TIDMTPH
RNS Number : 0040Y
Telephonetics PLC
26 August 2009
26 August 2009
Telephonetics Plc
Unaudited interim results
For the six months to 31 May 2009
Telephonetics Plc ('Telephonetics' or 'the Company' or 'the Group'), a leading
provider of end-to-end customer interaction solutions employing advanced speech
recognition and call handling technology, today announces its interim results
for the six months ended 31 May 2009.
Highlights
* Revenues increase by 8% to GBP4.99m (2008: GBP4.62m)
* Adjusted EBITDA* of GBP0.67m (2008: GBP0.65m)
* Profit before tax of GBP0.41m (2008: GBP0.60m)
* Net cash funds of GBP4.47m
* Earnings per share 0.30p (2008: 0.42p)
* Deployments under contract increased in the period by 7% to 537
* Successful migration of national cinema chain, Empire Cinemas, to MovieLINE
Mike Neville, Chairman of Telephonetics, commented:
"I am delighted with the Group's improved trading which was due to a combination
of factors including a first time contribution from newly acquired Datadialogs,
increased product and service revenues, and a higher contribution for Movieline.
As the supplier of choice in the growing health and public sector market, we
continue to make good progress having signed major new customers in the first
half. Given our resilient trading position combined with the fact we are debt
free, have significant cash funds and are focused on cost control, we look to
the future with confidence.
* adjusted EBITDA is defined as profit before interest, taxation, depreciation,
amortisation, one-off restructuring and share-based charges.
For further information please contact:
+---------------------------------------------------------------------------+--+
| Telephonetics | |
| James Ormondroyd (Finance Director +44 (0) 1442 242242 | |
| Maitland | |
| Neil Bennett +44 (0) 207 379 5151 | |
| George Hudson | |
| Brewin Dolphin Investment Banking | |
| Nominated Adviser & Broker +44 (0) 845 213 4726 | |
| Neil Baldwin | |
| Sean Wyndham-Quin | |
| | |
+---------------------------------------------------------------------------+--+
| | |
+---------------------------------------------------------------------------+--+
Financial Review
During the six months to 31 May 2009, unaudited revenue increased by 8% to
GBP4.99m. This improved performance was due to a combination of factors
including a first time contribution from newly acquired Datadialogs of GBP0.19m,
Telephonetics' product and service revenues increasing by GBP0.12m due to an
uplift in support revenues, and higher revenues for MovieLINE due to improved
telecom rates and stable minutes linked to strong box office admissions.
Gross margin was stable at 61% (2008: 62%). The Group made adjusted EBITDA of
GBP0.67m (2008: GBP0.65m) the lower margin a result of investment costs in
Datadialogs of GBP0.07m following its acquisition and investment in sales,
marketing and development. Profit before tax was GBP0.41m, down GBP0.19m from
last year's GBP0.60m principally as a result of lower interest income of
GBP0.10m together with a charge for amortisation of acquired intangible assets
of GBP0.05m.
The Group remains debt free other than a small bank loan of GBP26,000 acquired
within the Datadialogs business. Cash generated from operating activities was
GBP0.16m which was GBP0.53m lower than 2008 due to a lower interest rate gained
on cash deposits in the period, investment costs incurred within the Datadialogs
business, and reversal of year end working capital timing differences.
Cash spent on investing activities totalled GBP1.09m (2008: GBP0.22m)
principally relating to the initial consideration paid for the acquisition of
Datadialogs and development expenditure. As a result, the Group's cash position
decreased by GBP0.92m to GBP4.47m from GBP5.39m at 30 November 2008.
Basic earnings per share were down 0.12p per share at 0.30p, and at a diluted
level down 0.11p at 0.27p. No dividend is payable for the period as the Group
continues to invest its resources in the development of the business.
Operating Review
Market & Strategy
Our top-level strategy is to provide a set of applications that interact
seamlessly in order to transform all (or part) of the customer interaction
process within any business:
* Smart call handling allows us to accept, analyse and route incoming calls in the
most efficient manner, thereby maximising customer satisfaction and live agent
efficiency.
* Intelligent automation, via speech recognition, allows us to ensure that live
agent resource is utilised where it can add most value whilst extending the
hours of day during which customers can interact with an organisation.
* Outbound alerting technology ensures that customers are kept informed of
important information via the mechanism most appropriate to them.
* Datadialogs' Eden technology integrates our customer's back office systems to
deliver a single view of their data and feed our other applications, thereby
providing total control of the end-to-end customer interaction.
* Media handling will add routing of email and web chat to our platform,
simplifying an agent's view of the world and unifying all inbound customer
interactions.
We continue to generate good organic revenue growth and as a supplier of choice
in the growing health and public sector market, we have continued to make
progress, with a number of new customers signed-up in the first half including
Swale Borough Council and NHS Blackpool. The NHS Trusts, councils, higher
education institutions and police forces that comprise our core customer base
increasingly recognise that our end-to-end customer interaction solutions can
make a very real difference to their business. The integration of Datadialogs
is progressing well and has been successful in signing up several new customers
including Interserve and Dee Valley Water.
We have a loyal customer base who are buying more applications than this time
last year. It is apparent that in the current economic climate they are willing
to spend on well designed solutions that maximise customer service and provide
significant internal efficiencies. The demand for our services has been
demonstrated by record attendance at our regular Health and Public Sector
technology days and User Group forums.
Recognising this we have continued to extend the range of applications on
our SEMAP+ platform to meet customer demand, culminating in the release of seven
new products to market in January. These further enable us to provide a
one-stop-shop to meet the multiple challenges facing our customers. They also
allow our customers to leverage their investment in our SEMAP+ platform whilst
increasing our recurring revenues and providing increasing 'stickiness' through
enhanced value.
Our "4th channel" customer first automated telephony offering has a similar cost
to a web response. When compared to a response from a call centre member of
staff at GBP1.25 per transaction, it can deliver significant savings. The
Society of Information Technology Management estimate a web response costs 17
pence. In addition, only 55% of people have used a government or council
website. In areas of multiple deprivation where the need to access public
services is more critical this reduces to only 15%, leaving 85% of people who do
not use the web to access information. Moreover, not everyone has access to the
internet and the telephone is currently the most popular form of communication.
Our technology helps councils to achieve clear value for money and compliance
with the Government's National Indicator 14, and ensures high customer
satisfaction levels.
A key supplier of Enterprise Case Management solutions (ECM) in local government
is Lagan. As part of our focus on local government we have integrated our
Automatic Call Distribution into the Lagan ECM. This exciting development has
now been through Lagan's rigorous certification process resulting in the
business becoming a Silver Lagan Solution Partner. This is great news for our
customers who can now purchase our ACD with full assurance from their ECM
supplier that this is a quality solution which is fully compatible with their
ECM.
Acquisition of Datadialogs
The acquisition of Datadialogs, in February 2009, and its Eden technology has
greatly increased the effectiveness of our proposition by simplifying the
interface to existing customer systems, business processes and data. Eden acts
as a smart conduit for this data, allowing us to maximise the power and
flexibility of our solutions, with no need for additional software development.
Datadialogs has been successful in signing up several new customers including
Interserve and Dee Valley Water, and has generated turnover in the period of
GBP191,000. Adjusted EBITDA for the period showed a loss of GBP68,000 due to a
significant investment in overheads which will allow for future growth expected
to pay back in year 2011. The outlook for the rest of the year is promising with
an increasing number of customers recognising the compelling proposition of the
technology.
The total consideration for the acquisition is estimated at GBP2.14m comprising
upfront cash of GBP0.72m, transaction expenses of GBP0.12m and an estimated
contingent consideration of GBP1.30m. The contingent consideration is based on
an earn out arrangement: GBP0.20m in cash is payable on Datadialogs achieving
revenues of GBP0.70m within the first year of acquisition; and up to a further
GBP2.80m is payable in a mixture of cash and shares over the two years
post-acquisition on the achievement of revenue targets of between GBP1.56m and
GBP10.0m over the period. Any new shares allotted as consideration will be
priced based on the average mid-market price of the Company preceding the date
of issue subject to a minimum of 10p per share. Based on Datadialogs'
management's current expectations of revenues over the two year period post
acquisition provision for contingent consideration has been made for a share
issue of GBP0.60m (5,995,275 shares at 10p per share) and cash payments of
GBP0.80m recorded at a present value of GBP0.70m.
Premises-based Revenues
Premises-based revenues increased by 10% to GBP3.34m from GBP3.03m. This
comprises product application licensing and hardware plus professional services
and support contracts. The increase in revenues is the result of the first time
contribution from Datadialogs GBP0.19m together with higher support revenues a
result of the compounding effect of continuing product sales to new and existing
customers.
The number of deployments under contract increased in the period by 7% to 537
from 500 at the year end. The proportion of recurring revenues under support
contracts is 60% (2007: 58%).
We are continuing to do well in terms of growing our sales pipeline in our key
markets of health and public sector for telephony products. Since the start of
the year our pipeline of selling opportunities in these verticals has grown by
23% over the first six months of the year and 44% over the twelve months to May
2009. This growth is due to a greater focus within the sales, marketing and
telemarketing team in particular in engaging with prospects in the public
sector. We have experienced a slightly longer purchasing cycle in the first
half, as customers faced difficult budget decisions in the public sector April
year end, however, these appear to be returning to normal over the summer
months.
Hosted Revenues
Hosted revenues, which are principally derived from our MovieLINE product and
used by 80% of the UK's major multiplex cinemas, increased by 4% to GBP1.65m
(2008: GBP1.59m). Call volumes were stable in the period which was better than
forecast due to stronger UK box office admissions, which in the first half of
2009 were 15% up on the first half of 2008 (source: UK Film Council Research and
Statistics Unit), and a slower transition by consumers to other channels
compared to previous periods. These factors combined with a better tariff from
telecommunication providers contributed to the progress of the MovieLINE
revenue stream.
During the period Telephonetics signed a multi-year contract extension with
Apollo Cinemas to continue supplying automatic speech recognition (ASR) ticket
booking and information technology to all of their 13 UK cinema sites. Apollo
has been using MovieLINE since 2005 to provide a one-number solution for film
information and ticket booking services to all its cinemas.
In addition, Telephonetics signed a multi-year contract with Empire Cinemas Ltd
for all of Empire's 17 UK cinema sites. Empire will utilise Telephonetics'
state-of-the-art Agent Interface software, which will enable it to seamlessly
link the MovieLINE booking service with a new call-centre operation also
provided by Telephonetics.
Research & Development
The Group continues to invest in its product development with total development
expenditure including capitalised amounts of GBP0.49m in the last six months
(2008: GBP0.32m).
A suite of new Automation Agent applications were released in January. These
range from Mail-2-Me which can automate the mundane task of capturing a caller's
name and address for dispatching of information/brochures, to Payments which can
automate the paying of bills such as Council Tax. These applications are already
proving popular with both existing and new customers and help underpin the value
of our multiple-application platform, SEMAP+.
Datadialogs continue to innovate and adapt Eden to meet the market needs. A core
addition to the product in the period has been the addition of comprehensive
support for industry standard web services, as always with zero requirement for
code. This specific functionality allows legacy systems to participate in web
service interactions, thereby extending their lifespan and maximising sunk
investment. In this scenario Eden consumes the legacy interfaces and presents
them to the outside world as web services, breathing new life into existing
solutions.
Sales & Marketing costs
Expenditure on sales and marketing, before amortisation of acquired customer
relationship intangible assets, increased by GBP0.18m to GBP1.44m due to
continued investment as we build expertise within the business and maximise the
revenues and opportunities from our product portfolio, combined with the post
acquisition selling expenses of Datadialogs to the interim period end of
GBP71,000.
General and administrative expenses
General and administrative expenses before restructuring costs and share-based
payment expenses were down 3% to GBP0.83m representing a creditable result with
increased overhead to manage Datadialogs of GBP57,000 more than offset.
Outlook
As announced on 10 August 2009 the Company has achieved a level of turnover
broadly in line with expectations in the year to date and, based on anticipated
order conversion, the Board expects this to continue for the remainder of the
year ending 30 November 2009. In addition, the Board remains focused on cost
control and has taken a more prudent approach to recruitment than originally
anticipated. As a result, the Board expects adjusted earnings before interest,
tax, depreciation, amortisation, one-off restructuring and share-based charges
for the current year to be slightly ahead of previous market expectations.
Unaudited consolidated income statement for the six months ended 31 May 2009
+----------------------+--------+---------+---------+---------+
| | | 6 | 6 | Year |
| | | months | months | ended |
| | | ended | ended | 30 |
| | | 31 | 31 | Nov |
| | | May | May | 2008 |
| | | 2009 | 2008 | |
+----------------------+--------+---------+---------+---------+
| | Note | GBP'000 | GBP'000 | GBP'000 |
+----------------------+--------+---------+---------+---------+
| Revenue | 2 | 4,994 | 4,616 | 9,951 |
+----------------------+--------+---------+---------+---------+
| Cost | | (1,953) | (1,752) | (3,865) |
| of | | | | |
| sales | | | | |
+----------------------+--------+---------+---------+---------+
| Gross | | 3,041 | 2,864 | 6,086 |
| profit | | | | |
+----------------------+--------+---------+---------+---------+
| Operating | 3 | (2,633) | (2,371) | (5,220) |
| expenses | | | | |
+----------------------+--------+---------+---------+---------+
| Profit from | | 408 | 493 | 866 |
| operations | | | | |
+----------------------+--------+---------+---------+---------+
| Profit | | | | |
| from | | | | |
| operations | | | | |
| analysed | | | | |
| as: | | | | |
+----------------------+--------+---------+---------+---------+
| Profit | | 408 | 414 | 786 |
| from | | | | |
| operations | | | | |
| before | | | | |
| restructuring | | | | |
| credit | | | | |
+----------------------+--------+---------+---------+---------+
| | 4 | - | 79 | 80 |
| Restructuring | | | | |
| credit | | | | |
+----------------------+--------+---------+---------+---------+
| | | 408 | 493 | 866 |
+----------------------+--------+---------+---------+---------+
| Finance | | (19) | (1) | (3) |
| expense | | | | |
+----------------------+--------+---------+---------+---------+
| Finance | | 20 | 104 | 208 |
| income | | | | |
+----------------------+--------+---------+---------+---------+
| Profit | 2 | 409 | 596 | 1,071 |
| before | | | | |
| tax | | | | |
+----------------------+--------+---------+---------+---------+
| Tax | | (86) | (139) | (120) |
| expense | | | | |
+----------------------+--------+---------+---------+---------+
| Profit | | 323 | 457 | 951 |
| for | | | | |
| the | | | | |
| period | | | | |
+----------------------+--------+---------+---------+---------+
| Earnings | | | | |
| per | | | | |
| share | | | | |
+----------------------+--------+---------+---------+---------+
| Basic | 5 | 0.30 | 0.42 | 0.87 |
| - | | | | |
| pence | | | | |
+----------------------+--------+---------+---------+---------+
| Diluted | 5 | 0.27 | 0.38 | 0.80 |
| - pence | | | | |
+----------------------+--------+---------+---------+---------+
| | | | | |
+----------------------+--------+---------+---------+---------+
Unaudited consolidated balance sheet as at 31 May 2009
+-------------+--------+---------+---------+---------+
| | | 31 May | 31 May | 30 Nov |
| | | 2009 | 2008 | 2008 |
+-------------+--------+---------+---------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+-------------+--------+---------+---------+---------+
| Assets | | | | |
+-------------+--------+---------+---------+---------+
| Non-current | | | | |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Intangible | | 13,512 | 11,004 | 11,093 |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Property, | | 276 | 316 | 269 |
| plant & | | | | |
| equipment | | | | |
+-------------+--------+---------+---------+---------+
| Deferred | | - | 70 | 33 |
| tax | | | | |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Total | | 13,788 | 11,390 | 11,395 |
| non-current | | | | |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Current | | | | |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Inventories | | 252 | 235 | 335 |
+-------------+--------+---------+---------+---------+
| Trade | | 2,588 | 2,340 | 2,536 |
| & | | | | |
| other | | | | |
| receivables | | | | |
+-------------+--------+---------+---------+---------+
| Cash & | | 4,466 | 4,665 | 5,389 |
| cash | | | | |
| equivalents | | | | |
+-------------+--------+---------+---------+---------+
| Total | | 7,306 | 7,240 | 8,260 |
| current | | | | |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Total | | 21,094 | 18,630 | 19,655 |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Current | | | | |
| liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Trade | | 4,701 | 4,484 | 5,149 |
| & | | | | |
| other | | | | |
| payables | | | | |
+-------------+--------+---------+---------+---------+
| Borrowings | | 18 | - | - |
+-------------+--------+---------+---------+---------+
| Obligations | | 1 | - | - |
| under | | | | |
| finance | | | | |
| leases | | | | |
+-------------+--------+---------+---------+---------+
| Corporation | | 160 | 163 | 81 |
| tax payable | | | | |
+-------------+--------+---------+---------+---------+
| Provisions | | 190 | - | 6 |
+-------------+--------+---------+---------+---------+
| Total | | 5,070 | 4,647 | 5,236 |
| current | | | | |
| liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Non-current | | | | |
| liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Borrowings | | 4 | - | - |
+-------------+--------+---------+---------+---------+
| Provisions | | 706 | 61 | 49 |
+-------------+--------+---------+---------+---------+
| Total | | 710 | 61 | 49 |
| non-current | | | | |
| liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Total | | 5,780 | 4,708 | 5,285 |
| liabilities | | | | |
+-------------+--------+---------+---------+---------+
| Net | | 15,314 | 13,922 | 14,370 |
| assets | | | | |
+-------------+--------+---------+---------+---------+
| Capital | | | | |
| & | | | | |
| reserves | | | | |
+-------------+--------+---------+---------+---------+
| Share | | 1,090 | 1,090 | 1,090 |
| capital | | | | |
+-------------+--------+---------+---------+---------+
| Share | | 6,803 | 6,803 | 6,803 |
| premium | | | | |
+-------------+--------+---------+---------+---------+
| Shares | | 600 | - | - |
| to be | | | | |
| issued | | | | |
+-------------+--------+---------+---------+---------+
| Reverse | | 506 | 506 | 506 |
| acquisition | | | | |
| reserve | | | | |
+-------------+--------+---------+---------+---------+
| Merger | | 4,951 | 4,951 | 4,951 |
| reserve | | | | |
+-------------+--------+---------+---------+---------+
| Retained | | 1,364 | 572 | 1,020 |
| earnings | | | | |
+-------------+--------+---------+---------+---------+
| Total | | 15,314 | 13,922 | 14,370 |
| equity | | | | |
+-------------+--------+---------+---------+---------+
Unaudited consolidated statement of changes in equity as at 31 May 2009
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| | Share | Share | Shares | Reverse | Merger | Retained | Total |
| | capital | premium | to be | acqu-isition | reserve | earnings | |
| | | | issued | reserve | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 1 | 1,090 | 6,802 | - | 506 | 4,951 | 46 | 13,395 |
| December 2007 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Profit for the | - | - | - | - | - | 457 | 457 |
| period | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Total recognised | - | - | - | - | - | 457 | 457 |
| income and | | | | | | | |
| expense | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Share based | - | - | - | - | - | 69 | 69 |
| payment credit | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Issue of share | - | 1 | - | - | - | - | 1 |
| capital | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 31 | 1,090 | 6,803 | - | 506 | 4,951 | 572 | 13,922 |
| May 2008 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 1 | 1,090 | 6,803 | - | 506 | 4,951 | 572 | 13,922 |
| June 2008 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Profit for the | - | - | - | - | - | 494 | 494 |
| period | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Total recognised | - | - | - | - | - | 494 | 494 |
| income and | | | | | | | |
| expense | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Share based | - | - | - | - | - | (46) | (46) |
| payment debit | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 30 | 1,090 | 6,803 | - | 506 | 4,951 | 1,020 | 14,370 |
| November 2008 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 1 | 1,090 | 6,803 | - | 506 | 4,951 | 1,020 | 14,370 |
| December 2008 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Profit for the | - | - | - | - | - | 323 | 323 |
| period | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Total recognised | - | - | - | - | - | 323 | 323 |
| income and | | | | | | | |
| expense | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Share based | - | - | - | - | - | 21 | 21 |
| payment credit | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Contingent | - | - | 600 | - | - | - | 600 |
| consideration | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance at 31 | 1,090 | 6,803 | 600 | 506 | 4,951 | 1,364 | 15,314 |
| May 2009 | | | | | | | |
+------------------+---------+---------+---------+--------------+---------+----------+---------+
Unaudited consolidated cash flow statement for the six months ended 31 May 2009
+--------------+--------+---------+---------+---------+
| | | 6 | 6 | Year |
| | | months | months | ended |
| | | ended | ended | 30 |
| | | 31 | 31 | Nov |
| | | May | May | 2008 |
| | | 2009 | 2008 | |
+--------------+--------+---------+---------+---------+
| | | GBP'000 | GBP'000 | GBP'000 |
+--------------+--------+---------+---------+---------+
| Cash | | | | |
| flow | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| | | 323 | 457 | 951 |
| Profit | | | | |
| for | | | | |
| the | | | | |
| period | | | | |
+--------------+--------+---------+---------+---------+
| | | | | |
| Adjustments | | | | |
| for: | | | | |
+--------------+--------+---------+---------+---------+
| | | 69 | 81 | 149 |
| Depreciation | | | | |
+--------------+--------+---------+---------+---------+
| Loss | | - | - | 18 |
| on | | | | |
| disposal | | | | |
| of | | | | |
| property, | | | | |
| plant & | | | | |
| equipment | | | | |
+--------------+--------+---------+---------+---------+
| | | 170 | 83 | 188 |
| Amortisation | | | | |
+--------------+--------+---------+---------+---------+
| | | (20) | (104) | (208) |
| Finance | | | | |
| income | | | | |
+--------------+--------+---------+---------+---------+
| | | 19 | 1 | 3 |
| Finance | | | | |
| costs | | | | |
+--------------+--------+---------+---------+---------+
| | | 21 | 69 | 23 |
| Share-based | | | | |
| payment | | | | |
| expense | | | | |
+--------------+--------+---------+---------+---------+
| | | 86 | 139 | 120 |
| Income | | | | |
| tax | | | | |
| expense | | | | |
+--------------+--------+---------+---------+---------+
| Operating | | 668 | 726 | 1,244 |
| cash | | | | |
| flows | | | | |
| before | | | | |
| movements | | | | |
| in | | | | |
| working | | | | |
| capital & | | | | |
| provisions | | | | |
+--------------+--------+---------+---------+---------+
| | | 83 | 18 | (86) |
| Decrease/ | | | | |
| (increase) | | | | |
| in | | | | |
| inventories | | | | |
+--------------+--------+---------+---------+---------+
| Decrease/ | | 140 | (95) | (291) |
| (increase) | | | | |
| in trade | | | | |
| and other | | | | |
| receivables | | | | |
+--------------+--------+---------+---------+---------+
| (Decrease)/ | | (713) | 162 | 827 |
| increase in | | | | |
| trade and | | | | |
| other | | | | |
| payables | | | | |
+--------------+--------+---------+---------+---------+
| | | (20) | (123) | (130) |
| Decrease | | | | |
| in | | | | |
| provisions | | | | |
+--------------+--------+---------+---------+---------+
| Cash | | 158 | 688 | 1,564 |
| generated | | | | |
| from | | | | |
| operations | | | | |
+--------------+--------+---------+---------+---------+
| | | (3) | (1) | (3) |
| Interest | | | | |
| paid | | | | |
+--------------+--------+---------+---------+---------+
| | | 20 | 104 | 208 |
| Interest | | | | |
| received | | | | |
+--------------+--------+---------+---------+---------+
| | | (5) | 60 | 34 |
| Corporation | | | | |
| tax (paid)/ | | | | |
| reclaimed | | | | |
+--------------+--------+---------+---------+---------+
| Net | | 170 | 851 | 1,803 |
| cash | | | | |
| flow | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| Investing | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| | | (63) | (69) | (114) |
| Purchase | | | | |
| of | | | | |
| property, | | | | |
| plant & | | | | |
| equipment | | | | |
+--------------+--------+---------+---------+---------+
| | | (169) | (48) | (216) |
| Development | | | | |
| expenditure | | | | |
+--------------+--------+---------+---------+---------+
| | | (43) | (98) | (113) |
| Purchase | | | | |
| of other | | | | |
| intangible | | | | |
| assets | | | | |
+--------------+--------+---------+---------+---------+
| Acquisition | | (813) | - | - |
| of | | | | |
| subsidiary, | | | | |
| net of cash | | | | |
| acquired | | | | |
+--------------+--------+---------+---------+---------+
| Net | | (1,088) | (215) | (443) |
| cash | | | | |
| used | | | | |
| in | | | | |
| investing | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| Financing | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| | | (4) | - | - |
| Repayment | | | | |
| of bank | | | | |
| loans | | | | |
+--------------+--------+---------+---------+---------+
| Repayment | | (1) | - | - |
| of | | | | |
| finance | | | | |
| leases | | | | |
+--------------+--------+---------+---------+---------+
| Issue | | - | 1 | 1 |
| of | | | | |
| ordinary | | | | |
| shares | | | | |
+--------------+--------+---------+---------+---------+
| Net | | (5) | 1 | 1 |
| cash | | | | |
| (used | | | | |
| in)/ | | | | |
| from | | | | |
| financing | | | | |
| activities | | | | |
+--------------+--------+---------+---------+---------+
| Net | | (923) | 637 | 1,361 |
| (decrease)/ | | | | |
| increase in | | | | |
| cash & cash | | | | |
| equivalents | | | | |
+--------------+--------+---------+---------+---------+
| Cash & | | 5,389 | 4,028 | 4,028 |
| cash | | | | |
| equivalents | | | | |
| at the | | | | |
| beginning | | | | |
| of the | | | | |
| period | | | | |
+--------------+--------+---------+---------+---------+
| Cash & | | 4,466 | 4,665 | 5,389 |
| cash | | | | |
| equivalents | | | | |
| at the end | | | | |
| of the | | | | |
| period | | | | |
+--------------+--------+---------+---------+---------+
Notes to the financial information for the six months ended 31 May 2009
1. Basis of preparation
These consolidated interim financial statements ('the interim financial
statements') of Telephonetics plc are for the six months ended 31 May 2009.
These interim financial statements have been prepared in accordance with those
IFRS standards and IFRIC interpretations issued and effective or issued and
early adopted as at the time of preparing these statements (August 2009). This
results announcement does not constitute statutory accounts of the Group within
the meaning of sections 434(3) and 435(3) of the Companies Act 2006. The balance
sheet at 30 November 2008 has been derived from the full Group accounts
published in the Annual Report 2008, which has been delivered to the Registrar
of Companies and on which the report of the independent auditors was unqualified
and did not contain a statement under either section 237(2) or section 237(3) of
the Companies Act 1985.
The interim financial statements have been prepared under the historical cost
convention.
The interim financial statements have been prepared in accordance with the
accountingpolicies set out in the Group's 30 November 2008 statutory accounts,
which are based on the recognition and measurement principles of IFRS in issues
as adopted by the European Union ("EU"). No changes to accounting policies are
expected for the year ending 30 November 2009.
The results for the six months ended 31 May 2009 were approved by the Board on
25 August 2009 and are available on the Company's web site
www.telephonetics.co.uk from 27 August 2009.
2. Segmental analysis
The following is an analysis of the Group's revenue and results by operating
segment for the periods under review:
+-----------------------+----------+----------+----------+----------+----------+----------+
| | Revenue | Segment profit/ (loss) |
+-----------------------+--------------------------------+--------------------------------+
| | 6 months | 6 months | Year | 6 months | 6 months | Year |
| | ended 31 | ended 31 | ended 30 | ended 31 | ended 31 | ended 30 |
| | May 2009 | May 2008 | Nov 2008 | May 2009 | May 2008 | Nov 2008 |
+-----------------------+----------+----------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Telephonetics | 4,803 | 4,616 | 9,951 | 1,248 | 1,175 | 2,199 |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Datadialogs | 191 | - | - | (68) | - | - |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Total | 4,994 | 4,616 | 9,951 | 1,180 | 1,175 | 2,199 |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Central | | | | (512) | (528) | (1,053) |
| administration | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Depreciation | | | | (69) | (81) | (149) |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Amortisation | | | | (170) | (83) | (188) |
| of | | | | | | |
| intangible | | | | | | |
| assets | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Share | | | | (21) | (69) | (23) |
| based | | | | | | |
| payment | | | | | | |
| charges | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Restructuring | | | | - | 79 | 80 |
| credit | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Net interest | | | | 1 | 103 | 205 |
+-----------------------+----------+----------+----------+----------+----------+----------+
| Profit before | | | | 409 | 596 | 1,071 |
| tax | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
| | | | | | | |
+-----------------------+----------+----------+----------+----------+----------+----------+
All of the segment revenue reported above is from external customers. Segment
profit represents the profit before interest, taxation, depreciation,
amortisation, one-off restructuring and share-based charges earned by each
segment without allocation of central administration costs (representing the
cost of directors' remuneration, allocated overhead and fees incurred in respect
of the company's AIM listed status). This is the measure reported to the chief
operating decision maker for the purposes of resource allocation and assessment
of segment performance.
The following is an analysis of the Group's assets by operating segment:
+------------------------------------+------+-----------+----------+----------+
| | | 6 months | 6 months | Year |
| | | ended 31 | ended 31 | ended 30 |
| | | May 2009 | May 2008 | Nov 2008 |
+------------------------------------+------+-----------+----------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+------+-----------+----------+----------+
| Total assets | | | | |
+------------------------------------+------+-----------+----------+----------+
| Telephonetics | | 17,053 | 16,770 | 16,728 |
+------------------------------------+------+-----------+----------+----------+
| Datadialogs | | 2,597 | - | - |
+------------------------------------+------+-----------+----------+----------+
| Head office | | 2,239 | 2,398 | 3,458 |
+------------------------------------+------+-----------+----------+----------+
| Inter-segment | | (795) | (538) | (531) |
| eliminations | | | | |
+------------------------------------+------+-----------+----------+----------+
| | | 21,094 | 18,630 | 19,655 |
+------------------------------------+------+-----------+----------+----------+
| Total liabilities | | | | |
+------------------------------------+------+-----------+----------+----------+
| Telephonetics | | 4,902 | 4,742 | 5,192 |
+------------------------------------+------+-----------+----------+----------+
| Datadialogs | | 1,288 | - | - |
+------------------------------------+------+-----------+----------+----------+
| Head office | | 415 | 504 | 624 |
+------------------------------------+------+-----------+----------+----------+
| Inter-segment | | (795) | (538) | (531) |
| eliminations | | | | |
+------------------------------------+------+-----------+----------+----------+
| | | 5,810 | 4,708 | 5,285 |
+------------------------------------+------+-----------+----------+----------+
| Net assets | | 15,284 | 13,922 | 14,370 |
+------------------------------------+------+-----------+----------+----------+
Segmental assets and liabilities include items directly attributable to a
segment and include any goodwill and provision for contingent consideration
balances associated with that segment. Head office represents the operations of
the parent holding company its assets and liabilities are principally cash,
inter-company financing and central administration working capital balances.
3. Analysis of operating expenses
+------------------------------------+-------+----------+----------+----------+
| | | 6 months | 6 months | Year |
| | | ended 31 | ended 31 | ended 30 |
| | | May 2009 | May 2008 | Nov 2008 |
+------------------------------------+-------+----------+----------+----------+
| | | GBP'000 | GBP'000 | GBP'000 |
+------------------------------------+-------+----------+----------+----------+
| Research & development | | 323 | 270 | 610 |
+------------------------------------+-------+----------+----------+----------+
| Sales & marketing | | 1,466 | 1,259 | 3,026 |
+------------------------------------+-------+----------+----------+----------+
| Analysed as: | | | | |
+------------------------------------+-------+----------+----------+----------+
| Expenses before | | 1,442 | 1,259 | 3,026 |
| amortisation of | | | | |
| acquired customer | | | | |
| lists | | | | |
+------------------------------------+-------+----------+----------+----------+
| Amortisation of | | 24 | - | - |
| acquired customer | | | | |
| lists | | | | |
+------------------------------------+-------+----------+----------+----------+
| General & administration | | 848 | 842 | 1,584 |
+------------------------------------+-------+----------+----------+----------+
| Analysed as: | | | | |
+------------------------------------+-------+----------+----------+----------+
| General & | | 827 | 852 | 1,641 |
| administration | | | | |
| before restructuring | | | | |
| credit and share | | | | |
| based payment | | | | |
| expense | | | | |
+------------------------------------+-------+----------+----------+----------+
| Share-based payment expense | | 21 | 69 | 23 |
+------------------------------------+-------+----------+----------+----------+
| Restructuring credit | | - | (79) | (80) |
+------------------------------------+-------+----------+----------+----------+
| | | 2,637 | 2,371 | 5,220 |
+------------------------------------+-------+----------+----------+----------+
4. Restructuring credit
In May 2008 the Group reorganised its leasehold property and terminated various
leases earlier than expected, as a result GBP79,000 of the vacant property
provision was surplus and has been credited back to the income statement in the
period ended 31 May 2008.
5. Earnings per share
The table below sets out the weighted average number of shares used to calculate
the earnings per share figures:
+------------------------------+----+-------------+-------------+--------------+
| | | 6 months | 6 months | Year |
| | | ended 31 | ended 31 | ended 30 |
| | | May 2009 | May 2008 | Nov 2007 |
+------------------------------+----+-------------+-------------+--------------+
| | | Number | Number | Number |
+------------------------------+----+-------------+-------------+--------------+
| Shares used for calculation | | 109,025,334 | 108,995,917 | 109,010,585 |
| of basic earnings per share | | | | |
+------------------------------+----+-------------+-------------+--------------+
| Exercise of share options | | 9,774,624 | 9,804,119 | 9,741,928 |
+------------------------------+----+-------------+-------------+--------------+
| Shares used in calculation | | 118,799,958 | 118,800,036 | 118,752,513 |
| of diluted earnings per | | | | |
| share | | | | |
+------------------------------+----+-------------+-------------+--------------+
6. Acquisition of subsidiaries
On 6 February 2009 the Company acquired 100% of the ordinary share capital of
Datadialogs Ltd (formerly known as Eden Origin Ltd). Datadialogs Ltd is a
specialist provider of codeless Enterprise Application Integration, Business
Process Management and Mashup Solutions.
Analysis of assets and liabilities acquired:
+--------------------------------------+----------+---------+------------+-------------+
| | | Book | Fair | Fair value |
| | | Value | value | on |
| | | GBP'000 | Adjustment | Acquisition |
| | | | GBP'000 | GBP'000 |
+--------------------------------------+----------+---------+------------+-------------+
| Non-current assets: | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Property, plant & equipment | | 13 | - | 13 |
+--------------------------------------+----------+---------+------------+-------------+
| Intangible assets - customer | | - | 294 | 294 |
| relationships | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Intangible assets - software | | - | 446 | 446 |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Current assets: | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Trade & other receivables | | 175 | - | 175 |
+--------------------------------------+----------+---------+------------+-------------+
| Cash & cash equivalents | | 23 | - | 23 |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Current liabilities: | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Trade & other payables | | (264) | (13) | (277) |
+--------------------------------------+----------+---------+------------+-------------+
| Borrowings | | (18) | - | (18) |
+--------------------------------------+----------+---------+------------+-------------+
| Obligations under finance leases | | (2) | - | (2) |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Non-current liabilities | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Borrowings | | (8) | - | (8) |
+--------------------------------------+----------+---------+------------+-------------+
| Provisions | | (2) | (141) | (143) |
+--------------------------------------+----------+---------+------------+-------------+
| | | (83) | 586 | 503 |
+--------------------------------------+----------+---------+------------+-------------+
| Goodwill on acquisition | | | | 1,636 |
+--------------------------------------+----------+---------+------------+-------------+
| Consideration paid | | | | 2,139 |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Consideration analysed as: | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Cash | | | | 720 |
+--------------------------------------+----------+---------+------------+-------------+
| Contingent consideration | | | | 1,303 |
+--------------------------------------+----------+---------+------------+-------------+
| Transaction expenses | | | | 116 |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | 2,139 |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Net cash outflow on acquisition: | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| Total purchase consideration | | | | 2,139 |
+--------------------------------------+----------+---------+------------+-------------+
| Less: contingent consideration | | | | (1,303) |
+--------------------------------------+----------+---------+------------+-------------+
| Consideration paid in cash | | | | 836 |
+--------------------------------------+----------+---------+------------+-------------+
| Less: cash and cash equivalents | | | | (23) |
| acquired | | | | |
+--------------------------------------+----------+---------+------------+-------------+
| | | | | 813 |
+--------------------------------------+----------+---------+------------+-------------+
Fair value adjustments
On acquisition of Datadialogs, all assets were fair valued and appropriate
intangible assets recognised following the principals of IFRS 3. A deferred tax
liability relating to these intangible assets was also recognised. Management
identified two material intangible assets: (i) software; and (ii) customer
relationships.
The software acquired with Datadialogs was valued using the multi-year period
excess earnings method. This method measures the present value of the future
earnings generated over the life of the intangible asset. The future cash flows
associated with the intangible asset are estimated, then contributory charges
deducted from these cash flows. Contributory charges recognise the cost of the
use of the assets employed to support the generation of revenue streams
that relate to the asset being valued. The residual cash-flows are then
discounted to present values. Contributory charges are made for working capital,
fixed assets, workforce and other intangible assets. The basis of the charge is
generally the product of the contributory asset's fair value and the required
rate of return on the asset. The resulting cash flows are then discounted using
the risk adjusted discount rate to give a net present value of the
excess earnings resulting from the asset. The value of this intangible asset at
acquisition, after taking accounting for any tax amortisation benefit, is
GBP446,000. Management believe that this software has a minimum useful economic
life of five years and therefore the intangible asset will be amortised over
this period.
The customer relationships intangible asset acquired with Datadialogs was valued
using the historical cost to recreate method. The historical creation cost
considers all the expenditure that has previously been incurred on creating the
intangible asset. This represents the current value of the amount spent on
the asset over time to bring it to its current state. The value of this
intangible asset at acquisition, after taking accounting for any tax
amortisation benefit, is GBP294,000. Management believe that these customer
relationships have a minimum useful economic life of four years and therefore
the intangible asset will be amortised over this period.
A GBP13,000 credit to trade & other payables has been made to record an opening
holiday pay accrual in line with the Group's accounting policy.
Contingent consideration
The contingent consideration is based on an earn out arrangement: GBP200,000 in
cash is payable on Datadialogs achieving revenues of GBP700,000 within the first
year of acquisition; and up to a further GBP2.80m is payable in a mixture of
cash and shares over the two years post acquisition on the achievement of
revenue targets of between GBP1.56m and GBP10.0m over the period. Any new shares
allotted as consideration will be priced based on the average mid-market price
preceding issue subject to a minimum of 10p per share. Based on Datadialogs'
management's current expectations of revenues over the two year period post
acquisition provision for contingent consideration has been made for a share
issue of GBP600,000 (5,995,275 shares at 10p per share) and cash payments of
GBP800,000 recorded at a present value of GBP703,000.
Impact of acquisition on the results of the Group
Included in the profit for the period is loss of GBP139,000 attributable to the
Datadialogs Ltd. Had this business combination been effected on 1 December 2008,
the revenue of the Group from continuing operations would have been GBP244,000,
and the loss for the period from continuing operations would have been
GBP231,000. The directors of the Group consider these 'pro-forma' numbers to
represent an approximate measure of performance of the combined group on a six
monthly basis and to provide a reference point for comparison in future periods.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DELFLKVBBBBX
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