Telecoms services group Maintel’s first eighteen months on AIM have been marked by solid progress, both in terms of financial performance and market reputation. Yet recent stock market uncertainty has seen the shares slide almost 20 per cent in value, which represents a tempting opportunity for those with an eye on robust growth.

Unusually for a technology-focused business, steadiness appears to be the watchword at Maintel. The company divides its activities between two divisions. The first, Maintel Europe, provides telecoms – and increasingly IT – support and maintenance services to business customers and public sector organisations. Maintel Voice and Data, meanwhile, re-sells minutes, line rental and broadband services to this same customer base. ‘It’s not hugely sexy,’ chief executive Tim Mason concedes, ‘but we’ve built a good, robust business from it.’

As you’d expect from such sentiments, April’s recent full year results were encouraging, but by no means spectacular. Both divisions pulled their weight, with Maintel Europe witnessing a six per cent rise in revenues to £10.2 million. Sales also grew by six per cent at Maintel Voice & Data (to £2.1 million) meaning that, overall, the group reported sales of £12.2 million – up from £11.5 million in 2004. From this relatively modest revenue increase, pre-tax profits leapt 50 per cent to £1.9 million.

Attentions are now switching to growing revenues more aggressively. Mason says that ‘having managed a stable first year as an AIM-listed company – with increased turnover, margin and profitability – further investment is being made with a view to increasing top line growth.’ This ambition, he hints, is being fuelled by the recruitment of additional sales staff and rising demand for internet-based telecoms systems (VoIP). Several potential acquisitions are being evaluated too.

In terms of both organic and acquisitive growth, Mason says that Maintel’s maintenance offerings are where the emphasis lies. ‘We would look to purchase further maintenance customer bases rather than additional products,’ he notes, ‘and we also lead with these services [during the sales process]. The aim is to become our customers’ trusted telecoms partner. We can then sell additional equipment and voice and data services and make a stronger margin than perhaps some of our rivals are able to.’

An example of the potential crossover between these two operations came in February as the company was awarded a £2.8 million contract to ‘supply, install and maintain’ a new voice and data system for the London Probation Board. The contract, which relates to 70 sites throughout the capital, will see Maintel both maintain all the associated equipment for five years and supply voice and data services.

Mason hopes further deals of this nature will soon follow, but notes that Maintel strives to develop a diverse client base. ‘Our smallest customer probably pays us £200 a year,’ Mason explains. ‘Our largest, the likes of Ikea and West Midlands Police, will pay closer to £250,000.’

For the current year, the emphasis on revenue growth is expected to have an immediate effect. House broker KBC Peel Hunt forecasts a £2.3 million profit before tax from £16 million of turnover. In 2007 a profit of £2.4 million is then anticipated from £18 million of revenue. These latter forecasts are not hugely inspiring, but analyst Andrew Darley does hint at extreme prudence in his estimates.

Currently changing hands for 140.5p and with earnings expected to hit 12.3p this year, the shares trade on a prospective p/e of 11.4 and are likely to offer a dividend yield in excess of three per cent.

‘Maintel is a steadily growing company that provides a good dividend and, following the recent downturn in its shares, offers good value at the moment,’ Darley surmises. Debt free and with £3.6 million in the bank, it’s hard to disagree with his sentiments, so while Maintel may not appeal to those seeking stellar growth it looks a good portfolio addition.

Maintel Holdings	AIM	£9.72m	91.50p	0.00p
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Maintel’s steady progress			19/06/2006