Maintel explains its poor 2017 showing

ultimate-guilty-dogs-compilation-350x197Systems integrator and managed services provider Maintel has given three reasons why it has had to revise its profit expectations.

It has just released a trading update stating that it had expected to recover the reduction in gross margin in the first half of this financial year, but “it is now evident that this will not happen”, and then outlined three reasons for the revision.

The first centred on the acquisition of Azzurri Communications in May 2016. This deal arrived with two large legacy contracts that were due to wind down over the trading period up to the end of first-half 2018.
“Both of these contracts generated higher gross margins than the group’s average contracts”, said the firm.

“Both contracts have migrated away more quickly than expected and, as a result, less revenue than originally anticipated will be generated from these customers throughout the second half of full-year 2017 and the first half of 2018.”

The second reason was that managed services and technology performance has “been adversely impacted” by delays to customer installations following the Avaya Chapter 11 process.

“The impact has been greater than expected due to prolonged delays in the resolution of the process.

The bankruptcy court approved Avaya’s reorganisation on 28 November, enabling Avaya to exit Chapter 11 by the end of 2017.

“Regarding Avaya, the group is pleased to report that ordering activity started to recover in November which will positively impact Q1 2018”, Maintel said.

The third reason concerned the integration of Intrinsic Technology, which is “going well”, with all of the Intrinsic systems migrated onto one system on 1 December.

“The revenue contribution is in line with our expectations at the time of the acquisition although the gross margins achieved have been lower than anticipated,” the firm stated.

Maintel now forecasts that it will have adjusted EBITDA in the range of £12.5 to £13 million. That still represents a 12 to 18 percent increase on the £11 million adjusted profit before tax posted last year after the acquisition of Azzurri Communications pushed revenue up 114 percent to £108 million.

Analysts are expected a full-year dividend to grow 10 percent year on year in line with existing guidance.