Interim Results
Intec Telecom Systems PLC
21 May 2002
Intec Telecom Systems PLC - Interim Results for the six months
ended 31 March 2002
Intec meets consensus revenue and EBITDA forecasts
Intec Telecom Systems PLC ("Intec" or "the Company"), a leading provider of
telecoms Operations Support Systems ("OSS"), is pleased to announce its
unaudited interim results for the six months ended 31 March 2002. Turnover at
£23.2 million has exceeded market consensus expectations, and despite continuing
pressures in the telecoms sector, Intec has recorded a positive EBITDA of
£755,000. Trading in the first few weeks of the third quarter is reassuring, and
the Directors believe that current visibility of full year results allow
confidence in achieving market expectations for the full year.
HIGHLIGHTS
• Half year turnover increases 61% to £23.2 million (H1 2001 - £14.4
million)
• £755,000 positive EBITDA despite ongoing industry pressures (H1 2001:
EBITDA loss of £143,000)
• 47 new contract wins, including customers in Africa, Australia,
Brazil, Egypt, India, Ireland, Jamaica, Malaysia, Switzerland, and the US.
• Recurring revenues up by 65% over H1 2001
• New product - Inter-activatE - successfully installed in beta site
• Integration of recent ICL OSS acquisition completed
• Customer installations reach 340
• Intec remains in strong cash position - £11.0 million in cash and cash
investments - and was cash generative in the second quarter
"The results from the first half of our 2002 year underline the importance of a
product offering with a solid business case for customers," says Intec's
Executive Chairman, Mike Frayne. "We have been able to grow our revenues and
deliver a positive EBITDA despite the pressure on all telecoms operators to
manage costs. Intec continues to extend its market share, both organically and
through carefully targeted acquistions, and we remain confident about our full
year growth prospects."
"All four geographic regions have made good contributions to our performance in
the first half, with our new customer base growing satisfactorily, despite the
difficulties in the telecoms sector," adds Chief Executive Kevin Adams. "We have
worked hard to manage costs across the business, and to ensure that our recent
ICL OSS acquisition contributes as expected. Our business pipeline for the
remainder of the year is solid."
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/Barney Jones
+44 (0) 20 7367 5100
fergus.wylie@cubitt.com
Chairman's and CEO's Statement
Overview
In the first half of 2002 Intec Telecom Systems has demonstrated its continuing
ability to generate revenue growth, and to deliver positive EBITDA through good
control of operating expenses, at a time when the telecoms industry is under
serious pressure. Intec has two market-leading product lines, and a very solid
base of over 250 communications companies in 50 countries. A combination of 49
new licence or service contracts for these products, and recurring revenues from
our customers representing 41% of turnover, has allowed us to report turnover of
£23.2 million and a positive EBITDA of £755,000 in the middle of our financial
year. Our pipeline of prospects also continues to be healthy, with signs of
recovery in a number of markets. However, competition remains high for new
business, with consequent adverse pressure on pricing and contract timescales.
Intec's response to the difficulties of the telecoms marketplace has been to
emphasise the importance to our customers of focusing on improving operational
efficiency through high-quality Operations Support Systems (OSS). Our solutions
deliver excellent return on investment in a number of areas, including improving
revenue collection, cutting costs and creating operational efficiencies. These
are attractive propositions in a market under pressure to improve financial
performance, and Intec has been able to convert customer interest into sales in
all regions.
A key feature of the period has been control of costs. Our policy is to continue
investing in development, marketing, sales and customer support, to enable us to
sustain business growth, but with a clear focus on eliminating unnecessary or
unproductive expenditure. A positive EBITDA in the period shows that our costs
have been well matched to revenues, despite our growth and significant
investment in new product development.
During the period we concluded the acquisition of the OSS business of ICL (now
Fujitsu Consulting), that increased our user base by around 25 installations in
Europe, Africa and Asia-Pacific. The integration of this business is almost
complete. We have also successfully launched the latest version of our
convergent mediation system, Inter-mediatE V4, which includes new Content
Manager capabilities. This functionality will be required by many
next-generation networks.
Operational Review
With the acquisitions made during 2001 now fully integrated, Intec has focused
on generating business from its expanded product portfolio in both new accounts
and existing customers during the six months under review. A total of 33 new
customers were signed in the period, in Africa, Australia, Brazil, India,
Ireland, Jamaica, Malaysia, Switzerland, and the US. Cross-selling or
multi-product contracts have been an important feature, involving 50% of core
mediation or billing product contracts won in the period. Intec's product range,
centred around its core offerings of convergent mediation (Inter-mediatE) and
interconnect billing (InterconnecT), represents a well-integrated portfolio of
OSS offerings, with good business logic for customers looking to improve
financial or operating efficiency. For example, an InterconnecT customer can
also add Omni-chargE, which provides very similar facilities for non-call
(services, co-location, infrastructure sharing, etc.) billing; Maxi-routE for
Least Cost Routing based on interconnect billing data; or InterogatE, our
network intelligence system.
During the period, Intec initiated a thorough review of branding and positioning
of its products. Going forward, we expect this initiative to be valuable in
maintaining the market lead of our core products, and in introducing new ones.
Shortly after the period end, we were pleased to have InterconnecT again rated
as clear market leader by an independent consultancy, with an estimated market
share of currently installed third party solutions of almost 40%, or over 130
installations, around twice our nearest competitor. IntermediatE also continues
to be ranked as one of the top two convergent mediation solutions in its field.
In March Intec announced Version 4 of IntermediatE. V4 adds substantial new
capabilities to Inter-mediatE, emphasising its ability to provide the highest
levels of next-generation functionality to all types of carriers, including
mobile (3G, CDMA, TDMA, GSM) operators, pure IP, Voice-over-IP and convergent
operators, content providers, and all types of fixed line carriers.
All three of Intec's major variants of its InterconnecT product family have
received important upgrades in the period. Interconnect is now at Version 6.0.7,
which adds improved functionality, performance and ease of use in a number of
key areas driven by market trends or requested by customers, including rating,
reporting, security and reference data management.
In the CABS area, we have expanded the facilities in our US datacentre to
accommodate steadily increasing business from a range of companies, as the
benefits of more complete and accurate Carrier Access billing become evident.
Intec now has around 80 customers using Interconnect CABS, either in-house or as
a service from Intec.
Our Business Partners channel remains an important route to market for Intec,
and we have been working to formalise and extend some of our most productive
partner relationships. As a result of the ICL OSS business acquisition we now
have a Partner relationship with Fujitsu, which will distribute our products in
a number of high-growth markets.
In March we announced the availability of a new product, Inter-activatE. This is
a carrier-grade activation and provisioning solution that incorporates expertise
gained by our Atlanta-based Inter-mediatE development team in linking
communications networks with Operations and Business Support Systems. Activation
and provisioning are vital activities for any telecoms operator.
Acquisition update
The acquisitions we made during 2001 are now effectively fully integrated into
the worldwide Intec business, with the growth in multiple product sales as clear
evidence of our ability to sell and deliver broader solutions. This has been an
important factor in delivering growth and profitability in a marketplace
experiencing continuing competitive pressure. We have trained both internal and
external (Partner) sales and support teams in our major products, and we are
also now working with a number of partners, notably Unisys, on promoting our
other products.
In January, we announced an agreement to acquire certain assets from ICL (now
Fujitsu) relating to its business in the telecoms sector. These included the IPR
to two OSS products, and around 25 customer support contracts located in Europe,
Asia-Pacific and Africa, with a view to migrating them to Intec's own products
in due course. Intec will perform no further development on the acquired
products, but will continue to support them in the immediate future. Fujitsu now
resells and integrates both InterconnecT and Inter-mediatE as a worldwide
partner.
Progress with our financial plan for these acquired assets is running ahead of
schedule, with at least one additional and significant contract won within the
former ICL customer base, and a number of commitments made for other licence
sales.
Corporate Developments
It is Intec policy to review our operating requirements on a continual basis,
and this is particularly necessary when external pressures within the telecoms
industry call for efficient operations and careful control of expenditure. As we
reported at the end of the first quarter, Intec initiated a cost management
focus designed to reflect both changes to our business environment and operating
needs, and the opportunities and requirements in future markets. On the staff
front, we implemented a company-wide review of skills and staff roles, with a
view to identifying efficiency and productivity improvements, and we are now
seeing the benefits of these in our cost base.
We have also undertaken a general cost management initiative focused on
eliminating or reducing cost items that we believe underperform in the current
market conditions, and we intend to remain focused on cost management in future
periods. Intec staff numbers at 31 December 2001 were 485. This number grew
moderately in the current period, primarily in sales, support and development.
With other new hires, numbers at 31 March 2002 stood at 495 people.
Financial Review
Revenue for the six months to 31 March 2002 amounted to £23.2 million, an
increase of 61% compared to the corresponding prior period ("2001"), although
this prior period included only approximately 3 months contribution from the
acquisitions of Computer Generation Inc., and CHA Systems. The reported revenues
for the current period include a contribution of £511,000 resulting from the
acquisition of ICL's OSS business in January 2002.
Revenues were generated from all three business activities - licence sales,
recurring revenues, and professional services. License sales increased by 50% at
£8.1 million compared to £5.4 million in 2001, and made up 35% of the total
compared to 38% for 2001. This small percentage difference reflects the
increase in recurring revenues which are up 65%. Recurring revenues, including
annual support charges, licence volume upgrades, and ASP/bureau services, were
£9.4 million and made up 40% of the total which is consistent with the prior
period. This substantial increase reflects the larger customer base. Revenues
from implementation, training, consulting and other professional services
activities were up 74% at £5.7 million and made up 25% of the total compared to
22% for the corresponding prior period.
Since a distinction between mediation and billing sales can be difficult to
make, as a result of increasing joint-product bids, bundled contracted licence
fees and the tendency for all geographic regions to have cross-selling
opportunities for new products, we do not report the breakdown in sales between
product families.
Earnings before interest, tax, depreciation, and amortisation ("EBITDA") were
positive in both quarters, as a result of increased revenues and careful cost
management. This was achieved against a background of substantial investment in
product development, amounting to £4.1 million in the current period (first half
2001: £2.4 million), and ongoing investment in our distribution channels. The
total of £755,000 EBITDA for the half year compares with an EBITDA loss of
£143,000 in the prior period.
The gross profit margin for the six months ended 31 March 2002 was 67% compared
to 64% for 2001, which reflects lower overall cost of sales in the enlarged
business.
The total operating loss of £3.0 million has decreased from £4.4 million in the
prior period. £0.8 million of this is attributed to a reduction in goodwill
amortisation as a result of the substantial impairment charge taken in 2001. The
balance arises from improvements in operating activities. Of £3.0 million
goodwill amortisation, £0.3 million arises from the recent OSS business acquired
from ICL which is being amortised over a period of two years.
The operating cash outflow for the three months to 31 December 2001 of £2.0
million has reduced substantially to £0.7 million for the six months to 31 March
2002 as a result of positive cash inflow of £1.3 million in the second quarter.
Cash balances decreased in the period by £7.0 million, of which £5.3 million
related to the payments for the current period ICL OSS business acquisition
(£3.0 million) and final contingent consideration payments on the acquisition of
CHA Systems, Inc. (£2.3 million).
The annualised debtors days increased slightly in the quarter, as a result of
substantial invoicing of work in progress and support & maintenance renewals
falling due at the end of the period. Cash collections post period-end have been
substantial and ahead of expectations.
Outlook
In the six months to 31 March the reports from companies in the telecoms sector
have been very mixed. While some companies, including Intec, believe that signs
of recovery are underway, there remain substantial problems in the industry.
High levels of debt and competitive pressures have forced many operators to
initiate severe capital expenditure cutbacks. Yet telecoms remains a vital
business and social tool, and growth in traffic remains strong, even if revenue
growth has not yet matched it. Intec has a product range that offers proven
return on investment, and improved operating efficiency, and we have been able
to continue converting customer interest into sales during the first half of the
year.
Looking forward, we anticipate continued aggressive competition for new business
in the OSS sector, with some consolidation inevitable among current vendors. Yet
Intec has a solid pipeline of new business, a strong customer base, more than
sufficient financial resources for its planned operations, and visibility in
excess of 85% of full-year revenues. The Board therefore remains cautiously
optimistic about Intec's performance against current expectations.
Mike Frayne, Executive Chairman
Kevin Adams, Chief Executive Officer
20 May 2002
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
Note 2002 2001 2001
£000 £000 £000
TURNOVER 23,248 14,393 39,798
EBITDA before exceptional items (i) 755 (143) 3,414
Operating loss (2,962) (4,358) (140,046)
Basic loss per share (1.71)p (2.38)p (80.21)p
Adjusted (loss)/earnings per share (ii) (0.13)p (0.17)p 1.14p
Notes to the financial highlights £000 £000 £000
(i) Operating loss (2,962) (4,358) (140,046)
Depreciation 813 520 1,380
Amortisation of goodwill 2,904 3,695 8,680
Impairment of goodwill - - 133,400
EBITDA before exceptional items 755 (143) 3,414
(ii) Adjusted (loss)/earnings per share based on
following adjusted loss after tax
Loss after tax (3,140) (3,971) (140,371)
Amortisation of goodwill and other 2,904 3,695 8,680
intangibles
Impairment of goodwill - - 133,400
Amount written off investment - - 283
Adjusted loss after tax (236) (276) 1,992
KEY CUSTOMER DATA
31 March 30 September 31 March
2002 2001 2001
Number Number Number
Cumulative:
Contracted customer base 233 203 165
Contracted customers acquired from ICL 19 - -
Total contracted customer base 252 203 165
Contracted installations 315 257 198
Contracted installations acquired from ICL 25 - -
Total contracted installations 340 257 198
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
Note 2002 2001 2001
£000 £000 £000
TURNOVER
Continuing operations 22,737 14,393 39,798
Acquisitions 511 - -
Total turnover 2 23,248 14,393 39,798
Cost of sales (7,686) (5,246) (12,675)
GROSS PROFIT 15,562 9,147 27,123
Distribution costs (5,302) (3,400) (9,158)
Administrative expenses:
Development expenditure (4,074) (2,399) (5,869)
Amortisation of goodwill and other (2,904) (3,695) (8,680)
intangible assets
Impairment of goodwill - - (133,400)
Other administrative expenses (6,140) (3,972) (10,140)
Total administrative expenses (13,118) (10,066) (158,089)
OPERATING LOSS
Continuing operations (2,821) (4,319) (140,124)
Acquisitions (37) - -
GROUP OPERATING LOSS (2,858) (4,319) (140,124)
Share of operating (loss)/profit in associate (104) (39) 78
Total operating loss (2,962) (4,358) (140,046)
Amount written off investment - - (283)
Interest receivable and similar income 277 739 1,171
Interest payable and similar charges (317) (29) (73)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (3,002) (3,648) (139,231)
Tax charge on loss on ordinary activities (138) (323) (1,140)
RETAINED LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION (3,140) (3,971) (140,371)
Loss per share - basic 3 (1.71)p (2.38)p (80.21)p
(Loss) / earnings per share - adjusted 3 (0.13)p (0.17)p 1.14p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
6 months ended 31 March 2002
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Loss for the period (3,140) (3,971) (140,371)
Exchange translation differences arising on
foreign currency net investments (110) 86 (168)
Total recognised gains and losses during the (3,250) (3,885) (140,539)
period
Unaudited Unaudited Audited
31 March 31 March 30 September
Note 2002 2001 2001
£000 £000 £000
FIXED ASSETS
Intangible assets 74,454 207,624 73,181
Tangible assets 2,962 2,656 3,009
Investments 364 626 422
77,780 210,906 76,612
CURRENT ASSETS
Stocks 28 42 29
Debtors 5 23,003 17,222 19,103
Investments 267 18,619 2,966
Cash at bank and in hand 10,701 5,151 14,987
33,999 41,034 37,085
CREDITORS: amounts falling due within one year 6 (7,307) (9,179) (7,759)
NET CURRENT ASSETS 26,692 31,855 29,326
TOTAL ASSETS LESS CURRENT LIABILITIES 104,472 242,761 105,938
CREDITORS: amounts falling due after more then
one year 6 - (180) -
Deferred income (6,692) (6,452) (5,248)
TOTAL NET ASSETS 97,780 236,129 100,690
CAPITAL AND RESERVES
Called up share capital 7 1,881 1,836 1,836
Share premium account 7 238,058 235,020 235,366
Other reserve 7 100 1,628 2,497
Merger reserve 7 249 249 249
Foreign exchange reserve 7 (261) 103 (151)
Profit and loss account 7 (142,247) (2,707) (139,107)
EQUITY SHAREHOLDERS' FUNDS 97,780 236,129 100,690
RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS
6 months ended 31 March 2002
Unaudited Unaudited Audited
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Loss for the financial period (3,140) (3,971) (140,371)
Other recognised gains and losses relating to (110) 86 (168)
the period
Issue of share capital net of associated 2,737 196,836 197,182
expenses
(Decrease)/increase in contingent consideration (2,397) 1,628 2,497
(Decrease)/increase in shareholders' funds (2,910) 194,579 59,140
Opening shareholders' funds 100,690 41,550 41,550
Closing shareholders' funds 97,780 236,129 100,690
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
Note 2002 2001 2001
£000 £000 £000
Net cash outflow from operating activities (i) (698) (554) (3,716)
Returns on investments and servicing of finance
Interest received 277 739 1,171
Interest element of finance lease rental (3) (7) (17)
payments
Interest paid and similar items (314) (22) (56)
(40) 710 1,098
Taxation
Overseas taxation (paid)/received (28) (30) 5
UK corporation taxation (paid)/received 5 (19) (531)
(23) (49) (526)
Capital investment
Payments to acquire tangible fixed assets (702) (791) (1,861)
Payments to acquire Intellectual Property Rights - (304) (304)
Proceeds on disposal of fixed assets 43 - 74
(659) (1,095) (2,091)
Acquisitions
Investment in subsidiaries (see note 4) (5,283) (186,651) (188,680)
Net cash acquired with subsidiaries - 1,572 1,801
(5,283) (185,079) (186,879)
Cash outflow before management of liquid
resources and financing (6,703) (186,067) (192,114)
Use of liquid resources
Increase/(decrease) in term deposits 2,628 (328) 15,377
Payments received from escrow 54 679 627
Financing
Issue of ordinary share capital - 183,652 183,700
Share issue costs charged to the share premium
account - (5,221) (4,922)
Capital element of finance lease rental payments (125) (59) (234)
(Decrease) / increase in cash in the period (ii), (4,146) (7,344) 2,434
(iii)
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
(i) Reconciliation of operating loss to net cash
outflow from operating activities
Operating loss (2,858) (4,319) (140,124)
Depreciation 813 520 1,380
Amortisation of goodwill 2,904 3,695 8,680
Impairment of goodwill - - 133,400
Loss on disposal of fixed assets (22) - (10)
Decrease in stock 2 66 79
(Increase)/decrease in debtors (3,642) 1,153 (2,948)
Decrease/(increase) in creditors 2,105 (1,669) (4,173)
Net cash outflow from operating activities (698) (554) (3,716)
(ii) Reconciliation of net cash flow to movement
in net funds
(Decrease)/increase in cash in the period (4,146) (7,344) 2,434
Net cash outflow from decrease in finance lease 125 59 234
Net cash inflow from decrease in liquid (2,682) (351) (16,004)
resources
Change in net funds resulting from cash flows (6,703) (7,636) (13,336)
Finance leases acquired with subsidiary - - (178)
Translation differences (157) - 58
Movement in net funds (6,860) (7,636) (13,456)
Net funds at 1 October 2001 17,765 31,221 31,221
Net funds at 31 March 2002 10,905 23,585 17,765
(iii) Analysis of movement in net funds
' Audited Exchange Unaudited
1 October movement 31 March
2001 Cash flow 2002
£000 £000 £000 £000
Cash in hand and at bank 14,987 (4,146) (140) 10,701
Finance leases (188) 125 - (63)
Term deposits and escrow account 2,966 (2,682) (17) 267
Total 17,765 (6,703) (157) 10,905
1. BASIS OF PREPARATION
The interim financial information has been prepared in accordance with
accounting policies set out in, and are consistent with, the Group's 2001
financial statements except for the adoption of FRS 19 Deferred tax and the
taxation charge for the period which is based on the estimated charge for the
year ending 30 September 2002.
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 2001 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.
The interim financial information was approved by the Board of Directors on 20
May 2002.
2. TURNOVER AND SEGMENTAL REPORTING
Turnover by origin
Unaudited Unaudited
6 months ended 31 March 2002 6 months ended 31 March 2001
Inter-segment Inter-
Total turnover External Total segment External
turnover turnover turnover turnover turnover
£000 £000 £000 £000 £000 £000
United Kingdom 9,552 (912) 8,640 8,325 - 8,325
Continental Europe 141 - 141 171 - 171
Asia-Pacific 1,161 - 1,161 - - -
North America & Canada 12,809 (180) 12,629 5,897 - 5,897
South America 677 - 677 - - -
24,340 (1,092) 23,248 14,393 - 14,393
Audited Year ended 30 September 2001
Inter-
Total segment External
turnover turnover turnover
£000 £000 £000
United Kingdom 22,919 (1,737) 21,182
Continental Europe 400 - 400
Asia-Pacific 1,072 (64) 1,008
North America & Canada 17,224 (215) 17,009
South America 205 (6) 199
41,820 (2,022) 39,798
2. TURNOVER AND SEGMENTAL REPORTING (continued)
Turnover by destination Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
United Kingdom 1,467 909 6,105
Continental Europe 5,350 5,021 10,528
Eastern Europe 219 828 1,562
Middle East 63 22 680
Africa 754 351 814
Asia-Pacific 2,451 2,102 4,977
North America & Canada 10,523 4,320 12,576
South America 2,421 840 2,556
23,248 14,393 39,798
Turnover by activity Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Licence sales 8,107 5,394 14,165
Professional services income:
Implementation and migrations 3,389 1,732 4,752
Consulting and training income 707 364 1,904
Hardware 100 211 502
Non-telecom custom network solutions 1,513 978 2,493
5,709 3,285 9,651
Recurring Income:
ASP Service 1,286 563 1,675
Volume upgrade licenses 971 1,103 3,598
Support and maintenance fees 7,175 4,048 10,709
9,432 5,714 15,982
Total turnover by activity 23,248 14,393 39,798
2. TURNOVER AND SEGMENTAL REPORTING (continued)
Loss before taxation Unaudited
6 months ended 31 March 2002
Before After
amortisation of amortisation of
goodwill Amortisation of goodwill
goodwill
£000 £000 £000
United Kingdom (99) (568) (667)
Continental Europe 104 (5) 99
Asia-Pacific 31 (222) (191)
North America & Canada (230) (2,109) (2,339)
South America 96 - 96
(98) (2,904) (3,002)
The segmental analysis of loss before taxation for the six months ended 31 March
2002 includes intercompany interest charge from the UK to North America & Canada
of £2,104,000 (31 March 2001 - £nil).
Unaudited
6 months ended 31 March 2001
Before After
amortisation of amortisation of
goodwill Amortisation of goodwill
goodwill
£000 £000 £000
United Kingdom (2,056) (99) (2,155)
Continental Europe 82 (5) 77
Asia-Pacific 6 (183) (177)
North America & Canada 1,974 (3,408) (1,434)
South America 41 - 41
47 (3,695) (3,648)
Audited Year ended 30 September 2001
Before After
amortisation of amortisation of
goodwill, goodwill,
impairment and impairment and
investment investment
writedown writedown
Amortisation of Goodwill Investment
goodwill impairment writedown
£000 £000 £000 £000 £000
United Kingdom 1,077 (329) - (283) 465
Continental Europe 221 (9) - - 212
Asia-Pacific (84) (681) (16,000) - (16,765)
North America & Canada 2,576 (7,661) (117,400) - (122,485)
South America (658) - - - (658)
3,132 (8,680) (133,400) (283) (139,231)
2. TURNOVER AND SEGMENTAL REPORTING (continued)
Net assets/(liabilities)
by origin
Unaudited Unaudited Unaudited Unaudited Audited
31 March 31 March 31 March 31 March 30 September
2002 2002 2002 2001 2001
Excluding Including Including Including
unamortised unamortised unamortised unamortised
goodwill Unamortised goodwill goodwill goodwill
goodwill
£000 £000 £000 £000 £000
United Kingdom 17,591 4,850 22,441 30,598 26,995
Continental Europe (35) 69 34 97 258
Asia-Pacific 1,352 5,910 7,262 22,796 7,782
North America & Canada 5,845 61,857 67,702 182,643 65,657
South America 341 - 341 (5) (2)
25,094 72,686 97,780 236,129 100,690
3. (LOSS)/EARNINGS PER ORDINARY SHARE
Unaudited Unaudited Audited
6 months ended 6 months ended Year ended
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Basic loss (3,140) (3,971) (140,371)
Amortisation of goodwill 2,904 3,695 8,680
Impairment of goodwill - - 133,400
Amount written off investment - - 283
Adjusted (loss)/earnings (236) (276) 1,992
Number Number Number
Weighted average number of shares 183,936,583 166,549,879 175,007,925
Pence Pence Pence
Basic loss per ordinary share (1.71) (2.38) (80.21)
Amortisation of goodwill and intangible assets 1.58 2.21 4.96
Impairment of goodwill - - 76.23
Amount written off investment - - 0.16
Adjusted (loss)/earnings per ordinary share (0.13) (0.17) 1.14
Diluted earnings per share is not presented in respect of outstanding share
options since none of the options are dilutive.
4. ACQUISITIONS
a) Current year acquisitions
On 25 January 2002, the group acquired the operational support systems ("OSS")
business of ICL, a Fujitsu company ("the vendor"). The OSS business acquired
comprises certain tangible fixed assets, intellectual property rights, and
customers.
The initial consideration for the acquisition was £2,850,000 paid in cash. In
addition, deferred cash consideration is payable on a quarterly basis,
calculated by reference to support contract revenues over the two year period
from the acquisition date. As at 31 March £142,000 of the deferred
consideration has been paid leaving an estimated £596,000 over the remainder of
the two year period.
Goodwill arising on acquisition has been capitalised and is being amortised over
two years from the date of acquisition.
Net Assets acquired: Provisional fair
value to group
£000
Tangible fixed assets 125
Goodwill arising on acquisition 3,482
3,607
Net initial cash consideration 2,850
Deferred consideration 738
Acquisition costs 19
3,607
b) Prior year acquisitions
Contingent consideration of £5,509,000 was settled in respect of the acquisition
of CHA Systems, Inc. £2,272,000 was paid in cash and the balance of £2,737,000
was settled through the issue of ordinary shares of Intec Telecom Systems PLC.
c) Reconciliation to cash flow statement
£000
Initial consideration for ICL OSS business (2,869)
Deferred consideration payments on ICL (142)
Contingent cash consideration paid on prior year (2,272)
acquisition
(5,283)
5. DEBTORS
Unaudited Unaudited Audited
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Trade debtors 16,303 11,882 13,535
Corporation tax recoverable 196 - 216
Withholding tax recoverable 87 - 82
Other debtors 1,858 2,226 1,139
WIP and accrued income 3,070 1,190 2,027
Prepayments
Due within one year 1,394 1,468 1,642
Due after more than one year 95 456 462
23,003 17,222 19,103
6. CREDITORS
Unaudited Unaudited Audited
31 March 31 March 30 September
2002 2001 2001
£000 £000 £000
Amounts falling due within one year
Obligations under finance leases 63 121 188
Trade creditors 2,446 2,650 2,007
Corporation tax 454 722 454
Overseas tax 317 275 356
Other creditors including taxation and social 866 2,026 601
security
Accruals 2,565 2,235 2,235
Contingent consideration 596 1,150 1,918
7,307 9,179 7,759
Amounts falling due after more than one year
Obligations under finance leases - 64 -
Long term note payable - stockholders - 116 -
- 180 -
7. STATEMENT OF MOVEMENTS ON RESERVES
Called Share Foreign Profit
up share premium exchange and loss
capital account Other Merger reserve account
reserve reserve Total
£000 £000 £000 £000 £000 £000 £000
At 1 October 2001 1,836 235,366 2,497 249 (151) (139,107) 100,690
Adjustment to fair value of
shares issued as part of
contingent consideration - - 340 - - - 340
Issue of shares to settle
contingent consideration for
CHA Systems, Inc. 45 2,692 (2,737) - - - -
Retained loss - - - - - (3,140) (3,140)
Foreign exchange translation - - - - (110) - (110)
At 31 March 2002 1,881 238,058 100 249 (261) (142,247) 97,780
8. CONTINGENT LIABILITY
As noted in the 2001 Report & Accounts, on 7 December 2000 a claim was brought
by British Telecommunications plc ("BT") against Intec Telecom Systems PLC ("the
Company") for infringement of UK patent 0 692 172 (the "Patent in Suit"), and
leave to add the Company's subsidiary, Independent Technology Systems Ltd, was
later granted by the Court. BT's claim is for an injunction to restrain the
Company and Independent Technology Systems Ltd from infringing the Patent in
Suit and also includes a claim for damages or an account of profits, delivery up
of any infringing goods and its legal costs. The Patent in Suit relates to data
analysers used in telecommunications systems. The allegation set out in BT's
particulars of claim is that the Company's interconnect settlement system
infringes the Patent in Suit. At this stage of the proceedings, no evidence
(expert or witness) has been exchanged. On the basis of the information received
to date from the Company, BT, and from the results of searches conducted by the
Company's patent attorneys, the Company has been advised by its legal advisers
that BT's analysis of the scope of the Patent in Suit is flawed and that upon a
sensible reading of the claims of the Patent in Suit the Company's system should
be held not to infringe the Patent in Suit. Alternatively, the Patent in Suit
should be found to be invalid. As the issues of liability and quantum are tried
separately before the UK Courts, BT has yet to plead any claim as to quantum.
Should BT succeed on liability at trial, it will only then plead its claim to
damages and/or account of profits. At this stage, therefore, the Company is not
able to provide an estimate as to the level of damages which BT may claim. The
Group is making provision for all the likely legal costs the Company may incur
up to trial on liability, and put in place contingency plans in the event of a
successful or partially successful claim, which the Directors believe would be
cost effective and avoid any such future claims. Accordingly no provision has
been made in these financial statements for such potential liability.
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