TIDMMAI
RNS Number : 6183X
Maintel Holdings PLC
27 April 2023
Maintel Holdings Plc
("Maintel", the "Company" or the "Group")
Final audited results for the year ended 31 December 2022
Projects delivery delays impact performance, business
transformation accelerates.
Maintel Holdings Plc, a leading provider of cloud and managed
communications services, announces its audited results for the
12-month period to 31 December 2022.
Key Financial Information
2022 2021
Final audited results for the year Increase/
to 31 December: (FY22) (FY21) (decrease)
Group revenue (GBP'm) 91.0 103.9 (12.4%)
Gross profit (GBP'm) 27.9 34.1 (18.2%)
Adjusted EBITDA ([1]) (GBP'm) 4.4 9.6 (54.6%)
(Loss)/ profit before tax (GBP'm) (4.9) 5.2 (194.2%)
Adjusted profit before tax ([5]) (GBP'm) 1.6 6.8 (76.5%)
Basic (loss)/ earnings per share (p) (30.4) 32.5 (104.8%)
Adjusted (loss) / earnings per share
([3]) (p) (1.6) 33.2 (193.5%)
Net (debt)([4]) (GBP'm) (16.6) (19.4) (14.4%)
Contracted cloud seats 168,000 132,000 27.3%
Financial headlines
-- Group revenue was GBP91.0m, down 12.4% (2021: GBP103.9m) with
recurring revenue at 77% (2021: 69%).
-- Revenue declined due to a number of contributing factors,
including supply chain issues surrounding semi-conductor hardware
in Q4 2021, delays in public-sector tenders, lower revenue from
large scale projects and GBP0.5 non-repeating revenue due to the
sale of Document Solution division in FY21.
-- Recurring revenue increased from 69.2% to 77.0%, due to
pandemic having a positive customer effect in accelerating change
of technology, with transitioning to cloud services.
-- Cloud and software revenues increased as a proportion of
total Group revenue to 44% (2021: 34%)
-- Adjusted EBITDA fell by 54.6.% flowing from revenue decreases
of 12.4%, delivering a disappointing group Adjusted EBITDA([1]) of
GBP4.4m (2021: GBP9.6m).
-- Gross profit decreased to GBP27.9m (2021: GBP34.1m) with
gross margin decreasing to 30.6% (2021: 32.8%) mainly due to the
lower level of rebates as hardware and software resell revenue
decreased.
-- The Adjusted Profit Before Tax([5]) fell to GBP1.6m from
GBP6.8m in FY21, mainly due to shortfall in revenue.
-- The business significantly reduced year-end net debt([4]) to GBP16.6m, (2021: GBP19.4m)
-- Adjusted loss per share([2]) at 1.6p, a decrease of 105%
(2021: earnings per share at 33.2p)
-- Basic loss per share at 30.4p (2021: earnings per share at 32.5p)
-- Cash conversion([3]) of 245% of adjusted EBITDA([1]) (2021: 48%)
Operational highlights
-- Major new and existing customer contract awards exceeding
GBP50m total contract value (TCV), based on new solution offerings
implemented at the end of 2019 and start of 2020.
-- Transformation to a cloud and managed services business
continued at pace, delivering a 27.3% increase in contracted cloud
seats with 168,000 at the year-end (2021: 132,000).
-- ESG strategy strengthened with strategic benefits to Group
including a sustainable future, tender compliance, banking
compliance and supporting shareholder value.
-- Maintel entered a 3-year refinance agreement with HSBC for a
GBP26m Sustainability linked loan facility at improved terms.
-- Gabriel ('Gab') Pirona was appointed Chief Financial Officer,
effective from 2 May 2022, bringing valuable experience into the
Group. Gab has helped deliver significant operational
improvements.
-- Carol Thompson appointed Executive Chairman from 1 November
2022 and charged with initiating a strategic and operational
review.
Post period end
-- Resignation of Ioan MacRae as CEO on 28 February 2023, Carol
Thompson's Executive Chairman's role was extended to cover the
function of Interim Chief Executive Officer.
-- Strategic, organisational and operational review completed in
Q1 FY23 led to the implementation of a plan to transform the
business, focusing growth on higher margin product lines, adapting
the delivery and support organisations to crystallise substantial
cost savings while creating a scalable cost base to support future
growth.
-- Trading to date in FY23: revenue, EBITDA and orders are all
in line with management expectations .
COVID-19
-- The primary impact on the business of Covid 19 was the well
documented supply chain disruption.
-- We continue to see the hardware supply chain issues
alleviate, with significantly reduced lead times on most key
product lines and therefore an acceleration in our ability to
deliver the projects in our order book. Some items do remain
constrained, and we continue to monitor the situation closely.
-- Indirect impacts on bid to bill cycles have been twofold,
especially in the Public Sector. Changes to access and
communication processes creating slower bid-to-sign timelines and
then delayed project implementation due to restrictions to on-site
access. Whilst a challenge for 2022, the business has entered 2023
with a very substantial forward WIP position.
-- Having embraced hybrid working, the business is now looking
at post pandemic working patterns to balance service to clients
with staff health and wellbeing agenda.
Publication of annual report/ posting and Notice of Annual
General Meeting
The Company's 2023 Annual General Meeting will be held at 2pm on
May 30(th) at 160 Blackfriars Road, London SE1 8EZ.
The FY22 Annual Report, notice of AGM, together with a form of
proxy, will shortly be posted to the Company's shareholders today.
The FY22 Annual Report and notice of AGM will shortly also be
available on the Company's website, www.maintel.co.uk/investors
.
Commenting on the Group's results, Carol Thompson, Executive
Chairman, said:
"2022 was difficult for the global economy, for many technology
businesses and Maintel. While we navigated most economic headwinds
in the early period of Covid-19, the combined effect of a prolonged
pandemic, high inflation and war in Ukraine weighed heavily on our
FY22 financial outturn. As a result, we conducted a strategic,
organisational and operational review in Q1 FY23 and enter FY23
with increased clarity on future market and product strategy with a
lean and flexible cost base on which we can return the business to
strong economic performance in the years to come. This has meant
changes to senior management with the loss of our CEO and Sales
Director. We are also exiting our Callmedia product line by 31 Jan
2024, and intensifying our mission to deliver service in a high
quality, value accretive way both to our valued client base and
Maintel.
There is much to do in FY23, to tighten focus on our future
product and services range and 'catch-up' our delivery programme
which has been badly delayed since late 2021 and throughout 2022.
Our treasury management function performed very well and continues
to do so. We have had constructive conversations with HSBC which
resulted in Maintel entering into an amended agreement that better
aligns the covenants with the business transformation plan and
supports the return to growth agenda and reshaping the
business.
As stated in the January 2023 Trading Update, FY23 focus is on
delivering improved EBITDA and cash generation in line with recent
historical levels and the Board is pleased to advise that trading
in Q1 2023 was in line with management's expectations.
There have been few businesses that have escaped the combined
challenges of a pandemic, political instability and high inflation.
Whilst FY22 was a difficult year, our team demonstrated resilience,
dedication and commitment to the business and our clients; and
above all their willingness to work with the board on putting this
tough period behind us."
Notes
[1] Adjusted EBITDA is EBITDA of GBP3.3m (2021: GBP13.4m),
adjusted for exceptional items (note 12) and share based payments
(note 27).
[2] Adjusted earnings/(loss) per share is basic loss per share
of 30.4p (2021: earnings per share of 32.5p), 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
(2021: 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 GBP17.5m RCF and GBP5.4m Term loan.
[5] Adjusted profit before tax of GBP1.6m (2021: GBP6.8m) is
basic loss before tax (2021: profit before tax), adjusted for
amortisation of intangibles, exceptional items and share based
payments.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014
The full annual report and accounts have been uploaded to our
website and will be posted to shareholders by no later than 5 May
2023.
For further information please contact:
Carol Thompson, Executive Chair
Gab Pirona, Chief Financial Officer
Dan Davies, Chief Technology Officer 0344 871 1122
finnCap (Nomad and Broker) 020 7220 0500
Jonny Franklin-Adams / Emily Watts/ Fergus
Sullivan (Corporate Finance)
Sunila de Silva (Corporate Broking)
Strategic Report
Chairman's statement
Much of 2022 has been about evolving our ability to service
clients with restricted access to people, supplies and partners.
Despite this our recurring revenue increased from 69.2% to 77.0%,
due to the pandemic having a positive customer effect in
accelerating change of technology, and we built a robust WIP for
2023, giving the business a head start with high levels of billable
revenue and therefore certainty in the first half of 2023. The
revenue mix in 2022 meant that higher value revenue lines such as
professional services and hard and software reseller revenue
diluted the returns in H2 leading to a halving of the Group's
EBITDA.
The main revenue shortfalls were in project revenues, which saw
a year-on-year reduction of c.GBP10.3m being the most substantial
part of the GBP12.9m year on year decline (FY22: GBP91.0m,
FY21:GBP103.9m). We have analysed our own performance and that of
our competitors to reset our marketing and sales efforts and we
plan to adjust our strategy to penetrate higher growth markets with
faster moving CAGR opportunities in 2023 and beyond. This shortfall
in revenue of GBP12.9m (12.4%) flows through almost GBP for GBP to
the gross margin shortfall of GBP10m, (29.3%) which is the primary
driver of the Adjusted EBITDA shortfall. Headcount at year-end was
493 compared to 515 in 2021.
Our managed services and technology division saw an overall
decline in revenue of 24.3% to GBP46.5m
(2021: GBP61.4m), with the managed service support base reducing
13.2% to GBP25.6m, predominantly due to contract losses already
highlighted in 2019 and early 2020 now fully realised, price
erosion on renewals, and to on-premise customers transitioning to
managed cloud services. Technology division revenues decreased by
34.5% to GBP20.9m (2021: GBP31.9m) aided by the project delivery of
orders closed in FY20, as well as licences associated with new
SD-WAN sales, hardware for cloud deployments and licences for
existing system expansions. This is despite the impact of
semiconductor supply constraints which delayed at least GBP5.5m of
additional revenue into 2023.
The number of contracted seats on our ICON and public cloud
platforms increased by 27.3% to 168,000 with revenue from cloud and
software customers now totalling GBP39.7m, 44.0% of Group revenue.
The Group's cloud portfolio continues to be enhanced by both public
and private cloud solutions, and revenue from cloud subscriptions
and associated managed services grew 30.0% to GBP12.8m. The
continued revenue benefit from the additional contracted seats will
be realised in 2023 and beyond as these projects continue to be
delivered.
Cash conversion FY22 was excellent thanks to new management
processes and led directly to the reduction in our net debt
position of GBP16.6m (2021: GBP19.4m). Maintaining a healthy
balance sheet through rigorous working capital management remains a
key focus for our finance team.
Moving onto the current performance of the business in the first
quarter we have been able to focus on unwinding the significant
order book built up through FY21 & FY22, driven by the
semiconductor supply chain crisis. As we continue to see supply
issues ease, and the associated projects increase in delivery
velocity, we find ourselves able to recognise 11.3% of the order
book carried forward from FY22. In turn this means the overall
performance of the business, at the end of quarter one, is in line
with management expectations and shows strong cash management and
ability to service debt.
With regard to cost management, to date the business has been
able to identify and secure annualised cost savings of GBP7.2m, and
further savings to be delivered during the year will increase this
annualised total to circa GBP11.3m.
In September 2022, the Board invited me to assume the role of
Executive Chairman and initiate a strategic and operational review.
Ioan Macrae made the decision at the end of February 2023 to
resign, and we thank him for his dedication to the business and
wish him well in his future endeavours. Whilst we look for a new
CEO, I will be taking on more executive duties, ensuring
independence is maintained and recusing myself from decisions where
necessary and with appropriate guidance from our advisors.
During this period, I am supported in the role by John Booth as
the Deputy Chairman who can step in if matters of independence
present themselves. After many years of dedicated service and
excellent contribution valued contribution to the board, we say
goodbye to Nicholas Taylor who stands down at the next AGM. The
board and executive team would like to thank him sincerely; he has
been an excellent advocate for the business and has unfailingly
provided support and good counsel to all of us.
The Board has identified a candidate to replace Nicholas as
Chair of the Remuneration Committee and we are in the final stages
of the appointment process. An announcement is expected to follow
shortly. In addition, the Board have started the process to recruit
a Senior Independent Director with a view to this person chairing
the Audit Committee.
C Thompson
Chairman
Results for the year
Revenues decreased by 12.4% to GBP91.0m (2021: GBP103.9m) and
adjusted EBITDA decreased to GBP4.4m (2021: GBP9.6m). Recurring
revenue as a % of total revenue (being all revenue excluding
one-off projects) increased to 77.0% (2021: 69.2%). Recurring
revenue increased because of:
-- Managed Services revenue decline of GBP3.9m because of
customer churn through the pandemic, price erosion on contract
renewal and transition of customers to Cloud.
-- Calls and Lines declined by 6.7% to GBP10.3m, down GBP0.7m
from GBP11.0m in 2021, largely due to overall market decline in
PSTN and transition to SIP and cloud.
-- Data increased by 1.2% (GBP200k) to GBP16.5m, from GBP16.3 in
2021 mainly due to price increases.
-- Mobile reduction of 7.7% (GBP0.4m) to GBP4.4m down from
GBP4.8m in 2021 mainly due to customer contracts moving direct to
network operator (Leicester County Council and Curry's).
-- Cloud revenue grew by GBP3.0m in 2022 due to continued growth
in public and private cloud contracts. This positive contribution
resulted in an overall recurring revenue decline of GBP1.8m, whilst
in the same period project revenue decreased by GBP10.3m.
-- Cloud revenue increase year-on-year is enhanced by the
capitalisation of third part licences, amounting to GBP1.2m in the
current year (2021: GBPnil).
Gross profit for the Group decreased to GBP27.9m (2021:
GBP34.1m) with gross margin decreasing to 30.6% (2021: 32.8%).
The Group delivered an Adjusted Profit Before Tax of GBP 1.6m
(2021: GBP6.8m). A djusted earnings per share (EPS)(a) decreased by
105% to a loss per share of 1.6p (2021: earnings per share of
33.2p) based on a weighted average number of shares in the period
of 14.4m (2021: 14.4m).
On an unadjusted basis, the Group generated a loss before tax of
GBP4.9m (2021: profit of GBP5.2m) and basic loss per share of 30.4p
(2021: earnings per share of 32.5p). This includes GBP1.0m of net
exceptional costs (2021: net exceptional income of GBP3.9m) (refer
note 12) and amortisation of acquired intangibles of GBP5.4m (2021:
GBP5.4m).
(Decrease)
2022 2021 /
GBP000 GBP000 increase
Revenue 91,036 103,895 (12.4%)
-------- -------- -----------
(Loss)/profit before taxation (4,889) 5,237 (193.5%)
Add back intangibles amortisation 5,437 5,416 0.4%
Exceptional items 904 (3,901) (123.2%)
Share based remuneration 181 49 269.4%
Adjusted profit before tax 1,633 6,801 (76.0%)
-------- -------- -----------
Adjusted EBITDA(a) 4,356 9,593 (54.6%)
-------- -------- -----------
Basic (loss)/earnings per share (30.4p) 32.5p (193.5%)
Diluted (30.4p) 32.5p (193.5%)
-------- -------- -----------
Adjusted (loss)/earnings per
share(b) (1.6p) 33.2p (104.8%)
Diluted (1.6p) 33.1p (104.8%)
-------- -------- -----------
(a) Adjusted EBITDA is EBITDA of GBP3.3m (2021: GBP13.4m)
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
GBP9.8m (2021: GBP4.4m) resulting in a cash conversion (C) of 245%
for the full year (2021: 48%). This is due to rigorous working
capital management.
(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 2022 2021 (Decrease)/
GBP000 GBP000 increase
Managed services related 25,572 29,456 (13.2%)
Technology(d) 20,937 31,948 (34.5%)
--------------------------------- --------- --------- ------------
Managed services and technology
division 46,509 61,404 (24.3%)
Network services division 40,093 37,689 6.4%
Mobile division 4,434 4,802 (7.7%)
Total Group 91,036 103,895 (12.4%)
--------------------------------- --------- --------- ------------
Cloud and Software Revenues GBP39.7m GBP35.7m 11.2%
(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.
All revenue from cloud and software customers accounts for 44%
of total Group revenues in the period (2021: 34%). Pure cloud
subscriptions and associated managed services grew by 31.5% to
GBP13.0m in the period (2021: GBP9.9m).
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.
2022 2021 (Decrease)/
GBP000 GBP000 increase
Division revenue 46,509 61,404 (24.3%)
Division gross profit 11,399 18,720 (39.1%)
Gross margin (%) 25% 30%
----------------------- ------- ------- ------------
This division decreased revenue by 24.3% to GBP46.5m. The
revenue decrease was mainly driven by the semiconductor supply
chain crisis, which significantly reduced our ability to deliver
hardware dependent projects from the order book, with areas such as
SD-WAN, LAN & WIFI being the worst affected, impacting
technology (-31.1% LFL) and professional services (-40.4% LFL)
revenues.
The declining on premise legacy support business further
decreased by 9.6% (LFL), in line with and driven by the global
market rate of decline in the legacy PBX and contact centre
markets. Some of this decline did benefit the Network Services
division with customers from our legacy managed service base
transitioning to Maintel's cloud-based services during the period,
with the most notable transformation contracts in the period being
for a number of key NHS front line trusts, local government and
retail customers.
Gross profit decreased in the division at a greater rate than
revenue (-39.1% LFL), driven by a significant decline in
Professional Services Gross Profit (-97.9%). Anticipating the
imminent unwinding of the significant order book built up through
the supply chain shortage, the Professional Services cost base was
maintained at a level not supported by in year revenues to prevent
an inability to successfully unwind a significant proportion of the
order book during FY23.
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.
2022 2021 (Decrease)/
GBP000 GBP000 increase
Call traffic 2,921 3,753 (22.2%)
Line rental 7,391 7,292 1.4%
Data connectivity services 16,537 16,342 1.2%
Cloud 12,827 9,869 30.0%
Other 417 433 (3.6%)
--------- ------- ------------
Total division 40,093 37,689 6.4%
Division gross profit 14,639 13,228 10.7%
Gross margin (%) 37% 35%
---------------------------- --------- ------- ------------
Network services revenue grew by 6.4% and improved g ross profit
margin by 1.8%, the growth in the higher margin cloud revenue
products offsetting the decline in lower margin call traffic
revenues. Cloud revenue increase year-on-year is enhanced by the
capitalisation of third party licences, amounting to GBP1.2m in the
current year (2021: GBPnil). Although the overall volume of voice
minutes transacted in FY22 increased by 34%, our fixed line
revenues (shown above under call traffic and line rental) declined
by 6.6% to GBP10.3m (2021: GBP11m), reflecting the overall market
decline for legacy Public Switched Telephone Network (PSTN)
products plus the migration of some existing customers from legacy
voice services with pence per minute call billing, to modern SIP
Trunking or Cloud Communication services with all-inclusive call
bundle based pricing.
Data connectivity revenues saw a modest increase in revenue of
1.2%. This is the first growth seen in this revenue stream since
FY17, reflecting the increasing impact that our new Software
Defined Wide Area Networking (SD-WAN) and managed Cloud Security
Services are having on this division. Much of the business closed
in these new areas has been delayed from delivery by the
semiconductor supply shortage, but those deployments that were
taken to revenue in FY22 have counteracted the decline in the
legacy WAN business for the first time. This trend is set to
continue and accelerate as the order book unwinds and we continue
to close new contracts.
Our momentum in SD-WAN and cloud security continued in the
period with key contract wins for one of the largest national
housing associations, a leading international manufacturer of
specialist superalloys, a not-for-profit national development
agency and significant expansion project wins for the contracts
closed in FY21 & FY22.
The number of contracted seats across our cloud communication
services significantly increased, this time by 27% in the year to
168,000 seats at the end of December (132,000 at December 21),
significantly outperforming forecasted market growth rates for this
technology segment for the fourth consecutive year. Revenue from
cloud and software customers amounted to GBP39.7m (2021: GBP35.7m),
with a 30.0% growth in our recurring cloud subscriptions and
associated managed services to GBP12.8m (2021: GBP9.9m).
For the first time public cloud seats represented the majority
(67.2%) of overall cloud seats contracted in the period,
highlighting the expected growing trend of a preference for public
cloud services in many industry verticals. This trend was
accelerated in FY22 by some significant wins in this space,
including; an 11,500 seat RingCentral Unified Communications win
for a front line NHS trust, a 4,500 seat Microsoft Teams Unified
Communications win for a local government organisation, a 6,500
seat RingCentral Unified Communications win for a tier 1 Insurance
organisation and a strategic initial 600 agent Genesys Contact
Centre win for one of the UK's "big four" supermarkets.
Our flagship ICON private cloud service sales also continued to
perform well, with key wins such as; a 7,500 seat win for Welsh
University Health Board, a 3,000 seat win for a premium retail
household name and a 1,000 seat win for a leading UK liquefied
petroleum gas (LPG) supplier. Demand for the Virtual Private Cloud
service that our ICON platform offers continues to remain high
across the Finance, Insurance, Healthcare and Housing verticals in
particular. With the platform providing very high (99.99%) core
service availability levels, 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
already closed so far in FY23.
Mobile Division
Maintel's mobile division generates revenue primarily from
commissions received as part of its dealer agreements with O2 which
scales in line with growth in partner revenues, in addition to
value added services sold alongside mobile such as mobile fleet
management and mobile device management.
2022 2021 (Decrease)
GBP000 GBP000
Revenue 4,434 4,802 (7.7%)
Gross profit 1,820 2,163 (15.9%)
Gross margin (%) 41.0% 45.1%
----------------------- ------- ------- -----------
Number of customers 354 647 (45.3%)
Number of connections 21,647 27,478 (21.2%)
----------------------- ------- ------- -----------
These revenues decreased by 7.7% to GBP4.4m (2021: GBP4.8m) with
gross profits also declining by 15.9%, reflecting a post pandemic
trend in the market for customers to stay with their incumbent
Mobile providers. Customer churn was at an all-time low; however
this lack of new business was compounded by downward price pressure
on contract re-signs as customers were looking to their incumbent
providers to drive down cost rather than move networks. Recognising
these market challenges early in the year, we proactively resourced
the mobile sales team to focus on customer retention as opposed to
new business.
Maintel's mobile proposition continues to be multi-faceted,
being network agnostic and ensuring we can provide competitive and
complete coverage for the UK. This ensures we are always in a
position to cater for our customers' requirements. Our mobile go to
market proposition remains focused on the mid-market enterprise
space (100 - 2,000 connections) and 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 GBP0.5m (2021: GBP0.5m) relates to the
recovery of one year's R&D tax credit of GBP0.5m (2021:
GBP0.5m).
Other administrative expenses
2022 2021
GBP000 GBP000 (Decrease)
Other administrative expenses 25,902 26,674 (2.9%)
--------------------------------- ------- ------- -----------
Other administrative expenses for the Group decreased by 2.9% to
GBP25.9m (2021: GBP26.7m).
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. On a life-for-like basis (i.e., excluding the
other administrative expenses associated with Doc Sol), reduced
from GBP26.4m in 2021. The net GBP0.5m reduction mainly reflects
the savings from organisational optimisation initiatives.
The overall headcount dropped by 4.3% or 22 FTEs and now stands
at 493 (2021: 515) as a result of the Group's programme of
re-organisation and right sizing of the business to facilitate our
continued transition to a cloud and managed services business as
reported at the year-end 2021.
Exceptional items
Exceptional costs of GBP0.9m (2021: exceptional gains GBP3.9m)
is substantially driven by staff-related restructuring costs
(GBP0.4m) associated with the ongoing review of the Group's
operating costs base.
Other exceptional costs include GBP0.3m in relation to foreign
exchange impact on a specific contract, which has 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 GBP0.2m.
In FY21, exceptional gains of GBP3.9m were substantially driven
by the disposal of the Document Solutions business; net proceeds
were GBP4.3m, after professional costs of GBP0.2m. Other
exceptional gains included GBP0.1m associated with an onerous
property lease provision release.
A full breakdown is shown in note 12.
Interest
The Group recorded a net interest charge of GBP1.1m in the year
(2021: GBP1.1m), which includes GBP0.1m relating to IFRS 16 in line
with the prior year (2021: GBP0.1m).
Taxation
The tax credit in the period of GBP0.5m is driven by a GBP0.9m
increase in deferred tax in relation to tax losses (GBP0.7m) and
fixed assets (GBP0.2m), offset by a GBP0.1m adjustment to prior
period current tax and a GBP0.3m adjustment to prior period
deferred tax for temporary taxable timing differences on intangible
assets.
The prior year tax charge of GBP0.6m was driven by the net
combined effect of the current taxation of profit of GBP0.8m,
offset by deferred tax credits on PPE and intangibles of
GBP0.2m.
Dividends and earnings per share
The continued impact of the pandemic throughout FY21 and into
FY22, combined with external macro-economic challenges in global
supply chain and recent conflicts in Ukraine means the Board is
taking a prudent approach to dividend policy and again made the
decision not to propose a final dividend for the full year 2022
(2021: nil pence per share). It remains the Board's intention to
review returns to shareholders when economic conditions improve and
financial performance permits.
Adjusted loss per share is at 1.6p, a decrease of 104.8% on
prior year (2021: earnings per share at 33.2p). On an unadjusted
basis, basic loss per share is at 30.4p (2021: earnings per share
at 32.5p).
Consolidated statement of financial position
Net assets decreased by GBP4.1m in the year to GBP19.4m at 31
December 2022 (2021: GBP23.5m) with the key movements explained
below.
Trade and other receivables decreased by GBP2.8m to GBP27.4m
(2021: GBP30.2m), driven by a decrease in prepayment and accrued
income to GBP13.7m (2021: GBP15.7m). Within this, accrued income
decreased by GBP3.2m, driven by some large individual project
accruals in the technology division which were subsequently
delivered and billed in the year; prepayments increased by GBP1.2m,
comprising mostly of increases in Data/Cloud (GBP1.5m increase),
net off by reductions in support deferred costs (GBP0.4m) as Avaya
Bulk Deal is completed in the year.
Trade and other payables increased by GBP3.2m to GBP47.5m (2021:
GBP44.3m). This increase is the net of (i) higher trade payables of
GBP7.8m in December 2022, due to delays in receiving certain
materials from suppliers required for customer installations,
including switches, (ii) an increase in deferred income of GBP1.5m
driven by technology advance billings; and (iii) a reduction in
Atos deferred consideration of GBP1.2m.
Borrowings of GBP22.7m (2021: GBP19.4m) represent the Group's
drawn down debt, consisting of GBP17.5m Rolling Credit Facility and
GBP5.4m Term loan, net of costs of issue of GBP0.2m.
Cash flow
As at 31 December 2022 the Group had net debt of GBP16.8m,
excluding issue costs of debt of GBP0.2m, (31 December 2021:
GBP19.4m), equating to a net debt: adjusted EBITDA ratio of 3.8x
(2021: 2.0x). An explanation of the GBP2.6m decrease in net debt,
excluding issue costs of debt, is provided below.
2022 2021
GBP000 GBP000
Cash generated from operating activities 9,839 4,408
Taxation paid (491) (192)
Capital expenditure (3,337) (2,213)
Issue costs of debt (234) (39)
Interest paid (1,119) (907)
--------- ---------
Free cash flow 4,658 1,057
Proceeds on disposal of Doc Sol (net of costs) 16 4,344
Payments in respect of business combination (1,227) (1,244)
Proceeds from borrowings 25,500 -
Repayments of borrowings (18,100) (3,000)
Lease liability payments (885) (1,155)
Increase in cash and cash equivalents 9,962 1
Cash and cash equivalents at start of period (3,869) (3,845)
Exchange differences 43 (25)
--------- ---------
Cash and cash equivalents at end of period 6,136 (3,869)
Bank borrowings (22,900) (15,493)
--------- ---------
Net debt excluding issue costs of debt and
IFRS 16 liabilities (16,764) (19,362)
Adjusted EBITDA 4,356 9,593
The Group generated GBP9.8m (2021: GBP4.4m) of cash from
operating activities and operating cashflow before changes in
working capital of GBP3.5m (2021: GBP9.4m).
Cash conversion in 2022 was 245% (c) , improving significantly
from the 48% conversion level delivered in 2021. This is due to
rigorous working capital management.
Capital expenditure of GBP3.3m (2021: GBP2.2m) was incurred
relating to the ongoing investment in the ICON platform, IT
infrastructure and continued development of Callmedia, the Group's
contact centre product.
Payments in respect of business combinations of GBP1.2m (2021:
GBP1.2m) relate to the deferred consideration amounts due
associated with the acquisition of a customer base from Atos in
2018. This is fully settled as at 31 December 2022.
A more detailed explanation of the working capital movements is
included in the analysis of the consolidated statement of financial
position. Further details of the Group's revolving credit and
overdraft facilities are given in note 21.
(c) calculated as operating cash flow (being adjusted EBITDA
plus working capital) to adjusted EBITDA
Current Trading and Outlook
The Board conducted a strategic, organisational, and operational
review in Q1 FY23 and enter FY23 with increased clarity on future
market and product strategy with a lean and flexible cost base on
which we can return the business to strong economic performance in
the years to come.
The FY23 focus is on delivering improved EBITDA and cash
generation, in line with recent historical levels.
In the first quarter, management has been focused on unwinding
the significant order book built up through FY21 & FY22, driven
by the semiconductor supply chain crisis. The Company has already
recognised 11.3% of the order book carried forward from FY22. In
turn this means the overall performance of the business, at the end
of quarter one, is in line with management expectations and shows
strong cash management and ability to service debt.
As regard to cost management, management has identified and
secure annualised cost savings of circa GBP6.0m, and further
savings to be delivered during the year are expected to increase
this annualised total to circa GBP10.0m.
The Board expects FY23 to be a year of progress, as management
continues to execute the recommendations that came out the of
strategic review, with focus on margin improvement and high growth
opportunities.
Dividend policy
The continued impact of the pandemic throughout 2021 and into
2022, combined with external macro-economic challenges in global
supply chain with regards to semi-conductors and recent conflicts
in the Ukraine means the Board is taking a prudent approach to
dividend policy and again made the decision not to propose a final
dividend for the full year 2021 (2020: nil pence per share). It
remains the Board's intention to review returns to shareholders
when economic conditions improve and financial performance permits.
It remains the Board's intention to review returns to shareholders
when conditions improve and financial performance permits.
Post year-end events
In January 2023, the Directors made the decision to discontinue
the development of our own "Callmedia" Contact Centre product line,
including the CX Now public cloud CCaaS variant. The product will
be wound down by 31 January 2024. This decision was made as part of
an ongoing strategic review of the business, in which we have
engaged with third party specialist to undertake a full product
review, the result of which will be implemented over the next
financial year and period of growth for the business.
During Q1 2023, the group led a strategic, organisational and
operational review to implement a plan to transform the business,
focusing growth on higher margin product lines, adapting the
delivery and support organisations to crystallise substantial cost
savings while creating a scalable cost base to support future
growth.
It is the intention of the Directors to liquate the dormant
subsidiaries entities during the financial year ended 31 December
2023. This is part of a project to simplify the corporate
structure.
There are no other events subsequent to the reporting date which
would have a material impact on the financial statements.
Financial Statements
Consolidated statement of comprehensive income
for the year-ended 31 December 2022
2022 2021
Note GBP000 GBP000
Revenue 4 91,036 103,895
Exceptional items 12 (278) -
Other cost of sales (62,900) (69,784)
-------------------------------------- ----- --------- ---------
Cost of sales (63,178) (69,784)
Gross profit 27,858 34,111
Other operating income 7 540 476
Intangibles amortisation 13 (5,437) (5,416)
Exceptional items 12 (626) 3,901
Share based remuneration 27 (181) (49)
Other administrative expenses 7 (25,902) (26,674)
-------------------------------------- ----- --------- ---------
Administrative expenses (32,146) (28,238)
Operating (loss)/profit 7 (3,748) 6,349
Financial expense 8 (1,141) (1,112)
(Loss)/profit before taxation (4,889) 5,237
Taxation credit/(charge) 9 528 (566)
--------- ---------
(Loss)/profit for the year (4,361) 4,671
Other comprehensive income/(expense)
for the year
Items that maybe reclassified
to profit or loss:
Exchange differences on translation
of foreign operations 19 (12)
--------- ---------
Total comprehensive (expense)
/ income for the year (4,342) 4,659
========= =========
(Loss) / earnings per share (pence)
Basic 10 (30.4)p 32.5p
Diluted 10 (30.4)p 32.5p
========= =========
Financial Statements
Consolidated statement of financial position
at 31 December 2022
31 December 31 December 31 December 31 December
2022 2022 2021 2021
Note GBP000 GBP000 GBP000 GBP000
Non-current assets
Intangible assets 13 52,989 56,021
Right of use assets 16 2,263 3,173
Property, plant and
equipment 15 1,381 1,091
Trade and other receivables 18 90 630
56,723 60,915
Current assets
Inventories 17 2,594 1,009
Trade and other receivables 18 27,376 30,229
Cash and cash equivalents 6,136 -
Total current assets 36,106 31,238
------------ ------------
Total assets 92,829 92,153
------------ ------------
Current liabilities
Trade and other payables 19 47,115 43,805
Lease liabilities 22 820 906
Income tax - 267
Borrowings 21 22,726 19,362
Total current liabilities 70,661 64,340
------------ ------------
Non-current liabilities
Other payables 19 370 455
Lease liabilities 22 1,452 2,251
Deferred tax 20 958 1,558
Total non-current liabilities 2,780 4,264
------------ ------------
Total liabilities 73,441 68,604
------------ ------------
Total net assets 19,388 23,549
============ ============
Equity
Issued share capital 24 144 144
Share premium 25 24,588 24,588
Other reserves 25 80 61
Retained earnings 25 (5,424) (1,244)
Total equity 19,388 23,549
============ ============
The consolidated financial statements were approved and
authorised for issue by the Board on 26 April 2023 and were signed
on its behalf by:
Carol Thompson
Executive Chairman
Financial Statements
Consolidated statement of changes in equity
for the year-ended 31 December 2022
Share Other Retained
capital Share reserves earnings Total
premium
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2021 144 24,588 73 (5,964) 18,841
Profit for the year - - - 4,671 4,671
Other comprehensive expense:
Foreign currency translation
differences - - (12) - (12)
------------------------------- ---------- ---------- ----------- ----------- --------
Total comprehensive income
for the year - - (12) 4,671 4,659
Transactions with owners in
their capacity as owners:
Share based remuneration - - - 49 49
At 31 December 2021 144 24,588 61 (1,244) 23,549
Loss for the year (4,361) (4,361)
Other comprehensive income:
Foreign currency translation
differences - - 19 - 19
------------------------------- ---------- ---------- ----------- ----------- --------
Total comprehensive expense
for the year - - 19 (4,361) (4,342)
Transactions with owners in
their capacity as owners:
Share based remuneration - - - 181 181
At 31 December 2022 144 24,588 80 (5,424) 19,388
Financial Statements
Consolidated statement of cash flows
for the year-ended 31 December 2022
2022 2021
GBP000 GBP000
Operating activities
(Loss)/profit before taxation (4,889) 5,237
Adjustments for:
Net gain on disposal of Doc Sol (16) (3,992)
Intangibles amortisation 5,437 5,416
Share based payment charge 181 49
Depreciation of plant and equipment 642 668
Depreciation of right of use asset 940 1,013
Interest payable 1,141 1,112
Other non-cash items 67 (105)
Operating cash flows before changes
in working capital 3,503 9,398
(Increase)/decrease in inventories (1,585) 676
Decrease/(increase) in trade and other
receivables 3,469 (7,114)
Increase in trade and other payables 4,452 1,448
--------
Cash generated from operating activities 9,839 4,408
Tax paid (491) (192)
--------- --------
Net cash inflows from operating activities 9,348 4,216
--------- --------
Investing activities
Purchase of plant and equipment (932) (344)
Purchase of intangible assets (2,405) (1,870)
Consideration for previously acquired
businesses (1,227) (1,244)
Net proceeds from disposal of Doc Sol 16 4,344
Net cash (outflows)/inflows from investing
activities (4,548) 886
--------- --------
Financing activities
Proceeds from borrowings 25,500 -
Repayment of borrowings (18,100) (3,000)
Lease liability repayments (885) (1,155)
Interest paid (1,119) (907)
Issue costs of debt (234) (39)
Net cash inflows/(outflows) from financing
activities 5,162 (5,101)
--------- --------
Net increase in cash and cash equivalents 9,962 1
Bank overdrafts at start of year (3,869) (3,845)
Exchange differences 43 (25)
--------
Cash and cash equivalents/(bank overdrafts)
at end of year 6,136 (3,869)
========= ========
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)
2022 2021
GBP000 GBP000
At 1 January 19,362 22,267
Proceeds from borrowings 25,500 -
Repayment of borrowings (18,100) (3,000)
Repayment of bank overdraft (3,869) -
Payments of interest on bank loans and overdraft (1,022) (770)
Interest expense on bank loans and overdraft
(non-cash movement) 1,017 916
Movement on interest accrual (balance held
within accruals - non-cash movement) 5 (146)
Issue costs of debt (234) -
Amortisation of issue costs (non-cash movement) 67 95
________ ________
At 31 December 22,726 19,362
________ ________
Lease liabilities (Note 22)
2022 2021
GBP000 GBP000
At 1 January 3,157 3,965
Capital lease repayments (885) (1,155)
Interest repayments (97) (127)
Interest expense (non-cash movement) 97 127
New leases (non-cash movement) - 391
Disposals (non-cash movement) - (44)
________ ________
At 31 December 2,272 3,157
________ ________
Current 820 906
Non-current 1,452 2,251
________ ________
Financial Statements
Notes forming part of the consolidated financial statements
for the year-ended 31 December 2022
General information
1
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.
Accounting policies
2
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. During the year, The Group
signed a new agreement with HSBC Bank plc ("HSBC") to replace the
National Westminster Bank ("NWB") facility. The new facility with
HSBC consists of a revolving credit facility ("RCF") of GBP20m with
a GBP6m term loan on a reducing basis. Repayments started in
October 2022, and at 31 December, GBP5.4m remained outstanding. The
key covenants include net leverage ratio and interest cover tests,
assessed on a quarterly basis. While the main terms of the
financing facility remain unchanged, as a result of the reduction
in the Adjusted EBITDA in 2022 the debt has been classified to
current liabilities. Subsequent to the end of the period, the
Company and HSBC agreed to accommodate further leeway in the
covenants to allow for the temporary deterioration in profits,
whilst the Company completes its transformation programme.
As highlighted in the risk management section (see pages 26-27
of the Annual Report and Accounts) the Board has put robust
business continuity plans in place to ensure continuity of trading
and operations. Management believes the pipeline will enable
Maintel to deliver upside from the budgeted revenue, whilst
focusing on driving efficiency through cost base reduction and
margin enhancement.
The Group's forecasts and projection models have been built on a
prudent basis, taking into account uncertainty around the impact of
the supply chain issues with regard to both project delivery and
timing of pipeline conversion, allows for actual performance to
exceed management forecasts in terms of revenue expectations. The
Board has reviewed the model in detail, taking account of
reasonably possible changes in trading performance, including
sensitivities in pipeline conversion and renewal risk, together
with further mitigating actions it could take such as overhead
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.
(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 as revenues over the customer contract
term.
Customer overspend and bonus payments are recognised monthly at
a point in time when the Group's performance obligations have been
completed; these are also payable by the network operators on a
monthly basis.
(f) Leased assets
When the Group enters into a lease, a lease liability and a
right of use asset is created.
A lease liability shall be recognised at the commencement date
of the lease term and will be measured at the present value of the
remaining lease payments discounted using the Groups' incremental
borrowing rate. In determining the lease term, hindsight will be
applied in respect of leases which contain an option to terminate
the lease. The lease liability is subsequently increased for a
constant periodic rate of interest on the remaining balance of the
lease liability and reduced for lease payments. Interest on the
lease liability is recognised in the income statement.
A right of use asset shall be recognised at the commencement
date of the lease term. The right of use asset will be measured at
an amount equal to the lease liability. The right of use asset will
subsequently be measured at cost less accumulated depreciation and
any accumulated impairment losses.
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 (i) three
years in respect of the Microsoft licences, (ii) five years in
respect of the Callmedia software and capitalised systems software
development costs.
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 represent
foreign exchange contracts held to manage the cash flow exposures
of forecast transactions denominated in foreign currencies. The
Group enters 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 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 have a functional currency of Pound Sterling (other
than Maintel International Limited ("MIL") which has a functional
currency of the Euro) consistent with the presentation currency of
the Group's consolidated financial statements. Transactions in
currencies other than Pound Sterling are recorded at the rates of
exchange prevailing on the dates of the transactions.
On consolidation the results of MIL, which are included in the
consolidated statement of comprehensive income, 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) Government grants
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions.
Government grants received in the year ended 31 December 2021 in
respect of the furlough of staff over the period of the COVID-19
pandemic, were recognised in the period when the related salary
costs are incurred.
(u) Share-based payments
The Group uses the Black-Scholes Model to calculate the
appropriate charge for options issued.
Where employees are rewarded using equity settled share-based
payments, the fair values of employees' services are determined
indirectly by reference to the fair value of the instrument granted
to the employee. This fair value is appraised at the grant
date.
All equity-settled share-based payments are ultimately
recognised as an expense in the income statement with a
corresponding credit to reserves.
If vesting periods apply, the expense is allocated over the
vesting periods, based on the best available estimate of the number
of share options expected to vest. Estimates are revised
subsequently if there is any indication that the number of share
options expected to vest differs from previous estimates. Any
cumulative adjustment prior to vesting is recognised in the current
year. No adjustment is made to any expense recognised in prior
years if share options that have vested are not exercised .
(v) Accounting standards issued
The following amendments to standards were issued and adopted in
the year, with no material impact on the financial statements:
-- Property, Plant and Equipment: Proceeds Before Intended Use - Amendments to IAS 16
-- Reference to the Conceptual Framework - Amendments to IFRS 3
-- Onerous Contracts - Cost of Fulfilling a Contract - Amendments to IAS 37
-- Annual Improvements to IFRS Standards 2018-2020
There were no other new accounting standards issued that have
been adopted in the year.
(w) Standards in issue but not yet effective
At the date of authorisation of these financial statements there
were amendments to standards which were in issue, but which were
not yet effective, and which have not been applied. The principal
ones were:
Effective for annual periods beginning on or after 1 January
2023
-- Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction - Amendments to IAS 12
-- Definition of Accounting Estimates - Amendments to IAS 8
-- Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2
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
Effective date deferred until accounting periods starting not
earlier than 1 January 2024
-- Classification of Liabilities as Current or Non-Current - Amendments to IAS 1
The Directors do not expect the adoption of these amendments to
standards to have a material impact on the financial
statements.
Accounting estimates and judgements
3
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 2022
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 Network
and technology services Mobile Total
GBP000 GBP000 GBP000 GBP000
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 remuneration (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)
=========
Revenue is wholly attributable to the principal activities of
the Group in the current and prior year.
Analysis of revenue by geographical location:
2022 2021
GBP000 GBP000
United Kingdom 89,037 100,575
European Union 1,951 3,164
Rest of the world 48 156
________ ________
91,036 103,895
________ ________
In 2022 the Group had no customer (2021: None) which accounted
for more than 10% of its revenue.
Analysis of revenue by timing of recognition:
2022 2021
GBP000 GBP000
Revenue recognised at a point in time 20,900 20,301
Revenue recognised over time 70,136 83,594
________ ________
91,036 103,895
________ ________
Analysis of movements in deferred income:
2022 2021
GBP000 GBP000
Deferred income - opening balance (18,572) (15,800)
Revenue recognised in the year 17,188 14,976
New revenue deferrals in the year (18,751) (17,748)
________ ________
Deferred income - closing balance (20,135) (18,572)
________ ________
Analysis of other expenses:
Managed
service Network
and technology services Mobile Central Total
GBP000 GBP000 GBP000 GBP000 GBP000
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
relate to foreign exchange expenses on delayed orders. Please see
Note 12 for further details.
Year-ended 31 December 2021
Managed
service Network
and technology services Mobile Total
GBP000 GBP000 GBP000 GBP000
Revenue 61,404 37,689 4,802 103,895
================ =========== ========= =========
Gross profit 18,720 13,228 2,163 34,111
---------------- ----------- --------- ---------
Other operating income 476
Other administrative expenses (26,674)
Share based remuneration (49)
Intangibles amortisation (5,416)
Exceptional items 3,901
---------
Operating profit 6,349
Financial expense (1,112)
---------
Profit before taxation 5,237
Taxation (566)
Profit after taxation 4,671
=========
Analysis of other expenses:
Managed
service Network
and technology services Mobile Central Total
GBP000 GBP000 GBP000 GBP000 GBP000
Other expenses
Intangibles amortisation - - - (5,416) (5,416)
Depreciation - - - (1,680) (1,680)
Exceptional items - - - 3,901 3,901
Employees
5
2022 2021
The average number of employees, including Number Number
Directors, during the year was:
Corporate and administration 88 92
Sales and customer service 175 184
Technical and engineering 230 239
________ ________
Total employees 493 515
________ ________
Staff costs, including Directors, consist of: GBP000 GBP000
Wages and salaries 27,004 28,398
Social security costs 3,317 3,387
Pension costs 748 772
________ ________
Total staff costs 31,069 32,557
________ ________
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 GBP167,000 (2021: GBP161,000) were payable to the schemes
at the year-end and are included in other payables.
Directors' remuneration
6
The remuneration of the Company Directors was as follows:
2022 2021
GBP000 GBP000
Directors' emoluments 833 794
Pension contributions 17 23
________ ________
Total Directors' remuneration 850 817
________ ________
Included in the above is the remuneration of the highest paid
Director as follows:
2022 2021
GBP000 GBP000
Director's emoluments 326 305
Pension contributions 9 8
________ ________
Total remuneration of the highest paid Director 335 313
________ ________
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 (2021: five, two auto-enrolled, two defined
contribution, one both defined contribution and auto enrolled).
Further details of Director remuneration are shown in the
Remuneration Committee report on page 51 of the Annual Report and
Accounts.
Operating (loss) / profit
7
2022 2021
GBP000 GBP000
This has been arrived at after charging/(crediting):
Depreciation of property, plant and equipment 642 668
Depreciation of right of use assets 940 1,012
Amortisation of intangible fixed assets 5,437 5,416
Other income:
- Research and development expenditure credit (540) (461)
- Other - (15)
Fees payable to the Company's auditor for the
audit of the parent and consolidated accounts 55 47
Fees payable to the Company's auditor for other
services:
- Audit of the Company's subsidiaries pursuant
to legislation 113 106
- Audit-related assurance services 24 26
Fees payable to other advisors for tax compliance
services 17 17
Foreign exchange movement 232 111
Government grant in respect of furloughed employees - (36)
________ ________
Financial expense
8
2022 2021
GBP000 GBP000
Interest payable on bank loans 1,017 916
Interest payable on deferred consideration 27 69
Interest expense on leases 97 127
________ ________
Total financial expense 1,141 1,112
________ ________
Taxation
9
2022 2021
GBP000 GBP000
UK corporation tax
Corporation tax on UK (loss)/profit for the
year - 682
Adjustment for prior year 67 119
________ ________
67 801
Overseas tax
Corporation tax on overseas profit for the
year 5 23
________ ________
Total current taxation on (loss)/profit on
ordinary activities 72 824
Deferred tax (Note 20)
Current year (895) (246)
Adjustment for prior year 295 (12)
________ ________
Total deferred taxation (600) (258)
________ ________
Total taxation (credit)/charge on (loss)/profit
on ordinary activities (528) 566
________ ________
The standard rate of corporation tax in the UK for the year was
19.00% (2021: 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)/profit before tax are as follows:
2022 2021
GBP000 GBP000
(Loss)/profit before tax (4,889) 5,237
________ ________
(Loss)/profit at the standard rate of corporation
tax in the UK of 19.0% (2021: 19.0%) (929) 995
Effect of:
Net income not taxable (42) (896)
Adjustments relating to prior years 465 107
Effects of overseas tax rates (3) (14)
Effects of changes in tax rates 6 374
Capital allowances in excess of depreciation (25) -
________ ________
Total taxation (credit)/charge on (loss)/profit
on ordinary activities (528) 566
________ ________
Included within 'Adjustments relating to prior years' is
GBP103,000 (2021: GBP106,000) in relation to R&D expenditure
credits for previous accounting periods. The remaining GBP362,000
adjustment for the year ended 31 December 2022 mainly relates to a
GBP280,000 increase in deferred tax timing differences on
intangible assets per the final 2021 trading subsidiary Corporation
tax return as compared to the draft tax return available at the
time of signing of the 2021 financial statements.
Factors that may affect future tax charges/credits:
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the year when assets are
realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantially enacted at the
reporting date. In the March 2021 Budget, the government announced
an increase in the UK corporation tax rate from 19% to 25%
(effective 1 April 2023), which was substantively enacted during
the prior year. This corporation tax rate increase was reconfirmed
in the Spring Budget 2023.
10 Earnings per share
Earnings per share is calculated by dividing the (loss)/profit
after tax for the year by the weighted average number of shares in
issue for the year, these figures being as follows:
2022 2021
GBP000 GBP000
(Loss)/profit after tax (4,361) 4,671
Adjustments:
Intangibles amortisation (net of non-acquired
element) 4,051 4,444
Exceptional items (Note 12) 904 (3,901)
Tax relating to above adjustments (1,184) (1,050)
Share based remuneration 181 49
Interest charge on deferred consideration 27 69
Tax adjustments relating to prior years (current
tax) 67 107
Adjustment for the tax impact of the change in
the deferred tax rate 81 374
________ ________
Adjusted earnings used in adjusted EPS (234) 4,763
________ ________
Adjustment for intangibles amortisation is in relation to
intangible assets acquired via business combinations.
2022 2021
Number Number
(000s) (000s)
Weighted average number of ordinary shares of
1p each used as the denominator in calculating
basic EPS 14,362 14,362
Potentially dilutive shares 11 20
________ ________
Weighted average number of ordinary shares of
1p each used as the denominator in calculating
diluted EPS 14,362 14,382
________ ________
(Loss)/earnings per share
Basic (30.4)p 32.5p
Diluted (30.4)p 32.5p
Adjusted - basic (1.6)p 33.2p
Adjusted - diluted (1.6)p 33.1p
The adjustments to (losses)/earnings have been made in order to
provide a clearer picture of the trading performance of the Group
after removing amortisation, the disposal of Doc Sol and other
non-recurring expenses. In calculating diluted earnings per share,
the weighted average number of ordinary shares in issue is adjusted
to assume conversion of all dilutive potential ordinary shares.
The Group has one category of potentially dilutive ordinary
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 year ended 31 December 2022 on the basis that
they are anti-dilutive, however they may become dilutive in future
periods.
Therefore, as a loss has arisen for the year ended 31 December
2022, the basic and diluted earnings per share are the same.
11 Adjusted earnings before interest, tax, depreciation
and amortisation
(Adjusted EBITDA)
2022 2021
GBP000 GBP000
(Loss) / profit before tax (4,889) 5,237
Financial expense 1,141 1,112
Depreciation of property, plant and
equipment 642 668
Depreciation of right of use assets 940 1,012
Amortisation of intangible fixed assets 5,437 5,416
________ ________
EBITDA 3,271 13,445
________ ________
Share based remuneration 181 49
Exceptional items (Note 12) 904 (3,901)
________ ________
Adjusted EBITDA 4,356 9,593
________ ________
Exceptional items
12
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:
2022 2021
GBP000 GBP000
Exceptional items included within cost
of sales
Foreign exchange expense on delayed orders 278 -
Exceptional items included within administrative
expenses
Staff restructuring and other employee
related costs 417 169
Fees relating to revised credit facilities
agreement 162 40
Costs/(income) relating to an onerous
property lease 63 (105)
Property related and other legal and professional
incomes - (13)
Gain on disposal of Doc Sol (16) (3,992)
________ ________
Total exceptional items 904 (3,901)
________ ________
Exceptional items included within cost of sales
Foreign exchange expense on delayed orders of GBP278,000 (2021:
GBPNil) relates 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
Staff restructuring and other employee related costs of
GBP417,000 (2021: GBP169,000) include redundancy costs.
Fees relating to the revised credit facilities agreement of
GBP162,000 (2021: GBP40,000) include associated professional fees
in negotiating the facility that commenced in the current year.
This does not include the arrangement fee of GBP234,000, which has
been recognised against Borrowings (Note 21) and is being amortised
over the three-year HSBC loan agreement.
Onerous lease costs of GBP63,000 relate to the Fareham property
and include the remaining expected costs of completion in relation
to the onerous contract to July 2023. Onerous lease income of
GBP105,000 in the prior year to 31 December 2021 related to Haydock
the Parks and comprised the release of remaining onerous lease
provision, dilapidations provision and lease creditor net of
related professional fees.
In the year ended 31 December 2021, the gain on disposal of Doc
Sol of GBP3,992,000 included proceeds of GBP4,344,000 net of
professional costs of GBP156,000. The remaining costs incurred in
the prior year of GBP352,000 (which were set against these proceeds
to arrive at the GBP3,992,000 gain), relate to the apportionment of
overheads and writing off of customer relationships relating to Doc
Sol.
Intangible assets
13
Customer Product Software
Goodwill relationships Brands platform and licences Other Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
At 1 January
2021 40,516 43,879 3,480 1,845 7,434 - 97,154
Additions - - - 431 1,189 250 1,870
Disposals - (158) - - - - (158)
_______ _______ ______ _______ _______ ______ ______
At 31 December
2021 40,516 43,721 3,480 2,276 8,623 250 98,866
Additions - - - 362 2,043 - 2,405
_______ _______ ______ _______ _______ ______ ______
At 31 December
2022 40,516 43,721 3,480 2,638 10,666 250 101,271
_______ _______ ______ _______ _______ ______ ______
Amortisation
and Impairment
At 1 January
2021 317 29,880 2,114 1,025 4,205 - 37,541
Amortisation
in the year - 3,711 410 275 978 42 5,416
Disposals - (112) - - - - (112)
_______ _______ ______ _______ _______ ______ ______
At 31 December
2021 317 33,479 2,524 1,300 5,183 42 42,845
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
_______ _______ ______ _______ _______ ______ ______
Net book value
At 31 December
2022 40,199 6,823 546 1,022 4,241 158 52,989
_______ _______ ______ _______ _______ ______ ______
At 31 December
2021 40,199 10,242 956 976 3,440 208 56,021
_______ _______ ______ _______ _______ ______ ______
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 2022 is GBP1,386,000 (2021: GBP972,000) relating to
amortisation from non-acquired intangible assets (here meaning
assets not acquired as part of a business combination).
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.
During the year, a review of the change in the scale of the
Group's activities in use of third-party licences took place. Based
on increases observed, it is deemed appropriate to begin to
capitalise these items. These purchases were not material in
previous reporting periods and material amounts that meet the
criteria are being incurred for the first time. The 2022 results
include capitalisation of subscription licenses of GBP1.124m.
Goodwill
The carrying value of goodwill is allocated to the cash
generating units as follows:
2022 2021
GBP000 GBP000
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 amounts for years 1 to 3, and a pre-tax discount
rate of 13.93% (2021: 12.5%) 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
7.6% (2021:13.3%), terminal growth rate 2.0% (2021: 2.0%), average
gross margin 42.6% (2021: 34.1%).
Managed service and technology division: average annual revenue
growth rate 3.9% (2021: 3.7%), terminal growth rate 2.0% (2021:
terminal reduction rate 5.1%), average gross margin 25.7% (2021:
32.4%).
Mobile division: average annual revenue growth rate 1.9% (2021:
1.9%), terminal growth rate 0.1% (2021: 0.4%), average gross margin
45.7% (2021: 42.6%).
The Group's impairment assessment at 31 December 2022 indicates
that there is significant headroom for each unit.
The discount rate is based on conventional capital asset pricing
model inputs and varies to reflect the relative risk profiles of
the relevant cash generating units. Sensitivity analysis using
reasonable variations in the assumptions shows no indication of
impairment.
Subsidiaries
14
The Company owns investments in subsidiaries including a number
which did not trade during the year. The following were the
principal subsidiary undertakings at the end of the year:
Maintel Europe Limited
Maintel International Limited
Maintel Europe Limited provides goods and services in the
managed services and technology and network services sectors.
Maintel Europe Limited is the sole provider of the Group's mobile
services.
Maintel International Limited provides goods and services in the
managed services and technology sector predominantly in
Ireland.
In addition, the following subsidiaries of the Company were
dormant as at 31 December 2022:
Maintel Voice and Data Limited Datapoint Global Services Limited
Maintel Finance Limited Maintel Network Solutions Limited
District Holdings Limited Datapoint Customer Solutions Limited
Intrinsic Technology Limited Maintel Mobile Limited
Warden Holdco Limited Azzurri Communications Limited
Warden Midco Limited
It is the intention of the Directors to liquidate the above 11
dormant subsidiaries in the year ended 31 December 2023. Please see
Note 29 for further information.
Each subsidiary company is wholly owned and, other than Maintel
International Limited, is incorporated in England and Wales.
Maintel International Limited is incorporated in the Republic of
Ireland.
Each subsidiary, other than Maintel International Limited, has
the same registered address as the parent. The registered address
of Maintel International Limited is Beaux Lane House, Mercer Street
Lower, Dublin 2, Ireland.
15 Property, plant and equipment
Office and
Leasehold computer Motor vehicles
improvements equipment Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2021 829 7,435 47 8,311
Additions 3 341 - 344
________ ________ ________ ________
At 31 December 2021 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
________ ________ ________ ________
Depreciation
At 1 January 2021 496 6,353 47 6,896
Provided in year 97 571 - 668
________ ________ ________ ________
At 31 December 2021 593 6,924 47 7,564
Provided in year 57 585 - 642
Disposals (325) (6,589) (47) (6,961)
________ ________ ________ ________
At 31 December 2022 325 920 - 1,245
________ ________ ________ ________
N et book value
At 31 December 2022 188 1,193 - 1,381
________ ________ ________ ________
At 31 December 2021 239 852 - 1,091
________ ________ ________ ________
During the year, the Group underwent a review of its fixed asset
registers and disposed of GBP0.325m Leasehold improvements,
GBP6.589m Office and computer equipment and GBP0.047m 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 year end. No profit or loss on
disposal was recognised on these disposals.
Right of use assets
16
Office
Land and and computer
buildings equipment Motor vehicles Total
GBP000 GBP000 GBP000 GBP000
Cost
At 1 January 2021 5,650 822 340 6,812
Additions 31 391 - 422
Disposals (174) - (152) (326)
________ ________ ________ ________
At 31 December 2021 5,507 1,213 188 6,908
Additions 30 - - 30
Disposals (229) (822) (188) (1,239)
________ ________ ________ ________
At 31 December 2022 5,308 391 - 5,699
________ ________ ________ ________
Depreciation and impairment
At 1 January 2021 2,264 499 241 3,004
Depreciation charge for
the year 703 255 54 1,012
Disposals (174) - (107) (281)
________ ________ ________ ________
At 31 December 2021 2,793 754 188 3,735
Depreciation charge for
the year 656 284 - 940
Disposals (229) (822) (188) (1,239)
________ ________ ________ ________
At 31 December 2022 3,220 216 - 3,436
________ ________ ________ ________
N et book value
At 31 December 2022 2,088 175 - 2,263
________ ________ ________ ________
At 31 December 2021 2,714 459 - 3,173
________ ________ ________ ________
During the year, the Group underwent a review of its fixed asset
registers and disposed of GBP0.229m Buildings-related assets,
GBP0.822m Office and computer equipment and GBP0.188m 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 year end. No profit or loss on disposal was recognised on
these disposals.
Inventories
17
2022 2021
GBP000 GBP000
Maintenance stock 26 35
Stock held for resale 2,568 974
________ ________
Total inventories 2,594 1,009
________ ________
Cost of inventories recognised as an expense 10,992 16,808
________ ________
Provisions of GBP10,000 were made against the maintenance stock
in 2022 (2021: GBP33,000). This is recognised in cost of sales. No
provisions were made against Stock held for resale in 2022 or 2021
as this balance represents new hardware awaiting installation at
customer sites.
Trade and other receivables
18
2022 2021
Current trade and other receivables GBP000 GBP000
Trade receivables 12,975 13,668
Other receivables 713 778
Prepayments and accrued income 13,688 15,783
________ ________
Total current trade and other receivables 27,376 30,229
________ ________
All amounts shown above fall due for payment within one
year.
2022 2021
Non-current trade and other receivables GBP000 GBP000
Trade receivables 90 630
________ ________
Total non-current trade and other receivables 90 630
________ ________
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 GBP5.1m in 2021 to GBP1.9m at the reporting date;
- Prepayments increased from GBP10.7m in 2021 to GBP11.9m at the reporting date;
- Deferred income increased from GBP18.6m in 2021 to GBP20.1m at the reporting date; and
- Deferred costs net of accrued costs increased from GBP6.8m in
2021 to GBP9.6m at the reporting date.
The corresponding adjustments for these movements represent
revenues and costs recognised in the income statement in the year,
driven by an increase in cloud revenues and associated level of
advance billings, combined with an increase in accrued revenue
accruals due to timings of project milestone delivery.
Trade and other payables
19
2022 2021
Current trade and other payables GBP000 GBP000
Trade payables 18,631 10,869
Other tax and social security 2,227 3,344
Other payables 2,823 3,900
Accruals 3,169 5,893
Deferred income 20,135 18,572
Deferred consideration in respect of business
combination - 1,227
Derivative financial instruments (Note 23) 130 -
________ ________
Total current trade and other payables 47,115 43,805
________ ________
The GBP7.8m increase in Trade payables in the year is
predominantly due to 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. A
payment was made to a key supplier in February 2023 for GBP4.2m of
the outstanding balance, following the receipt of the related
materials.
2022 2021
Non-current other payables GBP000 GBP000
Intangible licences and other payables 118 194
Advanced mobile commissions 58 98
Other payables 194 163
________ ________
Total non-current trade and other payables 370 455
________ ________
Deferred taxation
20
Property,
plant Intangible Tax
and
equipment assets losses Other Total
GBP000 GBP000 GBP000 GBP000 GBP000
Net (asset)/liability
at 1 January 2021 (1,169) 3,081 (9) (87) 1,816
Charge/(credit) to consolidated
statement of comprehensive
income (107) (151) - 12 (246)
Adjustment to prior
year to consolidated
statement of comprehensive
income - - 9 (21) (12)
________ ________ ________ ________ ________
Net (asset)/liability
at 31 December 2021 (1,276) 2,930 - (96) 1,558
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
________ ________ ________ ________ ________
The net deferred tax liability mainly arises on the recognition
of an intangible asset in relation to the Maintel Mobile,
Datapoint, Proximity, Azzurri, Intrinsic and Atos acquisitions.
This is partially offset by a deferred tax asset in relation to tax
timing differences on property, plant and equipment, as well as
current year taxable losses which are expected to be utilised
against future year taxable profits. Other items include timing
differences in relation to provisions.
Included within 'Adjustment to prior year' is a GBP280,000
increase in deferred tax timing differences on intangible assets
per the final 2021 trading subsidiary Corporation tax return as
compared to the draft tax return available at the time of signing
of the 2021 financial statements.
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 continue 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 liability balance at 31 December 2022 has
been calculated on the basis that the associated assets and
liabilities will unwind at 25% (2021: 25%).
Borrowings
21
2022 2021
GBP000 GBP000
Current bank overdraft - secured - 3,869
Current bank loan - secured 22,726 15,493
________ ________
Total borrowings 22,726 19,362
________ ________
On 24 March 2022, the Group signed a new agreement with HSBC
Bank plc ("HSBC") to replace the previous facility. The new
facility with HSBC consists of a revolving credit facility ("RCF")
of GBP20m with a GBP6m term loan on a reducing basis. The maturity
date of the agreement is 3 years from the signing date. The term
loan is being repaid in equal monthly instalments, starting in
October 2022. The year-end principal balance of the term loan was
GBP5.4m and of the RCF was GBP17.5m.
Interest on the borrowings is the aggregate of the applicable
margin and SONIA for Pound Sterling / SOFR for US Dollar / EURIBOR
for Euros.
Covenants based on EBITDA to Net Finance Charges and Total Net
Debt to EBITDA are tested on a quarterly basis. HSBC granted a
waiver on the covenants at 31 December 2022 after the current
reporting period had ended. Therefore, the total borrowings 31
December 2022 have been classified as current liabilities at year
end. At the date of signing these financial statements, GBP3m of
the term loan is not due to be repaid in the 12 months from 31
December 2022.
The current bank borrowings above are stated net of unamortised
issue costs of debt of GBP0.2m (31 December 2021: GBP0.1m).
The facilities are secured by a fixed and floating charge over
the assets of the Company and its subsidiaries. Interest is payable
on amounts drawn on the revolving credit facility and loan facility
at a covenant-depending tiered rate of 2.60 % to 3.25% per annum
over SONIA, with a reduced rate payable on the undrawn
facility.
The Directors consider that there is no material difference
between the book value and fair value of the loan.
Lease Liabilities
22
2022 2021
GBP000 GBP000
Maturity analysis - contractual undiscounted
cash flows
In one year or less 872 1,003
Between one and five years 1,389 2,113
In five years or more 145 294
________ ________
Total undiscounted lease liabilities at 31
December 2022 2,406 3,410
________ ________
Discounted lease liabilities included in the
statement of
financial position
Current 820 906
Non-current 1,452 2,251
________ ________
Total lease liabilities included in the statement
of financial position 2,272 3,157
________ ________
Amounts recognised in the comprehensive income
statement
Interest expense on lease liabilities 97 127
Expenses relating to short term leases 89 91
________ ________
Amounts recognised in the statement of cash
flows
Total cash outflow (including payments relating
to short term leases) 1,071 1,373
________ ________
During the years ended 31 December 2022 and 31 December 2021
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 GBPNil (2021: GBPNil).
Financial instruments
23
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
2022 2021
GBP000 GBP000
Non-current financial assets
Trade receivables 90 630
________ ________
Total 90 630
________ ________
Current financial assets
Trade receivables 12,975 13,668
Accrued income 1,920 5,102
Other receivables 713 778
________ ________
Total 15,608 19,548
________ ________
Financial liabilities
measured at amortised
cost
2022 2021
GBP000 GBP000
Non-current financial liabilities
Other payables 370 455
Lease liabilities 1,452 2,251
________ ________
Total 1,822 2,706
________ ________
Current financial liabilities
Trade payables 18,631 10,869
Borrowings 22,726 19,362
Other payables 2,823 3,900
Accruals 3,169 5,893
Deferred consideration in respect of business
combination - 1,227
Lease liabilities 820 906
________ ________
Total 48,169 42,157
________ ________
Financial liabilities
measured at fair value
2022 2021
GBP000 GBP000
Current financial liabilities
Derivative financial instruments 130 -
________ ________
Total 130 -
________ ________
Derivative financial instruments held under current financial
liabilities on the consolidated statement of financial position
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 on
page 104 for further information.
The Group held the following foreign currency denominated
financial assets and financial liabilities:
Assets Liabilities
2022 2021 2022 2021
GBP000 GBP000 GBP000 GBP000
US Dollars 327 326 3,965 1,799
Euros 526 500 43 22
________ ________ ________ ________
Total 853 826 4,008 1,821
________ ________ ________ ________
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
GBP389,000 is provided at 31 December 2022 (2021: GBP420,000). 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 2022 owed
the Group GBP0.7m including VAT (2021: GBP1.2m). 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:
2022 2021
GBP000 GBP000
Provision at start of year 420 336
Provision created 103 161
Provision reversed (134) (77)
________ ________
Provision at end of year 389 420
________ ________
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. T he 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:
< 30 31-60 > 60
Current days days days Total
31 December 2022
Expected credit loss %
range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (GBP'000) 11,004 931 289 1,262 13,486
Expected credit loss rate
(GBP'000) (40) (30) (11) (308) (389)
Accrued income 1,920 - - - 1,920
15,017
< 30 31-60 > 60
Current days days days Total
31 December 2021
Expected credit loss %
range 0%-1% 2%-5% 3%-10% 10%-100%
Gross debtors (GBP'000) 10,746 1,612 393 1,967 14,718
Expected credit loss rate
(GBP'000) (60) (41) (27) (292) (420)
Accrued income 5,102 - - - 5,102
19,400
Receivables are grouped based on the credit terms offered. The
probability of default is determined at the year-end based on the
aging of the receivables and historical data about default rates on
the same basis. That data is adjusted if the Group determines that
historical data is not reflective of expected future conditions due
to changes in the nature of its customers and how they are affected
by external factors such as economic and market conditions.
Foreign currency risk
The functional currency of all Group companies is Pound Sterling
apart from Maintel International Limited, which is registered in,
and operates from, the Republic of Ireland, and whose functional
currency is the Euro. The consolidation of the results of that
company is therefore affected by movements in the Euro/Sterling
exchange rate.
In addition, some Group companies transact with certain
customers and suppliers in Euros or 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 is holding the following foreign exchange contracts at
31 December 2022:
Maturity
Less
than 1 to 3 to 6 to 9 to
1 month 3 months 6 months 9 months 12 months Total
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 represents the negative change in their fair
value. This carrying value is disclosed on page 102 of the Annual
Report and Accounts. The Group held no foreign exchange contracts
as at 31 December 2021.
The Group enters 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 GBP18,000 lower/higher due to the
positive/negative change in fair value of foreign exchange
contracts.
Interest rate risk
The Group had total borrowings of GBP22.7m at 31 December 2022
(2021: GBP19.4m). 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 2022,
and all other variables were held constant, the Group's loss (2021:
profit) for the year would have been GBP86,000 (2021: GBP106,000)
higher/lower (2021: lower/higher) 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 6 to 12 2 to 5 More than
months months Years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000
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
Deferred consideration - - - - -
Derivative financial
instruments 130 - - - 130
______ ______ ______ ______ ______
At 31 December 2022 25,671 24,611 1,904 - 52,186
______ _______ _______ ______ _______
0 to 6 6 to 12 2 to 5 More than
months months Years 5 years Total
GBP000 GBP000 GBP000 GBP000 GBP000
Trade payables 10,869 - - - 10,869
Other payables 2,856 1,044 455 - 4,355
Lease liabilities 533 470 2,113 294 3,410
Accruals 5,893 - - - 5,893
Borrowings (including
future interest) 400 19,762 - - 20,162
Deferred consideration 608 619 - - 1,227
______ ______ ______ ______ ______
At 31 December 2021 21,159 21,895 2,568 294 45,916
______ _______ _______ ______ _______
[1] HSBC granted a waiver on the covenants over the Group's
borrowings at 31 December 2022 after the current reporting period
had ended. Therefore, the total borrowings 31 December 2022 have
been classified as current liabilities at year end 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 earnings. Typically returns to
shareholders will be funded from retained profits, however in order
to take advantage of the opportunities available to it from time to
time, the Group will consider the appropriateness of issuing
shares, repurchasing shares, amending its dividend policy and
borrowing, as is deemed appropriate in the light of such
opportunities and changing economic circumstances.
Share capital
24
Allotted, called up and fully paid
2022 2021 2022 2021
Number Number GBP000 GBP000
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 (2021: Nil).
No shares were repurchased during the year (2021: Nil).
Reserves
25
Share premium, translation reserve, and retained earnings
represent balances conventionally attributed to those descriptions.
Other reserves include a capital redemption reserve of GBP31,000
(2021: GBP31,000) and a translation reserve of GBP49,000 (2021:
GBP30,000).
The capital redemption reserve represents the nominal value of
ordinary shares repurchased and cancelled by the Company and is
non-distributable in normal circumstances.
The Group having no regulatory capital or similar requirements,
its primary capital management focus is on maximising earnings per
share and therefore shareholder return.
The Directors have proposed that there will be no final dividend
in respect of 2022 (2021: GBPNil).
Share Incentive Plan
26
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.
Share based payments
27
The Remuneration Committee's report on page 52 of the Annual
Report and Accounts describes the options granted over the
Company's ordinary shares to the Directors.
In aggregate, options are outstanding over 6.0% of the current
issued share capital. The number of shares under option and the
vesting and exercise prices may be adjusted at the discretion of
the Remuneration Committee in the event of a variation in the
issued share capital of the Company.
2022 2022 2021 2021
Number Weighted Number of Weighted
of
Options Average Options Average
Exercise Exercise
price price
Outstanding at 1 January 314,409 383.40p 246,082 378.14p
Granted during the year 637,870 331.31p 148,000 375.00p
Lapsed during the year (101,958) 335.30p (79,673) 351.55p
_______ _______ _______ _______
Outstanding at 31 December 850,321 350.09p 314,409 383.40p
_______ _______ _______ _______
Exercisable at year-end 23,652 608.80p 13,409 727.12p
The weighted average contractual life of the outstanding options
was 4 years (2021: 8 years), exercisable in the range 221p to
880p.
No shares were exercised in the year by way of issue of new
shares. No options have expired during the periods covered by the
table above.
Outstanding share options by exercisable price
range 2022 2021
Number of Number of
Share options Share options
Exercisable Price range
221p to 274p 65,000 65,000
330p to 505p 771,912 236,000
675p to 880p 13,409 13,409
_______ _______
Total share options outstanding 850,321 314,409
_______ _______
The Group recognised GBP181,000 of expenditure related to
equity-settled share-based payments in the year (2021:
GBP49,000).
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 5 April 27 April 5 May
Number of options granted 167,000 420,870 50,000
Share price at date of grant 335.00p 330.00p 330.00p
Exercise price 335.00p 330.00p 330.00p
Option life in years 10 10 10
Expiry date 5 April 2032 27 April 5 May 2032
2032
Risk-free rate 1.55% 1.82% 1.96%
Expected volatility 38.49% 38.33% 38.27%
Expected dividend yield 0% 0% 0%
Fair value of options 0.933p 0.925p 0.929p
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.
Related party transactions
28
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:
2022 2021
GBP000 GBP000
Short term employment benefits 1,605 1,584
Social security costs 206 196
Contributions to defined contribution pension
schemes 41 46
________ ________
1,852 1,826
________ ________
Other transactions - Group
During the year, the Group paid fees of GBP83,483 (2021:
GBP5,400) 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 2022 (2021: GBPNil).
Post balance sheet events
29
In January 2023, the Directors made the decision to discontinue
the development of our own "Callmedia" Contact Centre product line,
including the CX Now public cloud CCaaS variant. The product will
be wound down by 31 January 2024 . This decision will trigger an
impairment of the intangible assets capitalised to date of GBP2.3m.
These are included in note 13 within software and licenses. This
decision was made as part of an ongoing strategic review of the
business, in which we have engaged with third party specialists to
undertake a full product review. The result of this review will be
implemented over the next financial year and is expected to result
in a period of growth for the business.
It is the intention of the Directors to liquidate the 11 dormant
subsidiaries during the financial year ended 31 December 2023 as
disclosed in Note 14. This is part of a project to simplify the
corporate structure.
There are no other events subsequent to the reporting date which
would have a material impact on the consolidated financial
statements.
Contingent liabilities
30
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 2022 each
subsidiary undertaking had a net positive cash balance.
The Company has entered into an agreement with Maintel Europe
Limited, guaranteeing the performance by Maintel Europe Limited of
its obligations under the lease on its London premises.
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END
FR SEIEFMEDSELL
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Von Nov 2023 bis Nov 2024
