Maintel Regulatory News (MAI)

6th December 2017

Maintel Holdings PLC

Trading update

Maintel Holdings PLC (the "Group" or "Maintel"), the leading systems integrator and managed services provider, today issues the following trading update for the year ending 31 December 2017.

The Group's ICON cloud services have continued to grow strongly in the second half of 2017, boosted by ongoing investment in the platform. The success in our ICON cloud business is very encouraging, as the Group continues to transform from a telecoms business to a fully managed service provider in the enterprise space.

The Group had expected to recover the reduction in gross margin in the first half of this financial year, but it is now evident that this will not happen for the following reasons:

· Following the acquisition of Azzurri Communications in May 2016, the Group highlighted two large legacy contracts that were due to wind down over the trading period up to the end of first half 2018. Both of these contracts generated higher gross margins than the Group's average contracts. Both contracts have migrated away more quickly than expected and, as a result, less revenue than originally anticipated will be generated from these customers throughout the second half of full year 2017 and the first half of 2018.

· As previously highlighted, Managed Services and Technology performance has been adversely impacted by delays to customer installations as a result of the Avaya Chapter 11 process. The impact has been greater than expected due to prolonged delays in the resolution of the process. However, the bankruptcy court approved Avaya's reorganisation on 28 November, enabling Avaya to exit Chapter 11 by the end of 2017. In terms of Avaya, the Group is pleased to report that ordering activity started to recover in November which will positively impact Q1 2018.

· The integration of Intrinsic Technology ("Intrinsic") is going well and all of the Intrinsic systems were migrated onto one system on 1 December. The revenue contribution is in line with our expectations at the time of the acquisition although the gross margins achieved have been lower than anticipated. 

The Board now expects adjusted EBITDA for the year ended 31 December 2017 will be in the range of £12.5m to £13m.

Reflecting our confidence in underlying cash flows and the longer-term prospects for the Group, we remain committed to our progressive dividend policy. It is our current intention for the total full year 2017 dividend to grow 10% year on year, in line with existing guidance.

We will provide more detail on expectations for 2018 at the time of the preliminary results announcement in March, however, at this juncture, the Board remains confident in delivering substantial growth in revenue and EBITDA in the full year to 31 December 2018. Growth will be driven by improvements in trading conditions, a recovery in Avaya installations, continued growth in the ICON cloud business and additional cost cutting and synergy realisation across the business. The Board expect this recovery to accelerate into the first half of calendar year 2018.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014

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