Interim Results

Intec Telecom Systems PLC 25 May 2005 25 May 2005 Intec Telecom Systems PLC Unaudited results for the six months ended 31 March 2005 On-target performance for enlarged business following turnaround of Singl.eView acquisition drives 55% revenue growth; Substantial new billing contracts in US and Europe bring confidence for full year. 25 May 2005: Intec Telecom Systems PLC ("Intec" or "the Company"), a global provider of enterprise-level software and services, announces its unaudited results for the six months ended 31 March 2005 ("H1 2005"). A turnaround of the Singl.eView business acquired at the end of 2004, combined with continuing good execution in the core business, has helped Intec meet revenue and profit objectives within a substantially enlarged business. A number of large contracts signed in the period, combined with good momentum in current trading, gives the Board confidence in its ability to meet full year expectations. Intec has also recently appointed a new non-executive Chairman, John Hughes, who brings extensive experience within large, high-technology businesses in the telecoms sector. HIGHLIGHTS • Turnover of £48.7 million increased by 55% (Six months ended 31 March 2004 ("H1 2004"): £31.4 million). • Operating cash inflow of £3.9 million (H1 2004: outflow of £0.3 million). • EBITDA1 earnings of £5.6 million (H1 2004: £4.3 million) before exceptional items. • Adjusted2 profit before tax of £3.6 million (H1 2004: £3.1 million) after continued investment in acquisitions and business development. • Adjusted EPS of 0.99p (H1 2004: 1.15p) against much enlarged share capital base. • Recurring revenue up 44% to £21.6 million (H1 2004: £15.0 million). • Loss before tax of £5.7 million (H1 2004: loss of £1.0 million), after depreciation and amortisation of goodwill and intangible assets of £10.5 million (H1 2004: £5.3 million). • Continuing balance sheet strength with cash and cash equivalent investments of £32.0 million (H1 2004: £12.8 million) following share placing associated with Singl.eView acquisition. • Several multi-million Pound contracts signed since the start of the financial year. • Customer installations reach 707 in 490 operators, with over 1,000 staff now involved in development and delivery of solutions to customers. "Intec continues in its successful turnaround of the Singl.eView business with another solid set of results, a number of high-profile contract announcements, and a good pipeline for the rest of 2005. Combined with the core Intec business, this has allowed us to build a very good foundation for the rest of the year," said Intec's new Chairman, John Hughes. "I am also very pleased to be joining a business with a strong and stable management team, a global staff that is clearly focused on success, and a company that has a clear vision for the future." "The major customer wins we have announced in recent months underline the growing acceptance of both Singl.eView and the core Intec products as true market leaders," added Chief Executive Kevin Adams. "Our pipeline of business for the rest of 2005 and beyond is very healthy, and I am particularly encouraged by the growing number of multi-product deals we are signing. Intec is now engaged in some of the most exciting new initiatives in the telecoms industry, such as IPTV and broadband mobile services. Our results for the half year, and the visibility we have looking forward, mean we are confident of meeting expectations for the full year." For further information: Kevin Adams, CEO Andrew Rodaway, Director of Marketing Robert Gibb Intec Telecom Systems PLC +44 (0) 1483 745800 +44 (0) 7768 808082 andrew.rodaway@intecbilling.com www.intecbilling.com Edward Bridges/James Melville-Ross/Cass Helstrip Financial Dynamics +44 (0) 20 7831 3113 intec@fd.com 1EBITDA - Earnings Before Interest, Tax, Depreciation and Amortisation are stated before exceptional items of £1.1 million relating to the Singl.eView acquisition, including restructuring costs and professional fees. 2Adjusted earnings - A reconciliation between adjusted profit before tax and the loss before tax is shown on the financial highlights page. Chairman's and CEO's Statement Intec Telecom Systems PLC - H1 2005 Overview Intec is now one of the world's largest and most successful suppliers of Business and Operations Support Systems (OSS/BSS). We have a steadily growing customer base, consistently strong financial performance, and technology that allows us to become involved in the most exciting projects in our sector. Although we have seen substantial changes in our business over the past year, Intec remains committed to its long-term goal of becoming the leading player worldwide in OSS/BSS solutions. Our first half results in 2005 reflect the impact of the substantial acquisition we first announced just under a year ago, the Singl.eView customer billing and management system, then owned by ADC Telecommunications. As well as substantial growth in revenues resulting from a much enlarged business, ownership of Singl.eView means that we have been able to sign a number of multi-million pound contracts with Tier 1 service providers. These contracts create stronger revenue streams, a higher level of awareness of Intec at a senior level in our customers, and, ultimately, a more strategic relationship. It is also gratifying to see that most of these contracts include more than one Intec product, demonstrating the expected benefits of cross-selling created by this acquisition, as well as the strong technical architecture we have developed. A total of 25 new customers were added in the period. These wins, combined with a large increase in professional services and steady growth in recurring revenues, raised turnover by 55% to £48.7 million, and allowed us to generate positive operating cashflow of £3.9 million. Turnover for the second quarter was slightly higher than Q1, following its usual pattern. Despite the growth in costs associated with the larger business, and the ongoing work of integrating a major acquisition, both EBITDA and adjusted earnings (before exceptional expenses) have also grown satisfactorily. Given the long term background of losses sustained by the Singl.eView business prior to Intec ownership, the turnaround in the performance of this business is a credit to all involved. Intec has continued with its policy of carefully-managed investment in its product portfolio, with the objective of ensuring that we can fully meet customer and market requirements, particularly for the demanding next-generation services that are driving demand in the OSS/BSS sector today. A new version of Singl.eView, version 6.0, was formally launched in the period under review. As well as the ongoing integration of the Singl.eView acquisition during the first half, which we consider to be now effectively complete at an operational level, Intec also announced the acquisition of Denmark-based Telmate, a specialist provider of wholesale billing and trading technology. This gives us access to technology which is highly complementary to Intec's existing capabilities in interconnect billing, as well as an existing revenue stream from a small but growing customer base. One of the most exciting developments of the past few months is Intec's growing involvement in a number of truly leading-edge technology projects in major carriers. These include a major project for the delivery of television services over IP networks (IPTV), and real-time rating and charging for content downloads and similar services at a Tier 1 operator. We are also a key supplier to both the world's leading 3G provider, and the world's premier MVNO, two areas of high activity in the telecom sector. Operational review Intec continues to focus on effective distribution and support of a number of OSS/BSS product families, and associated services, across all four of its global regions. In the first half of 2005 Intec added 25 new customers, bringing our customer base to 490, representing 707 product installations. We announced wins with Bezeq (Israel), Interconnect Clearinghouse Nigeria, Carphone Warehouse (UK/ Europe), MTN (Africa), STC (Saudi Arabia), and a major US carrier, among others. Other new customers were secured in the US, Ireland, Turkey, Morocco, Bangladesh, Denmark, Australia, Sweden, Sri Lanka and Brazil. Larger contracts, and contracts for multiple products, have been an important feature of the period. While Singl.eView contracts naturally tend to be larger than those for core Intec products, it is notable that sizable deals have also been signed for these core Intec systems. For example, in Nigeria we signed a large deal with Interconnect Clearinghouse Nigeria Limited (ICN), for two products, InterconnecT and Inter-mediatE. ICN acts as a clearing house for all telecommunications service providers in the country. We also announced our first customers in Israel (Bezeq) and Saudi Arabia (STC), underlining our growing presence in the Middle-East region. In April we announced a large deal with Europe's leading communications retailer, The Carphone Warehouse Group, which included both Singl.eView and Inter-mediatE. In April we also announced the signing of a multi-million dollar licence and services agreement for Singl.eView with a major US carrier, to manage billing of its next-generation services as well as providing consolidated billing, invoicing and reporting across its legacy billing platforms for business customers. This recent contract win for Singl.eView highlights a growing trend among the world's largest operators, namely the consolidation of multiple systems to reduce costs, increase customer service quality, and manage billing for new services. Singl.eView is an effective solution for such projects. We also announced a contract in Africa worth around $15 million with MTN, for a new customer billing system using Singl.eView to handle billing for MTN's South Africa operation, which has over 7.7 million pre- and post-paid subscribers. We have experienced high levels of commercial activity across all regions. Both North America and Europe, which experienced the most difficult trading conditions in the telecoms market slowdown of recent years, show marked improvement. We are also seeing good opportunities developing in the CALA region for Singl.eView, historically a weak area for this product line. Asia-Pacific continues to be a strong contributor to Intec's success, with activity in a number of fast-developing regions. Our prospects and pipeline for the rest of the year, and looking forward to 2006, are therefore very encouraging. We have good full year revenue visibility, at 88%, despite a substantially higher target. The market environment is highly competitive, but Intec has a very effective sales and marketing organisation, combined with good indirect channels through business partners and system integrators such as Accenture and EDS, and our ability to convert prospects to customers remains high. Multiple licences were signed for InterconnecT, Inter-mediatE, InterconnecT CABS, Intec DCP, and Singl.eView, as well as our new InterconnecT OR optimised trading and routing product. Shortly after the period end, a leading industry publication named Intec as the market leader in mediation systems in the preceding twelve months, adding to our well-established leadership in interconnect billing. During the first half we ran highly successful User Conferences in our EMEA, Asia-Pacific and CALA regions with over 400 delegates attending the events. Products Intec continues its policy of substantial investment in its products and technology base. Intec now employs around 320 people in its Product Operations organisation, based from a number of development centres. A large number of staff are based in relatively low cost locations such as Cape Town and Brisbane, enabling Intec to deliver maximum value for its development spend. Intec has carrier grade products in retail billing and customer management (Singl.eView), interconnect billing and settlement (InterconnecT family), convergent mediation (Inter-mediatE), service activation (Inter-activatE), dynamic charging (Intec DCP), content partner management (InterconnecT CPM), and optimised routing (InterconnecT OR), plus various additional solutions. During the period we formally launched the latest version of Singl.eView v6, which brings many enhancements in terms of functionality, scalability, performance and localisation. The launch included a new product module, Singl.eView Financial Assurance. Financial Assurance is designed to enhance the cash flow and income of fixed and mobile service providers through the analysis and management of revenue leakage in their systems. A number of customers are already live with Singl.eView v6. We also announced a new performance benchmark for InterconnecT v7, the latest version of our market leading settlements system. In an eight-hour test using an HP Superdome server, more than 1.6 billion event data records (EDRs) were processed correctly. This is several times the current processing requirement of even the world's largest carriers. InterconnecT v7 also now offers innovative ways of reducing the cost of ownership including rating on a bank of Intel-based PC blades in conjunction with a Unix server. Telmate In November 2004, Intec announced that it had acquired Denmark-based OSS specialist Telmate. Final consideration stands at £1.9 million of which £1.1 million remains payable as at 31 March 2005. Telmate, which previously had a distribution agreement with Intec, has developed a strong capability in software for the management and routing optimisation of wholesale telecoms traffic. These capabilities are complementary to Intec's current market leading position in intercarrier billing systems, and will now be sold as part of Intec's InterconnecT range. Intec has already integrated Telmate products with its own systems, and has secured a contract approaching £500,000 in value with a European carrier. Staff and infrastructure Intec's policy is to locate sales and support staff near to the customers they serve, and to develop and support products from the most effective locations. Our main Regional Centres of Excellence are in Woking, UK; Atlanta, US; Sao Paulo, Brazil; and Kuala Lumpur, Malaysia. We also have sales/support offices in over 20 additional locations, including major facilities in Australia, Ireland, Canada, Denmark, South Africa and India. Staff numbers at the end of the quarter stood at 1,374, compared with 672 a year ago. Around 620 staff were acquired with Singl.eView. Intec has recently expanded its offices in both Brazil and the UK, to accommodate additional staff and to provide improved facilities for customer meetings, training, etc. The balance of staff expertise in Intec is now geared towards the delivery of projects to customers, with over 1,000 people directly involved in the development, implementation and support of our technology. This, combined with Intec's expertise in installing over 700 systems in 70 countries, gives us great ability to tackle major OSS/BSS projects. We are actively developing our resource requirements in the light of the business opportunities we see ahead to ensure that we continue to meet our customer delivery commitments and achieve the high levels of customer satisfaction and retention that we have historically enjoyed. During the period we have initiated a number of programmes aimed at expanding the Professional Services resource base available to customers worldwide; further increasing our competitiveness in major project bids; and simplifying the process of implementation of our products. These programmes are already delivering financial and operating benefits, such as improved operating margins, and we expect further improvements as they progress. During the latter half of the period, Intec welcomed a new Chairman, John Hughes, who brings extensive experience in large technology companies such as Lucent and Hewlett-Packard. Former Executive Chairman, Mike Frayne, remains a non-executive Director of the business. Intec benefits from a stable and experienced management team which has worked together from the company's earliest days. Financial analysis Revenue for the period at £48.7 million was up 55% over the equivalent period in 2004 (£31.4 million). Adjusted profit before tax stood at £3.6 million (H1 2004: £3.1 million), reflecting good performance from the enlarged business after a long period of losses prior to Intec ownership. Adjusted earnings after tax, excluding a charge of £8.2 million for amortisation of goodwill, were £3.0 million (H1 2004: £2.4 million) representing adjusted EPS of 0.99p (H1 2004: 1.15p). New licence sales, at £8.0 million, or 16% of turnover, were higher in absolute terms than the first half of 2004 (£7.7m) but lower as a percentage of total sales, reflecting the much higher proportion of services revenue in the enlarged business. Professional services accounted for £19.1 million or 39% of revenue, against less than half that figure (£8.7 million) in H1 2004. Recurring revenues at £21.6 million or 44% of turnover are up 44% (H1 2004: £15.0 million), reflecting a steadily growing customer base and very high levels of contract renewal. All regions made satisfactory contributions in the period, with EMEA contributing 46% of turnover, North America 30%, CALA 6% and Asia-Pacific 17%. Only the CALA region showed a reduction in percentage terms, reflecting the negligible level of business acquired in this region with Singl.eView. At the end of the first quarter we noted a reduction in gross margin to 61% following the acquisition of Singl.eView. This was partly due to the proportion of revenue derived from professional services, but also the run out of low margin inherited contracts, and the initial low level of utilisation in the acquired professional service group, combined with ongoing 'proof of concept' projects which we expected to deliver new business in the near future. In the first half of the year gross margin improved to 63%. We expect continuing improvement in overall gross margin as various internal programmes take effect. All key operating costs rose compared to the smaller business of last year. Distribution costs rose 55% to £8.9 million as a result of an expanded sales group, increased commission payments from higher sales and the generally higher costs associated with bidding major projects. Total administrative costs increased 53% to £28.0 million, with increases coming from higher goodwill amortisation and depreciation charges following the Singl.eView acquisition, plus certain exceptional charges. Development expenditure was up 31% at £7.7 million, against revenue growth of 55%, underlining the growing maturity of Intec's business model. The increase comes from a broader product portfolio, particularly Singl.eView, plus ongoing investment in new versions of core products. Goodwill amortisation charges have increased from £4.1 million in Q1 2004 to £8.2 million in the current period, due to the acquisition of Singl.eView. Operating cash inflow of £3.9 million in the first half represents a very satisfactory result for a period of investment in new products, acquisition integration and increased working capital expenditure in the enlarged business. Net funds (cash and cash investments less debt) at £29.5 million have not changed materially since the start of the period (September 30 2004: £29.7 million), with cash inflow from operations balanced by capital expenditure and acquisition expenditure. Outlook Intec is executing well on its objective of a turnaround of the Singl.eView business in 2005, in both financial and operating terms, with another good set of results and a number of large new contract wins. Integration of Singl.eView with the core Intec business is effectively complete, and we are seeing many synergies within the enlarged business, for example, the growth in multi-product contracts and our ability to win sophisticated, next-generation OSS/BSS projects. The backlog going into the second half is strong, both in the core Intec business and Singl.eView. Competition for new business remains strong, yet we have good visibility of full year revenues, and the Board is confident that expectations for 2005 will be met. John Hughes, Chairman, and Kevin Adams, CEO. 24 May 2005 FINANCIAL HIGHLIGHTS Six months ended 31 March 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September Note 2005 2004 2004 £000 £000 £000 TURNOVER 48,689 31,428 68,828 Adjusted profit before tax (i) 3,608 3,135 8,277 EBITDA before exceptional items (ii) 5,579 4,295 10,667 FRS 3 Operating loss (6,043) (1,046) (1,369) Basic loss per share (2.11) p (0.82) p (0.80) p Adjusted earnings per share (iii) 0.99 p 1.15 p 3.57 p Notes to the Financial Highlights: Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September 2005 2004 2004 (i) Loss before tax (5,694) (989) (1,187) Amortisation of goodwill and other intangibles 8,154 4,124 8,762 Exceptional items 1,148 - 702 Adjusted profit before tax 3,608 3,135 8,277 (ii) Adjusted profit before tax 3,608 3,135 8,277 Net interest income (349) (57) (182) Depreciation 2,320 1,217 2,572 EBITDA before exceptional items 5,579 4,295 10,667 (iii) Adjusted earnings per share calculation based on the following adjusted earnings after tax: Loss after tax (6,332) (1,716) (1,737) Amortisation of goodwill and other intangible assets 8,154 4,124 8,762 Exceptional items 1,148 - 702 Adjusted earnings after tax 2,970 2,408 7,727 KEY CUSTOMER DATA 31 March 30 September 31 March 2005 2004 2004 Number Number Number Cumulative: Contracted customer base 485 465 400 Contracted customers from acquisitions 5 - - 490 465 400 Contracted installations 700 668 574 Contracted installations from acquisitions 7 - - 707 668 574 CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months ended 31 March 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September Note 2005 2004 2004 £000 £000 £000 TURNOVER 2 48,689 31,428 68,828 Cost of sales (17,864) (8,498) (19,550) GROSS PROFIT 30,825 22,930 49,278 Distribution costs (8,882) (5,714) (13,068) Administrative expenses: Development expenditure (7,732) (5,905) (11,494) Amortisation of goodwill and other intangible assets (8,154) (4,124) (8,762) Exceptional expenses (1,148) - (702) Other administrative expenses (10,952) (8,233) (16,621) Total administrative expenses (27,986) (18,262) (37,579) GROUP OPERATING LOSS (6,043) (1,046) (1,369) Interest receivable and similar income 430 105 287 Interest payable and similar charges (81) (48) (105) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (5,694) (989) (1,187) Tax charge on loss on ordinary activities 4 (638) (727) (550) RETAINED LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (6,332) (1,716) (1,737) Loss per share - basic 5 (2.11)p (0.82)p (0.80)p Earnings per share - adjusted 5 0.99p 1.15 p 3.57 p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Six months ended 31 March 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Loss for the period (6,332) (1,716) (1,737) Exchange translation differences arising on foreign currency net investments (993) (963) (868) Total recognised losses during the period (7,325) (2,679) (2,605) CONSOLIDATED BALANCE SHEET 31 March 2005 Unaudited Unaudited Audited 31 March 31 March 30 September Note 2005 2004 2004 £000 £000 £000 FIXED ASSETS Intangible assets 96,741 64,977 103,459 Tangible assets 7,647 4,132 7,530 Investments 5 5 6 104,393 69,114 110,995 CURRENT ASSETS Stocks - 3 - Debtors 6 41,580 24,357 40,634 Investments 3,322 5,575 3,966 Cash at bank and in hand 28,612 7,269 28,216 73,514 37,204 72,816 CREDITORS: amounts falling due within one year 7 (7,417) (6,491) (8,962) NET CURRENT ASSETS 66,097 30,713 63,854 TOTAL ASSETS LESS CURRENT LIABILITIES 170,490 99,827 174,849 CREDITORS: amounts falling due after more than one year 8 (2,763) (80) (2,817) PROVISIONS FOR LIABILITIES AND CHARGES 9 (3,427) (1,812) (3,403) ACCRUALS AND DEFERRED INCOME 10 (29,243) (10,759) (26,399) TOTAL NET ASSETS 135,057 87,176 142,230 CAPITAL AND RESERVES Called up share capital 11 3,007 2,101 2,998 Share premium account 11 160,605 239,343 160,462 Merger reserve 11 6,768 6,768 6,768 Own shares 11 (95) (440) (95) Foreign exchange reserve 11 (2,847) (1,949) (1,854) Profit and loss account 11 (32,381) (158,647) (26,049) EQUITY SHAREHOLDERS' FUNDS 135,057 87,176 142,230 RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS Six months ended 31 March 2005 Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Loss for the financial period (6,332) (1,716) (1,737) Other recognised losses relating to the period (993) (963) (868) Issue of share capital net of associated expenses 152 681 55,316 Decrease in contingent consideration - (236) (236) Increase in own shares - (344) - (Decrease)/increase in shareholders' funds (7,173) (2,578) 52,475 Opening shareholders' funds 142,230 89,754 89,755 Closing shareholders' funds 135,057 87,176 142,230 CONSOLIDATED CASH FLOW STATEMENT Six months ended 31 March 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September Note 2005 2004 2004 £000 £000 £000 Net cash inflow/(outflow) from operating activities (i) 3,931 (274) 4,595 Returns on investments and servicing of finance Interest received 429 104 288 Interest element of finance lease rental payments (15) (7) (83) Interest paid and similar items (69) (40) (23) 345 57 182 Taxation Overseas taxation paid (606) (597) (1,123) Capital investment Payments to acquire tangible fixed assets (2,554) (1,049) (2,367) Proceeds on disposal of fixed assets 44 - - (2,510) (1,049) (2,367) Acquisitions Investment in subsidiaries 3 (b) (929) (12) (42,567) Net cash acquired with subsidiaries 75 - 1,354 (854) (12) (41,213) Cash inflow/(outflow) before management of liquid resources and financing 306 (1,875) (39,926) Use of liquid resources Decrease in cash investments/term deposits 514 42 1,652 Financing Issue of ordinary share capital 152 94 56,840 Share issues costs charged to the share premium account - (5) (1,760) Loan - - 2,223 Capital element of finance lease rental payments (89) (84) (152) Increase in cash in the period (ii), (iii) 883 (1,828) 18,877 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT Six months ended 31 March 2005 Unaudited Unaudited Audited Six months ended Six months ended Year ended 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 (i) Reconciliation of operating loss to net cash inflow/(outflow) from operating activities Operating loss (6,043) (1,046) (1,369) Depreciation 2,320 1,217 2,572 Amortisation of goodwill and other intangible 8,154 4,124 8,762 assets Loss on disposal of fixed assets 16 2 45 (Increase)/decrease in stock - (2) - (Decrease) in debtors (339) (3,029) (6,300) (Increase)/decrease in creditors (177) (1,540) 885 Net cash inflow/(outflow) from operating 3,931 (274) 4,595 activities (ii) Reconciliation of net cash flow to movement in net funds Increase/(decrease) in cash in the period 883 (1,828) 18,877 Net cash outflow/(inflow) from decrease/(increase) in debt and lease financing 89 84 (2,071) Net cash inflow from decrease in liquid resources (514) (42) (1,652) Change in net funds resulting from cash flows 448 (1,786) 15,154 New finance leases - - (201) Translation differences (617) (634) (383) Movement in net funds (159) (2,420) 14,570 Net funds at 1 October 29,700 15,130 15,130 Net funds at 31 March / 30 September 29,541 12,710 29,700 (iii) Analysis of movement in net funds ' Audited Unaudited 1 October Exchange 31 March movement 2004 Cash flow 2005 £000 £000 £000 £000 Cash in hand and at bank 28,216 883 (487) 28,612 Debt due after one year (2,223) - - (2,223) Finance leases (259) 89 - (170) Term deposits 3,966 (514) (130) 3,322 29,700 458 (617) 29,541 NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION Six months ended 31 March 2005 1. BASIS OF PREPARATION The interim financial information has been prepared in accordance with accounting policies set out in, and consistent with, the Group's 2004 financial statements except for the taxation charge for the period which is based on the estimated charge for the year ending 30 September 2005. 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 2004 has been extracted from the Group's statutory accounts for that period, which have been filed with the Registrar of Companies following the 2005 Annual General Meeting. 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 23 May 2005. 2. TURNOVER AND SEGMENTAL REPORTING Turnover by origin Unaudited Unaudited Six months ended 31 March 2005 Six months ended 31 March 2004 Total Inter- External Total Inter- External turnover segment turnover turnover Segment turnover turnover turnover £000 £000 £000 £000 £000 £000 United Kingdom 11,969 (19) 11,950 15,284 (269) 15,015 Continental Europe 11,578 (121) 11,457 2,375 - 2,375 Africa 525 - 525 87 - 87 Asia-Pacific 4,846 - 4,846 1,053 - 1,053 North America and 20,416 (1,894) 18,522 12,745 (752) 11,993 Canada Central and Latin 1,389 - 1,389 905 - 905 America 50,723 (2,034) 48,689 32,449 (1,021) 31,428 Audited Year ended 30 September 2004 Total Inter- External Turnover Segment turnover turnover £000 £000 £000 United Kingdom 32,670 (1,849) 30,821 Continental Europe 5,889 - 5,889 Africa 266 - 266 Asia-Pacific 2,126 - 2,126 North America and 29,600 (1,964) 27,636 Canada Central and Latin 2,090 - 2,090 America 72,641 (3,813) 68,828 Turnover by destination Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 United Kingdom 6,887 2,227 7,280 Continental Europe 9,797 7,581 11,030 Eastern Europe 1,499 1,991 4,599 Middle East 592 304 633 Africa 3,733 2,238 7,451 Europe, Middle East and Africa (EMEA) 22,508 14,341 30,993 Asia-Pacific 8,432 4,442 9,090 North America and Canada 14,693 8,971 20,756 Central and Latin America 3,056 3,674 7,989 Total turnover by destination 48,689 31,428 68,828 Turnover by activity Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Licence sales 7,983 7,676 19,123 Professional services income: Implementation and migrations, 19,118 7,758 17,499 consulting and training Hardware 29 16 466 Non-telecom custom network solutions - 957 1,651 19,147 8,731 19,616 Recurring income: ASP Service 3,599 2,016 4,337 Volume upgrade licences 2,679 3,013 4,320 Support and maintenance fees 15,281 9,992 21,432 21,559 15,021 30,089 Total turnover by activity 48,689 31,428 68,828 Unaudited Six months ended 31 March 2005 Profit/(loss) before tax Before Amortisation Exceptional After amortisation of Administrative amortisation of goodwill goodwill expense of goodwill £000 £000 £000 £000 United Kingdom (1,905) (505) (518) (2,928) Continental 6,994 (5,395) (341) 1,258 Europe Asia-Pacific 104 - - 104 Africa (3,332) - (132) (3,464) North America and 1,771 (2,254) (157) (640) Canada Central and Latin (24) - - (24) America 3,608 (8,154) (1,148) (5,694) Unaudited Six months ended 31 March 2004 Profit/(loss) before tax Before Amortisation Exceptional After amortisation of administrative amortisation of goodwill goodwill expense of goodwill £000 £000 £000 £000 United Kingdom 834 (889) - (55) Continental Europe (640) (978) - (1,618) Asia-Pacific 97 - - 97 Africa - - - - North America & Canada 2,959 (2,257) - 702 Central and Latin America (115) - - (115) 3,135 (4,124) - (989) Audited Year ended 30 September 2004 Profit/(loss) before tax Before Amortisation Exceptional After amortisation of administrative amortisation of goodwill goodwill expense of goodwill £000 £000 £000 £000 £000 £000 £000 £000 United Kingdom 1,263 (1,402) (455) (594) Continental (363) (2,849) (247) (3,459) Europe Asia-Pacific 55 - - 55 Africa 240 - - 240 North America and 7,216 (4,511) - 2,705 Canada Central and Latin (134) - - (134) America 8,277 (8,762) (702) (1,187) Net assets/ (liabilities) by origin Unaudited Unaudited Unaudited Unaudited Audited 31 March 31 March 31 March 31 March 30 September 2005 2005 2005 2004 2004 Excluding Unamortised Including Including Including unamortised goodwill Unamortised Unamortised unamortised goodwill goodwill goodwill goodwill £000 £000 £000 £000 £000 United Kingdom 11,892 1,412 13,304 11,204 24,293 Continental 13,394 46,021 59,415 11,242 54,793 Europe Africa 489 - 489 (26) 208 Asia-Pacific 1,025 - 1,025 306 (5) North America and 11,876 48,353 60,229 63,882 62,395 Canada Central and Latin 595 - 595 568 546 America 39,271 95,786 135,057 87,176 142,230 3. ACQUISITIONS a) Prior year acquisitions - Singl.eView On 27 August 2004, the Group acquired the Singl.eView retail billing software division from ADC Telecommunications, Inc. The original consideration, settled in cash, amounted to US$74.5 million (£40.6 million) plus acquisition costs of £1.9 million. The revised consideration is currently £40.4 million and may be subject to change following working capital adjustments. Goodwill arising on acquisition has been capitalised and is being amortised over five years from the date of acquisition. Goodwill charged in the period amounts to £4.2 million (2004: £0.7 million). Allowing for provisional fair value adjustments, a revised fair value table is shown below: Note (i) Note (ii) Alignment of Net assets at date of acquisition Net book accounting Fair value Provisional and provisional fair value value policies adjustments fair value £000 £000 £000 £000 Intangible fixed assets 2,724 (2,724) - - Tangible fixed assets 2,562 - - 2,562 Debtors 6,372 6,096 1,788 14,256 Cash 1,354 - - 1,354 Deferred tax 125 (125) - - Deferred income (5,519) (4,653) (107) (10,279) Creditors due within one year (2,876) (1,132) (618) (4,626) Provisions due within one year (1,223) - (1,331) (2,554) Net assets acquired 3,519 (2,538) (268) 713 Goodwill arising on acquisition 41,615 42,328 Consideration paid in cash 40,383 Acquisition costs 1,945 42,328 i) The accounting policy alignments principally represent: a) adjustments in respect of revenue recognition on contracts in progress so that amounts previously recognised or deferred under US GAAP are now recognised under a percentage of completion basis, subject to appropriate deferrals of revenue where significant contractual performance obligations have yet to be met; and b) treatment of deferred tax and balance sheet presentation with the requirements of UK generally accepted accounting principles. ii) The fair value adjustments represent: a) the estimated cost of completing certain onerous fixed price contracts. A number of long term contracts acquired are in progress, and where appropriate, provisional fair value adjustments have been made. b) estimated costs to complete certain ongoing legal matters; c) estimated provisions for losses on onerous leases d) adjustments to the fair value of accrued and deferred revenue e) provisions for bad debts. b) Current year acquisitions - Telmate Aps On 29 October 2004, the Group acquired Telmate Aps (Denmark) which provides software for the management and routing optimisation of wholesale telecoms traffic. The total consideration payable is £1.96 million including acquisition costs of £48k. £1.1 million of the consideration is deferred as at 31 March 2005 and will be paid during 2005. Alignment of Net assets at date of acquisition Net book accounting Fair value Provisional and provisional fair value value policies adjustments fair value £000 £000 £000 £000 Tangible fixed assets 7 - - 7 Debtors 131 - - 131 Cash 75 - - 75 Deferred income (37) - - (37) Creditors due within one year (201) - - (201) Net liabilities acquired (25) - - (25) Goodwill arising on acquisition 1,982 1,957 Consideration paid in cash 837 Deferred consideration* 1,072 Acquisition costs 48 1,957 *£0.7 million of the group's cash balance is held in an escrow account as restricted cash reserved to satisfy part of the deferred consideration shown above. c) Reconciliation to cash flow statement £000 Telmate consideration paid in cash 837 Acquisition costs for Telmate 48 Additional acquisition costs for Singl.eview 44 929 4. TAX CHARGE ON LOSS ON ORDINARY ACTIVITIES Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Current taxation: UK corporation tax at 30% (2004: 30%) - - - Overseas taxation 638 719 875 Prior year - 8 (305) Total current tax 638 727 570 Deferred taxation: Origination and reversal of timing differences - - (20) Tax on loss on ordinary activities 638 727 550 5. (LOSS)/EARNINGS PER ORDINARY SHARE Unaudited Unaudited Audited Six months Six months Year ended ended ended 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Basic loss (6,332) (1,716) (1,737) Amortisation of goodwill and intangible assets 8,154 4,124 8,762 Exceptional items 1,148 - 702 Adjusted earnings 2,970 2,408 7,727 Number Number Number Weighted average number of shares 300,070,399 209,140,650 216,147,912 Pence Pence Pence Basic loss per ordinary share (2.11) (0.82) (0.80) Amortisation of goodwill and intangible assets 2.72 1.97 4.05 Exceptional items 0.38 - 0.32 Adjusted earnings per ordinary share 0.99 1.15 3.57 Diluted loss/earnings per share is not presented in respect of outstanding share options since none of the options are dilutive. 6. DEBTORS Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Trade debtors 22,416 14,703 22,532 Corporation tax recoverable 353 196 349 Overseas tax recoverable - 84 42 Deferred tax 263 247 266 Other debtors 211 102 1,308 Prepayments and accrued income: Prepayments due within one year 3,632 1,634 4,076 Prepayments due after more than one year 597 563 583 Accrued income due within one year 14,108 6,828 11,478 41,580 24,357 40,634 7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Obligations under finance leases 71 134 128 Trade creditors 2,889 2,308 4,946 Corporation tax 915 1,145 915 Overseas tax 88 154 103 Other creditors including taxation and social security 2,382 2,750 2,870 Deferred consideration (see note 3(b)) 1,072 - - 7,417 6,491 8,962 8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Loan 2,223 - 2,223 Obligations under finance leases 99 - 131 Other creditors 441 80 463 2,763 80 2,817 9. PROVISIONS FOR LIABILITIES AND CHARGES Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Onerous lease commitments 1,729 1,812 2,223 Lease incentives 578 - 607 Other provisions 1,120 - 573 3,427 1,812 3,403 Onerous lease commitments disclosed above relate to future estimated losses on sub-let or vacant lease commitments acquired with the Digiquant and Singl.eView businesses. 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 losses 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 which expires in 2014. The comparatives for the year ended 30 September 2004 have been reclassified to enable a consistent comparison with the current quarter. 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. 10. ACCRUALS AND DEFERRED INCOME Unaudited Unaudited Audited 31 March 31 March 30 September 2005 2004 2004 £000 £000 £000 Amounts falling due within one year Accruals 7,778 3,914 8,939 Deferred income 21,465 6,845 17,460 29,243 10,759 26,399 11. STATEMENT OF MOVEMENTS ON RESERVES Called Share Foreign Profit up share premium Merger exchange and loss capital account reserve Own shares reserve account Total £000 £000 £000 £000 £000 £000 £000 At 1 October 2004 2,998 160,462 6,768 (95) (1,854) (26,049) 142,230 Issue of shares 9 143 - - - - 152 Retained loss - - - - - (6,332) (6,332) Foreign exchange translation - - - - (993) - (993) At 31 March 2005 3,007 160,605 6,768 (95) (2,847) (32,381) 135,057 This information is provided by RNS The company news service from the London Stock Exchange

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