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
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