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* Adjusted profit before tax up 54% to £8.3 million on turnover increase of 36% to £68.8 million; successful acquisition of leading retail billing system.

30 November 2004, London - Intec Telecom Systems PLC (LSE:ITL, “Intec” or “the Company”), a global provider of enterprise-level software and services, today announces its audited results for the year ended 30 September 2004. The Company is pleased to report growth of over 35% in both profitability and revenues, positive operating cashflow despite continued strong investment in business growth, and a total of 100 new customers won or acquired in 2004. During the year Intec also made an important acquisition, the ‘Singl.eView’ retail billing business of ADC, which is now generating substantial new business opportunities for the company.

FINANCIAL AND OPERATING HIGHLIGHTS

• Revenues for the year ended 30 September 2004 increased by 36% (30% organic) to £68.8 million (year ended 30 September 2003: £50.7 million).
• Adjusted profit before tax substantially increased to £8.3 million (2003: £5.4 million).
• Positive operating cash inflow of £4.6 million generated during the year (2003: inflow of £8.5 million).
• Operating loss of £1.4 million (2003: 1.9 million) attributable to goodwill and intangible amortisation of £8.8 million.
• Loss before tax £1.2 million (2003: £1.8 million).
• Customer base increased by 27% to 465, with important new customer wins in the UK, US, Europe, Latin America, and Asia.
• $74.5 million acquisition of ‘Singl.eView’ retail billing business concluded during the year.
• Gross margin improved to 72% (2003: 70%).
• Cash and cash equivalents stand at £32.2 million (2003: £15.3 million).
• Several new products introduced to complement core billing and mediation families.
• Strong pipeline for 2005.

Commenting on the results, Mike Frayne, Executive Chairman said: “In 2004 Intec has become one of the top five players in the OSS/BSS market worldwide, through both our acquisition of Singl.eView and the good organic growth we have generated in the core business. Growth in revenues and earnings has substantially exceeded the industry average, and we have also enhanced our cash position, despite strong investment in all aspects of the business. Although we see continuing competitive conditions in the telecoms market, the important opportunities we are now engaged with for Singl.eView and other key products give me confidence that Intec has strong prospects for 2005 and beyond.”

Kevin Adams, Chief Executive, added, “Intec has won and acquired many new customers in 2004, including a number of multi-million Pound contracts around the world. Execution of our long-term strategy of high-quality, profitable growth has continued, with expansion in all areas of the business. Integrating Singl.eView, although clearly a large project, and restoring sales momentum to its pipeline, are both progressing very well, and we are cautiously confident that we can meet our objectives in 2005.”


Executive Chairman’s Statement

This year has been both challenging and rewarding for Intec, as we have made great progress towards our objective of becoming one of the largest and most successful Operations Support Systems /Business Support Systems software (OSS/BSS) product players in our sector: challenging, as we have worked hard to acquire, integrate (including extensive integration planning) and take forward the Singl.eView business while still executing our plans for strong organic growth within the core business; and rewarding, as with Singl.eView we have secured a strategically important asset and seen both revenue and profitability grow very satisfactorily despite continuing strong competition worldwide for new contracts.

The headline figures of revenue growth of 36% to £68.8 million, adjusted pre-tax profits up 54% and a much reduced loss after goodwill amortisation and exceptional items, although very pleasing, do not tell the full story of another year of substantial achievements. Intec’s staff and management team, which with Singl.eView now numbers over 1,300 people, has worked very hard to create a larger, stronger business that is a leader in several areas, that is profitable, cash-generative and fully-funded, and that has the best products in each of its key operating sectors. This is a great achievement and, once again, I thank all involved for their efforts throughout the year.

Singl.eView

The acquisition of the Singl.eView business marks a watershed for Intec. Prior to this acquisition, we would have been considered a successful, but perhaps niche, player in certain markets. The products, people and customers we acquired in August with Singl.eView take Intec into the market for the most critical systems used by our client base, retail or customer billing, and some of the areas around it such as customer management. In the telecoms sector there is a customer-centred strategic focus, and billing is one of the primary systems that make the greatest impact on our customers’ business performance. I am very pleased that we have entered this space with a solution and a worldwide staff capability that we believe is superior to anything else we see in the market.

The scale of the Singl.eView acquisition naturally required Shareholder approval, and a detailed prospectus was therefore circulated in the summer, with approval granted at an EGM on 24 August. A great deal of work was also completed during this period on pre-acquisition integration planning to ensure the best possible transition to Intec ownership.

Market

The telecoms industry, while undoubtedly performing better today than it has over recent periods, still faces structural and technical challenges, for example the growing innovation and competition from next-generation wireless technologies such as 3G, or the rapid spread of Internet Protocol (IP)-based networks. These are positive developments for Intec, and we are encouraged by the number of substantial opportunities we see for both Singl.eView and existing Intec products in high-value projects worldwide. Our objective is to turn these market developments into profitable business over coming quarters.

Organic Business

Naturally, Singl.eView has not been our only area of focus in 2004, and we continue to invest heavily in product development to ensure our continuing success. I am pleased that all of our other major product lines have continued to move ahead during the year. Both InterconnecT and Inter-mediatE, which historically have generated over 90% of our revenue, have been the subject of substantial new version releases. We believe both products are clear technical leaders in terms of performance, functionality and robustness. The feedback we have to date from customers who have seen or used the new products is very positive. Both products have performed well, with Intec announcing more new contract wins across the OSS/BSS sector than any other competitor. In addition, the products acquired in September 2003 from Digiquant A/S of Denmark, now developed and marketed principally as Intec DCP, have won a number of important new orders, including a major contract in North America.

Careful investment, based on solid business cases, that generates high-quality, marketable products with good customer demand, remains the foundation of Intec’s success. That, combined with effective sales and marketing, plus close attention to customer care, allows us to build and retain a strong customer base that now includes over 60% of the world’s top 100 carriers, as well as a number of companies outside the telecoms sector. We see non-telecoms customers as potentially an interesting opportunity for Intec technology, and we are actively investigating a number of sectors.

Outlook

In 2005 we will continue to focus on the best possible performance in a business which has now almost doubled in size, with a particular emphasis on maximising the opportunities created by our acquisition of Singl.eView. There is evidence that many carriers are reviewing their systems and architectures for ways to improve financial performance, customer satisfaction and operational flexibility. We believe we are in a strong position to offer them the products and services to help achieve these goals. Although the industry remains cautious in its approach to expenditure, the need to move forward is growing and we believe that Intec can continue to grow and develop as one of the leading providers in our market.

Mike Frayne
Executive Chairman
29 November 2004

Chief Executive’s Review

The 30% organic growth in turnover, Intec achieved in 2004, with only a 10% staff increase, is particularly pleasing as it has been within a telecoms industry that is cautious about capital expenditure and operating expenses. Intec announced more new contracts in the past twelve months than any other competitor, and continues to gain market share. An increasing number of the deals signed have been valued at several million pounds, indicating Intec’s growing profile as one of the world’s major OSS/BSS suppliers, with the technology and capabilities to address large and sophisticated projects.

2004 has seen the emergence of a number of important trends. Firstly, a slow but steady improvement in the fortunes of the telecoms industry, with many carriers reporting their best results for several years. This feeds through into a better trading environment for suppliers like Intec. That said, carriers remain cautious about expenditure, and the focus remains on projects which clearly deliver cost, efficiency or customer satisfaction benefits. Intec has a product set which can help fulfil these requirements.
Secondly, many of the technical innovations developed in the last few years, such as 3G networks, voice over Internet Protocol (VoIP), and video messaging, are now reaching consumers in large numbers. These changes drive new technology projects that address the complex capabilities that such services require. We have won important and innovative projects in 2004 in all these areas.

Our growth comes from focusing on the strengths that have made Intec successful, particularly good customer care, sound implementations and technically strong products. It is therefore pleasing to report that both customer churn and staff turnover remain at very low levels, and certainly a long way below industry averages. We have over 1,000 people worldwide involved directly in the development, implementation and support of our products, working with customers in over 70 countries.

A pleasing feature of the year has been the mainly organic growth in new licence sales, up 64% in 2004 following relatively difficult trading conditions in 2003 and 2002. Demand for new licences has been apparent across all markets and product lines, although emerging markets and new technologies have seen the strongest growth. New licences are the lifeblood of a software business, feeding through into both short and long term revenue streams. Our other sources of revenue, recurring revenue and professional services, have also grown very satisfactorily, up 19% and 42% respectively, due to our growing customer base and numerous large projects around the world. In 2005 we expect the balance of revenues to shift somewhat, as the higher levels of professional services associated with Singl.eView projects are reflected in the results.

Our customer base has increased in 2004 by 100 customers to a total of 465 companies representing 668 product installations, with important wins announced at Telekom Malaysia, M-Tel (Nigeria), TelePacific, Telecom Egypt, Telenet (Belgium), Telefonica Moviles, Nitel, VIVO (Brazil), China Unicom, Golden Telecom (Russia), PJN (Indonesia), Safaricom, Energis, VimpelCom, Cable & Wireless, and TA Orange (Thailand), among others. Customers have been won in all market sectors, from major fixed line carriers to the latest IP and 3G focused operators. Singl.eView brings us around 67 new contracted installations of which 19 are also existing Intec customers. Some of the best known new Singl.eView customers include Deutsche Telekom, Virgin Mobile, Tele2 and AT&T. We run User Groups and Conferences in each of our operating regions, as well as providing various online and interactive forums and newsletters as ways to support and communicate with clients. The quality of our customer relatio
nships remains of paramount importance to all staff at Intec.

Intec now has a substantially expanded Operations and Business Support Systems (OSS/BSS) software product set compared to previous periods, with world class products in retail billing (Singl.eView), multi-service mediation (Inter-mediatE), interconnect settlements (InterconnecT), and dynamic charging/active mediation (Intec DCP). We also have solutions with growing presence and success in a number of other areas, including service activation (Inter-activatE), content partner management (InterconnecT CPM) and optimised routing (InterconnecT OR). The individual elements within our product portfolio are complementary and we always seek to maximise customer commitment and satisfaction through offering the most complete solution. All carriers needs a core set of OSS/BSS technologies, and Intec’s approach has always been to acquire, develop and market the systems, such as billing, which we believe will remain important to carriers regardless of external factors.
All regions have performed well in 2004, with the following revenue growth rates: EMEA, up 42%; North America, up 34%; CALA, up 18%; Asia Pacific, up 37%. These are excellent results, particularly when seen against a backdrop of a global telecoms industry that has itself shown little growth in overall size.

Outlook

2004 has been a key period in Intec’s development, both in terms of our business performance and our future potential. We are now unarguably one of a small group of major suppliers in the OSS/BSS sector, with a product set that we believe is unmatched in breadth and performance. With the capabilities that we have, and the opportunities that we see, I am confident that Intec will continue performing strongly and I look forward to 2005 with confidence.

Kevin Adams
Chief Executive Officer
29 November 2004

FINANCIAL PERFORMANCE

I am pleased to report that in 2004 Intec has once again delivered increased revenues and substantial profit growth against a backdrop of continued challenging market conditions and a weakening dollar.

Revenue

In the year to 30 September 2004, our seventh year of operations and our fourth full year as a public company, revenue increased by 36% to £68.8 million, against £50.7 million for the equivalent period in 2003. The Singl.eView acquisition contributed £3.1 million to revenue for the month of September. Both revenue and costs have been impacted by the dollar which weakened against sterling by approximately 11%. Had we not suffered this dollar impact we estimate our revenues would have grown by approximately a further 5%.

Intec’s principal sources of revenue in our core OSS business are from our two major product families, Settlement (InterconnecT & InterconnecT CABS) and Mediation/Activation (Inter-mediatE & Inter-activatE), which together account for 81% of 2004 total revenues. Revenue for these products in 2004 was £55.7m (2003 - £47.7m) giving organic growth of 17%.

As reported last year, in September 2003 we acquired the Digiquant business from which we have developed a product range called Intec DCP. DCP deals with the management and billing of next-generation services, and accounted for 10% of revenues in 2004.

The Singl.eView product suite, acquired on 27 August 2004, accounted for 4% of current year revenues.

Margins and Costs

Due to customer and market requirements approximately 45% of Group sales are made in dollars whilst only 26% of the Group’s total costs are in dollars. Intec’s principal exposure to foreign currency lies in translation risk when the net results and net assets of overseas subsidiaries are translated into Sterling.

The movements in average exchange rates during the period have reduced reported costs by approximately £1.7 million. With an estimated reduction in reported revenues of £3.4 million the net impact at the EBITDA level is estimated to be a reduction of £1.7m.

Gross margin has improved to 72 % (2003: 70%). This has been achieved by an increased proportion of licence sales and volume upgrades in the year, combined with improved margins on support & maintenance and professional services.
Distribution costs of £13.1 million increased by £4.3 million compared to last year’s costs of £8.8 million. Of this £3.3 million relates to new spend arising from the Digiquant and Single.View acquisitions. The remaining increase of £1.0 million is in line with increased sales revenue.

Development costs of £11.5 million have increased by £1.4 million compared to last year’s costs of £10.1 million. An increase of £1.6 million is directly attributable to the acquisitions noted above. We have been able to reduce our spend on the core Intec products by £0.2 million as a result of successful new releases of these products early in the year. Other administrative expenses of £16.6 million have increased by £5.2 million compared to last year’s cost of £11.4 million, with £3.7 million attributable to acquisitions. The remaining £1.5 million has been incurred in supporting revenue growth.

Earnings

Earnings performance in 2004 has significantly improved compared to 2003. This has been achieved through a combination of revenue growth and careful cost management. As such, Intec has been able to deliver EBITDA before exceptional items of £10.7 million (2003: £7.2 million), an increase of 48% despite the impact of the weakening dollar and the ‘turn around’ challenge of the formerly loss-making Digiquant business. Adjusted earnings per share were 3.57p per ordinary share (2003: 2.17p). We are pleased to report an adjusted profit before tax (after exceptionals) of £7.6 million compared to £5.4 million in 2003, an increase of 41%. The FRS 3 loss after tax and amortisation is £1.7 million (2003: Loss of £3.0 million)

Exceptional Items

During the period Intec incurred exceptional expenditure of a non operational nature of £0.7 million; these costs are in connection with abortive acquisitions £0.2 million and integration and restructuring costs of £0.5 million.

Taxation

The major trading companies in the Group have not incurred corporate tax liabilities. The US operations have substantial ongoing tax benefits arising from goodwill allowances which will continue to reduce tax charges against profits in future periods. In addition, there are significant losses brought forward in the US, Canada, Denmark and Ireland. However, we have incurred corporate taxation in a number of our smaller overseas trading subsidiaries and branches amounting to £0.4 million (2003: £0.5 million), offset by a tax credit of £0.4 million (2003: £0.1 million charge) in respect of previous years. The remainder of the tax charge is in respect of withholding tax, which is deducted at source in certain jurisdictions and which we cannot recover, amounting to £0.6 million (2003: £0.4 million). This has resulted in an overall tax charge of £0.6million (2003: £1.3 million).

Cash Flows And Financial Position

We are pleased to report a positive operating cash inflow of £4.6 million. Whilst this is lower than the 2003 cash inflow of £8.5 million it is not unexpected due to the increased working capital requirements arising from larger long term projects. We have continued our focus on improving our trade debtors’ collections and as a result have achieved an improvement in the annualised debtor-days ratio of 88 days compared to 92 days at 30 September 2003.

Overall our cash resources increased by £16.9 million from £15.3 million at the start of the year to £32.2 million at 30 September 2004. A large proportion of this increase arose from a net inflow of £13.9 million raised through the Placing and Open Offer associated with the Singl.eView transaction.

Our cash and cash equivalents of £32.2 million are more than sufficient to meet the Group’s current operating requirements. A significant proportion of our liquid funds are invested in a cash fund to spread risk and improve yields.

Acquisitions

Intec has a well-developed strategy and process for business expansion through both organic development and carefully-evaluated and managed acquisitions. The following progress review considers acquisitions made during the 2004 financial year and provides an update on the 2003 acquisition of Digiquant A/S.

Digiquant A/S

As previously reported, on 17 September 2003, Intec acquired Danish company Digiquant A/S.
During 2004 the provisional fair values disclosed in the prior year financial statements have been finalised and are detailed in Note 3 to the Financial Statements.

Singl.eView

On 27 August 2004, Intec acquired the ‘Singl.eView’ retail billing software division from ADC Telecommunications Inc. The total consideration, settled in cash, amounted to US$74.5 million (£40.6 million) plus acquisition costs of £1.9 million. Of the $74.5 million, $71 million was raised through a vendor placing of 60.4 million Intec shares to an existing shareholder, General Atlantic Partners, and its related entities. The remaining $3.5 million was funded from Intec’s own cash reserves. As part of the acquisition process, Intec also conducted a Placing and Open Offer of 31.2 million shares, raising net proceeds of £17.1 million after issue costs.

In the post acquisition period, Singl.eView contributed £3 million to revenue and an operating loss of £0.9 million after goodwill amortisation of £0.7 million. Singl.eView currently has 610 staff based primarily in Australia, Canada and Ireland. Intec has a detailed integration plan in respect of Singl.eView and has made significant progress in implementing this plan in the period since acquisition.
Accounting policy adjustments and provisional fair values have been made in respect of this acquisition as detailed in Note 3 to the accounts. We expect that there will be adjustments to these provisional fair values in the future as we work through the contracts inherited at the time of acquisition.

John Arbuthnott FCMA
Finance Director
29 November 2004

This press release was distributed by ResponseSource Press Release Wire on behalf of Intec Telecom Systems in the following categories: Business & Finance, Computing & Telecoms, for more information visit https://pressreleasewire.responsesource.com/about.