REG - Maintel Holdings PLC - Final Results
01/05/2024 07:15
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RNS Number : 7101M Maintel Holdings PLC 01 May 2024
1 MAY 2024
Maintel Holdings Plc
("Maintel", the "Company" or the "Group")
Final audited results for the year ended 31 December 2023
Performance turnaround supported by business transformation.
Maintel Holdings Plc, a leading provider of cloud and managed communications
services, announces its audited results for the 12-month period to 31 December
2023.
Key Financials
Final audited results for the year to 31 December: 2023 2022 Increase/ (decrease)
Group revenue (£'m) 101.3 91.0 11.3%
Gross profit (£'m) 31.2 27.9 11.8%
Adjusted EBITDA( 1 ) (£'m) 9.1 4.4 106.8%
Loss before tax (£'m) (6.8) (4.9) (38.8%)
Adjusted profit before tax ( 5 ) (£'m) 5.5 1.6 243.8%
Basic earnings / (loss) per share (p) (37.3) (30.4) (22.7%)
Adjusted earnings / (loss) per share ( 3 ) (p) 23.6 (1.6) -
Net debt( 4 ) (£'m) (18.1) (16.6) (9.0%)
Contracted cloud seats 182,000 168,000 8.3%
2023 Financial Headlines
· Group revenue was £101.3m, up 11.3% (2022: £91.0m) with recurring
revenue of £75.0m (2022: £70.1m) at 74% of total revenue (2022: 77%).
· The significant increase in revenue year on year reflects
accelerated trading momentum in the second half, which delivered growth beyond
the successful delivery of the order book contracted in 2022.
· Adjusted EBITDA rose by 107% to £9.1m (2022: £4.4m) flowing from
strong revenue growth compounded by the benefits delivered through the
business reorganisation executed during the first half of 2023.
· Gross profit increased to £31.2m (2022: £27.9m) with gross
margin of 30.8% consistent year on year (2022: 30.7%).
· Adjusted profit before tax( 5 ) increased to £5.5m (2022: £1.6m)
mainly due to the growth in revenue, and the reduction in operating expenses.
· The net debt ( 4 ) at year-end amounted to £18.1m, (2022: £16.6m),
owing mainly to the exceptional restructuring exceptional costs and increased
debt servicing charges. The benefits of restructuring are realised quickly and
permanently.
· Adjusted earnings per share( 2 ) at 23.6p, increased
significantly from the 1.6p adjusted loss per share in 2022.
· Basic loss per share at 37.3p (2022: basic loss per share at
30.4p), reflects exceptional costs of (£7.0m) plus increased interest charges
of £2.2m compared with £1.1m in 2022.
· Cash conversion( 3 ) was 97%( ) of adjusted EBITDA( 1 ) (2022:
245%.
2023 Operational Highlights
· Strategic review - was completed in Q1 2023 and led to the
implementation of a plan to transform the business, focusing on higher growth
product lines, adapting the delivery and support organisations to crystallise
substantial cost savings while creating a scalable cost base to support future
growth.
· Business transformation - was successfully completed in the first
half of 2023, resulting in better alignment of the product and sales teams on
the provision of specialised digital communications, and the formation of the
new professional services business group. As part of the group structure
simplifications, operations in Ireland have been wound down, and international
contracts are now fully serviced from our operations in the UK.
· New business - secured eight lots in the NS3 public framework, as
well as winning new long term value contracts which included Vanquis Banking
Group, Kingfisher IT Services, Harrods, Atos/Unify, Northampton General
Hospital NHS Trust and the Leeds Teaching Hospital.
Board changes
· On 11 May 2023, Clare Bates joined the Board of Directors as
Independent Director and Nick Taylor resigned from his Non-Executive Director
role on 30 May 2023.
· On 27 February 2024, Dan Davies was appointed to the Interim CEO
role (and continues his CTO and Head of Marketing roles) enabling Carol
Thompson to focus on her Executive Chair role. The search for a permanent CEO
is ongoing.
· On 18 April 2024, John Booth announced his intention to not seek
for re-election at the Company's Annual General Meeting and Carol Thompson
left as Executive Chair.
Post period end
· The Company successfully met the temporary milestones attributed by
HSBC to its Group loan covenants in 2023. HSBC was satisfied that the recovery
phase had been successfully completed and re-instated the initial covenants of
the loan from 31 March 2024. In March 2024, the facility was extended to 30
September 2025, from the initial term ending on 24 March 2025.
· In line with the disclosure made at the time of the 2022 results,
the Callmedia business was successfully wound-down in Q12024.
· Trading to date in 2024, in respect of revenue, EBITDA and orders, are
all in line with management expectations.
Publication of annual report/ posting and Notice of Annual General Meeting
The Company's 2023 Annual General Meeting will be held at 10.30am on 19 June
2024 at the offices of Hudson Sandler, 25 Charterhouse Square, London EC1M
6AE.
The 2023 Annual Report and Notice of AGM, together with a form of proxy, will
be posted to the Company's shareholders no later than 10 May 2024 and the 2023
Annual Report will also be available on the Company's
website, www.maintel.co.uk/investors (http://www.maintel.co.uk/investors) .
Commenting on the Group's results, Dan Davies, Interim Chief Executive
Officer, said:
"2023 was a year of business transformation and performance turnaround for
Maintel, thanks to the successful implementation of a strategic review and a
new focus on three technology segments: Unified Communications &
Collaboration, Customer Experience, and Security & Connectivity. The Group
delivered an 11.3% increase in revenue, a significant improvement in Adjusted
EBITDA, and a strong cash conversion performance.
"We are strong as a business and have made a confident start to 2024, with
trading at the end of quarter one being in line with management expectations.
While we continue to navigate challenging global macro-economic and political
issues, the Board expects FY2024 to reflect a consolidation of the progress
made in 2023, as management continues to focus on the strategic organic growth
initiatives, with a focus on margin improvement and revenue expansion
opportunities."
Notes
1 Adjusted EBITDA is EBITDA of £2.0m (2022: £3.3m), adjusted for
exceptional items (note 12) and share based payments (note 27).
2 Adjusted earnings/(loss) per share is basic loss per share of 37.3p (2022:
basic loss per share of 30.4p), adjusted for amortisation of acquired
intangibles, 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 (2022: 14.4m).
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 £20.0m RCF and £3.0m
Term loan.
5 Adjusted profit before tax of £5.5m (2022: £1.6m) is basic profit before
tax adjusted for amortisation of intangibles, exceptional items and share
based payments.
This announcement contains inside information for the purposes of the retained
UK version of the EU Market Abuse Regulation (EU) 596/2014 ("UK MAR").
For further information please contact:
Maintel Holdings PLC 0344 871 1122
Dan Davies, Interim Chief Executive Officer
Gab Pirona, Chief Financial Officer
Cavendish (Nomad and Broker) 020 7220 0500
Jonny Franklin-Adams / Emily Watts/ Hamish Waller (Corporate Finance)
Sunila de Silva (Corporate Broking)
Hudson Sandler (Financial & Corporate PR) 020 7796 4133
Wendy Baker / Nick Moore / Eloise Fleet maintel@hudsonsandler.com
NOTES TO EDITORS
Maintel Holdings Plc ("Maintel") is a leading provider of cloud, networking
and security managed communications services to the UK public and private
sectors. Its services aim to help its clients operate at the highest level by
designing, implementing, innovating and managing their vital digital
communication solutions, with a focus across three strategic pillars:
· Unified Communications and Collaboration - Making customers'
people more effective, efficient, and collaborative with UC&C technology.
The core focus of this pillar is the high growth Unified Communications as a
Service (UCaaS) market segment.
· Customer Experience - Helping customers to acquire, delight and
retain their customers using customer experience technology. The core focus of
this pillar is the high growth Contact Centre as a Service (CCaaS) market
segment.
· Security & Connectivity - Securely connecting customers'
people, partners and guests to their cloud platforms, applications, and data
with secure connectivity, and protecting their business from cyber threat. The
core focus of this pillar is the high growth Software Defined Wide Area
Networking (SD-WAN), Security Service Edge (SSE) and Cyber Managed Service
market segments.
Maintel combines technology from its strategic, global technology vendor and
carrier partners, with its own Intellectual Property, deployed from and
managed by its own platforms, to provide seamless solutions that its customers
can consume without the need for the internal skillset needed to deploy and
manage the technology themselves.
Maintel serves the whole market, with a particular focus on key verticals of
Financial Services, Retail, Public Healthcare, Local Government, Higher
Education, Social Housing and Utilities. Its core market constitutes
organisations with between 250 and 10,000 employees in the private, public and
not-for-profit sectors with headquarters in the UK.
The Company was founded in 1991 and it listed on London's AIM market in 2004
(AIM: MAI).
INTERIM CHIEF EXECUTIVE OFFICER'S STATEMENT
2023 was a year of business transformation, assisted by a more normalised
trading environment and the associated unwind of the order book, which
resulted in a turnaround of the Group's performance.
As we entered 2023, Maintel continued to face significant challenges including
overcoming the historic global semiconductor shortage and several years of
working practice changes in the client base due to the pandemic, meaning a new
approach was required in terms of technology usage, solution design and the
new and enduring move to hybrid working. Against this backdrop, our teams
worked well together and with their stakeholders to respond to these
challenges, designing a new way of working and delivering service which led to
an enduring step change in performance.
A comprehensive strategic review begun in late 2022, was completed in the
early part of 2023 and the subsequent transformation plan included
organisational and cost reduction changes. These changes focused the business
on higher growth product lines, adapting the delivery and support
organisations to crystallise substantial cost savings while creating a
scalable cost base to support future growth. This plan was successfully
implemented in the first half of 2023.
Performance
At the trading update on 22 January 2024, the Company announced that, as a
result of accelerated trading momentum, our financial performance for 2023 was
expected to be ahead of market expectations. Subsequently, we are pleased to
report an 11.3% increase in revenue to £101.3m (2022: £91.0m) and
significant progress in profit generation and working capital management that
resulted in a much improved Adjusted EBITDA performance of £9.1m (2022:
£4.4m).
Cash conversion in the period continued to be strong, driven by a rigorous
working capital management process. Our overall net debt position increased to
£18.1m (2022: £16.6m), noting that this includes exceptional items
(including one-time restructuring costs). Deleveraging remains a focus, and
with restructuring costs largely behind us, our goal is to return to leverage
and interest coverage ratios in line with market norms.
Strategy and Operational Update
Our leaner, more focused organisation delivered cost structure improvements
which had a one-time exceptional cost. The restructuring of the Group was
completed in the first half and payback was within the same year, leaving the
future clear for performance and yield improvement.
Maintel has been repositioned from a generalist in communications managed
services, to a specialist across three strategic pillars: Unified
Communications & Collaboration, Customer Experience and Security &
Connectivity. The services we provide across these three areas are vital to
our customers, as they fundamentally underpin their ability to thrive in a
dynamic hybrid working and multi-cloud world.
In order to establish an expert position in these three technology segments,
we have been focused on deepening our consultancy and advisory capabilities,
developing our own intellectual property to complement and differentiate the
business across its three pillars of focus, and strengthening our
relationships with the strategic technology vendor partners and carriers that
form the core of the services we now focus on delivering for our customers.
Great progress has already been made in each of these areas of specialisation,
with several exciting launches also planned for 2024. As is expanded on in the
"Our Future" section of this report, looking forward we also continue to plan
for the role that next generation technologies such as Artificial Intelligence
will play, both in terms of our own ways of working, but also how they will
enhance our product and service offerings.
Whilst executing our Group restructuring, we saw the continued easing of the
global semiconductor shortage which largely returned to normalised levels by
Q2 2023. This allowed our operational teams to focus on delivery and return
the order book to more usual levels by the end of the year. This acceleration
of order book delivery resulted in a significant increase in our
project-related revenues, seeing one-time technology and professional services
revenue increase by 25.6%.
The successful delivery of these projects resulted in an additional, ongoing
contribution to our recurring revenues as they went live, unlocking the
recurring managed service, software subscription and circuit/infrastructure
rental revenues.
As a result, our overall recurring revenues grew by 7%, including continued
strong growth in cloud revenues (+24.7%) and a return to robust growth for
data connectivity services (+11.4%), driven by our successes in the Software
Defined Wide Area Networking (SD-WAN) and cloud security space. These growth
areas were complemented by a 16.7% increase in call traffic revenues, driven
by significant contact centre calling volumes largely from our strong
financial services customer base.
Our heritage on-premise support base remain stable, an area that has been in
industry-wide double-digit decline for a number of years. We continue to
expect this area of the business to diminish over time, but are putting effort
and resources into reducing the rate of decline to maximise the longevity of
these profitable heritage contracts.
New Business Wins
2023 also saw a strong performance in new business wins. Maintel secured eight
lots in the new Network Services 3 (NS3 - RM6116) public sector framework (our
main route to market for the Public Sector), whilst also winning significant
new value and long-term contracts that included Vanquis Banking Group,
Kingfisher IT Services, Harrods, Atos/Unify, Northampton General Hospital NHS
Trust and The Leeds Teaching Hospital. These were all strong wins,
demonstrating the validity of the strategic market pivot and our ability to
capitalise on these areas of strong CAGR.
The Board
Clare Bates joined the Board of Directors as independent Non-Executive
Director on 11 May 2023 and Nick Taylor resigned from his Non-Executive
Director role on 30 May 2023.
On 27 February 2024, Carol Thompson relinquished her role as Interim CEO,
remaining Executive Chair. At the same time, I was appointed to the Interim
CEO role while continuing in my roles as CTO and leading our marketing team.
On 18 April 2024, John Booth announced his intention not to seek re-election
of the Company's Annual General Meeting and Carol Thompson left as Executive
Chair.
The search for a permanent CEO is ongoing and the search for a new independent
Chair is underway, to lead the business over the next phase of its
development.
Our People
Our core strength is in our people, who showed great resilience and focus
throughout 2023 in delivering this performance. Having achieved this result,
the team are positive, energised, and keen to engage with clients, both
existing and new.
The rate of technological change in our markets is faster than ever. The rapid
move to hybrid working and the adoption of public cloud services were both
accelerated significantly by the pandemic and play exceptionally well into our
specialised offerings. In addition, the rise of Artificial Intelligence brings
with it a generational change to the technology landscape. We continue to
invest in our people to ensure that we capitalise on the opportunities that
these technology trends will undoubtably bring.
The level of support that I've received, since taking on the Interim CEO role
in February, is more than I could ever have asked for. Our team are highly
skilled and inspiring, and I thank them for their hard work and dedication.
Mergers and acquisitions
Maintel has focused on evolving its products, customer engagements and
technological advantages in key areas such as SD-WAN, Cloud Security, CCaaS
& UCaaS, and therefore no acquisitions have been pursued. While focusing
on organic growth strategies, and our market strategy in 2024, we remain open
to new opportunities, ideas and partnerships so long as they are value
accretive and do not require up-front investment.
Current Trading and Outlook
Having concluded our organisational and strategic transformation in 2023,
positioning the business to generate strong growth and deliver solid economic
performance in the years to come, Maintel is focus remains on margin
improvement, mitigating the impact of continued inbound price pressure, and on
opportunities in high growth segments in 2024.
Whilst the top-line performance in 2023 was supported by the unwinding of the
significant order book built up during the semiconductor supply chain crisis
of 2021-22, and the acceleration of project delivery, 2024 has seen a return
to normalised business development and growth. The Company is expecting to
close significant new business wins in the first half of 2024, which will
contribute towards the expected growth in the second half of the year.
In the first quarter of 2024, major projects won in 2022 and 2023 were
completed, together with the successful implementation of planned annual price
increase. As a result, the overall performance of the business at the end of
quarter one is in line with management expectations. Strong cash management,
allowing for the effective servicing of our debt, combined with the solid
improvement in profitability, have enabled the Company to conclude, as of 31
March 2024, the temporary recovery phase agreed with HSBC at the beginning of
2023.
The business has made a confident start to 2024 with encouraging growth in our
sales pipeline and the cost management measures taken in 2023 will continue to
benefit the Group in 2024. While navigating challenging macro-economic and
political conditions, the Board expects 2024 to reflect a consolidation of the
progress made in 2023 as management continues to focus on strategic organic
growth initiatives, with a focus on margin improvement and revenue expansion
opportunities.
Dan Davies
Interim Chief Executive Officer
BUSINESS REVIEW
Results for the year
Revenues increased by 11.3% to £101.3m (2022: £91.0m) and adjusted EBITDA
increased to £9.1m (2022: £4.4m). Recurring revenue as a percentage of total
revenue (being all revenue excluding one-off projects) amounted to 74% (2022:
77%). While the relative percentage decreased due to the strength of the
project revenue (2023: £26m, compared with 2022: £21m), the absolute value
of the recurring revenue increased by 7.1% to £75m (2022: £70m). The
increase in recurring revenue was mainly driven by:
· Managed Services and Technology division revenue increased by 12% to
£52.1m (2022:£46.5m)supported by strong project revenue (+25.6%) following
the easing of supply chain shortages and the successful unwinding of our
contracted order book.
· Network Services division increased by 13.0% to £45.3m. Calls
and Lines increased by 3.2% to £10.6m (2022: £10.3m), largely resulting from
price. Data increased by 11.4% to £18.4m (2022: £16.5m) mainly due to new
implementations and price. Cloud revenue grew by £3.2m (+24.7%) due to
continued growth in public and private cloud contracts.
· Mobile division revenue reduced by £0.6m (-13.2%) to £3.8m
(2022: £4.4m) as the business development efforts are focused on core revenue
streams.
Gross profit for the Group increased by 12.1% to £31.2m (2022: £27.9m) with
gross margin improving to 30.9% (2022: 30.6%).
The Group delivered an adjusted profit before tax of £5.5m (2022: £1.6m).
Adjusted earnings per share (EPS)((a)) increased to 23.6 per share (2022: loss
per share of 1.6p) based on a weighted average number of shares in the period
of 14.4m (2022: 14.4m).
On an unadjusted basis, the Group generated a loss before tax of £6.8m (2022:
loss of £4.9m) and basic loss per share of 37.3p (2022: basic loss per share
of 30.4p). This includes £7.0m of net exceptional costs (2022: net
exceptional costs of £1.0m) (refer note 12) and amortisation of acquired
intangibles of £5.1m (2022: £5.4m).
( )
2023 2022 Increase / (decrease)
£000
£000
Revenue 101,262 91,036 11.2%
Loss before taxation (6,780) (4,889) 38.6%
Add back intangibles amortisation 5,111 5,437 (6.0)%
Exceptional items 6,979 904 672.0%
Share based remuneration 189 181 4.4%
Adjusted profit before tax 5,499 1,633 236.9%
Adjusted EBITDA((a)) 9,139 4,356 109.8%
Basic loss per share (37.3p) (30.4p) (22.7)%
Diluted (37.3p) (30.4p) (22.7)%
Adjusted Earnings / (loss) per share((b)) 23.6p (1.6p) -
Diluted 23.5p (1.6p) -
(a) Adjusted EBITDA is EBITDA of £2.0m (2022: £3.3m) adjusted for
exceptional items and share based remuneration (note 11)
(b) Adjusted profit after tax divided by weighted average number of shares
(note 10)
Cash performance
The Group generated net cash flows from operating activities of £5.0m (2022:
£9.8m) resulting in a cash conversion ((C)) of 97% for the full year (2022:
245%).
(c) 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 2023 2022 Increase /
£000 £000 (decrease)
Managed services related 25,807 25,572 0.9%
Technology((d)) 26,290 20,937 25.6%
Managed services and technology division 52,097 46,509 12.0%
Network services division 45,317 40,093 13.0%
Mobile division 3,848 4,434 (13.2%)
Total Group Revenue 101,262 91,036 11.2%
Cloud and Software Revenues £50.9m £39.7m 28.2%
(d) 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.
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 combines 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 non-recurring revenues from hardware, software,
professional and consultancy services and other non-recurring sales.
Services are predominantly provided across the UK, with some customers also
having international footprints. The division also supplies and installs
project-based technology, professional and consultancy services to our direct
clients and through our partner relationships.
2023 2022 Increase
£000 £000
Division revenue 52,097 46,509 12.0%
Division gross profit 12,285 11,399 7.8%
Gross margin (%) 24% 25%
This division increased revenue by 12.0% to £52.1m, mainly driven by strong
project revenue deriving from the delivery of projects sold in 2022 and 2023,
enabled by the availability of equipment following the easing of the
availability of semiconductor and the normalisation of the global technology
hardware supply chain. Both the technology and professional services divisions
benefitted from the improved trading conditions and grew respectively by 29%
and 18% respectively in 2023.
The slowdown in the decline of our heritage on premise support business,
combined with price actions resulted in a 0.9% growth in the revenue of that
product line to £25.8m. The general global market decline in the legacy PBX
and contact centre markets, still benefits the Network Services division with
customers from our legacy managed service base transitioning to Maintel's
cloud-based services. The most notable transformation contracts in 2023 being
for a number of key financial services and retail customers.
Gross profit increased in the division at a lower rate than revenue (+7.8%),
due to the revenue mix weighted towards the Technology revenue streams. The
revenue mix also translates into the decrease in the average gross margin of
the division from 25% to 24%.
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.
2023 2022 Increase /
£000 £000 (decrease)
Call traffic 3,408 2,921 16.7%
Line rental 7,234 7,391 (2.1%)
Data connectivity services 18,415 16,537 11.4%
Cloud 16,000 12,827 24.7%
Other 260 417 (37.6%)
13.0%
Total division 45,317 40,093
Division gross profit 17,386 14,639 18.8%
Gross margin (%) 38% 37%
Network Services revenue grew by 13.0% and gross profit increased by 18.8% to
£17.4m, resulted in a 1.0pts improvement in gross profit to 38%. The growth
in the higher margin cloud revenue products offsetting the decline in lower
margin call traffic revenues. Our fixed line telephony revenues (shown above
under call traffic and line rental) increased by 3.2% to £10.6m (2022:
£10.3m). Within this, our overall line rental revenues reduced by 2.1%,
reflecting the overall market decline for legacy Public Switched Telephone
Network (PSTN) products as customers migrate to consolidated modern SIP
Trunking or Cloud Communication services. However our revenue from Call
Traffic increased by 16.7%, driven by an increase in inbound contact centre
calling traffic and outbound SIP call traffic, predominantly from our strong
Financial Services customer base.
Data connectivity revenues saw a significant increase of 11.4%. The
acceleration of revenue since 2022 is now reflecting the increasing impact
that our new Software Defined Wide Area Networking (SD-WAN) and managed Cloud
Security Services are having on the performance of this division. Much of the
business closed in these new areas had been delayed from delivery by the
semiconductor supply shortage however delivery conditions have now normalised,
and the trend is set to continue as we continue to win new contracts.
Our momentum in the Security & Connectivity space continued in the period
with key contract wins for several customers including a leading retailer and
NHS Trusts.
The number of contracted seats across our cloud communication services
significantly increased, up 8.6% in the year to ~182,500 seats at the end of
December 2023 (~168,000 at December 2022), in line with the market growth
rates for this technology segment.
Overall, 75.4% of the overall cloud seats contracted in 2023 were public cloud
based, highlighting the expected growing trend of a preference for public
cloud services in many industry verticals. This trend was accelerated by some
significant wins in this space, including a >7,000 seat RingCentral Unified
Communications win for Kingfisher, a ~2000 seat RingCentral win with Angus
Council, a strategic Genesys Contact Centre win for the Vanquis Banking group,
and many other public cloud wins.
Our flagship ICON private cloud service sales also continued to perform, with
key wins such as a ~5,000 seat win for Gloucestershire Health and Care NHS
Foundation Trust. Demand for the Virtual Private Cloud service that our ICON
platform offers continues to remain high across the sectors with complex
requirements or where an absolute minimum of downtime is required, such as
Finance, Insurance, Healthcare and Housing verticals in particular. With the
platform providing very high (99.999%) core service availability levels,
including hybrid local survivability, guaranteed UK data sovereignty, security
ringfenced customer instances, license and handset investment protection and
the ability to allow customers to manage platform evolution at their own pace.
Our cloud communications pipeline remains strong, with key wins expected to
close in FY24. Having long surpassed the inflection point where economies of
scale are realised, our focus has now turned to quality of earnings over
volume for our cloud communications business.
Mobile Division
The 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.
Increase / (Decrease)
2023 2022
£000 £000
Revenue 3,848 4,434 (13.2%)
Gross profit 1,568 1,820 (13.8%)
Gross margin (%) 40.7% 41.0% (0.3%)
Number of customers 511 535 (4.5%)
Number of connections 28,445 26,689 6.6%
Revenues decreased by 13.2% to £3.8m (2022: £4.4m) and gross profits also
declined by 13.8%, reflecting the refocus of the Maintel's business
development towards our focus revenue streams. Although customer churn
remained low in the period, the lack of new business compounded by downward
price pressure on contract renewals drove the negative revenue progression.
Recognising these market challenges, Maintel has been proactively resourcing
the mobile sales team to focus on customer retention as opposed to new
business.
Maintel's mobile proposition continues to be multi-faceted and network
agnostic and ensuring we can provide competitive and complete coverage for the
UK. This enables us to be 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 the launch of our
new mobile reporting functionality within our ICON Portal digital customer
engagement platform has resonated well with our customer base.
Other operating income
Other operating income of £0.5m (2022: £0.5m) relates to the recovery of one
year's R&D tax credit of £0.5m (2022: £0.5m).
Other administrative expenses
2023 2022
£000 £000 (Decrease)
24,123 25,902 (6.9%)
Other administrative expenses
Other administrative expenses for the Group decreased by 6.9% to £24.1 (2022:
£25.9m).
Administrative expenses mainly comprise costs related to the sales and
marketing teams, the support functions and the managerial positions, as well
as the associated growth generating investments and general costs. The net
£1.8m reduction mainly reflects the savings from organisational optimisation
initiatives.
The overall average headcount in 2023 reduced by 2.2% (or 11 FTEs) and now
stands at 482 (2022: 493). At 31 December 2023, the FTEs was 445 compared to
503 at 31 December 2022 as a result of the Group's programme of
re-organisation, creating an organisation 'fit for future'.
Exceptional items
Exceptional costs of £7.0m (2022: exceptional costs £0.9m) were
substantially driven by the business transformation project (£4.9m) as
discussed in more detail below.
· The termination of the Callmedia business represents £2.3m non-cash
impairment charge of the previously capitalised software development and
£0.3m of development costs net of associated revenues.
· £1.6m results from the downsizing of the London premises and
exceptional service charge.
· Staff-related restructuring costs (£1.5m) associated with the
organisational review of the business.
· Other transformation costs in the year of £0.7m relate to the
strategic review of the business having led to the strategic pivot re-focusing
the business over three pillars: unified communications and collaboration,
customer experience and security & connectivity.
· Other exceptional costs include £0.4m of fees relating to our
credit facility agreement following the amended agreement that negotiated
temporary covenant terms in place during the phase of transformation of the
Company.
In 2022, exceptional costs of £0.9m were substantially driven by
staff-related restructuring costs (£0.4m) associated with the ongoing review
of the Group's operating costs base. Other exceptional costs included £0.3m
in relation to foreign exchange impact on a specific contract, which had been
delayed since 2021 as a consequence of the logistics issues related to the
Covid pandemic; and fees relating to a revised credit facilities agreement of
£0.2m.
A full breakdown is shown in note 12.
Interest
The Group's net interest charge was £2.2m in the year (2022: £1.1m).
Taxation
The tax credit in the period of £1.4m is driven by a £1.4m increase in
deferred tax in relation to tax losses (£0.7m) and fixed assets (£0.8m), and
a £0.3m adjustment to prior period deferred tax for temporary taxable timing
differences on intangible assets.
The prior year tax credit of £0.5m was driven by the net combined effect of
deferred tax arising from the current tax losses of £0.7m, fixed assets
(£0.2m) offset by a £0.3m adjustment to prior period taxation.
Dividends and earnings per share
The Board continues to take a prudent approach to the Company's dividend
policy. Throughout 2023 the Board has been focused on de-leveraging of the
Company and investing in the future growth of the Group's operations.
Consequently, it has made the decision not to propose a final dividend for the
full year 2023 (2022: nil pence per share). It remains the Board's intention
to review returns to shareholders when economic conditions improve and
financial performance permits.
Adjusted profit per share is 23.6p, increasing from the adjusted loss per
share of 1.6p in 2022. On an unadjusted basis, basic loss per share is at
37.3p (2022: basic loss per share at 30.4p).
Consolidated statement of financial position
Net assets decreased by £5.2m in the year to £14.2m at 31 December 2023
(2022: £19.4m) with the key movements explained below.
Trade and other receivables decreased by £2.0m to £25.4m (2022: £27.4m),
driven by a decrease in prepayments and accrued income to £12.7m (2022:
£13.7m). Within this, accrued income decreased by £0.6m, as billing
milestones were reached during the year as equipment became available;
prepayments decreased by £0.4m, as the result of a pro-active reduction in
upfront payments to suppliers.
Trade and other payables decreased by £3.2m to £43.9m (2022: £47.1m).
Within this, trade payables decreased by £5.9m at December 2023, following
the normalisation of working capital; deferred income increased by £1.7m
driven by recurring revenue and technology advance billings; Other payables
and accruals increased by £1.0m driven principally by the recognition of an
onerous lease contract and capital expenditure accruals.
Intangible assets decreased by £4.3m driven by impairment charges of £2.3m
in relation to the termination of the Callmedia business, amortisation of
£5.1m, offset by £3.1m of capital expenditure in relation to capitalised
software development and software licences.
Inventories reduced by £0.9m in the period driven by the unwinding of the
significant order book built up through 2021 and 2022.
Borrowings of £22.9m (2022: £22.7m) represent the Group's drawn down debt,
consisting of £20.0m Rolling Credit Facility and £3.0m Term loan, net of
costs of issue of £0.1m.
Cash flow
As at 31 December 2023 the Group had net debt of £18.2m, excluding issue
costs of debt of £0.1m, (31 December 2022: £16.8m), equating to a net debt:
Adjusted EBITDA ratio of 2.0x (2022: 3.8x). An explanation of the £1.4m
increase in net debt, excluding issue costs of debt, is provided below.
2023 2022
£000 £000
Cash generated from operating activities 4,972 9,839
Taxation paid - (491)
Capital expenditure (3,472) (3,337)
Issue costs of debt - (234)
Interest paid (1,894) (1,119)
Free cash flow (394) 4,658
Proceeds on disposal of Doc Sol (net of costs) - 16
Payments in respect of business combination - (1,227)
Proceeds from borrowings 2,500 25,500
Repayments of borrowings (2,400) (18,100)
Lease liability payments (975) (885)
(Decrease) / increase in cash and cash equivalents (1,269) 9,962
Cash and cash equivalents/(bank overdrafts) at start of period 6,136 (3,869)
Exchange differences (21) 43
Cash and cash equivalents at end of period 4,846 6,136
Bank borrowings (23,000) (22,900)
Net debt excluding issue costs of debt and IFRS 16 liabilities (18,154) (16,764)
Adjusted EBITDA 9,139 4,356
The Group generated £5.0m (2022: £9.8m) of cash from operating activities
and operating cashflow before changes in working capital of £5.3m (2022:
£3.5m).
Cash conversion ((C)) in 2023 was 97% (2022: 245%).
Capital expenditure of £3.5m (2022: £3.3m) was incurred relating to the
ongoing investment in the ICON platform and IT infrastructure.
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 facilities are given in note 21.
(c) calculated as operating cash flow (being adjusted EBITDA plus working
capital) to adjusted EBITDA
Risk management
The Board has overall responsibility for setting the risk appetite for the
business and for ensuring that the Group's ongoing risk profile aligns with
this. The Board is also responsible for identifying the business risks and
uncertainties faced by the Group that could have a material adverse effect on
the business, most of which are beyond its control, and for determining the
appropriate course of action to manage these. It reviews a dynamic risk report
quarterly, the process behind which is monitored by the Audit and Risk
committee. The most significant current risks and uncertainties are described
below; the extent of the impact of each would naturally depend on the precise
nature and duration of the event. This list is not exhaustive and there may be
risks and uncertainties of which we are currently unaware, or which we
currently believe are immaterial, that could have an adverse effect on the
business.
Nature of risk How do we mitigate the risk? Trend
Disruptive technology changes the landscape of the market, and the Group may Maintel has a dedicated product function to ensure that the Group's product Risk unchanged from last year
not keep pace with product and service innovation. and service portfolio remains competitive. We have also re-structured the
business to ensure focus on accelerating developments, including those of the
ICON platform.
A catastrophic event - for example a power outage or pandemic - means that the All employees can work remotely, and the Group's operational and Risk unchanged from last year
Group is unable to service its customers. administrative servers are located and managed such that damage from an outage
is minimised. A business continuity plan is in place which is reviewed
regularly and enhanced from the results of testing. The Group is also
increasingly moving to cloud based systems which are more readily available
for a response to a catastrophic event. ISO22301- Business Continuity is
maintained and externally audited on an annual basis.
Nature of risk How do we mitigate the risk? Trend
Cyber-attacks on Maintel, customer or supplier systems rendering them unusable The Group has an outsourced Security Operations Centre (SOC) and compliments Risk increased compared with last year
temporarily or permanently. this with in-house systems and tools to ensure Maintel and its customer
systems are secured. Customer networks and data are completely segregated from
the Group's and data and systems are replicated in more than one location.
Maintel holds several security accreditations including Cyber Essentials, ISO
27001 Information Security, ISO22301-Business Continuity and PCI DSS, all of
which entail extensive external auditing of the Group's systems and processes.
Maintel is also covered by cyber threat insurance.
Loss of key supplier through its business failure or termination of The Group has a multi-vendor strategy to reduce this risk and has defined Risk reduced compared with last year
relationship with Maintel. product managers who work closely with each supplier to maintain constructive
relationships and promptly identify potential issues, formalised by monthly
internal review meetings. Due to the unprecedented semi-conductor shortage, we
are monitoring our key suppliers more closely for adverse impacts and have
raised the risk level accordingly.
Loss of major customer through its business failure or termination of The impact of this risk is partly mitigated by the fact that no customer Risk unchanged from last year
relationship with Maintel or Maintel's partners. provides more than 10% of the Group's revenue. We have developed various
initiatives to manage this risk including executive sponsorship and improved
account management and engagement. We are actively monitoring customer churn
and continue to develop our customer offering and service delivery.
The Group's approach to financial risk management is further explained in note
23 to the financial statements.
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022
Note £000 £000
Revenue 4 101,262 91,036
Exceptional items 12 - (278)
Other cost of sales (70,022) (62,900)
Cost of sales (70,022) (63,178)
Gross profit 31,240 27,858
Other operating income 7 550 540
Intangibles amortisation 13 (5,111) (5,437)
Exceptional items 12 (6,979) (626)
Share-based payments 27 (189) (181)
Other administrative expenses 7 (24,123) (25,902)
Administrative expenses (36,402) (32,146)
Operating loss 7 (4,612) (3,748)
Financial expense 8 (2,168) (1,141)
Loss before taxation (6,780) (4,889)
Taxation credit 9 1,429 528
Loss for the year (5,351) (4,361)
Other comprehensive (expense)/income
for the year
Items that maybe reclassified to profit or loss:
Exchange differences on translation of foreign operations (16) 19
Total comprehensive expense for the year (5,367) (4,342)
Loss per share (pence)
Basic 10 (37.3)p (30.4)p
Diluted 10 (37.3)p (30.4)p
The attached notes form part of these consolidated financial statements.
Consolidated statement of financial position
at 31 December 2023
31 December 31 December 31 December 31 December
2023 2023 2022 2022
Note £000 £000 £000 £000
Non-current assets
Intangible assets 13 48,644 52,989
Right of use assets 16 1,036 2,263
Property, plant and equipment 15 1,109 1,381
Trade and other receivables 18 - 90
Deferred tax 20 471 -
51,260 56,723
Current assets
Inventories 17 1,677 2,594
Trade and other receivables 18 25,408 27,376
Cash and cash equivalents 4,846 6,136
Total current assets 31,931 36,106
Total assets 83,191 92,829
Current liabilities
Trade and other payables 19 43,938 47,115
Lease liabilities 22 909 820
Borrowings 21 2,322 22,726
Total current liabilities 47,169 70,661
Non-current liabilities
Other payables 19 502 370
Lease liabilities 22 731 1,452
Deferred tax 20 - 958
Borrowings 21 20,579 -
Total non-current liabilities 21,812 2,780
Total liabilities 68,981 73,441
Total net assets 14,210 19,388
Equity
Issued share capital 24 144 144
Share premium 25 24,588 24,588
Other reserves 25 64 80
Retained losses 25 (10,586) (5,424)
Total equity 14,210 19,388
The consolidated financial statements were approved and authorised for issue
by the Board on 30 April 2024 and were signed on its behalf by:
Gab Pirona
Chief Financial Officer
The attached notes form part of these consolidated financial statements.
Consolidated statement of changes in equity
for the year ended 31 December 2023
Share capital
Other reserves Retained losses
Share premium
Total
£000 £000 £000 £000 £000
Balance at 1 January 2022 144 24,588 61 (1,244) 23,549
Loss for the year - - - (4,361) (4,361)
Other comprehensive income:
Foreign currency translation differences - - 19 - 19
Total comprehensive expense - - 19 (4,361) (4,342)
for the year
Transactions with owners in their capacity as owners:
Share-based payments - - - 181 181
At 31 December 2022 144 24,588 80 (5,424) 19,388
Loss for the year - - - (5,351) (5,351)
Other comprehensive expense:
Foreign currency translation differences - - (16) - (16)
Total comprehensive expense - - (16) (5,351) (5,367)
for the year
Transactions with owners in their capacity as owners:
Share-based payments - - - 189 189
At 31 December 2023 144 24,588 64 (10,586) 14,210
The attached notes form part of these consolidated financial statements.
Consolidated statement of cash flows
for the year ended 31 December 2023
2023 2022
£000 £000
Operating activities
Loss before taxation (6,780) (4,889)
Adjustments for:
Net gain on disposal of Doc Sol - (16)
Intangibles amortisation 5,111 5,437
Share-based payments 189 181
Depreciation of plant and equipment 637 642
Depreciation of right of use asset 835 940
Impairment of property, plant and equipment 53 -
Impairment of right of use assets 761 -
Impairment of intangible fixed assets 2,288 -
Interest payable 2,168 1,141
Other non-cash items - 67
Operating cash flows before changes in working capital 5,262 3,503
Decrease/(increase) in inventories 917 (1,585)
Decrease in trade and other receivables 2,058 3,469
(Decrease)/increase in trade and other payables (3,265) 4,452
Cash generated from operating activities 4,972 9,839
Tax received/(paid) - (491)
Net cash inflows from operating activities 4,972 9,348
Investing activities
Purchase of plant and equipment (418) (932)
Purchase of intangible assets (3,054) (2,405)
Consideration for previously acquired businesses - (1,227)
Net proceeds from disposal of Doc Sol - 16
Net cash outflows from investing activities (3,472) (4,548)
Financing activities
Proceeds from borrowings 2,500 25,500
Repayment of borrowings (2,400) (18,100)
Lease liability repayments (975) (885)
Interest paid (1,894) (1,119)
Issue costs of debt - (234)
Net cash (outflows)/inflows from financing activities (2,769) 5,162
Net (decrease)/increase in cash and cash equivalents (1,269) 9,962
Cash and cash equivalents/(bank overdrafts) at start of year 6,136 (3,869)
Exchange differences (21) 43
Cash and cash equivalents at end of year 4,846 6,136
Consolidated statement of cash flows
for the year ended 31 December 2023 (continued)
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)
2023 2022
£000 £000
At 1 January 22,726 19,362
Proceeds from borrowings 2,500 25,500
Repayment of borrowings (2,400) (18,100)
Repayment of bank overdraft - (3,869)
Payments of interest on bank loans and overdraft (1,821) (1,022)
Interest expense on bank loans and overdraft (non-cash movement) 2,009 950
Movement on interest accrual (balance held within accruals - non-cash (188) 72
movement)
Issue costs of debt - (234)
Amortisation of issue costs (non-cash movement) 75 67
________ ________
At 31 December 22,901 22,726
________ ________
Lease liabilities (Note 22)
2023 2022
£000 £000
At 1 January 2,272 3,157
Capital lease repayments (975) (885)
Interest repayments (73) (97)
Interest expense (non-cash movement) 73 97
New leases (non-cash movement) 343 -
________ ________
At 31 December 1,640 2,272
________ ________
Current 909 820
Non-current 731 1,452
________ ________
The notes on following pages form part of these consolidated financial
statements.
Notes forming part of the consolidated financial statements
for the year ended 31 December 2023
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 2006.
(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. The facility with HSBC Bank plc ("HSBC") consisting of a revolving
credit facility ("RCF") of £20m with a £6m term loan on a reducing basis,
remained in place during the year and has been extended to 30 September 2025
in March 2024. Repayments started in October 2022, and at 31 December 2023,
£3m remained outstanding. The key covenants include net leverage ratio and
interest cover tests, assessed on a quarterly basis. During 2023, the Company
successfully met the temporary milestones and HSBC being satisfied that the
recovery phase had been successfully completed, the initial covenants of the
loan were reinstated in early 2024. As a consequence, the debt has been
classified to long term liabilities at 31 December 2023, whilst the debt had
been reclassified as current liabilities in 2022.
As highlighted in the risk management section the Board has put robust
business continuity plans in place to ensure continuity of trading and
operations. Management believes that following the strategic pivot operated in
2023, with a product offering aligned to its strategy, the pipeline will
enable Maintel to deliver upside from the budgeted revenue, whilst maintaining
the efficiency of its cost base and continuously enhancing margins.
The Group's forecasts and projection models have been built on a prudent
basis, taking into account inflationary pressure, reasonable prudence with
regard to both project delivery and timing of pipeline conversion. The Board
has reviewed the model in detail, taking account of reasonably possible
changes in trading performance, including sensitivities in pipeline conversion
and renewal risk, together with further mitigating actions it could take such
as operating costs savings. 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, the Directors have a reasonable expectation that the Company
and the Group have adequate resources to continue in operational existence for
the foreseeable future. Therefore, the Group financial statements have been
prepared on a going concern basis.
(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
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
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 kit - 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 customer - 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 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.
Depreciation for leased property (disclosed as 'Land and buildings' in Note
16), motor vehicles and office and computer equipment is charged to the
statement of comprehensive income on a straight-line basis over the shorter of
the lease term and the useful economic life of the asset. The useful economic
life of a right of use asset is based on that assigned to equivalent owned
assets, as disclosed in the 'Property, plant and equipment' policy (n).
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.
Brands
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.
Product platform
The product platform is stated at cost less accumulated amortisation. 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.
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 three years in respect of the Microsoft licences.
The net book value of the Callmedia capitalised systems, software and
development costs has been impaired in the year in line with the decision made
in 2023 to exit the Callmedia business by January 2024. See Note 13 for
further information.
Licences (third-party subscription licences)
Third-party subscription licences are 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. Licences are amortised over their estimated useful lives of three
years.
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 economic 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, lease liabilities and
derivative financial instruments.
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.
Derivative financial instruments held by the Group at 31 December 2022
represented foreign exchange contracts held to manage the cash flow exposures
of forecast transactions denominated in foreign currencies. The Group entered
into derivative financial instruments principally with financial institutions
with investment grade credit ratings. No such instruments were held at
December 2023, as the Group had no material exposure to foreign currency at
that time.
Foreign exchange contracts are held at fair value using techniques which
employ the use of market observable inputs. The key inputs used in valuing the
derivatives are the exchange rates at year end between Pound Sterling and US
Dollar. Market values have been used to determine fair value and have been
obtained from an independent third party. Any movements in the fair value of
the foreign exchange contracts are recognised in the consolidated statement of
comprehensive income as no hedge accounting is applied.
(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 Pound Sterling. All Group companies
at 31 December 2023 have a functional currency of Pound Sterling, consistent
with the presentation currency of the Group's consolidated financial
statements. Transactions in currencies other than Pound Sterling are recorded
at the rates of exchange prevailing on the dates of the transactions.
As at 31 December 2023, the Group, did not hold any interest in foreign
subsidiaries, following the transfer of the control of Maintel International
Limited ("MIL") to the liquidators of MIL. Certain non-material contracts had
been transferred to Maintel Europe Limited ("MEL") prior to the appointment of
the liquidator. See Note 14 for further information.
On consolidation the results of MIL, which are included in the consolidated
statement of comprehensive income up to the transfer of the entity to the
liquidators, are translated into Pound Sterling, at rates approximating those
ruling when the transactions took place. The monetary assets and liabilities
of MIL are translated at the rate ruling at the reporting date. Non-monetary
items that are measured at historical cost are translated using rates
approximating those ruling at the dates of the initial transactions.
Exchange differences on retranslation of the foreign subsidiary are recognised
in other comprehensive income and accumulated in a translation reserve.
(t) Share-based payments
The Group uses the Black-Scholes Model to calculate the appropriate fair value
at the date the options are granted to the employee.
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.
(u) Accounting standards issued
The following standards and amendments to standards were issued and adopted in
the year, with no material impact on the financial statements:
· IFRS 17 - Insurance Contracts
· Deferred tax related to assets and liabilities arising from a
single transaction - amendments to IAS 12
· International tax reform and temporary exception for deferred tax
assets and liabilities related to the OECD pillar two income taxes -
amendments to IAS 12
· Definition of Accounting Estimates - amendments to IAS 8
· Disclosure of Material Accounting Policies - amendments to IAS 1
and IFRS Practice Statement 2
There were no other new accounting standards issued that have been adopted in
the year.
(v) 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:
Effective for annual periods beginning on or after 1 January 2024
· Lease liability in a sale and leaseback transaction - amendments
to IFRS 16
· Non-current liabilities with covenants - amendments to IAS 1
· Supplier finance - amendments to IAS 7 and IFRS 7
Effective for annual periods beginning on or after 1 January 2025
· Lack of exchangeability in currencies - amendments to IAS 21
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 2023
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.
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
Network services
Mobile Total
£000 £000 £000 £000
Revenue 52,097 45,317 3,848 101,262
Gross profit 12,285 17,387 1,568 31,240
Other operating income 550
Other administrative expenses (24,123)
Share-based payments (189)
Intangibles amortisation (5,111)
Exceptional items (6,979)
Operating loss (4,612)
Financial expense (2,168)
Loss before taxation (6,780)
Taxation 1,429
Loss after taxation (5,351)
Revenue is wholly attributable to the principal activities of the Group in the
current and prior year.
Analysis of revenue by geographical location:
2023 2022
£000 £000
United Kingdom 99,526 89,037
European Union 1,655 1,951
Rest of the world 81 48
________ ________
101,262 91,036
________ ________
In 2023 the Group had no customer (2022: None) which accounted for more than
10% of its revenue.
Analysis of revenue by timing of recognition:
2023 2022
£000 £000
Revenue recognised at a point in time 26,290 20,900
Revenue recognised over time 74,972 70,136
________ ________
101,262 91,036
________ ________
Analysis of movements in deferred income:
2023 2022
£000 £000
Deferred income - opening balance (20,135) (18,572)
Revenue recognised in the year 17,676 17,188
New revenue deferrals in the year (19,407) (18,751)
________ ________
Deferred income - closing balance (21,866) (20,135)
________ ________
Analysis of other expenses:
Managed service and technology Central
Network services
Mobile Total
£000 £000 £000 £000 £000
Other expenses
Intangibles amortisation - - - (5,111) (5,111)
Depreciation - - - (1,472) (1,472)
Exceptional items (1,104) (1,516) - (4,359) (6,979)
Exceptional items attributed to Managed service and technology relate to
transformation costs incurred. Please see Note 12 for further details.
Year-ended 31 December 2022
Managed service and technology
Network services
Mobile Total
£000 £000 £000 £000
Revenue 46,509 40,093 4,434 91,036
Gross profit 11,399 14,639 1,820 27,858
Other operating income 540
Other administrative expenses (25,902)
Share-based payments (181)
Intangibles amortisation (5,437)
Exceptional items (626)
Operating loss (3,748)
Financial expense (1,141)
Loss before taxation (4,889)
Taxation 528
Loss after taxation (4,361)
Analysis of other expenses:
Managed service and technology Central
Network services
Mobile Total
£000 £000 £000 £000 £000
Other expenses
Intangibles amortisation - - - (5,437) (5,437)
Depreciation - - - (1,582) (1,582)
Exceptional items (278) - - (626) (904)
Exceptional items attributed to Managed service and technology in the year to
31 December 2022 relate to foreign exchange expenses on delayed orders. Please
see Note 12 for further details.
5 Employees
2023 2022
The average number of employees, including Directors, during the year was: Number Number
Corporate and administration 98 88
Sales and customer service 162 175
Technical and engineering 222 230
________ ________
Total employees 482 493
________ ________
Staff costs, including Directors, consist of: £000 £000
Wages and salaries 26,167 27,004
Social security costs 2,859 3,317
Pension costs 709 748
Share-based payments 189 181
________ ________
Total staff costs 29,924 31,250
________ ________
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 £166,000 (2022: £167,000) 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:
2023 2022
£000 £000
Directors' emoluments 1,383 833
Pension contributions 36 17
________ ________
Total Directors' remuneration 1,419 850
________ ________
Included in the above is the remuneration of the highest paid Director as
follows:
2023 2022
£000 £000
Director's emoluments 492 326
Pension contributions 12 9
________ ________
Total remuneration of the highest paid Director 504 335
________ ________
The Group paid contributions into defined contribution personal pension
schemes in respect of six Directors during the year, two of whom were
auto-enrolled at minimal contribution levels, three were on defined
contributions and one on both auto-enrolment and defined contribution schemes
(2022: six, two auto-enrolled, three defined contribution, one both defined
contribution and auto enrolled).
Further details of Director remuneration are shown in the Remuneration
Committee report included in the annual report.
7 Operating loss
2023 2022
£000 £000
This has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment 637 642
Depreciation of right of use assets 835 940
Amortisation of intangible fixed assets 5,111 5,437
Impairment of property, plant and equipment( 1 ) 53 -
Impairment of right of use assets( 1 ) 761 -
Impairment of intangible fixed assets( 1 ) 2,288 -
Foreign exchange movement (36) 232
Fees payable to the Company's auditor for the audit of the parent and 59 55
consolidated accounts
Fees payable to the Company's auditor for other services:
- Audit of the Company's subsidiaries pursuant to legislation 122 113
- Audit-related assurance services 22 24
Fees payable to other advisors for tax compliance services 18 17
________ ________
( 1 ) All impairment charges have been recognised in exceptional items. Please
see Note 12 for further details.
Other income in the year relates primarily to research and development credits
of £331k (2022: £540k).
8 Financial expense
2023 2022
£000 £000
Interest payable on bank loans 2,084 1,017
Interest payable on deferred consideration - 27
Interest expense on leases 73 97
Other interest payable 11 -
________ ________
Total financial expense 2,168 1,141
________ ________
Interest payable on bank loans includes £75,000 (2022: £67,000) amortisation
of issue costs.
9 Taxation
2023 2022
£000 £000
UK corporation tax
Corporation tax on UK loss for the year - -
Adjustment for prior year - 67
________ ________
- 67
Overseas tax
Corporation tax on overseas profit for the year - 5
________ ________
Total current taxation on loss on ordinary activities - 72
Deferred tax (Note 20)
Current year (1,383) (895)
Adjustment for prior year (46) 295
________ ________
Total deferred taxation (1,429) (600)
________ ________
Total taxation credit on loss on ordinary activities (1,429) (528)
________ ________
9 Taxation (continued)
The standard rate of corporation tax in the UK for the year was 23.52% (2022:
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 loss before tax are as
follows:
2023 2022
£000 £000
Loss before tax (6,780) (4,889)
________ ________
Loss at the standard rate of corporation tax in the UK of 23.52% (1,595) (929)
(2022: 19.00%)
Effect of:
Net expense not deductible 213 -
Net income not taxable - (42)
Adjustments relating to prior years (46) 465
Effects of overseas tax rates - (3)
Effects of changes in tax rates (25) 6
Capital allowances less than/(in excess) of depreciation 21 (25)
Other 3 -
________ ________
Total taxation credit on loss on ordinary activities (1,429) (528)
________ ________
Included within 'Adjustments relating to prior years' is £Nil (2022:
£103,000) in relation to R&D expenditure credits for previous accounting
periods. The £46,000 adjustment for the year ended 31 December 2023 relates
to a decrease in deferred tax timing differences on losses and other items per
the final 2022 trading subsidiary Corporation tax return as compared to the
draft tax return available at the time of signing of the 2022 financial
statements.
Factors that may affect future tax charges/credits:
The rate of UK Corporation tax increased from 19% to 25% on 6 April 2023.
Existing deferred tax assets and liabilities had been calculated at the rate
at which the relevant balances were expected to be recovered or settled. This
rate was 25% and therefore existing deferred tax liabilities have not had to
be remeasured.
There are no future factors at the reporting date that are expected to impact
the Group's future tax charge. The Group is not within the scope of the OECD
Pillar Two model rules.
10 Earnings per share
Earnings per share is calculated by dividing the loss after tax for the year
by the weighted average number of shares in issue for the year, these figures
being as follows:
2023 2022
£000 £000
Loss after tax (5,351) (4,361)
Adjustments:
Intangibles amortisation (net of non-acquired element) 3,724 4,051
Exceptional items (Note 12) 6,979 904
Tax relating to above adjustments (2,176) (1,184)
Share-based payments 189 181
Interest charge on deferred consideration - 27
Tax adjustments relating to prior years 30 67
Adjustment for the tax impact of the change in the deferred tax rate - 81
________ ________
Adjusted earnings used in adjusted EPS 3,395 (234)
________ ________
Adjustment for intangibles amortisation is in relation to intangible assets
acquired via business combinations.
2023 2022
Number Number
(000s) (000s)
Weighted average number of ordinary shares of 1p each used as the denominator 14,362 14,362
in calculating basic EPS and diluted EPS
Potentially dilutive shares 76 11
________ ________
Weighted average number of ordinary shares of 1p each used as the denominator 14,438 14,362
in calculating diluted Adjusted EPS
________ ________
6
Earnings/(loss) per share
Basic (37.3)p (30.4)p
Diluted (37.3)p (30.4)p
Adjusted - basic 23.6p (1.6)p
Adjusted - diluted 23.5p (1.6)p
The adjustments to losses have been made in order to provide a clearer picture
of the trading performance of the Group after removing amortisation and
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 shares, 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.
Potentially dilutive shares have not been included in the diluted EPS for the
current or prior year on the basis that they are anti-dilutive, however they
may become dilutive in future periods.
11 Adjusted earnings before interest, tax, depreciation and amortisation (Adjusted EBITDA)
Note 2023 2022
£000 £000
Loss before tax (6,780) (4,889)
Financial expense 8 2,168 1,141
Depreciation of property, plant and equipment 15 637 642
Depreciation of right of use assets 16 835 940
Amortisation of intangible fixed assets 13 5,111 5,437
________ ________
EBITDA 1,971 3,271
________ ________
Share-based payments 27 189 181
Exceptional items 12 6,979 904
________ ________
Adjusted EBITDA 9,139 4,356
________ ________
12 Exceptional items
The costs analysed below have been shown as exceptional items in the income
statement as they are not considered to be part of the Group's recurring
income or expenses:
2023 2022
£000 £000
Exceptional items included within cost of sales
Transformation costs - -
Foreign exchange expense on delayed orders - 278
Exceptional items included within administrative expenses
Transformation costs 5,051 -
Staff restructuring and other employee related costs 1,548 417
Fees relating to revised credit facilities agreement 380 162
Costs relating to an onerous property lease - 63
Gain on disposal of Doc Sol - (16)
________ ________
Total exceptional items 6,979 904
________ ________
Exceptional items included within cost of sales
Foreign exchange expense on delayed orders in the prior year of £278,000
related to the loss incurred on a contract that faced significant delay due to
the industry-wide chip shortages. This is considered to be exceptional
circumstances given the 18-month wait between orders with the supplier and
installation for the client (15 months having elapsed at 31 December 2022).
These delays resulted in the Group incurring a loss on fluctuating USD to GBP
exchange rates as the required materials were invoiced in USD.
Exceptional items included within administrative expenses
Transformation costs of £5,051,000 (2022: £Nil) incurred in the year include
the following items relating to the ongoing strategic review of the business
which was implemented during the year:
Impairment charges amounting to £2,288,000 (2022: £Nil) relating to
previously capitalised 'Callmedia' software development and development costs
of £333,000 net of associated revenues, resultant to the decision made during
the year to discontinue the development of our own "Callmedia" Contact Centre
product line, including the CX Now public cloud CCaaS variant. Refer to Note
13 Intangible assets.
Onerous lease costs of £1,342,000 include £761,000 relating to the
impairment of the right of use asset in relation to the Blackfriars Road
London office lease, £53,000 relating to the impairment of leasehold
improvements and other onerous operating lease costs of £528,000. In
addition, exceptional service charges of £237,000 were incurred in the year
also relating to the downsizing of the London office space.
Other transformation costs in the year of £851,000, included professional
fees from third party specialists engaged by the company to perform a
strategic and product review of the business and costs associated with the
implementation of the results of the strategic and full product review.
Staff restructuring and other employee related costs of £1,548,000 (2022:
£417,000) principally include redundancy costs.
Fees relating to the credit facilities agreement of £380,000 (2022:
£162,000) include associated professional fees incurred to negotiate the
temporary terms in place during the phase of transformation of the Company. In
2022, fees of £162,000 included the professional fees associated with the
negotiating of the facility that commenced in that year.
Onerous lease costs in the prior year of £63,000 relate to the Fareham
property and included the remaining expected costs of completion in relation
to the onerous contract to July 2023.
13 Intangible assets
Goodwill Customer relationships Brands Product platform Software and licences Total
Other
£000 £000 £000 £000 £000 £000 £000
Cost
At 1 January 2022 40,516 43,721 3,480 2,276 8,623 250 98,866
Additions - - - 362 2,043 - 2,405
_______ _______ ______ _______ _______ ______ ______
At 31 December 2022 40,516 43,721 3,480 2,638 10,666 250 101,271
Additions - - - 220 2,834 - 3,054
_______ _______ ______ _______ _______ ______ ______
At 31 December 2023 40,516 43,721 3,480 2,858 13,500 250 104,325
_______ _______ ______ _______ _______ ______ ______
Amortisation and Impairment
At 1 January 2022 317 33,479 2,524 1,300 5,183 42 42,845
Amortisation in the year - 3,419 410 316 1,242 50 5,437
_______ _______ ______ _______ _______ ______ ______
At 31 December 2022 317 36,898 2,934 1,616 6,425 92 48,282
Amortisation in the year - 3,062 410 352 1,237 50 5,111
Impairment in the year - - - - 2,288 - 2,288
_______ _______ ______ _______ _______ ______ ______
At 31 December 2023 317 39,960 3,344 1,968 9,950 142 55,681
_______ _______ ______ _______ _______ ______ ______
Net book value
At 31 December 2023 40,199 3,761 136 890 3,550 108 48,644
_______ _______ ______ _______ _______ ______ ______
At 31 December 2022 40,199 6,823 546 1,022 4,241 158 52,989
_______ _______ ______ _______ _______ ______ ______
Amortisation charges for the year have been charged through administrative
expenses in the statement of comprehensive income.
Included within the amortisation charge for the year ended 31 December 2023 is
£1,387,000 (2022: £1,386,000) relating to amortisation from non-acquired
intangible assets (here meaning assets not acquired as part of a business
combination).
Impairment charges for the year of £2,288,000 (2022: £Nil) relate to
Callmedia and have been recognised within exceptional items (Note 12).
Software and product platform include capitalised development costs, being
internally generated assets. Other intangible assets include stock management
platforms which are managed by third parties.
Goodwill
The carrying value of goodwill is allocated to the cash generating units as
follows:
2023 2022
£000 £000
Network services division 21,134 21,134
Managed service and technology division 15,758 15,758
Mobile division 3,307 3,307
________ ________
Total carrying value of goodwill 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 and a pre-tax discount rate of 14.92% (2022: 13.93%) is applied to the
resultant projected cash flows of each CGU.
Key assumptions used to calculate the cash flows used in the impairment
testing were as follows:
Network services division: average annual revenue growth rate 15.9% (2022:
7.6%), terminal growth rate 3.0% (2022: 2.0%), average gross margin 41.7%
(2022: 42.6%).
Managed service and technology division: average annual revenue growth rate
1.4% (2022: 3.9%), terminal growth rate 3.0% (2022: terminal growth rate
2.0%), average gross margin 25.7% (2022: 25.7%).
Mobile division: average annual revenue growth rate 1.1% (2022: 1.9%),
terminal growth rate 0.0% (2022: 0.1%), average gross margin 47.9% (2022:
45.7%).
The Group's impairment assessment at 31 December 2023 indicates that there is
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 growth
rate 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 principal subsidiary undertaking at the end of the
year was:
Maintel Europe 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.
In addition, the following subsidiaries of the Company were dormant as at 31
December 2023 and had been placed under members' voluntary liquidation during
the year:
Maintel International Limited Datapoint Global Services Limited
Maintel Voice and Data Limited Maintel Network Solutions Limited
Maintel Finance Limited Datapoint Customer Solutions Limited
District Holdings Limited Maintel Mobile Limited
Intrinsic Technology Limited Azzurri Communications Limited
Warden Holdco 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.
The registered address of Maintel Europe Limited is the same as that of the
parent. The registered address of each other subsidiary, other than Maintel
International Limited, is Teneo Financial Advisory Limited, The Colmore
Building, 20 Colmore Circus Queensway, Birmingham, B4 6AT. The registered
address of Maintel International Limited is Teneo, 3rd Floor, 20 on Hatch,
Hatch Street Lower, Dublin 2, Ireland.
15 Property, plant and equipment
Leasehold improvements Office and computer equipment Total
Motor vehicles
£000 £000 £000 £000
Cost
At 1 January 2022 832 7,776 47 8,655
Additions 6 926 - 932
Disposals (325) (6,589) (47) (6,961)
________ ________ ________ ________
At 31 December 2022 513 2,113 - 2,626
Additions - 418 - 418
________ ________ ________ ________
At 31 December 2023 513 2,531 - 3,044
________ ________ ________ ________
Depreciation and impairment
At 1 January 2022 593 6,924 47 7,564
Depreciation in the year 57 585 - 642
Disposals (325) (6,589) (47) (6,961)
________ ________ ________ ________
At 31 December 2022 325 920 - 1,245
Depreciation in the year 57 580 - 637
Impairment in the year 53 - - 53
________ ________ ________ ________
At 31 December 2023 435 1,500 - 1,935
________ ________ ________ ________
Net book value
At 31 December 2023 78 1,031 - 1,109
________ ________ ________ ________
At 31 December 2022 188 1,193 - 1,381
________ ________ ________ ________
During the prior year, the Group underwent a review of its fixed asset
registers and disposed of £325,000 Leasehold improvements, £6,589,000 Office
and computer equipment and £47,000 Motor vehicles, all included within
Property, plant and equipment. These assets had been fully depreciated and
were no longer in revenue-generating use by the prior year end. No profit or
loss on disposal was recognised on these disposals.
Impairment charges for the year of £53,000 (2022: £Nil) relate to onerous
lease costs and have been recognised within exceptional items (Note 12).
16 Right of use assets
Land and buildings Office and computer equipment Motor vehicles Total
£000 £000 £000 £000
Cost
At 1 January 2022 5,507 1,213 188 6,908
Additions 30 - - 30
Disposals (229) (822) (188) (1,239)
________ ________ ________ ________
At 31 December 2022 5,308 391 - 5,699
Additions 26 343 - 369
________ ________ ________ ________
At 31 December 2023 5,334 734 - 6,068
________ ________ ________ ________
Depreciation and impairment
At 1 January 2022 2,793 754 188 3,735
Depreciation charge for the year 656 284 - 940
Disposals (229) (822) (188) (1,239)
________ ________ ________ ________
At 31 December 2022 3,220 216 - 3,436
Depreciation charge for the year 525 310 - 835
Impairment charge for the year 761 - - 761
________ ________ ________ ________
At 31 December 2023 4,506 526 - 5,032
________ ________ ________ ________
Net book value
At 31 December 2023 828 208 - 1,036
________ ________ ________ ________
At 31 December 2022 2,088 175 - 2,263
________ ________ ________ ________
During the prior year, the Group underwent a review of its fixed asset
registers and disposed of £229,000 Buildings-related assets, £822,000 Office
and computer equipment and £188,000 Motor vehicles, all included within Right
of use assets. These assets had been fully depreciated and were no longer in
revenue-generating use by the prior year end. No profit or loss on disposal
was recognised on these disposals.
Impairment charges for the year of £761,000 (2022: £Nil) relate to onerous
lease costs and have been recognised within exceptional items (Note 12).
17 Inventories
2023 2022
£000 £000
Maintenance stock - 26
Stock held for resale 1,677 2,568
________ ________
Total inventories 1,677 2,594
________ ________
Cost of inventories recognised as an expense 13,831 10,992
________ ________
No provisions were made against maintenance stock in 2023 (2022: £10,000).
This is recognised in cost of sales. No provisions were made against Stock
held for resale in 2023 or 2022 as this balance represents new hardware
awaiting installation at customer sites.
18 Trade and other receivables
2023 2022
Current trade and other receivables £000 £000
Trade receivables 12,336 12,975
Other receivables 315 713
Prepayments and accrued income 12,757 13,688
________ ________
Total current trade and other receivables 25,408 27,376
________ ________
All amounts shown above fall due for payment within one year.
2023 2022
Non-current trade and other receivables £000 £000
Trade receivables - 90
________ ________
Total non-current trade and other receivables - 90
________ ________
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 decreased from £1.9m in 2022 to £1.3m at the
reporting date;
- Prepayments decreased from £11.9m in 2022 to £11.5m at the
reporting date;
- Deferred income increased from £20.1m in 2022 to £21.9m at the
reporting date; and
- Deferred costs net of accrued costs decreased from £9.6m in 2022 to
£9.3m at the reporting date.
18 Trade and other receivables (continued)
The corresponding adjustments for these movements represent revenues and costs
recognised in the income statement in the year, driven by an increase in
recurring revenues and associated level of advance billings, combined with the
discharging of technology inventories used in the delivery of projects.
19 Trade and other payables
2023 2022
Current trade and other payables £000 £000
Trade payables 12,761 18,631
Other tax and social security 2,351 2,227
Other payables 3,521 2,823
Accruals 3,439 3,169
Deferred income 21,866 20,135
Derivative financial instruments (Note 23) - 130
________ ________
Total current trade and other payables 43,938 47,115
________ ________
The £5.9m decrease in Trade payables in the year is predominantly due to
prior year delays in receiving certain materials from suppliers which were
required for customer installations, in particular switches. The Group has
agreements with suppliers to delay payment until the materials are delivered
and installed. These delays have significantly reduced during the current
year.
2023 2022
Non-current other payables £000 £000
Intangible licences and other payables 298 118
Advanced mobile commissions 61 58
Other payables 143 194
________ ________
Total non-current trade and other payables 502 370
________ ________
20 Deferred taxation
Property,
plant and Intangible Tax
equipment assets losses Other Total
£000 £000 £000 £000 £000
Net (asset)/liability at 1 January 2022 (1,276) 2,930 - (96) 1,558
Charge/(credit) to consolidated statement of comprehensive income 370 (569) (675) (21) (895)
Adjustment to prior year to consolidated statement of comprehensive income (25) 280 - 40 295
________ ________ ________ ________ ________
Net (asset)/liability at 31 December 2022 (931) 2,641 (675) (77) 958
Charge/(credit) to consolidated statement of comprehensive income 169 (787) (587) (178) (1,383)
Adjustment to prior year to consolidated statement of comprehensive income - - (33) (13) (46)
________ ________ ________ ________ ________
Net (asset)/liability at 31 December 2023 (762) 1,854 (1,295) (268) (471)
________ ________ ________ ________ ________
The net deferred tax asset mainly arises on the recognition of tax timing
differences on property, plant and equipment, as well as prior and current
year taxable losses which are expected to be utilised against future year
taxable profits. Other items include timing differences in relation to
provisions. This is partially offset by a deferred tax liability which mainly
arises on the recognition of an intangible asset in relation to the Maintel
Mobile, Datapoint, Proximity, Azzurri, Intrinsic and Atos acquisitions.
The Board has reviewed the Group forecasts and projection models covering
three years from the year end, taking into account reasonably possible changes
in trading performance. As a result, the Board determined that the Group will
make sufficient profits in the future against which the losses can be
utilised. There are no time restrictions on when these taxable losses can be
utilised. The deferred tax asset relating to tax losses has therefore been
recognised on this basis.
The net deferred tax asset balance at 31 December 2023 has been calculated on
the basis that the associated assets and liabilities will unwind at 25% (2022:
25%).
21 Borrowings
2023 2022
£000 £000
Current bank loan - secured 2,322 22,726
Non-current bank loan - secured 20,579 -
________ ________
Total borrowings 22,901 22,726
________ ________
The facility with HSBC Bank plc ("HSBC") consisting of a revolving credit
facility ("RCF") of £20m with a £6m term loan on a reducing basis, remained
in place during the year and has been extended to 30 September 2025 in March
2024.
The term loan is being repaid in equal monthly instalments, starting in
October 2022.
The year-end principal balance of the term loan was £3.0m (2022: £5.4m) and
of the RCF was £20.0m (2022: £17.5m).
The key covenants include net leverage ratio and interest cover tests,
assessed on a quarterly basis. During 2023, the Company successfully met the
temporary milestones and HSBC being satisfied that the recovery phase had been
successfully completed, the initial covenants of the loan were reinstated in
early 2024. As a consequence, the debt has been classified to long term
liabilities at 31 December 2023, whilst the debt had been reclassified as
current liabilities at 31 December 2022.
Interest on the borrowings is the aggregate of the applicable margin and SONIA
for Pound Sterling / SOFR for US Dollar / EURIBOR for Euros.
The current bank borrowings above are stated net of unamortised issue costs of
debt of £0.1m (2022: £0.2m).
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
the undrawn facility.
The Directors consider that there is no material difference between the book
value and fair value of the loan.
22 Lease Liabilities
2023 2022
£000 £000
Maturity analysis - contractual undiscounted cash flows
In one year or less 958 872
Between one and five years 698 1,389
In five years or more 74 145
________ ________
Total undiscounted lease liabilities at 31 December 2023 1,730 2,406
________ ________
Discounted lease liabilities included in the statement of
financial position
Current 909 820
Non-current 731 1,452
________ ________
Total lease liabilities included in the statement of financial position 1,640 2,272
________ ________
Amounts recognised in the comprehensive income statement
Interest expense on lease liabilities 73 97
Expenses relating to short term leases 1 89
________ ________
Amounts recognised in the statement of cash flows
Total cash outflow (including payments relating to short term leases) 1,049 1,071
________ ________
Lease liabilities predominantly relate to the Company office premises in
London, Blackburn and Cannock and Office and computer equipment. During the
years ended 31 December 2023 and 31 December 2022 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 (2022: £Nil).
23 Financial instruments
The Group's financial assets and liabilities mainly comprise cash, borrowings,
trade and other receivables, trade and other payables, lease liabilities and
derivative financial instruments. The carrying value of all financial assets
and liabilities equals fair value given their short-term nature.
Financial assets measured at amortised cost
2023 2022
£000 £000
Non-current financial assets
Trade receivables - 90
________ ________
Total - 90
________ ________
Current financial assets
Trade receivables 12,336 12,975
Accrued income 1,307 1,920
Other receivables 315 713
________ ________
Total 13,958 15,608
________ ________
Financial liabilities
measured at amortised cost
2023 2022
£000 £000
Non-current financial liabilities
Other payables 502 370
Lease liabilities 731 1,452
Borrowings 20,579 -
________ ________
Total 21,812 1,822
________ ________
Current financial liabilities
Trade payables 12,761 18,631
Borrowings 2,322 22,726
Other payables 3,521 2,823
Accruals 3,439 3,169
Lease liabilities 909 820
________ ________
Total 22,952 48,169
________ ________
Financial liabilities
measured at fair value
2023 2022
£000 £000
Current financial liabilities
Derivative financial instruments - 130
________ ________
Total - 130
________ ________
Derivative financial instruments held under current financial liabilities on
the consolidated statement of financial position at 31 December 2022 reflect
the negative change in fair value of US Dollar foreign exchange contracts.
These foreign exchange contracts are not designated in hedge relationships,
but are, nevertheless, intended to reduce the level of foreign currency risk
for expected sales and purchases. Please refer to the Foreign currency risk
section for further information.
The Group held the following foreign currency denominated financial assets and
financial liabilities:
Assets Liabilities
2023 2022 2023 2022
£000 £000 £000 £000
US Dollars 210 327 71 3,965
Euros 350 526 122 43
________ ________ ________ ________
Total 560 853 193 4,008
________ ________ ________ ________
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 £194,000 is provided at
31 December 2023 (2022: £389,000). 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
2023 owed to the Group was £1.0m including VAT (2022: £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:
2023 2022
£000 £000
Provision at start of year 389 420
Provision created 43 103
Provision reversed (238) (134)
________ ________
Provision at end of year 194 389
________ ________
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 2023
Expected credit loss % range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (£'000) 10,630 691 800 409 12,530
Expected credit loss rate (£'000) (37) (19) (26) (112) (194)
Accrued income 1,307 1,307
13,643
Current < 30 days 31-60 days > 60 days Total
31 December 2022
Expected credit loss % range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (£'000) 11,004 931 289 1,262 13,486
Expected credit loss rate (£'000) (40) (30) (11) (308) (389)
Accrued income 1,920 - - - 1,920
15,017
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 at 31 December 2023 is Pound
Sterling.
In addition, some Group companies transact with certain customers and
suppliers in Euros or US Dollars. Those transactions are affected by exchange
rate movements during the year. Such transactions in Euros are not deemed
material in a Group context and sensitivity to Euro exchange rate movements is
considered to be immaterial.
Starting from the year ended 31 December 2022, the Group uses foreign exchange
contracts to manage some of its foreign currency risk exposures for US Dollar
transactions, in particular purchases. The US Dollar foreign exchange
contracts are not designated as cashflow hedges and are entered into for
periods consistent with foreign currency exposure of the underlying
transactions, generally from 3 to 6 months.
The Group held no foreign exchange contracts as at 31 December 2023.
The Group was holding the following foreign exchange contracts at 31 December
2022:
Maturity
Less than 1 month 1 to 3 months 3 to 6 months Total
6 to 9 months 9 to 12 months
Foreign exchange contracts
Contract amount (in $000) - 2,500 2,000 - - 4,500
Average contract rate (USD/GBP) - 1.1685 1.1917 - - 1.180
The carrying value of these foreign exchange contracts held under current
financial liabilities on the Consolidated statement of financial position at
31 December 2022 represents the negative change in their fair value.
In the prior year, the Group entered into derivative financial instruments
principally with financial institutions with investment grade credit ratings.
Foreign exchange contracts are held at fair value using techniques which
employ the use of 'Level 2' market observable inputs. The key inputs used in
valuing the derivatives are the exchange rates at yearend between Pound
Sterling and US Dollar. Market values have been used to determine fair value
and have been obtained from an independent third party. The fair values of all
other financial instruments are measured using Level 1 inputs.
If the USD/GBP rates had been 0.5% higher/lower during 2022, and all other
variables were held constant, the Group's profit/loss for the year would have
been £18,000 lower/higher due to the positive/negative change in fair value
of foreign exchange contracts.
Interest rate risk
The Group had total borrowings of £22.9m at 31 December 2023 (2022: £22.7m).
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 the year, and all other variables were held constant, the
Group's loss (2022: loss) for the year would have been £121,000 (2022:
£86,000) 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 12,761 - - - 12,761
Other payables 2,319 1,202 502 - 4,023
Lease liabilities 511 447 772 - 1,730
Accruals 3,439 - - - 3,439
Borrowings (including future interest) 2,218 2,144 21,853 26,215
-
______ ______ ______ ______ ______
At 31 December 2023 21,248 3,793 23,127 - 48,168
______ _______ _______ ______ _______
0 to 6 months 6 to 12 months 2 to 5 Years More than 5 years Total
£000 £000 £000 £000 £000
Trade payables 18,631 - - - 18,631
Other payables 2,414 409 370 - 3,193
Lease liabilities 435 437 1,534 - 2,406
Accruals 3,169 - - - 3,169
Borrowings (including future interest)( 1 ) 892 23,765 - - 24,657
Derivative financial 130 - - - 130
instruments
______ ______ ______ ______ ______
At 31 December 2022 25,671 24,611 1,904 - 52,186
______ _______ _______ ______ _______
1 HSBC granted a waiver on the covenants over the Group's borrowings at 31
December 2022 after the prior reporting period had ended. Therefore, the total
borrowings at 31 December 2022 have been classified as current liabilities and
the above maturity analysis has been presented on this basis. Please see Note
21 for further information on the Group's borrowings.
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 losses.
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
2023 2022 2023 2022
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 (2022: Nil).
No shares were repurchased during the year (2022: Nil).
25 Reserves
Share premium, translation reserve, and retained losses represent balances
conventionally attributed to those descriptions. Other reserves include a
capital redemption reserve of £31,000 (2022: £31,000) and a translation
reserve of £33,000 (2022: £49,000).
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 has 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
2023 (2022: £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
The Remuneration Committee's report, included in the annual report, describes
the options granted over the Company's ordinary shares to the Directors.
In aggregate, options are outstanding over 5.8% (2022: 6.6%) 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.
2023 2023 2022 2022
Number of Weighted Number of Weighted
Options Average Options Average
Exercise price Exercise price
Outstanding at 1 January 947,279 348.61p 314,409 383.40p
Granted during the year 575,000 120.22p 637,870 331.31p
Lapsed during the year (695,245) 354.08p (5,000) 330.00p
_______ _______ _______ _______
Outstanding at 31 December 827,034 185.21p 947,279 348.61p
_______ _______ _______ _______
Exercisable at year-end - - 126,409 469.23p
The weighted average contractual life of the outstanding options was 8 years
(2022: 4 years), exercisable in the range 115p to 375p (2022: 221p to 880p).
No share options were exercised in the year by way of issue of new shares
(2022: none).
Outstanding share options by exercisable price range 2023 2022
Number of Number of
Share options Share options
Exercisable Price range
115p to 175p 575,000 -
221p to 274p - 65,000
330p to 375p 252,034 755,870
430p to 505p - 113,000
675p to 880p - 13,409
_______ _______
Total share options outstanding 827,034 947,279
_______ _______
The Group recognised £189,000 of expenditure related to equity-settled
share-based payments in the year (2022: £181,000).
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 28 April 2023 11 August 2023
Number of options granted 525,000 50,000
Share price at date of grant 115.00p 175.00p
Exercise price 115.00p 175.00p
Option life in years 10 10
Expiry date 28 April 2033 11 August 2033
Vesting period 3 years 3 years
Risk-free rate 3.72% 4.53%
Expected volatility 40.26% 41.02%
Expected dividend yield 0% 0%
Fair value of options 0.360p 0.882p
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:
2023 2022
£000 £000
Short term employment benefits 1,952 1,605
Social security costs 241 206
Contributions to defined contribution pension schemes 49 41
________ ________
2,242 1,852
________ ________
Other transactions - Group
During the year, the Group paid fees of £Nil (2022: £83,483) to AAA Rated
Limited, 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 31 December 2023 (2022: £Nil).
29 Post balance sheet events
The facility with HSBC Bank plc consisting of a revolving credit facility of
£20m with a £6m term loan on a reducing basis, remained in place during the
year and has been extended to 30 September 2025 in March 2024.
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
HSBC Bank plc. At 31 December 2023 each subsidiary undertaking had a 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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