Interim Results

Intec Telecom Systems PLC 30 May 2006 Intec Telecom Systems PLC - Unaudited results for the six months ended 31 March 2006 Eighteen percent organic revenue increase; profit before tax up 29%; strong cash generation London, 30 May 2006 - Intec Telecom Systems PLC ("Intec" or "the Company"), a leading supplier of software solutions to the global telecoms industry, announces its unaudited results for the six months ended 31 March 2006 ("H1 2006"), prepared under IFRS1. The company has demonstrated excellent organic growth resulting from solid trading across all aspects of the business, as well as good cash generation. Increased momentum, in both new business wins and sales into our existing customer base, particularly with multi-product deals, has been a feature of the period. Intec has maintained its policy of investing in both products and delivery capability to meet demand, resulting in a solid earnings performance. Financial highlights • Revenue increased by 18% to £57.6m (six months ended 31 March 2005 ("H1 2005"): £48.7m) • New licence revenue increased 29% to £10.3m (H1 2005: £8.0m) • Profit before tax increased 29% to £2.5m (H1 2005: £1.9m) • Cash generated by operations of £10.7m (H1 2005: £4.0m). Net cash inflow of £6.0m • Operating profit increased 32% to £2.1m (H1 2005: £1.6m) • Earnings per ordinary share of 0.43p (H1 2005: 0.45p) following increased H1 tax charge • Net cash of £27.5m (30 September 2005: £21.5m) after deducting debt of £2.2m Operational highlights • Strong organic growth across all aspects of the business, with key new customer wins in the US, UK, Western Europe, Russia, Africa, Asia and Latin America • New, award winning solutions brought to market for wireless/MVNO, IPTV, wholesale and error management applications • Increase in ratio of multi-product deals from growing product portfolio • Intec now has 616 installations at 384 companies (H1 2005: 566 installations at 353 companies) • Ongoing investment in global delivery capability, including offshore facilities, to meet demand Commenting on today's results, Kevin Adam, Intec's Chief Executive Officer, said: "Intec is generating organic growth across the business as the adoption of our BSS/OSS solutions among major carriers continues to accelerate. We are able to deliver both solid earnings and cash generation, whilst making the investment necessary to match this growth and the ongoing competitive pressure in our industry. Taking these factors into account, we expect our full year performance to be in line with current market expectations." A meeting for analysts will be held today at 9.15 for 9.30 a.m. at the offices of Smithfield, 10 Aldersgate Street, London EC1A 4HJ. 1These results are the first reported under the International Financial Reporting Standards ("IFRS"). All numbers including comparatives are stated accordingly. The 2005 financial year results, restated under IFRS, were published on 19 May 2006. For further information, please contact: Intec Telecom Systems PLC www.intecbilling.com Kevin Adams, Chief Executive Officer +44 (0)1483 745 800 Robert Gibb, Investor Relations Manager +44 (0)1483 745 941 +44 (0)7876 656 896 robert.gibb@intecbilling.com Smithfield Consultants Sara Musgrave, Libby Young +44 (0)20 7360 4900 intec@smithfieldgroup.com Pictures are available for the media to view and download from www.vismedia.co.uk NOTES TO EDITORS About Intec Telecom Systems PLC Intec supplies billing software solutions to over 60 of the world's top 100 telecoms carriers and is one of the world's fastest growing major BSS/OSS (business and operations support systems) vendors. Intec's 350 customers include AT&T, BellSouth, Cable & Wireless, The Carphone Warehouse (UK), China Unicom, Deutsche Telekom, Eircom (Ireland), France Telecom, Hutchison 3G, O2, Orange, T-Mobile, Telefonica, Vodafone, Virgin Mobile, Vivo and Verizon. Intec has a comprehensive and expanding range of solutions and services ranging from market leading mediation and convergent billing products such as their Wholesale Business Management solution through to innovative IPTV solutions. Intec works closely with its customers, many of whom have been with Intec since its inception, to provide the highest standards of performance, flexibility and robustness to help carriers service their customers effectively and profitably. Founded in 1997, Intec is listed on the London Stock Exchange (ITL.L) and has over 1,600 staff and 31 offices in 25 countries. For more information visit www.intecbilling.com CHAIRMAN'S STATEMENT Intec is maintaining its position as one of the fastest growing and most successful of the major business and operations support systems (BSS/OSS) vendors, in a dynamic and competitive marketplace where a degree of operator consolidation is evident. Our broad product portfolio of vital software solutions for the global telecoms industry, our expanding tier 1 customer base, and our growing team of highly-skilled people remain the fundamental assets of the business. Intec sits at the leading edge of systems for next generation networks (NGN), enabling our customers to launch, manage and capitalise on high value, convergent services such as music, video and mobile commerce. This is underpinned by continuing demand for Intec solutions supporting more traditional telecoms networks, as well as new markets like IPTV, VoIP and broadband. We believe that few companies in our space offer the depth and breadth of technology that Intec possesses, and we have continued to build on this with several new launches in the past six months, including solutions for IPTV, new wireless licencees or MVNOs, wholesale business, and centralised error management. The Company now has over 1,630 staff in 24 countries. Of this number, around 1,000 are implementation, support and consulting staff, with a further 320 focused on development and product support. This reflects our emphasis on good customer service through comprehensive professional services and product development, with teams located around the world, including a rapidly expanding facility in India. Results This is our first set of results reported under International Financial Reporting Standards (IFRS). All comparatives are re-stated accordingly. Comparative results for 2005 were reported to the market on 19 May 2006. Whilst the introduction of IFRS has no impact on the revenue recognition or underlying cash flows of the business, the three principal changes resulting from IFRS relate to the treatment of goodwill amortisation, the number of shares in issue used for EPS and other calculations, and the capitalisation of certain product development costs. Revenue for the half year increased organically by 18% from £48.7 million to £57.6 million. Profit before tax was up 29%from £1.9 million to £2.5 million, although our policy of investing to meet marketplace demand is limiting underlying margin development at present. Basic earnings per share was 0.43p (H1 2005: 0.45p). This slight fall reflected an increased number of shares in circulation and a 97%increase in the tax charge, predominantly due to increased tax in some jurisdictions where our local entities are now subject to tax as a result of their business success. Operating cash generation was good at £10.7m, and Intec remains a well funded business. No acquisitions have been made in the period, although activity in our industry in this area appears to be increasing. Intec continues to evaluate opportunities pro-actively, based on our long-term policy of growing the scale and capability of the business through acquisitions which will enhance shareholder value. I am pleased to announce that Intec has recently appointed UBS as its corporate broker and financial adviser, with immediate effect. We believe that the global perspective that UBS brings to our financial activities will be very beneficial as Intec continues to develop on a worldwide basis. The Market Competition in the BSS/OSS market remains strong, partially as a result of consolidation between operators such as the regional Bell operating companies (RBOCs) in the US and amongst several European players. We have seen a number of projects and opportunities delayed by these events, as well as a trend towards a smaller number of larger projects. While the market in which we operate is clearly growing, in the near term it is difficult to predict in terms of specific purchasing decisions and timescales. However, recently published, independent research shows that Intec continues to announce more new contracts than its major competitors, and our focus remains firmly on gaining high-quality new customer wins. In conclusion, the opportunities for Intec within a dynamic and expanding telecoms sector remain excellent. The business is performing well both operationally and financially, and I expect Intec to continue growing and developing well as we go forward. John Hughes Chairman 26 May 2006 CHIEF EXECUTIVE OFFICER'S STATEMENT AND REVIEW The first half of our 2006 financial year has shown that Intec can generate real organic growth in a competitive global marketplace. Revenue rose substantially, with a particularly good contribution from new licence sales. The revenue increase was driven primarily by growth in our Intec Convergent Billing (Singl.eView) retail billing business, supported by continuing strong sales in the 'classic' Intec products, with many new licences for both interconnect billing and mediation. Investing in the resources and facilities to deliver this increased level of business has put pressure on gross margins, although we see this as a short to medium term issue only. A number of investment-based initiatives, including a fast-growing offshore professional services facility, and expansion of our capability to deliver even greater levels of standard product functionality, are in place to help us deliver future margin growth. Notwithstanding the impact of these investments, both earnings and cash generation have met our expectations. Operational Review The period was notable for consolidation activity amongst telecom operators in several key markets, particularly in the US and Europe. The effect of these consolidations is mixed - we have seen some delays and postponements in expected business, as customers review operational requirements. Equally, the need for carriers to drive cost efficiency and service quality in very competitive markets, as well as bringing new IP-based services to market, is stimulating new investment in higher levels of system consolidation, automation and technology replacement. Intec's broad customer base means that we are not particularly exposed in any one region or to any one customer. Intec announced a number of important customer wins in the first half, with new contracts in the US, UK, Western Europe, Africa, Asia and Latin America. Notable wins have included TelstraClear (New Zealand), KPN (Holland), VimpelCom (Russia), Cox Communications (USA), CTBC (Brazil), Verizon Dominicana (Dominican Republic), Telemig Celular and Amazonia Celular (both in Brazil), Mobilink (Pakistan), plus a high profile Asia Pacific customer in a multi-million pound deal. Out of 45 new product licences contracted for in the period, twelve were cross-sells of additional products to existing customers, and nineteen were multi-product sales, underlining the importance of our comprehensive, integrated portfolio. During the first half of 2006, the Company increased its customer base to 384 customers and 616 installations. Intec has a strong pipeline of opportunities, many of them multi-product, multi-million pound deals. While this is very encouraging, one consequence is that projects are often now of a more complex nature, with revenue recognised over longer periods. We are also seeing more requirement for 'proof of concept' projects which are often not significant revenue generators in the short term. Moreover, it is not uncommon for customers to extend the scope of a contract and increase the project period to include further work or additional products once the initial phases have gone into production. Our revenue recognition policies are also moving from being largely milestone-based to 'percentage-of-completion'. These factors typically extend the recognition period of both licence and service revenue streams, as well as having some balance sheet impacts. We consider this a normal and expected development for the business as it grows and matures. The strong organic growth we are experiencing does imply considerable up-front investment to ensure we meet demand. Intec has an excellent reputation for delivery to customers, and we intend to ensure that this is maintained. For example, the investment we have made in two important initiatives - our offshore services facility in India, and increasing the proportion of standardised functionality we can deliver rapidly to a customer - are both now paying real benefits. With the former we can be more cost-competitive, while protecting margins, and with the latter we can offer real competitive advantage over vendors with less functional offerings. However, both programmes require ongoing investment to deliver their full potential, and to address the growing market demand we are seeing, resulting in short-term limits to margin development. In the particular case of our offshore facility in India, Intec has accelerated its expansion considerably and at the end of March, over 200 people were employed there with a target of 300 set for the year end. Although this initiative is expected to be highly beneficial to Intec over the longer term, it will not move from investment phase to margin enhancing until 2008. This significant investment was acknowledged at the time of the Singl.eView acquisition, and the Board remains confident of the benefits to shareholders that will result in the longer term. In December Intec opened a Moscow office to serve both Russia and the wider CIS. This local presence is a response to Intec's high-profile customer base in the region, and to the considerable growth potential of the area. Further office openings are planned in the future around the world to meet customer opportunities and support requirements. Strategy for Growth Intec has a strong track record for rapid and sustained revenue growth with a 42% CAGR from 2000 to 2005. In that time, customer numbers have grown from around 140 to almost 500 and staff numbers from 176 to over 1,600. Intec is pursuing a clear and realistic strategy to maintain this momentum. Our target market is primarily tier 1 and larger tier 2 communications service providers and other companies in the same delivery chain, for example content providers. In particular, Intec proactively identifies, monitors and targets new markets, such as geographic growth areas (e.g. Africa and Eastern Europe), new technologies (e.g. VoIP and IPTV) and new business models (e.g. MVNOs). Growing our revenue base implies both expanding our customer list, and also developing the level of business we do with existing customers. We are increasingly developing and marketing a broader solutions-based capability, where one or more products are integrated into a targeted offering that meets a clearly identifiable market need. Partners remain an important part of Intec's distribution and delivery capability, and in 2006 we have deepened our relationship with a number of influential companies, including Lucent and Cisco. Intec prides itself on running an efficient and productive business, with a cost-focused culture that is nevertheless prepared to invest where we see genuine benefit. Increasing this operational effectiveness is a clear management priority, particularly as Intec grows as a business. General and administrative expenses are being carefully controlled as well. For example, a global ERP system is being rolled out to avoid duplication of effort, reduce overheads and maximise efficiency. Good cost control, accurate budgeting, efficient working practices and examination of return-on-investment are continually emphasised at all levels of the Company. Market Drivers We have identified several specific growth drivers for Intec - convergence towards next generation services; industry rejuvenation; and legacy replacement and consolidation. In the area of convergence, new initiatives, such as 3G, VoIP, IPTV, the rapid growth of the downloaded content market, and the trend towards all-IP networks are all stimulating new BSS/OSS spend to enable new services to be delivered securely and with a seamless, high-quality customer experience. Intec has a product and solution portfolio which is proven to be capable of delivering in these technically demanding convergence projects. After several years of tight economic conditions in the communications sector there is a steady rejuvenation in the market overall, with numerous hot spot areas, particularly in the developing world. Substantial new investment is taking place in many of these regions, driven by social and economic factors, with new wireless licencees and MVNOs taking the bulk of new expenditure. Intec's global business model and comprehensive, well-integrated product portfolio allows us to sell effectively in these growing markets. In more developed telecom markets, where competition, consolidation and customer loyalty are key issues, many carriers are now looking to invest strategically, for example in large-scale billing system consolidation or modernisation projects, to reduce costs and improve service. These are challenging projects, and the trend is strongly towards proven, tier 1 software solutions, which Intec is well positioned to supply. Product Developments High quality BSS/OSS products remain the backbone of Intec's success. In the period under review Intec launched several new product offerings and enhancements, including three pre-integrated solutions targeted on specific business needs. Intec IPTV, targeted at providers of television services over Internet Protocol, is already undergoing deployment at a major carrier in Asia Pacific, a region that is leading the world in the rollout of IPTV services, according to industry analysts. The Wholesale Business Management solution covers the complete span of functionality from trading and routing, billing and settlement, to pre-processing and mediation, for carriers with a substantial wholesale business. The Intec Mobile Business Solution is targeted at mobile operators and MVNOs worldwide for a single, scalable platform, capable of evolving from simple voice and messaging services through to fully converged, circuit-switched and IP-based next-generation mobile services. The newly launched Intec Centralized Error Management System (Intec CEMS) can cut customers' revenue losses by dramatically reducing error volumes, lowering the costs of managing errors, and recovering revenue from unbilled usage and service order errors. One major carrier using Intec CEMS recorded a 90 per cent reduction in its aged error write-offs and a 60 per cent reduction in its error volumes. Intec CEMS won the Best New Product category at the TeleStrategies 2006 Billing & OSS World Excellence Awards in May. Also during the period, the Company was recognised as a top 3 UK job creator and Europe's 13th fastest growing company in the 2005 Europe's 500 ranking. Frost & Sullivan also awarded Intec its 2006 Growth Strategy Leadership Award in the communications billing vendor market. Financial Analysis Intec is now reporting its results according to IFRS, for both the period under review and the comparative periods shown. For the first half of its 2006 business year Intec generated profits before tax of £2.5m (H1 2005: £1.9m) on revenues up 18% at £57.6m (H1 2005: £48.7m), reflecting a strong performance in all regions and from all key revenue streams. It should be noted that the profit figure for 2005 was after a charge of £1.1m for exceptional integration expenses resulting primarily from the Singl.eView acquisition. In the current period a charge of £0.6m due to foreign exchange translation (H1 2005: credit of £0.4m) is included in other administrative expenses. Basic earnings per ordinary share were 0.43p compared to 0.45p for the comparative period. This slight reduction is predominantly due to increased tax charges in successful overseas entities, as well as a slightly higher average number of shares in issue. Revenue performance was satisfactory in all regions, with North America having a particularly strong result, up 47%, reflecting the ongoing recovery in the US telecoms market. EMEA revenue rose 4%, CALA revenue rose 44%, and APAC fell slightly by 4%, these latter two results primarily reflecting the flow of revenue in the comparative half year. Licence revenue of £10.3m (H1 2005: £8.0m) is an excellent result in a very competitive market, the increase of 29% compared to 2005 coming from contracts signed in the latter half of 2005 and new business won during the first six months of our 2006 fiscal year. Equally pleasing is the increase in professional services revenue of 26% to £24.2m (H1 2005: £19.1m) as a result of our larger projects for Intec Convergent Billing (Singl.eView) Recurring revenues, representing 40% of the overall revenue in the period, continue to be a great strength of the business with an increase of 7% from £21.6m to £23.1m - a good result in challenging market conditions where customers continually seek to reduce ongoing costs and the increase in corporate activity has seen some consolidation of operators. Whilst gross margin has decreased, partly as a result of a greater mix of professional services revenue, overall gross profit increased by £1.7m or 6% to £32.4m, with a gross margin of 56% (H1 2005: 63%). Investment in our offshore operation is still in the development phase and, due to set up and training cycles, is expected to improve gross margins gradually towards 2008, as we reduce overall delivery costs and reduce contractor levels. Distribution costs increased by 6% which, compared to the 18% increase in revenues, demonstrates the benefits of increased efficiency in our sales and distribution channels. Overall development and administrative expenses remain under control with a net 3% increase in overall costs. This arises predominantly from the increase in facilities worldwide to service our customers and the centres of excellence being developed around the world. Cash generated by operations is up substantially to £10.7m (H1 2005: £4.0m), which is an excellent result for the six months. Both accrued income and trade debtors have decreased from the year end, demonstrating our good conversion of revenue to cash. Deferred income has increased from the year end and the balance reflects a larger proportion of annual support renewals invoiced in the first half of the calendar year. With a net increase of £6.0m in cash since 30 September 2005, we are now in a position to settle the working capital credit facility with ADC Telecommunications, Inc. executed upon acquisition of the Singl.eView business in 2004 resulting in approximately a net $3m being repaid. Outlook Intec is making excellent progress within the global BSS/OSS market, with above-average revenue growth, important new customer wins, a growing, well-regarded product portfolio, and a substantial pipeline of opportunities. While margin development remains a priority, this is a period of investment that we believe is necessary for Intec to compete and fulfil its potential. Competition is as intense as ever, especially in a period of industry consolidation, and our carrier customers remain very cost focused. Taking these factors into account, we expect our full year performance to be in line with current market expectations. Kevin Adams Chief Executive Officer 26 May 2006 FINANCIAL HIGHLIGHTS Six months ended 31 March 2006 Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Revenue 57,578 48,689 116,228 =========== ========== ========== Profit before tax 2,456 1,911 11,076 =========== ========== ========== Operating profit 2,061 1,562 10,235 =========== ========== ========== Cash generated from operations 10,723 3,974 1,232 =========== ========== ========== Earnings per ordinary 0.43p 0.45p 3.01p share =========== ========== ========== Diluted earnings per ordinary share 0.42p 0.44p 2.97p =========== ========== ========== CONSOLIDATED INCOME STATEMENT Six months ended 31 March 2006 Continuing Note Unaudited Unaudited Unaudited operations Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 REVENUE 2 57,578 48,689 116,228 Cost of sales (25,141) (17,956) (44,597) ----------- ----------- ---------- GROSS PROFIT 32,437 30,733 71,631 Distribution costs (9,434) (8,928) (18,600) Administrative expenses: ----------- ----------- ---------- Development (7,555) (7,729) (16,049) expenditure Amortisation of intangible assets (801) (671) (1,268) Reorganisation and integration expenses - (1,148) (1,132) Other administrative expenses (12,586) (10,695) (24,347) ----------- ----------- ---------- Total administrative expenses (20,942) (20,243) (42,796) ----------- ----------- ---------- OPERATING PROFIT 2,061 1,562 10,235 Investment income 501 430 1,026 Finance costs (106) (81) (185) ----------- ----------- ---------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAX 2,456 1,911 11,076 Income tax expense 3 (1,166) (574) (2,024) ----------- ----------- ---------- PROFIT FOR THE PERIOD 1,290 1,337 9,052 =========== =========== ========== Earnings per share - basic 4 0.43p 0.45p 3.01p =========== =========== ========== Earnings per share - diluted 4 0.42p 0.44p 2.97p =========== =========== ========== CONSOLIDATED BALANCE SHEET 31 March 2006 Note Unaudited Unaudited Unaudited 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 NON-CURRENT ASSETS Goodwill 101,541 101,856 101,486 Intangible assets 7,224 4,729 5,425 Property, plant and equipment 8,012 6,513 7,781 Trade and other receivables 588 597 689 Deferred tax asset 619 281 630 Investments 5 5 6 --------- --------- --------- 117,989 113,981 116,017 CURRENT ASSETS Trade and other receivables 5 48,149 40,720 56,165 Cash and cash equivalents 29,747 31,934 23,770 --------- --------- --------- 77,896 72,654 79,935 TOTAL ASSETS 195,885 186,635 195,952 --------- --------- --------- CURRENT LIABILITIES Trade and other payables 6 (33,867) (36,719) (37,475) Provisions 8 (869) (874) (684) --------- --------- --------- (34,736) (37,593) (38,159) NON-CURRENT LIABILITIES Deferred tax liabilities (921) (793) (890) Other payables 7 (824) (2,763) (577) Provisions 8 (2,484) (2,553) (2,681) --------- --------- --------- (4,229) (6,109) (4,148) TOTAL LIABILITIES (38,965) (43,702) (42,307) --------- --------- --------- NET ASSETS 156,920 142,933 153,645 ========= ========= ========= EQUITY Share capital 3,037 3,007 3,017 Share premium account 161,406 160,605 160,745 Merger reserve 6,768 6,768 6,768 Own shares (95) (95) (95) Translation and other 1,525 (993) 922 reserves Retained earnings (15,721) (26,359) (17,712) --------- --------- --------- TOTAL EQUITY 156,920 142,933 153,645 ========= ========= ========= CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Six months ended 31 March 2006 Share Share Merger Own Translation Retained Total Capital premium reserve shares reserves earnings account £000 £000 £000 £000 £000 £000 £000 Balance at 1 October 2005 3,017 160,745 6,768 (95) 922 (17,712) 153,645 -------------------- ------- ------- ------ ------ -------- ------- ------- Exchange differences arising on translation of foreign operations - - - - 603 - 603 -------------------- ------- ------- ------ ------ -------- ------- ------- Net income recognised directly in equity - - - - 603 - 603 Profit for the period - - - - - 1,290 1,290 -------------------- ------- ------- ------ ------ -------- ------- ------- Total recognised income and expense for the period - - - - 603 1,290 1,893 Issue of share capital net of share issue expenses 20 400 - - - - 420 VAT recovered on previous share issue expenses - 261 - - - - 261 Recognition of share-based payments - - - - - 701 701 -------------------- ------- ------- ------ ------ -------- ------- ------- Balance at 31 March 2006 3,037 161,406 6,768 (95) 1,525 (15,721) 156,920 CONSOLIDATED CASH FLOW STATEMENT Six months ended 31 March 2006 Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Operating profit 2,061 1,562 10,235 Adjustments for: Depreciation 1,879 1,987 3,690 Amortisation of intangible assets 801 671 1,268 (Gain)/loss on disposal of fixed assets (8) 16 1 Shared-based payment expense 701 234 1,166 ----------- ----------- ---------- Operating cash flows before movements in working capital 5,434 4,470 16,360 Decrease/(increase) in receivables 8,834 (339) (12,711) Decrease in payables (3,545) (157) (2,417) ----------- ----------- ---------- Cash generated by operations 10,723 3,974 1,232 Income taxes paid (net) (1,305) (606) (1,253) Interest received 492 429 942 Interest paid (35) (69) (87) Interest element of finance lease rental payments (7) (15) (36) ----------- ----------- ---------- Net cash generated by operating activities 9,868 3,713 798 Investing activities Payments to acquire tangible fixed assets (4,262) (2,554) (6,569) Proceeds on disposal of property, plant and equipment 3 44 78 Acquisition of - (929) (2,004) subsidiaries Net cash acquired with subsidiaries - 75 74 Expenditure on capitalised product development (387) (43) (649) ----------- ----------- ---------- Net cash used in investing (4,646) (3,407) (9,070) activities Financing activities VAT recovered on previous share issue expenses 261 - - Proceeds on issue of 421 152 302 shares Repayments of obligations under finance leases (29) (89) (132) ----------- ----------- ---------- Net cash generated in financing activities 653 63 170 ----------- ----------- ---------- Net increase/(decrease) in cash and cash equivalents 5,875 369 (8,102) Cash and cash equivalents at beginning of period 23,770 32,182 32,182 Effect of foreign exchange rates 102 (617) (310) ----------- ----------- ---------- Cash and cash equivalents at end of period 29,747 31,934 23,770 ----------- ----------- ---------- NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION Six months ended 31 March 2006 1. BASIS OF PREPARATION The transition date for the application of IFRS for the Group is 1 October 2004. The Group will adopt IFRS for the first time in its consolidated financial statements for the year ending 30 September 2006, which will include comparative financial information for the year ended 30 September 2005. In accordance with the Listing Rules of the UKLA this Interim Report for the six month period ended 31 March 2006, including comparative information for the six month period ended 31 March 2005 and for the year ended 30 September 2005, has been prepared on a basis consistent with the Group's anticipated IFRS accounting policies for the year ended 30 September 2006, except for IAS 32/39 where the Group has elected under IFRS1 to apply IAS32/IAS39 from 1 October 2005. The anticipated IFRS accounting policies assume that all existing standards in issue from the IASB will be fully endorsed by the EU. These are subject to ongoing amendment by the IASB and subsequent endorsement by the EU and therefore subject to possible change. The Group's anticipated IFRS accounting policies for the year ended 30 September 2006 are published in Intec's IFRS statement of 19 May 2006 and are available on the company's website (www.intecbilling.com). The financial information in this report 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 2005 is based upon the Group's audited UK GAAP accounts, restated under IFRS The statutory accounts for the year ended 30 September 2005 have been delivered to 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. 2. SEGMENTAL INFORMATION Geographical segments At 31 March 2006, the Group is organised into four key geographical segments: Europe, Middle East and Africa (EMEA), North America, Caribbean and Latin America (CALA) and Asia-Pacific. These four geographical segments are the Group's primary reporting format for segment information by customer location. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise development costs, corporate assets and liabilities and expenses. Segment information under the primary reporting format is as disclosed in the table below: Continuing EMEA EMEA North North Asia-Pacific Asia-Pacific CALA CALA Total Total operations America America 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 Revenue 23,460 22,508 21,594 14,693 8,125 8,432 4,399 3,056 57,578 48,689 ------------- ------ ------ ------- ------ ------ ------ ------ ------ ------ ------ Segment 7,215 7,172 6,240 5,417 3,437 3,810 1,540 657 18,432 17,056 profit Unallocated costs: - product operations (12,248) (10,190) - corporate costs (4,123) (4,156) - reorganisation and integration - (1,148) ------ ------ Operating profit 2,061 1,562 Investment income/(finance costs) 395 349 ------ ------ Profit on ordinary activities before tax 2,456 1,911 Taxation (1,166) (574) ------ ------ Profit for the period 1,290 1,337 ====== ====== Turnover by activity Unaudited Unaudited Unaudited Six months Six months Year ended ended ended 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Licence sales 10,297 7,983 25,378 Professional services income: 24,175 19,147 45,905 Recurring income: ASP Service 3,504 3,599 7,662 Volume upgrade licences 2,925 2,679 6,236 Support and maintenance fees 16,677 15,281 31,047 ----------- ---------- ---------- 23,106 21,559 44,945 ----------- ---------- ---------- Total turnover by 57,578 48,689 116,228 activity =========== ========== ========== 3. INCOME TAX EXPENSE Unaudited Unaudited Unaudited 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Current taxation: UK corporation tax at 30% (2005: 30%) - - - Foreign tax 918 638 1,957 ---------- ---------- ----------- 918 638 1,957 ---------- ---------- ----------- Adjustments in respect of prior years UK corporation tax - - (111) Foreign tax 199 - - ---------- ---------- ----------- 199 - (111) ---------- ---------- ----------- Total current tax expense 1,117 638 1,846 ---------- ---------- ----------- Deferred taxation: UK 49 (64) 33 Foreign - - 145 ---------- ---------- ----------- Total deferred tax expense 49 (64) 178 ---------- ---------- ----------- ---------- ---------- ----------- Total income tax 1,166 574 2,024 ========== ========== =========== 4. EARNINGS PER ORDINARY SHARE Unaudited Unaudited Unaudited Six months ended Six months ended Year ended 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Continuing operations Profit for the period - basic and diluted 1,290 1,337 9,052 ---------- ---------- ---------- Profit for the period - basic and diluted 1,290 1,337 9,052 Reorganisation and integration expenses - 1,148 1,132 Adjusted profit for the period - basic and diluted 1,290 2,485 10,184 ---------- ---------- ---------- Number Number Number '000 '000 '000 Weighted average number of ordinary shares - basic 302,437 300,070 300,623 Effect of dilutive potential ordinary shares options 2,812 4,811 4,103 Weighted average number of ordinary shares - diluted 305,249 304,881 304,726 ---------- ---------- ---------- Pence Pence Pence Basic earnings per ordinary share 0.43 0.45 3.01 ---------- ---------- ---------- Effect of dilutive potential ordinary shares options (0.01) (0.01) (0.04) Diluted earnings per ordinary share 0.42 0.44 2.97 ---------- ---------- ---------- Basic earnings per ordinary share 0.43 0.45 3.01 Reorganisation and integration expenses - 0.38 0.38 ---------- ---------- ---------- Adjusted earnings per ordinary share 0.43 0.83 3.39 Effect of dilutive potential ordinary shares options - (0.01) (0.04) Adjusted diluted earnings per ordinary share 0.43 0.82 3.35 ---------- ---------- ---------- 5. TRADE AND OTHER RECEIVABLES Unaudited Unaudited Unaudited 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Trade debtors 24,710 22,416 29,585 Corporation tax recoverable 329 353 329 Overseas tax recoverable 127 - 141 Other debtors 342 211 286 Prepayments 4,360 3,632 4,798 Accrued income 18,281 14,108 21,026 ---------- ---------- ---------- 48,149 40,720 56,165 ========== ========== ========== 6. TRADE AND OTHER PAYABLES Unaudited Unaudited Unaudited 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Loan 2,223 - 2,223 Obligations under finance leases 100 71 70 Trade creditors 3,210 2,889 3,837 Corporation tax 859 915 859 Overseas tax 849 88 1,023 Other creditors including taxation and social security 2,716 2,382 3,216 Accruals 6,649 7,837 10,422 Deferred income 17,261 21,465 15,825 Deferred consideration - 1,072 - ---------- ---------- ---------- 33,867 36,719 37,475 ========== ========== ========== 7. NON-CURRENT LIABILITIES - OTHER PAYABLES Unaudited Unaudited Unaudited 31 March 31 March 30 September 2006 2005 2005 £000 £000 £000 Loan - 2,223 - Obligations under finance leases 264 99 62 Other creditors 560 441 515 ---------- ---------- ---------- 824 2,763 577 ========== ========== ========== 8. PROVISIONS FOR LIABILITIES AND CHARGES Onerous lease Lease Other Total commitments incentives provisions £000 £000 £000 £000 At 1 October 2005 1,848 908 609 3,365 Established during the period 111 273 - 384 Reclassificati on (504) 255 249 - Utilised during the period (206) (14) (222) (442) Foreign exchange adjustment 30 10 6 46 ---------- ---------- ---------- --------- 1,279 1,432 642 3,353 ========== ========== ========== ========= Analysed as: Current liabilities 278 29 562 869 Non-current liabilities 1,001 1,403 80 2,484 ---------- ---------- ---------- --------- 1,279 1,432 642 3,353 ========== ========== ========== ========= Onerous lease commitments disclosed above relate to sub-let or vacant lease commitments acquired with the Digiquant and Singl.eView businesses where the lease commitment is expected to be greater than any sublease income. Amounts provided relate to the period up to the first option to break on a property in Denmark and properties acquired with the Singl.eView acquisition. The first option to break for the Denmark property is in 2011 and accordingly the provision above includes the discounted fair value of the future lease rental shortfalls up to this point. Lease incentives are in respect of rent free periods on certain properties leased within the group. The provision is expected to be utilised over the life of the lease, the longest of which expires in 2014. Other provisions disclosed above relate to future estimated costs to complete certain ongoing legal matters in respect of Singl.eView, a potential repayment of a grant previously received by Singl.eView and the costs of completing certain onerous fixed price implementation contracts. These provisions are expected to be utilised within one year. This information is provided by RNS The company news service from the London Stock Exchange

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