REG - Maintel Holdings PLC - Final Results
31/03/2022 07:00
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RNS Number : 6855G Maintel Holdings PLC 31 March 2022
Maintel Holdings Plc
("Maintel", the "Company" or the "Group")
Final audited results for the year to 31 December 2021
Maintel Holdings Plc, a leading provider of cloud and managed communications
services, announces its results for the 12-month period to 31 December
2021.
Financial headlines
· Group revenue down 2% to £103.9m (2020: £106.4m) with recurring
revenue at 69% (2020: 73%).
· Revenue declined due to only four-month revenue contribution from
Document Solutions division (Doc Sol) prior to disposal, and supply chain
issues surrounding
semi-conductor hardware in Q4 2021
· Recurring revenue declined due to pandemic affecting customer
change of technology, price erosion on contract re-sign, transition of
customers to cloud services and no cost per copy revenue post Documentation
Solutions (Doc Sol) disposal in April 2021.
· On a like-for-like basis (no Doc Sol contribution), adjusted
EBITDA grew by 10% based on revenue growth of 1%( 6 ), delivering group
adjusted EBITDA( 1 )of £9.6m (2020: £9.5m).
· Gross profit increased to £34.1m (2020: £30.9m) with gross
margin increasing to 32.8% (2020: 29.0%)
· Profit for the year of £4.7m (2020: loss of £1.7m)
· Significant reduction in year-end net debt( 4 ) to £19.4m,
(2020: £22.3m)
· Cloud and software revenues increased as a proportion of total
Group revenue to 34% (2020: 26%)
· Adjusted earnings per share( 2 ) at 33.2p, an increase of 4%
(2020: 31.9p)
· Basic earnings per share at 32.5p (2020: loss per share of 12.1p)
· Cash conversion( 3 ) of 48%( ) of adjusted EBITDA( 1 ) (2020:
123%), including a £2.1m working capital repayment under the HMRC VAT
deferment program (2020: £2.9m benefit); excluding this VAT impact underlying
cash conversion was 70% (2020: 79%)
Operational highlights
· Major new and existing customer contract awards exceeding £50m
total contract value (TCV), based on new solution offerings implemented at the
end of 2019 and start of 2020
· Transformation to a cloud and managed services business continued
at pace delivering a 30% increase on contracted cloud seats with 132,000 at
the year-end (2020: 102,000)
· ESG strategy was implemented with strategic benefits to Group
including a sustainable future, tender compliance, banking compliance and
supporting shareholder value
· Disposal of Doc Sol to Corona Corporate Solutions for a total
consideration £4.5m (total net proceeds of £4.3m net of associated costs),
enabling the Group to focus on the core business of managed cloud
communications, and generating cash which strengthened the balance sheet
Post period end
· New Refinance contract signed with HSBC UK for £26m facility on
a minimum three-year term
· Trading to date in 2022: revenue, EBITDA and orders are all in
line with management expectations
· H1 Cloud forecast on track for full year ambition of a further
30% growth on contracted seats
· Sales are forecasting to be on plan for Q1 (sixth consecutive
quarter)
· Widely reported supply chain issues on semi-conductors continue
to negatively impact revenue for the year
· Consistently reviewing the political uncertainty in mainland
Europe to give context to any UK investment decisions and potential supply
chain issues
Key Financial Information
Increase /
Audited results for 12-months ended 31 December: 2021 2020 (decrease)
Group revenue £103.9m £106.4m (2.4)%
Adjusted profit before tax( 5 ) £6.8m £6.3m 7.9%
Profit/(Loss) before tax £5.2m (£2.2m) 336%
Adjusted earnings per share( 2 ) 33.2p 31.9p 4.1%
Basic earnings/(loss) per share 32.5p (12.1p) -
Final dividend per share proposed Nil Nil -
COVID-19
· The second national lockdown to April 2021, further delayed
contract awards and project delivery throughout the period
· Public Sector contract awards were adversely affected including
restrictions to on-site access
· The Omicron variant in the latter part of 2021 further impacted
contract signing processes for new customer projects and access to on-site
delivery for existing projects
· Maintel team were moved to a fully hybrid and remote working, in
line with Government guidelines for much of Q4 and the early part of 2022
Commenting on the Group's results, Ioan MacRae, Chief Executive Officer, said:
I am pleased with the Group's performance in 2021 despite the combined effects
of the national lockdown in early 2021, the wave of Omicron in the latter part
of the year, and latterly the global supply chain issues surrounding
semi-conductors that is affecting the whole market. To achieve, on a
like-for-like basis, organic growth in both revenue and adjusted EBITDA( 1 ),
whilst managing these challenges, is testament to the product offerings we now
have and the admirable performance from the reshaped Maintel team.
I am delighted that we have secured a minimum three-year agreement with HSBC
UK, providing a new and improved banking facility for £26m. The team at HSBC
have been hugely supportive of Maintel since we began discussions around a new
banking partner and I look forward to enjoying the benefits and flexibilities
that our new facilities offer. I would like to thank the team at NatWest Bank
for their service to Maintel over the last six years and the support that they
have shown.
As mentioned in the 2020 Annual Report, 2021 was about setting the foundation
of the business for a return to continuous organic growth, whilst introducing
strategic new products and solution offerings to ensure our differentiation
and market relevance for future years. Through 2021, the team focused on the
three strategic pillars, namely: Control, Focus, Invest.
Control:
· The restructuring of the business during 2020 and early 2021 has
ensured we operated with the right structure and cost base, lowering headcount
to an average of 515 employees, whilst upskilling our workforce and acquiring
the talent we needed
· Business forecasting across all departments has remained accurate
and predictable, whether that be on recurring revenues or net new solution
sales for Tech and PS, ensuring effective management and investment
predictions
· The sales team has delivered consistently throughout 2021
achieving budget on either GM or revenue and are expected to also deliver to
budget in Q1 2022
· Net debt has further reduced to £19.4m, down £2.9m from
£22.3m, as of December 31(st) 2021.
Focus
· We expanded our core portfolio, specifically on Public and
Private cloud solutions for UCaaS and CCaaS, and enhanced our portfolio on LAN
and WiFi with SD-WAN capability, which contributed to major customer contracts
being signed worth over £50m TCV
· We enhanced our logistics capability by a strategic outsourcing
of the services to Agilitas in December 2020, delivering improved project and
service delivery to customers, whilst also reducing our real estate and cost
base
· The disposal of our Doc Sol in April 2021 for £4.5m, further
reduced our debt and cost base, whilst also allowing us to focus on our core
capabilities and enhance our product offerings
· We enhanced our managed services through specialist partnerships
with Allvotec, J Brand and Empowered, to ensure we can deliver projects on our
new portfolio without the need to invest in headcount and accreditations
Invest
· We continued to invest in our own IP, specifically on Callmedia
CX Now which has seen new contracts signed in 2021
· ICON Portal was launched in June 2021, allowing customers a
"single pane" into the services they take from Maintel. Further investment
and development will see continued enhancements to ICON Portal which will
differentiate Maintel as a Managed Services Partner
· Our cloud portfolio was expanded, with the full launch of Genesys
CCaaS and Ringcentral UCaaS solutions, as well as development for ICON private
cloud and MS Teams Connector, which greatly contributed in Maintel achieving a
30% increase in contracted cloud seats
· The introduction of the SD-WAN portfolio, enhancing our existing
LAN and WiFi capabilities, as well as building on Secure Homeworker, has seen
Maintel win some major customer contracts in FY21, including JD Sports,
Sanctuary Housing, Biffa and Currys
· These new portfolio and service offerings, which were introduced
for the start of 2021 have proven very successful already and contributed to
the Group securing major customer contracts, worth over £50m to-date
· We established an ESG Office by broadening our governance and
compliance team with the appointment of Joanne Ballard as ESG Strategy and
Compliance Director, ensuring the Group invests in all elements of ESG to
support a sustainable future, as well as ensuring our compliance in public and
private sector tenders, banking compliance and supporting our shareholders in
sustainable investment
· Investment will continue as we look to introduce new technology
in 2022, with CPaaS on Amazon and Twillio, enhancement of Microsoft Teams
integration, and offerings around 5G and IOT
Despite the headwinds faced, I am immensely proud of the Maintel team for
continuous focus on our customers and the service we offer them, despite
working in a largely remote environment and dealing with personal challenges
through the pandemic. Our customer focus has ensured key front-line
organisations, namely NHS, Local Authorities and Police Forces, remained fully
operational through 2021, providing vital support to the UK population.
Notes
1 Adjusted EBITDA is EBITDA of £13.4m (2020: £7.3m), adjusted for
exceptional items and share based payments (note 11).
2 Adjusted earnings per share is basic earnings per share of 32.5p (2020:
loss per share of 12.1p), adjusted for acquired intangibles amortisation,
exceptional items, interest charge on deferred consideration, share based
payments and deferred tax items related to fixed assets acquired in prior
years (note 10). The weighted average number of shares in the period was 14.4m
(2020: 14.3m).
3 Cash conversion is calculated as operating cash flow (being adjusted
EBITDA plus working capital) to adjusted EBITDA.
4 Interest bearing debt (including issue costs of debt and excluding lease
liabilities) minus cash. Current year net debt includes £15.5m RCF and
£3.869m of overdraft facilities.
5 Adjusted profit before tax of £6.8m (2020: £6.3m) is basic profit before
tax, adjusted for intangibles amortisation, exceptional items and share based
payments.
6 On a like for like basis, revenue for FY21 was £102.7m (2020: £101.8m)
and adjusted EBITDA was £9.5m (2020: £8.6m).
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014
The full annual report and accounts have been uploaded to our website and will
be posted to shareholders by no later than 31 March 2022
For further information please contact:
Ioan MacRae, Chief Executive Officer 0344 871 1122
Dan Davies, Chief Technology Officer
finnCap (Nomad and Broker)
Jonny Franklin-Adams / Kate Bannatyne / Fergus Sullivan (Corporate Finance) 020 7220 0500
Richard Chambers / Sunila de Silva (Corporate Broking)
Oakley Advisory Limited (Financial Advisors) 020 7766 6900
Christian Maher
Strategic Report
Chairman's statement
In spite of the headwinds of a second year of a pandemic and its impact on our
lives, business and the economy, Maintel has grown its revenues on a
like-for-like basis (no Doc Sol contribution) by 1% and adjusted EBITDA by 9%,
thus delivering on our recovery plan. Our expanded and strategic range of
products and services underpins this progress, the early signs of which can be
seen in our cloud seat growth and the acceleration in our transition to a
cloud and managed service provider.
Particularly pleasing is our adjusted EBITDA figure of £9.6m (2020: £9.5m),
as the last two years' work on cost management and more efficient ways of
working is now bearing fruit and will continue to do so. Further investment
is planned to streamline our digital business processes and enrich our product
suite aligning product delivery with customers' value journey.
Our managed services and technology division saw an overall decline in revenue
of 4% to £61m
(2020: £64m), with the managed support base reducing 17% to £29m,
predominantly due to contract losses already highlighted in 2019 and early
2020 now fully realised, price erosion on renewals, and to on-premise
customers transitioning to managed cloud services. Technology division
revenues grew by 13% to £20m (2020: £18m) aided by the project delivery of
orders closed in FY20, as well as licenses associated with new SD-WAN sales,
hardware for cloud deployments and licenses for existing system expansions.
This is despite the impact of semiconductor supply constraints which delayed
at least £2m of additional revenue into 2022.
The number of contracted seats on our ICON and public cloud platforms
increased by 30% to 132,000 with revenue from cloud and software customers now
totalling £35.7m, 34% of Group revenue. The Group's cloud portfolio
continues to be enhanced by both public and private cloud solutions, and
revenue from cloud subscriptions and associated managed services grew 52% to
£9.9m. The continued revenue benefit from the additional contracted seats
will be realised in 2022 and beyond as these projects continue to be
delivered.
Cash generation in the period remained strong and resulted in net debt of
£19.4m at year-end, outperforming market expectations, and down from £22.3m
at 31 December 2020 and £25.7m at 31 December 2019, evidencing strong cash
and cost management. We stopped using UK Government furlough payments in June
2021 (total claimed in 2021 £0.04m (2020: £0.4m)) and will pay deferred VAT
of £2.1m by end of March 2022.
During his first two years, with all their challenges, our Chief Executive
Officer has led a significant restructuring of the business and the Senior
Executive Team. Building on this, he seeks to deepen and strengthen our
customer offer and the mechanism of its delivery. Our headcount is 515, down
from 560 at 31 December 2020 and the business now benefits from a more
efficient cost structure with the correct skill sets in place and a widening
portfolio to enable our ambition of annual organic growth.
Challenges remain: the global shortage of semiconductors, predicted higher
inflation and ongoing economic and political uncertainty will continue to test
us, but we face the future with a reinvigorated team, a strong product offer
and lean cost base. The Board is not proposing a dividend at this stage and
will review this decision later in 2022.
Following the retirement of Dr Annette Nabavi at mid-year, we are delighted to
welcome Carol Thompson to the Maintel Board. Carol brings a wealth of
experience and has already assisted the management team in refinancing with
HSBC, as well as evaluating the finance team's structure and operational
efficiencies as we await the arrival of our new Chief Financial Officer. The
search for a new Chief Financial Officer is progressing very positively and we
hope to provide a further update in due course.
The Board would like to thank Mark Townsend, who retired as Chief Financial
Officer at the end of August. His guidance and leadership over the past five
years, during the Azzurri and Intrinsic acquisitions, and more recently in his
work sustaining the transformation of Maintel, has been important and we wish
him well for the future.
Maintel is proud of its engagement in the front line of pandemic response, and
the Board is immensely grateful to our staff who have worked so tirelessly in
often difficult and unusual circumstances this year. We remain confident in
the new leadership team's plan to re-engineer the Group for a cloud-first
world and in sustaining our return to organic growth.
J D S Booth
Chairman
31 March 2022
Results for the year
Revenues decreased by 2% to £103.9m (2020: £106.4m) and adjusted EBITDA
increased to £9.6m (2020: £9.5m). Revenue was impacted by:
· Semi-conductor supply issues, resulting in £2m negative revenue
impact in December 2021
· No revenue contribution from Doc Sol post disposal in April 2021
of £300k per month, resulting in £2.4m revenue impact
· Non repeat of one-off stock sale in December 2020 for £1.3m
revenue through Agilitas
Recurring revenue as a % of total revenue (being all revenue excluding one-off
projects) decreased to 69% (2020: 73%). Recurring revenue declined by £5.8m
(2021 £71.9m / 2020 £77.8m) as a result of:
· No cost per copy revenue post Document Solutions sale in April
2021. Impact of £1.2m for the remaining eight months
· Managed Support revenue decline of £4.9m as a result of customer
churn through the pandemic, price erosion on contract renewal and transition
of customers to Cloud
· Calls+Lines declined by 8.6% to £11m, down £1.2m from £12.2m
in 2020, largely due to overall market decline in PSTN and transition to SIP
and cloud
· Data reduced by 4% (£800k) to £16.3m, down from £17.1 in 2020
mainly due to price erosion
· Mobile reduction of 20% (£1.2m) to £4.8m down from £6m in 2020
mainly due to customer contracts moving direct to network operator (Leicester
County Council and Currys)
· However, Cloud revenue grew by £3.4m in 2021 due to continued
growth in public and private cloud contracts. This positive contribution
resulted in an overall recurring revenue decline of £5.8m
Gross profit for the Group increased to £34.1m (2020: £30.9m) with gross
margin increasing to 32.8% (2020: 29.0%).
The Group delivered adjusted profit before tax of £6.8m (2020: £6.3m).
Adjusted earnings per share (EPS) increased by 4% to 33.2p (2020: 31.9p) based
on a weighted average number of shares in the period of 14.4m (2020: 14.3m).
On an unadjusted basis, the Group generated a profit before tax of £5.2m
(2020: loss before tax of £2.2m) and basic earnings per share of 32.5p (2020:
loss per share of 12.1p). This includes £3.9m of net exceptional income
(2020: net exceptional costs of £2.5m) (refer note 12) and intangibles
amortisation of £5.4m (2020: £6.3m).
2021 2020 (Decrease) /
£000
£000
increase
Revenue 103,895 106,430 (2)%
Profit/(loss) before tax 5,237 (2,232)
Add back intangibles amortisation 5,416 6,286
Exceptional items((c)) (3,901) 2,482
Share based remuneration 49 (259)
Adjusted profit before tax 6,801 6,277 8%
Adjusted EBITDA((a)) 9,593 9,522 1%
Basic earnings/(loss) per share 32.5p (12.1p) -
Diluted 32.5p (12.1p) -
Adjusted earnings per share((b)) 33.2p 31.9p 4%
Diluted 33.1p 31.8p 4%
(a) Adjusted EBITDA is EBITDA of £13.4m (2020: £7.3m) less exceptional items
and share based remuneration (note 11)
(b) Adjusted profit after tax divided by weighted average number of shares
(note 10)
(c) Exceptional items includes proceeds from disposal of plant and equipment
of £4.3m, net of disposal costs. (note 12)
Cash performance
The Group generated net cash flows from operating activities of £4.4m (2020:
£9.6m) resulting in a cash conversion( (d) )of 48% for the full year (2020:
123%). Net cash flows from operating activities included a £2.1m working
capital repayment (2020: £2.9m benefit) arising from HMRC's COVID-19 VAT
deferral scheme. Excluding this repayment underlying cash conversion was
70%((c) )(2020: 79%).
(d) calculated as operating cash flow (being adjusted EBITDA plus working
capital) to adjusted EBITDA
Review of operations
The following table shows the performance of the three operating segments of
the Group.
Revenue analysis 2021 2020 (Decrease)/
£000 £000 increase
Managed services related 29,456 35,614 (17)%
Technology((e)) 31,948 28,617 12%
Managed services and technology division 61,404 64,231 (4)%
Network services division 37,689 36,201 4%
Mobile division 4,802 5,998 (20)%
Total Maintel Group 103,895 106,430 (2)%
Cloud and Software Revenues 35.7 27.7 28.9%
(e) Technology includes revenues from hardware, software, professional
services and other sales
Elements of cloud services revenues are currently accounted for in both the
managed services and technology division (under the technology revenue line)
and the network services division. All revenues from cloud and software
customer accounts for 34% of total Group revenues in the period (2020: 26%).
Pure cloud subscriptions and associated managed services grew by 52% to £9.9m
in the period (2020: £6.5m).
As part of the Group's review of its technology strategy and portfolio of
products and services, the Doc Sol division of the business was divested to
HIG-backed managed print services provider Corona Corporate Solutions (CCS) in
May, for £4.5m. This has allowed Maintel to focus on areas more aligned to
its core business and future strategic direction whilst also strengthening the
balance sheet.
Managed services and technology division
The managed services and technology division contains two distinct revenue
lines:
· Managed services: all support and managed service recurring
revenues for hardware and software located on customer premises. This includes
both legacy PBX and Contact Centre systems, which are in a managed decline
across the sector as organisations migrate to more effective and efficient
cloud solutions with areas of technology such as Local Area Networking (LAN),
WIFI and security, which are still very much current and developing technology
areas and therefore enduring sources of revenue.
· Technology: all one-off revenues from hardware, software,
professional and consultancy services and other one-off sales.
Services are provided both across the UK and internationally. The division
also supplies and installs project-based technology, professional and
consultancy services to our direct clients and through our partner
relationships.
2021 2020 (Decrease)/
£000 £000 increase
Division revenue 61,404 64,231 (4)%
Division gross profit 18,720 17,620 6%
Gross margin (%) 30% 27%
Despite revenues in this division decreasing by 4% to £61.4m, gross profit
increased by 6% driven by a 12% increase in professional services margin.
Revenues from both technology and professional services grew by 14% and 9.4%
respectively, however this was outweighed by a £6.2m (17.3%) decline in the
traditional on-premise managed service revenues, in line with and driven by
the global market rate of decline in the legacy PBX and contact centre
markets. Some of this decline did benefit the Network Services division with
customers from our legacy managed service base transitioning to Maintel's
cloud-based services during the period, most notably a significant cloud
transformation contract for Admiral Insurance.
Technology hardware sales were impeded by the current global semiconductor
shortage which has resulted in a significant extension of supplier lead times
for several key hardware items. In December alone the Group took orders worth
more than £2m of such products which could not be taken to revenue as a
direct result of this shortage. This has contributed to project go live
delays, made worse by the second nationwide lockdown between January and March
2021 which, in combination, suppressed revenues in this division. However, as
a result, Maintel exited the year with a healthy order book for the division.
Network Services Division
The Network Services division is made up of three strategic revenue lines:
· Cloud - subscription and managed service revenues from cloud
contracts
· Data - subscription, circuit, co-location and managed service
revenues from Wide Area Network (WAN), SD-WAN, internet access and managed
security service contracts
· Call traffic and line rental - recurring revenues from both
legacy voice and modern SIP Trunking contracts
2021 2020 (Decrease)/
£000 £000 increase
Call traffic 3,753 4,507 (17)%
Line rental 7,292 7,583 (4)%
Data connectivity services 16,342 17,088 (4)%
Cloud 9,869 6,476 52%
Other 433 547 (21)%
37,689 36,201 4%
Total division
Division gross profit 13,228 10,669 24%
Gross margin (%) 35% 29%
Network services revenue grew by 4% and improved gross profit by 24% due to
the growth in the higher margin cloud revenue products and offsetting the
decline in lower margin call traffic revenues.
Although our SIP channel base saw a net increase of 19.7%, our fixed line
revenues (shown above under call traffic and line rental) declined by 9.1% to
£11m (2020: £12.1m), reflecting the overall market decline for legacy Public
Switched Telephone Network (PSTN) products plus the migration of some existing
customers from legacy voice services with pence per minute call billing in
favor of modern SIP Trunking services with all-inclusive call bundle based
pricing.
Data connectivity revenues declined by 4%, mostly due to pricing erosion. Our
SD-WAN based "multicloud connectivity" proposition reached maturity in 2021,
with several large, long-term contract wins including Currys, Sanctuary
Housing Group, Biffa and JD Sports. Due to the time taken to roll out such
significant SD-WAN deployments, combined with hardware lead time delays driven
by global semiconductor shortages, the recurring revenues from these contract
wins will be realised later in 2022, with full year benefits flowing into 2023
and beyond providing a fantastic platform for a return to growth of this
revenue line.
The number of contracted seats across our cloud communication services
increased by 30% in the year to 132,000 at the end of December. Revenue from
cloud and software customers amounted to £35.7m (2020: £27.7m), with a 52%
growth in our recurring cloud subscriptions and associated managed services to
£9.9m (2020: £6.5m).
87% of the new seat growth came from our flagship ICON private cloud services
and includes cloud transformation contracts for Admiral Insurance and
Sanctuary Housing Group. However, there were also key wins in our new public
cloud (UCaaS and CCaaS) portfolio, including contract wins for Creation
Finance and Biffa Waste Services. Demand for the Virtual Private Cloud service
that ICON Communicate offers remains high, but across a more focussed section
of our target market - mainly in Finance, Insurance, Healthcare and Housing -
with very high (99.999%) core availability, guaranteed UK data sovereignty and
allowing customers to manage platform change and evolution at their own pace.
Outside of these areas, we have seen the pipeline for other vertical markets
swing significantly in volume and timing in favour of public cloud services
due to their ease and speed of deployment and rapid innovation in areas such
as collaboration and customer experience. Maintel are well placed to serve
both markets.
Mobile Division
Maintel's mobile division generates revenue primarily from commissions
received as part of its dealer agreements with O2 which scales in line with
growth in partner revenues, in addition to value added services sold alongside
mobile such as mobile fleet management and mobile device management.
(Decrease)
2021 2020
£000 £000
Revenue 4,802 5,998 (20)%
Gross profit 2,163 2,595 (17)%
Gross margin (%) 45% 43%
Number of customers 647 811 (20)%
Number of connections 27,478 30,758 (11)%
These revenues decreased by 20% to £4.8m (2020: £6.0m) with gross profits
held at a more modest reduction of (17%) and overall gross margin increased by
2% YOY to 45% (2020: 43%), driven by the loss of two significant mobile
contracts which were high revenue but low margin.
Maintel's mobile proposition continues to be multi-faceted, being vendor
agnostic and ensuring we are configurable, which ensures we are always in a
position to cater for our customers' requirements. Our mobile go to market
proposition remains focused on the mid-market enterprise space (100 - 2,000
connections) and our revitalised product roadmap for this division will see
the introduction of exciting new technology in areas such as 5G and the
Internet of Things (IoT), alongside the planned launch of reporting and
self-service functionality within our ICON Portal digital customer engagement
platform.
The Mobile Division had a relatively slower growth year in terms of net new
logo wins. However, a mobile estate refresh for distribution giant
Westcon-Comstor was a significant win, offsetting the two large contract
losses referenced above; generally overall churn is low for this revenue
stream, reflecting high levels of customer satisfaction.
Other operating income
Other operating income of £0.6m (2020: £0.6m) includes the recovery of one
year's R&D tax credit of £0.5m (2020: £0.5m) and rental income from the
sub-letting of a part of the Group's London premises of £nil (2020: £0.1m).
Other administrative expenses
2021 2020
£000 £000 Increase
26,674 23,879 12%
Other administrative expenses
Other administrative expenses for the Group increased by 12% to £26.7m (2020:
£23.9m). The main driver of the increase is a reclassification during the
year of project delivery and support salary costs of £4m from cost of sales.
There is a mixture of cost decreases such as a 11% reduction in the Group's
headcount to 515 at 31 December 2021 (2020: 560), the successful completion of
business reorganisation and right sizing of our operations. Support received
from the Government's Job Retention Scheme in the year amounted to £0.04m
(2020: £0.4m).
The level of the Group's administrative expenses will continue to be tightly
controlled in 2022 and we expect to deliver further cost savings in the
period.
Exceptional items
Exceptional gains of £3.9m (2020: exceptional loss of £2.5m) is
substantially driven by the disposal of Doc Sol; net proceeds were £4.3m,
after professional costs of £0.2m. Other exceptional gains include £0.1m
associated with an onerous property lease provision release. In 2020, £1.7m
of exceptional costs related to restructuring and reorganising of the Group's
operational structure. A full breakdown is shown in note 12.
Interest
The Group recorded a net interest charge of £1.1m in the year (2020: £1.3m),
which includes £0.1m relating to IFRS 16 in line with the prior year (2020:
£0.2m).
Taxation
The tax charge in the period of £0.6m (2020: tax credit £0.5m) is driven by
the net combined effect of the current taxation of profit of £0.8m (2020:
£0.2m); offset by deferred tax credits on PPE and intangibles of £0.2m
(2020: £0.7m).
Dividends and earnings per share
The continued impact of the pandemic throughout 2021 and into 2022, combined
with external macro-economic challenges in global supply chain with regards to
semi-conductors and recent conflicts in the Ukraine means the Board is taking
a prudent approach to dividend policy and again made the decision not to
propose a final dividend for the full year 2021 (2020: nil pence per
share). It remains the Board's intention to review returns to shareholders
when economic conditions improve and financial performance permits.
Adjusted earnings per share is at 33.2p, an increase of 4% on prior year
(2020: 31.9p). On an unadjusted basis, basic earnings per share is at 32.5p
(2020: loss per share 12.1p).
Consolidated statement of financial position
Net assets increased by £4.7m in the year to £23.5m at 31 December 2021
(2020: £18.8m) with the key movements explained below.
Trade and other receivables increased by £7.4m to £30.2m (2020: £22.8m),
driven by an increase in prepayment and accrued income to £15.7m (2020:
£8.7m). Within this, accrued income increased by £3.5m, driven by some large
individual project accruals; prepayments increased by £3.5m, comprising
£2.5m Managed Services (including £1.2m Avaya bulk subscription purchase and
£1m West Lothian/Exclusive Network five-year support costs), and £1m Cloud.
Non-current accrued income per note 18 of £nil (2020: £1.0m); last year's
accrual relates to the sale of the Group's consumable and spares inventory to
a third-party logistics provider on repayment terms over three years.
Trade and other payables increased by £0.5m to £44.3m (2020: £43.8m); this
increase is the net of (i) higher trade payables of £1.5m in December 2021 in
respect of Avaya bulk subscription licences (ii) an increase in deferred
income of £2.8m driven by Cloud advance billings; (iii) a reduction in Atos
deferred consideration of £2.2m; and (iv) the reduction of deferred VAT on
other taxes and social security of £2.2m.
Borrowings of £19.4m (2020: £22.2m) represent the Group's drawn down debt
and overdraft facility.
Non-current other payables of £0.5m (2020: £2.2m) includes deferred
consideration relating to the previous acquisition of the customer base from
Atos £nil (2020: £1.2m).
Cash flow
As at 31 December 2021 the Group had net debt of £19.4m, excluding issue
costs of debt, (31 December 2020: £22.3m), equating to a net debt: adjusted
EBITDA ratio of 2.0x (2020: 2.3x).
An explanation of the £2.9m decrease in net debt is provided below.
2021 2020
£000 £000
Cash generated from operating activities before acquisition costs 4,408 9,573
Taxation paid (192) (158)
Capital expenditure (2,213) (2,650)
Issue costs of debt (39) (53)
Interest paid (907) (1,105)
Free cash flow 1,057 5,607
Proceeds on disposal of Doc Sol (net of costs) 4,344 -
Payments in respect of business combination (1,244) (1,096)
Proceeds from borrowings - 4,500
Repayments of borrowings (3,000) (8,000)
Lease liability payments (1,155) (1,174)
Increase/(decrease) in cash and cash equivalents 1 (163)
Cash and cash equivalents at start of period (3,845) (3,696)
Exchange differences (25) 14
Cash and cash equivalents at end of period (3,869) (3,845)
Bank borrowings (15,493) (18,500)
Net debt excluding issue costs of debt and IFRS 16 liabilities (19,362) (22,345)
Adjusted EBITDA 9,593 9,522
The Group generated £4.4m (2020: £9.6m) of cash from operating activities
and operating cashflow before changes in working capital of £9.4m (2020:
£7.4m).
Cash conversion in 2021 was 48% ((c)), including a £2.1m working capital
repayment under the HMRC VAT deferral scheme, declining from the 123%
conversion level delivered in 2020.
Capital expenditure of £2.2m (2020: £2.7m) was incurred relating to the
ongoing investment in the ICON platform, IT infrastructure and continued
development of Callmedia, the Group's contact centre product.
Payments in respect of business combinations of £1.2m (2020: £1.1m) relate
to the deferred consideration amounts due associated with the acquisition of a
customer base from Atos in 2018.
A more detailed explanation of the working capital movements is included in
the analysis of the consolidated statement of financial position.
Further details of the Group's revolving credit and overdraft facilities are
given in note 21.
(c) calculated as operating cash flow (being adjusted EBITDA plus working
capital) to adjusted EBITDA
Outlook
The foundation of the business has now been set and I look forward to
continued organic growth over the coming years. I remain mindful that whilst
we still face challenges in 2022 with inflation rates and economic and
political uncertainty, the Maintel Team is operating "as one" with a renewed
drive to succeed and better serve our customers. The first quarter is in
line with management expectations and the team are building a healthy pipeline
across both the public and private sectors. Forecasts to date indicate that
the sales team will deliver their sixth consecutive quarter of Revenue and GM
target.
Whilst we continue to see the easing of the pandemic during 2022, we remain
mindful of a potential further variant and as such continue to adopt a hybrid
working environment for the team, ensuring we are fully operational whilst
utilising our current offices. We continue to review and renegotiate our
office utilisation and commitments and plan to adjust our real estate
accordingly.
The semi-conductor supply issue remains an imminent threat to revenue,
especially during the first half of 2022. The lack of required hardware has
already impacted Q4 2021 by over £2m and is likely to have a greater negative
impact in Q1 and Q2 of 2022. Whilst the Group continues to work closely with
our key vendors on delivery dates, it is anticipated that supply will not
return to previous levels until at least H2 of 2022. We are mitigating
customer impact wherever possible whilst managing expectations and project
delivery.
Our portfolio will continue to expand as further releases of our own IP
products are taken to market, in particular Callmedia CX Now, ICON Portal,
ICON SIP and further integration with Microsoft Teams. Furthermore, we will
be launching new solutions on CPaaS with Twillio and Amazon, 5G and IoT to
build back our mobile revenues, as well as expanding our security portfolio to
include a SOC for cyber security.
With two consecutive years of 30%+ cloud growth, our intention is to continue
this momentum through 2022, supported by both public and private cloud
solutions and in anticipation of public sector tenders starting to return to
pre-pandemic levels, especially within the health sector. Our sales teams
remain focused in supporting our customers transition to a managed cloud
offering, whilst ensuring they benefit from additional functionality,
scalability and efficiencies.
Whilst we expand our portfolio and services, we will invest in the digital
transformation of the Group, with specific projects already underway to fully
integrate our key business systems, financial systems and customer data, the
purpose of which is to increase efficiencies, aid our sales, operations and
project teams, and to ensure we provide our valued customers with improved
business flows and "ease of business".
Our ESG strategy has been implemented following the appointment of Joanne
Ballard as ESG Strategy and Compliance Director in July 2021, and we have
clearly set out the targets we wish to achieve over the forthcoming years and
as such, take responsibility for a more sustainable future. Establishing our
ESG office has ensured our reporting and targets are generally compliant with
tenders being issued through Crown Commercial Services and in the private
sector, as well as complying with banking requirements and supporting our
shareholders on sustainable and responsible investment.
We will be integrating these targets with social events through 2022, to
"unite" our team following such a lengthy remote working environment, whilst
ensuring their safety and wellbeing.
The Group has performed admirably over the past two years and I look forward
to seeing the fruits of the renewed energy and confidence that exists in the
Group as we continue our growth. Maintel's vision is to help every
organisation to thrive through the application of technology and a human
touch. We see technology as the enabler, not the outcome. I am therefore
positive about the future, albeit mindful of the challenges that lie ahead.
There remain some headwinds as we progress through 2022, predominately in
relation to global hardware and supply chain issues which we are managing
closely.
Dividend policy
The continued impact of the pandemic throughout 2021 and into 2022, combined
with external macro-economic challenges in global supply chain with regards to
semi-conductors and recent conflicts in the Ukraine means the Board is taking
a prudent approach to dividend policy and again made the decision not to
propose a final dividend for the full year 2021 (2020: nil pence per
share). It remains the Board's intention to review returns to shareholders
when economic conditions improve and financial performance permits.It remains
the Board's intention to review returns to shareholders when conditions
improve and financial performance permits.
Post year-end events
Banking facilities
On 24 March 2022, the Group signed a new three-year banking arrangement with
HSBC UK Bank plc ("HSBC") to replace its current bank facilities with the
National Westminster Bank Plc ("NWB"). The NWB facilities were due to expire
on 27 October 2022. The new facility with HSBC consists of a revolving
credit facility ("RCF") of £20m in committed funds with a £6m term loan on a
reducing basis. Interest terms for the RCF and term loan are linked to SONIA
plus a fixed margin.
On behalf of the Board
Ioan MacRae
Chief Executive Officer
31 March 2022
Financial Statements
Consolidated statement of comprehensive income
for the year-ended 31 December 2021
2021 2020
Note £000 £000
Revenue 4 103,895 106,430
Cost of sales (69,784) (75,546)
Gross profit 34,111 30,884
Other operating income 7 476 611
Intangibles amortisation 13 (5,416) (6,286)
Exceptional items 12 3,901 (2,482)
Share based remuneration 27 (49) 259
Other administrative expenses (26,674) (23,879)
Administrative expenses (28,238) (32,388)
Operating profit / (loss) 7 6,349 (893)
Financial expense 8 (1,112) (1,339)
Profit / (loss) before taxation 5,237 (2,232)
Taxation (charge)/credit 9 (566) 498
Profit / (loss) for the year 4,671 (1,734)
Other comprehensive (expense) / income for the year
Items that maybe reclassified to profit or loss:
Exchange differences on translation of foreign operations (12) 6
Total comprehensive income / (expense) for the year 4,659 (1,728)
Earnings / (loss) per share (pence)
Basic 10 32.5p (12.1)p
Diluted 10 32.5p (12.1)p
Consolidated statement of financial position
at 31 December 2021
31 December 31 December 31 December 31 December
2021 2021 2020 2020
Note £000 £000 £000 £000
Non current assets
Intangible assets 13 56,021 59,613
Right of use assets 16 3,173 3,808
Property, plant and equipment 15 1,091 1,415
Trade and other receivables 18 630 1,050
60,915 65,886
Current assets
Inventories 17 1,009 1,865
Trade and other receivables 18 30,229 22,758
Income tax - 261
Total current assets 31,238 24,884
Total assets 92,153 90,770
Current liabilities
Trade and other payables 19 43,805 41,650
Lease liabilities 22 906 1,092
Income tax 267 -
Borrowings 21 19,362 22,267
Total current liabilities 64,340 65,009
Non-current liabilities
Other payables 19 455 2,231
Lease liabilities 22 2,251 2,873
Deferred tax 20 1,558 1,816
Total non-current liabilities 4,264 6,920
Total liabilities 68,604 71,929
Total net assets 23,549 18,841
Equity
Issued share capital 24 144 144
Share premium 25 24,588 24,588
Other reserves 25 61 73
Retained earnings 25 (1,244) (5,964)
Total equity 23,549 18,841
The consolidated financial statements were approved and authorised for issue
by the Board on 31 March 2022 and were signed on its behalf by:
I MacRae
Chief Executive Officer
Consolidated statement of changes in equity
for the year-ended 31 December 2021
Share capital
Other reserves Retained earnings
Share premium
Total
£000 £000 £000 £000 £000
Balance at 1 January 2020 143 24,588 67 (3,971) 20,827
Loss for the year - - - (1,734) (1,734)
Other comprehensive income:
Foreign currency translation differences - - 6 - 6
Total comprehensive expense for the year - - 6 (1,734) (1,728)
Transactions with owners in their capacity as owners:
Issue of new ordinary shares 1 - - - 1
Share based remuneration - - - (259) (259)
At 31 December 2020 144 24,588 73 (5,964) 18,841
Profit for the year - - - 4,671 4,671
Other comprehensive expense:
Foreign currency translation differences - - (12) - (12)
Total comprehensive income for the year - - (12) 4,671 4,659
Transactions with owners in their capacity as owners:
Share based remuneration - - - 49 49
At 31 December 2021 144 24,588 61 (1,244) 23,549
Consolidated statement of cash flows
for the year-ended 31 December 2021
2021 2020
£000 £000
Operating activities
Profit / (loss) before taxation 5,237 (2,232)
Adjustments for:
Net gain on disposal of Doc Sol (3,992) -
Intangibles amortisation 5,416 6,286
Share based payment charge/(credit) 49 (259)
Loss on sale of property, plant and equipment - 2
Exceptional non-cash items - 325
Depreciation of plant and equipment 668 665
Depreciation of right of use asset 1,013 1,241
Interest payable 1,112 1,339
Other non-cash items (105) -
Operating cash flows before changes in working capital 9,398 7,367
Decrease in inventories 676 1,377
(Increase)/decrease in trade and other receivables (7,114) 3,113
Increase/(decrease) in trade and other payables 1,448 (2,284)
Cash generated from operating activities 4,408 9,573
Tax paid (192) (158)
Net cash inflows from operating activities 4,216 9,415
Investing activities
Purchase of plant and equipment (344) (568)
Purchase of intangible assets (1,870) (2,082)
Consideration for previously acquired businesses (1,244) (1,096)
Net proceeds from disposal of Doc Sol 4,344 -
Net cash inflows/(outflows) from investing activities 886 (3,746)
2021 2020
£000 £000
Financing activities
Proceeds from borrowings - 4,500
Repayment of borrowings (3,000) (8,000)
Lease liability repayments (1,155) (1,174)
Interest paid (907) (1,105)
Issue costs of debt (39) (53)
Net cash outflows from financing activities (5,101) (5,832)
Net increase/(decrease) in cash and cash equivalents 1 (163)
Bank overdrafts at start of year (3,845) (3,696)
Exchange differences (25) 14
Bank overdrafts at end of year (3,869) (3,845)
The following cash and non-cash movements have occurred during the year in
relation to financing activities from non-current liabilities
Reconciliation of liabilities from financing activities
Loans and borrowings (Note 21)
2021 2020
£000 £000
At 1 January 22,267 25,579
Cash Flows (3,000) (3,404)
Non-cash movements (Amortised debt issue costs) 95 92
________ ________
At 31 December 19,362 22,267
________ ________
Lease liabilities (Note 22)
2021 2020
£000 £000
At 1 January 3,965 4,354
Non-cash movements 347 785
Cash flows (1,155) (1,174)
________ ________
At 31 December 3,157 3,965
________ ________
Current 906 1,092
Non-current 2,251 2,873
Notes forming part of the consolidated financial statements
for the year-ended 31 December 2021
1 General information
Maintel Holdings Plc is a public limited company incorporated and domiciled
in the UK, whose shares are publicly traded on the Alternative Investment
Market (AIM). Its registered office and principal place of business is 160
Blackfriars Road, London SE1 8EZ.
2 Accounting policies
The principal policies adopted in the preparation of the consolidated
financial statements are as follows:
(a) Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted International Accounting Standards in conformity with the
requirements of the Companies Act.
(b) Basis of consolidation
The consolidated financial statements present the results of the Company and
its subsidiaries ("the Group") as if they formed a single entity. InterCompany
transactions and balances between Group companies are therefore eliminated in
full.
Where the Company has control over an investee, it is classified as a
subsidiary. The Company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the consolidated statement of
financial position, the acquiree's identifiable assets, liabilities and
contingent liabilities are initially recognised at their fair values at the
acquisition date. The acquisition related costs are included in the
consolidated statement of comprehensive income on an accruals basis. The
results of acquired operations are included in the consolidated statement of
comprehensive income from the date on which control is obtained.
(c) Rounding of amounts
All amounts disclosed in the financial statements and notes have been rounded
to the nearest thousand unless otherwise stated.
(d) 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. Post year-end the Group signed a new agreement with HSBC Bank plc
("HSBC") to replace the National Westminster Bank ("NWB") facility. The new
facility with HSBC consists of a revolving credit facility ("RCF") of £20m
with a £6m term loan on a reducing basis. The key covenants that will
prevail over this period include net leverage ratio and interest cover tests.
As highlighted in the risk management section (see pages 26-27) the Board has
put robust business continuity plans in place to ensure continuity of trading
and operations. In addition, to address the trading impact of COVID-19 during
2021, the Directors have already taken significant steps to preserve working
capital and maintain a satisfactory liquidity position (see page 28, COVID-19
section).
The Group's forecasts and projection models, taking into account uncertainty
around the medium-term impact of the supply chain issues with regard to both
project delivery and timing of pipeline conversion, means that actual
performance could fall short of management forecasts in terms of revenue
expectations. The Board has reviewed the model in detail, taking account of
reasonably possible changes in trading performance, including revenues falling
below a COVID-19 affected FY 20 by 2%, and further mitigating actions it could
take such as further overhead savings and capital expenditure programme
postponement. As a result, the Board believes that the Group has sufficient
headroom in its agreed funding arrangements to withstand a greater negative
impact on its cash flow than it currently expects.
On this basis, whilst it is acknowledged that there is continued uncertainty
surrounding the future impacts of COVID-19 and supply chain issues, the
Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future.
(e) Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and can be reliably measured.
Revenue represents sales to customers at invoiced amounts and commissions
receivable from suppliers, less value added tax.
Managed services and technology
Managed services revenues are recognised over time, over the relevant contract
term, on the basis that the customer simultaneously receives and consumes the
benefits provided by the Group's performance of the services over the contract
term. Where the Group's performance of its obligations under a contract
exceeds amounts received, accrued income is recognised depending on the
Group's billing rights. Where the Group's performance of its obligations under
a contract is less than amounts received, deferred income is recognised as
this is also the point where the Group transfers the benefits of the goods and
services to the end customer
Technology revenues for contracts with customers, which include both supply of
technology goods and installation services, represent in substance one
performance obligation and result in revenue recognition at a point in time,
when the Group has fulfilled its performance obligations under the relevant
customer contract. Under these contracts, the Group performs a significant
integration service which results in the technology goods and the integration
service being one performance obligation. Over the course of the contract,
the technology goods, which comprise both hardware and software components are
customised through the integration services to such an extent that the final
customised technology goods installed on completion are substantially
different to their form prior to the integration service. Revenue is
recognised when the integrated technology equipment and software has been
installed and accepted by the customer.
Network services
Revenues for network services are comprised of call traffic, line rentals and
data services, which are recognised over time, for services provided up to the
reporting date, on the basis that the customer simultaneously receives and
consumes the benefits provided by the Group's performance of the services over
the contract term. Amounts received in advance of the performance of the call
traffic, line rentals and data services are recognised as performance
obligations and released to revenue as the Group performs the services under
the contract. Where the Group's performance of its obligations under a
contract are less than amounts received, deferred income is recognised.
Mobile
Connection commission received from the mobile network operators on fixed line
revenues, are allocated primarily to two separate performance obligations,
being (i) the obligation to provide a hardware fund to end users for the
supply of handsets and other hardware k-t - revenues are recognised under
these contracts at a point in time when the hardware goods are delivered to
the customer and the customer has control of the assets; and (ii) ongoing
service obligations to the custom-r - revenues are spread over the course of
the customer contract term. In the case of (i) revenues are recognised based
on the fair value of the hardware goods provided to the customer on delivery
and for (ii) the residual amounts, representing connection commissions less
the hardware revenues are recognised as revenues over the customer contract
term.
Customer overspend and bonus payments are recognised monthly at a point in
time when the Group's performance obligations have been completed; these are
also payable by the network operators on a monthly basis.
(f) Leased assets
When the Group enters into a lease, a lease liability and a right of use asset
is created.
A lease liability shall be recognised at the commencement date of the lease
term and will be measured at the present value of the remaining lease payments
discounted using the Groups' incremental borrowing rate. In determining the
lease term, hindsight will be applied in respect of leases which contain an
option to terminate the lease. The lease liability is subsequently increased
for a constant periodic rate of interest on the remaining balance of the lease
liability and reduced for lease payments. Interest on the lease liability is
recognised in the income statement.
A right of use asset shall be recognised at the commencement date of the lease
term. The right of use asset will be measured at an amount equal to the lease
liability. The right of use asset will subsequently be measured at cost less
accumulated depreciation and any accumulated impairment losses. The
depreciation policy for leased property, motor vehicles and office and
computer equipment is on a straight-line basis over the shorter of the lease
term and the useful life of the asset.
Where leases are 12 months or less or of low value, payments made are expensed
evenly over the period of the lease.
Rentals receivable under operating leases are credited to the consolidated
statement of comprehensive income on a straight-line basis over the term of
the lease. The aggregate cost of lease incentives offered is recognised as a
reduction of the rental income over the lease term on a straight-line basis.
In addition, the carrying amount of the right-of-use assets and lease
liabilities are remeasured if there is a modification, a change in the lease
term or a change in the fixed lease payments. The remeasured lease liability
(and corresponding right-of-use asset) is calculated using a revised discount
rate, based upon a revised incremental borrowing rate at the time of the
change.
(g) Employee benefits
The Group contributes to a number of defined contribution pension schemes in
respect of certain of its employees, including those established under
auto-enrolment legislation. The amount charged in the consolidated statement
of comprehensive income represents the employer contributions payable to the
schemes in respect of the financial period. The assets of the schemes are held
separately from those of the Group in independently administered funds.
The cost of all short-term employee benefits is recognised during the period
the employee service is rendered.
Holiday pay is expensed in the period in which it accrues.
(h) Exceptional items
Exceptional items are significant items of non-recurring income or expenditure
that have been separately presented by virtue of their nature to enable a
better understanding of the Group's financial performance. Non-recurring
exceptional items are presented separately in the consolidated statement of
comprehensive income.
(i) Interest
Interest income and expense is recognised using the effective interest rate
basis.
(j) 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 balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation
purposes, except for differences arising on:
· The initial recognition of goodwill
· 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 nor 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 that
future taxable profits and taxable temporary differences will be available
against which the asset can be utilised.
Management judgement is used in determining the amount of deferred tax asset
that can be recognised, based upon the likely timing and level of future
taxable profits together with future tax planning strategies.
The amount of the deferred tax asset or liability is measured on an
undiscounted basis and is determined using tax rates that have been enacted or
substantively enacted by the date of the consolidated statement of financial
position and are expected to apply when the deferred tax assets/liabilities
are recovered/settled.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· 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.
(k) Dividends
Dividends unpaid at the reporting date are only recognised as a liability at
that date to the extent that they are appropriately authorised and are no
longer at the discretion of the Company.
Proposed but unpaid dividends that do not meet these criteria are disclosed in
the notes to the
consolidated financial statements.
(l) Intangible assets
Goodwill
Goodwill represents the excess of the fair value of the consideration of a
business combination over the acquisition date fair value of the identifiable
assets, liabilities and contingent liabilities acquired; the fair value of the
consideration comprises the fair value of assets given. Direct costs of
acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset and carried at cost with any
impairment in carrying value being charged to the consolidated statement of
comprehensive income.
Customer relationships
Customer relationships are stated at fair value where acquired through a
business combination, less accumulated amortisation.
Customer relationships are amortised over their estimated useful lives of six
years to eight years.
Product platform
The product platform is stated at cost less accumulated amorisation. Where
these have been acquired through a business combination, the cost is the fair
value allocated less accumulated amortisation.
The product platform is amortised over its estimated useful life of eight
years.
Brand
Brands are stated at fair value where acquired through a business combination
less accumulated amortisation.
Brands are amortised over their estimated useful lives, being eight years in
respect of the ICON brand.
Software (Microsoft licences and Callmedia)
Software is stated at cost less accumulated amortisation. Where these assets
have been acquired through a business combination, the cost is the fair value
allocated in the acquisition accounting.
Software is amortised over its estimated useful life of (i) three years in
respect of the Microsoft licences, (ii) five years in respect of the Callmedia
software and capitalised systems software development costs.
Other
Other intangible assets includes stock management platforms which is managed
by third parties. Other intangibles are amortised over their estimated useful
lives, being 5 years.
(m) Impairment of non-current assets
Impairment tests on goodwill are undertaken annually on 31 December. Customer
relationships and other assets are subject to impairment tests whenever events
or changes in circumstances indicate the carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount (being the higher of value in use and fair value less costs to sell),
the asset is written down accordingly in the administrative expenses line in
the consolidated statement of comprehensive income and, in respect of goodwill
impairments, the impairment is never reversed.
Where it is not possible to estimate the recoverable amount of an individual
asset, 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
are separately identifiable cash flows). Goodwill is allocated on initial
recognition to each of the Group's cash-generating units that are expected to
benefit from the synergies of the combination giving rise to goodwill.
(n) Property, plant and equipment
Property, plant and equipment is stated at cost, less accumulated depreciation
and any impairment in value. Depreciation is provided to write off the cost,
less estimated residual values, of all tangible fixed assets, other than
freehold land, over their expected useful lives, at the following rates:
Office and computer equipment - 25% straight line
Motor vehicles - 25% straight line
Leasehold improvements - over the remaining period of the lease
Property, plant and equipment acquired in a business combination is initially
recognised at its fair value.
(o) Inventories
Inventories comprise (i) maintenance stock, being replacement parts held to
service customers' telecommunications systems, and (ii) stock held for resale,
being stock purchased for customer orders which has not been installed at the
end of the financial period. Inventories are valued at the lower of cost and
net realisable value.
(p) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits with
an original maturity of three months or less, held for meeting short term
commitments.
(q) Financial assets and liabilities
The Group's financial assets and liabilities mainly comprise cash, borrowings,
trade and other receivables, trade and other payables and lease liabilities.
Trade and other receivables are not interest bearing and are stated at their
amortised cost as reduced by appropriate allowances for irrecoverable amounts
or additional costs required to effect recovery.
The Group reviews the amount of credit loss associated with its trade
receivables based on forward looking estimates that take into account current
and forecast credit conditions. The Group has applied the Simplified Approach
applying a provision matrix based on number of days past due to measure
lifetime expected credit losses and after taking into account customer sectors
with different credit risk profiles and current and forecast trading
conditions. Trade and other payables are not interest bearing and are stated
at their amortised cost.
(r) Borrowings
Interest bearing bank loans and overdrafts are initially recorded at the value
of the amount received, net of attributable transaction costs. Interest
bearing borrowings are subsequently stated at amortised cost with any
difference between cost and redemption value being recognised in the
consolidated statement of comprehensive income over the period of the
borrowing using the effective interest method.
(s) Foreign currency
The presentation currency of the Group is Sterling. All Group companies have a
functional currency of Sterling (other than Maintel International Limited
("MIL") which has a functional currency of the Euro) consistent with the
presentation currency of the Group's consolidated financial statements.
Transactions in currencies other than Sterling are recorded at the rates of
exchange prevailing on the dates of the transactions.
On consolidation, the results of MIL are translated into Sterling at rates
approximating those ruling when the transactions took place. All assets and
liabilities of MIL, including goodwill arising on its acquisition, are
translated at the rate ruling at the reporting date. Exchange differences on
retranslation of the foreign subsidiary are recognised in other comprehensive
income and accumulated in a translation reserve.
(t) Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions. Government grants in respect of the furlough of
staff over the period of the COVID-19 pandemic, is recognised in the period
when the related salary costs are incurred.
(u) Share-based payments
The Group uses the Black Scholes Model to calculate the appropriate charge for
options issued.
Where employees are rewarded using equity settled share-based payments, the
fair values of employees' services are determined indirectly by reference to
the fair value of the instrument granted to the employee. This fair value is
appraised at the grant date.
All equity-settled share-based payments are ultimately recognised as an
expense in the income statement with a corresponding credit to reserves.
If vesting periods apply, the expense is allocated over the vesting periods,
based on the best available estimate of the number of share options expected
to vest. Estimates are revised subsequently if there is any indication that
the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognised in the
current year. No adjustment is made to any expense recognised in prior years
if share options that have vested are not exercised.
(v) Accounting standards issued
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 - Interest Rate
Benchmark Reform - Phase 2 (effective for annual periods beginning on or after
1 January 2021) were issued and adopted in the year, with no material impact
on the financial statements.
There were no other new accounting standards issued have been adopted in the
year.
(w) Standards in issue but not yet effective
At the date of authorisation of these financial statements there were
amendments to standards which were in issue but which were not yet effective
and which have not been applied. The principal ones were:
Amendment to IFRS 16, 'Leases' - COVID-19 related rent concessions. Extension
of the practical expedient (effective for annual period on or 1 April 2021)
A number of narrow-scope amendments to IFRS 3, IAS 16, IAS 37 and some annual
improvements on IFRS 1, IFRS 9, IAS 41 and IFRS 16 (effective for annual
periods beginning on or after 1 January 2022)
Amendments to IAS 1, Presentation of financial statements on classification of
liabilities (effective date deferred until accounting periods starting not
earlier than 1 January 2024)
Narrow scope amendments to IAS 1, Practice statement 2 and IAS 8 (effective
for annual periods beginning on or after 1 January 2023.
Amendment to IAS 12 - deferred tax related to assets and liabilities arising
from a single transaction (effective for annual periods beginning on or after
1 January 2023)
The Directors do not expect the adoption of these amendments to standards to
have a material impact on the financial statements.
3 Accounting estimates and judgements
In the process of applying the Group's accounting policies, management has
made various estimates, assumptions and judgements, with those likely to
contain the greatest degree of uncertainty being summarised below:
Impairment of non-current assets
The Group is required to test, on an annual basis, whether goodwill has
suffered any impairment. The Group is also required to test other finite life
intangible assets for impairment where impairment indicators are present. The
recoverability of assets subject to impairment reviews is assessed based on
whether the carrying value of assets can be supported by the net present value
of future cash flows derived from such assets, using cash flow projections
which have been discounted at an appropriate rate. In calculating the net
present value of the future cash flows, certain assumptions are required to be
made in respect of uncertain matters.
In particular, management exercises estimation in determining assumptions for
revenue growth rates and gross margins for future periods which are important
components of future cash flows, and also in determining the appropriate
discount rates which are used across the Group's cash generating units (refer
to note 13).
4 Segment information
Year-ended 31 December 2021
For management reporting purposes and operationally, the Group consists of
three business segments: (i) managed service and technology sales, (ii)
network services, and (iii) mobile services. Revenue from managed services,
network services and mobile is recognised over time and technology revenue is
recognised at a point in time. Each segment applies its respective resources
across inter-related revenue streams, which are reviewed by management
collectively under these headings. The businesses of each segment and a
further analysis of revenue are described under their respective headings in
the Strategic Report.
The chief operating decision maker has been identified as the Board, which
assesses the performance of the operating segments based on revenue and gross
profit.
Managed service and technology
Network services
Mobile Total
£000 £000 £000 £000
Revenue 61,404 37,689 4,802 103,895
Gross profit 18,720 13,228 2,163 34,111
Other operating income 476
Other administrative expenses (26,674)
Share based remuneration (49)
Intangibles amortisation (5,416)
Exceptional items 3,901
Operating profit 6,349
Financial expense (1,112)
Profit before taxation 5,237
Taxation (566)
Profit after taxation 4,671
Revenue is wholly attributable to the principal activities of the Group and
other than sales of £3.2m to EU countries and £0.2m to the Rest of the world
(2020: £3.3m to EU countries, and £0.4m to the Rest of the world), revenues
arise within the United Kingdom.
In 2021 the Group had no customer (2020: None) which accounted for more than
10% of its revenue.
The Board does not regularly review the aggregate assets and liabilities of
its segments and accordingly an analysis of these is not provided.
Managed service and technology Central/
Network services inter-
Mobile company Total
£000 £000 £000 £000 £000
Other
Intangibles amortisation - - - (5,416) (5,416)
Depreciation - - - (1,680) (1,680)
Exceptional items - - - 3,901 3,901
Year-ended 31 December 2020
Managed service and technology
Network services
Mobile Total
£000 £000 £000 £000
Revenue 64,231 36,201 5,998 106,430
Gross profit 17,620 10,669 2,595 30,884
Other operating income 611
Other administrative expenses (23,879)
Share based remuneration 259
Intangibles amortisation (6,286)
Exceptional items (2,482)
Operating loss (893)
Financial expense (1,339)
Loss before taxation (2,232)
Taxation 498
Loss after taxation (1,734)
Managed service and technology Central/
Network services inter-
Mobile company Total
£000 £000 £000 £000 £000
Other
Intangibles amortisation - - - (6,286) (6,286)
Depreciation - - - (1,906) (1,906)
Exceptional items - - - (2,482) (2,482)
5 Employees
2021 2020
The average number of employees, including Directors, during the year was: Number Number
Corporate and administration 92 92
Sales and customer service 184 210
Technical and engineering 239 258
________ ________
515 560
________ ________
Staff costs, including Directors, consist of: £000 £000
Wages and salaries 28,398 30,112
Social security costs 3,387 3,467
Pension costs 772 824
________ ________
32,557 34,403
________ ________
The Group makes contributions to defined contribution personal pension schemes
for employees and Directors. The assets of the schemes are separate from those
of the Group. Pension contributions totalling £161,000 (2020: £168,000) were
payable to the schemes at the year-end and are included in other payables.
6 Directors' remuneration
The remuneration of the Company Directors was as follows:
2021 2020
£000 £000
Directors' emoluments 794 851
Pension contributions 23 26
________ ________
817 877
________ ________
Included in the above is the remuneration of the highest paid Director as
follows:
2021 2020
£000 £000
Director's emoluments 305 243
Pension contributions 8 7
________ ________
313 250
________ ________
The Group paid contributions into defined contribution personal pension
schemes in respect of five Directors during the year, two of whom were
auto-enrolled at minimal contribution levels, two were on defined
contributions and one on both auto-enrolment and defined contribution schemes
(2020: eight, three auto-enrolled, two defined contribution, one both defined
contribution and auto enrolled).
Further details of Director remuneration are shown in the Remuneration
Committee report on page 48.
7 Operating profit / (loss)
2021 2020
£000 £000
This has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment 668 665
Depreciation of right of use assets 1,012 1,241
Amortisation of intangible fixed assets 5,416 6,286
Other income:
- Operating lease rentals receivable - property - (147)
- Research and development expenditure credit (461) (464)
- Other (15) -
Fees payable to the Company's auditor for the audit of the parent and 47 47
consolidated accounts
Fees payable to the Company's auditor for other services:
- Audit of the Company's subsidiaries pursuant to legislation 106 100
- Audit-related assurance services 26 26
Fees payable for tax compliance services 17 42
Foreign exchange movement 111 (90)
Government grant in respect of furloughed employees (36) (387)
Gain on sale of inventory - (348)
Loss on disposal of property plant and equipment - 2
________ ________
8 Financial expense
2021 2020
£000 £000
Interest payable on bank loans 916 1,060
Interest payable on deferred consideration 69 106
Interest expense on leases 127 156
Other interest charges - 17
________ ________
1,112 1,339
________ ________
9 Taxation
2021 2020
£000 £000
UK corporation tax
Corporation tax on UK profit/(loss) of the year 682 11
Adjustment for prior year 119 212
________ ________
801 223
Overseas tax
Corporation tax on overseas profit/(loss) of the year 23 -
________ ________
Total current taxation on profit/(loss) on ordinary activities 824 223
Deferred tax (note 20)
Current year (246) (739)
Adjustment for prior year (12) 18
________ ________
Total deferred taxation (258) (721)
________ ________
Total taxation on profit/(loss) on ordinary activities 566 (498)
The standard rate of corporation tax in the UK for the year was 19.00% (2020:
19.00%), and therefore the Group's UK subsidiaries are taxed at that rate. The
differences between the total tax shown above and the amount calculated by
applying the standard rate of UK corporation tax to the profit/(loss) before
tax are as follows:
2021 2020
£000 £000
Profit/(loss) before tax 5,237 (2,232)
________ ________
Profit/(loss) at the standard rate of corporation tax in the UK of 19% (2020: 995 (424)
19.0%)
Effect of:
Net income not taxable (896) (87)
Adjustments relating to prior years 107 230
Benefit for losses utilised in the year not recognised for tax previously - (203)
Effects of overseas tax rates (14) (4)
Effects of changes in tax rates 374 -
Origination and reversal of timing differences - (10)
________ ________
566 (498)
________ ________
Prior year adjustments debiting corporation tax of £106,000 include the tax
charge in respect of research and development expenditure credits taxed in the
prior year.
In the March 2021 Budget, the government announced an increase in the UK
corporation tax rate from 19% to 25% (effective 1 April 2023) which was
substantively enacted by the Group during the financial year. Deferred tax
assets and liabilities are measured at the tax rates that are expected to
apply in the year when assets are realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted or substantially enacted at
the reporting date.
10 Earnings per share
Earnings per share is calculated by dividing the profit/(loss) after tax for
the year by the weighted average number of shares in issue for the year, these
figures being as follows:
2021 2020
£000 £000
Earnings/(loss) used in basic and diluted EPS, being profit/(loss) after tax 4,671 (1,734)
Adjustments:
Intangibles amortisation (net of non-acquired element) 4,444 5,453
Exceptional items (note 12) (3,901) 2,482
Tax relating to above adjustments (1,050) (1,507)
Share based remuneration 49 (259)
Interest charge on deferred consideration 69 106
Tax adjustments relating to prior years 107 230
Benefit for losses utilised in the year not recognised for tax previously - (203)
Adjustment for the tax impact of the change in the deferred tax rate 374 -
________ ________
Adjusted earnings used in adjusted EPS 4,763 4,568
________ ________
Adjustment for intangibles amortisation is in relation to intangible assets
acquired via business combinations.
2021 2020
Number Number
(000s) (000s)
Weighted average number of ordinary shares of 1p each used as the denominator 14,362 14,338
in calculating basic EPS
Potentially dilutive shares 20 13
________ ________
Weighted average number of ordinary shares of 1p each used as the denominator
in calculating diluted EPS
14,382 14,351
________ ________
Earnings/(loss) per share
Basic 32.5p (12.1)p
Diluted 32.5p (12.1)p
Adjusted - basic but after the adjustments in the table above 33.2p 31.9p
Adjusted - diluted after the adjustments in the table above 33.1p 31.8p
The adjustments above have been made in order to provide a clearer picture of
the trading performance of the Group after removing amortisation the disposal
of Doc Sol and other non-recurring expenses.
In calculating diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Group has one category of potentially dilutive
ordinary share, being those share options granted to employees where the
exercise price is less than the average price of the Company's ordinary shares
during the period.
11 Adjusted earnings before interest, tax, depreciation and amortisation
(Adjusted EBITDA)
2021 2020
£000 £000
Profit / (loss) before tax 5,237 (2,232)
Financial expense 1,112 1,339
Depreciation of property, plant and equipment 668 665
Depreciation of right of use assets 1,012 1,241
Amortisation of intangible fixed assets 5,416 6,286
EBITDA 13,445 7,299
Share based remuneration 49 (259)
Exceptional items (note 12) (3,901) 2,482
Adjusted EBITDA 9,593 9,522
12 Exceptional items
Most of the exceptional items in the year related to the restructuring and
reorganisation of the Group's operational structure. The disposal of Doc Sol
gain of £3,992k (2020: £Nil) includes proceeds of £4,344k net of
professional costs of £156k. The remaining £352k relates to the
apportionment of overheads and writing off of customer relationships relating
to Doc Sol. Onerous lease income of £105k (2020: charge of £597k) relates to
Haydock the Parks and comprises the release of remaining onerous lease
provision, dilapidations provision and lease creditor net of related
professional fees. Staff restructuring and other employee related costs of
£169k (2020: £1,723k) includes a credit of £205K relating to the reversal
of an exceptional holiday pay accrual as a result of COVID-19 (2020: charge of
£347k). These and the other costs analysed below have been shown as
exceptional items in the income statement as they are not normal operating
revenues or expenses:
2021 2020
£000 £000
Gain on disposal of Doc Sol (3,992) -
(Income)/costs relating to an onerous property lease (105) 597
Property related and other legal and professional incomes (13) -
Staff restructuring and other employee related costs 169 1,723
Fees relating to revised credit facilities agreement 40 137
Systems integration costs - 25
________ ________
(3,901) 2,482
________ ________
13 Intangible assets
Goodwill Customer relationships Brands Product platform Software Total
Other
£000 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2020 40,516 43,879 3,480 1,772 5,425 - 95,072
Additions - - - 73 2,009 - 2,082
_______ _______ _______ _______ _______ _______ _______
At 31 December 2020 40,516 43,879 3,480 1,845 7,434 - 97,154
Additions - - - 431 1,189 250 1,870
Disposals - (158) - - - - (158)
_______ _______ _______ _______ _______ _______ _______
At 31 December 2021 40,516 43,721 3,480 2,276 8,623 250 98,866
_______ _______ _______ _______ _______ _______ _______
Amortisation and Impairment
At 1 January 2020 317 25,361 1,705 762 3,110 - 31,255
Amortisation in the year - 4,519 409 263 1,095 - 6,286
_______ _______ _______ _______ _______ _______ _______
At 31 December 2020 317 29,880 2,114 1,025 4,205 - 37,541
Amortisation in the year - 3,711 410 275 978 42 5,416
Disposals - (112) - - - - (112)
_______ _______ _______ _______ _______ _______ _______
At 31 December 2021 317 33,479 2,524 1,300 5,183 42 42,845
_______ _______ _______ _______ _______ _______ _______
Net book value
At 31 December 2021 40,199 10,242 956 976 3,440 208 56,021
_______ _______ _______ _______ _______ _______ _______
At 31 December 2020 40,199 13,999 1,366 820 3,229 - 59,613
_______ _______ _______ _______ _______ _______ _______
Amortisation charges for the year have been charged through administrative
expenses in the statement of comprehensive income. Included within the
amortisation charge for FY21 is £972k (2020: £833k) relating to amortisation
from non-acquired intangible assets.
Software and product platform include capitalised development costs being an
internally generated asset. Other intangible assets include stock management
platforms which is managed by third parties.
Goodwill
The carrying value of goodwill is allocated to the cash generating units as
follows:
2021 2020
£000 £000
Network services division 21,134 21,134
Managed service and technology division 15,758 15,758
Mobile division 3,307 3,307
________ ________
40,199 40,199
________ ________
For the purposes of the impairment review of goodwill, the net present value
of the projected future cash flows of the relevant cash generating unit are
compared with the carrying value of the assets for that unit; where the
recoverable amount of the cash generating unit is less than the carrying
amount of the assets, an impairment loss is recognised.
Projected cash flows are based on a five-year horizon which use the approved
plan amounts for years 1 to 3, and a pre-tax discount rate of 12.5% (2020:
12.5%) is applied to the resultant projected cash flows.
Key assumptions used to calculate the cash flows used in the impairment
testing were as follows:
Network services division: average annual growth rate 13.3% (2020: 9.8%),
terminal growth 2.0% (2020: 2.2%), average gross margin 34.1% (2020: 40.5%).
Managed service and technology division: average annual reduction rate 3.7%
(2020: terminal reduction rate 4.8%), terminal reduction rate 5.1% (2020:
6.3%), average gross margin 32.4% (2020: 20.8%).
Mobile division: average annual growth rate 1.9% (2020: 0.9%), terminal growth
rate 0.4% (2020: terminal reduction rate 2.2%), average gross margin 42.6%
(2020: 41.1%).
The Group's impairment assessment at 31 December 2021 indicates that there is
significant headroom for each unit.
The discount rate is based on conventional capital asset pricing model inputs
and varies to reflect the relative risk profiles of the relevant cash
generating units. Sensitivity analysis using reasonable variations in the
assumptions shows no indication of impairment.
14 Subsidiaries
The Company owns investments in subsidiaries including a number which did not
trade during the year. The following were the principal subsidiary
undertakings at the end of the year:
Maintel Europe Limited
Maintel International Limited
Maintel Europe Limited provides goods and services in the managed services and
technology and network services sectors. Maintel Europe Limited is the sole
provider of the Group's mobile services. Maintel International Limited
provides goods and services in the managed services and technology sector
predominantly in Ireland.
In addition, the following subsidiaries of the Company were dormant as at 31
December 2021:
Maintel Voice and Data Limited Datapoint Global Services Limited
Maintel Finance Limited Maintel Network Solutions Limited
District Holdings Limited Datapoint Customer Solutions Limited
Intrinsic Technology Limited Maintel Mobile Limited
Warden Holdco Limited Azzurri Communications Limited
Warden Midco Limited
Each subsidiary company is wholly owned and, other than Maintel International
Limited, is incorporated in England and Wales. Maintel International Limited
is incorporated in the Republic of Ireland.
Each subsidiary, other than Maintel International Limited, has the same
registered address as the parent. The registered address of Maintel
International Limited is Beaux Lane House, Mercer Street Lower, Dublin 2,
Ireland.
15 Property, plant and equipment
Leasehold Improvements Office and computer equipment Total
£000 £000 £000
Cost
At 1 January 2020 909 6,890 7,846
Additions 37 531 568
Disposals (93) (10) (103)
Transfers (24) 24 -
________ ________ ________
At 31 December 2020 829 7,435 8,311
Additions 3 341 344
________ ________ ________
At 31 December 2021 832 7,776 8,655
________ ________ ________
Depreciation
At 1 January 2020 444 5,841 6,332
Disposals (93) (8) (101)
Transfers 54 (54) -
Provided in year 91 574 665
________ ________ ________
At 31 December 2020 496 6,353 6,896
Provided in year 97 571 668
________ ________ ________
At 31 December 2021 593 6,924 7,564
________ ________ ________
Net book value
At 31 December 2021 239 852 1,091
________ ________ ________
At 31 December 2020 333 1,082 1,415
________ ________ ________
In the prior year, certain assets misclassified as leasehold improvements,
were transferred to office and computer equipment.
16 Right of use assets
Land and buildings Office and computer equipment Motor vehicles Total
£000 £000 £000 £000
Cost
At 1 January 2020 4,487 593 340 5,420
Additions 844 229 - 1,073
Dilapidations provision reclassification 319 - - 319
________ ________ ________ ________
At 31 December 2020 5,650 822 340 6,812
Additions 31 391 - 422
Disposals (174) - (152) (326)
________ ________ ________ ________
At 31 December 2021 5,507 1,213 188 6,908
________ ________ ________ ________
Depreciation and impairment
At 1 January 2020 951 253 129 1,333
Depreciation charge for the year 883 246 112 1,241
Impairment for the year 430 - - 430
________ ________ ________ ________
At 31 December 2020 2,264 499 241 3,004
Depreciation charge for the year 703 255 54 1,012
Disposals (174) - (107) (281)
________ ________ ________ ________
At 31 December 2021 2,793 754 188 3,735
________ ________ ________ ________
Net book value
At 31 December 2021 2,714 459 - 3,173
________ ________ ________ ________
At 31 December 2020 3,386 323 99 3,808
________ ________ ________ ________
Dilapidations provisions were reclassified during the prior period from right
of use assets to other payables.
The right of use asset relating to the Group's leased offices in Haydock was
fully impaired during the prior period. The corresponding impairment charge
was recognised as an exceptional item in the income statement for £430,000.
There are no impairment charges of the right of use assets recognised in the
current year.
17 Inventories
2021 2020
£000 £000
Maintenance stock 35 228
Stock held for resale 974 1,637
________ ________
1,009 1,865
________ ________
Cost of inventories recognised as an expense 16,808 14,867
________ ________
Provisions of £33,000 were made against the maintenance stock in 2021 (2020:
£79,000). This is recognised in cost of sales.
18 Trade and other receivables
2021 2020
£000 £000
Trade receivables 13,668 13,188
Other receivables 778 789
Prepayments and accrued income 15,783 8,781
________ ________
30,229 22,758
________ ________
All amounts shown above fall due for payment within one year.
2021 2020
£000 £000
Trade receivables (non-current) 630 -
Accrued income (non-current) - 1,050
________ ________
630 1,050
________ ________
In adopting IFRS 9, the Group reviews the amount of credit loss associated
with its trade receivables and accrued income based on forward looking
estimates that take into account current and forecast credit conditions as
opposed to relying on past historical default rates. In adopting IFRS 9, the
Group has applied the Simplified Approach applying a provision matrix based on
number of days past due to measure lifetime expected credit losses, after
taking into account customer sectors with different credit risk profiles, and
current and forecast trading conditions.
Movements in contract assets and liabilities were as follows:
- Accrued income increased from £2.6m in 2020 to £5.1m at the
reporting date
- Prepayments increased from £7.3m in 2020 to £10.7m at the
reporting date
- Deferred income increased from £15.8m in 2020 to £18.6m at the
reporting date; and
- Deferred costs net of accrued costs has increased from £6.6m in
2020 to £6.8m at the reporting date.
The corresponding adjustments for these movements represent revenues and costs
recognised in the income statement in the year, driven by an increase in cloud
revenues and associated level of advance billings, combined with an increase
in accrued revenue accruals due to timings of project milestone delivery.
19 Trade and other payables
2021 2020
Current trade and other payables £000 £000
Trade payables 10,869 9,358
Other tax and social security 3,344 5,533
Other payables 3,900 5,234
Accruals 5,893 4,550
Deferred managed service income 13,555 13,199
Other deferred income 5,017 2,601
Deferred consideration in respect of business combination 1,227 1,175
________ ________
43,805 41,650
________ ________
2021 2020
Non-current other payables £000 £000
Deferred consideration in respect of business combination - 1,227
Intangible licences and other payables 194 436
Advanced mobile commissions 98 175
Other payables 163 393
________ ________
455 2,231
________ ________
20 Deferred taxation
Property,
plant and Intangible Tax
equipment assets losses Other Total
£000 £000 £000 £000 £000
Net (asset)/liability at 1 January 2020 (1,274) 3,893 (74) (8) 2,537
Charge/(credit) to consolidated statement of comprehensive income 301 (1,036) - 5 (730)
Adjustment to prior year to consolidated statement of comprehensive income (196) 224 74 (84) 18
Credit to consolidated statement of comprehensive income in respect of - - (9) - (9)
anticipated further use of tax losses
________ ________ ________ ________ ________
Net (asset)/liability at 31 December 2020 (1,169) 3,081 (9) (87) 1,816
Credit to consolidated statement of comprehensive income (107) (151) - 12 (246)
Adjustment to prior year to consolidated statement of comprehensive income - - 9 (21) (12)
________ ________ ________ ________ ________
Net (asset)/liability at 31 December 2021 (1,276) 2,930 - (96) 1,558
________ ________ ________ ________ ________
The deferred tax liability represents a liability established on the
recognition of an intangible asset in relation to the Maintel Mobile,
Datapoint, Proximity, Azzurri, Intrinsic and Atos acquisitions. Other items
include right of use assets.
The deferred tax liability balance at 31 December 2021 has been calculated on
the basis that the associated assets and liabilities will unwind at 25% (2020:
19%).
21 Borrowings
2021 2020
£000 £000
Current bank overdraft - secured 3,869 3,845
Current bank loan - secured 15,493 18,422
________ ________
19,362 22,267
________ ________
On 26 May 2021, the Group signed an amendment and extension to its current
bank facilities with the National Westminster Bank Plc ("NWB"). The current
facilities due to expire 8 April 2021 were extended to 27 October 2021. The
revised facility was increased to £34.5m consisting of a revolving credit
facility ("RCF") of £30m in committed funds on a reducing basis and a £4.5m
amortising term loan issued under the Coronavirus business interruption loan
scheme ("CLBILS") by the British Business Bank, which was repaid in full
during the year. Interest terms for the RCF were on a ratchet to LIBOR
according to the Group's net leverage ratio, whilst on the term loan are
linked to the base rate plus a fixed margin.
On 24 March 2022, the Group signed a new agreement with HSBC Bank plc ("HSBC")
to replace the NWB facility. The new facility with HSBC consists of a
revolving credit facility ("RCF") of £20m with a £6m term loan on a reducing
basis. The maturity date of the agreement is 3 years from the signing
date. The term loan will be repaid in equal monthly instalments 7 months
from signing. Interest on the borrowings is the aggregate of the applicable
margin and SONIA for sterling / SOFR for USD / EURIBOR for euros.
Covenants based on EBITDA to Net Finance Charges and Total Net Debt to
EBITDA are tested on a quarterly basis. The Company was in compliance with its
covenants ratios tests throughout the year-ended 31 December 2021.
The non-current bank loan above is stated net of unamortised issue costs of
debt of £0.1m (31 December 2020: £0.1m).
The facilities are secured by a fixed and floating charge over the assets of
the Company and its subsidiaries. Interest is payable on amounts drawn on the
revolving credit facility and loan facility at a covenant-depending tiered
rate of 2.60 % to 3.25% per annum over SONIA, with a reduced rate payable on
undrawn facility.
The Directors consider that there is no material difference between the book
value and fair value of the loan.
22 Lease Liabilities
2021 2020
£000 £000
Maturity analysis - contractual undiscounted cash flows
In one year or less 1,003 1,214
Between one and five years 2,113 2,667
In five years or more 294 436
Total undiscounted lease liabilities at 31 December 2021 3,410 4,317
Current 906 1,092
Non-current 2,251 2,873
Lease liabilities included in the statement of financial position 3,157 3,965
Amounts recognised in the comprehensive income statement
Interest expense on lease liabilities 127 156
Expenses relating to short term leases 91 95
Amounts recognised in the statement of cash flows
Total cash outflow 1,373 1,174
During the years ended 31 December 2021 and 31 December 2020 there were no
variable lease payments to be included in the measurement of lease liabilities
and there were no sale and leaseback transactions. Income from subleasing
right of use assets in the year was £Nil (2020: £147,000).
23 Financial instruments
The Group's financial assets and liabilities mainly comprise cash, borrowings,
trade and other receivables, trade and other payables and lease liabilities.
The carrying value of all financial assets and liabilities equals fair value
given their short term in nature.
Financial assets measured at amortised cost
2021 2020
£000 £000
Non-current financial assets
Trade receivables 630 -
Accrued income - 1,050
________ ________
630 1,050
________ ________
Current financial assets
Trade receivables 13,668 13,188
Accrued income 5,102 1,516
Other receivables 778 789
________ ________
19,548 15,493
________ ________
Financial liabilities
measured at amortised cost
2021 2020
£000 £000
Non-current financial liabilities
Other payables 455 1,004
Deferred consideration in respect of business combination - 1,227
Lease liabilities 1,003 1,214
________ ________
1,458 3,445
________ ________
Current financial liabilities
Trade payables 10,869 9,358
Short-term borrowings 19,362 22,267
Other payables 3,900 5,234
Accruals 5,893 4,550
Deferred consideration in respect of business combination 1,227 1,175
Lease liabilities 2,407 3,103
________ ________
43,658 45,687
________ ________
The Group held the following foreign currency denominated financial assets and
financial liabilities
Assets Liabilities
2021 2020 2021 2020
£000 £000 £000 £000
US Dollars 326 78 1,799 1,650
Euros 500 552 22 3
________ ________ ________ ________
826 630 1,821 1,653
________ ________ ________ ________
The maximum credit risk for each of the above is the carrying value stated
above. The main risks arising from the Group's operations are credit risk,
currency risk and interest rate risk, however other risks are also considered
below.
Credit risk
Management has a credit policy in place and the exposure to credit risk is
monitored on an ongoing basis. Credit evaluations are performed on customers
as deemed necessary based on, inter alia, the nature of the prospect and size
of order. The Group does not require collateral in respect of financial
assets.
At the reporting date, the largest exposure was represented by the carrying
value of trade and other receivables, against which £420,000 is provided at
31 December 2021 (2020: £336,000). The provision represents an estimate of
potential bad debt in respect of the year-end trade receivables, a review
having been undertaken of each such year-end receivable. The largest
individual receivable included in trade and other receivables at 31 December
2021 owed the Group £1.2m including VAT (2020: £0.7m). The Group's customers
are spread across a broad range of sectors and consequently it is not
otherwise exposed to significant concentrations of credit risk on its trade
receivables.
The movement on the provision for trade receivables is as follows:
2021 2020
£000 £000
Provision at start of year 336 336
Provision created 161 180
Provision reversed (77) (180)
________ ________
Provision at end of year 420 336
________ ________
A debt is considered to be bad when it is deemed irrecoverable, for example
when the debtor goes into liquidation, or when a credit or partial credit is
issued to the customer for goodwill or commercial reasons. The Group has
applied the Simplified Approach applying a provision matrix based on number of
days past due to measure lifetime expected credit losses and after taking into
account customer sectors with different credit risk profiles and current and
forecast trading conditions. The Group's provision matrix is as follows:
Current < 30 days 31-60 days > 60 days Total
31 December 2021
Expected credit loss % range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (£'000) 10,746 1,612 393 1,967 14,718
Expected credit loss rate (£'000) (60) (41) (27) (292) (420)
Accrued income 5,102 - - - 5,102
19,400
Current < 30 days 31-60 days > 60 days Total
31 December 2020
Expected credit loss % range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (£'000) 11,626 1,083 376 439 13,524
Expected credit loss rate (£'000) (60) (29) (21) (226) (336)
Accrued income 1,516 - - 1,350 2,866
15,754
Receivables are grouped based on the credit terms offered. The probability of
default is determined at the year-end based on the aging of the receivables
and historical data about default rates on the same basis. That data is
adjusted if the Group determines that historical data is not reflective of
expected future conditions due to changes in the nature of its customers and
how they are affected by external factors such as economic and market
conditions.
Foreign currency risk
The functional currency of all Group companies is Sterling apart from Maintel
International Limited, which is registered in, and operates from, the Republic
of Ireland, and whose functional currency is the Euro. The consolidation of
the results of that company is therefore affected by movements in the
Euro/Sterling exchange rate. In addition, some Group companies transact with
certain customers and suppliers in Euros or dollars. Those transactions are
affected by exchange rate movements during the year but are not deemed
material in a Group context. Sensitivity to exchange rate movements is
considered to be immaterial.
Interest rate risk
The Group had total borrowings of £19.4m at 31 December 2021 (2020: £22.3m).
The interest rate charged is related to SONIA and bank rate respectively and
will therefore change as those rates change. If interest rates had been 0.5%
higher/lower during 2021, and all other variables were held constant, the
Group's profit (2020: loss) for the year would have been £106,000 (2020:
£126,000) lower/higher (2020: higher/lower) due to the variable interest
element on the loan.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its
financial obligations as they fall due. This risk is managed by balancing the
Group's cash balances, banking facilities and reserve borrowing facilities in
the light of projected operational and strategic requirements.
The following table details the contractual maturity of financial liabilities
based on the dates the liabilities are due to be settled:
Financial liabilities:
0 to 6 months 6 to 12 months 2 to 5 Years More than 5 years Total
£000 £000 £000 £000 £000
Trade payables 10,869 - - - 10,869
Other payables 2,856 1,044 455 - 4,355
Lease liabilities 533 470 2,113 294 3,410
Accruals 5,893 - - - 5,893
Borrowings (including future interest) 400 19,762 - - 20,162
Deferred consideration 608 619 - - 1,227
______ ______ ______ ______ ______
At 31 December 2021 21,159 21,895 2,568 294 45,916
______ _______ _______ ______ _______
0 to 6 months 6 to 12 months 2 to 5 Years Total
£000 £000 £000 £000
Trade payables 9,358 - - 9,358
Other payables 4,541 693 1,004 6,238
Lease liabilities 581 511 2,873 3,965
Accruals 4,550 - - 4,550
Borrowings (including future interest) 413 22,670 - 23,083
Deferred consideration 583 592 1,227 2,402
______ ______ ______ ______
At 31 December 2020 20,026 24,466 5,104 49,596
______ _______ _______ _______
Market risk
As noted above, the interest payable on borrowings is dependent on the
prevailing rates of interest from time to time.
Capital risk management
The Group's objective when managing capital is to safeguard its ability to
continue as a going concern in order to provide returns to shareholders.
Capital comprises all components of equity, including share capital, capital
redemption reserve, share premium, translation reserve and retained earnings.
Typically returns to shareholders will be funded from retained profits,
however in order to take advantage of the opportunities available to it from
time to time, the Group will consider the appropriateness of issuing shares,
repurchasing shares, amending its dividend policy and borrowing, as is deemed
appropriate in the light of such opportunities and changing economic
circumstances.
24 Share capital
Allotted, called up and fully paid
2021 2020 2021 2020
Number Number £000 £000
Ordinary shares of 1p each 14,361,492 14,361,492 144 144
_________ _________ _________ _________
The Company adopted new Articles on 27 April 2016, which dispensed with the
need for the Company to have an authorised share capital. The Company has one
class of ordinary shares which carry no right to fixed income. All of the
Company's shares in issue are fully paid and each share carries the right to
vote at general meetings.
No shares were issued in the year (2020: 39,433 - for consideration of £394).
No shares were repurchased during the year (2020: Nil).
25 Reserves
Share premium, translation reserve, and retained earnings represent balances
conventionally attributed to those descriptions.
Other reserves include a capital redemption reserve of £31,000 (2020:
£31,000) and a translation reserve of £30,000 (2020: £42,000).
The capital redemption reserve represents the nominal value of ordinary shares
repurchased and cancelled by the Company and is non-distributable in normal
circumstances.
The Group having no regulatory capital or similar requirements, its primary
capital management focus is on maximising earnings per share and therefore
shareholder return.
The Directors have proposed that there will be no final dividend in respect of
2021 (2020: £Nil).
26 Share Incentive Plan
The Company established the Maintel Holdings Plc Share Incentive Plan ("SIP")
in 2006, which was updated in 2016. The SIP is open to all employees and
Executive Directors with at least six months' continuous service with a Group
company and allows them to subscribe for existing shares in the Company out of
their gross salary. The shares are bought by the SIP on the open market. The
employees and Directors 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 five years to benefit from the full tax benefits of the plan.
27 Share based payments
On 18 May 2009 the Directors of the Company approved the adoption of the
Maintel Holdings Plc 2009 Option Plan and on 20 August 2015 they approved the
Maintel 2015 Long-term Incentive Plan. The Remuneration Committee's report on
page 48 describes the options granted over the Company's ordinary shares.
In aggregate, options are outstanding over 2.0% of the current issued share
capital. The number of shares under option and the vesting and exercise prices
may be adjusted at the discretion of the Remuneration Committee in the event
of a variation in the issued share capital of the Company.
2021 2021 2020 2020
Number of Weighted Number of Weighted
Options Average Options Average
Exercise price Exercise price
Outstanding at 1 January 246,082 378.14p 295,236 354.56p
Granted during the year 148,000 375.00p 75,000 236.47p
Lapsed during the year (79,673) 351.55p (99,721) 294.17p
Exercised during the year - - (24,433) 1.00p
_______ _______ _______ _______
Outstanding at 31 December 314,409 383.40p 246,082 378.14p
_______ _______ _______ _______
Exercisable at year-end 13,409 727.12p 15,082 547.12p
The weighted average contractual life of the outstanding options was 8 years
(2020: 8 years), exercisable in the range 221p to 880p.
No shares were exercised in the year by way of issue of new shares. The
weighted average share price at the exercise date of the exercised shares in
the prior year was 219.06p. No options have expired during the periods covered
by the table above.
2021
Exercisable Number of
Price range Share options
221p to 274p 65,000
375p to 505p 236,000
675p to 880p 13,409
_______
314,409
_______
The Group recognised £49,000 of expenditure related to equity-settled
share-based payments in the year (2020: credit of £259,000).
The fair value of options granted during the year is determined by applying
the Black-Scholes model. The expense is apportioned over the vesting period of
the option and is based on the number which are expected to vest and the fair
value of these options at the date of grant.
The inputs into the Black-Scholes model in respect of options granted in the
period are as follows:
Date of grant 3 February
Number of options granted 148,000
Share price at date of grant 375p
Exercise price 375p
Option life in years 3
Expiry date 3 February 2024
Risk-free rate 0.37%
Expected volatility 39.89%
Expected dividend yield 0%
Fair value of options 1.029p
Expected volatility was determined by calculating the historical volatility of
the Group's share price for the five-year period prior to the date of grant of
the share option. The expected life used in the model is based on management's
best estimate. The Group did not enter into any share-based payment
transactions with parties other than employees during the current or previous
period.
28 Related party transactions
Transactions with key management personnel
Key management personnel comprise the Directors and executive officers. The
remuneration of the individual Directors is disclosed in the Remuneration
Committee report. The remuneration of the Directors and other key members of
management during the year was as follows:
2021 2020
£000 £000
Short term employment benefits 1,584 1,187
Social security costs 196 184
Contributions to defined contribution pension schemes 46 51
________ ________
1,826 1,422
________ ________
Other transactions - Group
During 2021, the Group paid fees of £5,400 (2020: £Nil) to AAA Consulting
Ltd, a company of which C Thompson is a shareholder and Director, in respect
of consultancy fees provided for the refinancing of the Group. No amounts were
outstanding at 2021 (2020: £Nil).
In 2021, the Group provided telecommunications services to Focus 4 U Limited,
amounting to £Nil (2020: £500) of which N J Taylor was a Director. Nick J
Taylor resigned from this appointment in March 2020. No amounts were
outstanding at 2021 (2020: £Nil).
In 2020, the Group traded with A J McCaffery, transactions amounting in
aggregate to less than £1,000. Angus McCaffery resigned as a Non-Executive
Director on 11 December 2020.
Other transactions - Company
The Company paid fees of £Nil (2020: £7,000) to Anchusa Consulting Limited,
a company of which A P Nabavi is a shareholder and Director, in respect of
consultancy services provided to the Company relating to the extension of its
credit facilities.
29 Post balance sheet events
Banking facilities
On 24 March 2022, the Group signed a new 3 year banking arrangement with HSBC
UK Bank plc ("HSBC") to replace its current bank facilities with the National
Westminster Bank Plc ("NWB"). The NWB facilities were due to expire on 27
October 2022. The new facility with HSBC consists of a revolving credit
facility ("RCF") of £20m in committed funds with a £6m term loan on a
reducing basis. Interest terms for the RCF and term loan are linked to SONIA
plus a fixed margin.
There are no other events subsequent to the reporting date which would have a
material impact on the financial statements.
30 Contingent liabilities
As security on the Group's loan and overdraft facilities, the Company has
entered into a cross guarantee with its subsidiary undertakings in favour of
the National Westminster Bank Plc. At 31 December 2021 each subsidiary
undertaking had a net positive cash balance.
The Company has entered into an agreement with Maintel Europe Limited,
guaranteeing the performance by Maintel Europe Limited of its obligations
under the lease on its London premises.
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