Final Results

Intec Telecom Systems PLC 27 November 2001 Intec Telecom Systems PLC Audited Preliminary results for the year ended 30 September 2001. Turnover increases 96%. EBITDA beats consensus Intec Telecom Systems PLC (LSE:ITL, 'Intec' or 'the Company'), a leading global provider of Operations Support Systems software for telecoms companies, today announces its audited results for the year ended 30 September 2001. The Company is pleased to report turnover growth of almost 100% and EBITDA profitability in excess of market consensus. FINANCIAL AND OPERATING HIGHLIGHTS * Revenues for the year ended 30 September 2001 increased by 96% to £39.8 million (year ended 30 September 2000: £20.3million) * Earnings before interest, tax, depreciation, and amortisation ('EBITDA') of £3.4m (year ended 30 September 2000: £4.5m). * Operating loss of £140.0 million largely attributable to goodwill impairment in acquisitions. * Customer base increased by 66 contracted installations, with major new wins in the UK, US, Europe, Latin America, and the Far East. * Global expansion continues as planned, with new offices in South America, Asia-Pacific, India and Middle-East. * Four acquisitions concluded and integrated during the year, in the US, UK and Malaysia. * Several new products introduced to complement core billing and mediation families. * Growing order book for 2002. There will be an analyst meeting at 11:00 hours today (27 November 2001) at Lehman Brothers, 1 Broadgate, London. Enquiries Intec Telecom Systems PLC +44 (0) 7768 808082/ +44 (0) 1483 745800 Andrew Rodaway andrew.rodaway@intec-telecom-systems.com Investec Henderson Crosthwaite (Brokers) +44 (0) 20 7597 5970 Jagjit Mundi, Co-head of Corporate Finance Lehman Brothers (Joint financial advisers) Nish Kotecha +44 (0) 20 7260 1929 Cubitt Consulting +44 (0) 20 7367 5100 Fergus Wylie/Serra Balls serra.balls@cubitt.com Intec Telecom Systems PLC - Full year results to 30 September 2001 Chairman's Statement The past twelve months have seen many changes in our business and in the world in which we operate. These changes, which include a dramatic fall in the business performance and stock market valuation of almost all technology companies, have created more competitive and less predictable market conditions than for many years. Yet within that climate of change, I am pleased to report that Intec Telecom Systems has continued to extend and strengthen its business and to consolidate its position as a supplier of critical software solutions in the worldwide telecoms marketplace. In 2001, Intec Telecom Systems has developed from a company selling and supporting essentially a single product line into a global business with customers in 40 countries and three distinct but complementary product families. Despite the challenges this brings, particularly in a marketplace that is more competitive than ever, the Intec team has delivered a creditable performance, and I want to begin my report by expressing my thanks to all concerned. In the year ended 30 September 2001, Group turnover increased by 96% to almost £40 million. This includes substantial contributions from acquisitions made during the year. As with many technology companies, reported profits have been impacted by writedowns of goodwill associated with acquisitions. However, EBITDA profitability at £3.4 million indicates the underlying strength of our business model, despite the extensive investment made in growth, product development and acquisition integration, plus an undoubtedly more competitive environment. Our acquisition in December 2000 of Computer Generation Inc., has fundamentally changed Intec as a business. Its world-class convergent mediation technology, rebranded and launched during 2001 as Inter-mediatE, has brought us both a substantial presence in the North American market as well as a product that we can sell worldwide with great effectiveness alongside our existing InterconnecT billing family. The growth in contract wins and customer sites that feature both products is one of the most gratifying aspects of our business year. That we have also extended our leadership in intercarrier billing, while developing other aspects of the business, proves the growing importance of non-retail revenue streams to communications companies. This will be particularly true of next-generation networks, expected to begin full-scale operations from 2002, that will generate much larger proportions of their revenue streams from added-value services such as multimedia content and e-business transactions. We extended our intercarrier billing business in February with the acquisitions of CHA Systems in Dallas and i2i in Malaysia. Both have made important contributions this year, in terms of products, new customer wins and technology. Finally, in May we acquired UK-based Dataphone Ltd, whose telecoms revenue assurance products are now being successfully marketed alongside our major product lines. Our business activities have led to a large increase in customer base, up from around 80 companies at the start of the year to over 230 at 30 September, including those acquired with CompGen, i2i, CHA and Dataphone. This increase leads to new sales opportunities with our expanded product family, as well as strengthening our revenue from support, upgrade and consulting business. Staff numbers have increased commensurately, to almost 500 people, and it has been particularly pleasing to see how well staff working for our acquired companies have integrated into the business. The telecoms world moves rapidly, and the cross-fertilisation of technical skills between companies in the enlarged group is proving beneficial in developing new products for next-generation networks. Several new regional offices have been opened to address business opportunities in developing markets, including Mexico, the Middle East and Taiwan. We have operated through Centres of Excellence in different geographic and time zones, providing our customers with world-class support regardless of location. On the product front, our success in winning a number of high-profile customers in the IP and 3G sectors demonstrates that we continue to have a leading-edge product portfolio capable of winning demanding competitive technical and commercial evaluations. Many of our new contracts have been with larger carriers, including several national PTTs and Tier one mobile operators, reflecting our determination to provide true carrier-grade solutions. Our strategy of locating development centres in a number of regions has proved to be successful, with good return on investment and a global view of the telecoms market helping us create very attractive and functional products. Several new products were developed internally during the year, and these have now won their first customers. The fall in value of world stock markets, and the particularly dramatic effects on technology stocks and shareholder value cannot be ignored. At Intec we remain focused on building a strong business with continued long-term growth prospects. Ultimately this will be the way to create renewed value and to restore confidence in technology as an important growth vehicle for investors. As always, we will remain a cost-conscious business which reviews its structure, operations, investment and product strategy to ensure they are aligned with market conditions. Our secure cash position is also reassuring in a market where we believe some vendors are experiencing financing difficulties. Looking forward, it remains difficult to predict how macro-economic factors will affect our markets, or whether exceptional circumstances, such as the tragic events of September 2001, will occur again. But Intec operates in an industry that is critical to the world economy, that shows no signs of slowing in the pace of its technical development, and where new technology is increasingly seen as vital to business success. Mediation, billing and revenue assurance are all necessary activities for telecom companies looking to maximise returns from their network investment, and Intec's ability to win many new customers during a turbulent year is evidence of that need. We also anticipate continuing our policy of strategic acquisitions to extend our customer base and develop our market offering. We are, therefore, cautiously confident that our growth will continue, and I hope that as investors you will share this confidence in the ongoing success of the business. Mike Frayne Executive Chairman 26 November 2001 Commenting on the results, Kevin Adams, Chief Executive Officer said: In 2001 Intec has transformed into a different company from a year ago. Not just larger, although our growth in a tough year for the telecoms industry has been very satisfying, but also stronger, more recognised and more able to deliver solutions to meet customer demands worldwide. This is the principal development in a year of change. Intec now has a product portfolio that meets three important needs in any communications company: collection of information on its network traffic (mediation); billing of business partners for that traffic (interconnect); and protection of these revenue streams from fraud, leakage and other kinds of loss. We can deliver these capabilities in any region of the world, and we have done so very effectively in 2001, winning new business in many new countries, as well as cross-selling to our existing customers. A key driver of our turnover in 2001 has been the ability to cross-sell multiple products in both new and existing customer accounts. With Intec's typically six month-plus sales cycle, this was most evident towards the end of the year, and we are encouraged by the growing number of opportunities we see today for these larger sales. InterconnecT remains the world's most widely installed third-party intercarrier billing system, with installations totalling over 110 at year-end, as a result of 30 new customers won this year, including major names like Westel (part of the T-Mobile Group), Kingston Communications, Indosat in Indonesia, Telecom Italia and TCO in Brazil. InterconnecT CABS, acquired with CHA Systems in January, has been a strong performer in 2001, with a total of over 25 US carriers using the system, either in-house or through our processing service in Dallas. Our US mediation division has been more affected by the downturn in the US telecoms industry compared to other regions. But Inter-mediatE has still notched up a number of impressive wins, notably Hutchison 3G in a worldwide agreement to make available both Inter-mediatE and InterconnecT to all of Hutchison's UMTS (3G) licence holders. Inter-mediatE customers now number over 100, including some of the world's largest fixed and mobile operators. Other notable new mediation customers in 2001 included IP providers Hansenet in Germany and Cbeyond Communications in Atlanta, UTA in Austria, TCO in Brazil, BellSouth in Chile and numerous installations at Cable & Wireless in the Caribbean. Four acquisitions in three countries in the course of 2001 has has meant a lot of work, with the Intec team meeting the challenge well. I am happy to report that all four acquisitions have been fully integrated at a staff level, with a high level of cooperation and interchange between locations. The cross-fertilisation of ideas and technology has been of immediate and practical benefit to both current product capabilities and future roadmaps. Staff numbers grew during the year from 239 in September 2000 to 483 at September 2001. Intec continually reviews the skills and staffing levels required in light of market conditions. Outlook With a year ending on 30 September, we saw little influence on our 2001 results from the tragic events earlier in the month in the US. But we cannot ignore the impact of these on the world economic situation, and the level of business confidence looking forwards. Telecoms is a mass-market business, where consumer and business confidence have a direct impact on traffic levels and usage patterns. Set against that is the tendency for people to communicate more in difficult times. It is still too early to assess long terms effects of the current economic climate on future business patterns, but we believe there is some evidence that a slow recovery is underway. The telecoms industry remains a vital part of business and social life, and there are undoubtedly new requirements for investment and upgrade in network infrastructure and supporting systems. Intec's three main product families are key components of the revenue generation chain for all carriers, and the relative resilience we have seen in our core business in 2001 reflects this. We cannot easily predict how the general world and telecom market conditions may develop, but we are cautiously optimistic that Intec's business model and product offering can generate above industry average growth this year, and we look forward to 2002 with optimism. Kevin Adams, Chief Executive Officer. Intec Telecom Systems PLC Results for the Year ended 30 September 2001 Financial Highlights Note 2001 2000 £'000 £'000 Revenue 39,798 20,279 EBITDA before exceptional items (i) 3,415 4,520 Operating (loss)/profit (ii) (140,046) 3,313 Basic (loss) / earnings per share (80.21p) 2.17p Adjusted earnings per share (iii) 1.14p 2.67p Diluted (loss)/earnings per share (80.21p) 2.16p Notes to the Financial Highlights (i) Group operating (loss)/profit (140,124) 3,160 Share of operating profit of associate 78 153 Depreciation 1,380 528 Amortisation of goodwill and other intangibles 8,680 100 Impairment of goodwill 133,400 - Exceptional flotation costs - 579 EBITDA before exceptional items 3,415 4,520 (ii) Group operating (loss)/profit (140,124) 3,160 Share of operating profit of associate 78 153 Operating (loss)/profit (140,046) 3,313 (iii)Adjusted (loss)/earnings per share calculation based on the following adjusted (loss)/earnings after tax: (Loss)/earnings after tax (140,371) 2,880 Amortisation of goodwill and other intangible assets 8,680 100 Impairment of goodwill 133,400 - Amount written off investment 283 - Exceptional flotation costs net of tax - 556 Adjusted earnings after tax 1,992 3,536 KEY CUSTOMER DATA Period ended: 30 Sept 2001 30 Sept 2000 No. No. Cumulative: Total contracted customer base - Billing 88 56 Total contracted customer base - Intermediate 8 - Contracted customer base - Compgen other 3 - Total Contracted Customer Base 99 56 Total Contracted Installations 141 73 Intec Telecom Systems PLC Consolidated Profit and Loss Accounts Before intangible Intangible amortisation, amortisation, impairment and impairment and Total Restated investment write investment write down down 2001 2001 2001 2000 £'000 £'000 £'000 £'000 TURNOVER Continuing 20,265 20,265 20,279 operations Acquisitions 19,533 19,533 - Total turnover 39,798 39,798 20,279 Cost of sales (12,675) (12,675) (6,514) Gross profit 27,123 27,123 13,765 Distribution costs (9,158) (9,158) (3,258) Administrative expenses: Development (5,869) - (5,869) (3,029) expenditure Amortisation of - (8,680) (8,680) (100) goodwill and other intangible assets Impairment of - (133,400) (133,400) goodwill Exceptional - - - (579) flotation costs Other (10,140) - (10,140) (3,639) administrative expenses Total (16,009) (142,080) (158,089) (7,347) administrative expenses OPERATING (LOSS)/ PROFIT Continuing (2,158) (196) (2,354) 3,160 operations Acquisitions 4,114 (141,884) (137,770) - Group operating 1,956 (142,080) (140,124) 3,160 (loss)/profit Share of operating 78 - 78 153 profit in associate Amount written off - (283) (283) - investment Interest receivable 1,171 - 1,171 642 and similar income Interest payable (73) - (73) (118) and similar charges (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 3,132 (142,363) (139,231) 3,837 Tax charge on (1,140) - (1,140) (957) (loss)/profit on ordinary activities (LOSS)/PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION AND RETAINED (LOSS)/ 1,992 (142,363) (140,371) 2,880 PROFIT FOR THE FINANCIAL YEAR (Loss)/earnings per (80.21) 2.17p share - basic Earnings/(loss) per 1.14 2.67p share - adjusted (Loss) / earnings (80.21) 2.16p per share - diluted Intec Telecom Systems PLC Consolidated statement of total recognised gains and losses 2001 2000 £'000 £'000 (LOSS)/PROFIT FOR THE FINANCIAL YEAR (140,371) 2,880 Exchange translation differences arising on foreign currency net investments (168) 17 TOTAL RECOGNISED GAINS AND LOSSES IN THE YEAR (140,539) 2,897 Reconciliation of movements in consolidated shareholders' funds 2001 2000 £'000 £'000 (Loss)/profit for the financial year (140,371) 2,880 Other recognised gains and losses relating to the (168) 17 year Issue of share capital net of associated expenses 197,182 40,018 Contingent consideration on acquisitions 2,497 - Increase in shareholders' funds 59,140 42,915 Opening shareholders' funds/(deficit) 41,550 (1,365) Closing shareholders' funds 100,690 41,550 Intec Telecom Systems PLC Consolidated Balance Sheets 2001 2000 £'000 £'000 FIXED ASSETS Intangible assets 73,181 1,863 Tangible assets 3,009 1,692 Investments 422 665 76,612 4,220 CURRENT ASSETS Stocks 29 - Debtors 19,103 13,794 Investments 2,966 18,970 Cash at bank and in hand 14,987 12,495 37,085 45,259 CREDITORS: falling due within one year (7,759) (5,827) NET CURRENT ASSETS 29,326 39,432 TOTAL ASSETS LESS CURRENT LIABILITIES 105,938 43,652 CREDITORS: falling due after more than one year - (125) Deferred income (5,248) (1,977) TOTAL NET ASSETS 100,690 41,550 CAPITAL AND RESERVES Called up share capital 1,836 1,485 Share premium account 235,366 38,535 Other reserves 2,497 - Merger reserve 249 249 Foreign exchange reserve (151) 17 Profit and loss account (139,107) 1,264 EQUITY SHAREHOLDERS' FUNDS 100,690 41,550 Intec Telecom Systems PLC Consolidated cash flow statement Note 2001 2000 £'000 £'000 Net cash outflow from operating activities (I) (3,716) (4,889) Returns on investments and servicing of finance Interest received 1,171 628 Interest element of finance lease rental payments (17) (19) Interest paid and similar items (56) (120) 1,098 489 Taxation Overseas taxation paid 5 (53) UK Corporation taxation paid (531) - (526) (53) Capital investment Payments to acquire tangible fixed assets (1,861) (1,458) Payment to acquire Intellectual Property Rights (304) (1,872) Proceeds on disposal of fixed assets 74 25 (2,091) (3,305) Acquisitions Investment in associated undertakings - (5) Investment in subsidiaries (188,680) (5) Net cash acquired with subsidiaries 1,801 14 (186,879) 4 Cash outflow before management of liquid resources (192,114) (7,754) and financing Use of liquid resources Decrease/(Increase) in term deposits 15,377 (18,291) Payments received from /(made to ) escrow 627 (679) Financing Issue of ordinary share capital 183,700 43,090 Share issue costs charged to the share premium (4,922) (3,839) account Capital element of finance lease payments (234) (111) Increase in cash in the period II),(III) 2,434 12,416 Intec Telecom Systems PLC Notes to the cash flow statement (I) Reconciliation of operating (loss) / profit to net cash outflow from operating activities 2001 2000 £'000 £'000 Operating (loss)/profit (140,124) 3,160 Shares gifted to employees - 214 Depreciation 1,380 528 Amortisation of goodwill and other intangible assets 8,680 100 Impairment of goodwill 133,400 - Gain on disposal of fixed assets (10) (1) Decrease in stock 79 - Increase in debtors (2,948) (9,475) (Decrease) / increase in creditors (4,173) 585 Net cash outflow from operating activities (3,716) (4,889) (II) Reconciliation of net cash flow to movement in net funds 2001 2000 £'000 £'000 Increase in cash in the period 2,434 12,416 Net cash outflow from decrease in finance lease 234 111 Net cash (inflow)/outflow from (decrease)/increase in liquid resources (16,004) 18,970 Change in net (debt) / funds resulting from cashflows (13,336) 31,497 Finance leases acquired with subsidary (178) - Amounts owed to former parent company - 3,382 Translation differences 58 - Movement in net (debt) / funds (13,456) 34,879 Net funds/(debt) at start 31,221 (3,658) Net funds at 30 September 17,765 31,221 (III) Analysis of movement in net funds Cash Foreign Exchange 30 30 flow Translation September September Acquisitions 2001 2000 excluding cash £'000 £'000 £'000 £'000 £'000 Cash in hand and 12,495 2,434 - 58 14,987 at bank Finance leases (244) 234 (178) - (188) Term deposits 18,291 (15,377) - - 2,914 Escrow Account 679 (627) - - 52 Total 31,221 (13,336) (178) 58 17,765 NOTES TO THE ACCOUNTS 1. Basis of preparation The financial information set out in this preliminary announcement does not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 September 2001 will be submitted for filing with the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 237(2) or 237(3) Companies Act 1985. Except as discussed below, the abridged information for the year ended 30 September 2000 has been extracted from the Group's statutory accounts for that period, which have been filed with the Registrar of Companies. 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. For the year ended 30 September 2000 development expenditure was shown as a component of cost of sales. All research & development expenditure is now disclosed as a separate element of administrative expenses and includes certain product development related costs, which were previously included in distribution costs. The effect of this classification on the year ended 30 September 2000 is to reduce cost of sales and distribution costs by £2,013,000 and £1,016,000 respectively and increases total administrative expenses by £ 3,029,000. This increases previously reported gross margin of 58% to 68%. The directors are of the opinion that the revised presentation of the profit and loss account is more in line with other software companies and provides a clearer presentation of the group's activities. The interim financial information was approved by the Board of Directors on 26 November 2001. 2. Turnover and segmental reporting Geographic areas - analysis by location of operations Total turnover Inter-segment turnover External turnover 2001 2000 2001 2000 2001 2000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover United 22,919 19,977 (1,737) - 21,182 19,977 Kingdom Continental 400 288 - - 400 288 Europe Asia-Pacific 1,072 14 (64) - 1,008 14 North 17,224 - (215) - 17,009 - America & Canada South 205 - (6) - 199 - America 41,820 20,279 (2,022) - 39,798 20,279 2. Turnover and segmental reporting (continued) Geographic markets - analysis by location of client Turnover by destination 2001 2000 £'000 £'000 United Kingdom 6,105 2,319 Continental Europe 10,528 8,731 Eastern Europe 1,562 3,516 Middle East 680 - Africa 814 1,411 Asia-Pacific 4,977 2,384 North America & Canada 12,576 73 South America 2,556 1,845 39,798 20,279 Turnover by type Turnover by activity is set out below. It is not practicable to allocate either profit before taxation or net assets by client location or activity. Turnover by Activity 2001 2000 £'000 £'000 Licence Sales 14,165 11,413 Professional services income: Implementation and migrations 4,752 3,374 Consulting and training income 1,904 1,023 Hardware 502 - Non-Telecom - custom network solutions 2,493 - Sub-total 9,651 4,397 Recurring income: ASP Service 1,675 138 Volume upgrade licences 3,598 1,934 Support and maintenance fees 10,709 2,397 Sub-total 15,982 4,469 39,798 20,279 Year ended 30 September 2001 Before Amortisation Goodwill Investment After amortisation amortisation of goodwill impairment writedown of goodwill, of goodwill, and £'000 £'000 impairment and impairment intangibles writedown and £'000 £'000 writedown £'000 Loss before taxation United 1,077 (329) - (283) 465 Kingdom Continental 221 (9) - - 212 Europe Asia-Pacific (84) (681) (16,000) - (16,765) North 2,576 (7,661) (117,400) - (122,485) America & Canada South (658) - - - (658) America Loss before 3,132 (8,680) (133,400) (283) (139,231) taxation 2. Turnover and segmental reporting (continued) Year ended 30 September 2000 Before amortisation Amortisation of After amortisation of goodwill and goodwill and of goodwill and intangibles intangibles intangibles £'000 £'000 £'000 Profit before tax United Kingdom 4,632 (91) 4,541 Continental (267) (9) (276) Europe Asia-Pacific (428) - (428) Profit on 3,937 (100) 3,837 ordinary activities before taxation Excluding Unamortised goodwill Including 2000 unamortised 2001 unamortised £'000 goodwill £'000 goodwill 2001 2001 £'000 £'000 Net assets United 25,007 1,988 26,995 41,638 Kingdom Continental 184 74 258 (121) Europe Asia-Pacific 1,650 6,132 7,782 33 North 2,403 63,252 65,655 - America & Canada Net assets 29,244 71,446 100,690 41,550 3.Earnings/(loss) per ordinary share 2001 2000 £'000 £'000 Basic and diluted earnings/(loss) (140,371) 2,880 Exceptional flotation costs (tax adjusted) - 556 Amortisation of goodwill and other intangible 8,680 100 assets Impairment of goodwill 133,400 - Amount written off investments 283 - 1,992 3,536 Number Number Basic weighted average number of shares 175,007,925 132,814,764 Employee share options - 303,268 Diluted weighted average number of shares 175,007,925 133,118,032 Pence Pence Diluted (loss) / earnings per ordinary share (80.21) 2.16 Adjustments for share options - 0.01 Basic (loss) /earnings per ordinary share (80.21) 2.17 Exceptional flotation costs - 0.42 Amortisation of goodwill and other intangible 4.96 0.08 assets Impairment of goodwill 76.23 - Amount written off investment 0.16 - Adjusted earnings per ordinary share 1.14 2.67 For the year ended 30 September 2001, none of the potential ordinary shares (including company share options) are dilutive and therefore they are excluded from the calculation of diluted loss per share. For the year ended 30 September 2000, diluted earnings per ordinary share are calculated on the assumption that applicable outstanding share options were exercised on the first day of the period or the date of grant if later. 4. Debtors Group Group Company Company 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Trade debtors 13,535 10,755 - - Amounts owed by subsidiary undertakings - - 19,173 8,624 Corporation tax recoverable 216 - - - Withholding tax recoverable: 82 144 - 1 Other debtors 1,139 631 16 31 Prepayments and accrued income Due within one year 3,669 2,264 11 12 Due after more than one year 462 - - - 19,103 13,794 19,200 8,668 5. Creditors: Falling due within one year Group Company 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Obligations under finance leases 188 119 - - Trade creditors 2,007 1,381 92 - Corporation tax 454 839 153 177 Overseas tax 356 43 - - Other creditors including taxation and social 601 379 - - security Accruals 2,235 3,066 178 33 Contingent consideration 1,918 - 1,918 - 7,759 5,827 2,341 210 6. Creditors: Falling due after more than one year Group Company 2001 2000 2001 2000 £'000 £'000 £'000 £'000 Obligations under finance leases - 125 - - Maturity of obligations under finance leases Within one year 188 119 - - More than one year but not more than two years - 125 - - 188 244 - - 7. Statement of movements on reserves Called Share Other Merger Foreign Profit up premium reserve reserve exchange and loss share account reserve account capital Group Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 1 October 1,485 38,535 - 249 17 1,264 41,550 2000 Issues of ordinary 351 201,753 - - - - 202,104 shares Share issue - (4,922) - - - - (4,922) expenses Fair value of shares to be issued as part of contingent consideration - - 2,497 - - - 2,497 Loss for the - - - - - (140,371) (140,371) period Foreign exchange translation - - - - (168) - (168) At 30 September 1,836 235,366 2,497 249 (151) (139,107) 100,690 2001 8. Intangible assets IPR Goodwill Total £'000 £'000 £'000 Cost At 1 October 2000 1,872 91 1,963 Additions 169 213,229 213,398 At 30 September 2001 2,041 213,320 215,361 Accumulated amortisation At 1 October 2000 93 7 100 Amortisation 213 8,467 8,680 Impairment provision - 133,400 133,400 At 30 September 2001 306 141,874 142,180 Net book value At 30 September 2001 1,735 71,446 73,181 At 30 September 2000 1,779 84 1,863 As a result of general market conditions, the Directors have performed impairment reviews of the goodwill arising on the company's recent acquisitions. This has resulted in a write-down of £117.4 million on the goodwill relating to CGI and £16.0 million on the goodwill relating to i2i. Notwithstanding the difficult market conditions the Directors believe that the acquisitions continue to be of strategic importance to the group and will going forward make a significant contribution to Group results.

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