RNS Number:4450S
Intec Telecom Systems PLC
25 November 2003
Intec Telecom Systems PLC - Audited Preliminary results for the year ended 30
September 2003
Adjusted profit before tax up 150% to #5.4 million on turnover increased 7% to
#50.7 million; substantial growth in customer base to over 550 installations.
Intec Telecom Systems PLC (LSE:ITL, "Intec" or "the Company"), a leading global
provider of Operations Support Systems software for telecoms companies, today
announces its audited results for the year ended 30 September 2003. The Company
is pleased to report a substantial rise in profitability, increased revenues,
and a customer base that now exceeds 550 installations. During 2003 Intec has
also made two important acquisitions and brought several key new products to
market to address the requirements of future telecoms services.
FINANCIAL AND OPERATING HIGHLIGHTS
* Revenues for the year ended 30 September 2003 increased by 7% to #50.7
million (year ended 30 September 2002: #47.5 million).
* Adjusted profit before tax substantially increased to #5.4 million (2002:
#2.2m).
* Positive operating cash inflow of #8.5 million generated during the year
(2002: inflow of #2.8 million).
* Operating loss of #1.9 million attributable to goodwill and intangible
amortisation of #7.2 million.
* Loss before tax #1.8 million (2002: #13.5 million)
* Customer base increased by 44% to 551 contracted installations, with
important new customer wins in the UK, US, Europe, Latin America, Asia and
Eastern Europe.
* Two acquisitions, Digiquant A/S, and a unit of Ericsson, concluded during
the year.
* Operating cost reductions, combined with gross margin improvement to 70%
(2002: 67%), enhance earnings and cashflow.
* Cash and cash equivalents stand at #15.3 million
* Several new products introduced to complement core billing and mediation
families.
Commenting on the results, Mike Frayne, Executive Chairman said "Intec's
strategy in 2003 has been to focus on the best possible operation of our current
business combined with careful investment in new products that will meet future
needs. We also continued to execute a considered strategy for acquisitions. I am
pleased to report that, despite a telecoms environment that has been
economically constrained, Intec has grown both revenues and earnings as well as
increasing investment in new, forward-looking products. Although we see
continued competitive conditions in 2004 I am cautiously optimistic that Intec
can move further ahead in all areas of performance."
Kevin Adams, Chief Executive, added, "Intec has set the pace in its core OSS
markets in 2003, with a steady flow of high-profile customer wins, key
acquisitions and forward-looking product releases. Passing the 500 installation
mark is a watershed achievement that underlines the success of our policy of
high-quality, profitable growth. We have also had good momentum in new customer
wins with over 100 new or acquired customers."
There will be an analyst meeting at 09:15 hours today (25 November 2003) at RW
Baird, Mint House, 77 Mansell Street, London E1 8AF, Tel: +44 (0) 20 7488 1212.
Enquiries
Intec Telecom Systems PLC
Mike Frayne, Executive Chairman +44 (0) 1483 745800
Kevin Adams, Chief Executive Officer +44 (0) 1483 745800
Andrew Rodaway +44 (0) 7768 808082
andrew.rodaway@intec-telecom-systems.com
RW Baird +44 (0) 20 7667 8416
Shaun Dobson sdobson@rwbaird.com
Cubitt Consulting +44 (0) 20 7367 5100
Fergus Wylie fergus.wylie@cubitt.com
Intec Telecom Systems PLC - Full year results to 30 September 2003
Executive Chairman's Statement
A year ago I noted a telecoms market that would continue to be very competitive
for vendors as well as increasingly technically challenging for service
providers and their suppliers. Intec's strategy in 2003 has therefore been to
focus on the best possible execution of our current business combined with
careful investment in new products that will meet future needs. We also
continued to execute a considered strategy for acquisitions. I am pleased to
report that, despite a telecoms environment that has been economically
constrained overall, Intec has grown both revenues and earnings as well as
increasing investment in new, forward-looking products.
Through a combination of increased revenues, up 7% to #50.7 million, and careful
control of operating costs Intec has delivered adjusted pre-tax profits
increased by 150% to #5.4 million, despite adverse currency movements. We have
also been able to generate positive operating cash flow at #8.5m. These are
substantial achievements within an industry sector that remains capital
expenditure-constrained and where pricing pressure and competitor activity have
been intense. Intec's hard-working professional staff have made this possible
and I thank them wholeheartedly for their efforts.
During 2003 Intec has noted many opportunities to acquire other companies in its
sector, frequently at modest valuations. However, we have a clear strategy and
process only to seek acquisitions that will truly add value to the business and
position us better for the future. Our acquisition criteria include the ability
to enhance our financial performance, to bring useful market or technical
benefits to the business, or to increase our penetration of major customers. We
also seek organisations which will be a good cultural fit for Intec, where we
will be able to integrate them successfully while retaining their individual
strengths. We continue to track opportunities and we will not hesitate to pursue
those that we feel will be beneficial to the business, as well as good value for
shareholders.
With these criteria in mind Intec made two important acquisitions during the
2003 financial year. In November 2002 we announced the acquisition of the '
Settler' business unit from Ericsson. This unit was formerly one of Intec's
strongest competitors in the interconnect billing market. Its acquisition
brought us 31 new customers around the world as well as a distribution
arrangement with Ericsson for the renamed 'InterconnecT Settler' product. The
agreement also covers the Settler development team in Sweden and exclusive
worldwide rights to develop and market the Settler product range. Other acquired
expertise and technology has allowed us to launch two new products in 2003,
InterconnecT Optimised Routing and InterconnecT Automated Reconciliation.
In September 2003 we announced the acquisition of Digiquant A/S of Denmark, a
provider of OSS technology focused on the next-generation market space.
Digiquant brings Intec two key assets - a revenue stream from new and existing
customers which amounted to some Euro16 million in 2003, and a truly world-class
product set that provides end-to-end capabilities for the management and billing
of advanced services such as Voice-over-IP. Digiquant also has a good customer
base of around 50 companies and a highly-experienced professional staff whose
skills are complementary to those within Intec.
Intec invests strongly in its products and underlying technologies. We consider
the level of investment we make to be a core strength of the business and a
major competitive differentiator against other vendors that have slashed
development and support budgets as they strive for profitability or even
survival. Yet we remain constantly aware of the need to balance investment with
potential and actual returns. During 2003 we have further refined our Product
Operations processes to be ever more focused on business performance with
regular examination at executive management level of profit and market potential
for all development projects.
During the year we have launched several important new products, notably the
Intec Dynamic Charging Platform (DCP) which addresses critical revenue
generation requirements for operators delivering advanced services such as
entertainment, mobile commerce and multimedia messaging. DCP is the first
offering in a range of new products which will complement our existing
technologies and extend our reach into new areas such as Voice-over-IP billing.
Our core product lines of convergent mediation (Inter-mediatE), interconnect
billing (InterconnecT) and service activation (Inter-activatE) have justified
our view that they remain critical components of the infrastructure of a
telecoms company, with key wins in high-profile customers.
In 2004 we see further evidence of a slow recovery in trading conditions in the
telecoms sector with many operators indicating their intentions to invest
cautiously in new projects that address next-generation service requirements. We
must balance this optimism with natural caution concerning ongoing competitive
pressures within the OSS vendor community, capital expenditure constraints
across the telecoms industry, and global concerns over political, economic and
security issues. Overall we are very pleased with Intec's progress in these
challenging markets and we look forward to 2004 as another year of opportunity
for further progress.
Mike Frayne
Executive Chairman
24 November 2003
Commenting on the results, Kevin Adams, Chief Executive Officer said:
In 2003 Intec has become a stronger, more profitable, more capable business.
Against a backdrop of competitive market conditions we have improved our
financial performance, market share, customer base and product capabilities. We
have concluded two important acquisitions and brought key, next-generation
products to market. A particular highlight of the year was winning certification
to the TL9000/ISO9001 quality standard for our Atlanta Centre of Excellence. We
have had good momentum in new customer wins with 114 new or acquired customers.
We also won two of the industry's most prestigious product awards, for both our
interconnect and mediation product lines.
One trend we have noted in 2003 is a growing focus by customers on financial
performance of vendors. Many OSS suppliers remain financially fragile or with
high levels of cash expenditure, and their long-term viability is clearly a
cause for customer concern. Intec continues to pursue its policy of tight
financial management, improved profitability and good cash flow. The
high-profile customers we have been able to secure in 2003 are evidence not only
of our good product and support capabilities but also that our stability and
long-term investment plans are seen as a benefit of doing business with us.
The balance of business in 2003 has reflected general market trends as well as
Intec's growing maturity as a software and services company. New licence sales,
while down on 2002 figures, still represent 23% of turnover, a very robust
result in present markets. Both recurring revenue and professional services have
grown with our recurring revenue reaching a very satisfactory 50% of turnover,
up from 42% in 2002. Our growing customer base, and high levels of customer
satisfaction, are the key factors in this good result.
Intec has had a strong focus on operating costs in 2003 as part of our drive to
enhance profitability and cash flow. The telecoms industry has been an
environment where margins and discretionary expenditure have been under constant
pressure. Intec has therefore adjusted its own business model appropriately. By
eliminating low-return expenditure, re-organising for greater productivity,
adopting more cost-efficient processes, and seeking better value in our own
purchases we have been able to trim many cost areas substantially without any
material impact on business performance. Cost of sales, distribution and general
administration are all lower in 2003 compared to 2002. The only area with a
material increase has been development, reflecting our expanded portfolio of
products as well as important new investment to meet the needs of new markets.
Staff numbers, before the acquisition of Digiquant, have remained essentially
static, indicating increased productivity.
Our core products, InterconnecT and Inter-mediatE, retain their market
leadership with over 200 and 130 installed sites respectively. New customer wins
announced in 2003 include Belgacom Mobile, Ukrainian Mobile Communications,
Slovak Telekom, VimpelCom, US Cellular, Taiwan's first 3G operator APBW, Telikom
Papua New Guinea, Eircom, ChinaSat, Swisscom Mobile, Mobilkom Austria and many
others. These cover all areas of the telecoms industry, from major fixed-line
providers through to next-generation mobile carriers, underlining the truly
convergent capabilities of Intec's products.
The acquisitions we have made, plus good growth in our existing customer base,
have allowed us to report the milestone figure of over 550 active customer
installations at the end of our business year, representing almost 400 separate
companies as Intec customers. Intec now counts over half of the world's top 100
telecoms companies as customers, including all of the top five by market
capitalisation. This quality of customer base gives us very solid recurring
revenue streams and good cross-selling opportunities. Intec also has, I
believe, one of the lowest rates of customer churn in the OSS industry as a
result of dedicated efforts to achieve high levels of customer satisfaction. It
is a source of pride to Intec that almost all of the customers won in the early
years of our existence remain with us.
2003 has been another good year of progress at Intec towards our long term
objective of building a stronger, more successful business within the OSS
sector. Market conditions have continued to be competitive, but Intec has
responded with good growth and substantially improved operating results. Our
acquisitions of Digiquant and the Ericsson Settler business have been two
highlights of the year and we are pleased with their progress and future
potential. Our investment in new products and the development of existing
systems positions us very well as a supplier to the world's telecommunications
market, particularly for advanced services.
Kevin Adams,
Chief Executive Officer
24 November 2003
INTEC TELECOM SYSTEMS PLC
FINANCIAL HIGHLIGHTS
Year ended 30 September 2003
Note 2003 2002 %
#'000 #'000 change
Revenue 50,673 47,474 7%
Adjusted profit before tax (i) 5,390 2,157 150%
EBITDA before exceptional items (ii) 7,222 3,739 93%
Operating loss (1,914) (13,325)
Basic loss per share (1.59p) (7.94p)
Adjusted earnings per share (iii) 2.17p 0.46p
Notes to the Financial Highlights #'000 #'000
(i) Loss before tax (1,780) (13,483)
Amortisation of goodwill and other intangibles 7,170 7,079
Impairment of goodwill - 7,464
Writedown of investments - 321
Exceptional item (Poland debtor provision) - 776
Adjusted profit before tax 5,390 2,157
(ii) Adjusted profit before tax 5,390 2,157
Net interest income (134) (163)
Depreciation 1,966 1,745
EBITDA before exceptional items 7,222 3,739
(iii) Adjusted earnings per share calculation based on
the following adjusted earnings after tax:
Loss after tax (3,042) (14,782)
Amortisation of goodwill and other intangible assets 7,170 7,079
Impairment of goodwill - 7,464
Writedown of investments - 321
Exceptional item (Poland debtor provision) - 776
Adjusted earnings after tax 4,128 858
KEY CUSTOMER DATA 2003 2002
No. No.
Cumulative:
Contracted customer base 314 254
Contracted customers from current year acquisitions 72 18
Total contracted customer base 386 272 42%
Cumulative:
Contracted installations 442 359
Contracted installations from current year acquisitions 108 24
Total contracted installation base 551 383 44%
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 2003
Before Intangible
intangible amortisation
amortisation (note 6) Total Total
Note 2003 2003 2003 2002
#'000 #'000 #'000 #'000
TURNOVER
Continuing operations 48,079 48,079 45,853
Acquisitions 2,594 2,594 1,621
Total turnover 2 50,673 50,673 47,474
Cost of sales (15,172) (15,172) (15,430)
Gross profit 35,501 35,501 32,044
Distribution costs (8,784) (8,784) (9,945)
Administrative expenses:
Development expenditure (10,073) - (10,073) (8,026)
Amortisation of goodwill and other intangible 6 - (7,170) (7,170) (7,079)
assets
Impairment of goodwill - - - (7,464)
Exceptional item - - - (776)
Other administrative expenses (11,388) - (11,388) (12,079)
Total administrative expenses (21,461) (7,170) (28,631) (35,424)
OPERATING LOSS
Continuing operations 4,913 (6,455) (1,542) (12,294)
Acquisitions 343 (715) (372) (1,031)
Group operating loss 5,256 (7,170) (1,914) (13,325)
Amount written off investments - - - (321)
Interest receivable and similar income 340 - 340 494
Interest payable and similar charges (206) - (206) (331)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION 5,390 (7,170) (1,780) (13,483)
Tax charge on loss on ordinary activities 4 (1,262) - (1,262) (1,299)
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION AND
RETAINED LOSS FOR THE FINANCIAL YEAR TRANSFERRED TO
RESERVES 4,128 (7,170) (3,042) (14,782)
(Loss)/earnings per share - adjusted/basic and 5 2.17p (3.76)p (1.59)p (7.94p)
diluted
Adjusted earnings per ordinary share has been calculated and disclosed above as
the directors consider it gives a more comparable indication of underlying
trading performance.
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 September 2003
2003 2002
#'000 #'000
LOSS FOR THE FINANCIAL YEAR (3,042) (14,782)
Exchange translation differences arising on foreign currency net (278) (557)
investments
TOTAL RECOGNISED GAINS AND LOSSES IN THE YEAR (3,320) (15,339)
RECONCILIATION OF MOVEMENTS IN CONSOLIDATED SHAREHOLDERS'
FUNDS
30 September 2003
2003 2002
#'000 #'000
Loss for the financial year (3,042) (14,782)
Other recognised gains and losses relating to the year (278) (557)
Issue of share capital net of associated expenses 6,727 3,353
Other reserve 236 (2,497)
Increase/(decrease) in shareholders' funds 3,643 (14,483)
Opening shareholders' funds 86,207 100,690
Closing shareholders' funds 89,850 86,207
CONSOLIDATED BALANCE SHEET
30 September 2003
Note 2003 2002
#'000 #'000
FIXED ASSETS
Intangible assets 6 69,106 63,422
Tangible assets 4,400 2,910
Investments 101 101
73,607 66,433
CURRENT ASSETS
Stocks 3 64
Debtors 7 22,648 17,965
Investments 5,616 5,151
Cash at bank and in hand 9,724 8,156
37,991 31,336
CREDITORS: amounts falling due within one year 8 (6,996) (4,126)
NET CURRENT ASSETS 30,995 27,210
TOTAL ASSETS LESS CURRENT LIABILITIES 104,602 93,643
CREDITORS: amounts falling due after more than one year 9 (69) -
PROVISIONS FOR LIABILITIES AND CHARGES 10 (2,050) -
ACCRUALS AND DEFERRED INCOME 11 (12,633) (7,436)
TOTAL NET ASSETS 89,850 86,207
CAPITAL AND RESERVES
Called up share capital 12 2,066 1,903
Share premium account 12 238,697 238,652
Merger reserve 12 6,768 249
Other reserve 12 236 -
Foreign exchange reserve 12 (986) (708)
Profit and loss account 12 (156,931) (153,889)
EQUITY SHAREHOLDERS' FUNDS 89,850 86,207
CONSOLIDATED CASH FLOW STATEMENT
30 September 2003
Note 2003 2002
#'000 #'000
Net cash inflow from operating activities (i) 8,537 2,770
Returns on investments and servicing of finance
Interest received 340 494
Interest paid and similar items (79) (327)
Interest element of finance lease rental payments - (4)
261 163
Taxation
UK Corporation taxation paid - (10)
Overseas taxation paid (898) (378)
(898) (388)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (2,056) (1,651)
Proceeds on disposal of fixed assets 49 59
(2,007) (1,592)
Acquisitions
Investment in subsidiaries (3,694) (5,222)
Net cash acquired with subsidiaries 505 6
(3,189) (5,216)
Cash inflow/(outflow) before management of liquid resources and
financing
2,704 (4,263)
Management of liquid resources
Increase in cash investments/term deposits (459) (2,252)
Payments received from escrow - 52
Financing
Issue of ordinary share capital 59 -
Share issue costs charged to the share premium account (11) -
Repayment of loan acquired with subsidiaries (720) -
Capital element of finance lease payments - (188)
Increase/(decrease) in cash in the year (ii),(iii) 1,573 (6,651)
NOTES TO THE CASH FLOW STATEMENT
Year ended 30 September 2003
(i) Reconciliation of operating LOSS to net cash IN FLOW from operating
activities
2003 2002
#'000 #'000
Operating loss (1,914) (13,325)
Depreciation 1,966 1,745
Amortisation of goodwill and other intangible assets 7,170 7,079
Impairment of goodwill - 7,464
Gain on disposal of fixed assets (5) (25)
Decrease/(increase) in stock 61 (39)
Increase in debtors (894) (172)
Increase in creditors 2,153 43
Net cash inflow from operating activities 8,537 2,770
(ii) Reconciliation of net cash flow to movement in net FUNDS
2003 2002
#'000 #'000
Increase/(decrease) in cash in the year 1,573 (6,651)
Net cash outflow from decrease in finance lease - 188
Net cash outflow from decrease in debt acquired with subsidiary 720 -
Net cash outflow from increase in liquid resources 459 2,200
Change in net funds resulting from cashflows 2,752 (4,263)
Finance leases acquired with subsidiary (210) -
Debt acquired with subsidiary (720) -
Translation differences 1 (195)
Movement in net funds 1,823 (4,458)
Net funds at 1 October 13,307 17,765
Net funds at 30 September 15,130 13,307
(iii) Analysis of movement in net FUNDS
30 September Acquisitions Foreign
2002 excluding cash exchange 30 September
#'000 and overdraft Cash flow translation 2003
#000 #'000 #'000 #'000
Cash in hand and at bank 8,156 - 1,573 (5) 9,724
Finance leases - (210) - - (210)
Debt due within one year - (720) 720 - -
Cash investments/term deposits 5,151 - 459 6 5,616
Total 13,307 (930) 2,752 1 15,130
NOTES TO THE FINANCIAL INFORMATION
1. BASIS OF PREPARATION
The financial information set out in this preliminary announcement does not
constitute the company's statutory accounts for the years ended 30 September
2003 or 2002, but is derived from those accounts. Statutory accounts for 2002
have been delivered to the Registrar of Companies and those for 2003 will be
delivered following the company's annual general meeting. The auditors have
reported on those accounts; their report was unqualified and did not contain
statements under Section 237(2) or 237(3) of the Companies Act 1985.
The preliminary announcement was approved by the Board of Directors on 24
November 2003.
The 2002 balance sheet has been restated to reflect a reclassification of
accruals. In the balance sheet, accruals of #3,080,000 which were included in
creditors due within one year at 30 September 2002 are now included in accruals
and deferred income on the face of the balance sheet.
2. TURNOVER AND SEGMENTAL REPORTING
Geographic areas - analysis by origin
Total turnover Inter-segment turnover External turnover
2003 2002 2003 2002 2003 2002
#'000 #'000 #'000 #'000 #'000 #'000
Turnover
United Kingdom 25,965 21,059 (576) (1,509) 25,389 19,550
Continental Europe 612 166 - - 612 166
Asia-Pacific 549 1,758 - - 549 1,758
Africa 765 89 - - 765 89
North America and Canada 23,528 25,566 (1,857) (600) 21,671 24,966
South America 1,687 945 - - 1,687 945
53,106 49,583 (2,433) (2,109) 50,673 47,474
Geographic markets - analysis by destination
Turnover by
destination
2003 2002
#'000 #'000
United Kingdom 5,135 3,519
Continental Europe 10,979 9,753
Eastern Europe 2,902 1,235
Middle East 1,077 728
Africa 1,670 1,687
Europe, Middle East and Africa (EMEA) Sub total 21,763 16,922
Asia-Pacific 6,621 5,521
North America and Canada 15,538 21,058
Caribbean and Latin America 6,751 3,973
50,673 47,474
Turnover by type
Turnover by activity is set out below.
Turnover by
activity
2003 2002
#'000 #'000
Licence Sales 11,635 15,481
Professional services income:
Implementation, migration, consulting and training 11,620 8,730
Hardware 113 576
Non-Telecom - custom network solutions 2,052 2,957
Sub-total 13,785 12,263
Recurring income:
ASP Service 3,532 2,761
Volume upgrade licences 3,442 1,928
Support and maintenance fees 18,279 15,041
Sub-total 25,253 19,730
50,673 47,474
Loss before taxation
Year ended 30 September 2003 Before After
amortisation amortisation
of goodwill and of goodwill and
exceptional Amortisation Goodwill Exceptional exceptional
items of goodwill impairment items items
#'000 #'000 #'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)
Caribbean and Latin America 514 - - - 514
Loss before taxation 5,390 (7,170) - - (1,780)
Year ended 30 September 2002 Before After
amortisation amortisation
of goodwill and of goodwill and
exceptional Amortisation Goodwill Exceptional exceptional
items of goodwill impairment items items
#'000 #'000 #'000 #'000 #'000
United Kingdom 613 (1,652) (1,684) (1,097) (3,820)
Continental Europe 185 (74) - - 111
Asia-Pacific 187 (420) (5,780) - (6,013)
Africa 64 (548) - - (484)
North America & Canada 948 (4,385) - - (3,437)
South America 160 - - - 160
Loss before taxation 2,157 (7,079) (7,464) (1,097) (13,483)
In 2002, exceptional items comprised the write down of own shares #175,000, a
write down of the Polish associate investment of #146,000 and provision against
debtor balance with the Polish associate of #776,000.
Excluding Including
unamortised Unamortised unamortised
goodwill goodwill goodwill
2003 2003 2003 2002
#'000 #'000 #'000 #'000
Net assets
United Kingdom 10,348 3,030 13,378 17,125
Continental Europe 1,389 9,718 11,107 (58)
Africa (219) - (219) (464)
Asia-Pacific (16) - (16) 494
North America and Canada 10,095 55,091 65,186 68,902
Caribbean and Latin America 414 - 414 208
Net assets 22,011 67,839 89,850 86,207
It is neither practicable nor meaningful to allocate either profit before
taxation or net assets by client location or activity.
3. ACQUISITIONS
a) Current year acquisitions
Settler
On 18 December 2002, the Group acquired Ericsson AB's 'Settler' interconnect
billing product unit, including the Settler development team and worldwide
rights to develop and market the Settler product range. The total
consideration, settled in cash, amounted to US$5.1 million (#3.0 million plus
acquisition costs of #0.1 million) as disclosed below.
Goodwill arising on acquisition has been capitalised and is being amortised over
four years from the date of acquisition. Goodwill charged in the period amounts
to #646,000. The 'Settler' business contributed #2,014,000 to revenue in the
period from 18 December 2002 to 30 September 2003.
Net liabilities at date of acquisition Provisional
And provisional fair value fair value
#'000
Creditors (176)
Goodwill arising on acquisition 3,299
3,123
Consideration paid in cash 2,990
Acquisition costs 133
3,123
Digiquant A/S
On 17 September 2003, the Group acquired Digiquant A/S. The total consideration
amounted to Euro9.5 million (#6.7 million) and has been satisfied through the issue
of 15,958,510 ordinary shares. 635,152 ordinary shares remain to be allotted in
exchange for shares held by present and former employees. Acquisition costs
were #0.2 million.
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 #69,000. Digiquant contributed #580,000 to revenue in the period from 17
September 2003 to 30 September 2003.
Net assets at date of acquisition Provisional
And provisional fair value fair value
#'000
Tangible fixed assets 1,076
Debtors 3,172
Long term deposits 606
Cash 505
Creditors(falling due within one year) (3,493)
Creditors(falling due after one year) (141)
Provisions for liabilities and charges (2,074)
Accruals and deferred income (2,596)
Goodwill arising on acquisition 9,787
6,842
Consideration paid in shares 6,679
Acquisition costs 163
6,842
b) Reconciliation to cash flow statement
#'000
Consideration for Settler business 2,990
Acquisition costs - Digiquant 163
Acquisition costs - Settler 133
Deferred consideration payments on prior year acquisition. 408
3,694
4 TAX ON LOSS ON ORDINARY ACTIVITIES
2003 2002
#'000 #'000
Current taxation:
UK corporation tax at 30% (2002: 30%) 555 -
Overseas taxation 974 1,098
Prior year adjustment (127) 273
Total current tax 1,402 1,371
Deferred taxation:
Origination and reversal of timing differences (140) (72)
Tax on loss on ordinary activities 1,262 1,299
The standard rate of current tax for the year is 30% (2002: 34%), based on the
UK Corporation tax rate, since the largest source of the Group's revenues is in
the UK.
It is expected that the tax charges will continue to be reduced by the benefit
of tax deductions for goodwill in the USA.
5 (LOSS)/EARNINGS PER ORDINARY SHARE
2003 2002
#'000 #'000
Basic and diluted loss (3,042) (14,782)
Amortisation of goodwill and other intangible assets 7,170 7,079
Impairment of goodwill - 7,464
Amounts written off investments - 321
Exceptional Poland debtor provision - 776
Adjusted earnings after tax 4,128 858
Number Number
Basic and diluted weighted average number of shares 190,889,194 186,219,551
Pence Pence
Basic and diluted loss per ordinary share (1.59) (7.94)
Amortisation of goodwill and other intangible assets 3.76 3.80
Impairment of goodwill - 4.01
Amounts written off investments - 0.17
Exceptional Poland debtor provision - 0.42
Adjusted earnings per ordinary share 2.17 0.46
For the year ended 30 September 2003 and the year ended 30 September 2002, none
of the potential ordinary shares (including company share options) are dilutive
and therefore they are excluded from the calculation of diluted loss per share.
6. INTANGIBLE ASSETS
IPR Goodwill Total
#'000 #'000 #'000
Cost
At 1 October 2002 2,032 218,111 220,143
Additions - 13,078 13,078
Disposal - (220) (220)
Translation differences (10) - (10)
At 30 September 2003 2,022 230,969 232,991
Accumulated amortisation
At 1 October 2002 538 156,183 156,721
Amortisation 222 6,948 7,170
Translation differences (6) - (6)
At 30 September 2003 754 163,131 163,885
Net book value
At 30 September 2003 1,268 67,838 69,106
At 30 September 2002 1,494 61,928 63,422
The disposal relates to a reduction in estimated deferred consideration to be
paid on the prior year acquisition of the operational support systems business
from ICL.
7. DEBTORS
2003 2002
#'000 #'000
Trade debtors 13,815 13,676
Amounts owed by subsidiary undertakings - -
Corporation tax recoverable 196 196
Overseas tax recoverable 85 63
Deferred tax 240 72
Other debtors 438 238
Prepayments and accrued income
Due within one year 7,285 3,720
Due after more than one year 589 -
22,648 17,965
The prepayments and accrued income due after more than one year relate to
deposits on leased properties due after more than five years.
8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
2003 2002
#'000 #'000
Bank loans and overdrafts 125 -
Obligations under finance leases 141 -
Trade creditors 2,233 1,767
Corporation tax 1,169 454
Overseas tax 625 516
Other creditors including taxation and social security 2,604 686
Deferred/contingent consideration 99 703
6,996 4,126
9. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
2003 2002
#'000 #'000
Obligations under finance leases 69 -
Maturity of obligations under finance leases
Within one year 141 -
More than one year but less than five years 69 -
210 -
10. PROVISIONS FOR LIABILITIES AND CHARGES
2003 2002
#'000 #'000
Onerous lease commitments 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.
11. ACCRUALS AND DEFERRED INCOME
2003 2002
#'000 #'000
Amounts falling due within one year
Accruals 5,924 1,670
Deferred income 6,709 5,766
12,633 7,436
12. STATEMENT OF MOVEMENTS ON SHARE CAPITAL AND RESERVES
Called Share Foreign Profit
up share premium Merger Other exchange and loss
capital account reserve reserve reserve account Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
As at 1 October 2002 1,903 238,652 249 - (708) (153,889) 86,207
Issues of ordinary shares 163 56 6,519 - - - 6,738
Share issue expenses - (11) - - - - (11)
Shares to be issued - - - 236 - - 236
Loss for the year - - - - - (3,042) (3,042)
Foreign exchange translation - - - - (278) - (278)
At 30 September 2003 2,066 238,697 6,768 236 (986) (156,931) 89,850
END
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