1st Quarter Results

Intec Telecom Systems PLC 26 February 2003 Intec Telecom Systems PLC Unaudited results for the three months ended 31st December 2002 - 'Q1 2003' Intec delivers increased EBITDA and positive operating cash flow of Â£1.3 million Intec Telecom Systems PLC ("Intec" or "the Company"), a leading provider of telecoms Operations Support Systems ("OSS"), is pleased to announce its unaudited results for the three months ended 31 December 2002, ("Q1"). Despite normal quarterly fluctuations, both EBITDA profit and positive cashflow targets have been met, and the Board remains cautiously confident of meeting expectations for the full year. Intec also concluded the successful acquisition of its largest interconnect competitor - Ericsson's 'Settler' business unit - in the period. HIGHLIGHTS - Turnover of Â£10.4 million within management expectations (3 months ended 31 December 2001 - Â£10.9 million) despite quarterly fluctuations. - Substantial increase in earnings before interest, tax, depreciation, and amortisation ("EBITDA") of Â£463,000 compared to Q1 2002 - Â£33,000. - Positive operating cash inflow of Â£1.3 million (Q1 2002 - outflow of Â£2.0 million) - the fourth sequential cashflow positive quarter. - Loss before tax was Â£1.5 million (Q1 2002: loss of Â£1.8 million), after depreciation and amortisation of goodwill and intangible assets of Â£2.1 million (Q1 2002: Â£1.7 million). - 42 new name customers, including 31 from the acquisition of Settler business in Sweden. - 61 new contracted installations, comprising 9 new InterconnecT family licences, 3 new Inter-mediatE licences, and 49 from acquisition of the Settler business. - Intec remains fully-funded with cash and cash equivalent investments of Â£11.3 million after full payment for recent Ericsson acquisition. - Successful acquisition of largest interconnect competitor - Ericsson's ' Settler' business unit. "Intec has delivered another solid, on-target first quarter within an industry that continues to be very competitive," said Intec's Executive Chairman, Mike Frayne. "Our strategy of investment properly balanced against revenues, combined with very good cost control, has allowed us to deliver substantially improved EBITDA earnings and positive operating cash flow, despite expected quarterly revenue fluctuations and intense competition for new business. Although the business environment is still very challenging, we are cautiously confident that the full year will yield results consistent with expectations." "The first quarter is typically difficult to close new business, particularly as it included a lengthy Christmas and New Year break. Intec's ability to deliver revenues within a few percent of expectations and EBITDA and cash flow that were substantially up on last year, particularly in a highly competitive business climate, is therefore very pleasing," added Chief Executive Kevin Adams. "Our product set and customer base has been strengthened with the acquisition of the Ericsson Settler business, and we see many benefits from this going forward." For further information: Kevin Adams, CEO Intec Telecom Systems PLC +44 (0) 1483 745800 kevin.adams@intec-telecom-systems.com Andrew Rodaway Intec Telecom Systems PLC +44 (0) 7768 808082 andrew.rodaway@intec-telecom-systems.com Cubitt Consulting Fergus Wylie/Sarah Brydon +44 (0) 20 7367 5100 fergus.wylie@cubitt.com Chairman's and CEO's Statement Intec Telecom Systems PLC - 1st Quarter Results 2003 Overview The telecoms industry continues to be a very competitive market for its suppliers. Despite this, and the normal quarterly fluctations expected in new business revenues, Intec has achieved another solid result in the first quarter of its 2003 financial year. Although turnover this quarter was towards the low end of our range of expectations, we have substantially increased EBITDA profit over the prior equivalent period, indicating that our policy of ongoing investment in balance with actual revenue is working well. We were also once again operating cashflow positive, the fourth successive quarter where this has been achieved. During the quarter we also completed the acquisition of Ericsson's 'Settler' interconnect business unit, historically our major competitor, bringing us clear market share leadership. Operational highlights Intec gained eleven new customers in the quarter from existing operations and thirty one new customers from its acquisition of the Ericsson 'Settler' business unit. In addition, two existing US customers placed substantial orders for additional product licences. Included in the figures for sales from existing operations are nine new InterconnecT family sales (primarily InterconnecT CABS CG customers) and three new Inter-mediatE licences. Our InterconnecT CABS division had a successful quarter, adding numerous new customers. We have invested in our Dallas-based CABS processing centre to allow for present and future expansion in workload, and we are seeing a pleasing increase in business from larger customers, as they recognise the benefits of high-quality, outsourced CABS processing. In EMEA Intec signed a new support services contract worth almost Â£1 million per annum with a mobile sector customer with operations in several countries. In the CALA region Intec concluded a very substantial deal in Venezuela for InterconnecT, and another contract worth almost US$1 million for services and licence upgrades with a Caribbean organisation. In the US we won several important new InterconnecT CABS CG customers, signed two new mediation customers, and extended licence agreements with two more. In Asia Pacific we make an important breakthrough in China, when we were formally selected to provide software to our first customer in the mainland region, an agreement which was signed just after the quarter end. Intec held an exceptionally successful User Group event in London in the quarter, attended by over 200 customer, partner and Intec delegates. This was a substantially larger event than the previous year, which was particularly gratifying given the current economic climate and the close focus on costs by our customers. Intec's User Groups continue to be an important driver of product direction and marketplace information. Products During 2002 Intec undertook a major review of its Product Operations division, as part of a larger, ongoing programme to achieve greater business efficiency and continual improvement in competitiveness. Intec has developed rapidly since it became a public company in June 2000, changing from a single-product company to a global OSS business with numerous offerings. This is a core part of our strategy, and has played a major role in helping us to achieve good growth in an industry which has been substantially affected by sector problems. However, maintaining a larger and fast-developing product portfolio is a considerable challenge, with the potential for costs to grow beyond our ability to generate equivalent revenues, if not carefully managed. Our aim with our product review has therefore been to focus on those product developments which we see have the best business potential, and also to rationalise our product branding and marketing strategies in parallel. Intec now offers its customers products from two core families: revenue generation, and network-facing systems. In the network-facing group the principal offerings are Inter-mediatE for carrier-grade, convergent mediation; and Inter-activatE for single-platform service activation. In the revenue generation group are InterconnecT, our market-leading revenue generation and settlement family; and our newly-launched solution, Inter-contenT, which allows operators, content providers, content aggregators and other partners to generate and share revenues from next-generation communications services. Inter-contenT was formally shown for the first time after the quarter-end at the 3GSM World Congress. A sophisticated demonstration involving the delivery of real-time video news clips to wireless handheld devices attracted a high level of interest from potential customers, and effectively demonstrated the advanced capabilities of Intec's solution. Staff and cost initiatives During the quarter Intec maintained cost management initiatives developed in preceding periods. Our objective has been to maintain product investment and staff resources at levels appropriate to the business, in terms of both operating revenues and future market potential, while working hard to reduce overall costs. The welcome increase in EBITDA profit that we have recorded in the quarter, together with positive operating cash flow, are indicative that these policies are proving successful in a very competitive market. We believe that sustained product investment, at a time when competitors are cutting back, will give us a clear competitive advantage in a market where the technical requirements for OSS are continually moving forwards. Staff numbers at the end of the quarter stood at 513, compared with 505 a year ago. This includes 29 new employees from the Settler business acquisition and is therefore indicative of efficiencies achieved in the core and earlier acquired businesses. We have continued to pursue sensible cost management policies in other areas of the business, with an emphasis on cutting costs from activities that are not core to the business or less productive, rather than those which might impact our performance. All expenditure is carefully scrutinised, and we frequently review suppliers for value and competitiveness. Staff-driven initiatives continue to play an important part in cost control. Ericsson 'Settler' acquisition In November 2002 Intec announced the post-year end acquisition of Ericsson's ' Settler' business unit, its major competitor in the interconnect billing market. With this acquisition Intec has expanded its base of supported customers by approximately 30 carriers. The agreement also covers the Settler development team in Sweden and exclusive worldwide rights to develop and market the Settler product range. The agreement includes further cooperation between the two companies where Ericsson will continue to offer solutions based on Settler as well as Intec's InterconnecT product suite. The total consideration amounts to US$5.1 million (Â£3.1 million including acquisition costs). The acquisition is expected to be revenue and earnings enhancing, generating new licence revenues, related services work and recurring revenues for support & maintenance. A key benefit of the agreement is the synergies that will be achieved. Ericsson has a direct presence in some countries where Intec has few resources, enabling a greater reach. In other areas, where the two companies have previously competed fiercely, efforts can be re-directed to other productive opportunities. The agreement enables Ericsson as well as other successful Settler partners to be able to offer their telecom customers Intec billing technology from either the InterconnecT or the Settler range. The integration of this acquisition is progressing well. Financial analysis In common with many enterprise software businesses Intec has always experienced a degree of unevenness in quarterly revenues, primarily due to current sales cycles and uncertainty in new contract closure dates. In the quarter under review, which included a particularly extended Christmas and New Year break for many businesses, revenues from new software licences have been impacted. Against this, recurring revenues from upgrades, bureau and support business, and revenues from professional services have increased significantly, resulting in reported revenues of Â£10.4 million for the quarter (Q1 2002: Â£10.9 million). Recurring revenues continue to be a growing contributor to our business model, at Â£5.7 million (55%) of turnover, up from Â£4.6 million (42%) in Q1 2002. Professional services income has also increased to Â£3.4 million (32%) in Q1 2003 from Â£2.6 million (24%) in Q1 2002. New licence sales revenue of Â£1.3 million (13%) have decreased compared to Â£3.7 million (34%) in Q1 2002. All regions made satisfactory contributions in the period, with EMEA contributing 38% of turnover, North America 46%, CALA 9%, and Asia-Pacific 7%. Gross margin increased to 69% (Q1 2002: 67%), reflecting a reduction in the use of third party contractors for implementations. Distribution costs also fell to Â£2.2 million (Q1 2002: Â£2.6 million) partly as a result of efficiency measures we have taken in our sales processes, as well as lower new licence commission payments. General administrative costs decreased by 2%, at Â£2.8 million (Q1 2002: Â£2.9 million) through continued close attention to cost control across the business. As stated earlier Intec continues to invest in its product portfolio to help us take advantages of next-generation technologies and the growing requirements of our major carrier customers. However, as a result of our review of product development priorities in the year, and some rationalisation of development facilities, development expenditure was up only marginally at Â£2.2 million (Q1 2002: Â£2.1 million) despite a substantially broader product portfolio. Intec incurs the majority of its development expenditure for InterconnecT family products in South Africa and for Inter-mediatE products in the US. As a result of the Settler acquisition we have 29 new staff in Sweden. Depreciation and goodwill amortisation charges have increased from Â£1.7 million in Q1 2002 to Â£2.1 million in the current quarter, reflecting additional goodwill amortisation from the acquisition of the former ICL Sims/Prospero business in the second quarter of 2002. No provision for goodwill impairment has been considered necessary. Cash and cash investments have decreased by Â£2.0 million since 30 September 2002, although it is important to note that Â£3.1 million (including acquisition costs) was paid as consideration for the Ericsson Settler business in December 2002. Positive operating cash inflows of Â£1.3 million reflect ongoing improvement in cash collections during the quarter, resulting from a continued focus on credit control. Intec's annualised debtor-days continues to improve, with the figure at 31 December 2002 standing at 91 days, compared with 105 days at 30 September 2002 and 116 days at 31 December 2001. Successful cash collections have continued during the second quarter with approximately Â£4.3 million collected up to 18 February 2003. Outlook The telecoms industry is experiencing many changes, with the imminent availability of 3G services to retail customers prominent among them. Intec has already demonstrated through a number of customer deliveries its ability to fully satisfy the technical demands of this market. But whatever the technology, telecoms continues to be a vital business and social service where traffic volumes grow consistently. As a result we view the industry as fundamentally sound, despite some obvious difficulties on the supply side. Intec sells solutions that are clearly necessary to operators, and our business performance in a challenging market underlines this. Intec is building market share, winning prestigious customers, and investing carefully in the business. We therefore remain cautiously confident that our performance in 2003 will be in line with previously stated forecasts for growth and profitability. Mike Frayne, Executive Chairman & Kevin Adams, CEO. 25 February 2003 FINANCIAL HIGHLIGHTS 3 months ended 31 December 2002 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2002 2001 2002 Â£000 Â£000 Â£000 TURNOVER 10,437 10,919 47,474 _______________ ______________ ____________ _______________ ______________ ____________ EBITDA before exceptional items (i) 463 33 3,739 _______________ ______________ ____________ _______________ ______________ ____________ Operating loss (1,642) (1,673) (13,325) _______________ ______________ ____________ _______________ ______________ ____________ Basic loss per share (0.90)p (1.05)p (7.94)p _______________ ______________ ____________ _______________ ______________ ____________ Adjusted (loss)/earnings per share (ii) (0.03)p (0.34)p 0.46 p _______________ ______________ ____________ _______________ ______________ ____________ Notes to the financial highlights Â£000 Â£000 Â£000 (i) Operating loss (1,642) (1,673) (13,325) Depreciation 459 406 1,745 Amortisation of goodwill and other intangibles 1,646 1,300 7,079 Impairment of goodwill - - 7,464 Exceptional item (Poland debtor provision) - - 776 _______________ ______________ ____________ EBITDA before exceptional items 463 33 3,739 _______________ ______________ ____________ (ii) Adjusted (loss)/earnings per share based on following adjusted loss after tax Loss after tax (1,714) (1,920) (14,782) Amortisation of goodwill and other intangibles 1,646 1,300 7,079 Impairment of goodwill - - 7,464 Write down of investments - - 321 Exceptional item (Poland debtor provision) - - 776 _______________ ______________ ____________ Adjusted (loss)/earnings after tax (68) (620) 858 _______________ ______________ ____________ KEY CUSTOMER DATA 31 December 30 September 31 December 2002 2002 2001 Number Number Number Cumulative: Contracted customer base 283 272 222 Contracted customers acquired 31 - - _______________ ______________ ____________ Total contracted customer base 314 272 222 _______________ ______________ ____________ _______________ ______________ ____________ Contracted installations 395 383 290 Contracted installations acquired 49 - - _______________ ______________ ____________ Total contracted installations 444 383 290 _______________ ______________ ____________ _______________ ______________ ____________ CONSOLIDATED PROFIT AND LOSS ACCOUNT 3 months ended 31 December 2002 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2002 2001 2002 Â£000 Â£000 Â£000 TURNOVER Continuing operations 10,382 10,919 47,474 Acquisitions 5 55 - - _______________ ______________ ____________ Total turnover 2 10,437 10,919 47,474 Cost of sales (3,183) (3,588) (15,430) _______________ ______________ ____________ GROSS PROFIT 7,254 7,331 32,044 Distribution costs (2,189) (2,602) (9,945) Administrative expenses: Development expenditure (2,238) (2,145) (8,026) Amortisation of goodwill and other intangible (1,646) (1,300) (7,079) assets Impairment of goodwill - - (7,464) Exceptional item - - (776) Other administrative expenses (2,823) (2,886) (12,079) Total administrative expenses (6,707) (6,331) (35,424) _______________ ______________ ____________ OPERATING LOSS Continuing operations (1,587) (1,602) (13,325) Acquisitions (55) - - _______________ ______________ ____________ GROUP OPERATING LOSS (1,642) (1,602) (13,325) Share of operating loss in associate - (71) - _______________ ______________ ____________ Total operating loss (1,642) (1,673) (13,325) Amounts written off investments - - (321) Interest receivable and similar income 123 177 494 Interest payable and similar charges (1) (307) (331) _______________ ______________ ____________ LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (1,520) (1,803) (13,483) Tax charge on loss on ordinary activities 3 (194) (117) (1,299) _______________ ______________ ____________ RETAINED LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (1,714) (1,920) (14,782) _______________ ______________ ____________ _______________ ______________ ____________ Loss per share - basic 4 (0.90)p (1.05)p (7.94)p _______________ ______________ ____________ _______________ ______________ ____________ (Loss) / earnings per share - adjusted 4 (0.03)p (0.34)p 0.46 p _______________ ______________ ____________ _______________ ______________ ____________ CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 3 months ended 31 December 2002 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Loss for the period (1,714) (1,920) (14,782) Exchange translation differences arising on foreign currency net investments (136) (302) (557) _______________ ______________ ____________ Total recognised gains and losses during the period (1,850) (2,222) (15,339) _______________ ______________ ____________ _______________ ______________ ____________ CONSOLIDATED BALANCE SHEET 31 December 2002 Unaudited Unaudited Audited Note 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 FIXED ASSETS Intangible assets 65,073 72,404 63,422 Tangible assets 2,876 2,853 2,910 Investments 101 371 101 _______________ ______________ ____________ 68,050 75,628 66,433 CURRENT ASSETS Stocks 30 28 64 Debtors 6 16,434 19,821 17,965 Investments 5,831 1,801 5,151 Cash at bank and in hand 5,456 13,287 8,156 _______________ ______________ ____________ 27,751 34,937 31,336 CREDITORS: amounts falling due within one year 7 (5,970) (7,591) (5,796) _______________ ______________ ____________ NET CURRENT ASSETS 21,781 27,346 25,540 _______________ ______________ ____________ TOTAL ASSETS LESS CURRENT LIABILITIES 89,831 102,974 91,973 Deferred income (5,415) (4,314) (5,766) _______________ ______________ ____________ TOTAL NET ASSETS 84,416 98,660 86,207 _______________ ______________ ____________ _______________ ______________ ____________ CAPITAL AND RESERVES Called up share capital 8 1,906 1,836 1,903 Share premium account 8 238,708 235,366 238,652 Other reserve 8 - 2,689 - Merger reserve 8 249 249 249 Foreign exchange reserve 8 (844) (453) (708) Profit and loss account 8 (155,603) (141,027) (153,889) _______________ ______________ ____________ EQUITY SHAREHOLDERS' FUNDS 84,416 98,660 86,207 _______________ ______________ ____________ _______________ ______________ ____________ RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS 3 months ended 31 December 2002 Unaudited Unaudited Audited 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Loss for the financial period (1,714) (1,920) (14,782) Other recognised losses relating to the period (136) (302) (557) Issue of share capital net of associated 59 - 3,353 expenses (Decrease)/increase in contingent consideration - 192 (2,497) _______________ ______________ ____________ (Decrease)/increase in shareholders' funds (1,791) (2,030) 14,483 Opening shareholders' funds 86,207 100,690 100,690 _______________ ______________ ____________ Closing shareholders' funds 84,416 98,660 86,207 _______________ ______________ ____________ _______________ ______________ ____________ CONSOLIDATED CASH FLOW STATEMENT 3 months ended 31 December 2002 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2002 2001 2002 Â£000 Â£000 Â£000 Net cash inflow/(outflow) from operating activities (i) 1,320 (1,998) 2,770 Returns on investments and servicing of finance Interest received 123 177 494 Interest element of finance lease rental - (2) (4) payments Interest paid and similar items (1) (305) (327) _______________ ______________ ____________ 122 (130) 163 _______________ ______________ ____________ Taxation Overseas taxation (paid)/received 1 (26) (378) UK corporation taxation received/(paid) - (10) (10) _______________ ______________ ____________ 1 (36) (388) _______________ ______________ ____________ Capital investment Payments to acquire tangible fixed assets (366) (352) (1,651) Proceeds on disposal of fixed assets 2 - 59 _______________ ______________ ____________ (364) (352) (1,592) _______________ ______________ ____________ Acquisitions Investment in subsidiaries (see note 5) (3,239) - (5,222) Net cash acquired with subsidiaries - - 6 _______________ ______________ ____________ (3,239) - (5,216) _______________ ______________ ____________ Cash outflow before management of liquid resources and financing (2,160) (2,516) (4,263) Use of liquid resources Decrease/(increase) in cash investments/term deposits (643) 1,009 (2,252) Payments received from escrow - - 52 Financing Issue of ordinary share capital 59 - - Capital element of finance lease rental payments - (75) (188) _______________ ______________ ____________ Decrease in cash in the period (ii),(iii) (2,744) (1,582) (6,651) _______________ ______________ ____________ _______________ ______________ ____________ NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT 3 months ended 31 December 2002 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 (i) Reconciliation of operating loss to net cash inflow/(outflow) from operating activities Operating loss (1,642) (1,602) (13,325) Depreciation 459 406 1,745 Amortisation of goodwill and other intangible 1,646 1,300 7,079 assets Impairment of goodwill - - 7,464 Loss/(profit) on disposal of fixed assets 17 27 (25) Decrease/(increase) in stock 33 1 (39) Decrease/(increase) in debtors 1,289 (750) (172) (Increase)/decrease in creditors (482) (1,380) 43 _______________ ______________ ____________ Net cash inflow/(outflow) from operating activities 1,320 (1,998) 2,770 _______________ ______________ ____________ _______________ ______________ ____________ (ii) Reconciliation of net cash flow to movement in net funds Decrease in cash in the period (2,744) (1,582) (6,651) Net cash outflow from decrease in finance lease - 75 188 Net cash (inflow)/outflow from (decrease)/ increase in liquid resources 643 (1,009) 2,200 _______________ ______________ ____________ Change in net funds resulting from cash flows (2,101) (2,516) (4,263) Translation differences 81 (274) (195) _______________ ______________ ____________ Movement in net funds (2,020) (2,790) (4,458) Net funds at 1 October 13,307 17,765 17,765 _______________ ______________ ____________ Net funds at 31 December / 30 September 11,287 14,975 13,307 _______________ ______________ ____________ _______________ ______________ ____________ (iii) Analysis of movement in net funds Audited Unaudited 1 October Exchange 31 December 2002 Cash flow movement 2002 Â£000 Â£000 Â£000 Â£000 Cash in hand and at bank 8,156 (2,744) 44 5,456 Term deposits and escrow account 5,151 643 37 5,831 _________ _________ ________ ___________ 13,307 (2,101) 81 11,287 _________ _________ ________ ___________ _________ _________ ________ ___________ NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION 3 months ended 31 December 2002 1. BASIS OF PREPARATION The interim financial information has been prepared in accordance with accounting policies set out in, and consistent with, the Group's 2002 financial statements except for the taxation charge for the period which is based on the estimated charge for the year ending 30 September 2003. The interim financial information is neither reviewed nor audited and does not comprise statutory accounts for the purposes of Section 240 of the Companies Act 1985. The abridged information for the year ended 30 September 2002 has been extracted from the Group's statutory accounts for that period, which will be filed with the Registrar of Companies following the 2002 Annual General Meeting. The Auditor's report on the statutory accounts of the Group for that period was unqualified and did not contain a Statement under either Section 237(2) or Section 237(3) of the Companies Act 1985. The interim financial information was approved by the Board of Directors on 25 February 2003. 2. TURNOVER AND SEGMENTAL REPORTING Turnover by origin Unaudited Unaudited 3 months ended 31 December 2002 3 months ended 31 December 2001 Inter- Inter- Total segment External Total segment External turnover turnover turnover turnover turnover turnover Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 United Kingdom 4,885 (123) 4,762 4,125 (450) 3,675 Continental Europe 14 - 14 130 - 130 Asia-Pacific 46 - 46 432 - 432 North America & Canada 5,595 (55) 5,540 6,531 (37) 6,494 South America 75 - 75 188 - 188 ________ ________ ________ _______ _______ _______ 10,615 (178) 10,437 11,406 (487) 10,919 ________ ________ ________ _______ _______ _______ ________ ________ ________ _______ _______ _______ Audited Year ended 30 September 2002 Inter- Total segment External Turnover turnover turnover Â£000 Â£000 Â£000 United Kingdom 21,148 (1,509) 19,639 Continental Europe 166 - 166 Asia-Pacific 1,758 - 1,758 North America & Canada 25,566 (600) 24,966 South America 945 - 945 _______ ________ ______ 49,583 (2,109) 47,474 _______ ________ ______ _______ ________ ______ 2. TURNOVER AND SEGMENTAL REPORTING (continued) Turnover by destination Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 United Kingdom 789 584 3,519 Continental Europe 2,273 2,409 9,753 Eastern Europe 596 91 1,235 Middle East 155 31 728 Africa 191 129 1,687 Asia-Pacific 693 1,278 5,521 North America & Canada 4,781 5,142 21,058 South America 959 1,255 3,973 ______________ _____________ ___________ Total turnover by destination 10,437 10,919 47,474 ______________ _____________ ___________ ______________ _____________ ___________ Turnover by activity Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Licence sales 1,340 3,665 15,481 Professional services income: Implementation and migrations 2,078 1,288 6,937 Consulting and training income 289 499 1,793 Hardware 368 38 576 Non-telecom custom network solutions 649 791 2,957 ______________ _____________ ___________ 3,384 2,616 12,263 Recurring Income: ASP Service 822 597 2,761 Volume upgrade licences 963 757 1,928 Support and maintenance fees 3,928 3,284 15,041 ______________ _____________ ___________ 5,713 4,638 19,730 ______________ _____________ ___________ Total turnover by activity 10,437 10,919 47,474 ______________ _____________ ___________ ______________ _____________ ___________ 2. TURNOVER AND SEGMENTAL REPORTING (continued) Loss before taxation Unaudited 3 months ended 31 December 2002 Before After amortisation of Amortisation of amortisation of goodwill goodwill goodwill Â£000 Â£000 Â£000 United Kingdom (2) (511) (513) Continental Europe 30 - 30 Asia-Pacific 27 - 27 North America & Canada 47 (1,135) (1,088) South America 24 - 24 ______________ _____________ ___________ 126 (1,646) (1,520) ______________ _____________ ___________ ______________ _____________ ___________ The segmental analysis of loss before taxation for the three months ended 31 December 2002 includes intercompany interest charge from the UK to North America & Canada of Â£954,000 (31 December 2001 - Â£1,048,000). Unaudited 3 months ended 31 December 2001 Before After amortisation of goodwill Amortisation of amortisation of goodwill goodwill Â£000 Â£000 Â£000 United Kingdom (858) (143) (1,001) Continental Europe 55 (2) 53 Asia-Pacific 143 (113) 30 North America & Canada 124 (1,042) (918) South America 33 - 33 ______________ _____________ ___________ (503) (1,300) (1,803) ______________ _____________ ___________ ______________ _____________ ___________ Audited Year ended 30 September 2002 Before amortisation of After goodwill, amortisation of impairment and goodwill, investment write impairment and down Amortisation of Goodwill Exceptional investment write goodwill impairment items down Â£000 Â£000 Â£000 Â£000 Â£000 United Kingdom 677 (2,200) (1,684) (1,097) (4,304) Continental Europe 185 (74) - - 111 Asia-Pacific 187 (420) (5,780) - (6,013) North America & Canada 948 (4,385) - - (3,437) South America 160 - - - 160 _______________ ______________ _________ __________ ____________ 2,157 (7,079) (7,464) (1,097) (13,483) _______________ ______________ _________ __________ ____________ _______________ ______________ _________ __________ ____________ 2. TURNOVER AND SEGMENTAL REPORTING (continued) Net assets/ (liabilities) by origin Unaudited Unaudited Unaudited Unaudited Audited 31 December 31 December 31 December 31 December 30 September 2002 2002 2002 2001 2002 Excluding Including Including Including unamortised Unamortised unamortised unamortised unamortised goodwill goodwill goodwill goodwill goodwill Â£000 Â£000 Â£000 Â£000 Â£000 United Kingdom 12,883 5,156 18,039 22,923 17,125 Continental Europe 31 - 31 218 (58) Africa (384) - (384) - (464) Asia-Pacific 107 - 107 7,130 494 North America & Canada 8,057 58,485 66,542 68,275 68,902 South America 81 - 81 114 208 _______________ ______________ _________ __________ ____________ 20,775 63,641 84,416 98,660 86,207 _______________ ______________ _________ __________ ____________ _______________ ______________ _________ __________ ____________ 3. TAX CHARGE ON LOSS ON ORDINARY ACTIVITIES Unaudited Unaudited Audited 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Current taxation: UK corporation tax at 30% (2002: 30%) - - - Overseas taxation 190 105 1,098 Prior year 4 12 273 __________ ___________ ____________ Total current tax 194 117 1,371 Deferred taxation: Origination and reversal of timing differences - - (72) __________ ___________ ____________ Tax on loss on ordinary activities 194 117 1,299 __________ ___________ ____________ __________ ___________ ____________ i) The major trading companies in the UK and the US have not incurred corporate tax liabilities. However, we have suffered corporate taxation is a number of our overseas trading subsidiaries and branches amounting to Â£0.1 million. The remainder of the tax charge is in respect of withholding tax, which is deducted at source in certain jurisdictions and which we do not expect to recover, amounting to Â£0.1 million. ii) The US operations have substantial ongoing tax benefits arising from goodwill allowances which will continue to ameliorate tax charges against profits in future periods. In addition, there are significant losses brought forward in the US. 4. (LOSS)/EARNINGS PER ORDINARY SHARE Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Basic loss (1,714) (1,920) (14,782) Amortisation of goodwill and intangible assets 1,646 1,300 7,079 Impairment of goodwill - - 7,464 Amount written off investment - - 321 Exceptional item (Poland debtor provision) - - 776 __________ ___________ ____________ Adjusted (loss)/earnings (68) (620) 858 __________ ___________ ____________ Number Number Number Weighted average number of shares 190,062,614 183,328,066 186,219,551 ___________ ____________ ____________ Pence Pence Pence Basic loss per ordinary share (0.90) (1.05) (7.94) Amortisation of goodwill and intangible assets 0.87 0.71 3.80 Impairment of goodwill - - 4.01 Amount written off investment - - 0.17 Exceptional item (Poland debtor provision) - - 0.42 __________ ___________ ____________ Adjusted (loss)/earnings per ordinary share (0.03) (0.34) 0.46 __________ ___________ ____________ __________ ___________ ____________ Diluted loss/earnings per share is not presented in respect of outstanding share options since none of the options are dilutive. 5. ACQUISITIONS a) Current year acquisitions On 18 December 2002, the group acquired Ericsson AB's 'Settler' interconnect billing product unit, including the Settler development team and worldwide rights to develop and market the Settler product range. The total consideration, settled in cash, amounted to US$5.1 million (Â£3.0 million plus acquisition costs of Â£0.1 million) as disclosed below. Goodwill arising on acquisition has been capitalised and is being amortised over four years from the date of acquisition. Goodwill charged in the period amounts to Â£29,000. Turnover from acquisitions of Â£55,000 is for the period from 18 December to 31 December 2002. Net liabilities at date of acquisition Provisional And provisional fair value fair value Â£'000 Creditors (176) Goodwill arising on acquisition 3,299 ___________ 3,123 ___________ ___________ Consideration paid in cash 2,990 Acquisition costs 133 ___________ 3,123 ___________ ___________ In addition to the above, a share option was granted to the advisers to the acquisition. This option vested on successful closure of the acquisition and was exercisable immediately. 293,121 ordinary shares were issued at 20.2 pence per share. b) Prior year acquisitions Deferred consideration of Â£116,000 was paid in respect of the operational support systems business acquired from ICL, a Fujitsu company. c) Reconciliation to cash flow statement Â£000 Consideration for 'Settler' business 2,990 Acqusition costs 133 Deferred consideration payments on prior year acquisition 116 ___________ 3,239 ___________ ___________ 6. DEBTORS Unaudited Unaudited Audited 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Trade debtors 12,023 13,867 13,676 Corporation tax recoverable 196 214 196 Deferred tax 86 - 72 Withholding tax recoverable - 87 - Other debtors 162 1,345 301 WIP and accrued income 2,960 3,037 2,571 Prepayments Due within one year 1,007 1,239 1,149 Due after more than one year - 32 - ___________ __________ ____________ 16,434 19,821 17,965 ___________ __________ ____________ ___________ __________ ____________ 7. CREDITORS Unaudited Unaudited Audited 31 December 31 December 30 September 2002 2001 2002 Â£000 Â£000 Â£000 Amounts falling due within one year Obligations under finance leases - 113 - Trade creditors 1,582 1,131 1,767 Corporation tax 454 472 454 Overseas tax 651 295 516 Other creditors including taxation and social 612 948 686 security Accruals 2,084 2,386 1,670 Deferred/contingent consideration 587 2,246 703 ___________ __________ ____________ 5,970 7,591 5,796 ___________ __________ ____________ ___________ __________ ____________ 8. STATEMENT OF MOVEMENTS ON RESERVES Called Share Foreign Profit up share premium exchange and loss capital account Other Merger reserve account reserve reserve Total Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 Â£000 At 1 October 2002 1,903 238,652 - 249 (708) (153,889) 86,207 Issue of shares 3 56 - - - - 59 Retained loss - - - - - (1,714) (1,714) Foreign exchange translation - - - - (136) - (136) _______ ________ _______ _______ ________ _________ ________ At 31 December 2002 1,906 238,708 - 249 (844) (155,603) 84,416 _______ ________ _______ _______ ________ _________ ________ _______ ________ _______ _______ ________ _________ ________ This information is provided by RNS The company news service from the London Stock Exchange

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