Turnover increases 96% to £40million - EBITDA beats consensus
Intec Telecom Systems PLC
+44 (0) 7768 808082 / +44 (0) 1483 745800
Intec Telecom Systems PLC (LSE:ITL, “Intec” or “the Company”), a leading global provider of Operations Support Systems software for telecoms companies, today announces its audited results for the year ended 30 September 2001. The Company is pleased to report turnover growth of almost 100% and EBITDA profitability in excess of market consensus.
FINANCIAL AND OPERATING HIGHLIGHTS
· Revenues for the year ended 30 September 2001 increased by 96% to £39.8 million (year ended 30 September 2000: £20.3million)
· Earnings before interest, tax, depreciation, and amortisation (“EBITDA”) of £3.4m (year ended 30 September 2000: £4.5m).
· Operating loss of £140.0 million largely attributable to goodwill impairment in acquisitions.
· Customer base increased by 66 contracted installations, with major new wins in the UK, US, Europe, Latin America, and the Far East.
· Global expansion continues as planned, with new offices in South America, Asia-Pacific, India and Middle-East.
· Four acquisitions concluded and integrated during the year, in the US, UK and Malaysia.
· Several new products introduced to complement core billing and mediation families.
· Growing order book for 2002.
The past twelve months have seen many changes in our business and in the world in which we operate. These changes, which include a dramatic fall in the business performance and stock market valuation of almost all technology companies, have created more competitive and less predictable market conditions than for many years. Yet within that climate of change, I am pleased to report that Intec Telecom Systems has continued to extend and strengthen its business and to consolidate its position as a supplier of critical software solutions in the worldwide telecoms marketplace.
In 2001, Intec Telecom Systems has developed from a company selling and supporting essentially a single product line into a global business with customers in 40 countries and three distinct but complementary product families. Despite the challenges this brings, particularly in a marketplace that is more competitive than ever, the Intec team has delivered a creditable performance, and I want to begin my report by expressing my thanks to all concerned.
In the year ended 30 September 2001, Group turnover increased by 96% to almost £40 million. This includes substantial contributions from acquisitions made during the year. As with many technology companies, reported profits have been impacted by writedowns of goodwill associated with acquisitions. However, EBITDA profitability at £3.4 million indicates the underlying strength of our business model, despite the extensive investment made in growth, product development and acquisition integration, plus an undoubtedly more competitive environment.
Our acquisition in December 2000 of Computer Generation Inc., has fundamentally changed Intec as a business. Its world-class convergent mediation technology, rebranded and launched during 2001 as Inter-mediatE, has brought us both a substantial presence in the North American market as well as a product that we can sell worldwide with great effectiveness alongside our existing InterconnecT billing family. The growth in contract wins and customer sites that feature both products is one of the most gratifying aspects of our business year.
That we have also extended our leadership in intercarrier billing, while developing other aspects of the business, proves the growing importance of non-retail revenue streams to communications companies. This will be particularly true of next-generation networks, expected to begin full-scale operations from 2002, that will generate much larger proportions of their revenue streams from added-value services such as multimedia content and e-business transactions.
We extended our intercarrier billing business in February with the acquisitions of CHA Systems in Dallas and i2i in Malaysia. Both have made important contributions this year, in terms of products, new customer wins and technology. Finally, in May we acquired UK-based Dataphone Ltd, whose telecoms revenue assurance products are now being successfully marketed alongside our major product lines.
Our business activities have led to a large increase in customer base, up from around 80 companies at the start of the year to over 230 at 30 September, including those acquired with CompGen, i2i, CHA and Dataphone. This increase leads to new sales opportunities with our expanded product family, as well as strengthening our revenue from support, upgrade and consulting business. Staff numbers have increased commensurately, to almost 500 people, and it has been particularly pleasing to see how well staff working for our acquired companies have integrated into the business. The telecoms world moves rapidly, and the cross-fertilisation of technical skills between companies in the enlarged group is proving beneficial in developing new products for next-generation networks. Several new regional offices have been opened to address business opportunities in developing markets, including Mexico, the Middle East and Taiwan. We have operated through Centres of Excellence in different g!
eographic and time zones, providing our customers with world-class support regardless of location.
On the product front, our success in winning a number of high-profile customers in the IP and 3G sectors demonstrates that we continue to have a leading-edge product portfolio capable of winning demanding competitive technical and commercial evaluations. Many of our new contracts have been with larger carriers, including several national PTTs and Tier one mobile operators, reflecting our determination to provide true carrier-grade solutions. Our strategy of locating development centres in a number of regions has proved to be successful, with good return on investment and a global view of the telecoms market helping us create very attractive and functional products. Several new products were developed internally during the year, and these have now won their first customers.
The fall in value of world stock markets, and the particularly dramatic effects on technology stocks and shareholder value cannot be ignored. At Intec we remain focused on building a strong business with continued long-term growth prospects. Ultimately this will be the way to create renewed value and to restore confidence in technology as an important growth vehicle for investors. As always, we will remain a cost-conscious business which reviews its structure, operations, investment and product strategy to ensure they are aligned with market conditions. Our secure cash position is also reassuring in a market where we believe some vendors are experiencing financing difficulties.
Looking forward, it remains difficult to predict how macro-economic factors will affect our markets, or whether exceptional circumstances, such as the tragic events of September 2001, will occur again. But Intec operates in an industry that is critical to the world economy, that shows no signs of slowing in the pace of its technical development, and where new technology is increasingly seen as vital to business success. Mediation, billing and revenue assurance are all necessary activities for telecom companies looking to maximise returns from their network investment, and Intec’s ability to win many new customers during a turbulent year is evidence of that need. We also anticipate continuing our policy of strategic acquisitions to extend our customer base and develop our market offering.
We are, therefore, cautiously confident that our growth will continue, and I hope that as investors you will share this confidence in the ongoing success of the business.
26 November 2001
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