additional engineers and training to take advantage of thisopportunity. This has culminated in Maintel being awarded a distinctive PSC+support contract with Nortel for the UK. Beyond the maintenance and supply business, we remain alert to the opportunitiesthat are presenting themselves more widely in the VoIP arena, and will takeadvantage of these as profitable avenues emerge. It is also the intention to purchase suitable maintenance bases at sensibleprices, as and when the opportunities arise, and integrate these into theexisting infrastructure. Maintel Voice and Data During the year, the division added a number of services to its productportfolio, in particular line rental which had a noticeable positive impact inthe latter stages of the year. Revenues grew by 6% in the year, to £2.1m. Inspite of a further reduction in call selling rates, we have succeeded inmaintaining strong call margins during the year although this will be temperedin 2006 by line rental which is lower margin. Attrition remained low in 2005, with no major customers leaving, reflecting therealistic pricing and reliable service provided by the company. The targetmarket remains SMEs, however we are seeing opportunities arise in providing someof our larger maintenance customers with a one stop shop solution, and willtailor our offerings to such opportunities subject, naturally, to overallcontract profitability. The new product and package offerings, assisted by a bolstering of the salesteam in the second half, has resulted in a number of large contracts beingsigned in the fourth quarter and since the year end, which have recently startedbilling, or will start shortly. Employee costs increased during the year, with the addition of sales and supportstaff, and further investments are planned for 2006. In December 2005, Pinnacle Voice and Data Ltd was acquired. The principalpurpose of the acquisition was the buyout of a commitment on Maintel Voice andData to pay Pinnacle commissions relating to business introduced by it, and theinitial consideration was £352,000 including costs, with £124,000 cash acquiredwith the company. Assuming all the contracts subject to the commission continueto run, the saving to Maintel is around £85,000 per annum. In addition, Maintelwill make a further payment to the vendor in December 2006, based on the valueof new contracts signed by the vendor on behalf of Maintel. Central costs The group has continued to manage central costs vigilantly and we are encouragedthat administrative expenses have only increased marginally by 2% to £3.3m(2004: £3.2m) excluding last year's float costs. Taxation The group benefits from a degree of marginal relief on the profits of MaintelVoice and Data, which largely offsets the small amount of costs that aredisallowable for tax deduction, so that the net tax rate in 2005 is 30%. In2004, the costs of the AIM listing were a disallowable cost, resulting in a taxrate for the year of 37%. Dividends An interim dividend of 1.5p per share (£196,000 in total) was paid on 26September 2005. It is proposed to pay a final dividend of 2.5p in respect of 2005, subject toshareholder approval at the AGM, and payable on 24 April to shareholders on theregister at the close of business on 24 March. This matches our commitment todistribute 40% of retained annual earnings. In accordance with FRS 21, thisdividend is not accounted for in the financial statements for the period underreview as it had not been resolved to pay it as at 31 December 2005. Purchase of own shares Further to the authority granted at the last AGM, the Company repurchased580,000 of its own shares during 2005, at prices between 112p and 126p, at atotal cost of £680,000. These shares were cancelled prior to the year end. Theshare price at 31 December 2005 was 136.5p. Cash flow At 31 December 2005 the group had cash and bank balances of £3.625m (2004 -£3.411m), all of it unrestricted. Net cash inflow in the year was £214,000,after capital expenditure of £119,000, corporation tax payments of £494,000,share buyback costs of £680,000, dividend payments of £196,000 and the net costof acquiring Pinnacle Voice and Data of £228,000. The group invests its surplus cash in high interest, low risk accounts or funds. IFRS (International Financial Reporting Standards) The directors intend to adopt IFRS reporting with effect from 1 January 2007. Outlook Now that the Group has successfully managed a stable first year as an AIM listedcompany with increased turnover, margin and profitability, further investment isbeing made with a view to increasing the top line growth. Additional sales staffare being employed both to win new maintenance business and manage existingcustomer relationships to maximise the income and profitability from the salesof VoIP as well as conventional telecom products and services. Recent contractgains have helped reinforce the value of this expansion. In particular, I am pleased to report that in February 2006 Maintel wascontracted by The London Probation Board to supply, install and maintain anetwork of Nortel VoIP installations across 70 sites throughout Greater London.The contract is to replace existing technologies through 2006 and maintain allequipment under a 5 year contract with a total value of approximately £2.8m.Additionally Maintel will be supplying voice and network services to the LondonProbation Board throughout the term of the contract. For 2006, Maintel expectsto receive £1.45m of revenue for the supply and installation phase of thiscontract, with ongoing annual income estimated at £330k. T T MasonChief Executive 10 March 2006 Maintel Holdings Plc Consolidated profit and loss accountfor the year ended 31 December 2005 2005 2004 £'000 £'000 Turnover 12,197 11,542 Cost of sales 7,188 6,901 --------- --------- Gross profit 5,009 4,641 ------------------------------ --------- --------- General administrative expenses 3,256 3,187 Cost of AIM listing - 309 ------------------------------ --------- --------- Administrative expenses 3,256 3,496 --------- --------- Operating profit 1,753 1,145 Interest receivable 153 120 Interest payable and similar charges (2) - --------- --------- Profit on ordinary activities 1,904 1,265before taxation --------- --------- Taxation on profit on 577 470ordinary activities --------- --------- Profit on ordinary activities 1,327 795after taxation ========= ========= The profit and loss account contains all gains and losses recognised in the yearand all amounts relate to continuing operations. Maintel Holdings Plc Consolidated profit and loss accountfor the year ended 31 December 2005 (continued) 2005 2004 Earnings per share Basic and diluted 10.0p 5.9p ========= ========= Adjusted - as above but excluding cost of AIM listing 10.0p 8.2pin 2004 ========== ========== Dividend per share 1.5p 3.0p =========== =========== A final dividend of 2.5p per share is proposed, subject to shareholder approvalat the AGM. In accordance with FRS 21, this dividend is not shown in thefinancial statements for the period under review as it had not been resolved topay it as at 31 December 2005. Maintel Holdings Plc Consolidated balance sheetas at 31 December 2005 2005 2005 2004 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 227 -Tangible assets 240 264 Current assetsStocks 585 636Debtors 1,947 2,050Cash at bank and in hand 3,625 3,411 -------- -------- 6,157 6,097 Creditors: amounts 2,085 2,120falling due within one year -------- -------- Net current assets 4,072 3,977 Deferred income (2,891) (3,044) -------- -------- Net assets 1,648 1,197 ======== ======== Capital and reservesCalled up share capital 129 135Share premium 628 628Capital redemption reserve 7 1Profit and loss account 884 433 ---------- ---------- Shareholders' funds - equity 1,648 1,197 ========== ========== Maintel Holdings Plc Consolidated cash flow statementfor the year ended 31 December 2005 2005 2004 £'000 £'000 Reconciliation of operating profit to netcash inflow from operating activities Operating profit 1,753 1,145Depreciation charge 143 196Decrease in stocks 51 263Decrease in debtors 132 248(Decrease)/increase in creditors (299) 44 --------- --------- Net cash inflow from operating activities 1,780 1,896 ========= ========= Cash flow statement--------------------- Net cash inflow from 1,780 1,896operating activities Returns on investments andservicing of financeNet interest received 151 120 TaxationCorporation tax (494) (341) Capital expenditure and financialinvestmentPayments to acquire tangible (119) (146)fixed assets Acquisitions and disposals Purchase of subsidiary undertaking (352) -Net cash acquired with subsidiary undertaking 124 - Equity dividends paid (196) (406) FinancingRepurchase of own shares for cancellation (680) - ---------- ---------- Increase in cash in the year 214 1,123 ========== ========== Maintel Holdings Plc Consolidated cash flow statementfor the year ended 31 December 2005 (continued) Reconciliation of net cash flow to movement in net cash 2005 2004 £'000 £'000 Increase in cash in the year 214 1,123 Net cash at 1 January 2005 3,411 2,288 --------- --------- Net cash at 31 December 2005 3,625 3,411 ========= ========= Maintel Holdings Plc Notes to the preliminary statement 1. The abridged financial information set out above has been extracted fromfinancial statements approved by the directors on 10 March 2006, which receivedan unqualified report by the Company's auditors, and which will be delivered tothe Registrar of Companies following the Company's annual general meeting. Thefinancial information does not constitute statutory accounts as defined insection 240 of the Companies Act 1985, and has been prepared on the basis of theaccounting policies set out in the financial statements for the year ended 31December 2004. 2. Segmental analysis 2005 2004 £'000 £'000 Turnover Telephone system maintenance and sales 10,094 9,566 Telephone network services 2,103 1,976 --------- --------- 12,197 11,542 ========= ========= Gross profit Telephone system maintenance and sales 4,313 3,980 Telephone network services 696 661 ---------- ---------- 5,009 4,641 ========== ========== Profit before taxation Telephone system maintenance and sales 1,691 1,326 Telephone network services 213 248 ---------- ---------- 1,904 1,574 Exceptional item - cost of AIM listing - (309) ---------- ---------- 1,904 1,265 ========== ========== 3. Earnings per share Earnings per share have been calculated using the weighted average number ofshares in issue during the period. This and earnings, being profit after tax,are as follows: 2005 2004 £'000 £'000 Earnings used in basic and diluted EPS, being profit aftertax 1,327 795 Cost of AIM listing - 309 --------- --------- Adjusted earnings 1,327 1,104 ========= ========= Weighted average number of shares 13,232 13,517 ========== ========== The weighted average in 2005 has been adjusted for the purchase of the Company'sshares noted below. There are no share options in existence which would resultin a dilution to basic earnings per share. 4. Purchase of own shares During 2005, and pursuant to the authority granted to it at its annual generalmeeting in April, the Company acquired 580,000 ordinary shares of 1p each, at atotal cost of £680,000. These shares were subsequently cancelled. 5. The annual report and accounts will be posted to shareholders on 28March 2006 and copies will also be available on request from the Company'sregistered office at 61 Webber Street, London SE1 0RF. 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