Maintel Regulatory News (MAI)

10 Sep 2007 07:01

Maintel Holdings PLC10 September 2007 Maintel Holdings Plc Interim results for the six months to 30 June 2007 Maintel Holdings Plc, the telecoms services company, announces interim unauditedresults for the six months to 30 June 2007. These are reported underInternational Financial Reporting Standards ("IFRS"), with 2006 comparisonsrestated accordingly. Financial Highlights Group turnover increased by 26% to £8.9m (2006 H1: £7.1m) Maintenance related revenue increased by 16% to £4.3m (2006 H1: £3.7m) Sales of equipment including VoIP solutions up 43% to £2.6m (2006 H1: £1.8m) Sales of broadband, call traffic and related products up 32% to £2.0m (2006 H1:£1.5m) Cash increased by £411,000 in H1 after paying a dividend of £361,000 and£258,000 taxation Adjusted profit before tax of £905,000 (2006 H1: £916,000); adjusted profitbefore tax is basic profit before tax of £780,000 (2006 H1: £916,000), adjustedfor goodwill impairment and intangible amortisation Adjusted earnings per share of 5.1p (2006 H1: 5.0p); adjusted earnings per shareis basic earnings per share of 4.3p (2006 H1: 5.0p), adjusted for goodwillimpairment and intangible amortisation Interim dividend proposed of 2.5p per share (2006: 2.1p) Operational Highlights Increased investment in recruitment and training of Nortel technical team Increased investment and training in sales resource Significant order for VoIP roll out for major city law firm for H2 delivery Acquisition in August of a customer base from Callmaster Limited for up to£442,000 cash, satisfied from existing resources - annual contract value approx£850,000 Order book of £1.4m at 31 August Winner of Nortel/Westcon Enterprise Achievement Award 2007 John Booth, Chairman said: "Growth was particularly strong in sales of new VoIP and data equipment as ourmaintained customers continue to invest in new technology. This has resulted inus entering the second half of 2007 with a large order book of work to becompleted and a healthy prospect list." For further information please contact: Tim Mason, Chief Executive 020 7401 4601 Dale Todd, Finance Director 020 7401 0562 Chairman's statement I am pleased to report continued robust performance by your company for thefirst half of 2007 with turnover up 26% on the equivalent period in 2006. Growthwas particularly strong in sales of new VoIP and data equipment as ourmaintained customers continue to invest in new technology. This has resulted inus entering the second half of 2007 with a large order book of work to becompleted and a healthy prospect list. In August we completed the purchase of the contract base of Callmaster Limitedreinforcing Maintel's ability to supplement organic growth with valuableacquisitions. We are confident that these developments will lead to continuedgrowth in the second half of the year. For the first half of the current year, adjusted earnings per share increasedslightly reflecting the significant investment made in our technical capabilityto support the requirements of our customers and continuing growth of our salesengine. Dividend In light of expectations in the second half, we are proposing an interimdividend of 2.5p per share, up from 2.1p last year, to be paid on 5 October 2007to shareholders on the register at 21 September 2007. J D S Booth Chairman 7 September 2007 Business review IFRS (International Financial Reporting Standards) This is the first reporting period for which the Group is required to reportunder IFRS, the main effects of which are to alter the treatment of goodwill andits amortisation, and to create a provision for accrued holiday pay. Priorperiod accounts have been restated under IFRS, and reconciliations between UKGAAP and IFRS are shown on pages 16 to 23. Results The first half of 2007 has seen another solid performance from the MaintelGroup, with revenues increasing 26% compared with the first half of 2006. Aspredicted in the annual report issued in March, profit has remained steadyprimarily due to the investment in engineering resource during the later stagesof 2006 and the cost of retraining existing engineers in new product lines,together with further investment in sales resource in early 2007. Beforegoodwill impairment, intangibles amortisation and the IFRS holiday pay accrual,profit before tax was £964,000, compared with £965,000 in the first half of2006, however share buy backs during 2006 and the absorption of residual taxlosses from the District group, mean that adjusted earnings per share haveincreased from 5.0p to 5.1p. UK GAAP profitability (£000) 30 June 2007 30 June 2006 31 Dec 2006 IFRS profit before tax 780 916 2,012Add back goodwill impairment andintangibles amortisation 125 - 188Add back holiday pay accrual 59 49 2UK GAAP profit before tax, beforegoodwill amortisation 964 965 2,202 The revenue growth has derived mostly from another strong performance from theNetwork services division, VoIP equipment sales in Maintel Europe and fromcustomers of the District group, which was acquired in June 2006. Cash balances have increased by £411,000 since the year end, to £2.6m,representing the profit in the period less £258,000 tax, £361,000 in dividendpayments, £63,000 capital expenditure and a £110,000 positive movement inworking capital. Maintenance and equipment division Revenue analysis (£000) 30 June 2007 30 June 2006 31 Dec 2006 Maintenance related 4,339 3,753 8,073Equipment, installations and other 2,551 1,784 4,754Total maintenance and equipment 6,890 5,537 12,827 The maintenance and equipment division has returned a £1.35m increase in revenuecompared with the first half of 2006, an estimated £500,000 of this derivingfrom the District acquisition. Both maintenance and equipment sales havetherefore shown good underlying growth, maintenance related revenues havingincreased by 16% to £4.3m in the first half of 2007. Equipment sales are showing a reduction compared with the second half of 2006due to that period incorporating £866,000 of revenue in respect of the LondonProbation Board ("LPB") contract - a project for which Maintel Europe earned theNortel/Westcon Enterprise Achievement Award. The second half of 2007 willbenefit from a £380,000 equipment sale signed in August with a major law firmwhich, together with an exceptionally large order book gives us confidence thatequipment sales for the year will exceed 2006. Division gross profit (£000) 2,623 2,302 5,038 The division showed a slight fall in profitability compared with the second halfof 2006, primarily a result of the investment in engineering, sales resource andtraining noted earlier, and the LPB contract in 2006. It is anticipated thatincreased utilisation of the engineering resource, and the effects of theincreased sales resource will be seen in the second half. Average headcount during the period 30 June 2007 30 June 2006 31 Dec 2006 Sales, marketing and customerservice 58 42 54Engineers 86 63 72 Network services division In the first half of 2007, the division has seen significant growth in itsprimary revenue streams of call traffic and line rental, with the former up 23%on the first half of 2006 and the latter up 118%. This change in revenue mix -line rental earning lower margins than call traffic - together with some pricepressure on call traffic margins, has caused the division's overall gross marginto drop from 29% in 2006 to 26% in the first half of 2007, although gross profithas continued to grow, from £505,000 in the second half of 2006 to £523,000 inthe period under review. As anticipated in the year end business review, the division has received noticeof cancellation from one of its larger but lower margin customers. The reductionin revenue will be seen from August 2007, but this will be tempered by asignificant first half new signing which will go some way to compensating forthe loss. Attrition otherwise remained low. Revenue analysis (£000) 30 June 2007 30 June 2006 31 Dec 2006 Call traffic 1,396 1,138 2,426Line rental 462 212 586Other 162 176 327Total Maintel Voice and Data 2,020 1,526 3,339 Division gross profit (£000) 523 456 961 Administrative expenses As already noted, investment in our sales team increased in the first half of2007, with a net 16 increase in headcount over the same period last year. Thelargest increase has been in the account management team which has beenachieving significant sales into our customer base. Administrative expenses (£000) 30 June 2007 30 June 2006 31 Dec 2006 Sales expenses 1,152 908 1,878Other administrative expenses(excluding goodwill impairment andintangibles amortisation) 1,148 1,012 1,844District sales and admin costs - - 211Total other administrativeexpenses 2,300 1,920 3,933 Administrative expenses increased, albeit at a reduced rate compared withrevenue, largely due to the increase in overall headcount and increase inrevenues impacting on variable overheads. 30 June 2007 30 June 2006 31 Dec 2006 Average Group headcount during theperiod 171 149 160Group revenue 8,910 7,063 16,166 Taxation The income statement shows a tax rate of 30.9%. The two main trading companiesare taxed at 30%, so that with disallowables the effective rate is above this,increased further by the goodwill impairment charge which does not attract taxrelief. In the period under review, however, the unused portion of District'stax losses has reduced the charge. Intangible assets Following the adoption of IFRS, the Group has three intangible assets - goodwillarising on the acquisition of Maintel Network Services Limited (previouslyPinnacle Voice and Data Limited) and an intangible asset represented by customercontracts and relationships acquired from District Holdings Limited, togetherwith goodwill relating to that acquisition. The goodwill is subject to an impairment test at each reporting date. Noimpairment charge is required at 30 June 2007 and the carrying value is £544,000at that date. The intangible is subject to an amortisation charge of 20% of cost per annum,£96,000 having been amortised in the first half, leaving a carrying value of£772,000. Balance sheet The balance sheet remains solid, with £2.6m of cash, as noted above,facilitating continued growth in equipment sales and network services fromexisting resources. No significant expenditure has been required on plant and equipment, or onstock, during the period. The deferred tax liability arises from the application of IFRS, whereby aliability of £290,000 was created on the establishment of the intangible assetrelating to District. This is partially offset by deferred tax assets, and islikely to be impaired in parallel with the amortisation of the intangible. Acquisition of contract base On 1 August 2007, the Group acquired a contract base of maintenance, calltraffic, line rental and VoIP hosted service customers from Callmaster Limited,for a consideration of up to £442,000. Two of Callmaster's engineers joined theGroup at the same time. The annual value of the contracts at the date ofacquisition was around £850,000. Once again I would like to extend my gratitude to all Maintel employees fortheir continued hard work and support which has produced another excellentresult for the Group. Tim Mason Chief Executive 7 September 2007 Maintel Holdings Plc Consolidated interim income statementfor the six months to 30 June 2007 Six months to Six months to Year ended 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Revenue 8,910 7,063 16,166 Cost of sales 5,764 4,305 10,167 ---------- ---------- ---------- Gross profit 3,146 2,758 5,999 Administrative expenses------------------------- ---------- ---------- ---------- Goodwill impairment 29 - 91 Intangibles amortisation 96 - 97 Other administrative expenses 2,300 1,920 3,933------------------------- ---------- ---------- ---------- 2,425 1,920 4,121 ---------- ---------- ---------- Operating profit 721 838 1,878 Financial income 59 78 135 Financial charges - - (1) ---------- ---------- ---------- Profit before taxation 780 916 2,012 Taxation 241 270 592 ---------- ---------- ---------- ========== ========== ========== Profit after taxation attributable 539 646 1,420 to equity holders of the parent ========== ========== ========== === === === === === ===Earnings per share==================== === === === === === ===Basic and diluted (note 3) 4.3p 5.0p 11.1p============================ ========== ========== ========== Maintel Holdings Plc Consolidated balance sheetas at 30 June 2007 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Non current assetsIntangible assets 1,316 1,482 1,441Property, plant and equipment 223 287 238 ---------- ---------- ---------- 1,539 1,769 1,679 ---------- ---------- ---------- Current assetsInventories 733 1,332 705Trade and other receivables 3,050 2,972 2,861Cash and cash equivalents 2,645 3,573 2,234 ---------- ---------- ---------- 6,428 7,877 5,800 ---------- ---------- ---------- Total assets 7,967 9,646 7,479 ---------- ---------- ---------- Current liabilitiesTrade and other payables 5,598 7,250 5,271Current tax liabilities 415 344 380 ---------- ---------- ---------- Total current liabilities 6,013 7,594 5,651 ---------- ---------- ---------- Non current liabilities Deferred tax liability 165 229 217 ---------- ---------- ---------- Total net assets 1,789 1,823 1,611 ========== ========== ========== EquityIssued share capital 124 128 124Share premium 628 628 628Capital redemption reserve 12 8 12Retained earnings 1,025 1,059 847 ---------- ---------- ---------- Total shareholders' equity 1,789 1,823 1,611 ========== ========== ========== Maintel Holdings Plc Consolidated cash flow statementfor the six months to 30 June 2007 Six months to Six months to Year ended 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Operating activitiesProfit before taxation 780 916 2,012Adjustments for:Goodwill impairment 29 - 91Intangibles amortisation 96 - 97Depreciation charge 78 65 136Financial income (59) (78) (135)Financial charges - - 1Loss on disposal of fixed assets - - 5 ---------- ---------- ---------- Operating profit before changes inworking capital 924 903 2,207 (Increase)/decrease in inventories (28) (615) 12Increase in trade and otherreceivables (189) (782) (671)Increase in trade and otherpayables 327 2,066 87 ---------- ---------- ---------- Cash generated from operatingactivities 1,034 1,572 1,635 Tax paid (258) (305) (603) ---------- ---------- ---------- Net cash flows from operatingactivities 776 1,267 1,032 ---------- ---------- ---------- Investing activitiesPurchase of plant and equipment (63) (83) (110)------------------------- ---------- ---------- ----------Purchase of subsidiary undertaking - (1,060) (1,207)Net cash acquired with subsidiaryundertaking - 183 183------------------------- ---------- ---------- ---------- - (877) (1,024)Financial income 59 78 135 ---------- ---------- ---------- Net cash flows from investingactivities (4) (882) (999) ---------- ---------- ---------- Financing activities Financial charges - - (1)Repurchase of own shares forcancellation - (114) (832)Equity dividends paid (361) (323) (591) ---------- ---------- ---------- Net cash flows from financingactivities (361) (437) (1,424) ---------- ---------- ---------- Net increase/(decrease) in cashand cash equivalents 411 (52) (1,391) Cash and cash equivalents at startof period 2,234 3,625 3,625 ---------- ---------- ---------- Cash and cash equivalents at endof period 2,645 3,573 2,234 ========== ========== ========== Maintel Holdings Plc Consolidated statement of changes in equityfor the period to 30 June 2007 Share capital Share premium Capital Retained Total redemption earnings reserve £'000 £'000 £'000 £'000 £'000 At 1 January2006 129 628 7 884 1,648 Changes inaccountingpolicy - - - (34) (34) ------- -------- --------- -------- ------ Restatedbalance 129 628 7 850 1,614 Profit for theperiod* - - - 646 646 Dividend - - - (323) (323) In respect ofpurchase ofown shares (1) - 1 - - Appropriatedin respect ofpurchase ofown shares - - - (114) (114) ------- -------- --------- -------- ------ At 30 June 2006 128 628 8 1,059 1,823 Profit for theperiod* - - - 774 774 Dividend - - - (268) (268) In respect ofpurchase ofown shares (4) - 4 - -Appropriatedin respect ofpurchase ofown shares - - - (718) (718) ------- -------- --------- -------- ------ At 31 December2006 124 628 12 847 1,611 Profit for theperiod* - - - 539 539 Dividend - - - (361) (361) ------- -------- --------- -------- ------ === ===At 30 June 2007 124 628 12 1,025 1,789 ======= ======== ========= ======== ====== \* Total recognised income and expenses for the period are the same as the profit for the period shown above. Maintel Holdings Plc Notes to the interim report 1. Accounting policies The transition to IFRS from UK GAAP has resulted in certain changes to theaccounting policies of the Group. The policies adopted in the preparation of theinterim financial information are as follows: (a) Basis of preparation of interim financial information The financial information included in this report does not constitute statutoryaccounts as defined in section 240 of the Companies Act 1985, and is unaudited.The comparative figures for the year ended 31 December 2006 do not constitutethe Group's statutory accounts for that financial year. Those accounts, whichwere prepared under UK GAAP, have been reported on by the Company's auditors anddelivered to the Registrar of Companies. The auditor's report on those statutoryaccounts was unqualified, did not include references to any matters to which theauditors drew attention without qualifying their report, and did not contain astatement under section 237(2) or (3) of the Companies Act 1985. The Group is required to report its consolidated financial statements underInternational Financial Reporting Standards ("IFRS"), as adopted by the EuropeanUnion, for all accounting periods beginning on or after 1 January 2007.Comparative information for 2006, previously reported under UK GAAP, has beenrestated under IFRS. This interim report has been prepared using those policies the Group expects tobe endorsed and applicable when the financial statements are prepared for theyear ending 31 December 2007. The related standards are subject to ongoingreview and endorsement by the European Union or possible amendment byinterpretive guidance from the International Accounting Standards Board and theInternational Financial Reporting Interpretations Committee and are, therefore,still subject to change. The financial effects of the transition from reporting under UK GAAP are shownin note 5, which includes reconciliations of equity and profit for thecomparative periods. The presentation of the Group's financial statements hasalso changed, in accordance with IAS 1 "Presentation of Financial Statements"and IAS 7 "Cash Flow Statements". The restated IFRS financial information provided for the year ended 31 December2006 does not constitute statutory accounts as defined in section 240 of theCompanies Act 1985, however it is anticipated to form the comparative period forthe statutory accounts for the year ending 31 December 2007, the Group's firstannual financial statements to be prepared under IFRS. The preparation of the consolidated interim financial information in accordancewith IFRS has resulted in changes to the accounting policies as compared withthe most recent annual financial statements prepared under UK GAAP. Theaccounting policies set out below have been applied consistently to all periodspresented in these consolidated interim financial statements and have beenapplied in preparing an opening IFRS balance sheet at 1 January 2006 for thepurposes of the transition to IFRS, as required by IFRS 1. (b) Transition to International Financial Reporting Standards IFRS 1 "First-time Adoption of International Financial Reporting Standards" setsout the rules for first time adoption of IFRS and the optional exemptions whichmay be used in applying the standards retrospectively to comparative periods.The Group has used the following exemption in adopting IFRS. IFRS 3 "Business Combinations" has only been applied to acquisitions completedafter the date of transition, 1 January 2006. As a result, the carrying value ofgoodwill in the UK GAAP balance sheet at 31 December 2005, which relates to theacquisition of Maintel Network Solutions Limited (previously Pinnacle Voice andData Limited) in December 2005, is brought forward to the IFRS opening balancesheet without adjustment. (c) Basis of consolidation The financial statements consolidate the results of Maintel Holdings Plc andeach of its subsidiaries. The results of the subsidiaries acquired are includedwithin the consolidated income statement and balance sheet from the effectivedate of acquisition, applying uniform accounting policies pursuant to IAS 27"Consolidated and separate financial statements". The results of disposedsubsidiaries are included in the consolidated income statement up to theeffective date of disposal. All intra-group transactions and balances areeliminated on consolidation. Acquisitions are accounted for using theacquisition method of accounting. Subsidiaries are all entities over which the Group has the power to govern theirfinancial and operating policies, and a shareholding of more than fifty percentof the company's voting rights. The existence and effect of potential votingrights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. (d) Revenue Revenue represents sales to customers at invoiced amounts less value added tax.Revenue from sales of equipment, chargeable works carried out and networkservices, is recognised when the goods or services are provided. Amountsinvoiced in advance in respect of maintenance contracts are deferred andreleased to the income statement over the period covered by the invoice. Revenueand profit on long term contracts is recognised dependent on the stage of andcosts to completion of each contract. (e) Intangible assets GoodwillPurchased goodwill represents the difference between the cost of the acquisitionand the fair value of the net identifiable asset, liabilities and contingentliabilities. Cost comprises the fair value of assets given, liabilities assumedand equity instruments issued, plus any direct costs of acquisition. Goodwill iscapitalised as an intangible asset. Other intangible assets Intangible assets are stated at cost less accumulated amortisation and consistof customer lists. Where these assets have been acquired through a businesscombination, the cost will be the fair value allocated in the acquisitionaccounting; where they have been acquired other than through a businesscombination, the initial cost is the aggregate amount paid and the fair value ofany other consideration given to acquire the asset. Customer lists are amortised over their estimated useful lives of five years. Impairment of Goodwill and other intangible assets Impairment tests on goodwill and other intangible assets with indefinite usefuleconomic lives are undertaken at each reporting date. Customer lists and otherassets are subject to impairment tests whenever events or changes incircumstances indicate the carrying amount may not be recoverable. Where thecarrying value of an asset exceeds its recoverable amount (being the higher ofvalue in use and fair value less costs to sell), the asset is written downaccordingly. Where it is not possible to estimate the recoverable amount of an individualasset, 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 areseparately identifiable cash flows). Goodwill is allocated on initialrecognition to each of the Group's cash-generating units that are expected tobenefit from the synergies of the combination giving rise to goodwill. Impairment charges are included in the administrative expenses line item in theincome statement. (f) Property, plant and equipment Property, plant and equipment is stated at historic cost, less accumulateddepreciation. Depreciation is provided to write off the cost, less estimatedresidual values, of all tangible fixed assets over their expected useful lives,at the following rates: Property, plant and machinery over the life of the lease to third parties Office and computer equipment 25% straight line Leasehold improvements over the remaining period of the lease (g) Inventories Inventories comprise (a) maintenance stock, being replacement parts held toservice customers' telecommunications systems, and (b) work in progress, beingstock purchased for customer orders which has not been installed at the end ofthe financial period. Inventories are valued at the lower of cost and netrealisable value. (h) Cash and cash equivalents Cash and cash equivalents comprise cash balances and short term deposits with anoriginal maturity of three months or less. Bank overdrafts that are repayable ondemand and form an integral part of the Group's cash management procedures arealso included as a component of cash and cash equivalents for the purposes ofthe cash flow statement. (i) Taxation Current tax is the expected tax payable on the taxable income for the year,together with any adjustments to tax payable in respect of previous years. Deferred tax is provided using the liability method, providing for temporarydifferences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for taxation purposes, except fordifferences arising on: • the initial recognition of goodwill; • goodwill for which amortisation is not tax deductible; • the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and • investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. The amount of the deferred tax asset or liability is determined using tax ratesthat have been enacted or substantially enacted by the balance sheet date andare expected to apply when the deferred tax assets/liabilities are recovered/settled. Deferred tax balances are not discounted. Deferred tax assets and liabilities are offset when the Group has a legallyenforceable right to offset current tax assets and liabilities and the deferredtax assets and liabilities relate to taxes levied by the same tax authority oneither: • the same taxable Group company; or • different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. (j) Employee benefits The Group contributes to a number of defined contribution pension schemes inrespect of certain of its employees; the Group does not contribute and has notcontributed to any defined benefit pension schemes. The amount charged in theincome statement represents the employer contributions payable to the schemes inrespect of the financial period. The assets of the schemes are held separatelyfrom those of the Group in independently administered funds. The cost of all short term employee benefits is recognised during the period theemployee service is rendered. Holiday pay is expensed in the period in which it accrues. (k) Dividends Dividends unpaid at the balance sheet date are only recognised as a liability atthat date to the extent that they are appropriately authorised and are no longerat the discretion of the Company. Proposed but unpaid dividends that do not meetthese criteria are disclosed in the notes to the accounts. 2. Segmental analysis Six months to Six months to Year ended 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Turnover Telephone system maintenance andequipment sales 6,890 5,537 12,827 Telephone network services 2,020 1,526 3,339 ---------- ---------- ---------- 8,910 7,063 16,166 ========== ========== ========== Gross profit Telephone system maintenance andequipment sales 2,623 2,302 5,038 Telephone network services 523 456 961 ---------- ---------- ---------- 3,146 2,758 5,999 ========== ========== ========== Profit before taxation Telephone system maintenance andequipment sales 692 737 1,797 Telephone network services 213 179 403 Goodwill impairment and intangibleamortisation (125) - (188) ---------- ---------- ---------- 780 916 2,012 ========== ========== ========== 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. An adjusted earnings per share figure - excluding the impairmentof goodwill and amortisation of intangibles - is also shown in order to providea clearer picture of the trading performance of the Group. Six months to Six months to Year ended 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Earnings used in basic and dilutedEPS, being profit after tax 539 646 1,420 Goodwill impairment and intangibleamortisation, less tax thereon 96 - 159 ---------- ---------- ----------Adjusted earnings, being profitafter tax, before goodwillimpairment and intangibleamortisation 635 646 1,579 ========== ========== ========== Weighted average number of shares 12,457 12,930 12,783 ========== ========== ========== Basic and diluted EPS 4.3p 5.0p 11.1p ========== ========== ========== Adjusted EPS 5.1p 5.0p 12.4p============== ========== ========== ========== 4. Dividends Six months to Six months to Year ended 30 June 2007 30 June 2006 31 Dec 2006 £'000 £'000 £'000 (unaudited) (unaudited) (audited) Dividends paid Final 2005, paid 24 April 2006 - 2.5p per share - 323 323 Interim 2006, paid 29 September 2006 - 2.1p per share - - 268 Final 2006, paid 25 April 2007 - 2.9p per share 361 - - ---------- ---------- ---------- 361 323 591 ========== ========== ========== The directors propose to pay an interim dividend of 2.5p per share on 5 October2007 to shareholders on the register at 21 September 2007. 5. Transition to International Financial Reporting Standards The Group's reported financial performance and position is altered as describedbelow as a result of the adoption of IFRS and the accounting policies detailedin note 1 above. The following table summarises the impact of the adoption of IFRS on the Group'soperating profit for the six months to 30 June 2006 and the year ended 31December 2006. Six months to Year ended 30 June 2006 31 Dec 2006 £'000 £'000 Operating profit - under UK GAAP 871 1,946==================================Reversal of goodwill amortisation 16 122Amortisation of intangible assets - (188)===================================and goodwill impairment=========================Staff costs - holiday pay (49) (2) ---------- ---------- Operating profit - under IFRS 838 1,878 ========== ========== The following table summarises the impact of the adoption of IFRS on the Group'stotal equity as at 1 January 2006, 30 June 2006 and 31 December 2006. 1 January 2006 30 June 2006 31 Dec 2006 £'000 £'000 £'000 Total equity - under UK GAAP 1,648 1,875 1,684==============================Reversal of goodwillamortisation - 16 122Amortisation of intangibleassets and goodwill impairment - - (159)=================================Staff costs - holiday pay net ofdeferred tax (34) (68) (36) ----------- ---------- ---------- Total equity - under IFRS 1,614 1,823 1,611 =========== ========== ========== A brief explanation of the adjustments is as follows: Staff costs - holiday pay IAS 19 requires that a liability for holiday pay is recorded for all accruedentitlement at each balance sheet date. The Group's primary holiday year end is31 December, in line with its financial year end, and most employees areentitled to carry forward a maximum of 10 days' holiday to the following holidayyear. As at 30 June, therefore, there tends to be a larger accrual (andtherefore expense in the income statement) required than is the case at 31December. Business combinations Under UK GAAP, the cost of an acquisition over and above the value of the netassets acquired was deemed to be goodwill. IFRS 3 requires that each acquisitionis considered separately and a value attributed to any identifiable otherintangible assets such as customer lists. The goodwill cost is therefore thedifference between the consideration paid for the investment after deducting thevalue of net assets including other intangible assets. IFRS 1 provides for an exemption from restating the acquisition of MaintelNetwork Solutions Limited (previously Pinnacle Voice and Data Limited) on thisbasis as the acquisition took place on 5 December 2005 - before the Group's IFRStransition date of 1 January 2006 - and so the historical goodwill of £374,000relating to that company has been retained. In such circumstances, IFRS 3requires that this goodwill, being an asset of indefinite life, is not amortisedbut is tested for impairment at each reporting date, and any such impairment isapplied in accordance with IAS 36. The directors have considered the acquisition of District Holdings Limited -acquired on 12 June 2006 - and attributed a value of £965,000 to the customercontracts and associated relationships of District. This intangible asset willbe amortised over its useful life, this being deemed to be 5 years, andsubjected to an impairment review at each reporting date. Reversal of goodwill amortisation Under UK GAAP, the goodwill arising on the acquisitions of Maintel NetworkSolutions Limited and District Holdings Limited was amortised over a 7 yearperiod. Under IAS 38 the intangible asset in relation to District is beingamortised over a 5 year period and tested for impairment at each reporting date.The effect of adopting IFRS is to reverse the District goodwill amortisationcharge in 2006 and to replace it with an intangible amortisation charge and toreverse the amortisation charge in respect of Maintel Network Solutions Limitedand replace it, where necessary, with an impairment charge. Deferred taxation On the establishment of the £965,000 intangible asset relating to District, IFRSrequires that a deferred tax liability be created and a liability of £290,000has accordingly been incorporated in the balance sheet. As the intangible asset is amortised, there is a proportionate tax credit to theincome statement which reduces the deferred tax liability in the balance sheet. More detailed disclosure of the effects of IFRS on the UK GAAP financialstatements is shown in the following tables. The only changes to the cash flow statement are presentational, the principalones being classifying tax cash flows as relating to operating activities andequity dividends as relating to financing activities. Maintel Holdings Plc Unaudited reconciliation of the Group's consolidated income statementfor the six months to 30 June 2006 Six months to Six months to 30 June 2006 30 June 2006 Under UK GAAP Goodwill Holiday pay Restated under IFRS £'000 £'000 £'000 £'000 (note 1) (note 3) Revenue 7,063 7,063 Cost of sales 4,305 4,305 ---------- -------- -------- ---------- Gross profit 2,758 2,758 Administrative expenses---------------- ---------- -------- -------- ---------- Goodwillamortisation 16 (16) - Otheradministrativeexpenses 1,871 49 1,920---------------- ---------- -------- -------- ---------- 1,887 (16) 49 1,920 ---------- -------- -------- ---------- Operatingprofit 871 16 (49) 838 Financialincome 78 78 Financial charges - - ---------- -------- -------- ---------- Profit beforetaxation 949 16 (49) 916 Taxation 285 (15) 270 ---------- -------- -------- ---------- Profit aftertaxationattributable toequity holdersof the parent 664 16 (34) 646 ========== ======== ======== ==========Earnings per share==================== === === === ===Basic anddiluted 5.1p 5.0p=================== ========== ======== ======== ========== Maintel Holdings Plc Unaudited reconciliation of the Group's consolidated income statementfor the year to 31 December 2006 Year to Year to 31 December 31 December 2006 2006 Under UK GAAP Goodwill Holiday pay Restated under IFRS £'000 £'000 £'000 £'000 (notes 1, 2) (note 3) Revenue 16,166 16,166 Cost of sales 10,167 10,167 ---------- -------- ------- ---------- Gross profit 5,999 5,999 Administrative expenses---------------- ---------- -------- ------- ---------- Goodwillamortisation 122 (122) - Goodwillimpairment - 91 91 Intangiblesamortisation - 97 97 Otheradministrativeexpenses 3,931 2 3,933---------------- ---------- -------- ------- ---------- 4,053 66 2 4,121 ---------- -------- ------- ---------- Operatingprofit 1,946 (66) (2) 1,878 Financialincome 135 135 Financialcharges (1) (1) ---------- -------- ------- ---------- Profit beforetaxation 2,080 (66) (2) 2,012 Taxation 621 (29) - 592 ---------- -------- ------- ---------- Profit aftertaxationattributable toequity holdersof the parent 1,459 (37) (2) 1,420 ========== ======== ======= ==========Earnings per share==================== === === === === Basic anddiluted 11.4p 11.1p=================== ========== ======== ======= ========== Maintel Holdings Plc Unaudited reconciliation of the Group's consolidated balance sheetAs at 1 January 2006 (the opening IFRS balance sheet) 31 December 31 December 2005 2005 Under UK Holiday pay Restated under GAAP IFRS £'000 £'000 £'000 (note 3) Non current assetsIntangible assets 227 227Property, plant and equipment 240 240Deferred tax asset 30 15 45 ---------- -------- ---------- 497 15 512 ---------- -------- ---------- Current assetsInventories 585 585Trade and other receivables 1,917 1,917Cash and cash equivalents 3,625 3,625 ---------- -------- ---------- 6,127 6,127 ---------- -------- ---------- Total assets 6,624 15 6,639 ---------- -------- ---------- Current liabilitiesTrade and other payables 4,613 49 4,662Current tax liabilities 363 363 ---------- -------- ---------- Total liabilities 4,976 49 5,025 ---------- -------- ---------- Total net assets 1,648 (34) 1,614 ========== ======== ========== EquityIssued share capital 129 129Share premium 628 628Capital redemption reserve 7 7Retained earnings 884 (34) 850 ---------- --------- ---------- Total shareholders' equity 1,648 (34) 1,614 ========== ========= ========== Maintel Holdings Plc Unaudited reconciliation of the Group's consolidated balance sheet As at 30 June 2006 30 June 2006 30 June 2006 Under UK Goodwill Holiday pay Restated under GAAP IFRS £'000 £'000 £'000 £'000 (notes 1, 2) (note 3) Non current assetsIntangible assets 1,176 306 1,482Property, plant andequipment 287 287 ---------- -------- -------- ---------- 1,463 306 1,769 ---------- -------- -------- ---------- Current assetsInventories 1,332 1,332Trade and otherreceivables 2,972 2,972Cash and cashequivalents 3,573 3,573 ---------- -------- -------- ---------- 7,877 7,877 ---------- -------- -------- ---------- Total assets 9,340 306 9,646 ---------- -------- -------- ---------- Current liabilitiesTrade and otherpayables 7,152 98 7,250Current taxliabilities 344 344 ---------- -------- -------- ---------- Total liabilities 7,496 98 7,594 ---------- -------- -------- ---------- Non current liabilities Deferred taxliability (31) 290 (30) 229 ---------- -------- -------- ---------- Total net assets 1,875 16 (68) 1,823 ========== ======== ======== ========== EquityIssued share capital 128 128Share premium 628 628Capital redemptionreserve 8 8Retained earnings 1,111 16 (68) 1,059 ---------- --------- --------- ---------- Total shareholders'equity 1,875 16 (68) 1,823 ========== ========= ========= ========== Maintel Holdings Plc Unaudited reconciliation of the Group's consolidated balance sheet As at 31 December 2006 31 December 31 December 2006 2006 Under UK Goodwill Holiday pay Restated under GAAP IFRS £'000 £'000 £'000 £'000 (notes 1, 2) (note 3) Non current assetsIntangible assets 1,217 224 1,441Property, plant andequipment 238 238 ---------- -------- -------- ---------- 1,455 224 1,679 ---------- -------- -------- ---------- Current assetsInventories 705 705Trade and otherreceivables 2,861 2,861Cash and cashequivalents 2,234 2,234 ---------- -------- -------- ---------- 5,800 5,800 ---------- -------- -------- ---------- Total assets 7,255 224 7,479 ---------- -------- -------- ---------- Current liabilitiesTrade and otherpayables 5,220 51 5,271Current taxliabilities 380 380 ---------- -------- -------- ---------- Total liabilities 5,600 51 5,651 ---------- -------- -------- ---------- Non current liabilities Deferred taxliability (29) 261 (15) 217 ---------- -------- -------- ---------- Total net assets 1,684 (37) (36) 1,611 ========== ======== ======== ========== EquityIssued share capital 124 124Share premium 628 628Capital redemptionreserve 12 12Retained earnings 920 (37) (36) 847 ---------- --------- --------- ---------- Total shareholders'equity 1,684 (37) (36) 1,611 ========== ========= ========= ========== Maintel Holdings Plc Explanatory notes to the UK GAAP to IFRS reconciliations 1. Goodwill and intangible assets Under UK GAAP goodwill was capitalised and amortised over its estimated usefullife, which under Maintel's accounting policies was 7 years. The Company has elected to adopt the exemption permitted by IFRS 1 "First timeadoption of International Financial Reporting Standards" not to alter thispolicy in respect of goodwill arising before the IFRS transition date of 1January 2006, and so no adjustment to the historical accounts has been made inrespect of the goodwill arising on the acquisition of Maintel Network SolutionsLimited (previously Pinnacle Voice and Data Limited). Goodwill previously amortised in respect of Maintel Network Solutions Limitedhas been reversed, and the balance subjected to an impairment review at eachreporting date. The treatment of the goodwill arising on the acquisition of District HoldingsLimited has, however, been amended in accordance with IFRS 3 "Businesscombinations" and IAS 38 "Intangible assets". The goodwill arising under UK GAAP on the acquisition of District has beenreversed, and an intangible asset of equal value created, representing customercontracts and relationships, which is being amortised over 5 years and issubject to an impairment review at each reporting date. 2. Deferred tax Under IAS 12 "Income taxes", deferred tax is recognised on the basis oftemporary differences between the carrying value of assets and liabilities inthe balance sheet, and their tax bases. A deferred tax liability has accordinglybeen created in respect of intangible assets as at the date of the acquisitionof District Holdings Limited, with subsequent releases as impairment of theintangible is recognised. The effect of adopting this standard is shown under the goodwill column in thereconciliation tables above. 3. Holiday pay accrual Under IAS 19 "Employee benefits", an accrual has been made for the full monetaryvalue of holiday to which the Group's employees are entitled but, at the balancesheet date, had not been taken. Employees are permitted to carry forward alimited amount of holiday entitlement at 31 December, such that the accrual at30 June is significantly higher than that at 31 December. 4. Cash flow statements The only changes to the cash flow statement are presentational, the principalones being classifying tax cash flows as relating to operating activities andequity dividends as relating to financing activities. Independent review report to the shareholders of Maintel Holdings Plc Introduction We have been instructed by the Company to review the financial information forthe six months ended 30 June 2007 on pages 7 to 23. We have read the otherinformation contained in the interim report and considered whether it containsany apparent misstatements or material inconsistencies with the financialinformation. Our report has been prepared in accordance with the terms of our engagement toassist the Company in meeting the requirements of the rules of the London StockExchange for companies trading securities on the Alternative Investment Marketand for no other purpose. No person is entitled to rely on this report unlesssuch a person is a person entitled to rely upon this report by virtue of and forthe purpose of our terms of engagement or has been expressly authorised to do soby our prior written consent. Save as above, we do not accept responsibility forthis report to any other person or for any other purpose and we hereby expresslydisclaim any and all such liability. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The directors areresponsible for preparing the interim report in accordance with the rules of theLondon Stock Exchange for companies trading securities on the AlternativeInvestment Market which require that the half-yearly report be presented andprepared in a form consistent with that which will be adopted in the Company'sannual accounts having regard to the accounting standards applicable to suchannual accounts. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom by auditorsof fully listed companies. A review consists principally of making enquiries ofgroup management and applying analytical procedures to the financial informationand underlying financial data and based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance with UnitedKingdom Auditing Standards and therefore provides a lower level of assurancethan an audit. Accordingly we do not express an audit opinion on the financialinformation. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2007. BDO STOY HAYWARD LLP Chartered Accountants London 7 September 2007 This information is provided by RNS The company news service from the London Stock Exchange