Interim Results

RNS Number : 6142S

Intec Telecom Systems PLC

21 May 2009

 



Intec Telecom Systems PLC

Thursday 21 May 2009

Interim results for the six months ended 31 March 2009

Intec Telecom Systems PLC (ITL.L/ITL LN, 'Intec', the 'Company' or the 'Group'), a leading supplier of billing and operations support systems to the global telecoms industry, announces its unaudited interim results for the six months ended 31 March 2009. 

	H1 2009 Reported	H1 2008 Reported	Growth Reported	H1 2008 Constant Currency	Growth Constant Currency
Revenue (£m)	80.3	57.2	40%	69.6	15%
Adjusted EBITDA (£m)	12.9	4.8	169%	9.1	42%
Adjusted profit before tax (£m)	11.1	2.2	405%	6.4	73%
Profit before tax (£m)	8.6	2.2	291%	6.4	34%
Basic EPS (p)	2.25	0.48		1.89	19%
Adjusted basic EPS (p)	2.92	0.36		1.77	65%
Net cash (£m)	52.9	24.6	115%	29.7	78%

For definition of constant currency, adjusted EBITDA, adjusted profit before tax and adjusted basic EPS, please see notes on page 2.

Highlights (at constant currency)

• Organic revenue growth up 15% 

• Strong growth in Americas at 35%

• Licence revenue increases by 31%

• Improved profitability before benefit of currency, with adjusted EBITDA margins at 16.1%

• Excellent cash conversion and currency benefit increases actual cash to £52.9m

• Increased customer focus driving improved pipeline and customer wins across all regions

• Ongoing strengthening of delivery model with new management hires

• Continued focus on strategic priorities and cost rationalisation programme 

Commenting on today's results, Andrew Taylor, CEO, said: 

"Against a backdrop of challenging market conditions, I am pleased to report that Intec has delivered its best ever first half results with double digit organic growth in revenue, profitability and cash flow. 

"Achievement of our strategic priorities and the ongoing business optimisation are progressing well. The prevailing global economic conditions have not materially impacted our business performance to date and, as our pipeline continues to improve, we have a higher degree of confidence in delivering our financial targets in 2009 before currency benefits."

A presentation to analysts will be held today at the offices of Financial Dynamics, please contact [e-mail] for further details. The presentation will be available on the website: www.intecbilling.com

Enquiries:

Intec Telecom Systems PLC	www.intecbilling.com
Andrew Taylor, Chief Executive Officer	[phone]
Robin Taylor, Group Finance Director
Financial Dynamics	[phone]
Giles Sanderson/Juliet Clarke/Haya Chelhot

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 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.

Founded in 1997, Intec is listed on the London Stock Exchange (ITL.L) and has over 1,600 staff and 31 offices in 24 countries. For more information visit www.intecbilling.com

NOTES TO THE HIGHLIGHTS

Profit before tax is reconciled to adjusted profit before tax, adjusted EBITDA and adjusted earnings after tax in the table below:

		H1 2009 Reported £000		H1 2008 Reported £000		H1 2008 Constant Currency £000
Profit before tax		8.6		2.2		6.4
Exceptional items		2.1		(0.4)		(0.4)
Amortisation of acquired intangible assets		0.4		0.4		0.4
Adjusted profit before tax	1	11.1		2.2		6.4
Net finance income		(0.5)		(0.3)		(0.4)
Depreciation		1.3		1.7		1.9
Amortisation of other intangible assets		1.0		1.2		1.2
Adjusted EBITDA	2	12.9		4.8		9.1
Adjusted basic EPS calculation:
Profit after tax		6.8		1.5		5.8
After tax impact of exceptional items		2.1		(0.4)		(0.4)
Adjusted earnings after tax	3	8.9		1.1		5.4

Throughout this report:

1 Adjusted profit before tax is stated before exceptional items and amortisation of acquired intangible assets.

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

3 Adjusted earnings after tax excludes the after tax effect of exceptional items from reported profit after tax.

4 The constant currency comparatives have been estimated by translating the 2008 results of overseas subsidiaries at 2009 exchange rates. This disclosure has been provided as a guide to the underlying growth in the business before the effect of the change in exchange rates.

BUSINESS REVIEW

FINANCIAL OVERVIEW

Following a strong set of financial results in 2008, I am pleased to report that Intec has returned its best ever first half performance in the six months ended 31 March 2009, delivering double digit growth in revenues, profitability and cash flow. 

Our performance during the period was characterised by a sustained effort to win and fulfil contracts from both new and existing customers, which led to strong reported organic growth against the comparative period in 2008. As a global business with more than 90% of revenue generated from outside the UK, there was also a significant benefit from currency translation.

OPERATIONAL REVIEW 

During the period, we have made substantial progress against each of the strategic priorities we set out in our 2008 business review.

Focus on delivering profitable revenue growth

The period was typified by improved execution with a relentless focus on sales, delivery and operational efficiencies. We increased revenues and profits from existing customers through up-selling activities and delivered wins across all product categories and all regions. Importantly, we materially improved our targeting and qualification of opportunities and this is now delivering good revenue and contract growth in both emerging and mature markets. 

During the period, we signed six new customer licence deals, extended two licences to new operators under an existing framework agreement and secured 13 licence volume upgrades with existing customers. We have also secured extensions on a number of existing billing contracts, which in conjunction with the volume upgrades, have contributed to the growth in the period. We have increased our pipeline across all regions and have improved visibility for the second half compared to this time last year. We also strengthened our regional management in the Asia-Pacific region with the appointment of a new regional leader, tasked with growing and converting what we believe will become a promising pipeline of opportunity. 

Throughout the first half, we continued our business development activities across the non-Telco domain and the work we are doing on our partnership strategy is at the later stages of management validation.  

Continued efforts to strengthen our global delivery model and improve our execution

We increased our efforts to identify additional ways to simplify and strengthen our global delivery model whilst improving the way that we deliver projects to our customers. We recently announced further consolidation of our managed services operations into our Atlanta regional headquarters, with the closure of our Dallas facility in June. In January, we strengthened the leadership in our off-shore facility in Bangalore and are concentrating our efforts to both broaden and improve the quality of the contribution that the Bangalore team makes to customer projects. We also have a very clear sense of ownership and accountability for our support and maintenance line of business, underlining the importance of both customer satisfaction and recurring support and maintenance revenues to our business. Our focus on quality and excellence is supported through enhanced levels of training and people development across our organisation.

Driving business optimisation and efficiencies across our business 

As part of ongoing activity to optimise our business and identify efficiencies, we have managed our costs tightly and focused our attention on addressing non-revenue and non-customer orientated costs across our business. We have done this while ensuring that we have an organisation that is scaled and skilled to deliver the expected outturn for the year. With the flexibility of our global professional services resource, we believe that, in the event of changing market conditions, we are well placed to react quickly and manage our resource pool effectively. As a result of these efforts, we have increased our adjusted EBITDA margin to 16.1% for the period.

Establishing a clear set of priorities and a "One Intec" vision for the future

While focused on improving the operational and financial performance of our business, we have been very conscious of our commitment to our employees to engage closely with them and create a "One Intec" vision for the future based on clearly defined corporate values, refreshed branding and a new corporate profile for the Group. In May, we successfully introduced this initiative internally across our global business and expect to follow this up with an external launch during the latter part of summer 2009.  

Continued focus to further enhance our financial performance

The prevailing global economic conditions have not materially impacted our business performance to date and, as our pipeline continues to improve, we have a higher degree of confidence in delivering our financial targets in 2009 before currency benefits.

Our focus will continue to be on cost control, the delivery of operational improvements and targeted sales effort to deliver top and bottom line financial performance. 

REVENUE BY REGION AND REGIONAL PERFORMANCE

At the end of 2008, we announced the consolidation of our regional sales structure from four regions to three, with North America and CALA (Caribbean and Latin America) combining into a new organisation serving the Americas. Regional performance against actual and constant currency is compared below:

	H1 2009 Reported	H1 2008 Constant currency	H1 2008 Reported	Growth at constant currency
	£m	£m	£m
EMEA	31.7	30.4	25.7	4%
Americas	36.5	27.0	20.9	35%
Asia-Pacific	12.1	12.2	10.6	(1%)
Total Revenue	80.3	69.6	57.2	15%

Note: constant currency comparisons are made between 2009 reported revenues and those 

of 2008 by applying the average exchange rates for 2009 to the 2008 local currency numbers. 

EMEA (Europe Middle East and Africa)

In EMEA, we increased revenues by 4% in constant currency which, given the maturity and competitive nature of the market, is a very pleasing performance. During the period, we closed eight new licence deals with particular success in the Middle East and Africa which accounted for five of the new customer wins. Throughout the region we had considerable success in up-selling to our existing customer base, securing six volume upgrades and multiple deals for additional services across all key product lines. In particular, we were pleased to announce a multi-million pound volume upgrade with one of the leading telecommunications service providers in Africa. Pipeline development has been a focus during the period and we are pleased with our coverage and visibility. In April, we received the Billing & OSS World 2009 Excellence Award for the 'Best Billing Solution' in recognition of the convergent billing work we have done with Polkomtel.

AMERICAS

We are very pleased to report an overall increase in revenues of 35% in constant currency. This growth is attributed to the good progress on delivery of deals won in 2008 and the success of our re-organised management and sales team in securing five licence volume upgrades and additional services to existing customers across the entire region. We also secured a new licence deal with the largest cable operator in Mexico and just after the period end were pleased to announce a multi-million dollar, three year managed services contract which will be fulfilled from our Americas' headquarters in Atlanta.

Although an improved result, we will concentrate our efforts during the next six months on strengthening our new business pipeline further and ensuring that our activities penetrate both existing and new customer markets resulting in new business wins. Competition and price pressure are evident across the region and, although there has not been a significant impact on our results in this half, we continue to see some signs of deferral in customer decisions as a result of the global economic crisis. 

ASIA-PACIFIC

At the beginning of the year we identified some signs of weakening market conditions in this region. However, following the recent change in our leadership and reorganisation of the sales function, the region has delivered revenues in line with the prior comparative period. Closing deals with new customers continues to be challenging. However, we closed three significant licence deals with existing customers during the period. Looking forward, we believe that the region continues to present a growth opportunity for Intec and we are focused on closing and delivering identified and qualified opportunities during the second half. In March 2009, and in recognition of our market leadership in convergent mediation, Billing China awarded Intec 'the best convergent mediation product' for our IntermediatE product. We also won the Telcomasia Readers' Choice Award for the 'BSS vendor of the year', recognising our strong product positioning across the region. 

REVENUE BY CATEGORY	H1 2009 Reported	H1 2008 Constant currency	H1 2008 Reported	Growth at constant currency
	£m	£m	£m
Licence	15.7	12.0	9.7	31%
Professional Services	34.4	27.1	22.6	27%
Managed Services	8.6	7.9	6.0	9%
Support & Maintenance	19.6	19.4	16.5	1%
Hardware	2.0	3.2	2.4	(38%)
Total Revenue	80.3	69.6	57.2	15%

The revenue mix has improved significantly with a 31% growth in high margin licence revenue. £8.0m of the licence revenue is derived from volume upgrades with existing customers and this has increased by over 60% from the comparative period. Revenue from managed services and support has also increased and these categories have a reduced cost base resulting from the restructuring during the current and prior period. Low margin hardware revenue, not a core revenue category for Intec, has decreased which increases the overall reported gross margin.

On a reported basis our gross margin has improved from 48% in H1 2008 to 51% in H1 2009. After excluding exceptional costs, share-based charges and the charge recognised for our employee incentive plan, the gross margin is 54% compared with 50% in constant currency terms.  

The organisation changes we made in 2008 and in the current year have reduced costs principally through the consolidation of our managed services facilities and we have improved our professional services margins through further investment in our near-shore resources in Malaysia and Brazil. 

COST OF SALES AND OPERATING EXPENSES

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

Expense before SBP and IP	H1 2009 Before £m	SBP/IP £m	H1 2009 Reported £m	H1 2008 Before £m	SBP/IP £m	H1 2008 Reported £m
Cost of sales	(37.1)	(1.4)	(38.5)	(29.0)	(0.1)	(29.1)
Development	(7.4)	(0.6)	(8.0)	(6.6)	(0.0)	(6.6)
Distribution	(11.3)	(0.6)	(11.9)	(8.3)	(0.1)	(8.4)
Admin. expense before forex	(7.8)	(0.9)	(8.7)	(8.2)	(0.4)	(8.6)
Operating expenses	(26.5)	(2.1)	(28.6)	(23.1)	(0.5)	(23.6)
Forex (loss) / gain	(0.3)	-	(0.3)	0.4	-	0.4

Operating expenses as a percentage of revenue declined from 40% in H1 2008 to 33% in H1 2009. On an absolute basis, development costs have increased by £0.8m of which £0.5m is currency related. In H2 2008, we increased our investment in the development function predominantly in South Africa. 

The increase in distribution costs of £3.0m is an underlying increase of £1.6m plus currency impacts of £1.4m and is driven by revenue related costs for sales commissions, investment in global sales management and partnering. We expect to report the benefit of cost actions in this area in H2 2009. 

Administrative costs have reduced from H1 2008 due to lower infrastructure and facility costs and savings associated with staff re-organisation.

Compared to the prior period, we have also recognised costs related to the annual employee incentive plan which reflects the more even distribution of expected earnings between the first and second half. The cost recognised in the first half is £2.5m (H1 2008: £nil). In addition, the share-based charge has increased from £0.6m in H1 2008 to £1.0m in H1 2009 which is primarily related to the increased vesting assumed for share awards under the long-term incentive plans.

TAXATION

The overall tax charge is £1.8m (H1 2008: £0.8m). This represents a tax charge of £2.2m (H1 2008: £0.9m) offset by a deferred tax credit of £0.4m (H1 2008: credit £0.1m). The increase in the tax charge results from a £0.5m increase in taxation on profits in certain territories and a £0.7m increase in withholding tax. The total charge is affected by a number of factors which include the jurisdiction in which contracts are signed and the availability of tax losses brought forward.  

EXCEPTIONAL ITEMS

Exceptional items comprise restructuring costs and additional gains recognized on the DCP business which was sold in November 2007. In H1 2009, we incurred costs of £2.2m for staff severance offset by an £0.1m gain on the estimated additional consideration receivable on certain revenues earned by the new owner of the DCP business, Volubill SA, in the two year period to November 2009. In H1 2008, we incurred re-organisation costs associated with the Mechanicsburg facility closure of £0.4m which have been presented in the comparative results as exceptional costs of £0.4m offset by the initial gain recognized on the DCP disposal of £0.8m resulting in a net exceptional profit of £0.4m in H1 2008.

WORKING CAPITAL AND CASH MANAGEMENT

The balance sheet has strengthened significantly since the prior year end with a cash balance of £52.9m. We continue to operate without any borrowings on our balance sheet given our strong profile of cash generation. Cash conversion from trade receivables and accrued income at the year end resulted in a significant reduction in working capital requirements.

	H1 2009	H1 2008
	£m	£m
Operating cash before working capital	12.2	4.8
Decrease/(increase) in working capital	8.0	(0.4)
Cash generated from operations	20.2	4.4

RISK

Principal risks and uncertainties facing the Group generally, and for the remaining six months of the financial year, are explained on pages 14 and 15 of the Group's 2008 Annual Report. The identified risks are changes within the customer base, exposure to rapidly changing technology, industry standards and customer needs, exposure to economic downturn, highly skilled people retention, increasing complexity and variability of customer contracts, regulatory compliance risks, exposure to foreign exchange transaction and translation risk. A copy of the Group's 2008 annual report is available on our website at www.intecbilling.com. The directors' decision to continue to adopt the going concern basis of preparation in the interim financial statements is explained in Note 1 to the condensed financial statements.

SUMMARY AND OUTLOOK

Intec has delivered excellent results in the first half with double digit organic revenue growth at constant currency and improved profitability. Achievement of our strategic priorities is progressing well and, following the reorganisation and simplification of our regional structure, we have strengthened management across key functions and implemented cost savings to fund investment in our focus areas.

Strong first half performance and improved pipeline visibility gives us a higher degree of confidence in delivering our financial targets in 2009 before currency benefits.

ANDREW TAYLOR

Chief Executive Officer

ROBIN TAYLOR

Group Finance Director

20 May 2009

CONDENSED CONSOLIDATED INCOME STATEMENT

Six months ended 31 March 2009

		Unaudited				Unaudited				Audited
	Note	Six months ended 31 March 2009				Six months ended 31 March 2008				Year ended 30 September 2008
		Before Exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total		Before exceptional items	Exceptional items	Total
		£000	£000	£000		£000	£000	£000		£000	£000	£000
Continuing operations
REVENUE	2	80,288	-	80,288		57,191	-	57,191		135,786	-	135,786
Cost of sales		(38,506)	(905)	(39,411)		(29,070)	(446)	(29,516)		(66,140)	(1,098)	(67,238)
GROSS PROFIT		41,782	(905)	40,877		28,121	(446)	27,675		69,646	(1,098)	68,548
Distribution costs		(11,906)	(152)	(12,058)		(8,419)	-	(8,419)		(18,819)	-	(18,819)
Development expenditure		(7,956)	(416)	(8,372)		(6,588)	-	(6,588)		(14,880)	-	(14,880)
Depreciation and amortisation		(2,704)	-	(2,704)		(3,299)	-	(3,299)		(6,237)	-	(6,237)
Other administrative expenses		(9,011)	(722)	(9,733)		(8,231)	-	(8,231)		(16,643)	-	(16,643)
TOTAL ADMINISTRATIVE EXPENSES		(11,715)	(722)	(12,437)		(11,530)	-	(11,530)		(22,880)	-	(22,880)
OPERATING PROFIT/ (LOSS)		10,205	(2,195)	8,010		1,584	(446)	1,138		13,067	(1,098)	11,969
Other gains and losses	3	-	132	132		-	804	804		-	1,350	1,350
Finance income		530	-	595		359	-	359		752	-	752
Finance costs		(3)	-	(68)		(51)	-	(51)		(321)	-	(321)
PROFIT/ (LOSS) BEFORE TAX		10,732	(2,063)	8,669		1,892	358	2,250		13,498	252	13,750
Income tax expense	4	(1,802)	9	(1,793)		(792)	-	(792)		(3,298)	-	(3,298)
PROFIT/ (LOSS) FOR THE PERIOD ATTRIBUTABLE TO EQUITY SHAREHOLDERS		8,930	(2,054)	6,876		1,100	358	1,458		10,200	252	10,452
EARNINGS/ (LOSS) PER SHARE (PENCE)		Pence	Pence	Pence		Pence	Pence	Pence		Pence	Pence	Pence
-  basic and adjusted basic	5	2.92	(0.67)	2.25		0.36	0.12	0.48		3.34	0.08	3.42
-  diluted and adjusted diluted	5	2.80	(0.65)	2.15		0.35	0.11	0.46		3.24	0.08	3.32

CONDENSED CONSOLIDATED BALANCE SHEET

31 March 2009

	Note	Unaudited 31 March 2009		Unaudited 31 March 2008		Audited 30 September 2008
		£000		£000		£000
NON-CURRENT ASSETS
Goodwill		93,022		93,022		93,022
Other intangible assets		6,711		7,915		7,443
Property, plant and equipment		7,461		5,874		5,455
Trade and other receivables	6	2,649		1,238		2,258
Deferred tax asset		2,160		3,141		1,791
		112,003		111,190		109,969
CURRENT ASSETS
Trade and other receivables	6	61,158		44,817		64,192
Cash and cash equivalents		52,916		24,598		28,927
		114,074		69,415		93,119
TOTAL ASSETS		226,077		180,605		203,088
EQUITY
Share capital		3,060		3,059		3,060
Share premium account	10	162,044		162,014		162,044
Merger reserve		249		249		249
Own shares		(95)		(95)		(95)
Translation and other reserves		10,441		(3,087)		(2,187)
Retained earnings		(2,350)		(20,064)		(10,192)
TOTAL EQUITY		173,349		142,076		152,879
NON-CURRENT LIABILITIES
Other payables	7	3,233		2,855		2,948
Deferred tax liabilities		452		428		601
Bank loan and other borrowings		230		145		194
Provisions	9	2,980		2,131		2,592
		6,895		5,559		6,335
CURRENT LIABILITIES
Trade and other payables	8	43,629		31,626		42,086
Current tax liabilities		1,317		474		770
Bank loan and other borrowings		247		265		396
Provisions	9	640		605		622
		45,833		32,970		43,874
TOTAL LIABILITIES		52,728		38,529		50,209
TOTAL EQUITY AND LIABILITIES		226,077		180,605		203,088

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 31 March 2009

	Share Capital	Share premium account	Merger reserve	Own shares	Translation reserves	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Six months ended 31 March 2009
Balance at 1 October 2008	3,060	162,044	249	(95)	(2,187)	(10,192)	152,879
Exchange differences arising on translation of foreign operations	-	-	-	-	12,628	-	12,628
Profit for the period	-	-	-	-	-	6,876	6,876
Total recognised income and expense for the period	-	-	-	-	12,628	6,876	19,504
Recognition of share-based payments	-	-	-	-	-	966	966
Balance at 31 March 2009	3,060	162,044	249	(95)	10,441	(2,350)	173,349
Six months ended 31 March 2008
Balance at 1 October 2007	3,057	161,989	249	(95)	(4,020)	(22,102)	139,078
Exchange differences arising on translation of foreign operations	-	-	-	-	933	-	933
Profit for the period	-	-	-	-	-	1,458	1,458
Total recognised income and expense for the period	-	-	-	-	933	1,458	2,391
Issue of share capital net of share issue expenses	2	25	-	-	-	-	27
Recognition of share-based payments	-	-	-	-	-	580	580
Balance at 31 March 2008	3,059	162,014	249	(95)	(3,087)	(20,064)	142,076
Year ended 30 September 2008
Balance at 1 October 2007	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 period	-	-	-	-	-	10,452	10,452
Total recognised income and expense for the year	-	-	-	-	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

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six months ended 31 March 2009

		Unaudited Six months ended 31 March 2009		Unaudited Six months ended 31 March 2008		Audited Year ended 30 September 2008
	Note	£000		£000		£000
Operating profit		8,010		1,138		11,969
Adjustments for:
Depreciation of property, plant and equipment		1,321		1,681		3,076
Amortisation of intangible assets		1,170		1,408		2,741
Amortisation of capitalised development expenditure		213		210		420
Amortisation of capitalised project costs		481		-		296
(Gain)/ loss on disposal of property, plant and equipment		(2)		5		28
Share-based payment expense		966		580		1,458
Increase/ (decrease) in provisions		89		(252)		40
Operating cash flows before movements in working capital		12,248		4,770		20,028
Decrease/ (increase) in receivables		13,287		4,463		(11,171)
(Decrease)/increase in payables		(5,326)		(4,823)		3,511
Cash generated by operations		20,209		4,410		12,368
Income taxes paid (net)		(1,015)		(937)		(2,462)
Net cash generated by operating activities		19,194		3,473		9,906
Investing activities
Interest received		441		359		751
Purchase of property, plant and equipment		(2,123)		(842)		(1,783)
Purchase of intangible assets		(65)		(174)		(259)
Expenditure on other intangible assets		-		(1,947)		(2,842)
Proceeds on disposal of property, plant and equipment		6		122		136
Net proceeds on disposal of business	3	350		428		538
Net cash used in investing activities		(1,391)		(2,054)		(3,459)
Financing activities
Interest paid		(8)		(3)		(34)
Interest element of finance lease rental payments		(12)		(11)		(98)
Proceeds on issue of shares		-		27		57
Repayments of obligations under finance leases		(246)		(311)		(427)
Net cash used in financing activities		(266)		(298)		(502)
Net increase in cash and cash equivalents		17,537		1,121		5,945
Cash and cash equivalents at beginning of period		28,927		22,580		22,580
Effect of foreign exchange rates		6,452		897		402
Cash and cash equivalents at end of period		52,916		24,598		28,927

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL INFORMATION  

Six months ended 31 March 2009

1.    BASIS OF PREPARATION

The interim condensed consolidated financial statements for the six months ended 31 March 2009 have been prepared in accordance with the requirements of the Listing Rules and International Accounting Standard 34, Interim Financial Reporting.

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in preparation of the Group's annual financial statements for the year ended 30 September 2008. The annual financial statements of Intec Telecom Systems PLC are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the European Union. 

The financial information in this report is neither reviewed nor audited and does not comprise statutory accounts for the purposes of Section 435 of the Companies Act 2006. No statutory accounts for the period have been delivered to the Registrar of Companies.

The condensed information for the year ended 30 September 2008 is based upon the Group's audited accounts. The statutory accounts for the year ended 30 September 2008 have been delivered to the Registrar of Companies. The auditor's report on those was not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying the report and did not contain a Statement under either Section 498(2) or Section 498(3) of the Companies Act 2006.

The 2008 results have been expanded to disclose separately the one-time charge for the closure of the Mechanicsburg facility in order to provide additional clarity of the underlying results for the comparative period. 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the business review. The financial position of the Group, including working capital and cash management, is also described in the business review.

The Directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue to operate for the foreseeable future. Accordingly, they continue to adopt the going concern basis in the interim financial statements.

2. SEGMENTAL INFORMATION

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

From 1 October 2008, two of the Group's key geographical segments comprising North America and Caribbean and Latin America (CALA) have been combined for operational reasons. As a consequence the segmental analysis disclosed in this note now comprises three key geographical segments comprising Europe, Middle East and Africa (EMEA), Americas, 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. The 2008 numbers have been restated to provide comparable information. 

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.

Inter-segment 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. As a result of the combination of North America and CALA, the 2008 numbers have been restated accordingly.

Continuing operations Six months ended 31 March 2009	EMEA	Americas	Asia-Pacific	Product operations	Unaudited Total
	2009	2009	2009	2009	2009
	£000	£000	£000	£000	£000
Gross revenue	31,659	37,067	12,144	6,851	87,721
Inter-segment revenue	-	(582)	-	(6,851)	(7,433)
Revenue	31,659	36,485	12,144	-	80,288
Gross expenses	19,218	29,257	8,814	14,882	72,171
Inter-segment expenses	(3,249)	(1,832)	(2,352)	-	(7,433)
Expenses	15,969	27,425	6,462	14,882	64,738
Segment profit/ (loss) before exceptional items	15,690	9,060	5,682	(14,882)	15,550
Exceptional items	(222)	(1,113)	(207)	(160)	(1,702)
Segment profit/ (loss)	15,468	7,947	5,475	(15,042)	13,848
Unallocated costs:
- operating corporate costs					(5,346)
- corporate costs - exceptional					(492)
Operating profit					8,010
Other gains and losses					132
Finance income					595
Finance costs					(68)
Profit on ordinary activities before tax					8,669
Taxation					(1,793)
Profit for the period					6,876

Continuing operations Six months ended 31 March 2008	EMEA	Americas	Asia-Pacific	Product operations	Unaudited Total
	2008	2008	2008	2008	2008
	£000	£000	£000	£000	£000
Gross revenue	25,730	21,685	10,550	4,345	62,310
Inter-segment revenue	-	(774)	-	(4,345)	(5,119)
Revenue	25,730	20,911	10,550	-	57,191
Gross expenses	17,361	19,191	7,125	12,294	55,971
Inter-segment expenses	(2,835)	(648)	(1,636)	-	(5,119)
Expenses	14,526	18,543	5,489	12,294	50,852
Segment profit/ (loss) before exceptional items	11,204	2,368	5,061	(12,294)	6,339
Exceptional items	-	(446)	-	-	(446)
Segment profit/ (loss)	11,204	1,922	5,061	(12,294)	5,893
Unallocated costs:
- corporate costs					(4,755)
Operating profit					1,138
Other gains and losses					804
Finance income					359
Finance costs					(51)
Profit on ordinary activities before tax					2,250
Taxation					(792)
Profit for the period					1,458

Revenue by type	Unaudited Six months ended 31 March 2009		Unaudited Six months ended 31 March 2008		Audited Year ended 30 September 2008
	£000		£000		£000
Licence	15,721		9,645		30,377
Professional services income	34,434		22,584		52,988
Managed services	8,591		6,026		12,299
Support and maintenance fees	19,599		16,530		34,598
Hardware	1,943		2,406		5,524
Total revenue by activity	80,288		57,191		135,786

3.    EXCEPTIONAL ITEMS

Exceptional items comprise items of income and expense that are material in amount which merit separate disclosure in order to provide an understanding of the Group's underlying financial performance. Examples of events giving rise to the disclosure of material items of income and expense as exceptional items include, but are not limited to, impairment events, restructuring of Intec's operations, onerous lease provisions and profits and losses on sale of businesses. Exceptional items are as follows:

		Unaudited 31 March 2009		Unaudited 31 March 2008		Audited 30 September 2008
		£000		£000		£000
Disposed business	a)	151		804		1,182
Other gains	b)	(19)		-		168
Exceptional costs	c)	(2,195)		(446)		(1,098)
		(2,063)		358		252

a)  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 license sales recognized by Volubill for a period of two years from completion. During the period the estimated additional consideration increased from £451,000 to £602,000. Accordingly an updated table is set out below.

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	602
Working capital adjustments	(572)
Net consideration	1,030
Profit on disposal before adjustments	1,448
Costs attributable to the disposal	(217)
Translation differences	102
Profit on disposal	1,333
Split as:
Recognised to 30 September 2008	1,182
Recognised for the 6 months to 31 March 2009	151

Net cash flows in respect of the disposed business are as follows:
Initial consideration	1,000
Additional consideration received	460
Working capital payments	(572)
Net proceeds on disposal of business	888
Split as:
Net proceeds to 30 September 2008	538
Net proceeds to 31 March 2009	350

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

c) Exceptional costs in 2009 comprise group-wide restructuring costs, including termination pay on staff redundancies amounting to £2.1 million and £0.1 million for closure costs of the Dallas facility. In 2008, the restructuring costs attributable to the closure of the Mechanicsburg facility were £0.4 million up to 31 March 2008 and £1.1 million for the year ended 30 September 2008.

4. INCOME TAX EXPENSE

	Unaudited 31 March 2009		Unaudited 31 March 2008		Audited 30 September 2008
	£000		£000		£000
Current taxation:
UK corporation tax at 28% (2008: 29%)	-		-		-
Foreign tax	2,153		846		1,800
	2,153		846		1,800
Adjustments in respect of prior years
UK corporation tax	-		-		(81)
Foreign tax	75		34		164
	75		34		83
Total current tax expense	2,228		880		1,883
Deferred taxation:
UK	(503)		(328)		-
Foreign	68		240		1,415
Total deferred taxation	(435)		(88)		1,415
Total income tax	1,793		792		3,298

Tax for the six month period is charged at 28% (six months ended 31 March 2008 - 30%, year ended 30 September 2008 - 29%), representing the best estimate of the average annual effective tax rate expected for the full year, applied to pre-tax income of the six-month period.

5. EARNINGS PER SHARE

	Unaudited Six months ended 31 March 2009		Unaudited Six months ended 31 March 2008		Audited Year ended 30 September 2008
	£000		£000		£000
Profit for the period	6,876		1,458		10,452
After tax effect of exceptional items	2,054		(358)		(252)
Adjusted profit for the period	8,930		1,100		10,200
	Number		Number		Number
	'000		'000		'000
Weighted average number of shares - basic	305,996		305,443		305,552
Effect of dilutive potential ordinary shares	13,138		8,602		8,581
Weighted average number of shares - diluted	319,134		314,045		314,133
	Pence		Pence		Pence
Basic earnings per share	2.25		0.48		3.42
After tax effect of exceptional items	0.67		(0.12)		(0.08)
Adjusted basic earnings per share	2.92		0.36		3.34
Basic earnings per share	2.25		0.48		3.42
Effect of dilutive potential ordinary shares	(0.10)		(0.02)		(0.10)
Diluted earnings per share	2.15		0.46		3.32
After tax effect of exceptional items	0.65		(0.11)		(0.08)
Adjusted diluted earnings per ordinary share	2.80		0.35		3.24

6. TRADE AND OTHER RECEIVABLES

		Unaudited 31 March 2009		Unaudited 31 March 2008		Audited 30 September 2008
		£000		£000		£000
Non-current:
Overseas tax		389		-		268
Other receivables		435		-		159
Prepayments		1,825		1,238		1,831
		2,649		1,238		2,258
Current:
Trade debtors		35,587		29,005		42,171
Corporation tax		-		-		81
Overseas tax		683		872		931
Other receivables		1,178		1,701		2,209
Prepayments		4,949		2,363		3,737
Accrued income		18,761		10,876		15,063
		61,158		44,817		64,192

7. NON-CURRENT LIABILITIES - OTHER PAYABLES

		Unaudited 31 March 2009		Restated Unaudited 31 March 2008		Audited 30 September 2008
		£000		£000		£000
Other payables		1,500		968		1,401
Accruals		1,733		1,887		1,547
		3,233		2,855		2,948

8. TRADE AND OTHER PAYABLES

		Unaudited 31 March 2009		Unaudited 31 March 2008		Audited 30 September 2008
		£000		£000		£000
Trade payables		4,732		3,206		4,438
Other payables		2,189		2,427		2,188
Accruals		12,223		7,245		13,971
Deferred revenue		24,485		18,748		21,489
		43,629		31,626		42,086

9. PROVISIONS

	Onerous lease commitments		Other provisions		Unaudited Total
	£000		£000		£000
At 1 October 2008	2,162		1,052		3,214
Established during the period	469		-		469
Utilised/paid during the period	(342)		(15)		(357)
Unwinding of discount	52		(83)		(31)
Translation differences	289		36		325
At 31 March 2009	2,630		990		3,620
Analysed as:
Current liabilities	585		55		640
Non-current liabilities	2,045		935		2,980
	2,630		990		3,620

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 brought forward are for the period up to the first option to break in 2011 on a property lease in Denmark and for part of the office space at the Group's UK headquarters up to September 2010. As a result of the change in the economic outlook related to sub-letting of properties, an additional provision of £469,000 was established during the period which now covers the period to September 2012.

Other provisions disclosed above mainly relate to the estimated restoration costs of properties primarily in North America, and is expected to be incurred in the years up to 2010.

10. POST BALANCE SHEET EVENT - CAPITAL RECONSTRUCTION

On 29 April 2009, the High Court of Justice consented to the cancellation of the Company's share premium account, which was approved by shareholders at a general meeting on 14 April 2009 and subsequently registered by Companies House on 6 May 2009. Cancellation of the £162.0 million in the share premium account has enabled the Company to eliminate the accumulated deficit on its profit and loss account.

CAUTIONARY STATEMENT

This Interim Management Report ('IMR') has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed. The IMR should not be relied on by any other party or for any other purpose.

The IMR contains certain forward looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward looking financial information.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been presented in accordance with IAS 34 "Interim Financial Reporting";

• the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

• the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By order of the Board

Robin Taylor	Andrew Taylor
Group Finance Director	Chief Executive Officer
20 May 2009	20 May 2009

 

END

 

 

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