3rd Quarter & 9 Mths Results

Intec Telecom Systems PLC 5 September 2000 Intec Telecom Systems PLC Unaudited results for the nine months ended 30 June 2000 Results on-track following successful June flotation on the London Stock Exchange. Intec Telecom Systems PLC ('Intec'), the world's leading provider of third party packaged interconnect billing and settlement software, today announces its unaudited results for the nine months to 30 June 2000, and its first reporting quarter as a listed company. The Company is pleased to report revenues and earnings in line with the Directors' expectations. HIGHLIGHTS * Revenues for nine months to 30 June 2000 increased by 178% to £12.163m (nine months ended 30 June 1999: £4.379m). * Earnings before interest, tax, depreciation, amortisation and exceptional flotation expenses ('EBITDA') increased significantly to £2.053m (nine months ended 30 June 1999: loss of £1.406m). * Profit before tax and exceptional flotation expenses (£0.499m) increased to £1.691m compared to a loss of £1.693m for the nine months ended 30 June 1999. * Four new contract wins, in Greece, Hungary, Holland and the Caribbean (new markets for Intec.) * Global expansion continues as planned, with operations developing successfully in Eastern Europe, South America and Asia-Pacific. * Strong order book and prospect list. Chairman's Statement Intec Telecom Systems PLC - 3rd Quarter Results In our first Quarterly reporting period as a listed company, I am very pleased to be able to report that the growth and financial performance of Intec continues to meet our expectations. Revenues and earnings have shown substantial growth, and we have been able to deliver results that underline the fundamental strength and long term opportunities of our business. In the nine months to June 30th 2000, revenues were £12.163 million, an increase of 178% on the same period in 1999, underlining the dramatic growth in the company. Revenues have been derived from new software licences for our market-leading InterconnecT product family (47% of turnover); from recurring revenues attributable to both upgrades within volume-based pricing model and from support contracts (including our innovative Application Service Provision (ASP) product) (28% of turnover); and from Professional Services (25% of turnover). In the first half of the year we reported our first operating profits, and I am pleased to report that, despite ongoing investment in many areas, we are growing profitably, with earnings before interest, tax, depreciation and amortisation ('EBITDA') of £2.053m, compared to a loss of £1.406m for the corresponding period for 1999. During the quarter we have made a number of significant advances, both internally and externally, that are designed to help us continue to grow the business and develop its potential in an expanding and dynamic market. One of the most important is the ongoing expansion of our new 'Futures Group', staffed by a team comprising both highly-experienced industry figures and technology experts. The Futures Group has the objective of anticipating, analysing and understanding forthcoming market and customer requirements, and then prototyping and developing the products required to meet those demands. On the international front, we continue to invest strongly in developing our sales in a number of key markets, including Western and Eastern Europe, Latin America, and Asia-Pacific. Notable achievements include the signing of new customers in Greece, Holland, Hungary and Jamaica. These include an affiliate of Vodafone, and a major national PTT. Success in these markets relies on investment in both sales and support infrastructure. New regional sales and support offices have been successfully launched in Poland, Malaysia and Brazil, giving us much stronger capabilities in these and surrounding territories. For example, one of the newest telecommunications companies in Brazil, Intelig, an affiliate of France Telecom, went live with the first interconnect billing implementation in the country, a project that was completed in just three months. The telecoms industry is evolving steadily towards an Internet Protocol (IP)- influenced market, where customers will demand hybrid solutions that contain both switched and unswitched network support. We provide and deliver many of these capabilities today, and we are aggressively developing the technology and products to address future needs, including active membership of standard- setting bodies like the Internet Protocol Detail Records (IPDR) organisation. Our design and development teams in Woking and Cape Town give us a capability to cost-effectively roll out high-quality products that can be implemented with high levels of customer satisfaction. We are also cooperating closely with other best-of-breed vendors to ensure we have the range of products and expertise that the market will demand well into the future. As one example of this, in June we announced a worldwide, bi- lateral, agreement with US-based Computer Generation Incorporated (CGI), a fully convergent (IP and voice) data collection and mediation company, to jointly market, sell and support both companies' solutions. The combination of Intec's well established InterconnecT billing solution and CGI's Data Collection System (DCS) product will enable telcos to mediate and provide billing and settlement across IP, fixed line and mobile networks. Another major area of investment will naturally be in product development. Our current success in winning a wide range of customers, from small, entrepreneurial start-ups in new areas like IP telephony, through to major national PTTs, underlines the depth of capabilities and strong technology incorporated in our InterconnecT product family. InterconnecT is recognised as the leading solution in the intercarrier biling market, and this position is continuously re-inforced by ongoing product development and improvement. Customer response to the many new capabilities introduced in the latest release, V6.05 of InterconnecT, has been very positive, and other members of the InterconnecT family, including InterconnecT ASP and InterconnecT ITU are operating with success in an increasing number of live customer sites. Our business partners, influential companies in the telecoms sector like Logica and Hewlett-Packard, continue to be important contributors to our success, both in developing new business opportunities and in successfully completing installations of InterconnecT around the world. Looking to the future we see every reason to be optimistic about our ongoing performance and leadership. Nevertheless, competition and market dynamics continue to keep us focused, and we do not forget that sustaining our leading position requires investment, initiative, intelligence and effort. In June we announced the appointment of three highly experienced Non-executive Directors, Gordon Crawford, Dr Ceri James and Edward Astle, to add additional strength to our Board. The new Directors bring substantial experience of growing high-technology businesses internationally in a public company environment. During the quarter, staff numbers grew from approximately 180 to 200 people, with most areas strengthening their teams. There continues to be pressure within the IT industry to recruit the best staff, but a combination of our increased profile as a public company, and an ongoing focus on providing a rewarding, open environment, allows us to hire the staff we require. All staff are incentivised with share options as part of their rewards package, and staff are encouraged to view long-term ownership of their shares as the best way to realise their personal investment in the Company. Finally I would like to pay tribute to the Company's staff and Directors, and our advisers, for their excellent contributions to our successful flotation. That we have been able to sustain our growth and financial performance during this busy period is testament to the strength of the team we have assembled, and it gives me great confidence in our future. Mike Frayne, Executive Chairman. Commenting on the results, Kevin Adams, Chief Executive Officer said: Intec Telecom Systems PLC was floated with great success on the London Stock Exchange (Symbol: ITL) on June 16th 2000 and listed as a techMARK company in the Quarter. Maintaining our revenue growth performance in the 3rd quarter during this busy time was an important achievement, which I believe it underlines the strength of our business model. The business outlook continues to be very positive, with a large proportion of telecoms companies actively considering the introduction of new billing systems to support their increasingly complex and cost-sensitive operations. We have a strong pipeline of future opportunities, and we have confidence in our ability to win a significant proportion of these contracts in the marketplace. We signed a number of important new customers in the 3rd quarter, including Panafon, one of Greece's most innovative mobile telecoms companies, and a major national PTT. Like many software companies working with major corporate customers, revenue unevenness has historically been a challenge for us. We remain subject to contractual and customer operational factors outside of our control, and we therefore anticipate quarterly revenue unevenness to be a part of our operating environment for some time to come. During the period under review, we were awarded 4 new contracts ( all in countries not previously represented), giving us an installed base of 64 sites at June 2000, representing around twice as many customers as our nearest competitor. Our strong cash position and our status as a listed company, combined with the leadership we have established in the intercarrier billing marketplace, means that we can continue to execute our long-term business development plan with great confidence. We continue to invest in the product development and global infrastructure that we believe are necessary to sustain our current success into the future. For further information: Intec Telecom Systems PLC Andrew Rodaway +44 7768 808082 / +44 (0) 1483 745800 Cubitt Consulting Fergus Wylie/Serra Konuralp +44 (0) 20 7367 5100 Intec Telecom Systems PLC Intec Telecom Systems PLC is the world's leading provider of third party packaged interconnect billing and settlement software in terms of market share with more installations and more telecom operators using its software than any competitor. Intec's core product is InterconnecT(tm), a software platform which allows billing and settlement between telecommunication operators to occur reliably, accurately and speedily. Intec has in excess of 64 installations world-wide. Intec's customer base includes, amongst others, MCI WorldCom, COLT Telecommunications, France Telecom, Swisscom, Thus and Telkom South Africa. Other product offerings include InterconnecT ITU and the InterconnecT ASP service. Results for the Nine months ended 30 June 2000 FINANCIAL HIGHLIGHTS Unaudited Unaudited Unaudited Audited 3rd 9 months 9 months Year quarter ended ended ended 30 ended 30 June 30 June September 30 June 2000 1999 1999 2000 £000 £000 £000 £000 REVENUE 4,568 12,163 4,379 8,433 EBITDA before exceptional flotation costs 754 2,053 (1,406) (158) Adjusted Profit profit (i) before tax 574 1,691 (1,693) (556) FRS3 operating profit/(loss) 75 1,172 (1,560) (368) Earnings /(loss) per share - basic and diluted 0.60p (0.15)p (0.06)p Adjusted earnings/(loss) per Share (ii) 0.99p (0.15)p (0.06)p (i) Adjusted profit before tax for the nine month period ended 30 June 2000 is FRS3 profit before tax of £1,192,000 after excluding exceptional flotation costs of £499,000. (ii)Adjusted earnings per share is calculated on profit after tax of £774,000 after excluding the after tax effect of exceptional flotation costs of £426,000 and the amortisation of intangible assets of £51,000. KEY CUSTOMER DATA Period Ended: 9 months 12 months 6 months 9 months ended 30 ended 30 ended 31 ended 30 June September March June 1999 1999 2000 2000 Cumulative: Contracted customer base 25 33 45 49 Contracted installations InterconnecT 26 36 52 56 InterconnecT ITU 1 2 4 4 InterconnecT ASP 0 1 4 4 Total 27 39 60 64 Intec Telecom Systems PLC Consolidated Profit and Loss Accounts Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 30 June 30 June September Note 2000 1999 1999 £000 £000 £000 REVENUE Continuing operations 11,987 4,379 8,433 Acquisitions - note required 176 - - Total revenue 2 12,163 4,379 8,433 Development expenditure 1,468 926 1,385 Other cost of sales 4,098 2,066 3,066 Total cost of sales 5,566 2,992 4,451 GROSS PROFIT 6,597 1,387 3,982 Distribution costs 2,992 1,512 2,264 Administrative expenses: Exceptional flotation costs 499 - - Other administrative expenses 1,934 1,435 2,086 Total administrative expenses 2,433 1,435 2,086 OPERATING PROFIT/(LOSS) Continuing operations 1,426 (1,560) (368) Acquisitions (254) - - Total operating profit/(loss) 1,172 (1,560) (368) Interest receivable 137 14 17 Interest payable and similar charges (117) (147) (205) PROFIT/(LOSS)/ ON ORDINARY ACTIVITIES BEFORE TAXATION 1,192 (1,693) (556) Tax charge on profit/(loss) on ordinary activities (418) (188) (188) RETAINED PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER 774 (1,881) (744) TAXATION Earnings/(Loss) per share - basic and diluted 3 0.60p (0.15)p (0.06)p Adjusted earnings/ (loss) per share 3 0.99p (0.15)p (0.06)p Intec Telecom Systems PLC Consolidated Balance Sheets Unaudited Unaudited Audited 30 June 30 June 30 September 2000 1999 1999 £000 £000 £000 FIXED ASSETS Intangible assets 1,912 - - Tangible assets 1,182 417 768 Investments 558 - - 3,652 417 768 CURRENT ASSETS Debtors 8,461 1,723 4,106 Investments 18,000 - - Cash at bank and in hand 16,950 61 79 43,411 1,784 4,185 CREDITORS: amounts falling due within one year (5,657) (970) (1,664) NET CURRENT ASSETS 37,754 814 2,521 TOTAL ASSETS LESS CURRENT LIABILITIES 41,406 1,231 3,289 CREDITORS: amounts falling due after more than one year - (2,910) (3,626) DEFERRED INCOME (2,000) (823) (1,028) 39,406 (2,502) (1,365) CAPITAL AND RESERVES Called up share capital 1,485 2 2 Share premium account 38,545 - - Merger reserve 249 249 249 Foreign exchange reserve (31) - - Profit and loss account (842) (2,753) (1,616) EQUITY SHAREHOLDERS' FFUNDS/(DEFICIT) 39,406 (2,502) (1,365) Reconciliation of Movements in Unaudited Unaudited Audited Consolidated Shareholders' 9 months 9 months Year Funds ended ended ended 30 30 June 30 June September 2000 1999 1999 £000 £000 £000 Profit/(loss) for the financial period 774 (1,881) (744) Foreign exchange translation (31) - - differences New equity share capital subscribed 43,857 - - Share issue costs (3,829) - - Net addition/(Reduction) to shareholders' funds 40,771 (1,881) (744) Opening Shareholders'(deficit) (1,365) (621) (621) Closing Shareholders'funds/(deficit) 39,406 (2,502) (1,365) Consolidated Cash Flow Statements Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 30 June 30 June September 2000 1999 1999 Note £ 000 £ 000 £ 000 Net cash inflow from operating activities (i) 1,695 616 749 Returns on investments and servicing of finance Interest received 137 14 17 Interest element of finance lease rental payments (14) - - Interest paid (103) (147) (205) 20 (133) (188) Taxation Overseas taxation paid (41) (198) (198) (41) (198) (198) Capital investment Payments to acquire tangible fixed assets (736) (165) (225) Purchase of Intellectual Property Rights (1,872) - - Proceeds on disposal of fixed assets 2 - - (2,606) (165) (225) Acquisitions Investment in associated undertakings (5) - - Net cash acquired with subsidiary 14 - - 9 - - Cash (outflow)/inflow before management of liquid resources and financing (923) 120 138 Use of liquid resources Increase in term deposits (ii) (18,000) - - Financing Issue of ordinary share capital 43,090 - - Issue costs charged to share premium account (3,829) - - Repayment of loan (3,382) - - Capital element of finance lease payments (85) - - Increase in cash in the period 16,871 120 138 Notes to the Consolidated cash flow statements Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 June 30 June 30 September 2000 1999 1999 £000 £000 £000 (i) Reconciliation of operating profit to net cash inflow from operating activities Operating profit/(loss) 1,172 (1,560) (368) Shares gifted to employees 214 - - Depreciation 331 154 210 Amortisation of goodwill and IPR 51 - - (Gain)/loss on disposal of fixed assets (1) - 8 (Increase)/Decrease in debtors (4,121) 843 (1,512) Increase in creditors 4,049 1,179 2,411 Net cash inflow from operating activities 1,695 616 749 £000 £000 £000 (ii)Reconciliation of net cash flow to movement in net cash funds/(debt) Increase in cash in the period 16,871 120 138 Cash outflow from decrease in lease financing 85 - - Cash outflow from decrease in debt financing 3,382 - - Cash outflow from increase in liquid resources 18,000 - - Change in net funds/(debt) resulting from cash flows 38,338 120 138 Amounts owed to immediate parent company debt due after one year - (393) (865) New finance lease - - (355) Movement in net cash funds/(debt) 38,338 (273) (1,082) Net debt at beginning of period year (3,658) (2,576) (2,576) Net cash funds/(debt) at end of period year 34,680 (2,849) (3,658) Unaudited Unaudited Audited 30 June 30 June 30 September 1999 1999 2000 £000 £000 £000 (iii) Analysis of net funds/(debt) Cash at bank 16,950 61 79 Finance leases (270) - (355) Debt due after one year - (2,910) (3,382) (270) (2,910) (3,737) Current asset investments 18,000 - - Net funds/(debt) 34,680 (2,849) (3,658) NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION Basis of preparation The interim financial information of Intec Telecom Systems PLC of the Intec Telecom Systems Group for the nine months ended is made up to 30 June 2000, and has been prepared in accordance with the accounting policies as set out in, and is is consistent with, the audited financial statements of Independent Technology Systems Limited for the year ended 30 September 1999 except that interim statements for the half year ended 31st March 2000. the taxation charge for the period is based on the estimated charge for the year ended 30 September 2000, and merger accounting has been adopted to account for the inclusion of Intec Telecom Systems PLC as the new parent company of the group. The interim financial information is unaudited 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 1999 has been extracted from the statutory financial statements of Independent Technology Systems Limited for that year which have been The results for the year ended 30th September 1999 have been extracted from the audited financial statements for that year, which have been filed with the Registrar of Companies. The Auditors' report on these accounts was unqualified and did not contain a statement under Section 237(2) or 237(3) of the Companies Act 1985. Segmental analysis Unaudited Unaudited Unaudited Unaudited Quarter 9 months 9 months Year ended ended ended ended 30 30 June 30 June 30 June September 2000 2000 1999 1999 Turnover by sales composition Licence Sales 2,507 5,779 1,756 3,455 Recurring income: 1,144 3,356 758 1,978 ASP Service 64 111 0 199 Volume upgrade licences 428 1,560 0 666 Support and maintenenance fees 652 1,685 758 1,113 Professional services income: 917 3,028 1,865 3,000 Implementation and migrations 711 2,505 1,511 2,366 Consulting income 206 523 354 634 Total Turnover 4,568 12,163 4,379 8,433 Turnover by Geographic Area United Kingdom 389 1,702 676 1,363 Continental Europe 2,563 5,856 2,226 4,320 Eastern Europe 894 1,481 - - Africa 108 730 496 1,181 Asia 134 979 289 1,100 South America 480 1,415 692 469 Total Turnover 4,568 12,163 4,379 8,433 Earnings per share Basic earnings per share is based on the weighted average number of shares in issue of 128,042,776 (1999 125,142,692) and profits on ordinary activities after taxation of £774,000 (1999: June -Loss of £1,881,000; September - Loss of £744,000). Adjusted earnings per share is based on the same weighted average number of shares and adjusted profits of £1,251,000 which exclude the after tax effect of exceptional flotation costs of £426,000 and the amortisation of intangible assets of £51,000 (1999: June -Loss of £1,727,000; September - Loss of £382,000). Diluted earnings/(loss) per share is based on a weighted average number of shares in issue, as adjusted by the dilutive effect of share options, of 128,078,344 (1999 125,142,692) and results in no reportable change to basic earnings/(loss) per share. Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 30 June 30 June September 2000 1999 1999 Basic and diluted earnings /(loss) per share 0.60p (0.15)p (0.06)p Adjustment for exceptional flotation costs 0.34p - - Adjustment for amortisation of intangible assets 0.05p - - Adjusted earnings/(loss) per share 0.99p (0.15)p (0.06)p The £18,000,000 current asset investment shown on the consolidated balance sheet consists of sterling deposits with a term of 30 days, with the balance of funds held in sterling money market accounts. Copies of the interim financial information are on our website: http:// www.intec-telecom-systems.com and copies are available from Intec Telecom Systems PLC, Wells Court 2, Albert Drive, Woking, Surrey GU21 5UB. INDEPENDENT REVIEW REPORT TO INTEC TELECOM SYSTEMS PLC Introduction We have been instructed by the Company to review the financial information set out on pages 5 to 11 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. The Listing Rules of the UK Listing Authority require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the nine months ended 30 June 2000. Deloitte & Touche 4 September 2000 Chartered Accountants Hill House 1 Little New Street London EC4A 3TR

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