Final Results
(Thomson Reuters ONE) - Intec Telecom Systems PLCTuesday 24 November 2009Results for the year ended 30 September 2009Intec Telecom Systems PLC (ITL.L/ITL LN, 'Intec', the 'Company' orthe 'Group'), a leading supplier of billing and operations supportsystems to the global telecoms industry, announces audited resultsfor the year ended 30 September 2009. 2009 2008 Growth 2008 Growth Reported Reported Reported Constant Constant Currency CurrencyRevenue (£m) 167.9 135.8 23.6% 158.7 5.8%Adjusted EBITDA (£m) 31.2 19.3 61.7% 26.9 16.0%Adjusted profit before 27.1 14.2 90.8% 21.5 26.0%tax (£m)Profit before tax (£m) 24.7 13.7 80.0% 20.9 18.2%Basic EPS (p) 12.5 3.4 267.6% 5.7 119.3%Adjusted diluted EPS (p) 7.5 3.5 114.2% 5.7 31.6%Cash (£m) 74.8 28.9 158.8% 32.5 130.2%For definition of constant currency, adjusted EBITDA, adjusted profitbefore tax and adjusted diluted EPS, please see notes to thehighlights.Highlights (at constant currency) * Organic revenue growth of 5.8% * Improved profitability with adjusted EBITDA margins of 18.6% * Inaugural full year dividend of 1p per share proposed * Cash increased to £74.8m * Contracted revenue backlog at 30 September 2009 over 20 % higher than in 2008 * Continued focus on sustainable growthCommenting on today's results, Andrew Taylor, CEO, said:"Intec has built upon the very strong performance in 2008 anddelivered an excellent performance in 2009 across all key metrics. Wehave made substantial progress in executing against each of ourstrategic priorities and have focused on excellence by continuing tobuild and develop a world class team.Notwithstanding the challenging economic and market conditions, webelieve that with Intec's established and growing customer base,robust financial position and market relevance, we are well placed tocontinue to deliver against our strategic objectives during 2010 andbeyond."John Hughes, Non-executive Chairman, said:"The last year has seen Intec transform itself as a business. Inaddition to our strong revenue and profit performance it wasparticularly pleasing to deliver excellent cash generation. Thisputs the Company on a solid footing for the future, as well asenabling us to invest in our internal infrastructure and systems tosupport further growth. The strength of the business has led theBoard to propose the introduction of a dividend for the first time,with an inaugural proposed full year dividend of 1p per share."A presentation to analysts will be held at 9:30 on 24 November 2009at the offices of Financial Dynamics, please contact intec(at)fd.com forfurther details. The presentation will be available on the website:www.intecbilling.comEnquiries:Intec Telecom Systems PLC www.intecbilling.comAndrew Taylor, Chief Executive Officer +44 (0)1483 745 800Robin Taylor, Group Finance DirectorFinancial Dynamics +44 (0)20 7831 3113Giles Sanderson/Juliet Clarke/Haya Herbert-BurnsAbout Intec Telecom Systems PLCIntec supplies solutions to over 70 of the world's top 100 telecomscarriers and is one of the world's fastest growing major BSS/OSS(business and operations support systems) vendors. Intec's 400customers include AT&T, Cable & Wireless, The Carphone Warehouse(UK), China Unicom, Deutsche Telekom, Eircom (Ireland), FranceTelecom, Hutchison 3G, O2, Orange, T-Mobile, Telefonica, Vodafone,Virgin Mobile, Vivo and Verizon. Intec works closely with customers,many of whom have been with Intec since its inception, to provide thehighest standards of performance, flexibility and robustness to helpcarriers service their customers effectively and profitably.Founded in 1997, Intec is listed on the London Stock Exchange (ITL.L)and has over 1,700 staff and 31 offices in 24 countries. For moreinformation visit www.intecbilling.comNOTES TO THE HIGHLIGHTSProfit before tax is reconciled to adjusted profit before tax,adjusted EBITDA and adjusted profit after tax in the table below: 2008 2009 2008 Constant Reported Reported Currency £m £m £mProfit before tax 24.7 13.7 20.9Exceptional items 1.6 (0.3) (0.2)Amortisation of acquiredintangible assets 0.8 0.8 0.8Adjusted profit before tax 1 27.1 14.2 21.5Net finance income (0.6) (0.4) (0.5)Depreciation 3.0 3.1 3.4Amortisation of other intangibleassets 1.7 2.4 2.5Adjusted EBITDA 2 31.2 19.3 26.9Profit after tax 38.4 10.5 17.5Amortisation of acquiredintangible assets 0.8 0.8 0.8After tax impact of exceptional 3items (15.1) (0.3) (0.2)Adjusted profit after tax 4 24.1 11.0 17.3Throughout this report:1 Adjusted profit before tax is stated before exceptional items andamortisation of acquired intangible assets.2 Adjusted EBITDA is earnings before interest, tax, depreciation,amortisation (including acquired intangibles but excludingamortisation of intangibles included in cost of sales) andexceptional items.3 Exceptional items are detailed in note 3 to the financialinformation.4 Adjusted profit after tax, which excludes the amortisation ofacquired intangibles and the after tax effect of exceptional itemsfrom reported profit after tax, is used as the basis for calculatingadjusted diluted earnings per share.5 The constant currency comparatives have been calculated bytranslating the 2008 results at 2009 exchange rates. This disclosurehas been provided as a guide to the underlying growth in the businessbefore the effect of the change in exchange rates.This press release and preliminary financial information (pressrelease) have only been prepared for the shareholders of the Company,as a whole, and their sole purpose and use is to assist shareholdersto exercise their governance rights and are not audited annualfinancial statements. The Company and its directors and employees arenot responsible for any other purpose or use, or to any other person,in relation to this press release.This press release contains indications of likely future developmentsand other forward looking statements that are subject to risk factorsassociated with, among other things, the economic and businesscircumstances occurring from time to time in the countries, sectorsand business segments in which the Group operates. These and otherfactors could adversely affect the Group's results, strategy andprospects. Forward looking statements involve risks, uncertaintiesand assumptions. They relate to events and/or depend on circumstancesin the future which could cause actual results and outcomes todiffer. No obligation is assumed to update any forward lookingstatements, whether as a result of new information, future events orotherwise.CHIEF EXECUTIVE OFFICER'S STATEMENTIntec has reported an excellent performance in 2009, deliveringgrowth in revenues, profitability and cash. We have strengthenedmanagement across our organisation and have sharpened execution witha focus on sales, delivery and operational optimisation. We haveimproved our targeting of opportunities and our ability to both winand deliver new customer contracts. Cross-selling and up-selling toexisting customers has been an important feature of this performance.Our broad spread of addressable markets has protected us somewhatfrom current global economic conditions and we have been successfulin increasing our pipeline and contracted backlog following ourincreased focus on sales execution. Mature market operators havecontinued to upgrade and renew their legacy systems to improveefficiency and gain competitive advantage and in emerging marketsgrowth has come from deregulation and an increase in wirelesssubscribers. Although we are pleased with our results, we believethere is still an opportunity to further enhance our financialperformance. While continuing to monitor closely the economic pulseof our customers, we will make targeted investments to furtherimprove our business.An important event for our employees, customers, partners and otherstakeholders has been the re-launch of Intec both internally andexternally through our "One Intec" vision. This vision for the futureis underpinned by the launch of clearly defined corporate values,refreshed imagery and a new corporate profile for the Group.FINANCIAL RESULTSI am especially pleased not only by our growth in revenue, profit andcash but also by our ability to build a strong backlog of businessduring a period of challenging economic conditions.During the year, we restructured, consolidated and strengthened ourteams in both the Americas and APAC regions, and delivered 2% and 14%growth at constant currency respectively. The comparison with theexceptional performance in 2008 masks the growth in the Americas,where business in the last quarter of 2009 for North America wasparticularly strong with several new strategic customer wins. APACbenefited from increased management focus as a primary growth areaand in Europe, Middle East and Africa (EMEA) we won business acrossthe region enabling very good growth of 7%.Sales and delivery execution has been excellent and our investment innew systems has substantially improved our pipeline and forecastmanagement, leading to a higher degree of forecast accuracy andpredictability and a better level of sales performance across ourbusiness. The year has been characterised by high sales conversionlevels and an increase in our 30 September 2009 contracted revenuebacklog by over 20% when compared to the same time last year. Ourglobal pipeline cover is significantly higher than it was at thestart of 2009.CUSTOMER WINS AND PRODUCT DEVELOPMENTIntec's strong sales results in 2009 arise from a healthy mix of newcustomer wins and repeat business from our existing customer baseleading to an increase in market share against our major competitors.A recent report from Analysys Mason[1], the telecoms industryanalysts, now places Intec as the number three software provider byrevenue of Billing Systems in the world.Overall, Intec signed twenty four new licence contracts in 2009 ofwhich fifteen were with new name customers and nine with our existingcustomer base. Nine of the twenty four contracts are formulti-product sales, resulting in thirty eight new productinstallations in total.In addition, strong business growth among our existing licensedcustomers meant that thirty eight of them exceeded their licensedvolume thresholds during the year triggering volume-based licenceupgrades.In our managed services business, we signed a number of smallrenewals and three major outsourcing contracts: a five-year deal witha new customer and two multi-year renewals.Customer wins came across all product categories and a broadgeographical constituency spanning mature and emerging markets, withcustomers ranging from new 'greenfield' operators to long-establishedPTTs.Of particular note was our success in winning eight new contracts forour Singl.eView retail billing solution, including two strategicallyimportant new customers outside of our traditional telecommunicationsservice provider market: a global handset manufacturer and a globalelectronics retailer. In each case, Singl.eView will providesolutions for the commercialisation of content and online services,demonstrating the flexibility of the Singl.eView solution inaddressing the business needs of the burgeoning Content and New Mediamarkets.We have extended our market leadership in the settlement market withnineteen new installations of our Wholesale Business ManagementSolution (WBMS). As with Singl.eView, these solutions are fullyadapted for the next-generation content market and we wereparticularly pleased to win the contract to provide a multi-partycontent settlement solution for a Tier 1 'app store'.We continue to win significant new business in our core serviceprovider market where we have demonstrated the capability of Intec'sproduct portfolio by delivering contracts to a range of companiesproviding mobile, fixed-line, broadband and cable services. In thismarket, we are seeing an increasing requirement for real-timesolutions across mediation, rating, charging and settlement.Multiple wins in 2009 for our Singl.eView on-line charging solutionand our active mediation solution, IntersessioN, indicate that Intecis well-positioned to meet these requirements.We have continued to improve the competitiveness of our coreportfolio and over the last year Intec has brought to market a numberof new releases, offering enhanced functionality across all threeproduct families. As well as the move to real-time, other commonthemes include features to increase scalability, reduce cost ofownership and provide more flexible reporting. Particularlysignificant is our ability to support low-cost commodity hardware,which will significantly reduce up-front and ongoing costs for ourcustomer base and open up new potential markets for Intec.STRATEGYIntec's vision is to become the most trusted supplier of BusinessSupport Software (BSS) products and solutions in the world.Earlier this year, we conducted an in-depth market and companyassessment, resulting in the creation of a clear strategy, vision andset of business priorities for the future. This exercise included anevaluation of the relevancy of Intec to our customers and anexamination of ways to improve our overall competitiveness and createthe ability to drive growth and profitability.We will continue to invest prudently in our leading software productsand solutions and will focus that investment in high value and highgrowth markets.The BSS market offers significant growth potential and, despite thecurrent economic conditions, continues to attract investment fromtelecoms service providers as they seek to adapt their businesspractices in search of new revenue streams and improved margins. Indeveloped markets, investment is focused on support for nextgeneration value-added services (also known as "Content Services"),whilst in emerging economies investment is driven by continued rapidsubscriber growth, particularly in wireless. Intec's recent productinvestments have anticipated many of these key market trends,ensuring that Intec's portfolio remains as relevant as ever to theneeds of our customer base.In 2010, we will increase our investment in products and skills toensure that our products remain world-class and deliver competitiveadvantage to our customers. These investments will occur across ourportfolio and include innovative solutions for emerging businessmodels in the settlement market, support for new technologies thattake Singl.eView to new price-performance levels and investments inour mediation suite that will enhance our real-time capabilities.In support of these product investments, we shall also focus on anumber of complementary strategic initiatives across the business: * Customer Centricity: Intec takes pride in the depth and quality of its customer relationships. Our broad and varied customer base is crucial to our future growth. By remaining close to our customers, we can learn at first-hand the issues they are facing in their markets and make sure that our solutions continue to meet their needs. In early 2010, we shall be conducting a comprehensive customer survey which will be used to drive continued improvements in our service levels and strengthen further our customer engagements. * Partnering: We will establish strategic alliances and partnerships in order to increase our market reach and growth prospects, while augmenting our delivery and solutions capability and breadth. In 2009, we created a dedicated partner team and business plan that will ensure that partnerships are at the centre of our strategy moving forward. In line with this plan, we have recently signed two major new partnership agreements. A number of our new business wins were closed in collaboration with partners and we anticipate that this will be an important feature of our business development going forward. * People: We will strive to attract and retain the very best staff as we increase our shift to a performance-driven culture. During 2009, we worked with our employee base to develop a shared set of corporate values. These values, which are tightly aligned with our overall strategic goals, are now firmly embedded across all of our activities and play an important role in our internal performance management programme. A recent employee survey shows a very high level of employee engagement and has provided excellent feedback which we will use to drive further improvements across the business. * Business Optimisation: We will take steps to improve the efficiency and effectiveness of our operations, while continuing to simplify our business, making it easier to understand and do business with. We have continued to invest in our Professional Services centre in India (Bangalore) and have increased staffing at our Professional Services centres in Malaysia (Kuala Lumpur) and Brazil (Sao Paulo). This emphasis will continue throughout 2010 as we develop further our off- and near-shore capabilities, while also enhancing our customer-facing capabilities across all regions. We have strengthened our management team with senior hires to run our Customer Services, Managed Services and Global IT activities and identified a number of key initiatives that will enable us to further optimise our future performance. We will continue to develop our service delivery and product-support capabilities, ensuring that we strengthen our reputation for delivering high quality software products on time and to excellent levels of customer satisfaction.SUMMARY AND OUTLOOKFollowing on from a very strong performance in 2008, Intec hasdelivered an excellent performance in 2009. We have made substantialprogress in executing against each of our strategic priorities andhave focused on excellence by continuing to build and develop a worldclass team.We strengthened our regional business leadership, which, coupled withthe implementation of global sales management, has enabled us tostrengthen the quality of our new business pipeline. Our salesperformance has been very strong with high win rates, which hasenabled us to build a strong contracted revenue back-log for 2010.We have continued to focus on efficiency by managing our costs moreeffectively and improving our delivery execution, ensuring thatcontracts are delivered on time and to a high level of customersatisfaction. We have continued to expand our geographical footprintin emerging growth markets.Looking forward, Intec enters the 2010 financial year as a strongerand more mature business with an increased level of focus onexecuting our strategy and building a truly world class softwarecompany. We continue to invest in organic growth as well asconsidering earnings accretive acquisitions. We will continue toconcentrate on delivering excellence across our business and throughtargeted investments in 2010 we will continue to optimise ouroperations, strengthen our global delivery model, improve ourcompetitiveness and deliver long term sustainable revenue growth.This continued focus on enhancing our financial performance furtherwill be balanced by our efforts to create a great place to work and agreat company to work with and to deliver against our "One Intec"vision and values.We enter 2010 with a strong pipe-line of prospects and contractedrevenue 20% higher than we entered 2009.Notwithstanding the challenging economic and market conditions, webelieve that with Intec's established and growing customer base,robust financial position and market relevance we are well placed tocontinue to deliver against our strategic objectives during 2010 andbeyond.ANDREW TAYLORCHIEF EXECUTIVE OFFICER23 NOVEMBER 2009CHIEF FINANCE OFFICER'S STATEMENTGROUP PERFORMANCEThe financial results represent another year of growth in revenue,profit and cash.Table 1 (£m) 2009 2008 Growth 2008 Growth Reported Reported Reported Constant Constant Currency CurrencyRevenue 167.9 135.8 23.6% 158.7 5.8%Adjusted EBITDA 31.2 19.3 61.7% 26.9 16.0%Adjusted profit before 27.1 14.2 90.8% 21.5 26.0%taxProfit before tax 24.7 13.7 80.0% 20.9 18.2%Basic EPS (pence) 12.5p 3.4p 267.6% 5.7p 119.3%Adjusted diluted EPS 7.5p 3.5p 114.2% 5.7p 31.6%(pence)Cash 74.8 28.9 158.8% 32.5 130.2%In delivering these results, we have increased investment in salesand marketing, strengthened the team and made operationalimprovements to the business. We continue to improve profit marginsand adjusted EBITDA (defined in Table 2) has increased to 18.6% ofrevenue (2008: 14.2%).Foreign exchangeThe Group operates across multiple geographies and therefore hassubstantial transactions in currencies other than UK Pounds Sterling(GBP).Approximately 80% of the Group's revenues and 40% of costs are Euroor US Dollar denominated. Over 10% of costs are incurred inAustralian Dollars and between 5% and 10% are incurred in each ofCanadian Dollars, Indian Rupees and South African Rand.In view of the very high proportion of the Group's revenues and costsdenominated in currencies other than GBP, it is not consideredpractical to attempt to hedge translation exposure. Steps taken tomitigate identified transaction exposures include matching thecurrency of current assets and liabilities and the use of forwardcontracts and swaps.During 2009, revenue benefited from translation gains of £22.9m whencompared to 2008. The estimated translation benefit in profit for theyear attributable to equity shareholders amounted to £7.0m whichequates to a benefit of 2.3p in adjusted EPS.Where applicable, subsequent commentary in this report is withreference to the 2008 constant currency comparatives (designated 2008CC) which have been calculated by translating the 2008 results at2009 exchange rates.Income statementThe following table is a presentation of the income statementincorporating non-statutory measures that the Board considers to beappropriate key performance indicators together with a constantcurrency restatement of the 2008 results.Table 2 (£m) Note 2009 2008 CC Growth CCRevenue KPI 167.9 158.7 +5.8%Cost of sales A (76.0) (76.1) -0.1%Amortisation of intangibles in (0.9) (0.3)cost of salesGross profit 91.0 82.3 +10.6%Operating expenses A (59.4) (56.3) +5.5%Foreign exchange (loss)/gain (0.4) 0.9Adjusted EBITDA KPI 31.2 26.9 +16.0%Depreciation and amortisation B (4.7) (5.9)Net finance income 0.6 0.5Adjusted profit before tax 27.1 21.5 +26.0%Tax on adjusted profit before tax (3.0) (3.4)Adjusted profit after tax 24.1 18.1 +33.1%Amortisation of acquired (0.8) (0.8)intangiblesExceptional items (1.6) 0.2Profit before exceptional 21.7 17.5 +24.0%taxationExceptional taxation 16.7 -Profit for the year 38.4 17.5 +119.4%Adjusted diluted EPS C, KPI 7.5p 5.7p +31.6%Gross margin 54.2% 51.9% +2.3 points Adjusted EBITDA as % of Revenue KPI 18.6% 17.0% +1.6 pointsNotes:KPI financial metrics considered to be key performance indicatorsA excluding depreciation, amortisation, foreign exchangedifferences and exceptional itemsB excluding acquired intangiblesC calculated with reference to adjusted profit after taxRevenueRevenue by region GrowthTable 3 (£m) 2009 2008 CC CCAmericas 73.3 71.8 +2.0%Europe Middle East and Africa (EMEA) 64.4 60.3 +6.8%Asia Pacific (APAC) 30.2 26.6 +13.5%Total revenue 167.9 158.7 +5.8%Revenue for the Group increased to £167.9m (2008 CC: £158.7m) withgrowth in all three Regions.Americas continues to grow and the 16.5% constant currency growth in2008 was followed by a further 2.0% growth to £73.3m revenue in2009. The majority of the Group's non-Telco revenue in the year hasbeen in this region which also accounts for most of the Group'sManaged Services revenue.Revenue from the EMEA region grew by 6.8% with particularly stronggrowth in the Middle East and Africa where consumer demand for mobileand broadband connections continued to expand rapidly. Licencerevenue, from both new clients and increases in existing clients'subscriber volumes, accounted for just under one third of thisregion's revenue.A strong second half resulted in APAC recording a 13.5% increase inrevenue to £30.2m. Growth has been driven by new business in Indiawhich accounted for three of the region's five largest deals.Revenue by type GrowthTable 4 (£m) 2009 2008 CC CCLicence 32.0 34.7 -7.8%Professional Services 76.5 62.3 +22.8%Managed Services 16.0 15.7 +1.9%Support and maintenance 39.9 39.1 +2.0%Hardware 3.5 6.9 -49.3%Total revenue 167.9 158.7 +5.8%There was strong growth in Professional Services revenue due to ahigher number of transactions involving the sale of integratedsolutions. Professional services accounted for 45.6% of the Group'srevenue (2008 CC: 39.3%).Good growth in Licence revenue in EMEA and APAC was not quitesufficient to compensate for a decline in the Americas which hadbenefited from a very large non-Telco licence deal in 2008. As aresult, the proportion of the Group's 2009 revenue derived fromLicence sales reduced to 19.1% (2008 CC: 21.9%).Hardware revenue is considered incidental and the decline wasexpected as a major integrated project, secured in 2008, progressedto the next phase.Gross profitGross profit, as set out in Table 2, increased by 10.6% to £91.0mreflecting the increase in revenue and improvement in gross marginrate to 54.2% (2008 CC: 51.9%). Estimated margin dilution of 2.2points, arising from the change in revenue mix by category, was morethan compensated for by efficiency improvements. These improvementshave arisen primarily in our Professional Services business where: * utilisation (i.e. the proportion of time chargeable to customer projects) has been significantly higher than in the prior year; and * there has been an increase in the proportion of work carried out in lower cost locations, under our Global Delivery Model.Operating expensesWe remain focused on optimising our cost base and, although we haveachieved further efficiencies in a number of areas, we madeinvestments in sales and marketing which resulted in our netoperating expenses, before depreciation, amortisation, foreignexchange differences and exceptional items increasing by 5.5% to£59.4m.The commentary, which follows, discusses changes in net operatingexpenses before incentive plan (IP), share based payments (SBP),exceptional items and depreciation and amortisation.Table 5 (£m) 2009 2008 CC Net IP/SBP Total Net IP/SBP TotalDevelopment 15.1 1.3 16.4 15.2 0.9 16.1Distribution 22.7 1.3 24.0 20.4 1.0 21.4Administration 17.0 2.0 19.0 17.3 1.5 18.8Operating expenses 54.8 4.6 59.4 52.9 3.4 56.3Development costs were consistent with the prior year, althoughinvestment increased in the second half and is planned to increasefurther in 2010.Distribution costs increased to 13.5% of revenue (2008 CC: 12.9%)reflecting the creation of our partner programme and the full-yearimpact of the investment in new systems and people which wascommenced in 2008.Administrative expenses showed a net decrease of £0.3m as the benefitof cost reduction initiatives was partially offset by an increase invacant property provision and related costs of £0.5m andnon-recurrence of the 2008 net reduction in provision for doubtfuldebts of £1.2m.Incentive plan costs increased to £6.0m (2008 CC: £4.3m), reflectingthe record results, and share based payments rose to £2.0m (2008 CC:£1.5m) due to additional participants and a higher cost in thecontext of the recent share price performance. £4.6m (2008 CC:£3.4m) of these costs are included in Operating expenses (see Table5) with the balance of £3.4m (2008 CC: £2.4m) recorded under Cost ofsales.Depreciation and amortisationDepreciation and amortisation, excluding amortisation of acquiredintangibles and amortisation included in cost of sales, as set out inTable 2, reduced to £4.7m (2008 CC: £5.9m) reflecting the lowerlevels of capital expenditure on computer equipment and software inrecent years, following the significant investment in group systemsin 2005. Capital expenditure has increased to £3.8m in 2009 (2008:£2.3m) and is planned to increase further in 2010.Exceptional itemsDuring the first half-year we incurred exceptional costs of £2.2m ina cost-reduction exercise. This was partly offset by gains totalling£0.6m which relate to deferred consideration received on the businesssold to Volubill SA in 2008 and the recovery of previously writtenoff balances relating to a former associate company.To aid comparability within the 2008 results presented in thisreport, we have reclassified the one-time costs of £1.1m for theclosure of the Mechanicsburg facility, which were previously includedin cost of sales, to exceptional items (see note 3 to the accounts).TaxationThe overall tax credit for the year is £13.7m (2008: charge £3.3m).This represents a current tax charge of £4.8m (2008: £1.9m) and adeferred tax credit of £18.5m (2008: charge £1.4m). £16.7m (2008:£nil) of the total tax credit has been included in exceptionalitems. The pre-exceptional tax charge is thus £3.0m or 11.5% ofpre-exceptional profit before tax (2008: £3.3m and 26.6%).The current tax charge comprises £2.2m (2008: £1.0m) of taxes onlocal profits in a number of group companies across the world and£2.6m (2008: £0.8m) of withholding taxes for which full credit reliefis not available. There were no significant prior year charges (2008:£0.1m).The deferred tax credit includes first time recognition of tax lossesin the UK, Ireland and the USA and also the future benefit of annualgoodwill allowances available to the US operations reflecting thecontinuing forecast profitability of the group entities in thosecountries. These amounts have been included in exceptional items andtotal £16.7m (2008: £nil). The remaining deferred tax credit of£1.8m (2008: charge £1.4m) relates to other temporary differencesand, for the first time, share options.Intec has operations in numerous countries and with a worldwidecustomer base, there is a natural level of complexity in our taxaffairs meaning that future levels of tax will be dependent on anumber of factors. Following the recognition of the deferred taxassets in respect of tax losses, other than those in the US, thebenefit to the tax charge in the accounts will be less in futureyears.EPSBasic earnings per share increased to 12.5p (2008: 3.4p) and ismaterially impacted by the deferred tax credit as discussed in thetaxation section above.Adjusted diluted earnings per share, which the directors considerprovides a useful measure of underlying trading, increased by 114.2%to 7.5p (2008: 3.5p and 2008 CC: 5.7p).The weighted average number of shares used to calculate basicearnings per share is 306.1m (2008: 305.6m) and for the fully dilutedequivalent 320.5m (2008: 314.1m). The significant increase in thelatter has arisen due to this year's rise in the share priceincreasing the number of dilutive share options included in thecalculation.GROUP FINANCIAL POSITIONBalance sheet reviewThe Group's balance sheet has strengthened considerably during theyear and net assets have increased to £204.7m. Table 6 is apresentation of net assets, with 2008 balances restated to 2009exchange rates, to aid discussion of material changes. 2009 2008 CC Change 2008Table 6 (£m) CCProperty plant and equipment 6.5 6.1 +6.6% 5.5Goodwill 93.0 93.0 - 93.0Other intangible assets 5.7 8.1 -29.6% 7.4Deferred tax asset 21.8 2.1 938.1% 1.8Trade and other receivables 63.9 75.4 -15.3% 66.5Cash and cash equivalents 74.8 32.5 +130.2% 28.9Trade and other payables (53.0) (47.0) +12.8% (42.1)Other liabilities (8.0) (9.0) -11.1% (8.1)Net assets 204.7 161.2 +27.0% 152.9Other intangible assetsAmortisation in the year exceeded additions leading to a decrease of29.6% in the carrying value of other intangible assets, principallypurchased software, capitalised development and project costs, to£5.7m.Deferred tax assetThe Group's improved trading performance has resulted in therecognition of a number of assets including tax losses in the UK andIreland and the future benefit of annual goodwill allowancesavailable in the USA (as further described under the Taxation headingabove). This has led to a near tenfold increase in the deferred taxasset on the balance sheet to £21.8m.Cash and cash equivalentsCash generation has been very strong and we have ended the year withrecord cash balances of £74.8m (2008 CC: £32.5m), an increase of£42.3m. Key components of the increase were adjusted EBITDA of£31.2m and a net reduction in working capital of £14.4m, part ofwhich is expected to reverse in the first quarter of 2010 as a numberof annual payments are made.Trade and other receivablesTrade and other receivables decreased to £63.9m (2008 CC: £75.4m), animprovement of £11.5m. Trade debtors, where the average credit periodbased on invoice date has reduced from 64 days to 57 days, decreasedby £11.4m and various other receivables decreased by £1.7m. Thesewere partially offset by an increase of £1.6m in accrued income to£19.0m, reflecting the usual effect of billing on projects accountedfor under the percentage of completion method, and contractualnegotiations concluded in September but invoiced during October.Trade and other payablesTrade and other payables increased to £53.0m (2008 CC: £47.0m), anincrease of £6.0m. Accruals accounted for £3.6m of the increase anddeferred revenue, representing amounts invoiced to customers but notyet recognised as revenue, increased by £1.6m to a total of £25.8m.Other liabilitiesThis is an amalgamation of borrowings, provisions and other liabilityheadings, each of which has moved by £0.5m or less.Shareholders' equityThere have been material changes in the components of shareholders'equity during 2009 as summarised in the table below.Table 7 (£m) 2009 2008 ChangeShare capital 3.1 3.0 0.1Share premium account 0.1 162.0 (161.9)Other reserves 135.4 0.2 135.2Translation reserve 7.9 (2.2) 10.1Retained earnings 58.2 (10.1) 69.1Shareholders' equity 205.7 152.9 53.7Share premium account and Other reservesOn 29 April 2009, the High Court of Justice consented to thecancellation of the Company's share premium account of £162.0mapproved by shareholders at a general meeting on 14 April 2009. Theresulting capital reconstruction led to an increase of £135.2m inother reserves and elimination of the deficit in retained earnings.Shares issued since April 2009 in satisfaction of option exerciseshas resulted in an increase of £0.1m in the share premium account.Translation reserveThe functional currencies of many Group companies have strengthenedsince 30 September 2008 resulting in a gain in the year of £10.1m onthe translation of non-UK net assets.Retained earningsThe profit for the year accounts for £38.4m of the £68.3m increase inthe Group's retained earnings. A further £26.9m arose on the April2009 cancellation of the share premium account, as described above,with a further £3.1m arising on the recognition of share-basedpayments and related deferred tax.Going ConcernThe Group has a strong balance sheet and an established customer baseacross different geographic areas. Consequently, the Board believesthat the Group is well placed to manage business risks successfullydespite the current uncertain economic outlook. The Board thereforehas a reasonable expectation that the Group has adequate resources tocontinue to operate for the foreseeable future and that it isappropriate to continue to adopt the going concern basis in thefinancial information.DividendThe capital reconstruction in April 2009 extinguished the deficit inthe distributable reserves of Intec Telecom Systems PLC which hadarisen from the previous impairment in the carrying value of certaininvestments. Distributable profits earned by the Company from April2009 to 30 September 2009 were in excess of £4.0m and the Company isin a position to add substantially to this balance throughout thecoming year.In view of this and taking into account the Group's performance andstrong balance sheet, the Board are pleased to propose an inauguralfull-year dividend of 1.0p per ordinary share amounting to £3.1mwhich, subject to approval at the Annual General Meeting on 4February 2010, will be paid on 18 February 2010 to shareholders onthe register at 15 January 2010.ROBIN TAYLORCHIEF FINANCIAL OFFICER23 NOVEMBER 2009CONSOLIDATED INCOME STATEMENTYear ended 30 September 2009 Before Exceptional Before Exceptional exceptional items exceptional items items (Note 3) Total items (Note 3) Total 2009 2009 2009 2008 2008 2008 Note £000 £000 £000 £000 £000 £000RevenueContinuing 2operations 167,891 - 167,891 135,786 - 135,786Cost of sales (76,897) (889) (77,786) (66,140) (1,098) (67,238)Gross profit 90,994 (889) 90,105 69,646 (1,098) 68,548Distributioncosts (23,986) (152) (24,138) (18,819) - (18,819)Developmentexpenditure (16,437) (416) (16,853) (14,880) - (14,880)Depreciationandamortisation (5,513) - (5,513) (6,237) - (6,237)Otheradministrativeexpenses (19,413) (719) (20,132) (16,643) - (16,643)Totaladministrativeexpenses (24,926) (719) (25,645) (22,880) - (22,880)Operatingprofit/ (loss) 25,645 (2,176) 23,469 13,067 (1,098) 11,969Other gainsand losses - 596 596 - 1,350 1,350Finance income 710 - 710 752 - 752Finance costs (82) - (82) (321) - (321)Profit/ (loss)before tax 26,273 (1,580) 24,693 13,498 252 13,750Income tax 4credit/(expense) (3,026) 16,701 13,675 (3,298) - (3,298)Profit for theyearattributableto equityshareholders 23,247 15,121 38,368 10,200 252 10,452 2009 2008Earnings pershare Pence Pence - basic 5 12.53 3.42- diluted 5 11.97 3.32All the results above relate to continuing operations.CONSOLIDATED BALANCE SHEET30 September 2009 2009 2008 Note £000 £000Non-current assetsGoodwill 93,022 93,022Other intangible assets 5,723 7,443Property, plant and equipment 6,543 5,455Trade and other receivables 6 2,659 2,258Deferred tax asset 21,767 1,791 129,714 109,969Current assetsTrade and other receivables 6 61,205 64,192Cash and cash equivalents 74,832 28,927 136,037 93,119Total assets 265,751 203,088Equity and liabilitiesEquity attributable to equity holders of theparentShare capital 9 3,077 3,060Share premium account 9 129 162,044Other reserves 9 135,362 249Own shares 9 (95) (95)Translation reserve 9 7,938 (2,187)Retained earnings 9 58,243 (10,192)Total equity 204,654 152,879Non-current liabilitiesOther payables 7 3,048 2,948Deferred tax liabilities 50 601Borrowings 336 194Provisions 8 2,311 2,592 5,745 6,335Current liabilitiesTrade and other payables 7 53,050 42,086Current tax liabilities 996 770Borrowings 220 396Provisions 8 1,086 622 55,352 43,874Total liabilities 61,097 50,209Total equity and liabilities 265,751 203,088CONDENSED CONSOLIDATED CASH FLOW STATEMENTYear ended 30 September 2009 2009 2008 Note £000 £000Operating profit 23,469 11,969Adjustments for:Depreciation of property, plant and equipment 3,049 3,076Amortisation of intangible assets 2,201 2,741Amortisation of capitalised developmentexpenditure 263 420Amortisation of capitalised project costs 928 296Loss on disposal of property, plant andequipment 38 28Share-based payment expense 2,043 1,458Increase in provisions 92 40Operating cash flows before movements inworking capital 32,083 20,028Decrease/ (increase) in receivables 9,994 (11,171)Increase in payables 4,356 3,511Cash generated by operations 46,433 12,368Income taxes paid (net) (2,935) (2,462)Net cash from operating activities 43,498 9,906Investing activitiesInterest received 710 751Purchase of property, plant, and equipment (3,210) (1,783)Purchase of intangible assets (139) (259)Expenditure on capitalised project costs (640) (2,842)Proceeds on disposal of property, plant andequipment 21 136Net proceeds on disposal of business 3 591 538Net cash used in investing activities (2,667) (3,459)Financing activitiesInterest paid (3) (34)Interest element of finance lease rentalpayments (27) (98)Proceeds on issue of shares 147 57Repayments of obligations under finance leases (362) (427)Net cash used in financing activities (245) (502)Net increase in cash and cash equivalents 40,586 5,945Cash and cash equivalents at beginning of year 28,927 22,580Effect of foreign exchange rates 5,319 402Cash and cash equivalents at end of year 74,832 28,927NOTES TO THE FINANCIAL INFORMATIONYear ended 30 September 20091. BASIS OF PREPARATIONThe financial information set out in this preliminary announcementdoes not constitute the company's financial statements for the yearsended 30 September 2009 or 2008 but is derived from those financialstatements. The financial statements for 2008 have been delivered tothe Registrar of Companies and those for 2009 will be deliveredfollowing the company's annual general meeting. The auditors havereported on those accounts; their report was unqualified and did notcontain statements under Section 498(2) or 498(3) of the CompaniesAct 2006.Whilst the financial information included in this preliminaryannouncement had been prepared in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted for use in theEuropean Union, this announcement does not in itself containsufficient information to comply with IFRS.The preliminary announcement was approved by the Board of Directorson 23 November 2009.The financial information has been prepared on a basis consistentwith the accounting policies set out in the 2008 annual accounts,with the exceptions disclosed below:The 2008 results have been expanded to disclose separately theone-time charge for the closure of the Mechanicsburg facility inorder to provide additional clarity of the underlying results for thecomparative period; andFrom 1 October 2008, two of the Group's key geographical regionscomprising North America and Caribbean and Latin America (CALA) havebeen combined for operational reasons. As a consequence thesegmental analysis disclosed in Note 2 now comprises three keygeographical segments comprising Americas, Europe, Middle East andAfrica (EMEA), and Asia-Pacific (APAC) and product operations. Thegeographical segments are based on customer location. Productoperations comprise our development, product management and offshoreoperations. The 2008 numbers have been restated to provide comparableinformation.2. SEGMENTAL INFORMATIONThe Directors consider that the Group operates in one continuingclass of business, namely that of the development, sale,implementation and support of business support software solutions.Inter-segmental revenue and expenses comprise amounts charged toother regions for resources used on projects outside their homeregion. The revenue and expenses are determined on an arms'-lengthbasis. Segment results include items directly attributable to asegment as well as those that can be allocated on a reasonablebasis. Unallocated items comprise corporate assets, liabilities andexpenses. Segment information under the primary reporting format isas disclosed in the table below: Product Americas EMEA APAC operations Total 2009 2009 2009 2009 2009Continuing operations £000 £000 £000 £000 £000Gross revenue 74,717 64,371 30,182 14,914 184,184Inter-segment revenue (1,379) - - (14,914) (16,293)Revenue 73,338 64,371 30,182 - 167,891Gross expenses 56,214 40,024 19,587 30,531 146,356Inter-segmentexpenses (3,948) (6,318) (6,027) - (16,293)Expenses 52,266 33,706 13,560 30,531 130,063Segment profit/(loss) beforeexceptional items 21,072 30,665 16,622 (30,531) 37,828Exceptional costs (1,113) (213) (196) (172) (1,694)Segment profit/(loss) 19,959 30,452 16,426 (30,703) 36,134Unallocated costs:- corporate costs (11,740)- corporate costs -exceptional (482)- foreign exchangeloss (443)Operating profit 23,469Other gains andlosses 596Finance income 710Finance costs (82)Profit before tax 24,693Taxation 13,675Profit after tax 38,3682. Revenue and segmental analysis (continued) Product Americas EMEA APAC operations Total 2008 2008 2008 2008 2008Continuing operations £000 £000 £000 £000 £000Gross revenue 60,399 52,712 24,334 9,967 147,412Inter-segment revenue (1,659) - - (9,967) (11,626)Revenue 58,740 52,712 24,334 - 135,786Gross expenses 45,250 35,990 16,560 27,047 124,847Inter-segmentexpenses (1,676) (6,333) (3,617) - (11,626)Expenses 43,574 29,657 12,943 27,047 113,221Segment profit/(loss) beforeexceptional items 15,166 23,055 11,391 (27,047) 22,565Exceptional costs (1,098) - - - (1,098)Segment profit/(loss) 14,068 23,055 11,391 (27,047) 21,467Unallocated costs:- corporate costs (10,303)- foreign exchangegain 805Operating profit 11,969Other gains andlosses 1,350Finance income 752Finance costs (321)Profit before tax 13,750Taxation (3,298)Profit after tax 10,452Revenue by categoryAdditional disclosures on revenue by category is set out below. 2009 2008 £000 £000Licence 32,009 30,377Professional services income 76,472 52,988Managed services 16,083 12,299Support and maintenance fees 39,857 34,598Hardware 3,470 5,524 167,891 135,7863. EXCEPTIONAL ITEMSExceptional items comprise exceptional 2009 2008costs and gains as set out below: £000 £000Deferred tax credit a) 16,701 -Restructuring costs b) (2,176) (1,098)Disposed business c) 322 1,182Other gains d) 274 168 15,121 252a) The deferred tax credit arises due to first time recognition ofdeferred tax assets on tax losses in the US, Ireland and the UK.b) Restructuring costs in 2009 comprise termination pay on staffredundancies across the group amounting to £2.1 million and £0.1million for closure costs of the Dallas facility. The restructuringcosts attributable to the closure of the Mechanicsburg facility were£1.1 million for the year ended 30 September 2008. To aidcomparability, the one-time costs of £1.1m for the closure of theMechanicsburg facility, which were previously included in cost ofsales within the 2008 Annual Report, have been reclassified asexceptional.c) On 19 November 2007, an asset sale and purchase agreement wasannounced with Volubill SA to sell certain assets and liabilities ofIntec Denmark for an initial consideration of £1 million in cash plusadditional consideration based on support and maintenance revenuesand new licence sales recognised by Volubill for a period of twoyears from completion. During the year the estimated additionalconsideration increased from £451,000 to £916,000. Accordingly anupdated table is set out below. £000Net liabilities disposed (418)Initial consideration 1,000Estimated additional consideration 916Working capital adjustments (572)Net consideration 1,344Profit on disposal before adjustments 1,762Costs attributable to the disposal (217)Translation differences (41)Profit on disposal 1,504Split as:Recognised in the year ended 30 September 2008 1,182Recognised in the year ended 30 September 2009 322 1,504Net cash flows in respect of the disposed business are asfollows:Initial consideration 1,000Additional consideration received 701Working capital payments (572)Net proceeds on disposal of business 1,129Net proceeds in the year ended 30 September 2009 591Net proceeds in the year ended 30 September 2008 538 1,129d) Other gains represent recovery of amounts in relation to aninvestment in Poland previously written off in 2002.4. INCOME TAX EXPENSEThe charge for the year comprises 2009 2008 £000 £000Current taxation:UK Corporation tax at 28% (2008: 29%) 1,165 1,479Utilisation of previously unrecognised UK taxlosses (1,165) (1,479)Foreign tax 6,072 1,841Utilisation of previously unrecognised foreign taxlosses (1,286) (41) 4,786 1,800Adjustments in respect of prior years:UK Corporation tax - (81)Foreign tax 6 164 6 83Total current tax expense 4,792 1,883Deferred taxation:UK (3,765) -Foreign (14,702) 1,415Total deferred taxation (18,467) 1,415Total income tax (credit)/expense (13,675) 3,298UK Corporation tax is calculated at 28% (2008: 29%) of the estimatedassessable profit for the year. Taxation for other jurisdictions iscalculated at the rates prevailing in the respective jurisdictions.Factors affecting the tax charge for the year: 2009 2008 £000 £000Profit on ordinary activities before tax 24,693 13,750Tax on Group profit at a weighted average standardUK Corporation tax rate of 28% (2008 - 29%) 6,914 3,988Net disallowed expenses and (non-taxable income ) (1,540) 1,451Tax effect of share based payments (90) 413Utilisation of previously unrecognised tax losses (2,451) (1,520)Derecognition of previously recognised tax losses 384 1,158Utilisation of previously unrecognised otherdeferred tax assets (3,307) (3,630)Current year tax losses not recognised 979 122Withholding taxes 2,570 2,948Lower rates of foreign tax (439) (1,715)Adjustments to current tax expense in respect ofprevious periods 6 83Total pre-exceptional tax expense 3,026 3,298Exceptional increase in previously unrecognisedtax losses (7,636) -Exceptional increase in previously unrecogniseddeferred tax assets (9,065) -Total tax (credit)/expense (13,675) 3,298The standard rate of current tax in the UK (being the country ofresidence of the parent company) for the year is 28% (2008 - 29%).The tax reconciliation is based on this rate due to the difficulty inselecting a weighted average rate given the range of tax rates (0% -39%) and countries in which the Group operates and the range ofprofits and losses arising in those countries. The amount of thefuture tax charge will depend primarily on the level of profitstogether with the jurisdiction in which they are achieved and theability to use available tax losses.5. EARNINGS PER SHAREContinuing operations 2009 2008 £000 £000Profit for the year - basic and diluted 38,368 10,452-Reconciliation:Profit for the year - basic and diluted 38,368 10,452First time recognition of deferred tax asset showninexceptional items (16,701) -After tax effect of exceptional items 1,580 (252)Amortisation of acquired intangibles 770 767Adjusted profit for the year 24,017 10,967 Number Number '000 '000Weighted average number of shares - basic 306,119 305,552Effect of dilutive potential ordinary shares 14,344 8,581Weighted average number of shares - diluted 320,463 314,133 2009 2008 £000 £000Basic earnings per share 12.53 3.42First time recognition of deferred tax asset showninexceptional items (5.46) -After tax effect of exceptional items 0.52 (0.08)Amortisation of acquired intangibles 0.25 0.25Adjusted basic earnings per share 7.84 3.59Basic earnings per share 12.53 3.42Effect of dilutive potential ordinary shares (0.56) (0.10)Diluted earnings per share 11.97 3.32First time recognition of deferred tax asset showninexceptional items (5.21) -After tax effect of exceptional items 0.49 (0.08)Amortisation of acquired intangibles 0.24 0.24Adjusted diluted earnings per share 7.49 3.48Basic earnings per share is calculated by dividing the earningsattributable to ordinary shareholders by the weighted average numberof ordinary shares outstanding during the year. The average numberof 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 thebasic earnings per share with a further adjustment to the weightedaverage number of ordinary shares outstanding to reflect the effectof all dilutive potential ordinary shares. The number of dilutivepotential ordinary shares is derived from the number of share optionsgranted to employees where the exercise price is less than theaverage market price of the Company's ordinary shares during theyear.Adjusted earnings per share, which is defined as basic earnings pershare before exceptional items, amortisation of acquired intangibleassets and the first time recognition of deferred tax shown inexceptional items, has been calculated and disclosed above as thedirectors consider it provides an additional indication of underlyingtrading performance.6. TRADE AND OTHER RECEIVABLES Non-current Current 2009 2008 2009 2008 £000 £000 £000 £000Trade receivables - - 36,920 43,241Provision for impairment of tradereceivables - - (895) (1,070)Net trade receivables - - 36,025 42,171Corporation tax - - - 81Overseas tax - 268 356 931Other receivables 386 159 1,328 2,209Prepayments 2,273 1,831 4,458 3,737Accrued income - - 19,038 15,063 2,659 2,258 61,205 64,1927. TRADE AND OTHER PAYABLES Non-current Current 2009 2008 2009 2008 £000 £000 £000 £000Trade payables - - 4,231 4,438Other payables 1,651 1,401 4,082 2,188Accruals 1,397 1,547 18,939 13,971Deferred revenue - - 25,798 21,489 3,048 2,948 53,050 42,0868. PROVISIONS Onerous lease Other commitments provisions TotalGroup £000 £000 £000At 1 October 2008 2,162 1,052 3,214Established during the year 502 - 502Utilised during the year (565) (108) (673)Unwinding of discount 44 4 48Translation differences 256 50 306At 30 September 2009 2,399 998 3,397Analysed
Datum: 24.11.2009 - 08:00 Uhr
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