Interim Results

Intec Telecom Systems PLC 12 May 2004 Intec Telecom Systems PLC Unaudited results for the six months ended 31 March 2004 Substantial new contracts signed, revenues increased by 41% and EBITA increased by 212% Intec Telecom Systems PLC ("Intec" or "the Company"), the leading global provider of telecoms Operations Support Systems ("OSS") products, is pleased to announce its unaudited results for the six months ended 31 March 2004, ("HY 2004 "). A combination of strong new licence sales across Intec's main product lines, increased revenues from both professional services and recurring business, and generally improved trading conditions in the telecoms sector have driven a 41% increase in turnover and an increase in adjusted earnings per share of 130%. Trading conditions continue to be healthy, and providing these remain stable the Board is confident of satisfying full year expectations. In addition the Company is engaged in several major opportunities which, should they conclude and be recognisable in the current year, will enhance Intec's financial performance for the full year. HIGHLIGHTS • Turnover of £31.4 million increased by 41% (6 months ended 31 March 2003 ("HY 2003") £22.3 million) with organic and acquisition-driven growth in all key activities. • Earnings before interest, tax, and amortisation ("EBITA") increased to £3.1 million compared with £1.0 million in HY 2003. • Adjusted EPS increased by 130% to 1.15p (HY 2003: 0.50p). • 42 new contracts of which 38 are with new customers. 20 new licences signed in the period plus 22 new bureau customers (HY 2003: 27 new contracts signed, plus 31 through acquisitions). • Notable customer wins announced in Africa, Brazil, China, Eastern Europe, Russia, the UK and the USA. • Revenue and earnings adversely affected by US dollar depreciation, estimated at £1.3 million and £0.6 million respectively. • Operating cash outflow of £0.3 million (HY 2003: inflow of £2.6 million) after working capital investment in Digiquant and to support business growth. • Loss before tax reduced to £1.0 million (HY 2003: loss of £2.3 million), after depreciation and amortisation of goodwill and intangible assets of £5.3 million (HY 2003: £4.4 million). • Customer installations reach 574 in 400 operators. • Intec retains balance sheet strength with cash and cash equivalent investments of £12.8 million (HY: 2003 £12.3 million). "Intec continues to set the pace in the OSS industry worldwide, with a very strong set of half year results and some notable customer wins," said Intec's Executive Chairman, Mike Frayne. "While investment by our carrier customers remains cautious, there is little doubt that a recovery is underway in the telecoms sector. Improved operating results and an increase in corporate activity are clear signals of a return to more optimism among carriers and suppliers. New licences sales, professional services and recurring revenue have all demonstrated healthy growth, and with ongoing cost control we have been able to convert this into substantially increased earnings. We believe there are strong opportunities for further success for our expanding product portfolio, as well as interesting consolidation and expansion possibilities through acquisitions. Intec is winning greater market share and raising its profile worldwide, and I believe that Intec can deliver another strong performance for the full year." "Intec signed 42 customer contracts in the first half, including several multi-million pound deals," added Chief Executive Kevin Adams. "The depreciation of the dollar continues to impact us in North America, but we have still seen strong contributions from all regions, with particularly impressive growth in Asia-Pacific and Latin America. Our ability to secure major contracts is growing steadily and I am pleased to note that we have won a number of high value, multi-product deals from our enlarged OSS portfolio." 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 Edward Bridges/James Melville-Ross/Cass Helstrip Financial Dynamics +44 (0) 20 7831 3113 Chairman's and CEO's Statement Intec Telecom Systems PLC - 1st Half Results 2004 Overview Intec Telecom Systems has set itself an objective to be the leading product player in the global OSS industry, in terms of market share, product quality and financial performance. Our strategy and day-to-day activities are geared towards meeting this target. We can only do this by delivering growth in revenues and earnings, investing in our products, building a high-quality, satisfied customer base, and taking advantage of appropriate acquisition opportunities that present themselves. But we are also clear on the need to balance good financial results with the requirements of long-term business improvement. Our first half results in 2004 clearly demonstrate Intec moving closer to its objectives. As well as revenues that are substantially higher than the first half of 2003, and improved earnings per share, we have continued to invest in both internal product development, acquired businesses, and development of our markets. Our customer base has increased organically and by acquisition, and it is rewarding to see that customer churn remains at very low levels. We also demonstrated the ability to sign substantial, multi million pound plus contracts. A total of 42 new contracts were signed which, combined with steady growth in both professional service and recurring revenues, result in reported turnover increasing by 41% to £31.4 million over the same period in 2003. Turnover for the second quarter (Q2) was also slightly up on Q1, a very good result following a particularly strong start to the year. As demonstrated by the increase in reported EBITA and adjusted earnings per share, Intec remains firmly in control of its cost structure whilst continuing its investment in products, the core business, and acquisitions. During the period Intec launched important new product versions intended to keep us in the lead in terms of technical excellence and product performance. These launches included substantial new versions of our core InterconnecT, Inter-mediatE and Inter-activatE products. Our product investment continues to run at high levels, backed by solid business case analysis of the market requirements and sales opportunities. Our recent acquisition of Digiquant A/S of Denmark has contributed in line with expectations in the period, particularly as we are engaged in re-branding and re-orienting the product line to match the very significant opportunities we see for our products in advanced, IP-based services. The acquired Digiquant product, now known as the Intec Advanced Services Framework (ASF) is a powerful and technically sophisticated system which can be adapted to a wide range of needs. We are currently actively pursuing many customer requirements for this kind of technology. Operational review Operationally our focus remains, as ever, on winning profitable, high-quality business with leading communications companies worldwide. In the first half Intec secured new licence business with 42 customers, allowing us to reach a total of 574 customer installations. During the last few months we have announced wins with a number of major carriers including Nigeria Telecom (Nitel), Golden Telecom (Russia), Romtelecom (Romania), China Unicom, Vivo (Brazil), Telefonica Moviles, Union Telephone (US), Your Communications (UK), Tel-Energo (Poland), ITXC (US), Orange/France Telecom, Telecom Egypt, Telenet (Belgium), Telecom Italia, Sotelma (Mali), M-Tel (Nigeria), and Telecom Malaysia, among others. The balance of business has been very satisfactory, with new licences signed for all key products, including nine InterconnecT family sales, fourteen Inter-mediatE sales, three Inter-activatE sales, twenty-three CABS licence or bureau sales and four ASF (Digiquant) sales. A number of contracts have been for multiple product licences, some have represented significant competitor replacements, and several have carried substantial, million-Pound plus valuations. In particular it is worth noting our contracts with Nitel for InterconnecT, Inter-mediatE, Inter-activatE and InterconnecT ITU (valued at over $4 million); with Vivo, Brazil's largest mobile group for a high-volume Inter-mediatE licence that will consolidate six different mobile companies onto one platform; with Poland's Tel-Energo for both InterconnecT and Inter-mediatE (valued at over €2 million); and another €2 million deal for Inter-mediatE in Romania with national carrier ROMTELECOM. Although not all deals reach these levels it is indicative of the high value that operators place on Intec products, and our ability to negotiate good contracts in an OSS business environment that remains very competitive. The volume of contracts we are signing is in excess of any major competitor, and as a result we are building market share compared to other OSS companies. We now have over 210 InterconnecT family installations worldwide, over 150 Inter-mediatE installations, 60 Intec ASF (Digiquant) installations and over 135 InterconnecT CABS customers. This growing customer base helps drive our recurring revenue streams and also provides us good opportunities to cross-sell our expanding product line. In 2004 we will run three, and possibly four, User Conferences, helping customers to get the best from their investment and to understand the broader product portfolio Intec has to offer them. Products Our products are the foundation of Intec's business success. We invest substantial amounts of time, money and professional expertise to ensure that our OSS family is the best in the world. Each product is the subject of a continuously evaluated business case and technical review to ensure it meets market requirements and return-on-investment criteria. We also work closely with customers to identify ways to improve the value they receive from their investment and the services we provide. Intec now has class-leading products in interconnect billing, convergent mediation, service activation, dynamic charging (DCP), content partner management (CPM) and IP billing. In the past few months we have introduced powerful new versions of InterconnecT (v7), Inter-mediatE (v5), and Inter-activatE (v2). Each release includes new features designed to help our carrier customers with the new services they are launching to meet market demand for sophisticated communications products, as well as performance, reliability and cost-of-ownership improvements. In 2004 Intec expects to invest in excess of £12 million in product research & development, and strong, carefully targeted product investment will remain a cornerstone of our business strategy. Staff and infrastructure Our global infrastructure has remained relatively stable in recent periods. Our acquisition of Digiquant brought us a major new development centre in Denmark, although most other offices were small regional sales and support operations which have now been absorbed into existing Intec facilities. Our Cape Town development centre also moved location, under very favourable terms, into larger, more modern premises, allowing us to begin relocating some additional development functions to this region. Since the latest version of InterconnecT will consolidate several existing development streams into one product, our goal is to have all InterconnecT family development in one facility, with obvious convenience and cost benefits. Staff numbers at the end of the quarter stood at 677, compared with 528 a year ago. This includes 117 new staff from Digiquant and a number of small increases in all areas but predominantly in professional services. During 2004 we will continue adjusting our organisational structure to reflect changing priorities in product development, sales/support/marketing focus, and customer needs. We remain conscious of the need to be vigilant on costs, especially as the telecoms industry returns to healthier levels of financial performance. The stringent cost controls of the past couple of years have served to make us aware of the benefits of constantly reviewing all expenditure for necessity and value, and we continue to follow this prudent policy. Equally we will not hesitate to invest where we see important opportunities for longer term benefits and financial returns. Digiquant acquisition In September 2003, shortly before the start of the period under review, Intec announced the acquisition of Digiquant A/S of Denmark. With this acquisition Intec expanded its base of supported customers by approximately 50 carriers. The agreement also brings us a highly-developed product set centred on managing next generation services such as VoIP, Internet access, WLAN, and VPNs. Intec is also using acquired Digiquant technology to build additional capabilities in its own existing products, notably Intec DCP and Intec CPM. With the inclusion of Digiquant technology we believe that these are now class-leading products in terms of functionality and proven capability to meet customer needs. During the first half the Digiquant business signed four new licence contracts and contributed £3.6 million in revenue. The operational integration of this business is effectively complete. Financial analysis Revenue for the period at £31.4 million was up 41% over the equivalent period in 2003 (HY 2003: £22.3 million), with organic growth and acquisitions contributing well to the increase. EBITA is substantially higher at £3.1 million (HY 2003: £1.0 million). Although we are able to defray some of the impact of the US$ through lower costs in our US operations, we estimate the impact on revenues and EBITA at £1.3 million and £0.6 million respectively. Adjusted earnings after tax, excluding a charge of £4.1 million for amortisation of goodwill, were £2.4 million (HY 2003: £1.0 million) representing adjusted EPS of 1.15p (HY 2003: 0.5p) Good new licence sales, up 80% on the previous period, at £7.7 million, was a particularly encouraging result, as this is typically the most challenging area for growth within an industry that remains cautious towards new capital expenditure. Recurring revenues are once again a growing contributor to our business model, at £15.0 million, up 29% from £11.7 million in HY 2003. Professional services income has also increased to £8.7 million, up 36% from £6.4 million in HY 2003. All regions made satisfactory contributions in the period, with EMEA contributing 46% of turnover, North America 28%, CALA 12%, and Asia-Pacific 14%. Gross margin increased to 73% (HY 2003: 69%), reflecting the higher contribution from improved licence revenue. All key operating costs rose but mainly at lower rates than revenue growth, suggesting improved efficiency in Intec's business model. Distribution costs rose 26% to £5.7 million (HY 2003: £4.5 million) partly as a result of an expanded sales group post-Digiquant as well as from increased commission payments from higher sales. General administrative costs increased by £2.8 million to £8.2 million (HY 2003: £5.4 million). This increase mainly comprises costs from Digiquant of £1.7 million and foreign exchange translation differences of £0.7 million. During the quarter we have taken steps to reduce the exposure on foreign currency movements. Intec continues to invest in its growing product portfolio to help us take advantages of next-generation technologies and the requirements of our major carrier customers. Development expenditure was up 34% at £5.9 million (HY 2003: £4.4 million) with the increase from a broader product portfolio and acquisitions plus substantial investment in new versions of core products. Intec incurs development expenditure for its InterconnecT family products in South Africa and Sweden, for Inter-mediatE and InterconnecT CABS CG products in the US, and the acquired Digiquant products in Denmark. Goodwill amortisation charges have increased from £3.5 million in HY 2003 to £4.1 million in the current half, reflecting additional goodwill amortisation from the acquisition of Digiquant. Cash and cash investments have decreased by £2.5 million since 30 September 2003 primarily as a result of seasonal working capital expenditure requirements, overseas tax payments and the depreciation of the US dollar. Operating cash outflow of £0.3 million reflects the Digiquant working capital investment and general working capital expenditure in the enlarged business. Good cash collections during the quarter, resulting from a continued focus on credit control, have mitigated this. Excluding the Digiquant requirement, operating cash inflow would be positive at £1.3 million. Intec's annualised debtor-days are stable with the figure at 31 March 2004 standing at 87 days, compared with 92 days at 30 September 2003 and 91 days at 31 March 2003. Average weighted debtor days stood at 58. Successful cash collections have continued during the third quarter with approximately £4.3 million collected in April 2004. Outlook There is little doubt that a recovery is underway in the telecoms sector. Improved operating results and an increase in corporate activity are clear signals of a return to more optimism among carriers and suppliers. However, competition for new business remains intense among the vendors who have survived the downturn in good shape, and Intec sees both new and existing competitors in its markets worldwide. Our ability to continue winning profitable business in this environment is evident in the current results. We believe there are strong opportunities for further success for our expanding product portfolio, as well as interesting consolidation and expansion possibilities through acquisitions. Intec will remain focused on its stated, long-term business objectives as well as short term performance. Providing market conditions remain stable, the Board is confident that our performance in 2004 will satisfy expectations for growth and profitability. In addition, we see a number of opportunities that have the potential to deliver additional revenue over and above current forecasts in coming quarters. Mike Frayne, Executive Chairman, and Kevin Adams, CEO. 11 May 2004 FINANCIAL HIGHLIGHTS 6 months ended 31 March 2004 Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September Note 2004 2003 2003 £000 £000 £000 TURNOVER 31,428 22,347 50,673 EBITA (i) 3,078 985 5,256 EBITDA (i) 4,295 1,928 7,222 Operating loss (1,046) (2,478) (1,914) Basic loss per share (0.82) p (1.32)p (1.59) p Adjusted earnings per share (ii) 1.15 p 0.50p 2.17 p Notes to the Financial Highlights: (i) Loss before tax (989) (2,252) (1,780) Amortisation of goodwill and other intangibles 4,124 3,463 7,170 Net interest income (57) (226) (134) EBITA 3,078 985 5,256 Depreciation 1,217 943 1,966 EBITDA 4,295 1,928 7,222 (ii) Adjusted earnings per share calculation based on the following adjusted earnings after tax: Loss after tax (1,716) (2,502) (3,042) Amortisation of goodwill and other intangible assets 4,124 3,463 7,170 Adjusted earnings/(loss) after tax 2,408 961 4,128 KEY CUSTOMER DATA 31 March 30 September 31 March 2004 2003 2003 Number Number Number Cumulative: Contracted customer base* 400 386 330 Total contracted installations* 574 551 465 * 31 March 2004 data is shown net of adjustments following redefinition of the criteria for recognising a new customer/installation and in recognition of customer consolidation, e.g. Vivo - three existing customers under one new contract. This does not have a significant impact on recurring revenues. CONSOLIDATED PROFIT AND LOSS ACCOUNT 6 months ended 31 March 2004 Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September Note 2004 2003 2003 £000 £000 £000 TURNOVER 2 31,428 22,347 50,673 Cost of sales (8,498) (7,005) (15,172) GROSS PROFIT 22,930 15,342 35,501 Distribution costs (5,714) (4,531) (8,784) Administrative expenses: Development expenditure (5,905) (4,408) (10,073) Amortisation of goodwill and other intangible assets (4,124) (3,463) (7,170) Other administrative expenses (8,233) (5,418) (11,388) Total administrative expenses (18,262) (13,289) (28,631) GROUP OPERATING LOSS (1,046) (2,478) (1,914) Interest receivable and similar income 105 227 340 Interest payable and similar charges (48) (1) (206) LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (989) (2,252) (1,780) Tax charge on loss on ordinary activities 3 (727) (250) (1,262) RETAINED LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (1,716) (2,502) (3,042) Loss per share - basic 4 (0.82)p (1.32)p (1.59)p CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 6 months ended 31 March 2004 Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Loss for the period (1,716) (2,502) (3,042) Exchange translation differences arising on foreign currency net investments (963) 141 (278) Total recognised losses during the period (2,679) (2,361) (3,320) CONSOLIDATED BALANCE SHEET 31 March 2004 (Restated -see (Restated -see note 1) note 1) Unaudited Unaudited Audited 31 March 31 March 30 September Note 2004 2003 2003 £000 £000 £000 FIXED ASSETS Intangible assets 64,977 63,250 69,106 Tangible assets 4,132 3,034 4,400 Investments 5 5 5 69,114 66,289 73,511 CURRENT ASSETS Stocks 3 47 3 Debtors 6 24,357 18,037 22,648 Investments 5,575 5,699 5,616 Cash at bank and in hand 7,269 6,605 9,724 37,204 30,388 37,991 CREDITORS: amounts falling due within one year 7 (6,491) (4,118) (6,996) NET CURRENT ASSETS 30,713 26,270 30,995 TOTAL ASSETS LESS CURRENT LIABILITIES 99,827 92,559 104,506 CREDITORS: amounts falling due after more than one 8 (80) (136) (69) year PROVISIONS FOR LIABILITIES AND CHARGES 9 (1,812) - (2,050) ACCRUALS AND DEFERRED INCOME 10 (10,759) (8,619) (12,633) TOTAL NET ASSETS 87,176 83,804 89,754 CAPITAL AND RESERVES Called up share capital 11 2,101 1,906 2,066 Share premium account 11 239,343 238,703 238,697 Other reserve 11 - - 236 Merger reserve 11 6,768 249 6,768 Own shares 11 (440) (96) (96) Foreign exchange reserve 11 (1,949) (567) (986) Profit and loss account 11 (158,647) (156,391) (156,931) EQUITY SHAREHOLDERS' FUNDS 87,176 83,804 89,754 RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS' FUNDS 6 months ended 31 March 2004 Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Loss for the financial period (1,716) (2,502) (3,042) Other recognised losses relating to the period (963) 141 (278) Issue of share capital net of associated expenses 681 54 6,727 (Decrease)/increase in other reserve (236) - 236 Increase in own shares (344) - - (Decrease)/increase in shareholders' funds (2,578) (2,307) 3,643 Opening shareholders' funds 89,754 86,111 86,111 Closing shareholders' funds 87,176 83,804 89,754 CONSOLIDATED CASH FLOW STATEMENT 6 months ended 31 March 2004 Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September Note 2004 2003 2003 £000 £000 £000 Net cash/ (outflow)/inflow from operating activities (i) (274) 2,588 8,537 Returns on investments and servicing of finance Interest received 104 225 340 Interest element of finance lease rental payments (7) - - Interest paid and similar items (40) (1) (79) 57 224 261 Taxation Overseas taxation paid (597) (41) (898) Capital investment Payments to acquire tangible fixed assets (1,049) (859) (2,056) Proceeds on disposal of fixed assets - 2 49 (1,049) (857) (2,007) Acquisitions (12) - - Investment in subsidiaries (see note 5) - (3,400) (3,694) Net cash acquired with subsidiaries - - 505 (12) (3,400 (3,189) Cash outflow before management of liquid resources and financing (1,875) (1,486) 2,704 Use of liquid resources Decrease/(increase) in cash investments/term deposits 42 (479) (459) Financing Issue of ordinary share capital 94 54 59 Share issues costs charged to the share premium account (5) - (11) Bank loan - 221 221 Repayment of bank loan - (12) (221) Repayment of loan acquired with subsidiaries - - (720) Capital element of finance lease rental payments (84) - - Decrease/(increase) in cash in the period (ii),(iii) (1,828) (1,702) 1,573 NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT 6 months ended 31 March 2004 Unaudited Unaudited 6 months 6 months Audited ended ended Year ended 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 (i) Reconciliation of operating loss to net cash (outflow)/inflow from operating activities Operating loss (1,046) (2,478) (1,914) Depreciation 1,217 943 1,966 Amortisation of goodwill and other intangible assets 4,124 3,463 7,170 Loss/(profit) on disposal of fixed assets 2 28 (5) (Increase)/decrease in stock (2) 16 61 Increase in debtors (3,029) (100) (894) Increase/(decrease) in creditors (1,540) 716 2,153 Net cash (outflow)/inflow from operating activities (274) 2,588 8,537 (ii) Reconciliation of net cash flow to movement in net funds Increase in cash in the period (1,828) (1,702) 1,573 Net cash outflow from decrease in finance lease 84 - - Net cash (inflow) from increase in debt - (209) - Net cash flow from decrease in debt acquired with subsidiary - - 720 Net cash (inflow)/outflow from (decrease)/increase in liquid resources (42) 479 459 Change in net funds resulting from cash flows (1,786) (1,432) 2,752 Finance leases acquired with the subsidiary - - (210) Debt acquired with the subsidiary - - (720) Translation differences (634) 219 1 Movement in net funds (2,420) (1,213) 1,823 Net funds at 1 October 15,130 13,307 13,307 Net funds at 31 March / 30 September 12,710 12,094 15,130 (iii) Analysis of movement in net funds Audited Unaudited 1 October Exchange 31 March 2003 Cash flow movement 2004 £000 £000 £000 £000 Cash in hand and at bank 9,724 (1,828) (627) 7,269 Term deposits and escrow account 5,616 (42) 1 5,575 Finance leases (210) 84 (8) (134) 15,130 (1,786) (634) 12,710 NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION 6 months ended 31 March 2004 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 2003 financial statements except for the taxation charge for the period which is based on the estimated charge for the year ending 30 September 2004. In addition, under UITF Abstract 38, "Accounting for ESOP trusts", Own shares held through the ESOT (Employee Share Option Trust) have been deducted in arriving at shareholders' funds. The change is retrospective and the comparative balance sheets have been restated to reflect a reclassification of the investment in own shares from Fixed Asset Investments to Shareholders' Funds. 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 2003 has been extracted from the Group's statutory accounts for that period, which have been filed with the Registrar of Companies following the 2003 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 11 May 2004. 2. TURNOVER AND SEGMENTAL REPORTING Turnover by origin Unaudited Unaudited 6 months ended 31 March 2004 6 months ended 31 March 2003 Inter- Inter- Total segment External Total segment External turnover turnover turnover turnover turnover turnover £000 £000 £000 £000 £000 £000 United Kingdom 15,371 (269) 15,102 11,494 (131) 11,363 Continental Europe 2,375 - 2,375 17 - 17 Asia-Pacific 1,053 - 1,053 205 - 205 North America & Canada 12,745 (752) 11,993 11,039 (603) 10,436 Central and Latin America 905 - 905 326 - 326 32,449 (1,021) 31,428 23,081 (734) 22,347 Audited Year ended 30 September 2003 Inter- Total segment External turnover turnover turnover £000 £000 £000 United Kingdom 25,965 (576) 25,389 Continental Europe 612 - 612 Asia-Pacific 549 - 549 Africa 765 - 765 North America & Canada 23,528 (1,857) 21,671 Central and Latin America 1,687 - 1,687 53,106 (2,433) 50,673 Turnover by destination Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 United Kingdom 2,227 2,097 5,135 Continental Europe 7,581 5,029 10,979 Eastern Europe 1,991 1,452 2,902 Middle East 304 353 1,077 Africa 2,238 441 1,670 Europe, Middle East and Africa (EMEA) 14,341 9,372 21,763 subtotal Asia-Pacific 4,442 1,676 6,621 North America and Canada 8,971 9,436 15,538 Central and Latin America 3,674 1,863 6,751 Total turnover by destination 31,428 22,347 50,673 Turnover by activity Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Licence sales 7,676 4,264 11,635 Professional services income: Implementation and migrations, consulting and 7,758 5,254 11,620 training Hardware 16 56 113 Non-telecom custom network solutions 957 1,118 2,052 8,731 6,428 13,785 Recurring income: ASP Service 2,016 1,560 3,532 Volume upgrade licences 3,013 1,105 3,442 Support and maintenance fees 9,992 8,990 18,279 15,021 11,655 25,253 Total turnover by activity 31,428 22,347 50,673 Profit/loss by origin Unaudited 6 months ended 31 March 2004 Before After amortisation of Amortisation of amortisation of goodwill goodwill goodwill £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) Unaudited 6 months ended 31 March 2003 Before After amortisation of Amortisation of amortisation of goodwill goodwill goodwill £000 £000 £000 United Kingdom 1,053 (1,198) (145) Continental Europe 124 - 124 Asia-Pacific 74 - 74 Africa - - - North America & Canada (98) (2,265) (2,363) Central and Latin America 58 - 58 1,211 (3,463) (2,252) Audited Year ended 30 September 2003 Before After amortisation of amortisation goodwill, of goodwill, impairment and impairment and investment Amortisation of investment write down goodwill write down £000 £000 £000 United Kingdom 2,528 (2,574) (46) Continental Europe 384 (69) 315 Asia-Pacific 660 - 660 Africa 594 - 594 North America & Canada 710 (4,527) (3,817) Central and Latin America 514 - 514 5,390 (7,170) (1,780) Net assets/(liabilities) by origin Unaudited Unaudited Unaudited Unaudited Audited 31 March 31 March 31 March 31 March 30 September 2004 2004 2004 2003 2003 Excluding Including Including Including unamortised Unamortised unamortised unamortised unamortised goodwill goodwill goodwill goodwill goodwill £000 £000 £000 £000 £000 United Kingdom 8,970 2,234 11,204 18,157 13,282 Continental Europe 2,502 8,740 11,242 (138) 11,107 Africa (26) - (26) (296) (219) Asia-Pacific 306 - 306 (80) (16) North America & Canada 11,037 52,845 63,882 66,084 65,186 Central and Latin America 568 - 568 77 414 23,357 63,819 87,176 83,804 89,754 3. TAX CHARGE ON LOSS ON ORDINARY ACTIVITIES Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Current taxation: UK corporation tax at 30% (2003: 30%) - - 555 Overseas taxation 719 244 974 Prior year 8 6 (127) Total current tax 727 250 1,402 Deferred taxation: Origination and reversal of timing differences - - (140) Tax on loss on ordinary activities 727 250 1,262 4. (LOSS)/EARNINGS PER ORDINARY SHARE Unaudited Unaudited Audited 6 months ended 6 months ended Year ended 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Basic loss (1,716) (2,502) (3,042) Amortisation of goodwill and intangible assets 4,124 3,463 7,170 Adjusted earnings 2,408 961 4,128 Number Number Number Weighted average number of shares 209,140,650 190,204,413 190,889,194 Pence Pence Pence Basic loss per ordinary share (0.82) (1.32) (1.59) Amortisation of goodwill and intangible assets 1.97 1.82 3.76 Adjusted earnings per ordinary share 1.15 0.50 2.17 Diluted loss/earnings per share is not presented in respect of outstanding share options since none of the options are dilutive. 5. PRIOR YEAR ACQUISITIONS On 17 September 2003, the company purchased Digiquant A/S. Although not mandatory, the directors present the results and cash flows of the acquired business separately to provide a more transparent picture of the group's operations. Summary profit and loss account Unaudited 6 months ended 31 March 2004 Rest of group Digiquant Group total £'000 £'000 £'000 TURNOVER 27,781 3,647 31,428 Cost of sales (7,526) (972) (8,498) GROSS PROFIT 20,255 2,675 22,930 Distribution costs (4,708) (1,006) (5,714) Development expenditure (4,946) (959) (5,905) Amortisation of goodwill and other intangibles (3,146) (978) (4,124) Other administrative expenses (6,545) (1,688) (8,233) Total administrative expenses (14,637) (3,625) (18,262) Operating loss 911 (1,957) (1,046) Amortisation of goodwill and other intangibles 3,146 978 4,124 EBITA 4,057 (979) 3,078 Depreciation 975 242 1,217 EBITDA 5,032 (737) 4,295 Summary cash flow statement Unaudited 6 months ended 31 March 2004 Rest of group Digiquant Group total £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 1,324 (1,598) (274) Return on investments and servicing of finance lease rental payments 99 (42) 57 Taxation (519) (78) (597) Capital investment (1,021) (28) (1,049) Acquisitions (12) - - Cash outflow before management of liquid resources and (129) (1,746) (1,875) financing Use of liquid resources 79 (37) 42 Financing 89 (84) 5 Increase/(decrease) in cash in the period 39 (1,867) (1,828) All amounts arise from continuing operations. Goodwill amortisation charges are allocated to the acquired businesses as above 6. DEBTORS Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Trade debtors 14,703 12,853 13,815 Corporation tax recoverable 196 196 196 Overseas tax recoverable 84 - 85 Deferred tax 247 94 240 Other debtors 102 66 438 Prepayments and accrued income: Prepayments due within one year 1,634 1,036 1,456 Prepayments due after more than one year 563 - 589 Accrued income due within one year 6,828 3,792 5,829 24,357 18,037 22,648 7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Bank loans and overdrafts - 74 125 Obligations under finance leases 134 - 141 Trade creditors 2,308 1,569 2,233 Corporation tax 1,145 454 1,169 Overseas tax 154 738 625 Other creditors including taxation and social 2,750 857 2,604 security Deferred/contingent consideration - 426 99 6,491 4,118 6,996 8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Bank loans and overdrafts - 136 - Obligations under finance leases - - 69 Other creditors 80 - - 80 136 69 9. PROVISIONS FOR LIABILITIES AND CHARGES Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Within one year 1,812 - 2,050 The amounts disclosed above relate to future estimated losses on sub-let lease commitments acquired with the Digiquant Group. Amounts provided relate to the period up to the first option to break on two properties in Denmark and Atlanta, USA. The first option to break on the Denmark lease is in 2011 and accordingly the provision above includes the discounted fair value of the future losses up to this point. 10. ACCRUALS AND DEFERRED INCOME Unaudited Unaudited Audited 31 March 31 March 30 September 2004 2003 2003 £000 £000 £000 Amounts falling due within one year Accruals 3,914 2,700 5,924 Deferred income 6,845 5,919 6,709 10,759 8,619 12,633 11. STATEMENT OF MOVEMENTS ON RESERVES Called Share Foreign Profit up share premium Merger Other Own exchange and loss capital account reserve reserve shares reserve account Total £000 £000 £000 £000 £000 £000 £000 £000 At 1 October 2003 2,066 238,697 6,768 236 (96) (986) (156,931) 89,754 Issue of shares 35 646 (236) (344) - - 101 Retained loss - - - - - - (1,716) (1,716) Foreign exchange translation - - - - - (963) - (963) At 31 March 2004 2,101 239,343 6,768 - (440) (1,949) (158,647) 87,176 This information is provided by RNS The company news service from the London Stock Exchange

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