Preliminary Results

Intec Telecom Systems PLC 21 November 2000 Intec Telecom Systems PLC Audited preliminary results for the year ended 30 September 2000 Strong revenues and earnings exceed market expectations Intec Telecom Systems PLC (LSE:ITL, 'Intec' or 'the Company'), the world's leading provider of third party packaged interconnect billing and settlement software, today announces its audited results for the year ended 30 September 2000. The Company is pleased to report revenues and earnings in excess of market expectations, including 140% turnover growth and strong profitability. The Company has also announced today full details of its proposed US$245 million acquisition of convergent mediation specialist Computer Generation, Inc. FINANCIAL AND OPERATING HIGHLIGHTS * Revenues for the year ended 30 September 2000 increased by 140% to £20.3 million (year ended 30 September 1999: £8.4m) * Earnings before interest, tax, depreciation, amortisation and exceptional flotation expenses ('EBITDA') increased significantly to £4.5m (year ended 30 September 1999: loss of £158,000). * Operating profit including associate increased to £3.3 million compared to a loss of £368,000 for the year ended 30 September 1999. * Customer base increased by 34 contracted installations, with major new sites in Eastern Europe, Latin America, the Far East and the Caribbean. * Global expansion continues as planned, with new offices in Eastern Europe, South America, Scandinavia and Asia-Pacific. * Acquisitions concluded in Malaysia (i2i), and agreed in United States (Computer Generation). * May 2000 private placing and June 2000 IPO raised net cash of almost £40 million. * Strong order book and prospect list for 2001. Highlights post-IPO The Company has made signi?cant progress in meeting the Group's milestones and strategic targets as set out in the Global Offer (Listing) Prospectus issued by the Company on 9 June 2000, including: * exceeding the Group's target of 70 contracted installations of InterconnecT or InterconnecT ITU or InterconnecT ASP by 30 September 2000. The Group increased the size of its customer base to 73 installations as at 30 September 2000 (60 as at the Global Offer). The Group is also on course to achieve its target of 85 to 90 installations by 31 March 2001. * the announcement, on 7 November 2000, of the acquisition of i2i, a competing inter-carrier billing solution provider based in Malaysia; * geographical penetration - the Group has followed the completion of its implementation of InterconnecT in Eastern Europe at SPT with further projects in Hungary (Matav) and Poland (TPSA). Additionally, the Directors believe that the Group's two implementations in Taiwan demonstrate the success of the newly formed Asian offices; * progress with the restructuring and expansion of the direct sales organisation to address new markets and growing business opportunities; * the signing of a marketing agreement with CompGen and the sale of CompGen's mediation solution to HanseNet in Germany and Planet eCom in Italy. The Group has also won 3 mediation pre-configuration deals; * the signing of new contracts for the supply of InterconnecT ITU with major customers, Swisscom and an Eastern European PTT * an increase in total staff numbers post-IPO from 183 to 239. Since 30 September 2000, Intec has continued to trade strongly particularly through the strengthening of its strategic customer relationships including: * a new relationship with T-Mobile relating to all its subsidiaries outside Germany (as announced on 20 October 2000); * increasing the depth of its relationship with France Telecom. France Telecom has ceased developing an in-house interconnect billing product and will, instead, be offering an ASP capability in each of the 80 plus countries where it has operations; * the strengthening of its partnership relationships - the T-Mobile relationship (as described above) was signed via Logica. Chairman's Statement Intec Telecom Systems PLC - Full year results to 30 September 2000 2000 has been an exceptional year for Intec Telecom Systems by any measure, and it is a pleasure to be able to report some of the highlights of the last twelve months. During the twelve months ended 30 September 2000, Group turnover grew by 140% to £20.3 million, exceeding market expectations by a good margin. As a result, our profitability before tax and exceptional items was also significantly higher than predicted, at £4.4 million. Adjusted earnings per share in this our first year as a listed company were 2.67p. Our revenue growth can be attributed to a number of factors working together. Firstly, recognition in the marketplace by telecoms companies that effective interconnect billing is an activity that contributes substantially to network revenue assurance in a highly competitive market. Secondly, by investing in sales support, marketing, support and product development, we have accelerated take-up of our solutions in all major deregulated markets, including Western and Central Europe, Latin America, and the Asia-Pacific region. Finally, I believe we are increasingly approaching our objective of our product being recognised as the de facto market standard for interconnect billing. As a result, during the year we secured many new, high profile customers, including a number of national PTTs and leading mobile operators. Our growth has meant substantial investment in many areas, foremost among them our professional staff. We have hired in all areas, but particularly in sales, support and development, with many people joining Intec in the new offices we opened to serve key markets, including Brazil, Malaysia and an associate in Poland. After our business growth, the most notable achievement this year is our successful flotation and listing as a public company on the London Stock Exchange on 16 June. During a period when market confidence in technology stocks was low, the shares we made available to the market were oversubscribed by more than ten times, and subsequently traded very strongly above the opening price. Since June, the market has responded very positively to our messages and results and we were admitted to both the FTSE250 and techMARK100 indices in mid-September. As part of the listing process, we were pleased to welcome to our Board three non-executive Directors with outstanding credentials as leading figures in our industry. Gordon Crawford is Executive Chairman, Chief Executive and founder of London Bridge Software Holdings plc, and brings valuable experience of building and running an international software business as a listed entity. Edward Astle is currently Non-executive Chairman of Dataflex Plc, one of Europe's leading suppliers of telecoms technology. Previously a main board Director of Cable and Wireless plc, Edward brings us large company experience, and a strong vision of the future of telecoms. Ceri James was co-founder of Admiral plc and his experience in growing this highly-regarded company to FTSE 250 status will be invaluable to us. Intec has embarked on a number of acquisitions of companies within the telecoms software sector, including i2i of Malaysia (concluded in November) and Computer Generation Inc. These acquisitions fulfil the commitment we made at the time of our Listing to seek global opportunities to expand the size and strength of the Group by moving into new areas that complement our existing business. I believe these and other opportunities will lead to continuing growth in Shareholder value. One of the key benefits of Listing is to be able to widen our ownership base to include both staff and major new investors. All staff now have the opportunity to participate in our share options scheme, and this has already proven to be a major advantage in our ability to attract, motivate and retain staff. It is also pleasing to see the large number of institutional investors, both in the UK and abroad, who have understood the strength of our business model and vision, and have not only invested in us, but have subsequently supported our growth initiatives. Looking forward, the telecoms industry continues to be increasingly dynamic, with new operators and licences, new technologies, and new acquisitions and alliances announced regularly. All these factors drive traffic volumes upward, while increasing competition puts pressure on revenue streams. We see good billing practice playing a growing role in this industry, and the outlook for Intec is therefore very positive. With the gradual but inevitable change to a communications business based on IP technology, and the deep impact this must have on the way communications services are charged for, I believe Intec is also well placed to provide the billing and related systems on which companies in this market will rely. In particular, our intended acquisition of Computer Generation, Inc. will give Intec additional capabilities in the IP domain and will ensure that the Company remains at the forefront of development in this exciting space. We look forward to 2001 with confidence. Mike Frayne, Executive Chairman. Commenting on the results, Kevin Adams, Chief Executive Officer said: Intec has developed dramatically, feeding the tremendous appetite in telecommunications companies for our solution, 2000 being the year when the hard work and investment of the previous three years has begun to filter through in financial terms. Our revenue has grown 140% to £20.3 million and is materially ahead of market expectations, likewise we have produced operating profits including share of associate of £3.3 million. We moved into profit in the first half of the year, and strong sales in Q3 and Q4 have added substantially to that result. Perhaps most notably, we have seen both an increase in overall order value, as InterconnecT is increasingly chosen by the major players to upgrade or replace other systems, and a number of high value infrastructure contracts with companies like France Telecom and T-Mobile International AG. France Telecom intends to install InterconnecT in its Global One and Orange subsidiaries, while T-Mobile International, a part of Deutsche Telekom, is making InterconnecT available to subsidiaries across Central and Eastern Europe. In other parts of the world we are breaking strongly into new markets, with significant wins in many regions, including Taiwan, Brazil, Singapore, the Netherlands, Greece, Poland, Africa and the Caribbean. The breadth of countries in which we have been successful underlines the generally global nature of the telecoms market, and the wide applicability of our product range. Between September 1999 and September 2000 we increased our headcount from 122 to 239 people. This is a significant achievement, given the general pressure in the IT and telecoms industry for well-qualified staff. A majority of Intec staff now work outside of the UK, in our global sales and support offices, or in our development centre in Cape Town. Outlook The telecoms industry is undergoing a period of exceptionally rapid change, driven by both commercial and technical factors. Traffic growth continues to be strong, counterbalancing to a great extent the long-term trend for per-call revenues to decrease. Nevertheless, more efficient use of networks to generate revenues is a growing necessity, and systems that assure revenue streams, to which interconnect charges are typically the first or second largest contributor, are vital. Interconnect billing, and associated activities that use data derived from it, such as Least Cost Routing or Fraud Prevention, are priority investments for many telcos, judging by our strong prospect list. On the technical side, developments in the mobile world particularly are driving the industry forward, with many new operator licences awarded or in progress at this time. GSM is booming, and we expect 3G technologies to follow a similar trend. We expect to continue our success in winning customers in these areas. However, the fixed line world is not standing still, and the massive growth of Internet call volumes currently shows no sign of abating. Our global focus, looking at markets that are developing rapidly through competition and deregulation in areas like Eastern Europe and South America, recognises the potential for new InterconnecT licence sales in a new generation of operators serving high-population, high mobile-penetration markets. Beyond these immediate developments, we foresee a growing requirement for billing technology capable of handling a new type of interconnect-like business-to-business relationship, between non-telco organisations (retailers, banks, content providers, etc) and communications enablers. We anticipate that in the telecoms world that new sources of revenue will be required to sustain and recoup current investment levels in new licences and technologies. We see great future potential in this market, and we are already looking at the products and technologies required. I believe, therefore, that 2001 will be as rewarding and exciting for Intec Telecom Systems, and its investors, staff and partners, as 2000 has been. For further information: Intec Telecom Systems PLC +44 7768 808082 / +44 (0) 1483 745800 Andrew Rodaway andrew.rodaway@intec-telecom-systems.com Cubitt Consulting +44 (0) 20 7367 5100 Fergus Wylie/Serra Konuralp Serra.konuralp@cubitt.com Intec Telecom Systems PLC Results for the Year ended 30 September 2000 Financial Highlights Year ended 30 September 2000 1999 £000 £000 Revenue Note 20,279 8,433 EBITDA before exceptional 4,520 (158) flotation costs Operating profit/(loss) (i) 3,313 (368) Adjusted profit before tax (ii) 4,416 (556) Basic earnings/(loss) per share 2.17p (0.59)p Adjusted earnings/(loss) (iii) 2.67p (0.59)p per share Diluted earnings/(loss) per share 2.16p (0.59)p Notes: (i) Operating profit/(loss) is group operating profit/(loss) of £3,160,000 and share of associates operating profit of £153,000. (ii) Adjusted profit before tax for the year ended 30 September 2000 is FRS3 profit before tax of £3,837,000 after excluding exceptional flotation costs of £579,000. (iii) Adjusted earnings per share is calculated on profit after tax of £2,880,000 after excluding the after tax effect of exceptional flotation costs calculated as £556,000 and the amortisation of intangible assets of £100,000. KEY CUSTOMER DATA Period Ended: September September September September 1997 1998 1999 2000 Cumulative: Contracted customer base 8 18 33 56 Contracted installations InterconnecT 8 18 36 62 InterconnecT ITU 0 1 2 7 InterconnecT ASP 0 0 1 4 Total 8 19 39 73 Intec Telecom Systems PLC Consolidated Profit and Loss Accounts Year ended 30 September 2000 1999 £000 £000 TURNOVER Continuing operations 19,988 8,433 Acquisitions 291 - Total turnover 20,279 8,433 Development expenditure (2,013) (1,385) Other cost of sales (6,514) (3,066) Total cost of sales (8,527) (4,451) Gross profit 11,752 3,982 Distribution costs (4,274) (2,264) Exceptional flotation costs (579) - Other administrative expenses (3,739) (2,086) Total administrative expenses (4,318) (2,086) OPERATING PROFIT/(LOSS) Continuing operations 3,441 (368) Acquisitions (281) - Group operating profit/(loss) 3,160 (368) Share of operating profit in 153 - associate Interest receivable and similar 642 17 income Interest payable and similar (118) (205) charges: PROFIT/(LOSS) ON ORDINARY 3,837 (556) ACTIVITIES BEFORE TAXATION Tax charge on profit/(loss) on (957) (188) ordinary activities PROFIT/(LOSS) ON ORDINARY 2,880 (744) ACTIVITIES AFTER TAXATION AND RETAINED PROFIT/(LOSS) FOR THE FINANCIAL YEAR Earnings/(loss) per share - basic 2.17p (0.59)p Earnings/(loss) per share - adjusted 2.67p (0.59)p Earnings/(loss) per share - diluted 2.16p (0.59)p Intec Telecom Systems PLC Consolidated statement of total recognised gains and losses Year ended 30 September 2000 1999 £000 £000 PROFIT/(LOSS) FOR THE FINANCIAL YEAR 2,880 (744) Exchange translation differences arising 17 - on foreign currency net investments TOTAL RECOGNISED GAINS AND LOSSES IN THE 2,897 (744) YEAR Reconciliation of movements in consolidated shareholders' funds Year ended 30 September 2000 1999 £000 £000 Profit/(loss) for the financial year 2,880 (744) Other recognised gains and losses 17 - relating to the year Issue of share capital net of 40,018 - associated expenses Increase/(decrease) in 42,915 (744) shareholders' funds Opening shareholders' deficit (1,365) (621) Closing shareholders' 41,550 (1,365) funds/(deficit) Intec Telecom Systems PLC Consolidated Balance Sheets As at 30 September 2000 1999 £000 £000 FIXED ASSETS Intangible assets 1,863 - Tangible assets 1,692 768 Investments 665 - 4,220 768 CURRENT ASSETS Debtors 13,794 4,106 Investments 18,970 - Cash at bank and in hand 12,495 79 45,259 4,185 CREDITORS: falling due within one (5,827) (1,664) year NET CURRENT ASSETS 39,432 2,521 TOTAL ASSETS LESS CURRENT 43,652 3,289 LIABILITIES CREDITORS: falling due after more (125) (3,626) than one year Deferred income (1,977) (1,028) TOTAL NET ASSETS/(LIABILITIES) 41,550 (1,365) CAPITAL AND RESERVES Called up share capital 1,485 2 Share premium account 38,535 - Merger reserve 249 249 Foreign exchange reserve 17 - Profit and loss account 1,264 (1,616) EQUITY SHAREHOLDERS' 41,550 (1,365) FUNDS/(DEFICIT) Intec Telecom Systems PLC Consolidated cash flow statement Year ended 30 September Note 2000 1999 £000 £000 Net cash (outflow) / inflow from operating (I) (4,889) 749 activities Returns on investments and servicing of finance Interest received 628 17 Interest element of finance lease rental (19) - payments Interest paid (120) (205) 489 (188) Taxation Overseas taxation paid (53) (198) Capital investment Payments to acquire tangible fixed assets (1,458) (225) Payment to acquire Intellectual Property (1,872) - Rights Proceeds on disposal of fixed assets 25 - (3,305) (225) Acquisitions Investment in associated undertakings (5) - Investment in subsidiary (5) - Net cash acquired with subsidiary 14 - 4 - Cash (outflow)/inflow before management (7,754) 138 of liquid resources and financing Use of liquid resources Increase in term deposits (18,291) - Escrow account (679) Financing Issue of ordinary share capital 43,090 - Share issue costs charged to the share (3,839) - premium account Capital element of finance lease payments (111) - Increase in cash in the period (II,III) 12,416 138 Intec Telecom Systems PLC Notes to the cash flow statement (I) Reconciliation of operating profit/loss) to net cash (outflow)/inflow from operating activities 2000 1999 £000 £000 Operating profit/(loss) 3,160 (368) Shares gifted to employees 214 - Depreciation 528 210 Amortisation of intangible assets 100 - (Profit)/loss on disposal of fixed assets (1) 8 Increase in debtors (9,475) (1,512) Increase in creditors 585 2,411 Net cash (outflow) / inflow from operating (4,889) 749 activities The net cash outflow from operating activities includes the repayment of amounts owed to the former immediate parent company of £2.8 million. (II) Reconciliation of net cash flow to movement in net funds/(debt) 2000 1999 £000 £000 Increase in cash in the year 12,416 138 Cash outflow from decrease in lease financing 111 - Cash outflow from increase in liquid resources 18,970 - Change in net funds resulting from cashflows 31,497 138 Amounts owed to former parent company 3,382 (865) New finance lease - (355) Movement in net funds/(debt) 34,879 (1,082) Net debt at 1 October (3,658) (2,576) Net funds/(debt) at 30 September 31,221 (3,658) (III) Analysis of movement in net funds/(debt) Other Cash non-cash 1999 flow transactions 2000 £000 £000 £000 £000 Cash in hand and at bank 79 12,416 - 12,495 Amounts owed to (3,382) - 3,382 - former parent company Finance leases (355) 111 - (244) Current asset - 18,970 - 18,970 investment Total (3,658) 31,497 3,382 31,221 (IV) Non cash transactions At 31 March 2000, the amounts owed to Bayswater International Limited were reclassified as creditors falling due within one year and therefore taken into working capital. At the 30 September 2000, the balance had been repaid in full. NOTES TO THE ACCOUNTS 1 Basis of preparation The financial information set out in this preliminary announcement does not comprise statutory accounts for the purpose of Section 240 of the Companies Act 1985. The statutory accounts for the year ended 30 September 2000 have been submitted for filing with the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 237(2) or 237(3) Companies Act 1985. The comparative information has been derived from the statutory accounts of Independent Technology Systems Limited, which will be filed with the Registrar of Companies. Adjustments to the comparative information are described in note 2 below. 2 Corporate restructuring During the period a corporate restructuring was carried out involving the introduction of a new holding company, Intec Telecom Systems Limited. The Company was incorporated under the name Alnery No. 1961 Limited on 22 February 2000 and changed its name to Intec Telecom Systems Limited on 16 March 2000. On 19 April 2000 the Company acquired the entire issued share capital of Independent Technology Systems Limited in a one for one share exchange. Intec Telecom Systems Limited re-registered as a public limited company under Section 43 of the Companies Act 1985 and changed its name to Intec Telecom Systems PLC. The Company was listed on the London Stock Exchange on 16 June 2000. The restructuring has been accounted for using merger accounting principles as the directors consider this necessary in order to meet the overriding requirement of the Companies Act 1985 to show a true and fair view. The financial information presents the results of the group as if Intec Telecom Systems PLC was the parent company throughout the current and preceding financial period. Share capital and reserves in the prior year consolidated balance sheet have been stated on a pro forma basis. Differences between these amounts and the previously reported share capital and reserves have been reflected in the merger reserve. The pro forma share capital as at 1 October 1999 represents the nominal value of shares in issue by the Company immediately prior to the restructuring. 3 TURNOVER AND SEGMENTAL REPORTING Turnover represents the amount derived from the provision of goods and services which fall within the Group's ordinary activities stated net of value added tax. A geographical analysis of turnover is set out below: 2000 2000 2000 1999 1999 1999 Turnover Profit Net Turnover Loss Net before assets before liabilities tax tax £000 £000 £000 £000 £000 £000 By origin United Kingdom 19,977 4,541 41,638 8,433 (556) (1,365) Continental Europe 288 (276) (121) - - - Asia-Pacific 14 (428) 33 - - - 20,279 3,837 41,550 8,433 (556) (1,365) The loss before tax and the net liabilities in Continental Europe and Asia are after elimination of intergroup activities. Turnover Turnover 2000 1999 £000 £000 By destination United Kingdom 2,319 1,363 Continental Europe 8,731 4,319 Eastern Europe 3,516 - Africa 1,411 1,181 Asia-Pacific 2,384 1,100 North America 73 - Latin America 1,845 470 20,279 8,433 Turnover by activity is set out below. It is not practicable to allocate either profit before taxation or net assets by client location or activity. Turnover Turnover 2000 1999 £000 £000 Turnover by activity Licence Sales 11,413 3,455 Recurring income: ASP Service 138 - Volume upgrade licences 1,934 665 Support and maintenance fees 2,397 1,113 Professional services income: Implementation and migrations 3,374 3,200 Consulting and training income 1,023 - 20,279 8,433 Included in implementation revenue is the gain on the change in estimation methodology of implementation revenues of £469,000 (1999:£nil). 4 EARNINGS/(LOSS) PER SHARE 2000 1999 £000 £000 Basic and diluted earnings/(loss) 2,880 (744) Exceptional flotation costs (tax adjusted) 556 - Amortisation of intangible assets 100 - Adjusted earnings/(loss) 3,536 (744) Number Number Basic weighted average number of shares 132,814,764 125,142,6692 Employee share options 303,268 - Diluted weighted average number 133,118,032 125,142,692 of shares Pence Pence Diluted earnings/(loss) per 2.16 (0.59) ordinary share Adjustments for share options 0.01 - Basic earnings/(loss) per 2.17 (0.59) ordinary share Exceptional flotation costs 0.42 - Amortisation of intangible assets 0.08 - Adjusted earnings/(loss) per 2.67 (0.59) ordinary share Diluted earnings per ordinary share are calculated on the assumption that applicable outstanding share options were exercised on the first day of the period or the date of grant if later. The calculation of the weighted average number of shares has been made on the basis that the 100 for one share split and bonus issue of 625.71346 for one applied throughout the current and prior periods. 5 Copies of the full financial information are on our website: http:// www.intec-telecom-systems.com and copies are available from Intec Telecom Systems PLC, Wells Court 2, Albert Drive, Woking, Surrey GU21 5UB.

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