REG - Maintel Holdings PLC - Final Results <Origin Href="QuoteRef">MAIH.L</Origin> - Part 2
20/03/2017 07:06
- Part 2: For the preceding part double click ID:nRST8724Za
incurred exceptional costs of £4.2m during 2016 (2015: £0.9m), covering primarily acquisition, restructuring and
redundancy costs associated with the Azzurri acquisition (described above and in note 12).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 second interim dividend consumed £3.8m 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.
Further details of the Group's RCF and overdraft facility are given in note 20.
Business model and strategy
The Group's objective is to maximise shareholder returns over the short, medium and long term through providing
communication solutions to mid-market and enterprise businesses either on-premise or cloud-based.
Maintel has long lasting relationships and retains the highest level of accreditations with its core vendors. With more
than 20 years' experience, Maintel specialises in combining the skills and technologies from its vendors with the
capabilities of its in-house experts to provide complete end-to-end solutions to its customers. Its technology portfolio
encompasses unified communications, contact centre, workforce optimisation, networking and security, mobile and
connectivity services for mid-market and enterprise businesses in the private and public sector.
The Group has moved towards increasing its exposure to managed services and technology and professional services which are
of a higher recurring revenue nature, and to embracing current high-growth services such as cloud, hosting and network
security, all delivered within a managed service. There is a progression from legacy services (e.g. traditional calls and
lines) into these higher value products and services. The Group has a high level of recurring revenue, at 73%. The
Company's customer contracts are typically multiyear on a rolling renewal basis.
While the majority of services are provided in the UK, the Group also services a range of customers overseas. The Group's
Irish subsidiary is well established, trades in euros and operates from offices in Dublin servicing multinational companies
that trade across Europe. The Irish subsidiary is seen as a benefit in the current uncertain environment created by the
UK's decision to leave the EU.
The Group has a contracted customer base of £80m per annum and there is considerable scope to cross-sell the broader
portfolio into this base. The managed services base in particular provides opportunity to sell local and wide area
networking services, managed security, additional equipment and professional services, and also to transition that base
from on-premise to cloud based solutions. The Group combines these revenue streams into a single business unit.
Organic growth is targeted in each financial year, and will be supplemented by the acquisition of complementary companies
or client bases where clear shareholder value can be created. Acquisitions may be funded out of cashflow, borrowings or the
issue of shares, dependent on a range of factors considered at the time. Targeted acquisitions will also bring extended
capabilities, such as cloud based services or enhanced contact centre expertise.
Principal risks and uncertainties
The directors consider that the principal risks to the Group relate to technological advance, marketplace relationships,
pricing strategies and integration risk. Some risks may be unknown to the Group and others may be more, or less, material
than currently envisaged by the directors, and so the following may not give a comprehensive view of all the risks and
uncertainties affecting the business.
Telecommunications hardware continues to be replaced by telecommunications software offering services that extend the
traditional PBX capability towards unified communications and collaboration. This continues a trend that started 15 years
ago with the transition from proprietary signalling to the use of existing IP networks, and the trend is now underway for
customers to transition their traditional on-premise deployments to hosted and cloud services.
Maintel is well positioned to capitalise on that change, having invested in the skills of its people and in adding
capability through a number of acquisitions in recent years. In particular, the acquisition of Azzurri in 2016 brought with
it strong capability in unified communications as a service, cloud and managed services.
Offering these cloud services places a responsibility on the Group to ensure the continuous operations of the platforms
from which they are delivered. Investment during the previous year in additional data centre and network capacity now means
that the whole of the ICON platform is fully resilient and capable of withstanding catastrophic failure in any of the core
data centres. The platform, and the networks that support it, are monitored 24/7 by the in house network operations centre
for rapid response to any outage.
We have also invested in our product development function, under the direction of the Chief technology and strategy
officer, to ensure that the product portfolio is competitively positioned and anticipates technological change. We
regularly discuss product roadmaps and initiatives with analyst houses to test our assumptions with respected third
parties, and maintain strong networks with the consultant and vendor communities.
We have also sought to protect our high levels of recurring revenues by offering increasingly differentiated and value
added services to our clients, enabling them to transfer responsibility for the management of their core communications
platforms to us, including the inherent risk. We have developed a comprehensive set of managed service offers including
managed cyber security, PCI compliance and system and mobile fleet management that ensure our service offerings remain
relevant and compelling.
In telecommunications, regulation plays a key role in the setting of prices and tariffs, particularly in the mobile area.
To that end, we have reduced our dependency on revenue from mobile voice and data services, replacing it with cloud and
managed service revenues. In addition to regulatory activity, fixed and mobile pricing and margins can also be impacted by
the activities of both competitors and suppliers. We mitigate these risks by assessing anticipated regulatory and
technology change and its impact on pricing strategies, amending our own pricing policies accordingly. We also continue to
maintain multiple supplier relationships across both the fixed and mobile sector, to ensure we have access to competitive
services. In telecommunications, we continue to see the transition from traditional PSTN and ISDN services towards SIP, a
migration we consider increases value for the Company.
One of the Group's principal vendor relationships is with Avaya, whose parent company is currently restructuring its debt
through a filing which provides protection under the bankruptcy provisions of Chapter 11 in the US. During this process we
are continuing to receive support from Avaya while they operate as business as usual, but remain well balanced in terms of
portfolio should there be a dip in sales of the Avaya product range while they go through the restructuring process.
The Group has close partner relationships with organisations such as O2/Telefonica and Vodafone, such that these companies
and their clients constitute a significant share of its managed service base. Should these relationships be terminated, the
managed service base would reduce to that extent over a period of time, necessitating a commensurate reduction in costs.
Partnerships with other integrators continue to be developed to reduce the percentage weighting of business with these
partners.
The Group's managed service contracts have a natural finite life, and are subject to competitive attack, so that there is
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 if cost effective.
The Group has stated that it will acquire suitable companies which fit certain criteria, and recognises that there is a
risk of operational disturbance in the course of integrating acquired companies into the Group's existing operations. The
Group mitigates this risk by way of due diligence and detailed planning involving senior management, drawing on the
experience of previous acquisitions.
Outlook
2016 was a transformational and successful year for Maintel. Our organic achievements were complemented by the Azzurri
acquisition, which has delivered significant value, both financially and strategically, as it has accelerated our move into
cloud and hosted managed services.
After a slow H1 we have seen encouraging and improving levels of new business, and we finished FY 2016 with a record Q4 in
terms of business signed.
Whilst the Group currently remains focused on bedding down the integration of Azzurri, maximising the cross sell and new
business opportunities and reducing debt levels, it will continue to be opportunistic in regards to acquisitions. The main
focus remains on strategic acquisitions that complement the existing product set and provide clear value to our
shareholders. The Group is well placed to take advantage of opportunities as they arise.
We go into 2017 with an encouraging pipeline of signed and unsigned business. The first weeks of the year show that the
momentum carried through from the fourth quarter has been maintained and the board is confident that the business will meet
market expectations for 2017.
The continued financial strength of the Group has enabled the board to declare a final dividend of 17.4p per share
resulting in a total dividend for the year of 30.8p per share, an increase of 5% over the previous year. The Board's
intention is to grow the dividend progressively and by a further 10% in the next financial year.
On behalf of the board
E Buxton
Chief executive
17 March 2017
Report on corporate governance
A description of the main governance policies and procedures adopted by the Group is set out below.
Board of directors
The Group is led by an effective board which comprises five executive directors and three non-executive directors, the
latter being John Booth, who is chairman, Annette Nabavi and Nicholas Taylor. The chairman is responsible for the effective
running of the board, which reviews its effectiveness on an ongoing basis. The chief executive is ultimately responsible
for all operational matters and the financial performance of the Group. Mrs Nabavi is the senior independent director.
Other than in respect of Mr Booth's and Mr Taylor's shareholdings in the Company, the non-executive directors are
independent of management and are free from any business or other relationship which could materially interfere with the
exercise of their independent judgement. During 2016 Anchusa Consulting Limited, a company owned by Mrs Nabavi, and Hopton
Hill Limited, a company owned by Mr Taylor, provided consultancy support related to the acquisition of Azzurri; however,
given the limited nature of these engagements, the board does not consider it to have compromised their independence.
The board is satisfied that each of the non-executive directors commits sufficient time to the fulfilment of their duties
as a director of the Company.
The executive directors are Eddie Buxton who is Chief executive, Stuart Legg (Group sales and marketing director), Kevin
Stevens (Group integration and transformation director), Mark Townsend (Chief financial officer) and Angus McCaffery who
has responsibility for business development.
The board meets regularly, normally monthly, and both reviews operations and assesses future strategy for the operating
subsidiaries and for the Group as a whole. It operates to a schedule of matters specifically reserved for its decision.
During the year, the Chairman also held meetings with the other non-executive directors in the absence of the executive
directors, and with the CEO in the absence of the other non-executive directors. Mrs Nabavi and Mr Taylor also met in the
absence of the Chairman.
Although not required to retire this year in accordance with the articles, corporate governance guidance recommends that
non-executive directors with more than 9 years' service are re-elected annually, and John Booth and Nicholas Taylor, having
been directors since 1996 and 2006 respectively, offer themselves for re-election. The board's view is that both directors
bring a valuable external contribution to the board, remain independent and are able effectively to challenge as well as
support the executive directors.
The Company has purchased insurance to cover its directors and officers against any costs they may incur in defending
themselves in any legal proceedings instigated against them as a direct result of duties carried out on behalf of the
Company. The insurance does not provide cover in the event that a director is proved to have acted fraudulently or
dishonestly.
The directors are able to seek independent professional advice as necessary, for the furtherance of their duties, at the
Company's expense within designated financial limits.
The following committees deal with specific aspects of the Group's affairs:
Audit committee
Membership of the Audit committee is restricted to non-executive directors and comprises Nicholas Taylor (Chairman), John
Booth and Annette Nabavi.
The board is satisfied that for the year under review and thereafter Mr Taylor has adequate recent and relevant commercial
and financial knowledge and experience to chair the committee; it also considers that Mrs Nabavi and Mr Booth have such
knowledge and experience.
The remit of the committee is to:
· consider the continued appointment of the external auditors, and their fees, terms of engagement and independence,
including the appointment of the auditors to undertake non-audit work;
· liaise with the external auditors in relation to the nature and scope of the audit;
· review the form and content of the financial statements and any other financial announcements issued by the Group;
· review any comments and recommendations received from the external auditors and considers any other matters which
might have a financial impact on the Group;
· review the Group's statements on internal control systems and the policies and processes for identifying and
assessing business risks and the management of those risks by the Group.
The audit committee convenes at least twice a year to review the 6 monthly and annual financial statements.
Attendees at committee meetings held in 2016 included: Chief financial officer, Chief executive officer, Group financial
controller and representatives of the external auditors. All of these attended at the invitation of the chairman of the
committee.
In 2016 it also liaised informally with the executive directors in relation to published financial information, the Azzurri
acquisition and other audit-related matters. Nicholas Taylor and Annette Nabavi also met separately with the external
auditors in the absence of executive management.
The principal issues addressed by the committee during the year were:
· the external auditors' year-end report for 2015, the review of the Group's preliminary results in 2016 and the
disclosures in the 2015 annual report;
· the external audit plan for the 2016 financial statements which included a review of the audit objectives, scope,
timetable and deliverables;
· accounting matters and compliance with IFRS 3 (Business combinations) associated with the acquisition of Azzurri;
· the re-appointment of BDO LLP as external auditors, their independence and objectivity and their fees;
· consideration of the external auditors' observations on the internal financial controls arising from their annual
audit.
BDO LLP is retained to perform audit and audit-related work for the Group. The committee monitors the nature and extent of
non-audit work undertaken by the auditors, including reviewing the letter of independence provided by the auditors annually
which includes details of audit and non-audit work undertaken. The committee is satisfied that there are adequate controls
in place to ensure auditor independence and objectivity. Details of audit and non-audit fees for the period under review
are shown in note 7 of the financial statements.
Remuneration committee
Annette Nabavi is chair of the remuneration committee, its other members being John Booth and Nicholas Taylor. The
committee met four times during the year. The committee's report to shareholders on directors' remuneration is set out
below.
Nomination committee
The nomination committee had two members during 2016, both non-executive, being John Booth, chairman, and Nicholas Taylor.
The committee meets as required and met twice in 2016, Annette Nabavi also attending each meeting by invitation. Its terms
of reference include:
· reviewing the structure, size and composition of the board;
· identifying and nominating suitable candidates to fill vacancies on the board.
Board attendances
The following table shows the attendance of the directors at meetings of the board and the Audit, Remuneration and
Nomination committees during the year.
Board Audit committee Remuneration committee Nomination committee
Number of meetings in the year
J Booth 33 2 4 2
E Buxton 33 - - -
S Legg 18 - - -
A McCaffery 29 - - -
A Nabavi 33 3 4 -
K Stevens 32 - - -
N Taylor 31 3 4 2
D Todd 11 - - -
M Townsend 19 - - -
In addition to the regular monthly meetings, additional meetings were held during the year relating to the acquisition of
Azzurri and the transfer of investments in subsidiaries between Group companies. D Todd resigned as a director in April
2016 and Stuart Legg and Mark Townsend were appointed in April 2016.
Conflicts of interest
The Group has established procedures for the disclosure and review of any conflicts, or potential conflicts, of interest
which the directors may have and for the authorisation of such conflict matters by the board. The board considers that
these procedures are operating effectively.
Relationship with shareholders
The Chairman's statement and the Strategic report above include a detailed review of the business and future developments.
In addition to regular financial reporting, significant matters relating to trading or development of the business are
released to the market by way of Stock Exchange announcements as required.
The directors meet with institutional and other shareholders when possible, usually following the announcement of the
Company's results, to keep them informed about the performance and objectives of the business. Annette Nabavi also attended
certain shareholder meetings during 2016, representing the non-executive directors, to better understand the shareholders'
views and to ensure there is an independent channel for their views, should that be necessary.
The annual general meeting provides a further forum for shareholders to communicate with the board. Details of resolutions
to be proposed at the annual general meeting are set out in the notice of meeting.
Internal control
The board is ultimately responsible for the Group's systems of internal control, and for reviewing their effectiveness.
Such systems can provide reasonable, but not absolute, assurance against material misstatement or loss. The board believes
that the Group has internal control systems in place appropriate to the size and nature of its business.
The directors do not consider that an internal audit function is required, given the size and nature of the business at
this time. This situation is reviewed annually.
The Group maintains a comprehensive process of financial reporting. The annual budget is reviewed and approved by the board
before being formally adopted, following which the board receives at least monthly financial reports of the Group's
performance compared to the budget, with explanations of significant variances. Monthly cash flow forecasts are provided to
the board, as are budget reforecasts if deemed appropriate.
The executive directors monitor key performance indicators on a monthly basis, management of these being delegated to the
Group's senior management.
The board undertakes a rolling review of known and potential risks, and addresses newly identified risks as they arise,
with controls put in place to minimise their potential effect on the Group.
The key operational functions of the Group are subject to processes established and externally audited under ISO9001,
ISO20000, ISO18001 and ISO27001, which the directors consider to be a valuable additional internal and external control
tool of the business.
Operating control
Each executive director has defined responsibility for specific aspects of the Group's operations. The executive directors,
together with key senior executives, meet regularly - both at weekly management and monthly operational board meetings - to
discuss day-to-day operational matters.
Investment appraisal
Capital expenditure is controlled via the budgetary process, the budget being approved by the board. Expenditure is
approved as required by the chief executive. Acquisitions and significant unbudgeted capital expenditure are reviewed by
the board as they arise.
Risk management
The board is responsible for identifying the major business risks faced by the Group and for determining the appropriate
course of action to manage these risks. The Group's approach to financial risk management is further explained in note 22
to the financial statements.
Going concern
The Group has a sound financial record including strong operating cash flows derived from a substantial level of recurring
revenue across a range of sectors and as a consequence, and after reviewing cash balances, borrowing facilities and
projected cash flows, the directors have a reasonable expectation that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing the financial statements.
Report of the remuneration committee
Scope of the report
The remuneration report summarises the remuneration committee's activities during the year, the outcomes for directors'
remuneration and the Group's remuneration policy. The report also describes how the Group applies the principles of good
corporate governance in relation to directors' remuneration.
The remuneration committee
The remuneration committee is appointed by the board and comprises only non-executive directors. The committee meets
regularly to determine, on behalf of the board, the framework of executive remuneration.
During the year, the membership of the committee comprised three non-executive directors, Annette Nabavi (chairman), John
Booth and Nicholas Taylor.
The committee's terms of reference are approved by the board. These are available for inspection at the Group's registered
address. The members of this committee do not have any conflicts from cross-directorships that relate to the business of
the committee. The members do not have any day to day involvement in the running of the Group.
The remuneration committee's remit is to measure the performance of, and determine remuneration policy relating to
directors and senior employees. To support this responsibility it has access to professional and other advice external to
the Group. Taking these factors into account, it then makes recommendations to the board.
During the year the committee met on four occasions.
To assist the work of the committee, the views of the chief executive officer are also invited where appropriate. However,
he does not participate in any decision related to his own remuneration.
Remuneration policy
The Group is committed to the governing objective of maximising shareholder value over time. Each year the remuneration
framework and the packages of the directors are reviewed to ensure they continue to achieve this objective.
The Group operates in large competitive markets with areas of significant growth potential. The Group's executive director
remuneration policy is designed to attract and retain directors of the calibre required to maintain the Group's position in
its marketplace.
The key features of remuneration and the policy for each element of the packages for executive directors are shown in the
table below:
Element of Remuneration Purpose and link to strategy Policy and approach
Base salary To pay a competitive level of fixed remuneration, taking into account experience and personal contribution to the Group's strategy. Intended to attract and retain the talent required to execute the strategy. Reviewed annually by the committee in January. Salary increases will normally be in line with pay review levels across the whole Group. However, reference is also made to
changes in role and responsibility. Reference is also made to comparisons with companies of similar size and complexity. The base salary of the executive directors has
been reviewed specifically in the light of the increased size of the Company following the acquisition of Azzurri in May 2016. Salary increases are effective from 1
February 2017.
Benefits These complement an executive's basic salary and are designed to ensure the well-being of employees. Benefits comprise pension contribution (typically 3% of basic salary except in the case of Mark Townsend where he receives a fixed sum of £10,000 per annum), car
allowance, and membership of private health, permanent health and life assurance schemes.
Bonus A cash bonus designed to incentivise specific short term goals and objectives, both financial and non-financial. Goals and objectives are set individually with a significant weight being put on meeting annual budget in terms of both revenue and EBITDA targets. Stuart Legg, the Group
sales and marketing director was targeted only on his on target earnings (OTE) in 2016.This was based on the achievement of gross profit sales targets for the Group as a
whole.Apart from Stuart Legg, whose OTE is up to 100% of base salary, executive directors' bonuses are set at between 20% and 35% of base salary.
Long term incentive plan (LTIP) To encourage and reward delivery of the Company's long term strategic objectives and provide alignment with shareholders through the use of share based incentives. All share based incentives offered to executive directors have 3 year retention schedules. Grants made under the company share option plan (CSOP) are at market price.
Grants made under the LTIP are provided as zero cost options with strict performance conditions based on the achievement of EPS and upper quartile valuation metrics.
Vesting is also subject to continuing employment. Dividends that would be payable on the share awards are rolled up and paid at the end of the vesting period based on the
proportion of the award that actually vests.
Eddie Buxton, Mark Townsend, Stuart Legg and Kevin Stevens have been granted share options, details of which are shown
below.
Directors' service agreements
Executive directors' service agreements, which include details of remuneration, will be available for inspection at the
annual general meeting. Each executive director has a six month rolling service agreement.
Non-executive directors
John Booth and Nicholas Taylor each have a 3 month rolling contract. Annette Nabavi has a contract which expires in normal
circumstances on 26 June 2017 but which is terminable on 3 months' notice.
The remuneration of the non-executive directors is agreed by the executive directors, and is based upon the level of fees
paid at comparable companies and taking account of the directors' evolving responsibilities. Taking these factors into
account, the remuneration of the non-executive directors was reviewed in 1 February 2017. The non-executives receive no
payment or benefits other than their fees and associated auto-enrolment pension contributions, although Mrs Nabavi and Mr
Taylor were beneficiaries of consultancy fees during the year as described below (2015: Mrs Nabavi and Mr Taylor).
Directors remuneration
The remuneration of the directors in office during the year was as follows:
Salaries/ Pension Total Total
fees Benefits Bonus contributions 2016(1) 2015(1, 2)
Non-executive directors
J D S Booth 42 - - - 42 41
D K Boyce (3) - - - - - 20
A P Nabavi (4) 30 - - - 30 25
N J Taylor (5) 31 - - - 31 31
Executive directors
E Buxton 194 12 60 6 272 213
S Legg 224 7 - 4 235 -
A J McCaffery 152 23 30 5 210 180
K Stevens 141 11 30 4 186 163
W D Todd 45 4 - 1 50 173
M Townsend 106 9 30 7 152 -
________ ________ ________ ________ ________ ________
965 66 150 27 1,208 846
_______ _______ _______ _______ _______ _______
(1) Excluding social security costs in respect of the above amounting to £152,000 (2015: £102,000), and excluding gains on
the exercise of share options in the year of £Nil (2015: £291,000).
(2) Total 2015 remuneration of £846,000 includes bonuses of £27,000, employer pension contributions of £20,000 and
benefits of £56,000, so that salaries amounted to £743,000.
(3) In 2016, Proximity Communications Ltd paid £13,000 (2015: £64,000) to a company of which Mr Boyce is a shareholder and
director in respect of consultancy services provided to Proximity following its acquisition.
(4) In addition to her fees as a director stated above, the Company paid £57,000 (2015: £11,000) to a company of which Mrs
Nabavi is a shareholder and director in respect of consultancy services provided to the Company during the year.
(5) In 2016, in addition to his fees as a director stated above, the Company paid £61,000 (2015: £20,000) to a company of
which Mr Taylor is a shareholder and director in respect of consultancy services provided to the Company during that year.
The directors are the only employees of the Company.
Directors' interests in ordinary shares
The directors' interests in the ordinary shares of the Company are shown in the report of the directors below. These
include holdings under the Company's Share Incentive Plan, to which all of the executive directors subscribe.
Share options
On 18 May 2009 the directors of the Company approved the adoption of the Maintel Holdings Plc 2009 Option Plan. The
following options remain outstanding under the Plan:
Option holder Number of shares Date of grant Option price Expiry of option
Eddie Buxton 107,818 18 May 2009 200p 18 May 2019
Eddie Buxton 107,818 18 May 2009 300p 18 May 2019
Dale Todd 10,000 17 April 2013 345p 17 April 2023
Dale Todd 10,000 19 December 2013 525p 19 December 2023
Kevin Stevens 10,000 29 May 2014 530p 29 May 2024
All options have vested.
On 20 August 2015 the directors of the Company approved the adoption of the Maintel 2015 Long-Term Incentive Plan. The
following options remain outstanding under the Plan:
Option holder Number of shares Date of grant Option price Expiry of option
As CSOP options
Eddie Buxton 3,409 27 April 2016 880p 27 April 2026
Stuart Legg 3,409 27 April 2016 880p 27 April 2026
Kevin Stevens 3,409 27 April 2016 880p 27 April 2026
Mark Townsend 3,409 27 April 2016 880p 27 April 2026
These options will vest on 27 April 2019 and may be exercised from that date; they are not subject to any performance
conditions.
Subject to performance conditions
Stuart Legg 1 25,000 27 April 2016 1p 27 April 2026
Kevin Stevens 2 15,000 27 April 2016 1p 27 April 2026
Mark Townsend 3 15,000 27 April 2016 1p 27 April 2026
(1) Full vesting for the LTIP grants made to Stuart Legg is subject to three performance conditions being satisfied: (a) a
minimum EPS growth in the period before the option vests, and (b) The Company's EV/EBITDA ratio being in excess of its peer
group for the majority of the 6 months prior to the option vesting, and (c) achievement of the Group sales target as set in
the budget agreed by the board each year.
(2) In the case of Kevin Stevens, full vesting is subject to the achievement of a minimum level of synergies achieved
following the acquisition of Azzurri.
(3) In the case of Mark Townsend, full vesting is subject to two performance conditions being satisfied:
(a) a minimum EPS growth in the period before the option vests, and (b) the Company's EV/EBITDA ratio being in excess of
its peer group for the majority of the 6 months prior to the option vesting.
If the performance conditions are not fully satisfied at the end of the vesting date, then the options will vest
proportionately against the achievement of certain threshold criteria; any portion that has not vested as a consequence of
the performance conditions not being satisfied in full or on a threshold basis will lapse.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options
during the year:
2016Numberof options 2016WAEP 2015Numberof options 2015WAEP
Outstanding at the beginning of the year 245,636 276p 299,545 245p
Granted during the year 68,636 176p - -
Exercised during the year - - (53,909) 100p
________ ________ ________ ________
Outstanding at the end of the year 314,272 254p 245,636 276p
________ ________ ________ ________
The Company's mid-market share price at 31 December 2016 was 887.5p per share, and the high and low prices during the year
were 1130p and 692.5p respectively.
Share Incentive Plan
In 2006 the Company established the Maintel Holdings Plc Share Incentive Plan ("SIP"), which was updated in 2016. The SIP
is open to all employees with at least 6 months' continuous service with a Group company, and allows employees and
executive directors to subscribe for existing shares in the Company at open market price out of their gross salary. The
subscribers own the shares from the date of purchase, but must continue to be employed by a Group company and hold their
shares within the SIP for 5 years to benefit from the full tax benefits of the plan. At 31 December 2016 there were 62,151
shares held by the SIP, representing 0.4% of the issued share capital of the Company (2015: 86,670 and 0.8%).
The report of the remuneration committee was approved by the board on 17 March 2017.
A P Nabavi
Chair of the remuneration committee
Report of the directors
for the year ended 31 December 2016
The directors present their annual report together with the audited financial statements for the year ended 31 December
2016.
Results and dividends
The consolidated statement of comprehensive income is set out below and shows the profit of the Group for the year.
During the year the Company paid a second interim dividend of 16.5p per ordinary share in respect of the 2015 financial
year, amounting to £1.777m (2014: 11.6p, amounting to £1.243m), and an interim dividend in respect of 2016 of 13.4p per
share, amounting to £1.902m (2015: 12.8p and £1.378m respectively). A final dividend for 2016 is proposed of 17.4p per
share with a payment date of 18 May 2017.
Directors
The directors of the Company as at 31 December 2016 and their interests in the ordinary shares of the Company at that date
were as follows:
Number of 1p ordinary shares
2016 2016 2015 2015
Beneficial Non-beneficial Beneficial Non-beneficial
J D S Booth 3,336,123 - 2,760,301 -
E Buxton 4,813 57,338 4,654 81,816
S D Legg 130 - - -
A J McCaffery 2,198,959 - 2,055,629 -
A P Nabavi 198 - - -
K Stevens 2,939 - 2,671 -
N J Taylor 16,315 62,151 15,947 77,523
M V Townsend 208 - - -
John Booth's shareholding includes 4,000 shares inherited by a charitable foundation controlled by him. He is also a
shareholder in Herald Investment Trust plc which has an interest in 804,217 1p ordinary shares in the Company; this is in
addition to Mr Booth's beneficial holding above.
The non-beneficial holdings above relate to holdings of the Share Incentive Plan, of which the respective directors are
trustees.
Since the year-end, the Share Incentive Plan has acquired a net increased holding of 1,374 shares in total, including 178
in respect of E Buxton, 30 in respect of S Legg and 31 in respect of K Stevens. There were no other changes in the
directors' shareholdings between 31 December 2016 and 17 March 2017.
Substantial shareholders
In addition to the directors' shareholdings, at 17 March 2017 the Company had been notified of the following shareholdings
of 3% or more in the ordinary share capital of the Company:
Number of % of issued
1p ordinary ordinary
shares shares
Marlborough Fund Managers Ltd 2,462,340 17.3%
J A Spens 2,088,314 14.7%
Herald Investment Trust plc 804,217 5.7%
Share capital
Details of the share capital of the Company are shown in note 23 of the financial statements.
3,428,572 shares were issued in the year in relation to the acquisition of Azzurri; no shares were repurchased during the
year.
The existing authority for the repurchase of the Company's shares is for the purchase of up to 1,614,196 shares. A fresh
authority, for the purchase of up to 2,128,139 shares, will be sought at the forthcoming annual general meeting.
Employees
Maintel's success is dependent on the knowledge, experience and motivation of its employees, and so on the attraction and
retention of those staff. The Group offers competitive compensation packages, including bonus structures where appropriate,
to align employee interest with that of the Group. The Group's management ensures that there is continual investment in
external and internal training of employees, and monitors compliance with both statutory regulation and best practice with
regard to equal opportunities.
The Group gives full and fair consideration to applications for employment from disabled persons, having regard to their
particular aptitudes and abilities and to their training and career development. This includes, where applicable and
possible, the retraining and retention of staff who become disabled during their employment.
Periodic updates are distributed to employees, and a Group intranet is core to open communication amongst employees; this
continues to be developed.
The Company established a Share Incentive Plan in 2006, allowing employees and executive directors to invest tax
effectively in its shares, and so aligning employee interests with those of shareholders. This has now been extended to all
employees joining from Azzurri. Under the plan, shares are acquired by employees out of pre-tax salary, with ownership
vesting at that time, and are held by trustees on behalf of the employees. The plan is therefore separate from the assets
of the Group.
Environment
The Group acknowledges its responsibilities to environmental matters and where practicable adopts environmentally sound
policies in its working practices, such as recycling paper and packaging waste and using specialist recyclers of scrap
telecommunications and IT equipment. A major consideration when replacing company cars is their impact on the environment.
The Group also makes use of in-house video-conferencing facilities to reduce the need for regional meetings. The Group has
ISO14001:2004 accreditation for its environmental management systems.
Modern Slavery Act policy
The Modern Slavery Act became law in 2015. The Act consolidates slavery and trafficking offences and introduces tough
penalties and sentencing for breaches of the Act.
The Group has a zero-tolerance approach to modern slavery and will not knowingly support or deal with any business which is
involved in slavery and/or human trafficking.
This policy reflects our commitment to maintaining ethical practices in all of our supply chains and across all of our
business, and as part of this commitment we are undertaking various steps to help us manage the risks outlined by this
legislation. These steps are detailed in our modern slavery statement and, as required by the act, will be published
annually on our website at www.maintel.co.uk/legal/policies.
Financial instruments
Details of the use of financial instruments by the Group are contained in note 22 of the financial statements.
Annual General Meeting
The Annual General Meeting of the Company will be held at its London offices on 15 May at 10.00am.
Auditors
All of the current directors have taken all the steps that they ought to have taken to make themselves aware of any
information needed by the Company's auditors for the purposes of their audit and to ensure that the auditors are aware of
that information. The directors are not aware of any relevant audit information of which the auditors are unaware.
A resolution proposing the re-appointment of BDO LLP as auditors of the Company will be proposed at the forthcoming annual
general meeting.
On behalf of the board
E Buxton
Director
17 March 2017
Statement of directors' responsibilities
Directors' responsibilities
The directors are responsible for preparing the annual report and financial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors
have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and the Company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. Under company law the directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs
of the Group and Company and of the profit or loss of the Group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the
Alternative Investment Market.
In preparing these financial statements, the directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent;
· state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to
ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available on a website.
Financial statements are published on the Company's website in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company's website is the responsibility of the directors. The directors' responsibility
also extends to the ongoing integrity of the financial statements contained therein.
Independent auditors' report
TO THE SHAREHOLDERS OF MAINTEL HOLDINGS PLC
We have audited the financial statements of Maintel Holdings Plc for the year ended 31 December 2016 which comprise the
consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated
statement of changes in equity, the consolidated statement of cash flows, the company balance sheet, the company
reconciliation of movement in shareholders' funds and the related notes. The financial reporting framework that has been
applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in preparation
of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required
to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors' responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance with applicable law and International Standards on
Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's (FRC's) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
· the financial statements give a true and fair view of the state of the group's and the parent company's affairs as
at 31 December 2016 and of the group's profit for the year then ended;
· the consolidated financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
· the parent company's financial statements have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and directors' report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
· the strategic report and directors' report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if,
in our opinion:
· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
· the parent company financial statements are not in agreement with the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law are not made; or
· we have not received all the information and explanations we require for our audit.
Julian Frost (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
17 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
for the year ended 31 December 2016
Year to 31 December 2016 Year to 31 December 2015
Note £000 £000
Revenue 4 108,296 50,623
Cost of sales (73,383) (31,571)
Gross profit 34,913 19,052
Other operating income 151 12
Administrative expenses
Intangibles amortisation 14 (4,733) (2,235)
Exceptional costs 12 (4,240) (884)
Other administrative expenses (23,064) (11,530)
(32,037) (14,649)
- More to follow, for following part double click ID:nRST8724ZcRecent news on Maintel Holdings
See all newsREG - Maintel Holdings PLC - Publication of Annual Report
AnnouncementREG - Maintel Holdings PLC - Final Results
AnnouncementREG - Maintel Holdings PLC - Board Changes
AnnouncementREG - Maintel Holdings PLC - Notice of Final Results
AnnouncementREG - Maintel Holdings PLC - Director/PDMR Shareholding
Announcement