3rd Quarter & 9 Mths Results

Intec Telecom Systems PLC 14 August 2001 PART 1 Intec Telecom Systems PLC Unaudited results for the nine months ended 30 June 2001 Turnover increases 120%; EBITDA £1.6m; strategic 3G contract Intec Telecom Systems PLC ('Intec' or 'the Company'), a leading provider of telecoms Operations Support Systems ('OSS'), today announces its unaudited results for the nine months ended 30 June 2001. The Company is pleased to report a good financial performance, important new customer wins and continuing corporate development in a market that remains competitive but with growing opportunities in next-generation technologies. HIGHLIGHTS * Turnover for the nine months increased by 120% to £26.7 million over the equivalent period (9 months ended 31 June 2000 - £12.2m), including £10.9 million from acquisitions. * Profit for the nine months before interest, tax, depreciation, and amortisation ('EBITDA') of £1.6 million. * Loss solely due to large write down of goodwill (£133.4 million) on acquisitions and goodwill amortisation (£7.3 million) in compliance with Financial Reporting Standards * Worldwide agreement with Hutchison 3G for convergent mediation and billing highlights cross-selling opportunities * 13 new contract wins including first customers in Brunei and Indonesia * Acquisition of Dataphone adds strong fraud management product in a growing market * Integration of previous acquisitions now complete * Intec remains in strong cash position - £19.4 million 'The telecoms industry is experiencing a period of fundamental change, as suppliers and carriers realign their businesses to market demand,' says Intec Executive Chairman, Mike Frayne. 'Yet our results show there is continuing demand from major operators for solutions that help them maximise revenues from their existing investment, and that operators are looking to invest in products that are compatible with the next wave of broadband technologies. Our global contract with Hutchison 3G reinforces Intec's capability as a key provider of OSS in the UMTS marketplace, as well as delivering strong revenue potential over several years.' 'We have decided to follow the accounting practice of a number of companies and, in accordance with UK Financial Reporting Standards, have recognised a substantial goodwill impairment charge (£133.4 million) on recent acquisitions in the profit and loss account. This means that we will not have to incur an inaccurate goodwill amortisation figure in future periods. It does not influence the underlying operating performance of the business, or our belief in the individual performance and strategic value of these acquisitions.' 'Contributions from all parts of the business, two new products launched and growing acceptance of Intec's solutions around the world provide a solid foundation for continued growth,' adds Chief Executive Kevin Adams. 'We remain highly focused on the basics of the business in these challenging times, and we feel confident that we can maintain and extend our market position through our competitive and customer-focused approach.' 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/Serra Balls +44 (0) 20 7367 5100 serra.balls@cubitt.com Chairman's and CEO's Statement Intec Telecom Systems PLC - Results for nine months to 30 June 2001 Overview We are very pleased to report that Intec has been able to deliver a sound revenue and adjusted profits performance in the first nine months of the year, despite continued investment in growing the company, and a business climate in the telecoms support systems industry that is very competitive and challenging. New customer wins in all major business areas, the launch of two new products, and the successful acquisition of Dataphone Limited continue to underline the fundamental strength of the company, and give us continued confidence for the future. One of the highlights was our worldwide agreement with Hutchison 3G, owners of the UK's 'A' licence for UMTS (3G) services, and a major 3G player in other European and Asia-Pacific markets, for both our key product lines, InterconnecT and Inter-mediatE. While the majority of our business remains in well-established fixed and mobile operators, the success of our products in a high-profile next-generation carrier like Hutchison 3G underlines our capability to transition successfully into new markets. We have continued making carefully managed investments in people, products, marketing and worldwide sales and support facilities, as we believe the opportunities in both existing operators looking to improve and upgrade their support systems, and new entrants such as the many recent 3G licensees, justify a cautiously confident outlook for the future. Our order book and prospect list are healthy, and while market conditions are likely to remain more competitive than usual, we believe that Intec's ability to deliver value for money to customers is unmatched. We have decided to follow the recent accounting practice of a number of companies and, in accordance with UK Financial Reporting Standards, have recognised a substantial goodwill impairment charge (£133.4 million) on recent acquisitions in the profit and loss account in this quarter. This recognises that current market valuations of many technology businesses are today substantially lower, and means that we will not have to incur an inaccurate goodwill amortisation figure in future periods. The write down does not influence the underlying operating performance of the business, or our belief in the individual performance and strategic value of these acquisitions. Operational highlights Intec gained 13 new customers in Q3, covering a wide range of territories and business profiles. Notable European wins included a worldwide agreement with Hutchison 3G for both convergent mediation and billing solutions, and a major InterconnecT ASP contract with UTA of Austria. In the US region we added 6 customers, with important wins for InterconnecT CABS in several larger CLECs, plus new Inter-mediatE installations in four locations. In Asia-Pacific we won our first customers in Indonesia and Brunei, with important wins in mobile and fixed carriers. We also added new customers in South America and Italy. The contract with Hutchison 3G UK, which is a worldwide framework agreement, is a strategic, high profile win which clearly positions Intec to market its solutions to the growing number of UMTS (3G) licensees worldwide. Hutchison 3G will use both Inter-mediatE and InterconnecT to collect, process and bill for a wide range of 3G network events, ranging from simple voice calls to complex business transactions. Our agreement with UTA is for a ten year period, and will generate a multi-million pound revenue stream over the duration of the contract. Intec will operate a complete interconnect billing service for UTA, Austria's largest private fixed network provider. Such long-term contracts illustrate the confidence that customers have in Intec as a stable provider of critical software systems. Staff Intec staff numbers at 30 June 2001 were 478, up from 242 at September 2000. We gained 18 staff in offices in the UK and Spain with the acquisition of Dataphone Limited, with important skills in mediation and revenue assurance. With several competitors and major telecoms manufacturers laying off significant numbers of staff, Intec has been able to recruit a number of very experienced people in areas that include sales, pre-sales, project management, implementation and support. We believe that forthcoming opportunities in both next generation markets and areas where deregulation is being implemented require us to develop staff capabilities in several regions and disciplines, and we will continue with our established policy of carefully investing in the resources necessary to win new business and meet customer demand. One significant hire was the appointment of Jim Karr as vice president of Intec's global partner programme. Jim brings twenty years' experience to this key role, with a track record of establishing successful partnerships with major network vendors and system integrators. Products On the product front, we have continued to develop both InterconnecT and Inter-mediatE to ensure they address the rapidly developing requirements of current and next-generation marketplaces. The next version of InterconnecT will extend significantly the functionality of the current product, and will incorporate architectural concepts and technology from the product acquired with i2i at the beginning of the year. Our US-based InterconnecT CABS product goes from strength to strength, with the recent announcement that it can now support the important US BOS billing standard, which makes it applicable to a wider range of customers. Inter-mediatE is also being actively developed and extended to meet anticipated requirements for next-generation networks, with performance and features that will enhance its position as the leader in real time, convergent mediation. Inter-mediatE is a true convergent solution, able to operate with all kinds of information, from both traditional and newer IP networks, including information on more complex traffic types, such as content or transactions. This is particularly important in next-generation networks, where operators' revenue generation strategies are likely to be based on much more complex business models. In mid-June we announced Omni-chargE, an internally developed product which provides capabilities similar to InterconnecT, but for 'non-call' billing. With growing deregulation of the worldwide telecoms industry, and higher levels of both competition and cooperation between carriers, there is a demand for carrier-to-carrier billing for services and products unrelated to network voice or data traffic. These can include leased lines, exchange facilities for xDSL and local loop unbundling, server and equipment co-location, consulting and infrastructure services. Omni-chargE allows for billing of all these services, as well as providing facilities for recording and managing complex agreements. At the end of May we announced the acquisition of Dataphone Limited, a small, privately-held UK-based OSS company with well-respected products in fraud management and other revenue assurance areas. One of the key products in the Dataphone portfolio is its fraud management solution, which uses very sophisticated data analysis and artificial intelligence techniques to identify telecoms fraud from network usage data. Fraud, a growing problem, is estimated to cost carriers up to 3% of revenues, amounting to tens of billions of pounds per year. Inter-venE, the new name for Dataphone's fraud product, was formally launched in June and we are already in discussion with customer prospects. Other Dataphone revenue assurance products are being examined for their potential to be integrated into our portfolio. A number of other products are in the final stages of development, and will be launched in the near future. In line with our accounting policy, all product development cost has been expensed. Financial results for the nine months to June 2001 In the nine months to June 2001, revenues were £26.7 million, an increase of 120% on the same period in 2000. Note that valid comparisons with previous periods are becoming more difficult, as the nine months under review include at least six months contribution from Compgen, as well as contributions for shorter periods from later acquisitions. Revenues have been derived from new software licences (36% of turnover) for our market-leading InterconnecT and Inter-mediatE product families; from recurring revenues (39% of turnover) attributable to both upgrades within our volume-based pricing model and from support contracts (including our Application Service Provision (ASP) product); and from Professional Services (including a small contribution from hardware sales) (25% of turnover). The good revenue performance in the third quarter, with 13 contracts signed including our first 3G win, have allowed us to record an EBITDA (earnings before interest, tax, depreciation and amortisation) profit of £1.64 million. This has been achieved despite ongoing investment in all areas of the business, but particularly the newly acquired Dataphone business, sales, marketing and product development and roll out. Statement on goodwill impairment Intangible assets have been written down due to the significant change in market conditions since the start of the year, which have materially reduced the market value of software businesses. For subsidiaries which Intec have acquired, where the current value has fallen below the net book value, the carrying amounts have been adjusted to reflect the recoverable amount, as required by Financial Reporting Standards. The impairment amounts to £133.4 million in relation to goodwill arising on acquisitions. The remaining goodwill will continue to be written down over 15 years. We continue to believe these acquisitions are of strategic importance and will make an important contribution to the group's long-term position and business performance. Analysis of results The gross margin on Intec's core business was 68%, unchanged from the reclassified figure for the 2000 financial year. This demonstrates ongoing good cost control measures during a period of growth and substantial corporate change, and the stability of our recurring revenue business model as our customer base continues to expand. Distribution costs have risen to £6.3 million from £2.7 million in the equivalent nine months in 2000, the increase of 136% obviously reflecting the enlarged group and the ongoing investment in sales and marketing effort, particularly with new products now available. Administrative expenses are also considerably greater now for the group, reflecting the impact of acquisitions and changes to accounting policy, as well as increased costs in corporate administration as a public company. As disclosed in the Interim report in May, all research & development expenditure is now disclosed as a separate element of administrative expenses and now also includes salary costs for employees contributing to product development that were previously included within other departments. As at 31 March 2001 Intec's annualised debtor-days were 104 days. Continuing emphasis on collections has further reduced annualised debtor days to 101 days, with further collections of £3.7 million since the end of June. There were no bad debts in the period. Acquisition progress During the quarter we concluded the acquisition of Dataphone Limited, a provider of fraud management and other revenue assurance solutions. The total consideration was £1.1 million satisfied in cash. For the year ended 30 November 2000, Dataphone had sales of approximately £1.3 million, which included £500,000 of recurring revenue from support contracts, and EBIT loss of approximately £1.1 million due, in part, to substantial investment in product development. We expect products from Dataphone to make growing revenue contributions in future quarters. A number of Dataphone staff have already been deployed into other areas of the business. The integration of our acquisitions of Computer Generation, CHA Systems and i2i is now materially complete, with all operations and products rebranded and relaunched under the Intec umbrella. All Intec sales and support offices, and a growing number of our partners, are trained and able to sell and support all relevant products. Any outstanding management or structural issues have been resolved and the costs of integration and office roll out have been incurred in the continuing operations line. The strategy of cross-selling of both mediation and billing products continues to be an area of focus. Our Atlanta office was recently formally announced as our North American Centre of Excellence, reflecting the strong progress made there in developing sales, support and management capabilities. The acquisition of i2i gave us a stronger presence in the Asia-Pacific region, and in June we consolidated both existing offices into new premises in the prestigious Petronas Twin Towers in Kuala Lumpur. Our official opening of this, our Asia-pacific Centre of Excellence, was well attended by press and business partners, and we have recorded a number of important wins in the region this quarter, including our first Indonesian and Brunei customers. Our Carrier Access Billing System (CABS) division in Dallas is performing very satisfactorily, winning five new customers in the higher end of the CLEC/ILEC market. Our InterconnecT CABS product is being continually developed, with support recently added for the BOS billing standard, which widens its potential market. Outlook The current difficulties faced by the telecoms industry, which we believe are primarily due to a fundamental realignment caused by technological and business factors, cannot be ignored in our own projections. Our March trading update reflected this fact, and subsequent results from other companies in our sector underline the nature of the industry. However, Intec has been able to deliver good revenue growth against this background, a testament to the hard work by staff in the period, for which the Directors would like to thank all concerned. Looking forward, we see strong opportunities in both existing and next-generation markets. Our existing markets continue to develop with significant opportunities for our established range of products. Additionally, as operators invest in new systems to address the challenges of evolving technologies such as 3G, and upgrade current OSS to meet steadily developing customer requirements and growing traffic levels, further growth opportunities are created. The rollout schedule for 3G is still hard to predict from an end-user perspective, but we are receiving a steady flow of interest in our solutions from 3G licensees, who recognise the need to implement and test systems as early as possible. Our core business continues to perform well, with additional managed investments in new regions and staff resulting in new customers in all regions, and a healthy and growing pipeline of opportunities. Mediation, intercarrier billing and revenue assurance are all vital activities for any telco. We believe our strategy will result in good future performance against a backdrop that remains both competitive and subject to external economic factors. Mike Frayne, Executive Chairman & Kevin Adams, CEO. Commenting on the results, Kevin Adams, Chief Executive Officer said: 'Intec continues to demonstrate that for vendors with the right product strategy, there are healthy business opportunities in the telecoms sector. 13 new customers in the quarter, including some particularly important wins in the 3G, US CLEC and Asia-Pacific markets, have helped us deliver another good set of results. Competition remains high for these contracts, and we are working hard to ensure we maintain our focus on core business areas, as well as containing costs. 'Growth in our product is a priority, and two new products launched in the quarter, Omni-chargE and Inter-venE, take us into new areas that are consistent with our strategy of focusing on helping our customers maximise network revenues. Our roadmaps for InterconnecT and Inter-mediatE are clear into the next generation, and we anticipate maintaining the technical leadership with these core products that has enabled us to win high-profile customers like Hutchison 3G. 'Integration of previous acquisitions is effectively complete, and the good performance and cross-selling opportunities these have created are very encouraging. As the business expands, we are also taking the necessary steps to ensure we have the management and reporting structure necessary for continued success, and I look forward to the rest of the year, and future periods with confidence.' FINANCIAL HIGHLIGHTS for the nine months ended 30 June 2001 Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 June 30 June 30 September 2001 2000 2000 Notes £'000 £'000 £'000 TURNOVER 26,745 12,163 20,279 EBITDA before exceptional (i) 1,647 2,053 4,520 flotation costs Operating (loss)/profit (ii) (139,911) 1,172 3,313 (Loss)/earnings per share - basic (81.14)p 0.60p 2.17p - diluted (81.14)p 0.60p 2.16p Adjusted earnings per share (iii) 0.57p 0.99p 2.67p Notes to the Financial Highlights (i) Group operating (loss)/profit (139,925) 1,172 3,160 Share of operating (loss)/profit of 14 - 153 associate Depreciation 885 331 528 Amortisation of goodwill and other 7,273 51 100 intangibles Impairment of goodwill 133,400 - - Exceptional flotation costs - 499 579 EBITDA before exceptional flotation costs 1,647 2,053 4,520 (ii) (Loss)/profit on ordinary (139,925) 1,172 3,160 activities before taxation Share of operating (loss)/profit of 14 - 153 associate Operating (loss)/profit (139,911) 1,172 3,313 (iii)Adjusted (loss)/earnings per share calculation based on the following adjusted (loss)/earnings after tax: (Loss)/earnings after tax (139,687) 774 2,880 Amortisation of goodwill and other 7,273 51 100 intangible assets Impairment of goodwill 133,400 - - Exceptional flotation costs net of tax - 426 556 Adjusted earnings after tax 986 1,251 3,536 Key customer data Period ended: 30 June 30 September 30 June 2001 2000 2000 Cumulative: Total contracted customer base - Billing 76 56 49 Total contracted customer base - IntermediatE 7 - - Contracted customer base - Compgen Other 2 - - Total Contracted Customer Base 85 56 49 Consolidated profit and loss accounts (Restated) (Restated) Unaudited Unaudited Audited 9 months 9 months Year ended ended Ended Note 30 June 30 June 30 September 2001 2000 2000 £'000 £'000 £'000 TURNOVER Continuing operations 15,817 12,163 20,279 Acquisitions 10,928 - - Total turnover 2 26,745 12,163 20,279 Cost of sales (8,513) (4,098) (6,514) GROSS PROFIT 18,232 8,065 13,765 Distribution costs (6,347) (2,694) (3,258) Administrative expenses - Development expenditure (3,994) (1,766) (3,029) - Amortisation of goodwill (7,273) (51) (100) and other intangible assets - Impairment of goodwill (133,400) - - - Exceptional flotation costs - (499) (579) - Other administrative expenses (7,143) (1,883) (3,639) Total administrative expenses (151,810) (4,199) (7,347) OPERATING (LOSS)/PROFIT Continuing operations (1,918) 1,172 3,160 Acquisitions (138,007) - - GROUP OPERATING (LOSS)/PROFIT (139,925) 1,172 3,160 Share of operating profit 14 - 153 /(loss) in associate Interest receivable and 1,009 137 642 similar income Interest payable and (39) (117) (118) similar charges (LOSS)/PROFIT ON ORDINARY (138,941) 1,192 3,837 ACTIVITIES BEFORE TAXATION Tax charge on (loss)/profit (746) (418) (957) on ordinary activities RETAINED (LOSS)/PROFIT ON (139,687) 774 2,880 ORDINARY ACTIVITIES AFTER TAXATION (Loss)/earnings 3 (81.14)p 0.60p 2.17p per share - basic Earnings/(loss) 3 0.57p 0.99p 2.67p per share - adjusted (Loss)/earnings 3 (81.14)p 0.60p 2.16p per share - diluted Consolidated statement of 30 June 30 June 30 September total recognised gains 2001 2000 2000 and losses £'000 £'000 £'000 (Loss)/profit for the period (139,687) 774 2,880 Exchange translation differences arising On foreign currency net investments 85 (31) 17 Total recognised gains (139,602) 743 2,897 and losses during the period Consolidated Balance Sheets Unaudited Unaudited Audited Note 30 June 30 June 30 September 2001 2000 2000 £'000 £'000 £'000 FIXED ASSETS Intangible assets 4 72,413 1,912 1,863 Tangible assets 3,245 1,182 1,692 Investments 650 558 665 76,308 3,652 4,220 CURRENT ASSETS Stocks 41 - - Debtors 5 18,887 8,461 13,794 Investments 12,167 18,000 18,970 Cash at bank and in hand 7,276 16,950 12,495 38,371 43,411 45,259 CREDITORS: amounts 6 (7,839) (5,501) (5,827) falling due within one year NET CURRENT ASSETS 30,532 37,910 39,432 TOTAL ASSETS LESS 106,840 41,562 43,652 CURRENT LIABILITIES CREDITORS: amounts falling due after more than one year (74) (156) (125) DEFERRED INCOME (6,478) (2,000) (1,977) NET ASSETS 100,288 39,406 41,550 CAPITAL AND RESERVES Called up share capital 1,836 1,485 1,485 Share premium account 235,066 38,545 38,535 Other reserve 1,628 - - Merger reserve 249 249 249 Foreign exchange reserve (68) (31) 17 Profit and loss account (138,423) (842) 1,264 EQUITY SHAREHOLDERS' FUNDS 100,288 39,406 41,550 Reconciliation of Unaudited Unaudited Audited Movements in Consolidated 30 June 30 June 30 September Shareholders' Funds 2001 2000 2000 £'000 £'000 £'000 (Loss)/profit for (139,687) 774 2,880 the financial period Foreign exchange (85) (31) 17 translation differences Issue of share capital 196,882 40,028 40,018 net of associated expenses Contingent consideration 1,628 - - Net addition to or reduction 58,738 40,771 42,915 in shareholders' funds Opening shareholders' 41,550 (1,365) (1,365) funds/(deficit) Closing shareholders' funds 7 100,288 39,406 41,550 Consolidated cash flow statements Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 June 30 June 30 September 2001 2000 2000 Notes £'000 £'000 £'000 Net cash (outflow)/inflow from operating activities (i) (2,783) 1,695 (4,889) Returns on investments and servicing of finance Interest received 1,009 137 628 Interest element of finance lease (9) (14) (19) rental payments Interest paid & similar charges (324) (103) (120) 676 20 489 Taxation Overseas taxation paid (30) (41) (53) UK Corporation taxation paid (689) - - (719) (41) (53) Capital investment Payments to acquire (1,570) (736) (1,458) tangible fixed assets Payments to acquire IPR (176) (1,872) (1,872) Proceeds on disposal 3 2 25 of tangible fixed assets (1,743) (2,606) (3,305) Acquisitions Investment in - (5) (5) associated undertakings Investment in subsidiaries (188,440) - (5) Net cash acquired 2,601 14 14 with subsidiaries (185,839) 9 4 Cash (outflow) before management of liquid resources and financing (190,408) (923) (7,754) Use of liquid resources Decrease / (Increase) in 6,124 (18,000) (18,291) term deposits Escrow account 679 - (679) Financing Issue of ordinary share capital 183,700 43,090 43,090 Share issue costs charged to (5,222) (3,829) (3,839) the share premium account Capital element of finance (92) (85) (111) lease rental payments (Decrease)/increase in cash (ii),(iii) (5,219) 16,871 12,416 in the period Notes to the consolidated cash flow statements Unaudited Unaudited Audited 9 months 9 months Year ended ended ended 30 June 30 June 30 September 2001 2000 2000 £'000 £'000 £'000 (i) Reconciliation of operating (loss)/profit to net cash (outflow)/inflow from operating activities Operating (loss)/profit (139,925) 1,172 3,160 Shares gifted to employees - 214 214 Depreciation 885 331 528 Amortisation of goodwill and other 7,273 51 100 intangible assets Impairment of goodwill 133,400 - - Loss/(gain) on disposal of fixed assets - (1) (1) Decrease/(increase) in stock 67 - - (Increase)/decrease in debtors (2,296) (4,121) (9,475) (Decrease)/increase in creditors (2,187) 4,049 585 Net cash (outflow)/inflow from operating (2,783) 1,695 (4,889) activities (ii) Reconciliation of net cash flow to movement in net debt (Decrease)/increase in cash in the period (5,219) 16,871 12,416 Net cash outflow from decrease in finance 92 85 111 lease Net cash outflow from (decrease)/increase (6,803) 18,000 18,970 in liquid resources Change in net debt resulting from cash (11,930) 34,956 31,497 flows Finance leases acquired with subsidiary (185) - - Amounts owed to former parent company - 3,382 3,382 Movement in net funds (12,115) 38,338 34,879 Net funds/(debt) at 1 October 2000/1999 31,221 (3,658) (3,658) Net funds at 30 June/30 September 19,106 34,680 31,221 Audited Unaudited 30 September Cash flow Acquisitions 30 June 2000 excluding cash 2001 £'000 £'000 £'000 £'000 (iii) Analysis of movement in net funds Cash in hand and at bank 12,495 (5,219) - 7,276 Finance leases (244) 92 (185) (337) Term deposits 18,291 (6,124) - 12,167 Escrow account 679 (679) - - Total 31,221 (11,930) (185) 19,106 (iv) Non-cash transactions As part of the consideration for the acquisitions of CHA and i2i, shares were issued to the value of £4.7 million and £13.7 million respectively. MORE TO FOLLOW

Companies

Intec Telecom Systems (ITL)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today