TIDMTPH
RNS Number : 6424H
Telephonetics PLC
25 February 2010
Press release
25 February 2010
Telephonetics Plc
Preliminary Results
For the year ended 30 November 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 preliminary
results for the year ended 30 November 2009.
Financial Highlights
- Revenues increased by 5.6% to GBP10.51m (2008: GBP9.95m)
- Like for like premises-based revenues up 5%
- Datadialogs revenues up 27% over pre-acquisition levels giving a
first time contribution of GBP0.55m
- Gross margins maintained at 61% (2008: 61%)
- Improved EBITDA margin in the core Telephonetics business by 4%
to 25%
- Adjusted EBITDA down 13% to GBP1.00m (2008: GBP1.15m)
- Profit before tax of GBP0.41m (2008: GBP1.07m)
- Debt free and net cash funds of GBP5.11m
- Earnings per share 0.33p (2008: 0.87p)
Operational Highlights
- Deployments under contract increased in the period by 5% to 525
- Successful long term contract renewal of Apollo Cinemas and
migration of Empire Cinemas to MovieLINE
- Successful acquisition of Datadialogs Limited and cross selling
of Eden technology into the customer base across all sectors
- Launch of 59R and Automation Agent applications with early
adopters in place in core markets
- Initial sales through new partners Lagan and ONI
Mike Neville, Chairman of Telephonetics, commented:
"Telephonetics made reassuring progress over the last twelve months despite the
very tough economic climate. The business has been strengthened by the
combination of Datadialogs and continues to make good progress across both the
public and private sectors. Our focus on fiscal discipline, customer service and
profitable growth means that we are well positioned for any sustained recovery
in the market."
For further information please contact:
+-------------------------------+-------------------------------+
| Telephonetics | |
| | +44 (0) 1442 242242 |
| James Ormondroyd (Finance | |
| Director) | |
| | |
+-------------------------------+-------------------------------+
| Maitland | |
| | +44 (0) 207 379 5151 |
| Neil Bennett or George Hudson | |
| | |
| Brewin Dolphin Investment | |
| Banking | +44 (0) 113 241 0130 |
| Nominated Adviser & Broker | |
| Neil Baldwin or Sean | |
| Wyndham-Quin | |
| | |
+-------------------------------+-------------------------------+
Chairman's statement
I am pleased to report to shareholders that we have made reassuring progress
over the last twelve months despite the very tough economic climate. The
recession has created many challenges which the business has managed to overcome
thanks to its robust and compelling portfolio, its focus on its customers and
the commitment of its staff.
During the period Group turnover increased by 6% to GBP10.51m (2008 - GBP9.95m).
The premises-based product line increased revenues by 5% which in itself is a
great achievement as IT purchasing decisions were delayed by customers seeking
to mitigate their own risks because of the economy. In addition, Datadialogs,
our newly acquired business solutions division, made a first time contribution
to the top line of GBP0.55m. This is approximately 27% annualised growth over
the division's pre-acquisition levels, and in light of the early stage
development of the business is most pleasing.
Gross margin, which is a key focus for the business, was stable at 61% (2008 -
61%). Telephonetics has held firm to its core belief in the value and quality of
its product offering. It has maintained this margin in the face of the difficult
economic climate, the need for customers to save money, and despite the delaying
of purchasing decisions. The resilience of the margin is a testament to the
quality of our products and the quality of our people.
Costs were also monitored closely during the year, and this has paid its own
dividends in terms of our overall results. This discipline will be maintained
and ensures the Group is well positioned for a rebound in the economic climate.
Adjusted EBITDA was slightly down at GBP1.00m (2008- GBP1.15m) largely as a
result of investment in core operating functions in the Datadialogs business.
The financial position of the Group continues to be robust: we are highly cash
generative, have significant cash resources and negligible debt on the balance
sheet. This position of strength, with the focus on maintaining financial
security underpins the Group's ability to confidently invest in its technology,
its staff and its customers.
Overall, our strategy of end to end customer interaction through packaged
applications and technology continues to deliver increased value to our
customers and our shareholders. Our unique offering is well aligned with the
drivers in government funded organisations and is targeted at helping them
achieve value for money.
In terms of customers, we have signed up over 20 new customers during this
financial year and we now have over 500 systems deployed.
Finally, I would like to take this opportunity to thank all of our hard working
staff for their commitment and dedication to the company and its customers. They
are the lifeblood of the company and without their continued support we would
not be in the strong position we are in today.
The business remains a leading UK provider of compelling business solutions,
strengthened further by the combination of the Datadialogs technology with our
existing voice and speech automation capabilities. I therefore believe, given
our fiscal discipline, our appetite for excellent customer service, and our
focus on profitable growth, that we are well positioned for any sustained
recovery in the market.
Financial Review
Group turnover was GBP10.51m, an increase of 6% (2008 - GBP9.95m). This improved
performance was due to a combination of factors including a first time
contribution from newly acquired Datadialogs of GBP0.55m, and an uplift in
support contract revenues by GBP0.32m which was offset by a reduction of
GBP0.31m in revenues for MovieLINE .
The Group made adjusted EBITDA of GBP1.00m (2008 - GBP1.15m), margins were lower
as a result of investment costs in Datadialogs, following its acquisition in
February 2009, of GBP0.25m and an increase in corporate expenses of GBP0.23m.
This was partially compensated by improved EBITDA margin in the core
Telephonetics business from 21% to 25%. Adjusted EBITDA is a performance measure
used internally to manage the operations of the business and removes the impact
of one off and non-cash items (see note 1 below for definition and
reconciliation).
This adjusted EBITDA result, together with lower interest income of GBP0.18m and
an increase in the charge for the amortisation of intangible assets of GBP0.20m,
resulted in profit before tax of GBP0.41m (2008 - GBP1.07m) and earnings per
share down 0.54p at 0.33p.
The Group continues to generate healthy cash flows and has a debt free balance
sheet, other than a small loan of GBP13,000 acquired with the Datadialogs
business. Cash generated from operating activities was GBP1.00m which was
GBP0.80m lower than 2008 due to a lower interest rate gained on cash deposits in
the period, investment costs incurred within the Datadialogs business and less
favourable working capital timing differences.
Cash spent on investing activities totalled GBP1.27m (2008 - GBP0.44m)
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 GBP0.28m to GBP5.11m from GBP5.39m at 30 November 2008.
Operating Review
Market & Strategy
The business remains committed to its strategy of providing a complete solution
for end-to-end customer interaction. Used appropriately, smart technology, such
as our SEMAP+ platform, can transform this interaction at every stage of the
process, delivering very significant benefits along the way in terms of improved
service levels and increased efficiency. Our customers are keen to reap these
benefits and maximise retention of their own customer base as part of their
business strategies. In the private sector, the economic climate serves to
increase the value inherent in repeat business and loyal customers. In the
public sector, authorities are under pressure to deliver more to their citizens
with less resource. Effective customer interaction is therefore clearly a vital
component if these strategies are to be successful.
In the previous period we spent time and resources introducing our customer
interaction solutions and automation agent model into our target markets and
educating them in respect of the capabilities and associated technology. This
work is reaping rewards in the current period as more customers are requesting
assistance with their own business cases, having accepted the automation agent
model and customer self-service as a key element of their overall strategy.
In local authorities, our solutions are now recognised as an important tool in
order to help those organisations achieve their goals. There is an increasing
appreciation that automated self-service solutions represent "The Fourth
Channel" in terms of how they interact with their customers. Furthermore, using
our flexible SEMAP+ technology, we are able to blend seamlessly self-service
with the use of live agents to provide superior service at reduced cost. We have
seen significant growth in the level of interest in this important market and
added seven new council customers including the London Borough of Lambeth, East
Dunbartonshire Council and South Staffordshire County Council.
In order to further enhance our customer interaction capabilities, we launched
our new automatic call distribution ("ACD") product, the 59R Contact Centre
suite. This built on our considerable experience in ACD and has been designed
in-house, from the ground up, as an integral component of our intelligent SEMAP+
platform, alongside its other existing capabilities.
For contact centre supervisors 59R provides instant, real-time reporting using a
highly interactive Web 2.0 browser-based interface, along with the ability to
operate agents from disparate geographical locations. Callers to an organisation
with 59R and our automation agents now benefit from increased and informed
choices as to how their call is handled - for example, they can be told the
current wait time for a suitably skilled member of staff and given the choice of
holding or using the appropriate self-service speech application. This maximises
customer choice and customer satisfaction whilst at the same time improving the
service level of the organisation and reducing the cost per call. The system has
been successfully deployed at a number of sites including Sandwell and West
Birmingham NHS Trust, New Forest District Council and Warwickshire County
Council.
Our careful focus on key strategic alliances continues. In the public sector we
have enhanced our relationship with Lagan, the major CRM provider for UK and
North American local authorities. Not only have we become a Silver Partner but
more significantly this alliance has started bearing fruit with new customer
wins at East Dunbartonshire Council and South Ayrshire Council.
In the health sector we have recently completed our integration with Blithe
Systems' Lilie product line. Blithe Systems is the UK's leading provider of
clinical management systems for sexual health. This work allows us to integrate
our Result application, for managing patient sexual health tests, directly with
a clinic's back office systems.
Our suite of ContactPortal applications in the acute health sector continues to
go from strength to strength. Sales of our speech-driven call steering, which
can replace switchboard operators, continues to expand both in terms of the
number of customer sites deploying it and the number of existing customers
upgrading their internally used solution for the benefit of external callers.
Our track record in successfully delivering this product has helped us replace a
competitor system by Nortel in a major London teaching hospital. Our
multi-application platform capability remains a key competitive advantage and
making complex self-service applications accessible in a pre-packaged form has
been a continued focus. Use of advanced speech-recognition technology to provide
new and enhanced services is also delivering real benefits for our customers and
their users.
A recent example of this is the deployment of our latest Reporting application
into an existing customer, Dacorum Borough Council. This "missed bin"
application uses our latest name and address capture technology to identify a
caller and allows them to report missed bin collections. Driven entirely by
spoken voice, the application collects all the necessary information and then
immediately submits a job into the customer's back-end system to ensure their
bin gets collected. Not only is this saving money for the local authority, but
it is allowing customers to report missed bins at any time of the day or night,
with knowledge that action is being taken at the earliest opportunity. We are
therefore providing increased customer service, increased efficiency and
effectiveness, and reduced costs - which we believe is a winning formula in the
growing public sector market.
Our end-to-end customer interaction capabilities do not always completely
replace direct human interaction. We recognise that there is a place for live
agents, yet at the same time we can optimise the caller experience by using
SEMAP+ as an adjunct to streamline the interaction process. Interflora is an
example of just such a successful solution deployment. Interflora prefers to use
live agents throughout the sales element of the process, however once the
customer has chosen their goods and are ready to pay, the agent adds little
value to the remainder of the call. At this stage, the live agent is able to
pass the caller over to a "secure payment service" which handles the actual
collection of the money, all achieved via a suitably skilled automation agent.
Our web interface technology, recently built into the SEMAP+ platform,
facilitates seamless transfer of data between the Interflora back-end systems
and our automation agent, such that the entire transaction completes quickly,
easily and securely. Interflora's own research has found this solution to be
appreciated by customers.
Not only has this saved Interflora money and improved customer satisfaction,
more importantly it has enabled their agents to focus more on selling rather
than the mundane task of taking credit card details.
The Eden technology acquired as part of our recent transaction with Datadialogs
also forms a key part of our end-to-end customer interaction strategy. This has
allowed the business to look at much larger, more complex customer requirements,
where there may be a need to retain older legacy systems, yet expose the data
within. Interest continues in both public and private sectors for the special
capabilities we can offer with Eden. A very successful recent deployment of Eden
was into a major contact centre; this involved the production of a completely
new and advanced CRM system to replace the customer's multitude of older legacy
applications in a very short time frame, particularly given the large size of
the project. The solution has enabled the customer to become Payment Card
Industry (PCI) compliant and at the same time has significantly improved the
ease of use and guidance for their telephone agents thus improving customer
service.
Eden has now also been purchased by one of our MovieLINE customers to mine data
both from MovieLINE and the customers' legacy retailing systems in order to
provide insight into customer behaviour and so optimise the retail offerings to
their customers.
Overall, our strategy of end-to-end customer interaction through packaged
applications and technology into our core markets continues to deliver
increasing value to our customers and our shareholders.
Acquisition of Datadialogs
Datadialogs was acquired in February 2009. Since then it has successfully signed
up several new customers including Interserve and Dee Valley Water and is
continuing its successful partnership with Civica, It has generated turnover in
the period to 30 November 2009 of GBP0.55m. We have invested a significant
amount of time and new resources into sales and marketing and as a result are
pleased to note that annualised revenue in the post-acquisition period is 27%
higher than that recorded in Datadialogs' last financial statements.
Adjusted EBITDA for the period showed a loss of GBP0.25m due to necessary new
investment in core business functions which will allow for future growth and is
expected to pay back in the financial year ended November 2011. The outlook for
Datadialogs is promising with an increasing number of customers recognising the
compelling proposition of this exciting technology.
The total consideration for the acquisition is now estimated at GBP1.50m
comprising upfront cash already paid of GBP0.72m, transaction expenses of
GBP0.12m and an estimated contingent consideration of GBP0.67m. The contingent
consideration is based on an earn out arrangement of which: 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's shares 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, a provision for contingent consideration
has been made for a share issue of GBP0.27m (2,654,945 shares at 10p per share)
and cash payments of GBP0.47m recorded at a present value of GBP0.40m.
Premises-based revenues
Premises-based revenues increased by 15% to GBP7.21m from GBP6.27m. 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 of GBP0.55m together with higher support contract
revenues, a result of continuing product sales to new and existing customers.
The number of deployments under contract increased in the period by 5% to 525
from 500 at the start of the year. The proportion of premises-based revenues
generated by support contracts is 57% (2008: 58%).
We are continuing to do well in terms of growing our sales pipeline in our key
markets of health and public sector. Our pipeline of selling opportunities in
these verticals has grown by 38% since the start of the financial year. 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.
Hosted revenues
Hosted revenues, which are principally derived from our MovieLINE product and
used by 83% of the UK's major multiplex cinemas, decreased by 9% to GBP3.30m
(2008: GBP3.61m). This is a combination of the 2008 result incorporating fees
earned for a significant one-off professional services project of approximately
GBP0.14m, together with call volumes reducing by 18% in the period which was
partially offset by a better tariff from our telecommunication providers.
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.
Gross margin
Gross margin was stable at 61% (2008 - 61%). The lower margin MovieLINE call
volume related revenues constituted a lower proportion of sales and was, offset
by an increase in non-cash amortisation charges for product related intangible
assets.
Research and development
The Group continues to invest in its product development with total development
expenditure including capitalised amounts of GBP1.09m (2008: GBP0.83m).
Sales and marketing expenses
Expenditure on sales and marketing, before amortisation of acquired customer
relationship intangible assets, increased by GBP0.12m to GBP3.15m due to
continued investment as we build expertise within the business and maximise the
revenues and opportunities from our product portfolio.
General and administrative expenses
General and administrative expenses before restructuring costs and share-based
payment expenses were up by GBP0.30m to GBP1.94m representing additional
overhead in managing the Datadialogs business and increased directors'
remuneration.
Outlook
As a supplier of choice in the growing health and public sector market, we
continue to make good progress having signed major new customers in the period.
Given our resilient trading position combined with the fact we are largely debt
free, have significant cash funds and are focused on cost control, we look to
the future with confidence.
Audited consolidated income statement for the year ended 30 November 2009
+---------------+--------+--------+---------+---------+
| | | | 2009 | 2008 |
+---------------+--------+--------+---------+---------+
| | | | GBP'000 | GBP'000 |
+---------------+--------+--------+---------+---------+
| Revenue | | | 10,510 | 9,951 |
+---------------+--------+--------+---------+---------+
| Cost | | | (4,081) | (3,865) |
| of | | | | |
| sales | | | | |
+---------------+--------+--------+---------+---------+
| Gross | | | 6,429 | 6,086 |
| profit | | | | |
+---------------+--------+--------+---------+---------+
| Operating | | | (5,997) | (5,220) |
| expenses | | | | |
+---------------+--------+--------+---------+---------+
| Profit | | | 432 | 866 |
| from | | | | |
| operations | | | | |
+---------------+--------+--------+---------+---------+
| Profit | | | | |
| from | | | | |
| operations | | | | |
| analysed | | | | |
| as: | | | | |
+---------------+--------+--------+---------+---------+
| Profit from | | 432 | 786 |
| operations | | | |
| before | | | |
+------------------------+--------+---------+---------+
| | | | | |
| restructuring | | | | |
| credit | | | | |
+---------------+--------+--------+---------+---------+
| | | | - | 80 |
| Restructuring | | | | |
| credit | | | | |
+---------------+--------+--------+---------+---------+
| | | | 432 | 866 |
+---------------+--------+--------+---------+---------+
| Finance | | | (44) | (3) |
| expense | | | | |
+---------------+--------+--------+---------+---------+
| Finance | | | 25 | 208 |
| income | | | | |
+---------------+--------+--------+---------+---------+
| Profit | | | 413 | 1,071 |
| before | | | | |
| tax | | | | |
+---------------+--------+--------+---------+---------+
| Tax | | | (58) | (120) |
| expense | | | | |
+---------------+--------+--------+---------+---------+
| Profit | | | 355 | 951 |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------+--------+--------+---------+---------+
| Earnings | | | | |
| per | | | | |
| share | | | | |
+---------------+--------+--------+---------+---------+
| Basic | | | 0.33 | 0.87 |
| - | | | | |
| pence | | | | |
+---------------+--------+--------+---------+---------+
| Diluted | | | 0.31 | 0.80 |
| - pence | | | | |
+---------------+--------+--------+---------+---------+
| | | | | |
+---------------+--------+--------+---------+---------+
Audited consolidated balance sheet as at 30 November 2009
+-------------+--------+--------+---------+---------+
| | | | 2009 | 2008 |
+-------------+--------+--------+---------+---------+
| | | | GBP'000 | GBP'000 |
+-------------+--------+--------+---------+---------+
| Assets | | | | |
+-------------+--------+--------+---------+---------+
| Non-current | | | | |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| Property, | | | 232 | 269 |
| plant & | | | | |
| equipment | | | | |
+-------------+--------+--------+---------+---------+
| Intangible | | | 12,807 | 11,093 |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| Deferred | | | - | 33 |
| tax | | | | |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 13,039 | 11,395 |
| non-current | | | | |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| | | | | |
| Current | | | | |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| Inventories | | | 161 | 335 |
+-------------+--------+--------+---------+---------+
| Trade | | | 2,152 | 2,536 |
| & | | | | |
| other | | | | |
| receivables | | | | |
+-------------+--------+--------+---------+---------+
| Cash & | | | 5,114 | 5,389 |
| cash | | | | |
| equivalents | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 7,427 | 8,260 |
| current | | | | |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 20,466 | 19,655 |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| | | | | |
| Liabilities | | | | |
+-------------+--------+--------+---------+---------+
| Current | | | | |
| liabilities | | | | |
+-------------+--------+--------+---------+---------+
| Trade | | | 4,754 | 5,149 |
| & | | | | |
| other | | | | |
| payables | | | | |
+-------------+--------+--------+---------+---------+
| Borrowings | | | 13 | - |
+-------------+--------+--------+---------+---------+
| Corporation | | | 88 | 81 |
| tax | | | | |
+-------------+--------+--------+---------+---------+
| Provisions | | | 202 | 6 |
+-------------+--------+--------+---------+---------+
| Total | | | 5,057 | 5,236 |
| current | | | | |
| liabilities | | | | |
+-------------+--------+--------+---------+---------+
| | | | | |
| Non-current | | | | |
| liabilities | | | | |
+-------------+--------+--------+---------+---------+
| Provisions | | | 304 | 49 |
+-------------+--------+--------+---------+---------+
| Deferred | | | 74 | - |
| tax | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 378 | 49 |
| non-current | | | | |
| liabilities | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 5,435 | 5,285 |
| liabilities | | | | |
+-------------+--------+--------+---------+---------+
| Net | | | 15,031 | 14,370 |
| assets | | | | |
+-------------+--------+--------+---------+---------+
| | | | | |
| Capital | | | | |
| & | | | | |
| reserves | | | | |
+-------------+--------+--------+---------+---------+
| Share | | | 1,091 | 1,090 |
| capital | | | | |
+-------------+--------+--------+---------+---------+
| Share | | | 6,804 | 6,803 |
| premium | | | | |
+-------------+--------+--------+---------+---------+
| Shares | | | 266 | - |
| to be | | | | |
| issued | | | | |
+-------------+--------+--------+---------+---------+
| Reverse | | | 506 | 506 |
| acquisition | | | | |
| reserve | | | | |
+-------------+--------+--------+---------+---------+
| Merger | | | 4,951 | 4,951 |
| reserve | | | | |
+-------------+--------+--------+---------+---------+
| Retained | | | 1,413 | 1,020 |
| earnings | | | | |
+-------------+--------+--------+---------+---------+
| Total | | | 15,031 | 14,370 |
| equity | | | | |
+-------------+--------+--------+---------+---------+
Audited consolidated statement of changes in equity as at 30 November 2009
+------------+---------+---------+---------+--------------+---------+----------+---------+
| | | | | Reverse | | | |
| | | | Shares | acquis-otion | | | |
| | Share | Share | to be | reserve | Merger | Retained | |
| | capital | premium | issued | | reserve | earnings | Total |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance | 1,090 | 6,802 | - | 506 | 4,951 | 46 | 13,395 |
| at 1 | | | | | | | |
| December | | | | | | | |
| 2007 | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Profit | - | - | - | - | - | 951 | 951 |
| for | | | | | | | |
| the | | | | | | | |
| year | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Total | - | - | - | - | - | 951 | 951 |
| recognised | | | | | | | |
| income and | | | | | | | |
| expense | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Share | - | - | - | - | - | 23 | 23 |
| based | | | | | | | |
| payment | | | | | | | |
| credit | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Issue | - | 1 | - | - | - | - | 1 |
| of | | | | | | | |
| share | | | | | | | |
| capital | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance | 1,090 | 6,803 | - | 506 | 4,951 | 1,020 | 14,370 |
| at 30 | | | | | | | |
| November | | | | | | | |
| 2008 | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance | 1,090 | 6,803 | - | 506 | 4,951 | 1,020 | 14,370 |
| at 1 | | | | | | | |
| December | | | | | | | |
| 2008 | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Profit | - | - | - | - | - | 355 | 355 |
| for | | | | | | | |
| the | | | | | | | |
| year | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Total | - | - | - | - | - | 355 | 355 |
| recognised | | | | | | | |
| income and | | | | | | | |
| expense | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Shares | - | - | 266 | - | - | - | 266 |
| to be | | | | | | | |
| issued | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Share | - | - | - | - | - | 38 | 38 |
| based | | | | | | | |
| payment | | | | | | | |
| credit | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Issue | 1 | 1 | - | - | - | - | 2 |
| of | | | | | | | |
| share | | | | | | | |
| capital | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
| Balance | 1,091 | 6,804 | 266 | 506 | 4,951 | 1,413 | 15,031 |
| at 30 | | | | | | | |
| November | | | | | | | |
| 2009 | | | | | | | |
+------------+---------+---------+---------+--------------+---------+----------+---------+
Audited consolidated cash flow statement for year ended 30 November 2009
+---------------------+--------+--------+---------+---------+
| | | | 2009 | 2008 |
+---------------------+--------+--------+---------+---------+
| | | | GBP'000 | GBP'000 |
+---------------------+--------+--------+---------+---------+
| Cash | | | | |
| flow | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 355 | 951 |
| Profit | | | | |
| for | | | | |
| the | | | | |
| year | | | | |
+---------------------+--------+--------+---------+---------+
| | | | | |
| Adjustments | | | | |
| for: | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 138 | 149 |
| Depreciation | | | | |
+---------------------+--------+--------+---------+---------+
| Loss | | | - | 18 |
| on | | | | |
| disposal | | | | |
| of | | | | |
| property, | | | | |
| plant & | | | | |
| equipment | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 391 | 188 |
| Amortisation | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (25) | (208) |
| Finance | | | | |
| income | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 44 | 3 |
| Finance | | | | |
| expense | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 38 | 23 |
| Share-based | | | | |
| payment | | | | |
| expense | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 58 | 120 |
| Income | | | | |
| tax | | | | |
| expense | | | | |
+---------------------+--------+--------+---------+---------+
| Operating | | | 999 | 1,244 |
| cash | | | | |
| flows | | | | |
| before | | | | |
| movements | | | | |
| in | | | | |
| working | | | | |
| capital & | | | | |
| provisions | | | | |
+---------------------+--------+--------+---------+---------+
| Decrease/ | | | | |
| (increase) | | | 174 | (86) |
| in | | | | |
| inventories | | | | |
+---------------------+--------+--------+---------+---------+
| Decrease/ | | | 559 | (291) |
| (increase) | | | | |
| in trade | | | | |
| and other | | | | |
| receivables | | | | |
+---------------------+--------+--------+---------+---------+
| (Decrease)/increase | | | (670) | 827 |
| in trade and other | | | | |
| payables | | | | |
+---------------------+--------+--------+---------+---------+
| Increase/ | | | 10 | (236) |
| (decrease) | | | | |
| in | | | | |
| provisions | | | | |
+---------------------+--------+--------+---------+---------+
| Cash | | | 1,072 | 1,564 |
| generated | | | | |
| from | | | | |
| operations | | | | |
+---------------------+--------+--------+---------+---------+
| | | | | |
| | | | (5) | (3) |
| Interest | | | | |
| paid | | | | |
+---------------------+--------+--------+---------+---------+
| | | | 25 | 208 |
| Interest | | | | |
| received | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (85) | 34 |
| Corporation | | | | |
| tax (paid)/ | | | | |
| reclaimed | | | | |
+---------------------+--------+--------+---------+---------+
| Net | | | 1,007 | 1,803 |
| cash | | | | |
| flow | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | | |
| Investing | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (88) | (114) |
| Purchase | | | | |
| of | | | | |
| property, | | | | |
| plant & | | | | |
| equipment | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (283) | (216) |
| Development | | | | |
| expenditure | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (83) | (113) |
| Purchase | | | | |
| of other | | | | |
| intangible | | | | |
| assets | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (813) | - |
| Acquisition | | | | |
| of | | | | |
| subsidiary, | | | | |
| net of cash | | | | |
| acquired | | | | |
+---------------------+--------+--------+---------+---------+
| Net | | | (1,267) | (443) |
| cash | | | | |
| used | | | | |
| in | | | | |
| investing | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | | |
| Financing | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | (13) | - |
| Repayment | | | | |
| of bank | | | | |
| loans | | | | |
+---------------------+--------+--------+---------+---------+
| Repayment | | | (3) | - |
| of | | | | |
| finance | | | | |
| leases | | | | |
+---------------------+--------+--------+---------+---------+
| Issue | | | 1 | 1 |
| of | | | | |
| ordinary | | | | |
| shares | | | | |
+---------------------+--------+--------+---------+---------+
| Net | | | (15) | 1 |
| cash | | | | |
| (used | | | | |
| in)/ | | | | |
| from | | | | |
| financing | | | | |
| activities | | | | |
+---------------------+--------+--------+---------+---------+
| | | | | |
| Net | | | | |
| (decrease)/ | | | (275) | 1,361 |
| increase in | | | | |
| cash & cash | | | | |
| equivalents | | | | |
+---------------------+--------+--------+---------+---------+
| Cash & | | | 5,389 | 4,028 |
| cash | | | | |
| equivalents | | | | |
| at the | | | | |
| beginning | | | | |
| of the | | | | |
| year | | | | |
+---------------------+--------+--------+---------+---------+
| Cash & | | | 5,114 | 5,389 |
| cash | | | | |
| equivalents | | | | |
| at the end | | | | |
| of the year | | | | |
+---------------------+--------+--------+---------+---------+
Notes to the financial information for the year ended 30 November 2009
1. Basis of preparation
The financial information set out in these preliminary results does not
constitute the company's statutory accounts for 2008 or 2009.
Statutory accounts for the years ended 30 November 2009 and 30 November 2008
have been reported on by the Independent Auditors. The Independent Auditors'
Report on the Annual Report and Financial Statements for 2008 was unqualified,
did not draw attention to any matters by way of emphasis, and did not contain a
statement under 237(2) or 237(3) of the Companies Act 1985. The Independent
Auditors' Report on the Annual Report and Financial Statements for 2009 was
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 30 November 2008 have been filed with the
Registrar of Companies. The statutory accounts for the year ended 30 November
2009 will be delivered to the Registrar in due course.
The financial information set out in these preliminary results has been prepared
using the recognition and measurement principles of International Accounting
Standards, International Financial Reporting Standards and Interpretations
adopted for use in the European Union (collectively Adopted IFRSs). The
accounting policies adopted in this results announcement have been consistently
applied to all the years presented and are consistent with the policies used in
the preparation of the statutory accounts for the period ended 30 November 2009.
Copies of the Annual Report & Accounts will be posted to shareholders on 24
March
2010. Further copies of this announcement can be downloaded from the website
www.telephonetics.co.uk or by applications to The Company Secretary,
Telephonetics Plc, Hamilton House, Marlowes, Hemel Hempstead, HP1 1BB.
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 EBITDA |
+---------------------------------+-------------------+-------------------+
| | 2009 | 2008 | 2009 | 2008 |
+---------------------------------+---------+---------+---------+---------+
| | Audited | Audited | Audited | Audited |
+---------------------------------+---------+---------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+---------+---------+---------+---------+
| Telephonetics | 9,960 | 9,951 | 2,442 | 2,110 |
+---------------------------------+---------+---------+---------+---------+
| Datadialogs | 550 | - | (245) | - |
+---------------------------------+---------+---------+---------+---------+
| Total | 10,510 | 9,951 | 2,197 | 2,110 |
+---------------------------------+---------+---------+---------+---------+
| | | | | |
| Central administration | | | (1,198) | (964) |
+---------------------------------+---------+---------+---------+---------+
| Adjusted EBITDA | | | 999 | 1,146 |
+---------------------------------+---------+---------+---------+---------+
| | | | | |
+---------------------------------+---------+---------+---------+---------+
| Depreciation | | | (138) | (149) |
+---------------------------------+---------+---------+---------+---------+
| Amortisation of intangible | | | (391) | (188) |
| assets | | | | |
+---------------------------------+---------+---------+---------+---------+
| Share based payment charges | | | (38) | (23) |
+---------------------------------+---------+---------+---------+---------+
| Restructuring credit | | | - | 80 |
+---------------------------------+---------+---------+---------+---------+
| Net interest | | | (19) | 205 |
+---------------------------------+---------+---------+---------+---------+
| Profit before tax | | | 413 | 1,071 |
+---------------------------------+---------+---------+---------+---------+
| | | | | |
+---------------------------------+---------+---------+---------+---------+
All of the segment revenue reported above is from external customers. Segment
EBITDA 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 quoted 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:
+------------------------------+----+--------+----------+---------+
| | | | 2009 | 2008 |
| | | | Audited | Audited |
+------------------------------+----+--------+----------+---------+
| | | | GBP'000 | GBP'000 |
+------------------------------+----+--------+----------+---------+
| Total assets | | | | |
+------------------------------+----+--------+----------+---------+
| Telephonetics | | | 16,441 | 16,728 |
+------------------------------+----+--------+----------+---------+
| Datadialogs | | | 1,778 | - |
+------------------------------+----+--------+----------+---------+
| Head office | | | 3,118 | 3,458 |
+------------------------------+----+--------+----------+---------+
| Inter-segment | | | (871) | (531) |
| eliminations | | | | |
+------------------------------+----+--------+----------+---------+
| | | | 20,466 | 19,655 |
+------------------------------+----+--------+----------+---------+
| Total liabilities | | | | |
+------------------------------+----+--------+----------+---------+
| Telephonetics | | | 4,753 | 5,192 |
+------------------------------+----+--------+----------+---------+
| Datadialogs | | | 1,038 | - |
+------------------------------+----+--------+----------+---------+
| Head office | | | 515 | 624 |
+------------------------------+----+--------+----------+---------+
| Inter-segment | | | (871) | (531) |
| eliminations | | | | |
+------------------------------+----+--------+----------+---------+
| | | | 5,435 | 5,285 |
+------------------------------+----+--------+----------+---------+
| Net assets | | | 15,031 | 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. Operating expenses
+---------------------------------------+----------+--+----------+---------+
| | | | 2009 | 2008 |
| | | | Audited | Audited |
+---------------------------------------+----------+--+----------+---------+
| | | | GBP'000 | GBP'000 |
+---------------------------------------+----------+--+----------+---------+
| Operating expenses are analysed as: | | | | |
+---------------------------------------+----------+--+----------+---------+
| Research & development | | | 807 | 610 |
+---------------------------------------+----------+--+----------+---------+
| Sales & marketing | | | 3,209 | 3,026 |
+---------------------------------------+----------+--+----------+---------+
| Analysed as: | | | | |
+---------------------------------------+----------+--+----------+---------+
| Sales & marketing before amortisation | | | | |
| of acquired customer list | | | 3,148 | 3,026 |
+---------------------------------------+----------+--+----------+---------+
| Amortisation of acquired customer | | | 61 | - |
| list | | | | |
+---------------------------------------+----------+--+----------+---------+
| | | | 3,209 | 3,026 |
+---------------------------------------+----------+--+----------+---------+
| General & administration | | | 1,981 | 1,584 |
+---------------------------------------+----------+--+----------+---------+
| Analysed as: | | | | |
+---------------------------------------+----------+--+----------+---------+
| General & administration before share | | | 1,943 | 1,641 |
| based payment expense and | | | | |
| restructuring credit | | | | |
+---------------------------------------+----------+--+----------+---------+
| Share based payment expense | | | 38 | 23 |
+---------------------------------------+----------+--+----------+---------+
| Restructuring credit(1) | | | - | (80) |
+---------------------------------------+----------+--+----------+---------+
| | | | 1,981 | 1,584 |
+---------------------------------------+----------+--+----------+---------+
| | | | 5,997 | 5,220 |
+---------------------------------------+----------+--+----------+---------+
(1) In May 2008 the Group reorganised its leasehold property and terminated
various leases earlier than expected, as a result GBP80,000 of the vacant
property provision was surplus and has been credited back to the income
statement in the period ended 31 May 2008.
4. Earnings per share
Earnings per ordinary share have been calculated using the weighted average
number of shares in issue during the relevant financial periods. The weighted
average number of equity shares in issue is 109,055,179 (2008 - 109,010,585) and
the earnings used is profit after tax being GBP355,000 (2008 - GBP951,000).
+------------------------------------+--+-------------+-------------+
| | | 2009 | 2008 |
| | | Audited | Audited |
+------------------------------------+--+-------------+-------------+
| | | Number | Number |
+------------------------------------+--+-------------+-------------+
| Reconciliation of denominator: | | | |
+------------------------------------+--+-------------+-------------+
| Weighted average number of shares | | 109,055,179 | 109,010,585 |
| used for the calculation of basic | | | |
| earnings per share | | | |
+------------------------------------+--+-------------+-------------+
| Effect of dilutive ordinary | | 4,424,332 | 9,741,928 |
| shares options being exercised | | | |
+------------------------------------+--+-------------+-------------+
| Weighted average number of shares | | 113,479,511 | 118,752,513 |
| used for the calculation of | | | |
| diluted earnings per share | | | |
+------------------------------------+--+-------------+-------------+
5. Acquisition of Datadialogs
On 6 February 2009 the Company acquired 100% of the ordinary share capital of
Datadialogs Limited (formerly known as Eden Origin Ltd). Datadialogs Limited 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 | | (263) | (12) | (275) |
+--------------------------------+-------+---------+------------+-------------+
| Borrowings | | (18) | - | (18) |
+--------------------------------+-------+---------+------------+-------------+
| Obligations under finance | | (3) | - | (3) |
| leases | | | | |
+--------------------------------+-------+---------+------------+-------------+
| | | | | |
+--------------------------------+-------+---------+------------+-------------+
| Non-current liabilities | | | | |
+--------------------------------+-------+---------+------------+-------------+
| Borrowings | | (8) | - | (8) |
+--------------------------------+-------+---------+------------+-------------+
| Provisions | | (2) | - | (2) |
+--------------------------------+-------+---------+------------+-------------+
| Deferred tax | | - | (142) | (142) |
+--------------------------------+-------+---------+------------+-------------+
| | | (83) | 586 | 503 |
+--------------------------------+-------+---------+------------+-------------+
| | | | | |
| Goodwill on acquisition | | | | 999 |
+--------------------------------+-------+---------+------------+-------------+
| Consideration paid | | | | 1,502 |
+--------------------------------+-------+---------+------------+-------------+
+---------------------------------------+----------+----+--------+----------+
| Consideration analysed as: | | | | |
+---------------------------------------+----------+----+--------+----------+
| Cash | | | | 720 |
+---------------------------------------+----------+----+--------+----------+
| Contingent consideration - shares to | | | | 266 |
| be issued | | | | |
+---------------------------------------+----------+----+--------+----------+
| Contingent consideration - cash | | | | 400 |
+---------------------------------------+----------+----+--------+----------+
| Transaction expenses | | | | 116 |
+---------------------------------------+----------+----+--------+----------+
| | | | | 1,502 |
+---------------------------------------+----------+----+--------+----------+
| | | | | |
+---------------------------------------+----------+----+--------+----------+
| Net cash outflow on acquisition: | | | | |
+---------------------------------------+----------+----+--------+----------+
| Total purchase consideration | | | | 1,502 |
+---------------------------------------+----------+----+--------+----------+
| Less: contingent consideration | | | | (666) |
+---------------------------------------+----------+----+--------+----------+
| 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 account 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 GBP207,000 credit to deferred tax has been made to record the liability
arising on these intangible assets together with a GBP62,000 debit to recognise
carried forward tax losses at the point of acquisition.
A GBP12,000 credit to trade & other payables has been made to record an opening
holiday pay accrual in line with the Group's accounting policy together with a
related GBP3,000 debit to deferred tax.
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 that 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 GBP265,495 (2,654,945 shares at 10p per share) and cash
payments of GBP465,000 recorded at a present value of GBP400,000. This estimate
is based on the most recent financial forecast for the business and is different
to that reported in the Group's interim report issued in August 2009.
Impact of acquisition on the results of the Group
Included in the profit for the period is a loss of GBP0.49m attributable to
Datadialogs Ltd (comprising a trading loss GBP0.25m, amortisation of acquired
intangibles GBP0.19m and implied interest on contingent consideration GBP0.04m).
Had this business combination been effected on 1 December 2008, the revenue of
the Group from continuing operations attributable to Datadialogs would have been
GBP0.61m and the loss for the period from continuing operations of Datadialogs
would have been GBP0.56m (comprising a trading loss GBP0.29m, amortisation of
acquired intangibles GBP0.23m and implied interest on contingent consideration
GBP0.04m). The directors of the Group consider these 'pro-forma' numbers to
represent an approximate measure of performance of the combined group on an
annual 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
FR TIMPTMBJTBMM
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