Final Results

RNS Number : 8414I

Intec Telecom Systems PLC

25 November 2008

 



Intec Telecom Systems PLC

Audited results for the year ended 30 September 2008

25 November 2008 - Intec Telecom Systems PLC (LSE: ITL), a leading supplier of billing and operations support systems, announces its audited results for the year ended 30 September 2008. 

Financial Highlights

• Revenue up 9% to £135.8m (2007: £124.5m) 

• Adjusted EBITDA* up 24% to £18.2m (2007: £14.7m) 

• Adjusted profit* before tax up 52% to £13.2m (2007: £8.7m)

• Reported profit before tax of £13.7m (2007: Loss of £7.5m)

• Adjusted earnings per share* up 26% to 2.98p (2007: 2.36p)

• Earnings per share of 3.42p (2007: Loss per share 2.55p)

• Net cash up 28% to £28.9m (2007: £22.6m)

Operational Highlights

• Successfully restructured business and strengthened management team

• Strong growth in emerging markets

• Significant contract wins in the Telco and non-Telco sector

• Continued focus on delivering operational improvements and efficiencies 

• Stronger more focused business with a clear set of priorities

Andrew Taylor, Chief Executive, commented: 

"We have had our best ever year, delivering strong growth in revenues, profitability and cash while at the same time restructuring the Group to reduce costs and deliver long-term growth. 

"We have strengthened the management team and created a more flexible organisation to pursue opportunities in existing and new markets. The success we have achieved underlines the leadership of our technology and our ability to deliver major projects on a truly global scale."  

John Hughes, Non Executive Chairman, said:

"After a record year, Intec has entered 2009 with a stronger, more focused organisation, a world-class portfolio of products and a healthy balance sheet." 

Enquiries:

Intec Telecom Systems PLC	www.intecbilling.com
Andrew Taylor, Chief Executive Officer	[phone]
Robin Taylor, Group Finance Director
College Hill	0207 457 2020
Adrian Duffield/Carl Franklin

About Intec Telecom Systems PLC

Intec supplies solutions to over 70 of the world's top 100 telecoms carriers and is one of the world's fastest growing major BSS/OSS (business and operations support systems) vendors. Intec's 400 plus customers include AT&T, Cable & Wireless, The Carphone Warehouse (UK), China Unicom, Deutsche Telekom, Eircom (Ireland), France Telecom, Hutchison 3G, O2, Orange, T-Mobile, Telefonica, Vodafone, Virgin Mobile, Vivo and Verizon. Intec works closely with its customers, many of whom have been with Intec since its inception, to provide the highest standards of performance, flexibility and robustness to help carriers service their customers effectively and profitably. Intec's comprehensive and expanding range of products, solutions and services includes:

•    Retail billing and customer management

•    Multi-service mediation and activation

•    Inter-carrier billing settlements including US CABS and ITU-based settlement 

•    End-to-end content partner management

•    Optimised wholesale routing and trading 

•    Real-time pre/post-paid mediation and charging

•    Pre-integrated solutions for wholesale, wireless and core IMS charging functions

Founded in 1997, Intec is listed on the London Stock Exchange (ITL.L) and has over 1,600 staff and 28 offices in 22 countries. For more information, visit the Intec website at ww.intecbilling.com.

* Throughout this report:

i) Adjusted profit before tax is stated before exceptional items, impairment and amortisation of acquired intangible assets.

ii) Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation (including acquired intangibles but excluding amortisation included in cost of sales), impairment and exceptional items.

iii) Adjusted earnings after tax excludes the after tax effect of exceptional items and impairment from stated profit/(loss) after tax.

Reconciliations are provided below for reference: 

		2008	2007
Notes to the financial highlights		£m	£m
(i) Profit/(loss) before tax		13.7	(7.5)
Exceptional items		(1.3)	1.7
Impairment		-	13.2
Amortisation of acquired intangible assets		0.8	1.3
Adjusted profit before tax		13.2	8.7
Net finance income		(0.4)	(0.4)
Depreciation		3.0	3.7
Amortisation of other intangible assets		2.4	2.7
Adjusted EBITDA		18.2	14.7
(ii) Adjusted earnings/(loss) per share calculation:
Profit/(loss) after tax		10.4	(7.8)
After tax effect of exceptional items		(1.3)	1.7
Impairment		-	13.2
Adjusted earnings after tax	(iii)	9.1	7.1

CHIEF EXECUTIVE OFFICER'S and FINANCE DIRECTOR'S STATEMENT

In 2008, Intec returned its best ever performance, delivering strong growth in revenues, profitability and cash generation, whilst addressing much-needed structural changes. We have simplified our organisational structure, strengthened management across the organisation and focused on improving cost control, cash management and operational efficiency. We also increased both staff empowerment and accountability to ensure that we are strong enough to face the challenges ahead and flexible enough to pursue new opportunities wherever they arise. Throughout 2008, but particularly in the second half, our ability to both win and deliver new customer contracts has been an important feature of our full year performance.

Although we are pleased with progress, there is still both the need and the opportunity to enhance the financial performance of Intec in the future. Notwithstanding the current global economic conditions, to build upon the success of 2008, we will continue with a relentless focus on cost management, a continued effort to deliver operational improvements, and a more focused sales effort to deliver top-line revenue performance. 

FINANCIAL RESULTS

Our full-year performance was characterised by a sustained effort to both win and fulfil new customer contracts. As a result, we delivered:

• Revenues up 9% at £135.8m (2007: £124.5m)

• Adjusted EBITDA up 24% to £18.2m (2007: £14.7m)

• Adjusted EBITDA margin up 1.6 percentage points to 13.4% (2007: 11.8%)

• Adjusted profit before tax improved by 52% to £13.2m (2007: £8.7m))

• Profit before tax was £13.7m compared to a loss in 2007 of £7.5m

• Cash up 28% at £28.9m (2007: £22.6m)

As a truly global business with more than 90% of our revenues generated outside the UK, we saw marked increases in revenues from our Asia Pacific (APAC) (+10% ) and Caribbean and Latin American (CALA) regions (over 100%), driven by new customer wins and the delivery of new and existing customer projects. In the Europe, Middle East and Africa region (EMEA), new customer wins, particularly across our OSS portfolio, and a focus on cross and up-selling in our large customer base enabled good growth of 2% on a like-for-like basis. In North America, as we anticipated, revenues declined slightly (-4%). However, we were encouraged by two substantial contract successes, one with a major financial services institution, and the other being a significant volume expansion at an existing client.  

We have continued to invest in our Professional Services centre in Bangalore and have increased staffing at our near-shore professional services centres in Malaysia (Kuala Lumpur) and Brazil (Sao Paulo). This development will continue throughout 2009. 

STRUCTURAL CHANGES

Throughout 2008 and as part of an ongoing strategy to simplify the business and further improve our performance, we focused on the following key objectives:

• Creating a new simplified organisational structure that acts as an enabler for growth;

• Ensuring our business has first class management and leadership with high levels of empowerment and accountability;

• Ensuring that we have a true customer and market driven approach; and

• The creation of a "one-Intec" corporate culture with a clear vision and set of priorities.

I am very pleased to report that we have made significant progress in each of these key areas and the new organisational structure is in place and delivering results. All key leadership positions have been filled with a strong mix of internal and external talent. Additionally, we consolidated our regional structure from four regions to three, with North America and CALA combining into a new organisation serving the Americas.

We globalised our regional sales organisation to drive higher levels of operational consistency, predictability and overall performance. Andy Thorburn joined as Intec's President of Global Sales in June 2008 and in the coming months we will strengthen our regional sales leadership to drive significant improvements in sales planning, qualification and pipeline management. 

On 1 January 2009, Reece Donovan will join Intec as President of Global Services. Reece, who is joining us from Steria, is a highly experienced Professional Services practitioner, who brings an in-depth knowledge of the global software sector and experience across a number of vertical customer segments. 

In addition to these important appointments, Richard Ullineus joined us from Amdocs on 4 November 2008 as our Head of Alliances and Partnerships. This is a strategically important appointment for Intec and Richard will be responsible for ensuring that partnering becomes a key enabler for Intec in the future. 

While introducing these structural and people changes, we have also engaged closely with our employees to develop a clearer view of Intec's corporate culture and to help evaluate a vision and set of priorities that will contribute to creating a more successful business. Our employees are extremely important to the success of Intec, and this level of engagement, coupled with a stronger management team, will ensure that in 2009 and beyond we work as "one Intec" with a highly consistent and customer focused approach towards the market, our customers, staff and stakeholders. 

CUSTOMER WINS AND PRODUCT DEVELOPMENT 

During 2008 Intec won 26 new licence sales in the telecommunications sector. These new licence wins were achieved across all regions, with APAC and CALA proving especially strong markets accounting for nine and eight new licences respectively. In particular we announced our first ever retail billing sales in CALA with contract wins in Uruguay with Antel and in Central America with a prestigious multi national Operator. These 26 new contracts were signed with a range of companies providing mobile, PSTN, cable and Broadband services, and are testimony to the ability of Intec's product portfolio to support convergent services and the "quad play" requirements of this rapidly developing market.

Revenue from these new licence deals, combined with other revenues from our existing customer base of some 400 customers contribute to the strong incremental growth.

We were also successful in winning two strategically and financially important contracts, one of which was with a global financial services organisation. Both contracts were valued at significantly more than £5m, and both offer good expansion opportunities.

The success we have achieved underlines the leadership of our technology and our ability to deliver major transformation projects on a truly global scale. 

Throughout 2008, we continued to invest in the development of our products and brought to market significant new developments in functionality that will ensure our products maintain their market leadership. Important releases included the launch of a financials Module for our Interconnect product line, and the launch of a real-time mediation platform - InterSession - as a part of our world-leading Total Service Mediation product family. 

As we continue to develop the competitiveness of our core portfolio during 2009, we will focus on extending our product reach and applicability to other vertical sectors, including the Financial Services and Government sectors.  

STRATEGIC PRIORITIES

Intec's strategic priority is to build on its position as a world-class provider of OSS and BSS software products and solutions. Additionally, we will enhance our ability to deliver a world-class services-implementation and solutions-support capability to our customers. To achieve these strategic goals, we will focus on the following priorities:

• Customer centricity: Build our customer base by signing new contracts and both renewing and up-selling to existing customers, in order to enhance overall revenue and profit per customer;

• Simplification:  Continue to simplify our organisation and business processes so we are more streamlined, efficient, easier to understand and easier to do business with;

• Operational optimisation: Continue to improve our Professional Services capability by maximising our use of lower cost off-shore and near-shore resources;

• Partnering: Enable growth and strengthen our delivery capability through the increasing adoption of alliances and partnerships across our business; 

• Investment for growth: Capitalise on targeted opportunities in both existing and new markets that are growing and continue to invest prudently in our products in order to increase our competitiveness and gain new customers and broaden relationships with existing ones;

• People: Build a world class team and a "one Intec" corporate culture.

DETAILED GROUP PERFORMANCE

The financial results for the year reflect improvements in revenues, profits and cash management. Revenues repeated the growth experienced in 2007 and improved cost control led to higher levels of profitability despite a reduction in gross margin. Cash management has been a major focus and we have been successful in accelerating cash collection in all of our regions. We will continue to address productivity, cost improvement and cash management in 2009.

In May 2007, we set a target to achieve a gradual increase in EBITDA as a percentage of revenues. We increased this percentage by 3.3 percentage points in 2007 and improved it by a further 1.6 points in 2008 to 13.4%. Excluding the one-time cost for the closure of Mechanicsburg, the adjusted percentage point increase was 2.4 points.

Basic earnings per share has increased to 3.42p compared to basic loss per share of (2.55)p in 2007. Adjusted earnings per share has increased by 26% to 2.98p from 2.36p in 2007.

The weighted average number of shares used to calculate basic earnings per share is 305.6m. (2007: 305.0m)

Business Performance

The Group uses a set of key performance indicators to manage the business on a monthly basis. The key financial indicators are highlighted below and comments are provided on material changes to facilitate a better understanding of the financial statements. 

	2008 £m	2007 £m	% change
Revenue	135.8	124.5	9%
Adjusted EBITDA	18.2	14.7	24%
% of revenues	13.4%	11.8%
Adjusted profit before tax	13.2	8.7	52%
Net cash	28.9	22.6	28%

Revenue

Revenue for 2008 increased by 9% to £135.8m (2007: £124.5m). In constant currency and as shown in the table below, the growth over 2007 was 6%. 

REGION	2008 Reported	2007 Constant currency	2007 Reported	Growth at constant currency
	£m	£m	£m
EMEA	52.7	54.0	52.5	(2%)
North America	41.2	43.7	43.6	(6%)
Asia-Pacific	24.4	22.1	21.1	10%
CALA	17.5	7.9	7.3	122%
Total Revenue	135.8	127.7	124.5	6%

Note: constant currency comparisons are made between 2008 reported revenues and those of 2007 by

applying the average exchange rates for 2008 to the 2007 local currency numbers. 

A like for like representation of the revenue performance is after the exclusion in both years of the revenue (DCP) related to the assets of Intec Denmark, sold to VoluBill SA in November 2007. Adjusted Group revenue for continuing business streams then shows an increase of 10%.

REGION	2008 Reported	2008 Reported less DCP	2007 Constant currency less DCP	Growth at constant currency
	£m	£m	£m
EMEA	52.7	52.5	51.3	2%
North America  - other	29.2	29.2	27.3	7%
- managed services	12.0	12.0	15.8	(24%)
- sub-total	41.2	41.2	43.1	(4%)
Asia-Pacific	24.4	24.3	21.8	11%
CALA	17.5	17.5	7.3	140%
Total Revenue	135.8	135.5	123.5	10%

Reviewing our revenues by region, our North American business, excluding managed services, increased by 7% to £29.2m in constant currency and benefited from the significant contract wins announced in the second half of the year. The Managed Services revenues in this region reduced by 24% compared with 2007. This decline was anticipated last year and prompted the decision to close our Mechanicsburg facility in April 2008. Revenue in EMEA, excluding DCP, increased by 2% in constant currency. In CALA revenues increased by 140% primarily as a result of the Antel contract signed in the first half of the year.  APAC achieved revenues that were 11% greater than 2007 on a constant currency basis. 

REVENUE BY CATEGORY	2008 Reported	2007 Constant currency	2007 Reported	Growth at constant currency
	£m	£m	£m
Licence	30.4	28.4	27.3	7%
Professional Services	52.9	47.9	46.8	10%
Managed Services	12.3	16.2	16.3	(24%)
Support & Maintenance	34.6	33.4	32.5	4%
Hardware	5.6	1.8	1.6	211%
Total Revenue	135.8	127.7	124.5	6%

Gross margin rates excluding the £1.1m one time charge for the closure of the Mechanicsburg facility decreased to 51% (2007: 54%). This change stems primarily from the high hardware content in revenues from the Antel contract, lower margins from Managed Services in North America and an increase in Professional Services costs. The latter is due to higher contractor costs required to accommodate a significant increase in business particularly in the second half of the year, set up costs of offshore centres in Sao Paulo and Kuala Lumpur and the impact of some large and highly complex contracts. In 2009, we will strive to improve productivity and efficiency to protect and improve our margins. 

Operating Expenses

As in prior reports, we have disclosed share based payments (SBP) and the employee incentive plan costs (IP) separately to allow an alternative analysis of operating expenses. A reconciliation and commentary to those numbers disclosed in the consolidated income statement is provided below.

Expense before SBP and IP	2008 £m	IP/SBP £m	2008 Reported £m	2007 £m	IP/SBP £m	2007 Reported £m
Cost of sales	(65.0)	(2.2)	(67.2)	(55.2)	(2.1)	(57.3)
Development	(14.0)	(0.9)	(14.9)	(14.2)	(0.9)	(15.1)
Distribution	(17.8)	(1.0)	(18.8)	(19.1)	(0.8)	(19.9)
Administration before forex	(15.9)	(1.5)	(17.4)	(16.9)	(1.6)	(18.5)
Operating expenses	(47.7)	(3.4)	(51.1)	(50.2)	(3.3)	(53.5)
Forex gains	0.8	-	0.8	1.0	-	1.0

Operating expenses declined by 5% to £47.7m (2007: £50.2m). Operating expenses as a percentage of revenues reduced to 35% (2007: 40%).

Development costs at £14.0m are slightly lower than last year by £0.2m. The disposal of the Danish business has resulted in an £0.8 m cost reduction. There has been increased investment in core products and we will continue this strategy in 2009.

Distribution costs reduced to £17.8m (2007: £19.1m) partially due to the reversal of the legal provision (£0.4m) highlighted in the interim report but also due to the full year impact of cost reductions made earlier in the year. 

Under new sales leadership, further changes have been made which will align our resources with market opportunity. We do not expect further absolute cost reductions in 2009.

Administration expenses reduced by £1.0m to £15.9m (2007: £16.9m) due to lower bad debt provisions, facility costs and audit fees. We continue to review our costs and expect to make further savings in 2009 by a number of actions which include an increased use of offshore resources, the introduction of global travel management and telephony, a reduction in the number of legal entities and further reductions in excess capacity. 

The cost of our share-based payments remains stable at £1.5m compared to £1.6m in 2007. The charge for the all employee incentive plan increased to £4.1m (2007: £3.8m) reflecting the improved performance over 2007.  

In addition to the above, depreciation reduced by £0.6m as we exercised greater control over capital expenditure. Amortisation reduced by £0.5m due to the write down of the EUR assets in 2007.

Other gains and losses

On 19 November 2007, an asset sale and purchase agreement was announced with VoluBill SA to sell certain assets and liabilities of the Denmark based Intec DCP business for an initial consideration of £1.0 m in cash plus a percentage of certain revenue streams for two years from completion. As part of the agreement, approximately 40 staff transferred to VoluBill SA. The disposal closed on 30 November 2007 and after working capital adjustments, resulted in a gain on disposal (including estimated future additional consideration) of £1.1m.

A further £0.2m is reported under this category and represents a partial recovery of amounts due from an investment previously written off in 2002.

Taxation

The overall tax charge is £3.3m (2007: £0.3m). This represents a current tax charge of £1.9 m (2007: £2.6m) and a deferred tax charge of £1.4m (2007: credit £2.3m).

The current tax charge comprises £1.0m (2007: £1.3m) of taxes on local profits in a number of smaller overseas territories, £0.8m (2007: £0.9m) of withholding taxes for which full credit relief is irrecoverable and a prior period charge of £0.1m (2007: prior period charge £0.4m).

The deferred tax charge of £1.4m (2007: credit £2.3m) includes a charge of £1.1 m (2007: credit £1.5m) because lower carried forward tax losses in Canada, Ireland and the United States were used than was forecast in the 2007 financial statements.  In those statements, the use of these losses was anticipated for the first time and a deferred tax credit of £1.5m was recognised. We have reassessed the recoverability of the remaining losses at a value of £0.4m, thus creating a deferred tax charge of £1.1m (2007: credit £1.5m). 

The major trading companies in the Group have not incurred material corporate tax liabilities. The US operations have annual goodwill allowances, based on the original purchase price which will continue to reduce tax charges against future profits. In addition there are substantial tax losses in the UK, the US, Canada, Denmark and Ireland, with a tax value of £24.5m (2007: £25.2m) available for future use.

Cash payments of taxes in the year amounted to £2.4m (2007: £3.3m) including withholding taxes of £1.1m (2007: £0.7m).

The level of tax in future years will continue to depend to a considerable extent on the location of contracts and the rate of utilisation of the carried forward tax losses. As an international business with customers in over 90 countries the Group's tax affairs are necessarily complex although the ongoing rationalisation of the group structure will simplify this to some extent.

Balance sheet and Cash Management

£m	2008	2007
Goodwill & Intangibles	100.5	100.4
Property, Plant & Equipment	5.5	6.9
Other non current assets	4.0	4.5
Non-current assets	110.0	111.8
Trade & other receivables	64.2	48.6
Cash	28.9	22.6
Current assets	93.1	71.2
Non-current liabilities	6.3	5.5
Trade and other payables & provisions	43.4	37.9
Current liabilities	43.9	38.4
Net assets	152.9	139.1
Bank loans and borrowings	0.6	0.7

Balance Sheet Review

Goodwill and other intangible assets include £93.0m (2007: £93.0m) of goodwill arising on acquisitions made in previous periods. The remaining balance comprises computer software £2.7m (2007: £4.2m), capitalised development costs £0.3m (2007: £0.7m), acquired intellectual property rights £0.9m (2007: £1.7m) and £3.5m (2007: £0.7m) attributable to the capitalised project implementation costs for managed services operations in North America. The current year amount is attributable to one customer and the costs are being amortised from April 2008 over the initial minimum contract period of five years.  The carrying value of these assets has been reviewed during the year and no impairment has been identified.

Net trade receivables have increased significantly from the prior year by £8.7m to £42.2m. This increase reflects the good trading result for the year and includes £8.3m invoiced to one customer and collected in October 2008. Using a weighted average method, debtors' days based on invoice date have reduced to 64 days (2007: 69 days) and on a due date basis 88 percent of the balance of trade receivables was either current or not more than 30 days past due (2007: 74%). As a result we have been able to reduce our bad debt provisions from £2.3m to £1.1m.  

Accrued income and work in progress has also increased significantly from 2007 by £5.2m to £15.1m and reflects the positive impact of some of the larger contracts that were signed during 2008, primarily in CALA and North America. 

The most significant increase in trade and other payables relates to the Group's deferred revenue balances which have increased by £4.7m to £21.5m and results from advance payments invoiced in the current year on large contracts. 

Cash

Cash increased significantly to £28.9m (2007: £22.6m). Cash generated by operations increased by 9% to £12.4m. Working capital increases, primarily in trade and other receivables as a result of strong second half trading in 2008 form a solid base for future cash conversion.  

Tax payments have decreased from £3.3m to £2.4m due to lower advance corporation tax payments in South Africa and Australia. Whilst we incurred lower capital expenditure on traditional plant, property and equipment, we invested £2.8m (2007: £0.7m) on set up costs for a North America managed service contract. Other significant items include the net disposal proceeds of the DCP business of £0.4m.  

Due to the £6.75m loan repayment in September 2007, our average cash balances during the year were lower than 2007 and as a result, our interest income reduced by £0.3m.

Our cash balances are spread through a number of banks worldwide with the largest single holding (at a bank with a credit rating of Aa2) accounting for 23.7% of the balance. Currently, we are in the initial stages of implementing an enhanced risk based cash management strategy to minimise the liquidity and currency risks associated with our cash balances. The group has no borrowings other than obligations under finance leases.

Foreign exchange management

As a global business, the Group has currency exposures on transactions denominated in a currency other than the functional currency of trading entities and on the translation of the balance sheet and income statement of overseas subsidiaries. The key currencies that give rise to this risk are primarily US Dollars, Euros, Indian Rupees, Canadian and Australian Dollars. 

In contrast to 2007, when the US dollar weakened ove the reporting period, during 2008 the US dollar remained on average, comparable to 2007 rates. This, in conjunction with significant strengthening of the Euro and other currencies highlighted above resulted in overall favourable translation gains. We estimate that a one percentage weakening of sterling against other currencies increased the Group's profit before tax by approximately £0.1 m for the year ended 30 September 2008.

Following an initial review of the options available in respect of mitigating the transaction and translation risk, the Group did not undertake to hedge these exposures in 2008. Given the volatility experienced with key currencies in the latter part of 2008, the Group is currently developing and implementing a detailed treasury policy including dedicated systems, controls and hedging strategies to reduce the Group's exposure to transaction risk.

SUMMARY AND OUTLOOK

Intec had a strong year in 2008, demonstrating our tenacity in a challenging market environment to convert pipeline opportunities into significant contract wins and our ability to deliver those contracts on time and to a high level of customer satisfaction. We restructured our business, and continued to focus on excellence by strengthening our team, and driving strong cost management and operational improvements in sales, delivery and support. Importantly, the quality and flexibility of our product portfolio, combined with our world-class solutions-delivery capability, ensured we won significant contracts in new and demanding markets, while we continued to strengthen our broad geographical footprint and expand our position in both lower-cost and growth markets.  

Looking forward, Intec has started 2009 as a stronger more focused business with a clear vision and set of strategic priorities for the future. Our focus is very much on delivering end-to-end excellence across our Group and driving a more controlled and efficient operation. This solid foundation, combined with a relentless effort to improve performance, provides confidence that, notwithstanding the possibility of declining economic conditions, we are well placed to deliver positive results during this financial year and beyond. 

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2008

	Note	Before exceptional items  Total  2008 £000	Exceptional items  Total 2008 £000	Total 2008 £000	Before exceptional items and impairment  Total 2007 £000	Exceptional items and impairment Total 2007 £000	Total 2007 £000
Revenue
Continuing operations	3	135,786	-	135,786	124,496	-	124,496
Cost of sales		(67,238)	-	(67,238)	(57,251)	-	(57,251)
Gross profit		68,548	-	68,548	67,245	-	67,245
Distribution costs		(18,819)	-	(18,819)	(19,937)	-	(19,937)
Development expenditure		(14,880)		(14,880)	(15,133)	-	(15,133)
Depreciation and amortisation		(6,237)	-	(6,237)	(7,642)	-	(7,642)
Impairment of goodwill		-	-	-	-	(8,875)	(8,875)
Impairment of intangible assets	2	-	-	-	-	(4,363)	(4,363)
Exceptional items		-	-	-	-	(1,732)	(1,732)
Other administrative expenses		(16,643)	-	(16,643)	(17,426)	-	(17,426)
Total administrative expenses		(22,880)	-	(22,880)	(25,068)	(14,970)	(40,038)
Operating profit/ (loss)		11,969	-	11,969	7,107	(14,970)	(7,863)
Other gains and losses	2	-	1,350	1,350	-	-	-
Finance income		752	-	752	1,012	-	1,012
Finance costs		(321)	-	(321)	(652)	-	(652)
Profit/ (loss) before tax		12,400	1,350	13,750	7,467	(14,970)	(7,503)
Income tax expense	4	(3,298)	-	(3,298)	(278)	-	(278)
Profit/ (loss) for the year attributable to equity shareholders		9,102	1,350	10,452	7,189	(14,970)	(7,781)
		2008	2008	2008	2007	2007	2007
Earnings/(loss) per share (pence)		Pence	Pence	Pence	Pence	Pence	Pence
- basic and adjusted	5	2.98	0.44	3.42	2.36	(4.91)	(2.55)
- diluted and adjusted diluted	5	2.90	0.42	3.32	2.36	(4.91)	(2.55)

All the results above relate to continuing operations.

Consolidated statement of recognised income and expenses

For the year ended 

		2008 £000	2007 £000
Exchange differences arising on translation of foreign operations		1,833	(2,053)
Profit/ (loss) for the year		10,452	(7,781)
Total recognised income and expense for the year attributable to equity holders of the parent		12,285	(9,834)

CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 2008

				Restated (Note 1)
	Note		2008 £000	2007 £000
Non-current assets
Goodwill			93,022	93,022
Other intangible assets			7,443	7,371
Property, plant and equipment			5,455	6,881
Trade and other receivables	6		2,258	1,456
Deferred tax asset			1,791	3,107
			109,969	111,837
Current assets
Trade and other receivables	6		64,192	48,629
Cash and cash equivalents			28,927	22,580
			93,119	71,209
Total assets			203,088	183,046
Equity and liabilities
Equity attributable to equity holders of the parent
Share capital	9		3,060	3,057
Share premium account	9		162,044	161,989
Merger reserve	9		249	249
Own shares	9		(95)	(95)
Translation and other reserves	9		(2,187)	(4,020)
Retained earnings	9		(10,192)	(22,102)
Total equity			152,879	139,078
Non-current liabilities
Other payables	7		2,948	2,614
Deferred tax liabilities			601	576
Bank loan and other borrowings			194	256
Provisions	8		2,592	2,083
			6,335	5,529
Current liabilities
Trade and other payables	7		42,086	36,825
Current tax liabilities			770	603
Bank loan and other borrowings			396	488
Provisions	8		622	523
			43,874	38,439
Total liabilities			50,209	43,968
Total equity and liabilities			203,088	183,046

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2008

			Restated (Note 1)
		2008 £000	2007 £000
Operating profit/ ( loss)		11,969	(7,863)
Adjustments for:
Depreciation of property, plant and equipment		3,076	3,675
Amortisation of intangible assets		2,741	3,598
Amortisation of capitalised development expenditure		420	369
Amortisation of capitalised project costs		296	-
Impairment of goodwill		-	8,875
Impairment of intangible assets		-	4,363
(Gain) / loss on disposal of property, plant and equipment		28	(10)
Share-based payment expense		1,458	1,623
Exchange gain on non operating items		-	(351)
Increase/ (decrease) in provisions		40	(345)
Operating cash flows before movements in working capital		20,028	13,934
Increase in receivables		(11,171)	(3,874)
Increase in payables		3,511	1,267
Cash generated by operations		12,368	11,327
Income taxes paid (net)		(2,462)	(3,279)
Net cash generated by operating activities		9,906	8,048
Investing activities
Interest received		751	1,012
Purchase of plant, property and equipment		(1,783)	(2,336)
Purchase of intangible assets		(259)	(1,101)
Expenditure on capitalised project costs		(2,842)	(728)
Proceeds on disposal of property, plant and equipment		136	69
Expenditure on capitalised product development		-	(123)
Net proceeds on disposal of business		538	-
Net cash used in investing activities		(3,459)	(3,207)
Financing activities
Interest paid		(34)	(411)
Interest element of finance lease rental payments		(98)	(120)
Repayment of VAT on acquisition costs		-	205
Proceeds on issue of shares		57	255
Repayment of bank borrowings		-	(6,751)
Repayments of obligations under finance leases		(427)	(661)
Net cash used in financing activities		(502)	(7,483)
Net increase/ (decrease) in cash and cash equivalents		5,945	(2,642)
Cash and cash equivalents at beginning of year		22,580	25,960
Effect of foreign exchange rates		402	(738)
Cash and cash equivalents at end of year		28,927	22,580

Cash and cash equivalents (which are presented as a single class of assets on the face of the balance sheet) comprise cash at bank and other short-term highly-liquid investments with a maturity of three months or less.

NOTES TO THE AUDITED FINANCIAL INFORMATION

Year ended 31 March 2008

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 2008 or 2007, but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies and those for 2008 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 2008.

The financial information has been prepared on a basis consistent with the accounting policies set out in the 2007 annual accounts, with the exceptions disclosed below: 

The balance sheet at 30 September 2007 has been restated to reclassify project costs incurred on a long term project from long term trade and other receivables to other intangible assets as it reflects more closely the nature and intended use of the asset. There is no effect on the income statement or net assets at that date. The effect of this reclassification is to reduce long term trade and other receivables and increase other intangible assets by £728,000 as at 30 September 2007. The effect of this reclassification on the cash flow statement is to reduce movements in receivables and increase expenditure on other intangible assets by £728,000 for the year ended 30 September 2007.

2. OTHER GAINS AND LOSSES

2a) Other gains and losses comprise exceptional gains as set out below:

	2008 £000	2007 £000
Disposed business	1,182	-
Other gains	168	-
	1,350	-

Disposed business

On 19 November 2007, an asset sale and purchase agreement was announced with Volubill SA to sell certain assets and liabilities of Intec Denmark for an initial consideration of £1 million in cash plus additional consideration based on support and maintenance revenues and new licence sales recognized by Volubill for a period of two years from completion. Within the agreement there are working capital adjustments the majority of which were settled in the period. These amounts have been included in the calculation of the gain on disposal disclosed in the table below.

The disposal costs are charges incurred as a direct result of the disposal.

Net assets disposed of and the calculated profit on disposal were as follows:

		2008
		£'000
Intangible assets		105
Property, plant and equipment		63
Current assets		26
Current liabilities		(612)
Net liabilities disposed		(418)
Initial consideration		1,000
Estimated additional consideration		451
Working capital adjustments		(572)
Net consideration		879
Profit on disposal before adjustments		1,297
Costs attributable to the disposal		(217)
Translation differences		102
Profit on disposal		1,182

Net cash flows in respect of the disposed business are as follows:
Initial consideration	1,000
Additional consideration received	110
Working capital payments	(572)
	538

Other gains

Other gains represent recovery of amounts in relation to an investment in Poland previously written off in 2002. 

2b) Exception items in 2007:

In 2007, exceptional costs comprise £2.4 million resulting from a detailed business model and operations review and an associated Board and staff restructuring, offset by the reversal of a provision of £0.2 million relating to the settlement of employment grants and a reversal of £0.5 million of the Danish onerous lease provisions recorded as exceptional cost in 2006. 

3. REVENUE AND SEGMENTAL ANALYSIS

The Directors consider that the Group operates in one continuing class of business, namely that of the development, sale, implementation and support of business/operations support software solutions.

The Group is organised into four key geographical segments comprising Europe, Middle East and Africa (EMEA), North America, Caribbean and Latin America (CALA) and Asia-Pacific (APAC) and product operations. The geographical segments are based on customer location. Product operations comprise our development, product management and offshore operations.  

Inter-segmental revenue and expenses comprise amounts charged to other regions for resources used on projects outside their home region. The revenue and expenses are determined on an arms-length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise corporate assets and liabilities and expenses. Segment information under the primary reporting format is as disclosed in the table below:

Continuing operations	EMEA 2008 £000	North America 2008 £000	APAC 2008 £000	CALA 2008 £000	Product operations 2008 £000	Total 2008 £000
Gross revenue	52,712	43,575	24,334	17,523	9,967	148,111
Inter-segment revenue	-	(2,358)	-	-	(9,967)	(12,325)
Revenue	52,712	41,217	24,334	17,523	-	135,786
Gross expenses	35,990	34,888	25,046	12,159	18,561	126,644
Inter-segment expenses	(6,333)	(746)	(3,617)	(1,629)	-	(12,325)
Expenses	29,657	34,142	21,429	10,530	18,561	114,319
Segment profit /(loss)	23,055	7,075	2,905	6,993	(18,561)	21,467
Unallocated costs:
- corporate costs						(9,498)
Operating profit						11,969
Other gains and losses						1,350
Finance income						752
Finance costs						(321)
Profit before tax						13,750
Taxation						(3,298)
Profit after tax						10,452

Continuing operations	EMEA 2007 £000	North America 2007 £000	APAC 2007 £000	CALA 2007 £000	Product operations 2007 £000	Total 2007 £000
Gross revenue	52,486	44,997	21,066	7,307	7,843	133,699
Inter-segment revenue	-	(1,360)	-	-	(7,843)	(9,203)
Revenue	52,486	43,637	21,066	7,307	-	124,496
Gross expenses	31,909	32,299	14,808	5,646	30,434	115,096
Inter-segment expenses	(4,203)	(669)	(4,248)	(83)	-	(9,203)
Expenses	27,706	31,630	10,560	5,563	30,434	105,893
Segment profit before exceptional items and impairment	24,780	12,007	10,506	1,744	(30,434)	18,603
- impairment of goodwill	-	-	-	-	(8,875)	(8,875)
- impairment of intangible assets	-	(4,363)	-	-	-	(4,363)
- exceptional credits	197	-	-	-	487	684
Segment profit /(loss)	24,977	7,644	10,506	1,744	(38,822)	6,049
Unallocated costs:
- corporate costs						(11,496)
- exceptional expenses						(2,416)
Operating loss						(7,863)
Finance income						1,012
Finance costs						(652)
Loss on ordinary activities before tax						(7,503)
Taxation						(278)
Loss for the period						(7,781)

Revenue by category

Additional disclosures on revenue by category is set out below. 

	2008 £000	2007 £000
Licence	30,377	27,318
Professional services income	52,988	46,737
Managed services	12,299	16,286
Support and maintenance fees	34,598	32,523
Hardware	5,524	1,632
	135,786	124,496

Due to the increase in hardware revenue in the current year, hardware revenue has been disclosed separately in the table above. This revenue was previously included within professional services income. 

4. INCOME TAX EXPENSE

The charge for the year comprises

			2008 £000	2007  £000
Current taxation:
UK Corporation tax at 29% (: 30%)			-	-
Foreign tax			1,800	2,186
			1,800	2,186
Adjustments in respect of prior years:
UK Corporation tax			(81)	280
Foreign tax			164	85
			83	365
Total current tax expense			1,883	2,551
Deferred taxation:
UK			-	-
Foreign			1,415	(2,273)
Total deferred taxation			1,415	(2,273)
Total income tax expense			3,298	278

5. EARNINGS/ (LOSS) PER ORDINARY SHARE

Continuing operations		2008  £000	2007  £000
Profit/ (loss) for the year - basic and diluted		10,452	(7,781)
Reconciliation:
Profit/ (loss) for the year - basic and diluted		10,452	(7,781)
After tax effect of exceptional items and impairment		(1,350)	14,970
Adjusted profit for the year		9,102	7,189
		Number	Number
		'000	'000
Weighted average number of shares - basic		305,552	305,042
Effect of dilutive potential ordinary shares		8,581	-
Weighted average number of shares - diluted		314,133	305,042
		Pence	Pence
Earnings/ (loss) per share - basic		3.42	(2.55)
Earnings/ (loss) per share - diluted		3.32	(2.55)
Earnings/ (loss) per share - basic		3.42	(2.55)
Exceptional items		(0.44)	0.57
Impairment of goodwill and intangible assets		-	4.34
Adjusted earnings per share - basic		2.98	2.36
Earnings/ (loss) per share - basic		3.42	(2.55)
Effect of dilutive potential ordinary shares		(0.10)	-
Earnings/ (loss) per share - diluted		3.32	(2.55)
Exceptional items		(0.42)	-
Adjusted earnings / (loss) per share - diluted		2.90	(2.55)

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. The average number of shares outstanding excludes those held in trust by the Group, which are treated as cancelled.

Diluted earnings per share is calculated on the same basis as the basic earnings per share with a further adjustment to the weighted average number of ordinary shares outstanding to reflect the effect of all dilutive potential ordinary shares. The number of dilutive potential ordinary shares is derived from the number of share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year. As the Group made a loss in the previous year, none of the share options are included in the calculation of diluted earnings per share for 2007.

Adjusted earnings per share which are before exceptional items and impairment has been calculated and disclosed above as the directors consider it provides an additional indication of underlying trading performance. Exceptional items in 2007 and 2008 do not have a tax impact.

6. TRADE AND OTHER RECEIVABLES

	Non-current - Restated (Note 1)		Current
	2008 £000	2007 £000	2008 £000	2007 £000
Trade receivables	-	-	43,241	35,770
Provision for impairment of trade receivables	-	-	(1,070)	(2,290)
Net trade receivables	-	-	42,171	33,480
Corporation tax	-	-	81	-
Overseas tax	268	-	931	836
Other receivables	159	-	2,209	1,433
Prepayments	1,831	1,456	3,737	3,035
Accrued income	-	-	15,063	9,845
	2,258	1,456	64,192	48,629

7. TRADE AND OTHER PAYABLES

	Non-current		Current
	2008 £000	2007 £000	2008 £000	2007 £000
Trade payables	-	-	4,438	2,742
Other payables	1,401	908	2,188	4,878
Accruals	1,547	1,706	13,971	12,406
Deferred revenue	-	-	21,489	16,799
	2,948	2,614	42,086	36,825

8. PROVISIONS

Group	Onerous lease commitments £000	Other Provisions £000	Total £000
At 1 October	2,168	438	2,606
Established during the year	222	581	803
Utilised during the year	(584)	-	(584)
Reversed during the year	-	(35)	(35)
Unwinding of discount	169	40	209
Translation differences	187	28	215
At 30 September 2008	2,162	1,052	3,214
Analysed as:
Current liabilities	575	47	622
Non-current liabilities	1,587	1,005	2,592

Onerous lease commitments disclosed above relate to future estimated losses on sub-let or vacant lease commitments on a number of properties within the group where the lease commitment is expected to be greater than any sub-lease income (where applicable). Amounts provided are for the period up to the first option to break in 2011 on a property lease in Denmark and up to September 2010 for part of the office space at the Group's UK headquarters. As a result of a change in tenancy due to the sale of certain assets and liabilities of Intec Denmark to Volubill SA, an additional provision of £193,000 was established during the year.

The other provisions category relates to the estimated restoration costs of properties primarily within North America and the UK, and is expected to be incurred in the years up to 2010 and 2015 respectively.  

9. STATEMENT OF CHANGES IN EQUITY

Group	Issued share capital £000	Share premium £000	Merger reserve £000	Own shares £000	Foreign exchange reserve £000	Retained earnings £000	Total equity £000
Balance at 1 October	3,057	161,989	249	(95)	(4,020)	(22,102)	139,078
Exchange differences arising on translation of foreign operations	-	-	-	-	1,833	-	1,833
Profit for the year	-	-	-	-	-	10,452	10,452
Total recognised income and expense for the period	-	-	-	-	1,833	10,452	12,285
Issue of share capital net of share issue expenses	3	55	-	-	-	-	58
Recognition of share-based payments	-	-	-	-	-	1,458	1,458
Balance at 30 September 2008	3,060	162,044	249	(95)	(2,187)	(10,192)	152,879

 

END

 

 

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