Last checked at 16 Mar 2009 07:00
Maintel Holdings Plc
Preliminary results for the year to 31 December 2008
Maintel Holdings Plc, the telecoms services company, announces preliminary results for the year to 31 December 2008.
Financial Highlights
Group revenue increased marginally to £19.4m (2007: £19.3m). Recurring revenue increased by 10% to £14.8m (2007: £13.4m) to be 76% of total 2008 revenue
Virtually all major maintenance contracts expiring in 2008 were successfully renewed
Sales of broadband, call traffic and related products up 21% to £5.7m (2007: £4.7m)
Equipment sales lower partly due to avoidance of lower margin business and partly to economic environment
Cost base reduced further in Q1 2009, by an annualised £400,000
Cash balances of £1.0m (2007: £2.1m) after buy back of shares for £1.8m; the Group has no debt
Profit before tax of £1.589m (2007: £1.979m)
Adjusted profit before tax of £2.021m (2007: £2.303m); adjusted profit before tax is basic profit before tax of £1.589m (2007: £1.979m), adjusted for goodwill impairment, intangible amortisation and one-off professional costs
Basic and diluted earnings per share of 9.2p (2007: 11.1p)
Adjusted earnings per share of 12.1p (2007: 13.1p); adjusted earnings per share is basic earnings per share of 9.2p (2007: 11.1p), adjusted for goodwill impairment, intangible amortisation and one-off professional costs
Final dividend proposed of 3.1p per share (2007: 3.0p), making 5.6p for the year (2007: 5.5p)
Eddie Buxton, Chief Executive, said:
"Group recurring revenues in 2008 amounted to £14.8m representing 76% of annual revenue, the maintenance base is at a record of almost £9.2m and further costs have been cut in Q1 2009, putting the Group on a firm footing for the year ahead."
For further information please contact:
Eddie Buxton, Chief Executive 020 7401 4601
Dale Todd, Finance Director 020 7401 0562
Chairman's statement
Maintel's revenue in 2008 was £19.4m, showing only marginal growth on 2007 (£19.3m), and Group profit before tax fell to £1.59m (2007 - £1.98m). This figure represents basic earnings per share of 9.2p (2007 - 11.1p) and adjusted earnings per share (as defined in the business review) of 12.1p (2007 - 13.1p).
In spite of slow overall revenue growth the addition of three significant new maintenance clients and comparatively high retention of our existing base enabled the Group's recurring revenues to grow by 10% to £14.8m so that they now comprise 76% of total revenue, a satisfactory ratio in difficult economic times. Our network services business also turned in a very respectable performance with turnover growth of 21% to £5.7m and gross profit increasing by 14%. Non-recurring revenue represented by equipment sales slowed markedly during the year for two main reasons; first, that we chose to avoid lower margin customer sales (as we previously indicated we would) in order to restore margins and second, conditions in the economy reduced our customers' discretionary spend on equipment.
We have adjusted our cost base to match the lower revenue stream from equipment sales by reducing sales and engineering personnel during the year and further at the start of 2009. The costs associated with this restructuring amount to £225,000, £114,000 of which fell in 2008. As a result of these exercises, we believe our business is now well positioned for the challenging economic conditions ahead.
The fall in stock market valuations has enabled us to repurchase and cancel a substantial amount of our equity - 1,565,000 shares or 14.5% of the number outstanding at the end of 2008 - during the year. This has seemed a better use of the Group's surplus cash than bank deposits in a period where yields are so low. We remain committed to our progressive dividend policy and are proposing a final dividend for the year of 3.1p (2007 - 3.0p) giving a total of 5.6p for the year (2007 - 5.5p). This will be payable on 29 April 2009 to shareholders on the register at 27 March 2009.
Since year end Tim Mason has retired as Chief Executive Officer and I would like here to express thanks on behalf of the Board and all shareholders for the energy and commitment that he has brought to this role over a number of years. After a thorough search process for Tim's successor we announced Eddie Buxton's appointment early in 2009. Eddie brings long and varied experience of the telecoms industry to us having worked in senior positions at Cable and Wireless, NTL and Centrica Telecoms and was most recently Managing Director of Redstone plc's telecoms division.
I would like finally to express the Board's gratitude to our loyal and hardworking staff for continuing to build and manage Maintel's business in the current challenging economic environment and market conditions.
J D S Booth
Chairman
13 March 2009
Business review
Results
In line with our projections in the interim report, the second half of 2008 saw an increase in maintenance revenues, fewer low margin equipment sales and a reduction in payroll costs, with the result that second half profits improved significantly.
| H1 2008 | H2 2008 | 2008 | 2007 | ||
| £000 | £000 | £000 | £000 | ||
| Revenue | 9,777 | 9,638 | 19,415 | 19,329 | |
| Profit before tax | 621 | 968 | 1,589 | 1,979 | |
| Add back goodwill impairment, intangibles amortisation and one-off professional fees | 190 | 242 | 432 | 324 | |
| Adjusted profit before tax | 811 | 1,210 | 2,021 | 2,303 | |
| Basic and diluted earnings per share | 3.5p | 5.7p | 9.2p | 11.1p | |
| Adjusted earnings per share* | 4.7p | 7.4p | 12.1p | 13.1p |
* Adjusted profit after tax divided by weighted average number of shares
The conscious avoidance of lower margin equipment sales previously highlighted, together with the effects of the economic environment reducing customers' discretionary spend on equipment, resulted in relatively static revenues overall, despite the healthy increase in maintenance and network services revenues. Recurring revenue (maintenance and network services) increased markedly to £14.8m (76% of total revenues) in 2008 (2007 - £13.4m and 69%), providing increased stability in uncertain times.
The significant year on year decline in equipment sales has caused overall revenue to be flat and the cost of bringing down headcount in line with the reduced level of revenues, £114,000 for the year, has contributed to a drop in adjusted profit before tax from £2.303m to £2.021m, or 9.2p per share (2007: 11.1p) and a drop in adjusted earnings per share from 13.1p to 12.1p.
The Company repurchased 1,565,000 shares during the year, the bulk of them in October. This will produce a significant earnings per share benefit in 2009.
| Revenue analysis (£000) | 2008 | 2007 |
| Maintenance related | 9,157 | 8,756 |
| Equipment, installations and other | 4,702 | 5,979 |
| Total maintenance and equipment division | 13,859 | 14,735 |
| Network services division | 5,678 | 4,682 |
| Intercompany | (122) | (88) |
| Total Maintel Group | 19,415 | 19,329 |
Cash flow from operating activities continues to be strong, at £1.391m in 2008 (2007 - £1.103m), and cash balances remained healthy at £1.010m (2007 - £2.109m) after spending £1.782m on repurchasing shares and dividend payments of £664,000.
Divisional performance is described further below.
Maintenance and equipment division
The maintenance and equipment division provides maintenance, service and support of office-based voice and data equipment across the UK on a contracted basis. It also supplies and installs voice and data equipment to maintenance customers.
The division's revenues fell from £14.7m in 2007 to £13.9m in 2008, as shown in the table above.
The lower level of equipment sales is due partly to a conscious decision to avoid very low margin business and partly to a reduction in demand, doubtless a function of the general economic downturn. Maintenance revenues, however, increased by a net £400,000, or 5%. Three major new signings in the first half are particularly worth highlighting:
Together these will contribute more than £700,000 of recurring revenue per annum.
The first two contracts are a product of our growing relationship with Cable and Wireless who awarded us a contract to provide solution design, installation and maintenance services for Mitel and Nortel products, and maintenance for Siemens products across the UK.
The annual value of the maintenance base at the end of the year was at a record high of almost £9.2m, with noticeably lower levels of attrition being experienced in 2008 than in recent years. Virtually all of the major contracts that came up for renewal during the year have been re-signed.
The reduced levels of equipment sales during the year led to a commensurate reduction in sales headcount as shown below. The decline in installation work also led us to reduce engineering headcount, as can be seen more clearly from the year end figures.
| Headcount | Average 2008 | Average 2007 | At 31 December 2008 |
| Sales and customer service | 49 | 59 | 46 |
| Engineers | 84 | 86 | 80 |
In January 2009, prevailing economic conditions caused us to review headcount further and 11 redundancies made, giving an annualised saving of around £400,000.
| 2008 | 2007 | |
| Division gross profit (£000) | 5,017 (36%) | 5,403 (37%) |
The division's gross profit fell slightly, by 0.5%, after taking into account redundancy-related costs in 2008. 2009 gross profit will benefit further from these mid-year cost reductions, and from the additional redundancies in January 2009.
Net margin (operating profit as a percentage of revenue) from the division reduced in line with gross margin, but remained strong at 10.3% (2007 - 11.4%), the division's overheads remaining tightly controlled during the year, but adversely affected by redundancy-related costs and an increase in property costs.
Given the application of common resource across both maintenance and equipment sales, it is not practical to quote definitive margin data on the separate business sectors; however management figures are used to monitor results internally.
Network services division
The network services division re-sells a portfolio of products providing the interconnectivity between customers and their staff and offices as well as the outside world. This includes call minutes, line rental, ADSL/Broadband, Wide area IP networking and non-geographic numbers.
| Revenue analysis (£000) | 2008 | 2007 |
| Call traffic | 3,405 | 3,120 |
| Line rental | 1,645 | 1,185 |
| Other | 628 | 377 |
| Total network services | 5,678 | 4,682 |
| 2008 | 2007 | |
| Division gross profit (£000) | 1,406 (25%) | 1,232 (26%) |
All revenue streams continued to grow steadily during the year, call traffic up 9%, line rental up 39% and other revenues including data services up 67%. Overall divisional revenue increased by 21% to £5.7m, with the gross margin percentage falling slightly due to the business mix - line rental attracting a lower margin than call traffic, for example.
The previously highlighted cancellation by one of our larger customers has taken time to be implemented, but the effects were finally seen in Q4 2008 and all but a nominal amount of revenue from that customer ceased by the end of 2008.
A further large customer cancelled in H2 2008 and has subsequently ceased to trade due to the economic environment. A new, similar sized customer was signed in December 2008, which is anticipated to substantially maintain the division's revenue run rate and growth. Other than those two customers, attrition in the division remained at its historically low levels, which is gratifying, particularly when considered alongside the low attrition in the maintenance division.
Sales and administrative costs continue to be closely controlled, though naturally increased in 2008 to support the revenue growth. Further specialist sales resource is being sought to deliver the division's growth aspirations.
Administrative expenses, excluding goodwill impairment and intangibles amortisation
| Administrative expenses (£000) | 2008 | 2007 |
| Sales expenses | 2,114 | 2,290 |
| Other administrative expenses (excluding goodwill impairment and intangible amortisation) | 2,302 | 2,115 |
| Total other administrative expenses | 4,416 | 4,405 |
Administrative expenses increased by only £11,000 in the year. The reduction in sales expenses reflected the reduction in the headcount and lower commissions arising from the lower levels of equipment sales. Other administrative expenses increased by £187,000 (9%), as a result of factors including the increase in network services staff to support its growth, a rent review and the rental of some additional space at the Group's London offices.
| 2008 | 2007 | |
| Average Group headcount during the period | 162 | 171 |
| Average sales and service headcount | 58 | 65 |
| Average corporate and admin headcount | 20 | 20 |
| Group revenue (£000) | 19,415 | 19,329 |
Interest
Net interest receivable has fallen from £115,000 to £68,000 in 2008, due to lower market interest rates and lower cash balances due to share buybacks. It is anticipated that the effect of the share buybacks will more than compensate for the reduced earnings per share effect of lower interest income.
Taxation
The income statement shows a tax rate of 31.2% (2007 - 30.1%). The two main trading companies are taxed at 28.5%, so that with disallowables the effective rate is above this, increased further by an element of the goodwill impairment charge which does not attract tax relief. The 2007 rate benefited from the effect on deferred tax of the reduction in the rate of corporation tax from 30% to 28%, and from the use of the remaining £15,000 of tax losses acquired on the purchase of District Holdings Limited.
Dividends
A final dividend for 2007 of 3.0p per share (£364,000 in total) was paid on 30 April 2008, and an interim 2008 dividend of 2.5p per share (£300,000) was paid on 10 October 2008.
It is proposed to pay a final dividend of 3.1p in respect of 2008, subject to shareholder approval at the AGM, and payable on 29 April to shareholders on the register at the close of business on 27 March. In accordance with accounting standards, this dividend is not accounted for in the financial statements for the period under review as it had not been committed to pay it as at 31 December 2008.
Balance sheet
The balance sheet remains solid, with £1.0m of cash and no debt, facilitating continued growth from existing resources.
Both trade receivables and trade payables have reduced significantly since 31 December 2007 mainly due to the reduction in equipment sales and to two major maintenance customers being invoiced on terms more favourable than the Group's standard annually in advance, the latter factor also helping to explain the reduction in deferred maintenance income at the end of 2008.
The value of maintenance stock has increased by £76,000 in the year, to £675,000, mainly due to the purchase of additional parts for new systems both for general maintenance and as on-site spares for a major contract, whilst the value of stock held for resale has fallen from £230,000 to £61,000 as a result of the much reduced equipment sales in 2008.
No significant expenditure has been required on plant and equipment during the period.
The deferred tax liability arises from the application of IFRS, whereby a liability of £290,000 was created on the recognition of the intangible asset relating to District. This is released broadly in parallel with the amortisation of the intangible and is partially offset by deferred tax assets.
Intangible assets
The Group has three intangible assets - goodwill arising on the acquisition of Maintel Network Services Limited (previously Pinnacle Voice and Data Limited) and an intangible asset represented by customer contracts and relationships acquired from District Holdings Limited and Callmaster, together with goodwill relating to the District acquisition.
The Maintel Network Services goodwill is subject to an impairment test at each reporting date. Impairment of £62,000 has been charged to the income statement in 2008 (2007 - £18,000), and the carrying value is £232,000 at that date. The 2008 charge is largely a result of the cancellation of a major customer referred to above.
The intangible assets represented by purchased customer contracts and relationships are subject to an amortisation charge of 20% of cost per annum in respect of maintenance contract relationships and 14.2% per annum in respect of network services contracts, £263,000 having been amortised in 2008 (2007 - £222,000), leaving a carrying value of £831,000. These assets are also subject to an impairment test each year, however no charge has been required at 31 December 2007 or 2008.
The goodwill relating to the District acquisition is subject to an impairment test at each reporting date, and has been subject to an impairment charge of £58,000 in 2008 (2007 - £58,000), leaving a carrying value of £145,000.
Purchase of own shares
Further to the authority granted at the last and penultimate AGMs, the Company repurchased and cancelled 1,565,000 of its own shares during 2008, at a weighted average price of 113p, and a total cost of £1,782,000.
The share price at 31 December 2008 was 83.5p.
Cash flow
At 31 December 2008 the Group had cash and bank balances of £1.010m (2007 - £2.109m), all of it unrestricted. Net cash inflow from operating activities in the year was £1.391m, £1.782m was used to buy back shares in the Company, £664,000 was paid in dividends, and £638,000 corporation tax was paid.
The Group has no debt and invests its surplus cash with mainstream UK banking organisations.
Principal risks
The directors consider that the principal risks to the Group relate to technological advance, marketplace relationships and pricing strategies, and the potential implications of the current economic environment.
Telecommunications hardware has historically focused on a PBX core, which is gradually being replaced, at least at the higher end, by Voice over Internet Protocol (VoIP) capabilities. Customers' acceptance of the new technologies moves at varying rates, however, so that legacy systems will continue to be serviced for some time to come. Maintel continues to address the technological shift by positioning itself to sell and maintain the new breed of telephone system, and has had notable success with this transition to date. Maintenance income from this new technology can be reduced when compared to traditional telephony although every effort is made to counter this effect through reduced costs in delivering our service and by retaining the resultant enhanced calls and lines revenue.
VoIP technology is also a potential threat to the reselling of call minutes. In practice, however, this technology is proving slow to be adopted, largely due to performance issues which are an important consideration for Maintel's business customers. Recognising the potential risk, however, the Group is ensuring that it expands its product portfolio with, for example, line rental continuing to grow significantly during 2008. The development of VoIP is constantly monitored so that the Group may take advantage of profitable business models as and when they appear, such as our sales of SIP trunking and hosted technology.
The Group is potentially subject to new pricing strategies by both competitors and suppliers, whether due to their own internal policies, in response to technological change or, in the case of call minutes and line rentals, potential regulatory change. The directors monitor margins closely and take action where appropriate.
The Group has a symbiotic relationship with Cable & Wireless, such that C&W constitutes around 10% of its maintenance base. Should this relationship be terminated, the maintenance base would reduce to that extent over time, necessitating a commensurate reduction in costs.
The Group maintains and provides equipment from a range of manufacturers, and relies on the support and continued supply of parts from those suppliers or intermediaries. Should that cease to be forthcoming, in some cases there may be a reduction in service the Group is able to supply to its customers. However this risk is spread due to the range of systems maintained.
The Group's maintenance contracts have a natural finite life, and are subject to competitive attack, so that there is an inevitable customer churn. The directors monitor the rate and causes of churn and implement strategies with the objective of minimising attrition and growing the customer base organically and by way of acquisition.
The current exceptional economic environment has impacted negatively on the Group's revenues, largely due to the curtailment in discretionary spend by some of the Group's customers, which has had a negative effect particularly on equipment sales. These conditions may persist and, indeed, may worsen, although the Group has already reduced its cost base to reflect reduced revenues and will continue to monitor costs accordingly.
The economic environment may also cause an increased number of the Group's customers to be unable to meet their financial obligations and/or to seek to delay payment beyond agreed terms. The Group carefully assesses the creditworthiness of prospects and insures its network services debt where necessary and possible; a significant proportion of the Group's revenue relates to maintenance charges paid in advance, to which no credit risk attaches.
Nortel
A significant proportion of the Group's business is associated with products supplied by Nortel. Certain Nortel subsidiaries in the US filed for Chapter 11 bankruptcy protection in January 2009 with certain other Nortel companies following analogous routes in other countries.
Nortel had $10bn revenues worldwide in 2007 and has announced that it will continue to focus on serving its customers.
The directors consider that the only impact on the Group in the short to medium term is the possible postponement of the purchase of Nortel equipment pending resolution of its financial issues, but that this is unlikely to have a significant effect on the Group given the lower levels of equipment sales being budgeted due to the economic climate, and the ability of the Group to offer alternative manufacturers' systems to customers.
Outlook
The deepening of the recession in Q3 and Q4 2008 and its continuing effect on equipment sales has unfortunately led to a further round of redundancies in early 2009, with the consequent cost reductions being noticeable from Q2 2009, amounting to an annualised £400,000 on top of a full year's benefit from the mid-year 2008 redundancies. Other than a handful of previously committed increases, employees did not receive customary salary increases at the start of 2009 and no director's remuneration was increased. Conversely, the bulk of maintenance revenues continue to attract an industry inflation-related annual uplift. In addition, 2009 will see a full year's revenue from the major H1 2008 maintenance signings noted above and a further £150,000 contract which commenced on 1 January 2009.
In summary, our reduced cost structure combined with the expected further increase in maintenance revenues puts the Group on a firm footing for 2009.
Eddie Buxton
Chief Executive
13 March 2009
Maintel Holdings Plc
Consolidated income statement
for the year to 31 December 2008
| | | | |
| | | 2008 | 2007 |
| | note | £’000 | £’000 |
| | | | |
| | | | |
| Revenue | 3 | 19,415 | 19,329 |
| | | | |
| Cost of sales | | 13,095 | 12,762 |
| | | | |
| Gross profit | | 6,320 | 6,567 |
| | | | |
| Administrative expenses | | | |
| Goodwill impairment | | 120 | 76 |
| Intangibles amortisation | | 263 | 222 |
| Other administrative expenses | | 4,416 | 4,405 |
| | | 4,799 | 4,703 |
| | | | |
| | | | |
| Operating profit | 3 | 1,521 | 1,864 |
| | | | |
| Financial income | | 69 | 115 |
| Financial charges | | (1) | - |
| | | | |
| Profit before taxation | | 1,589 | 1,979 |
| | | | |
| Taxation | | 495 | 595 |
| | | | |
| Profit after taxation attributable to equity holders of the parent | | 1,094 | 1,384 |
| | | | |
| | | | |
| | | | |
| Earnings per share | | | |
| | | | |
| Basic and diluted | 4 | 9.2p | 11.1p |
| | | | |
Maintel Holdings Plc
Consolidated balance sheet
as at 31 December 2008
| 2008 | 2007 | ||
| £'000 | £'000 | ||
| Non current assets | |||
| Intangible assets | 1,208 | 1,591 | |
| Property, plant and equipment | 200 | 208 | |
| 1,408 | 1,799 | ||
| Current assets | |||
| Inventories | 736 | 829 | |
| Trade and other receivables | 3,164 | 3,928 | |
| Cash and cash equivalents | 1,010 | 2,109 | |
| 4,910 | 6,866 | ||
| Total assets | 6,318 | 8,665 | |
| Current liabilities | |||
| Trade and other payables | 5,173 | 6,025 | |
| Current tax liabilities | 193 | 295 | |
| Total current liabilities | 5,366 | 6,320 | |
| Non current liabilities | |||
| Deferred tax liability | 98 | 139 | |
| Total net assets | 854 | 2,206 | |
| Equity | |||
| Issued share capital | 108 | 124 | |
| Share premium | 628 | 628 | |
| Capital redemption reserve | 28 | 12 | |
| Retained earnings | 90 | 1,442 | |
| Total equity | 854 | 2,206 | |
Maintel Holdings Plc
Consolidated statement of changes in equity
for the year to 31 December 2008
| | Share capital | Share premium | Capital redemption reserve | Retained earnings | Total |
| | £’000 | £’000 | £’000 | £’000 | £’000 |
| | | | | | |
| At 1 January 2007 | 124 | 628 | 12 | 847 | 1,611 |
| | | | | | |
| Profit for the year* | - | - | - | 1,384 | 1,384 |
| Dividend | - | - | - | (672) | (672) |
| Movements in respect of purchase of own shares | - | - | - | (117) | (117) |
| | | | | | |
| | | | | | |
| At 31 December 2007 | 124 | 628 | 12 | 1,442 | 2,206 |
| | | | | | |
| Profit for the year* | - | - | - | 1,094 | 1,094 |
| Dividend | - | - | - | (664) | (664) |
| Movements in respect of purchase of own shares | (16) | - | 16 | (1,782) | (1,782) |
| | | | | | |
| At 31 December 2008 | 108 | 628 | 28 | 90 | 854 |
\* Total recognised income and expenses for the year are the same as the profit for the year shown above.
Maintel Holdings Plc
Consolidated cash flow statement
for the year to 31 December 2008
| 2008 | 2007 | |
| £'000 | £'000 | |
| Operating activities | ||
| Profit before taxation | 1,589 | 1,979 |
| Adjustments for: | ||
| Goodwill impairment | 120 | 76 |
| Intangibles amortisation | 263 | 222 |
| Depreciation charge | 118 | 136 |
| Interest received | (69) | (115) |
| Other interest paid | 1 | - |
| Loss on disposal of plant and equipment | 2 | - |
| Operating cash flows before changes in working capital | 2,024 | 2,298 |
| Decrease/(increase) in inventories | 93 | (124) |
| Decrease/(increase) in trade and other receivables | 764 | (1,067) |
| (Decrease)/increase in trade and other payables | (852) | 755 |
| Cash generated from operating activities | 2,029 | 1,862 |
| Tax paid | (638) | (759) |
| Net cash flows from operating activities | 1,391 | 1,103 |
| Investing activities | ||
| Purchase of plant and equipment | (115) | (106) |
| Proceeds from disposal of plant and equipment | 3 | - |
| Purchase of base of customer relationships | - | (448) |
| Interest received | 69 | 115 |
| Net cash flows from investing activities | (43) | (439) |
| Financing activities | ||
| Other interest paid | (1) | - |
| Repurchase of own shares for cancellation | (1,782) | (117) |
| Equity dividends paid | (664) | (672) |
| Net cash flows from financing activities | (2,447) | (789) |
| Net decrease in cash and cash equivalents | (1,099) | (125) |
| Cash and cash equivalents at start of period | 2,109 | 2,234 |
| Cash and cash equivalents at end of period | 1,010 | 2,109 |
Maintel Holdings Plc
Notes to the preliminary statement
1. Basis of preparation
The abridged financial information set out in this document has been extracted from financial statements approved by the directors on 13 March 2009 and which will be delivered to the Registrar of Companies following the Company's annual general meeting. The Group's auditors have reported on the financial statements and their report is unqualified and did not contain statements under sections 273 (2) or (3) of the Companies Act 1985. The above financial information does not constitute statutory accounts as defined in section 240 of the Companies Act 1985.
While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement itself does not contain sufficient information to comply with IFRSs. As described above, the Group expects to publish full financial statements which comply with IFRSs, in March 2009.
2. Accounting policies
The consolidated financial statements have been prepared under the historical cost convention, and the principal policies adopted in their preparation are as disclosed in the 2007 Annual Report.
3. Segmental analysis
For management reporting purposes, the Group consists of two business segments:
(i) telephone maintenance and equipment sales, and (ii) telephone network services.
Year to 31 December 2008
| Maintenance and equipment | Network services | Central/ inter- company | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Revenue | 13,859 | 5,678 | (122) | 19,415 |
| Included in telephone system maintenance turnover above is £8,000 of leasing income. | ||||
| Other than equipment sales of £34,000 to EU countries, revenue is wholly attributable to the principal activities of the Group and arises predominantly within the United Kingdom. | ||||
| Maintenance and equipment | Network services | Central/ inter- company | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Operating profit | 1,433 | 472 | (384) | 1,521 |
| Interest income | 68 | |||
| Profit before taxation | 1,589 | |||
| Taxation | (495) | |||
| Profit after taxation | 1,094 | |||
| Balance sheet | ||||
| Assets | 4,594 | 1,308 | 416 | 6,318 |
| Liabilities | (4,462) | (1,158) | 156 | (5,464) |
| Total | 132 | 150 | 572 | 854 |
| Other | ||||
| Capital expenditure | 115 | - | - | 115 |
| Depreciation | 118 | - | - | 118 |
| Amortisation and impairment | 22 | 48 | 313 | 383 |
Year to 31 December 2007
| | Maintenance and equipment | Network services | Central/ inter- company | Total |
| | £’000 | £’000 | £’000 | £’000 |
| | | | | |
| Revenue | 14,735 | 4,682 | (88) | 19,329 |
| | | | | |
| Included in telephone system maintenance turnover above is £97,000 of leasing income. | ||||
| | ||||
| Other than equipment sales of £39,000 to EU countries, revenue is wholly attributable to the principal activities of the Group and arises predominantly within the United Kingdom. | ||||
| | | | | |
| Operating profit | 1,680 | 477 | (293) | 1,864 |
| Interest income | | | | 115 |
| Profit before taxation | | | | 1,979 |
| Taxation | | | | (595) |
| Profit after taxation | | | | 1,384 |
| | | | | |
| | | | | |
| Balance sheet | | | | |
| Assets | 6,007 | 1,485 | 1,173 | 8,665 |
| Liabilities | (5,276) | (1,342) | 159 | (6,459) |
| Total | 731 | 143 | 1,332 | 2,206 |
| | | | | |
| | | | | |
| Other | | | | |
| Capital expenditure | 106 | - | - | 106 |
| Depreciation | 136 | - | - | 136 |
| Amortisation and impairment | 9 | 20 | 269 | 298 |
4. 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:
| | 2008 | 2007 |
| | Number (000s) | Number (000s) |
| | | |
| Weighted average number of shares | 11,832 | 12,452 |
| | | |
| | 2008 | 2007 |
| | £’000 | £’000 |
| | | |
| Earnings used in basic and diluted EPS, being profit after tax | 1,094 | 1,384 |
| | | |
| Goodwill impairment and intangibles amortisation, less tax thereon | 305 | 231 |
| One-off professional costs, less tax thereon | 35 | 18 |
| Adjusted earnings | 1,434 | 1,633 |
| | | |
| | | |
| Basic and diluted earnings per share | 9.2p | 11.1p |
| | | |
| Adjusted earnings per share | 12.1p | 13.1p |
The adjustment above in respect of goodwill impairment, intangibles amortisation, one-off professional costs and tax thereon has been made in order to provide a clearer picture of the trading performance of the Group.
5. Dividends
| | 2008 | 2007 |
| | £’000 | £’000 |
| Dividends paid | | |
| | | |
| Final 2006, paid 25 April 2007 | | |
| - 2.9p per share | - | 361 |
| | | |
| Interim 2007, paid 5 October 2007 | | |
| - 2.5p per share | - | 311 |
| | | |
| Final 2007, paid 30 April 2008 | | |
| - 3.0p per share | 364 | - |
| | | |
| Interim 2008, paid 10 October 2008 | | |
| - 2.5p per share | 300 | - |
| | | |
| | 664 | 672 |
The directors propose to pay a final dividend of 3.1p (2007 - 3.0p) per share on 29 April 2009 to shareholders on the register at 27 March 2009.
6. Purchase of own shares
Pursuant to the authority granted at the last and penultimate AGMs, the Company repurchased and cancelled 1,565,000 of its own 1p ordinary shares during 2008, at prices between 94p and 161.5p each at a total cost of £1,782,000. The purchases represent 14.5% of the Company's issued share capital as at 31 December 2008.
7. The annual report and accounts will be posted to shareholders in due course and copies will also be available on the Group's web site www.maintel.co.uk and on request from the Company's registered office at 61 Webber Street, London SE1 0RF.