Maintel Regulatory News (MAI)

Maintel Holdings Plc

("Maintel", the "Company" or the "Group")

Interim results for the 6 months to 30 June 2016

Maintel Holdings Plc, the leading systems integrator and managed services provider, is pleased to announce its interim results for the 6 month period to 30 June 2016.

Highlights

· Group revenue increased 54% to £38.1m (H1 2015: £24.8m), including £15.4m contribution from Azzurri[1]

· Increase in recurring revenue to 75% (H1 2015: 71%)

· Group gross profit increased 38% to £13.1m (H1 2015: £9.5m)

· Group adjusted EBITDA increased 23% to £4.4m (H1 2015: £3.6m), including £1.7m contribution from Azzurri

· Adjusted earnings per share[2] at 26.6p (H1 2015: 27.4p)

· Robust cash performance, with underlying cash conversion [3] of 88%

· Net debt [4] of £27.1m, better than board expectations

· Strong order backlog for H2, on track to meet full year profit expectations

· Progressive dividend policy reiterated:

o Interim dividend per share at 13.4p (H1 2015: 12.8p)

o Full year 2016 dividend to grow 5% year on year, with 10% growth for FY17

· Acquisition of Azzurri remains on track to be earnings enhancing in this financial year

Operational Highlights

· Transformational acquisition of Azzurri completed 4 May 2016

· Pleasing performance post-acquisition with notable contract wins and delivery of synergy plan on track

Key Financial Information

Commenting on the Group's results, Eddie Buxton, CEO, said:

"The highlight of the period was the acquisition of Azzurri which was transformational for Maintel, adding significantly to our offering both in terms of products and services, specifically in the highly profitable growth areas of managed and cloud based services, and also its highly complementary customer base.

Excluding Azzurri, trading in the underlying Maintel business was slower than expected due to delays in the timing of four large contracts. All of these contracts closed successfully at the end of Q2 2016 and as such we enter the second half with a strong order book as well as a full pipeline of opportunities. Our growth prospects remain positive and we are confident of delivering a profit performance for the year in line with market expectations."

Notes

[1] Azzurri Communications Limited (Azzurri) is the principal trading operation for Warden Holdco Limited, which was acquired on 4 May 2016 (note 5).

[2] Adjusted earnings per share is basic (loss)/earnings per share of (8.2p) (H1 2015: 16.8p), adjusted for intangibles amortisation, exceptional costs relating to the acquisition of Azzurri (H1 2015: Proximity) and deferred tax charges on Datapoint and Azzurri profits (note 3). The weighted average number of shares in the period increased to 12.0m (H1 2015:10.7m) arising from the equity raise in May 2016 to support the Azzurri acquisition.

[3] Cash conversion is adjusted EBITDA to operating cash flow excluding acquisition costs.

[4] Interest bearing debt (excluding issue costs of debt) minus cash.

[5] Adjusted profit before tax of £3.9m (H1 2015: £3.3m) is basic profit before tax, adjusted for intangibles amortisation and the Azzurri exceptional costs (H1 2015: Proximity).

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Chairman's statement

I am pleased to be able to report a satisfactory set of results for the period, with reported revenue having increased by 54%, compared with H1 2015, to £38.1m and adjusted profit before tax increasing by 17% to £3.9m (H1 2015: £3.3m), incorporating 2 months' contribution from the Azzurri business acquired in May 2016. Adjusted earnings per share (EPS) decreased by 3% to 26.6p (H1 2015: 27.4p) as a result of the additional shares issued to support the Azzurri acquisition.

The overall gross margin of the Group slightly declined to 34% (H1 2015: 38%). This reduction is due to the inclusion of the lower margin Azzurri business, with a small decrease in the underlying business due to the lower contribution of higher margin professional services to the mix, which we expect to recover in H2 assisted by the large backlog of orders.

Recurring contracted revenue made up 75% of H1 2016 revenues (H1 2015: 71%; FY 2015: 69%) including the contribution from Azzurri which, as anticipated, brought a higher level of recurring revenue to the Group (Azzurri standalone business is 79% recurring).

Revenues in the managed services and technology division increased by 24% to £23.8m, with managed services related revenue up 18% compared with H1 2015 and technology (equipment sales) up 34%, including the contribution from Azzurri. The historic Maintel business showed an 8% decrease, due to four large multi-year contracts only being signed at the end of Q2. This is expected to have a positive impact on the division's growth in H2. The pipeline here remains strong and in particular we are seeing an increase in public sector opportunities.

The network services division showed an encouraging 173% growth in revenue to £11.7m (H1 2015: £4.3m) driven by a significant contribution from Azzurri, in particular in data revenues. Excluding Azzurri, divisional gross margin increased by 2% to 28%. Maintel's underlying revenues declined by 2%, after excluding a one-off equipment sale in H1 2015, performing better than the market trend.

The mobile division's revenue increased 90% to £2.7m (H1 2015: 1.4m). Maintel's historic mobile division saw a reduction in revenue of 17% over the previous year, due partly to the changes in roaming charges but mainly due to the reduction in small business customer acquisition and retention. We have taken the decision to reduce our presence in the small business space and refocus activity in line with the other product propositions targeting the mid-market sector.

As part of this review, the Group closed the Azzurri small business mobile operation in East Kilbride and is in the process of migrating these customers from the base. While the combined Group will continue to benefit from real scale in mobile, our exposure is expected to be under 9% of Group turnover moving forward.

In May 2016, the Group completed the transformational acquisition of Azzurri for an enterprise value of £48.5m. In order to fund this, the Group secured banking facilities of £36.0m and issued £24m of new equity.

Azzurri brings additional scale, a wider product capability and a large and complementary customer base to the Maintel Group. The combined Group now has a comprehensive and compelling services portfolio including managed, data and cloud based services. Our offering will also allow customers to choose public or private hosted cloud services and will accelerate the shift in business mix to these high growth areas of the market. The early signs are positive, with year on year growth of 83% in our hosted unified communications offering and two further new contracts signed in Q2, which have added an additional 4,500 hosted seats onto our platform.

The integration of Azzurri is progressing very well, with the Group on track to achieve synergies of £1.9m in the current year and the £4.6m of annualised synergies from 2017 forecast at the time of the acquisition. The combined business will be integrated onto a common set of systems in early October 2016.

We ended the first half of the financial year with a healthy backlog of signed projects and enter the second half with a strong pipeline. Trading conditions remain good although there is evidence of sales cycles for larger customers becoming longer.

The Group continues to deliver strong cash generation with 88% of adjusted EBITDA converting to cash in the period and net debt standing at £27.1m at period-end, slightly ahead of board expectations. The Board proposes to pay an interim dividend of 13.4p, representing a 5% growth on the 2015 interim dividend, equivalent to 50% of adjusted earnings per share.

I would like to welcome new colleagues from Azzurri to the Group and thank all our staff for their hard work and commitment during the first half of 2016. It is also a pleasure to welcome new investors and thank them and our existing shareholders for their support.

J D S Booth

Chairman

16 September 2016

Business review

The first half of 2016 has seen an increase in revenue of 54% to £38.1m (H1 2015: £24.8m) and adjusted profit before tax (as described below) of 17% to £3.9m (H1 2015: £3.3m).

The period benefited from two months' contribution from Azzurri (see note 5), which was acquired in May 2016 and therefore made no contribution to the comparative period last year.

Adjusted earnings per share (EPS) decreased by 3% to 26.6p (H1 2015: 27.4p) based on an increased weighted average number of shares in the period of 11,992,977 (H1 2105: 10,739,299) following an equity raise in May 2016 to support the Azzurri acquisition. The acquisition of Azzurri remains on track to be earnings enhancing this financial year.

On an unadjusted basis, the Company generated a loss before tax of £0.7m (H1 2015: profit of £2.1m), equivalent to a loss per share of 8.2p (H1 2015: earnings of 16.8p). This includes £2.8m of exceptional costs associated with the Azzurri acquisition and related restructuring activities (H1 2015: £0.1m in respect of the Proximity acquisition) and intangibles amortisation of £1.8m (H1 2015: £1.1m), the increase in the latter due to the acquired Azzurri intangible.

(a) Excluding the exceptional costs (note 4)

(b) After management charges

(c) Adjusted profit after tax divided by weighted average number of shares (note 3)

Azzurri

Maintel completed the acquisition of Azzurri on 4 May 2016 for an aggregate cash consideration of £1 and with a commitment that the Company procure the repayment of Azzurri's then existing senior debt and other indebtedness immediately following completion. This equated to an enterprise value for Azzurri of £48.5m.

Azzurri was a transformational acquisition for Maintel, providing additional scale and product capability, with an attractive customer base. The combined Group now has a comprehensive and compelling services portfolio including managed, data and cloud based services. The enlarged Group offering will also allow customers to choose public or private hosted cloud services and will accelerate the shift in business mix to these high growth areas of the market.

Since acquisition the business has been performing well with some notable new customer wins, particularly with ICON Communicate, Azzurri's hosted unified communications proposition. Recent major wins include a large insurance company with 3,000 seats, a large charity with 1,600 seats and an expansion of the relationship with a major housing association. There has been an 83% increase in UCaaS seats on the ICON platform in the past twelve months.

We are continuing Azzurri's investment in the ICON platform; Microsoft's Skype for Business product has been added to Mitel's unified communications offering, and we will be launching an Avaya-based service before the year end, providing support for three of the recognised leading vendors in the Unified Communications market. We have also invested in increasing both the capacity and resilience of the platform, and gained certification to enable us to offer fully PCI compliant services, allowing us to offer a significant advantage for any organisation processing card payments.

The integration of Azzurri is on track and progressing well; the senior management team is in place, the sales team has been integrated and reorganised; and the back office re-organisation, including moving onto one set of systems across the Group, will have been completed by the end of the year. The anticipated 2016 in-year and 2017 annualised synergies of £1.9m and £4.6m respectively are in line with previously stated objectives.

As part of the integration planning, the board has undertaken a strategic review of its mobile business, resulting in the decision to reduce its exposure in the SME space. As a result Azzurri's East Kilbride operation was closed in May 2016. Consequently, the ongoing exposure to mobile is expected to account for under 9% of Group turnover.

As a consequence of the acquisition, significant legal and professional fees have been incurred, amounting to £2.5m. In addition, as part of the integration process, there have been a number of redundancies across the Group in H1. The cost of these redundancies along with other synergy related costs amounted to £0.3m. Both these costs have been disclosed as an exceptional item in the income statement. Further exceptional costs associated with the integration will be incurred in H2 but with cost savings thereafter.

Review of operations

The following table shows the performance of the three operating segments of the Group. The 2016 half year numbers include two months' contribution from Azzurri.

(d) Technology includes revenues from hardware, software, professional services and other sales

(e) Azzurri was acquired on 4 May 2016, and therefore an estimated two months' of its financial performance has been considered post- acquisition

Excluding Azzurri, the Group experienced lower trading activity than expected in H1, with four major sales contracts taking longer to close than anticipated. All were closed at the end of Q2 and have contributed to our strong H2 order book.

Three of the contracts are multi-year managed services contracts with a total value of over £11.0m. While these contract wins have had no impact on H1 revenues they will have a significant positive impact on H2 results.

Recurring contracted revenue made up 75% of H1 2016 revenues (H1 2015: 71%) including the 2 months' contribution from Azzurri which, as anticipated, brought a higher level of recurring revenue to the Group (Azzurri standalone business is 79% recurring in the period since acquisition).

Overall gross margin for the Group reduced to 34% (H1 2015: 38%) driven by the lower margin contribution from Azzurri in this period.

Detailed divisional performance is described further below.

The managed services and technology division provides the management, maintenance, service and support of both on premise and off premise voice and data equipment across the UK and internationally, on a contracted basis. It also supplies and installs voice and data equipment together with providing professional services, both to our direct clients and through our partner relationships.

Revenues in this division increased by 24% to £23.8m, with managed services related revenue up 18% compared with H1 2015 and technology (equipment and professional services sales) up 34%, both significantly boosted by the contribution from Azzurri. The underlying Maintel business excluding Azzurri declined by 8%, with managed services related revenue reducing by 6% and technology revenue by 11%, due to the timing of new contracts completing, as detailed above.

The division's sales pipeline remains strong in both private and public sectors and we are starting to see significant growth in the hosted/cloud opportunities as a proportion of the pipeline.

Managed services

Excluding Azzurri, revenue declined by 6% due to the delay in signing the previously highlighted large contracts which completed during June. As a result the managed service base grew to £26m, a 6% increase over December 2015; this will have a significant benefit to H2 results.

H1 2016 continued to see a reduction in the legacy maintenance base as the Group focuses on winning larger managed service contracts with newer technology and a wider suite of services to support these contracts.

The pipeline for new managed services opportunities is growing; however, the greater complexity of these opportunities has resulted in a lengthening of sales cycles and the on-boarding process compared to traditional maintenance contracts.

Technology

Excluding Azzurri, the first half of 2016 was soft for technology sales which held back headline revenue growth year on year in this area.

As with managed services, the backlog of sales moving into H2 is healthy, with a £0.9m project to upgrade a data network for a public sector client and a £1.8m contract for a large construction group, being delivered in August/September.

The public sector framework is providing a significant source of new opportunities particularly in healthcare and local government. We are, however, starting to see some impact of cloud based opportunities on equipment sales and we see this trend continuing, and we are well placed with Azzurri's ICON platform to take advantage of this.

Network services division

The network services division sells a portfolio of services which includes telephone line rental, inbound and outbound telephone calls, data connectivity, internet access and hosted IP telephony solutions. These services complement those offered by the managed service and technology division and the mobile division.

(f) VoIP of £214,000 (30 June 2015: £161,000; 31 December 2015: £370,000) and Inbound calls of £90,000 (30 June 2015: £89,000; 31 December 2015: £182,000) have been reclassified from Other to Data connectivity services and Call traffic respectively.

Network services revenues increased by 173% year on year, driven by the contribution from Azzurri.

Excluding Azzurri, Maintel revenues declined by 7%, but excluding a one off £235,000 equipment sale associated with a WAN optimisation project in H1 2015, underlying revenue only declined by 2%. Divisional gross margin increased by 2% to 28% partly due to the H1 2015 equipment sale being at low margin.

Call minutes revenue was 4% down on the prior year driven by a major customer re-signing at lower volumes as they implement a Skype for Business roll out, which also impacted legacy line rental revenue. Call revenue has been more resilient than expected given the combination of the market reduction in call volumes, regulatory price reductions and bundled free minute packages.

Legacy line rental revenues decreased by 13%, impacted by a combination of the above and our continued pro-active transitioning of customers onto newer SIP based voice technology, which has seen year on year growth of 33%.

As we continue to see this move away from legacy calls and lines services to newer data and SIP technology, our underlying data services revenue has grown by a healthy 18% year on year, excluding the one off project installation in H1 2015 previously noted.

Moving forward, the acquisition of Azzurri strengthens our position in this sector with ICON Connect, our Data Network proposition.

Mobile division

Maintel Mobile derives its revenues primarily from commissions received under its dealer agreements with Vodafone and O2, whilst Azzurri derives most of its revenues from dealer agreements with O2.

Excluding Azzurri, the Mobile division saw a reduction in revenue of 17% over the previous year due partly to the changes in roaming charges but mainly due to the reduction in small business customer acquisition and retention as the Group refocused its investment into other areas of higher growth potential.

Gross margins of 49% were maintained at similar levels to H1 2015.

As highlighted earlier in the report, as part of integrating Azzurri, the Group has undertaken a strategic review of its mobile business, resulting in the decision to reduce its presence in the small business space. This reduces the exposure of mobile for the Group and re-focuses our sales activity in line with the other product propositions in the target mid-market sector. As a result, the ongoing exposure to mobile is expected to reduce to under 9% of Group turnover.

As part of this review, the Group closed the Azzurri small business mobile operation in East Kilbride and is in the process of removing these customers from the Azzurri base.

The combined Group will continue to benefit from real scale in mobile as well as Azzurri's greater experience and well-defined mobile managed service wrap that is attractive to larger customers.

Administrative expenses, excluding intangibles amortisation, management recharges and non-trading adjustments

Total administrative expenses increased by 49% to £9.0m. Excluding Azzurri, Maintel's costs are down 1% on last year at £6.0m, with lower underlying sales costs and headcount compensating for inflation increases. In addition, property costs are lower year on year, as a result of the office moves in H2 2015 which included the consolidation of two offices (Brentford and Webber Street) into our current Blackfriars HQ and the move to cheaper Dublin premises.

Following the Azzurri acquisition, headcount as at 30 June 2016 for the Group now stands at 727 (30 June 2015: 282).

As we progress with our integration plan, total administration costs will continue to be tightly controlled and we will deliver further cost savings in H2 in line with the integration plan produced at the time of the transaction.

The exceptional costs of £2.8m (H1 2015: £0.1m) shown in the income statement primarily relate to the legal and professional fees from the acquisition of Azzurri of £2.5m and redundancy costs incurred resulting from the acquisition and integration of £0.3m (H1 2015: Proximity of £0.1m).

The intangibles amortisation charge increased in the period due to the 2 month charge resulting from the Azzurri acquisition. Impairment and amortisation charges are discussed further below.

Foreign exchange

The Group's reporting currency is sterling; however it trades in other currencies, notably the euro, and has assets and liabilities in those currencies. The euro rate moved from €1.36 = £1 at 31 December 2015 to €1.21 = £1 at 30 June 2016. The effect of this and other movements in the period was a gain to the income statement of £92,000 (H1 2015 charge: £100,000), which is included in other administrative expenses.

The exchange difference arising on the retranslation at the reporting date of the equity of the Group's Irish subsidiary, whose functional currency is the euro, is recorded in the translation reserve as a separate component of equity, being £37,000 in the period (H1 2015: £54,000).

Interest

The increase in the net interest charge to £295,000 (H1 2015: £139,000) resulted from the additional borrowings taken on to finance the Azzurri acquisition, with net borrowings excluding issue costs of debt increasing to £27.1m at 30 June 2016 (30 June 2015: £8.8m) from a year end 2015 balance of £3.2m.

Taxation

The effective tax charge for H1 2016 was £290,000 against the loss of £696,000 (H1 2015 tax charge: £287,000), for the reasons described below. Each of the Group companies is taxed at 20%, with the exception of Maintel International Limited, which is taxed at 12.5% (H1 2015: 20.25%; 12.5%). Certain expenses that are disallowable for tax raise the underlying effective rate above this, and form the predominant reason why a tax charge was incurred on the period's loss.

The tax charge in the period was adversely impacted due to certain acquisition related costs deemed disallowable which amounted to £497,000. This was offset by the tax charge benefiting from some adjustments, including (a) relief claimed on certain 2015 costs which were deemed disallowed in that period but are now allowed following further investigation (£26,000), and (b) the difference in the rate at which deferred tax on the amortisation of the intangibles is released (£21,000).

The tax charge in the period includes a deferred tax charge relating to the tax losses of the Datapoint companies, whereby they do not currently pay corporation tax on their profits, but a tax asset in respect of the historic losses is charged to the income statement as the losses are used. This deferred tax charge in the period was £237,000 (H1 2015: £179,000).

The tax charge in the period also includes a deferred tax charge relating to the Azzurri profits, whereby they do not currently pay corporation tax on their profits, but a tax asset in respect of the historic capital allowances is charged to the income statement as the capital allowances are used. This deferred tax charge in the period was £311,000 in relation to the brought forward capital allowances.

Dividends and adjusted earnings per share

An interim dividend for 2015 of 12.8p (£1.4m) was paid on 7 October 2015 and a final dividend for 2015 of 16.5p per share (£1.8m) was paid on 5 April 2016, taking the total dividend declared in 2015 to 29.3 pence per share.

As previously highlighted, it is the board's intention to increase the dividend pence per share by 5% over 2015 total dividend pence per share and then growing progressively year on year by 10% for 2017.

As a result, the board proposes to pay an interim dividend of 13.4p in respect of 2016 on 12 October to shareholders on the register at the close of business on 30 September, which equates to a pay-out ratio as a percentage of adjusted earnings of 50%. The corresponding ex-dividend date will be 29 September. In accordance with accounting standards, this dividend is not accounted for in the financial statements for the period under review, as it had not been committed as at 30 June 2016.

Consolidated statement of financial position

Net assets increased by £20.4m to £27.0m from 31 December 2015 due to the inclusion of the acquired balance sheet of Azzurri.

Intangible assets at £64.4m, have increased by £46.3m from 31 December 2015, driven by intangibles arising on the acquisition of Azzurri (see note 5).

The value of property, plant and equipment has increased by £3.0m to £3.6m from 31 December 2015. This includes a freehold property valued at £1.6m and plant and equipment and leasehold improvements of £1.3m resulting from the acquisition of Azzurri. Post-acquisition, Azzurri incurred £0.2m of expenditure relating to the ICON platform and expanding capacity in its data centre infrastructure. Maintel incurred minimal capital expenditure in H1 2016 with its tangible asset value in line with the year end 2015 balance at £0.7m.

Trade and other receivables increased by £24.5m in the period to £35.5m with £21.2m attributable to Azzurri. Excluding Azzurri, Maintel trade and other receivables increased by £3.3m, the main elements being (a) an increase in trade receivables driven by two orders for equipment and licences amounting to £3.5m, both of which were settled in August, offsetting the impact of a high level of seasonal renewals at the end of 2015 and (b) higher prepaid support costs covering several contracts signed in H1 2016.

Inventories are valued at £2.7m at 30 June, an increase of £1.4m from 31 December 2015, with Azzurri contributing £1.5m. Excluding Azzurri, Maintel inventories have reduced marginally by £0.1m compared to year end 2015 to £1.2m, as a result of strong control over the levels of managed service stock; there was little movement in the stock held for resale.

Trade and other payables amounted to £49.6m, an increase of £29.3m in the period. Excluding Azzurri, trade and other payables were at £19.8m reflecting a £0.6m reduction when compared to the year end 2015 value of £20.3m. The main drivers were the weighting of customer contract renewals to H2 2015 so that a higher level of deferred income is carried at December than at June, together with a lower VAT liability caused by lower equipment sales and the impact of acquisition costs. These were offset by an increase in trade payables and accruals due to the impact of the remaining acquisition costs settled in July, vendor costs associated with a large equipment deal in June and accrued bank interest.

Corporation tax liabilities have reduced by £0.1m due to lower profits emanating from Maintel's trading activities in H1 2016. As noted in the Taxation section above, no corporation tax provision has been made for Azzurri's profit contribution since acquisition, as there are sufficient brought forward capital allowances to offset any corporation tax provision required.

The deferred tax liability has increased by £2.1m in the first half to £2.9m resulting from (a) the creation of a deferred tax liability of £4.3m associated with the Azzurri intangibles of £23.2m and (b) the deferred tax adjustment related to the Datapoint and Azzurri historical tax losses and capital allowances respectively of £0.6m in aggregate offset by (a) a deferred tax asset of £2.5m resulting from the acquisition of Azzurri (see note 5), and (b) the unwinding of intangibles amortisation related deferred tax liabilities from Azzurri and previous acquisitions of £0.3m.

Intangible assets

The Group has two intangible asset categories: (i) an intangible asset represented by customer contracts and relationships, brand value, product platforms and software acquired from third party companies, and (ii) goodwill relating to those acquisitions.

The intangible assets represented by purchased customer contracts and relationships, brand value, product platforms and software were carried at £29.7m at the period end (31 December 2015: £8.3m). The intangible assets are subject to an average amortisation charge of 18% of cost per annum in respect of the managed service and technology division, 13% per annum in respect of the network services division and 16% per annum in respect of the mobile customer relationships, with £1.8m being amortised in H1 2016 (H1 2015: £1.1m), the increase being attributable to the Azzurri intangibles acquired in May 2016.

Goodwill of £34.7m (31 December 2015: £9.9m) increased by £24.8m as a result of the Azzurri acquisition. No impairment has been charged to the consolidated statement of comprehensive income in H1 2016 (H1 2015: £nil).

Cash flow

The Group had net debt (excluding issue costs of debt) of £27.1m at 30 June 2016, compared with £3.2m at 31 December 2015, and an explanation of the £23.9m increase is set out below.

The Group generated £3.8m of cash from operating activities excluding acquisition costs, with a £0.3m negative working capital impact in the period, compared with £0.1m consumed in the comparative period. This was underpinned by a high cash conversion rate of 88% of adjusted EBITDA to operating cash flow excluding acquisition costs.

The net effect of the equity raised and new borrowing facilities associated with the acquisition of Azzurri together with repaying existing borrowing facilities, acquisition related costs and settlement of the 2015 final dividend consumed £1.9m in cash and cash equivalents.

The increase in the net debt position compared with December 2015 is a result of the borrowings acquired in May 2016 to fund the acquisition of Azzurri (see note 8).

Outlook

Notwithstanding the softer than anticipated trading in the Maintel business excluding Azzurri, the first half was a very positive period for Maintel as a Group. The highlight of the period was the acquisition of Azzurri, which in the two months' since completion performed well and in line with expectations, including the signing of several substantial contracts which have contributed to our order backlog for the second half. Our integration plan is on track, with significant further cost savings to be made in the second half. As stated at the time of the acquisition of Azzurri, we expect the acquisition to be earnings enhancing this financial year.

In the underlying Maintel business, the signing of the four delayed contracts at the end of Q2 will have a positive impact on growth in H2 and we enter the second half with a strong order book and a full pipeline of opportunities.

With our service offering now broader and more attractive than previously, we can expect a greater proportion of opportunities to be successfully converted, albeit that with larger customers, multi service contracts are more complex, resulting in longer sales cycles.

We therefore remain confident for the second half of the financial year, and of delivering a profit outcome for the full year in line with the market expectations.

The Group continues to deliver good cash generation and the focus is on maintaining a progressive dividend policy whilst simultaneously reducing the debt levels, in line with the board's target of 2x adjusted EBITDA by the end of the financial year.

On behalf of the board

E Buxton

Chief Executive

16 September 2016

Maintel Holdings Plc

Consolidated statement of comprehensive income

for the 6 months ended 30 June 2016 (unaudited)

Maintel Holdings Plc

Consolidated statement of financial position

at 30 June 2016 (unaudited)

Maintel Holdings Plc

Consolidated statement of changes in equity

for the 6 months ended 30 June 2016 (unaudited)

Maintel Holdings Plc

Consolidated statement of cash flows

for the 6 months ended 30 June 2016 (unaudited)