1st Quarter Results

Intec Telecom Systems PLC 12 February 2004 Intec Telecom Systems PLC Unaudited results for the three months ended 31st December 2003 - 'Q1 2004' Good trading and recent acquisitions deliver increased revenues and EBITA Intec Telecom Systems PLC ("Intec" or "the Company"), a global provider of telecoms Operations Support Systems ("OSS"), is pleased to announce its unaudited results for the three months ended 31 December 2003, ("Q1"). A combination of new business sales, strong carry-forward revenue, and contributions from recent acquisitions have driven revenues up 50%. This, combined with on-going cost controls, have produced a strong result for the quarter, with a good increase in earnings before goodwill. The trading outlook continues to be satisfactory and the Board is cautiously confident of satisfying the full year expectations. HIGHLIGHTS • Turnover of £15.6 million increased by 50% (3 months ended 31 December 2002 - £10.4 million) with organic and acquisition-driven growth in all key activities. • Earnings before interest, tax, and amortisation ("EBITA") increased to £1,538,000 compared with £4,000 in Q1 2003. • Increased Adjusted EPS of 0.58p (Q1 2003 - loss of 0.03p) • 24 new contracts signed in the period, 11 new licences, plus 13 new bureau customers (Q1 2003: 11, plus 31 through acquisitions) • Revenue and earnings adversely affected by continuing US dollar depreciation, estimated at £0.7 million and £0.3 million respectively . • Operating cash outflow of £0.1 million (Q1 2003 - inflow of £1.3 million) after working capital investment in Digiquant. • Loss before tax reduced to £0.75 million (Q1 2003: loss of £1.5 million), after depreciation and amortisation of goodwill and intangible assets of £2.3 million (Q1 2003: £1.6 million). • Customer installations reach 563 in almost 400 carrier customers. • Intec remains fully-funded with cash and cash equivalent investments of £13.8 million (Q1 2003 - £11.3 million). • Positive contribution from recent Digiquant acquisition with revenues of £2.4 million and EBITDA profit of £0.1 million in the quarter. "This is a very satisfactory result, produced through both new and carry-forward revenues, in what is historically not a strong quarter for Intec," said Intec's Executive Chairman, Mike Frayne. "Most importantly all aspects of the business produced growth and earnings contributions. New licences sales improved to somewhat healthier levels after previous slow periods for new investment within the telecoms sector. Continuing cost control, despite the investment required in new products and acquisitions, has also brought higher earnings. Competition and pricing pressure remains strong but we are optimistic about prospects for the full year." "Intec signed 24 new customer contracts in Q1, underlining the strength of our offering in today's telecom market," added Chief Executive Kevin Adams. "Despite the impact of the devaluation of the US$, in which we generate around 45% of our revenues, we have seen solid contributions from all regions. Our recent acquisition of Digiquant, combined with new products we have introduced, have created new market opportunities for Intec. Conditions in the telecom market remain challenging. However, I believe Intec is well-positioned to deliver against current expectations." 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 Fergus Wylie/Sarah Brydon Cubitt Consulting +44 (0) 20 7367 5100 fergus.wylie@cubitt.com Chairman's and CEO's Statement Intec Telecom Systems PLC - 1st Quarter Results 2004 Overview The telecoms industry shows encouraging signs of steady recovery. Levels of marketplace activity have increased and we believe that many customers are actively reviewing capital expenditure plans to make way for the projects needed to address new service and customer requirements in 2004. Intec has been able to capitalise on improving confidence in the industry with the closure of an encouraging amount of new business in an unusually strong first quarter of the year. The increase in revenue comes from both true organic growth as well as acquisition-related activity, and the increase in earnings is made possible by continued close attention to operating costs. We have also increased our investment in product development and sales activities to ensure that we will be able to take advantage of the opportunities we see in the market. Operational highlights Intec signed 11 new software licence contracts in the quarter, including customers in the UK, Denmark, France, Kenya, Poland, the Caribbean, South-East Asia, the Philippines and the US. These included three new InterconnecT family sales, five new Inter-mediatE licences, and three new licences for the former Digiquant product line. In EMEA (Europe, Middle East and Africa) Intec signed an Inter-mediatE software deal with Manchester, UK-based telecommunications company Your Communications; a deal to upgrade the mediation platform of a long-standing UK billing customer; a new mediation system for a French fixed-line carrier, as well as a substantial deal in Africa and one in Eastern Europe with Tel-Energo. In the CALA (Caribbean and Latin/Central America) region Intec sold new licences for both Inter-mediatE and InterconnecT. Four of the new licences were cross-sold to existing customers who bought an additional major licence. Our US operation concluded thirteen new CABS service bureau deals. Intec held its first CALA User Group event in Rio de Janeiro, Brazil in the quarter, which was exceptionally successful, attended by over 50 customer, partner and Intec delegates. We also held major User events for EMEA/A-P (Asia-Pacific) and North America, both continuing to show good increases in attendance over previous years. Intec's User Groups continue to be an important driver of product direction and marketplace information. Products Our strategy with Product Operations is to invest in building truly world-class products that will meet the needs of customers worldwide. We expanded our product family substantially in 2003 and will deliver major new versions and new capabilities for core products in 2004. Our expenditure on product development is substantial, and we monitor it carefully to ensure that all products have a solid business case to justify investment. We believe that continual improvement and expansion of our product offering is a core reason for Intec's marketplace success and the high levels of customer satisfaction and retention that we enjoy. Intec now offers its customers products from three core families: interconnect settlements, network-facing (convergent mediation and service activation), and advanced services management. InterconnecT and Inter-mediatE are market-leading products that will be the subject of major version upgrades in coming months. Inter-activatE has recently reached version two status, with substantially enhanced capabilities and performance from a new, distributed architecture. Within our advanced services management family, ASF, we have the Intec Dynamic Charging Platform (DCP), a real-time active mediation and charging system for next-generation services; Intec Content Partner Management (CPM) which allows revenue sharing and settlement between the parties involved in delivery of content-oriented services; and Intec Billing and Customer Services (BCS) for management and billing of offerings such as Voice-over-IP, Internet access, and Enterprise VPNs. The ASF offerings, combining advanced, proven technology acquired from Digiquant with existing Intec products, represent an exciting opportunity to develop new business in the next-generation services market. Staff and cost initiatives With increased investment in new products, new acquisitions to integrate, and the need to bring our expanded portfolio successfully to market we are conscious of the need to manage costs carefully in the light of business opportunities and developments within global markets. Intec now sells and supports its technology in over 70 countries. This brings numerous financial and operational challenges if we are to maintain the high levels of sales success and customer service that we want to achieve. Our policy is to continually review expenditure on staff and facilities to ensure we are achieving both business objectives and productive, cost-effective operations. The increase in revenues and EBITDA that we have reported in Q1 are evidence that our policies are working. However, we will remain vigilant on costs and budgets to maintain our performance. During 2004 we will continue adjusting our organisational structure to reflect changing priorities in product development, sales/support/marketing focus, and customer needs. One project coming to fruition during 2004 is the release of a next-generation InterconnecT product which we expect, in the long term, to offer reduced development costs through consolidation of multiple development streams. Staff numbers at the end of the quarter stood at 672, compared with 515 a year ago. This includes 32 new employees from the Ericsson Settler business acquisition and 126 from Digiquant, 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. Digiquant acquisition In September 2003, shortly before the start of the period under review, Intec announced the acquisition of Digiquant A/S of Denmark. With this acquisition Intec has expanded its base of supported customers by approximately 50 carriers. The agreement also brings us a highly-developed product set centred on managing next generation services such as VoIP, Internet access, WLAN, and VPNs. Intec is also using acquired Digiquant technology to build additional capabilities in its own existing products, notably Intec DCP and Intec CPM. With the inclusion of Digiquant technology we believe that these are now class-leading products in terms of functionality and proven capability to meet customer needs. During Q1 2004 the Digiquant business signed 3 new licence contracts and contributed £2.4 million in revenue and delivered a small EBITDA profit, a very encouraging result for the immediate post-acquisition period. We continue to work on integration and promotional work on this acquired business. Financial analysis Despite the continuing depreciation of the US dollar, revenue for the period at £15.6 million was up 50% over the equivalent period in 2003 (Q1 2003: £10.3 million) with both organic growth and acquisitions contributing evenly to the increase. EBITA is substantially higher up to £1.5 million (Q1 2003: £4,000). Adjusted earnings after tax, excluding a charge of £2.3 million for amortisation of goodwill, was £1.2 million (Q1 2003: loss of £620,000) representing adjusted EPS of 0.58 p (Q1 2003 loss of 0.03p) All aspects of the business - new licences, recurring revenues and professional services - have shown good growth and earnings performance has increased due to high margin contributions from licence sales and volume upgrades as well as improved operational gearing within the business. Licence revenue of £3.4 million has increased by 155% compared to £1.3 million in Q1 2003 as a result of contracts concluded in both the current and previous quarters. Recurring revenues are a growing contributor to our business model, at £7.5 million, up 32% from £5.7 million in Q1 2003. Professional services income has also increased to £4.7 million up 38% from £3.4 million in Q1 2003. All regions made satisfactory contributions in the period, with EMEA contributing 44% of turnover, North America 27%, CALA 15%, and Asia-Pacific 14%. Gross margin increased to 73% (Q1 2003: 69%), reflecting the higher contribution from licence revenue. All key operating costs rose but at lower rates than revenue growth, suggesting improved efficiency in Intec's business model. Distribution costs rose 35% to £3.0 million (Q1 2003: £2.2 million) partly as a result of an expanded sales group post-Digiquant as well as increased commission payments from higher sales. General administrative costs increased by 46%, at £4.1 million (Q1 2003: £2.8 million) with £1.1 million as a result of the Ericsson and Digiquant acquisitions. 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. Development expenditure was up 30% at £3.0 million (Q1 2003: £2.2 million) with the increase from a broader product portfolio and acquisitions plus substantial investment in new versions of core products partly offset by greater efficiency due to reorganisation of the development group in 2003. Intec incurs development expenditure for its InterconnecT family products in South Africa and Sweden, for Inter-mediatE and InterconnecT CABS CG products in the US, and the acquired Digiquant products in Denmark. We have been able to offset some of the margin impact of the loss in revenue due to US dollar depreciation as a result of incurring substantial development and operating costs in the US. Depreciation and goodwill amortisation charges have increased from £2.1 million in Q1 2003 to £2.9 million in the current quarter, reflecting additional goodwill amortisation from the acquisition of Digiquant and the Ericsson Settler business. Cash and cash investments have decreased by £1.5 million since 30 September 2003 primarily as a result of seasonal working capital expenditure requirements, overseas tax payments and the depreciation of the US dollar. Operating cash outflow of £0.1 million reflects the Digiquant working capital investment and general working capital expenditure in the enlarged business. Good cash collections during the quarter, resulting from a continued focus on credit control, have mitigated this. Excluding the Digiquant requirement operating cash inflow would be positive at £0.8 million. Intec's annualised debtor-days have stabilised with the figure at 31 December 2003 standing at 91 days, compared with 92 days at 30 September 2003 and 91 days at 31 December 2002. Average weighted debtor days stood at 63. Successful cash collections have continued during the second quarter with approximately £4.5 million collected up to 2 February 2004. During the quarter we announced that investment consortium Mican Limited, formerly Intec's largest shareholder with approximately 44% of the issued share capital, had been restructured into individual shareholdings by its principals, who include a trust holding shares for the beneficial interest of Intec Executive Chairman Mike Frayne. We believe the increase in free float and liquidity resulting from this unbundling, as well as the greater transparency it brings to the ownership of Intec shares, will be beneficial. Outlook Prospects for the telecoms industry appear to be improving with a number of carriers and vendors reporting generally improved trading conditions. This has to be set against continuing competitive conditions with numerous vendors competing strongly for all opportunities. Intec's response is to offer the best possible products and services through focused sales and marketing campaigns in regions where we see the ability to win profitable business. Our current results show that Intec is building market share, winning good contracts, and investing carefully in the business. We therefore remain cautiously confident that our performance in 2004 will satisfy expectations for growth and profitability. Mike Frayne, Executive Chairman and Kevin Adams, CEO. 11 February 2004 FINANCIAL HIGHLIGHTS 3 months ended 31 December 2003 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2003 2002 2003 £000 £000 £000 TURNOVER 15,631 10,437 50,673 EBITA (i) 1,538 4 5,256 EBITDA (i) 2,171 463 7,222 Operating loss (768) (1,642) (1,914) Basic loss per share (0.53) p (0.90) p (1.59) p Adjusted earnings/(loss) per share (ii) 0.58 p (0.03) p 2.17 p Notes to the Financial Highlights: (i) Loss before tax (753) (1,520) (1,780) Amortisation of goodwill and other 2,306 1,646 7,170 intangibles Net interest income (15) (122) (134) EBITA 1,538 4 5,256 Depreciation 633 459 1,966 EBITDA 2,171 211 7,222 (ii) Adjusted earnings per share calculation based on the following adjusted earnings after tax: Loss after tax (1,102) (1,714) (3,042) Amortisation of goodwill and other 2,306 1,646 7,170 intangible assets Adjusted earnings/(loss) after tax 1,204 (68) 4,128 KEY CUSTOMER DATA 31 December 30 September 31 December 2003 2003 2002 Number Number Number Cumulative: Contracted customer base 396 386 314 Total contracted installations 563 551 444 CONSOLIDATED PROFIT AND LOSS ACCOUNT 3 months ended 31 December 2003 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2003 2002 2003 £000 £000 £000 TURNOVER 2 15,631 10,437 50,673 Cost of sales (4,141) (3,183) (15,172) GROSS PROFIT 11,490 7,254 35,501 Distribution costs (2,823) (2,189) (8,784) Administrative expenses: Development expenditure (3,017) (2,238) (10,073) Amortisation of goodwill and other (2,306) (1,646) (7,170) intangible assets Other administrative expenses (4,112) (2,823) (11,388) Total administrative expenses (9,435) (6,707) (28,631) GROUP OPERATING LOSS (768) (1,642) (1,914) Interest receivable and similar income 43 123 340 Interest payable and similar charges (28) (1) (206) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (753) (1,520) (1,780) Tax charge on loss on ordinary activities 3 (349) (194) (1,262) RETAINED LOSS ON ORDINARY ACTIVITIES AFTER (1,102) (1,714) (3,042) TAXATION Loss per share - basic 4 (0.53)p (0.90)p (1.59)p Earnings/(loss) per share - adjusted 4 0.58p (0.03)p (2.17)p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 3 months ended 31 December 2003 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Loss for the period (1,102) (1,714) (3,042) Exchange translation differences arising on foreign currency net investments (828) (136) (278) Total recognised losses during the period (1,930) (1,850) (3,320) CONSOLIDATED BALANCE SHEET 31 December 2003 (Restated -see (Restated -see note 1) note 1) Unaudited Unaudited Audited 31 December 31 December 30 September Note 2003 2002 2003 £000 £000 £000 FIXED ASSETS Intangible assets 66,797 65,073 69,106 Tangible assets 4,227 2,876 4,400 Investments 5 5 5 71,029 67,954 73,511 CURRENT ASSETS Stocks 3 30 3 Debtors 6 23,513 16,434 22,648 Investments 2,354 5,831 5,616 Cash at bank and in hand 11,482 5,456 9,724 37,352 27,751 37,991 CREDITORS: amounts falling due within one year 7 (7,921) (3,886) (6,996) NET CURRENT ASSETS 29,431 23,865 30,995 TOTAL ASSETS LESS CURRENT LIABILITIES 100,460 91,819 104,506 CREDITORS: amounts falling due after more than 8 (33) - (69) one year PROVISIONS FOR LIABILITIES AND CHARGES 9 (1,984) - (2,050) ACCRUALS AND DEFERRED INCOME 10 (10,555) (7,499) (12,633) TOTAL NET ASSETS 87,888 84,320 89,754 CAPITAL AND RESERVES Called up share capital 11 2,101 1,906 2,066 Share premium account 11 239,347 238,708 238,697 Other reserve 11 - - 236 Merger reserve 11 6,768 249 6,768 Own shares 11 (481) (96) (96) Foreign exchange reserve 11 (1,814) (844) (986) Profit and loss account 11 (158,033) (155,603) (156,931) EQUITY SHAREHOLDERS' FUNDS 87,888 84,320 89,754 RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS 3 months ended 31 December 2003 Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Loss for the financial period (1,102) (1,714) (3,042) Other recognised losses relating to the period (828) (136) (278) Issue of share capital net of associated expenses 685 59 6,727 (Decrease)/increase in contingent consideration (236) - 236 Increase in own shares (385) - - (Decrease)/increase in shareholders' funds (1,866) (1,791) 3,643 Opening shareholders' funds 89,754 86,111 86,111 Closing shareholders' funds 87,888 84,320 89,754 CONSOLIDATED CASH FLOW STATEMENT 3 months ended 31 December 2003 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September Note 2003 2002 2003 £000 £000 £000 Net cash/ (outflow)/inflow from operating activities (i) (142) 1,320 8,537 Returns on investments and servicing of finance Interest received 43 123 340 Interest element of finance lease rental (7) - - payments Interest paid and similar items (21) (1) (79) 15 122 261 Taxation Overseas taxation (paid)/received (412) 1 (898) Capital investment Payments to acquire tangible fixed assets (462) (366) (2,056) Proceeds on disposal of fixed assets - 2 49 (462) (364) (2,007) Acquisitions Investment in subsidiaries (see note 5) - (3,239) (3,694) Net cash acquired with subsidiaries - - 505 - (3,239) (3,189) Cash outflow before management of liquid resources and financing (1,001) (2,160) 2,704 Use of liquid resources Decrease/(increase) in cash investments/term deposits 3,262 (643) (459) Financing Issue of ordinary share capital 65 59 59 Share issues costs charged to the share premium account - - (11) Repayment of loan acquired with subsidiaries - - (720) Capital element of finance lease rental (36) - - payments Increase/(decrease) in cash in the period (ii), 2,290 (2,744) 1,573 (iii) NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT 3 months ended 31 December 2003 Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 (i) Reconciliation of operating loss to net cash (outflow)/inflow from operating activities Operating loss (768) (1,642) (1,914) Depreciation 633 459 1,966 Amortisation of goodwill and other intangible 2,306 1,646 7,170 assets Loss/(profit) on disposal of fixed assets 2 17 (5) (Increase)/decrease in stock (2) 33 61 (Increase)/decrease in debtors (1,748) 1,289 (894) (Increase)/decrease in creditors (565) (482) 2,153 Net cash (outflow)/inflow from operating activities (142) 1,320 8,537 (ii) Reconciliation of net cash flow to movement in net funds Increase in cash in the period 2,287 (2,744) 1,573 Net cash outflow from decrease in finance lease 36 - - Net cash flow from decrease in debt acquired with - - 720 subsidiary Net cash (inflow)/outflow from (decrease)/increase in liquid resources (3,262) 643 459 Change in net funds resulting from cash flows (939) (2,101) 2,752 Finance leases acquired with the subsidiary - - (210) Debt acquired with the subsidiary - - (720) Translation differences (532) 81 1 Movement in net funds (1,471) (2,020) 1,823 Net funds at 1 October 15,130 13,307 13,307 Net funds at 31 December / 30 September 13,659 11,287 15,130 (iii) Analysis of movement in net funds ' Audited Unaudited 1 October Exchange 31 December 2003 Cash flow movement 2003 £000 £000 £000 £000 Cash in hand and at bank 9,724 2,287 (529) 11,482 Term deposits and escrow account 5,616 (3,262) - 2,354 Finance leases (210) 36 (3) (177) 15,130 (939) (532) 13,659 NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION 3 months ended 31 December 2003 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 2003 financial statements except for the taxation charge for the period which is based on the estimated charge for the year ending 30 September 2004. In addition, under UITF Abstract 38, "Accounting for ESOP trusts", Own shares held through the ESOT (Employee Share Option Trust) have been deducted in arriving at shareholders' funds. The change is retrospective and the comparative balance sheets have been restated to reflect a reclassification of the investment in own shares from Fixed Asset Investments to Shareholders' Funds. 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 2003 has been extracted from the Group's statutory accounts for that period, which will be filed with the Registrar of Companies following the 2003 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 11 February 2004. 2. TURNOVER AND SEGMENTAL REPORTING Turnover by origin Unaudited Unaudited 3 months ended 31 December 2003 3 months ended 31 December 2002 Inter- Inter- Total segment External Total segment External turnover turnover turnover turnover turnover turnover £000 £000 £000 £000 £000 £000 United Kingdom 7,245 (224) 7,021 4,885 (123) 4,762 Continental Europe 1,145 - 1,145 14 - 14 Asia-Pacific 636 - 636 46 - 46 North America & Canada 7,018 (553) 6,465 5,595 (55) 5,540 Central and Latin America 364 - 364 75 - 75 16,408 (777) 15,631 10,615 (178) 10,437 Audited Year ended 30 September 2003 Inter- Total segment External Turnover turnover turnover £000 £000 £000 United Kingdom 25,965 (576) 25,389 Continental Europe 612 - 612 Asia-Pacific 549 - 549 Africa 765 - 765 North America & Canada 23,528 (1857) 21,671 Central and Latin America 1,687 - 1687 53,106 (2,433) 50,673 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 2003 2002 2003 £000 £000 £000 United Kingdom 1,256 789 5,135 Continental Europe 3,408 2,273 10,979 Eastern Europe 1,013 596 2,902 Middle East 257 155 1,077 Africa 934 191 1,670 Europe, Middle East and Africa (EMEA) 6,868 4,004 21,763 subtotal Asia-Pacific 2,152 693 6,621 North America and Canada 4,319 4,781 15,538 Central and Latin America 2,292 959 6,751 Total turnover by destination 15,631 10,437 50,673 Turnover by activity Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Licence sales 3,416 1,340 11,635 Professional services income: Implementation and migrations, consulting and 4,110 2,367 11,620 training Hardware 6 368 113 Non-telecom custom network solutions 549 649 2,052 4,665 3,384 13,785 Recurring income: ASP Service 1,142 822 3,532 Volume upgrade licences 1,295 963 3,442 Support and maintenance fees 5,113 3,928 18,279 7,550 5,713 25,253 Total turnover by activity 15,631 10,437 50,673 2. TURNOVER AND SEGMENTAL REPORTING (continued) Unaudited 3 months ended 31 December 2003 Before After amortisation of Amortisation of amortisation of goodwill goodwill goodwill £000 £000 £000 United Kingdom (150) (688) (838) Continental Europe 50 (489) (439) Asia-Pacific 50 - 50 Africa (15) - (15) North America & Canada 1,716 (1,129) 587 Central and Latin America (98) - (98) 1,553 (2,306) (753) The segmental analysis of loss before taxation for the three months ended 31 December 2003 includes intercompany interest charge from the UK to North America & Canada of £nil (31 December 2002 - £954,000). Unaudited 3 months ended 31 December 2002 Before After amortisation of Amortisation of amortisation of goodwill goodwill goodwill £000 £000 £000 United Kingdom (2) (511) (513) Continental Europe 30 - 30 Asia-Pacific 27 - 27 North America & Canada 47 (1,135) (1,088) Central and Latin America 24 - 24 126 (1,646) (1,520) Audited Year ended 30 September 2003 Before After amortisation of amortisation of goodwill, goodwill, impairment and impairment and investment Amortisation of investment write write down goodwill down £000 £000 £000 United Kingdom 2,528 (2,574) (46) Continental Europe 384 (69) 315 Asia-Pacific 660 - 660 Africa 594 - 594 North America & Canada 710 (4,527) (3,817) Central and Latin America 514 - 514 5,390 (7,170) (1,780) 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 2003 2003 2003 2002 2003 Excluding Including Including Including unamortised Unamortised unamortised unamortised unamortised goodwill goodwill goodwill goodwill goodwill £000 £000 £000 £000 £000 United Kingdom 9,016 2,389 11,405 17,943 13,282 Continental Europe 1,877 9,229 11,106 31 11,107 Africa (84) - (84) (384) (219) Asia-Pacific 173 - 173 107 (16) North America & Canada 10,748 53,969 64,717 66,542 65,186 Central and Latin 571 - 571 81 414 America 22,301 65,587 87,888 84,320 89,754 3. TAX CHARGE ON LOSS ON ORDINARY ACTIVITIES Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Current taxation: UK corporation tax at 30% (2003: 30%) 34 - 555 Overseas taxation 315 190 974 Prior year - 4 (127) Total current tax 349 194 1,402 Deferred taxation: Origination and reversal of timing differences - - (140) Tax on loss on ordinary activities 349 194 1,262 4. (LOSS)/EARNINGS PER ORDINARY SHARE Unaudited Unaudited Audited 3 months ended 3 months ended Year ended 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Basic loss (1,102) (1,714) (3,042) Amortisation of goodwill and intangible 2,306 1,646 7,170 assets Adjusted (loss)/earnings 1,204 (68) 4,128 Number Number Number Weighted average number of shares 208,436,038 190,062,614 190,889,194 Pence Pence Pence Basic loss per ordinary share (0.53) (0.90) (1.59) Amortisation of goodwill and intangible 1.11 0.87 3.76 assets Adjusted earnings /(loss) per ordinary share 0.58 (0.03) 2.17 Diluted loss/earnings per share is not presented in respect of outstanding share options since none of the options are dilutive. 5. ACQUISITIONS a) Prior year acquisitions On 17 September 2003, the company purchased Digiquant A/S. Although not mandatory, the directors present the results and cash flows of the acquired business separately to provide a more transparent picture of the group's operations. Summary profit and loss account Unaudited 3 months ended 31 December 2003 Rest of group Digiquant Group total £'000 £'000 £'000 TURNOVER 13,184 2,447 15,631 Cost of sales (3,710) (431) (4,141) GROSS PROFIT 9,474 2,016 11,490 Distribution costs (2,200) (623) (2,823) Development expenditure (2,544) (473) (3,017) Amortisation of goodwill and other intangibles (1,817) (489) (2,306) Other administrative expenses (3,181) (931) (4,112) Total administrative expenses (7,542) (1,893) (9,435) Operating loss (268) (500) (768) Amortisation of goodwill and other intangibles 1,817 489 2,306 EBITA 1,549 (11) 1,538 Depreciation 495 138 633 EBITDA 2,044 127 2,171 Summary cash flow statement Unaudited 3 months ended 31 December 2003 Rest of group Digiquant Group total £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 826 (968) (142) Return on investments and servicing of finance lease rental payments 42 (27) 15 Taxation (412) - (412) Capital investment (419) (43) (462) Cash outflow before management of liquid resources and financing 37 (1,038) (1,001) Use of liquid resources 3,262 - 3,262 Financing 65 (36) 29 Increase/(decrease) in cash in the period 3,364 (1,074) 2,290 All amounts arise from continuing operations. 6. DEBTORS Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Trade debtors 15,071 12,023 13,815 Corporation tax recoverable 196 196 196 Overseas tax recoverable 88 86 85 Deferred tax 243 - 240 Other debtors 186 162 438 Prepayments and accrued income: Prepayments due within one year 1,607 1,007 1,456 Prepayments due after more than one year 596 - 589 Accrued income due within one year 5,526 2,960 5,829 23,513 16,434 22,648 7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Bank loans and overdrafts - - 125 Obligations under finance leases 144 - 141 Trade creditors 3,106 1,582 2,233 Corporation tax 1,187 454 1,169 Overseas tax 127 651 625 Other creditors including taxation and social 3,258 612 2,604 security Deferred/contingent consideration 99 587 99 7,921 3,886 6,996 8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Obligations under finance leases 33 - 69 9. PROVISIONS FOR LIABILITIES AND CHARGES Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Within one year 1,984 - 2,050 The amounts disclosed above relate to future estimated losses on sub-let lease commitments acquired with the Digiquant Group. Amounts provided relate to the period up to the first option to break on two properties in Denmark and Atlanta, USA. The first option to break on the Denmark lease is in 2011 and accordingly the provision above includes the discounted fair value of the future losses up to this point. 10. ACCRUALS AND DEFERRED INCOME Unaudited Unaudited Audited 31 December 31 December 30 September 2003 2002 2003 £000 £000 £000 Amounts falling due within one year Accruals 4,635 2,084 5,924 Deferred income 5,920 5,415 6,709 10,555 7,499 12,633 11. STATEMENT OF MOVEMENTS ON RESERVES Called Share Foreign Profit up share premium Merger Other Own exchange and loss capital account reserve reserve shares reserve account Total £000 £000 £000 £000 £000 £000 £000 £000 At 1 October 2,066 238,697 6,768 236 (96) (986) (156,931) 89,754 2003 Issue of shares 35 650 - (236) (385) - - 64 Retained loss - - - - - - (1,102) (1,102) Foreign exchange - - - - - (828) - (828) translation At 31 December 2,101 239,347 6,768 - (481) (1,814) (158,033) 87,888 2003 END This information is provided by RNS The company news service from the London Stock Exchange

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