Maintel blames Avaya bankruptcy protection for sales hit

'Nervousness from customers is understandable'

UK comms and networking integrator Maintel has blamed trading partner Avaya’s bankruptcy filing in the US for slowing customer demand on this side of the pond.

Maintel said in preliminary half-year results that its managed services division was “negatively affected” by delays to customer installations caused by the telco taking longer than expected to emerge from Chapter 11.

Bankruptcy protection for Avaya's $6.3bn (£5bn) in debt only affects the telco’s US subsidiaries – its foreign entities do not fall under the chapter 11 umbrella. (It filed the debt reorg plan in late January this year.)

However, Ronald Rubens, Europe North veep at Avaya, admitted to The Register earlier this year that bankruptcy protection could have an impact on investment in the UK as customers remain jittery.

John Booth, Maintel company chair, said uncertainty regarding the telco kit supplier was impacting its financials:

“Whilst the issues with Avaya were beyond our control, the nervousness from customers is understandable from what has been a protracted process."

He pointed out that following a hearing on 25 August, the US Bankruptcy Court had approved a Scheduling Order, setting Avaya’s Confirmation Hearing for 15 November – after which Avaya is expected to emerge from Chapter 11.

Sales at Maintel increased by 68 per cent to £63.8m for the first six calendar months of 2017, with earnings before interest, tax, depreciation and amortisation  (EBITDA) up 62 per cent to £7.1m - largely due to the £48.5m acquisition of its rival Azzurri last year.

However, Maintel did not break down its organic revenue, which has presumably taken a sizeable hit from the issues with Avaya, given the fact it mentioned the networking partner 16 times in the results release.

Eddie Buxton, chief exec at Maintel, said the firm’s integration of Azzurri is now nearly complete, "with synergies moderately ahead of where we expected them to be at the time of completion".

He said: “Whilst we do not anticipate material improvement from our Avaya base in the second half, we do expect to see continued rapid growth in our ICON cloud platforms."

John McCaul, analyst at Megabuyte, noted the results have led to the house broker downgrading revenues and profit forecasts by 5 per cent and 9 per cent respectively for the current year.

He said:

“2017 has clearly got off to a difficult start, with the reliance on large Avaya customers offsetting the growth in Maintel's ICON offering. The issues faced are expected to continue, with the downgrading of revenues and profits by the house broker, for both the current year and 2018.” ®

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