RNS Number:4227A
Citel PLC
18 July 2007
Citel plc
("Citel" or the "Company")
Preliminary results for the period ended 31 March 2007
Citel designs, develops and markets a range of VoIP solutions for the business
telephone market that enable enterprises to migrate their telephone systems from
the traditional voice network to an IP-based data network, without replacing
existing handsets and wiring infrastructure. These are Citel's first full year
results since its admission to trading on AIM in July 2006.
Financial Highlights
* Turnover of #2.5 million
* Portico (formerly Handset Gateway) revenue impacted by Tier one
delayed roll outs but increased focus on Tier two and three carriers
yielding results
* Gross margin as a percentage of turnover improved to 62% from 58% in
the prior year
* Operating charges pre goodwill impairment and share option expenses
decreased year-on-year
* Strong balance sheet with cash of #4.6 million
Operational Highlights
* Secured supply agreements with two of the world's largest carriers, AT
&T and Sprint
* Both carriers have revealed strong pipeline of potential VoIP
customers, drawn from principally government and education markets
* Smaller carriers aggressively rolling out hosted VoIP, orders received
and installed. Recent orders from Centennial Business and Phonoscope
* Implementation of direct selling strategy towards the latter half of
the fiscal year, has resulted in significant increased sales of the
Portico product in FYE 2008
Product and Technology Enhancement
* Portico now certified with Avaya's next generation SIP IP platform
* Internet Telephony magazine has named the Citel EXTender IP6000
recipient of the 2006 Product of the Year
* Introduction of private-label low density PBX EXTender for NEC and
Panasonic
* Two patents and two seminal patents pending
Commenting on the preliminary results Mike Robinson, CEO of Citel, said:
"The VoIP migration market is extremely active. We have expanded our direct
sales force as well as increased our focus on Tier two and three carriers which
have resulted in more unit sales of Portico in the first quarter of FYE 2008
than in all of FYE 2007, a trend which we believe will continue throughout this
year. While Tier one carriers have been slower to roll-out their hosted VoIP
programs than expected, we expect significant progress to be made this fiscal
year. There continues to be no significant competitor to Citel's solution for
VoIP migration and we remain confident of the strength of Citel's market
position. "
Contact Details:
Citel Mike Robinson, CEO 001 206 965 8920
Jose David, CFO 001 206 965 8925
Panmure Gordon Dominic Morley +44 (0)20 7459 3600
Giles Stewart
Andrew Collins
Cardew Tim Robertson +44 (0)20 7930 0777
Shan Shan Willenbrock
Chief Executive Officer's and Chairman's Statement
We are pleased to present our results for the 12 months to 31 March 2007. This
represents our first year as a quoted company since our Admission to AIM on 7
July 2006. Our strategy remains focused on providing a leading VoIP migration
solution directly to end users, carriers, and Internet Service Providers in
order to capitalise on the substantial growth in the VoIP marketplace.
With the North American VoIP services market forecast to grow to $23.4 billion
in 2009, Citel's entry has been timed to capitalise on the growing migration of
voice communication from legacy circuit-switched networks to new voice-enabled
data networks. Growth in the VoIP market is being driven by end-users seeking to
capture the feature and cost benefits that VoIP offers and by telecommunications
service providers seeking to profit from the margin enhancement opportunities
provided by the switch to IP communications.
In the period under review, we have secured agreements with Sprint and AT&T to
supply our Portico product, formerly called the Handset Gateway. Both companies
are currently undertaking testing on Citel's products which is progressing
satisfactorily and we have been encouraged by the carriers' indication that the
potential market size for our VoIP migration solutions has increased.
As the exact timing of the roll-out to customers via Sprint and AT&T is
difficult to predict we have expanded our focus on smaller carriers and Internet
Service Providers and as a result, we have won a number of contracts including:
Centennial Business Solutions, Universal Connectivity and Phonoscope. In
addition, we are now selling directly to the end user which we believe should
lessen the sale cycles and drive more immediate revenues. Recent customer wins
include the supply of Portico to Sam Houston University. We shipped more units
of Portico in the first quarter of FYE 2008 than in all of FYE 2007, a result
which proves the extended focus of our strategy has been effective in
accelerating and increasing revenues for the Company.
Financial Review
Turnover for the 12 months ended 31 March 2007 was #2.5 million, against #4.0
million from the 12 months ended 31 March 2006. During the period, the Company
experienced lower sales due to the delay in Tier one carriers rolling out their
hosted VoIP programs. Unit sales of Portico advanced in the final quarter of
this year and the product is gaining significant traction this fiscal year.
Gross margin increased from 58% to 62%. Operating expenses decreased
year-on-year from #5.5 million to #5.2 million due to a #453,000 impairment
charge in the year ended 31 March 2006. Without the charge, operating expenses
increased 2.4% year-on-year. Expenses were in line with management's
expectations. The one-off charge of #741,000 related to the conversion of debt
instruments just prior to the IPO. Basic and diluted earnings per share
decreased from a loss of 31.8p per share to a loss of 21.0p for the year ended
31 March 2007. Our successful placing at the time of our admission to AIM on 7
July 2006 raised #7.2 million net of expenses. Cash at the period end was #4.6
million. In line with the Board's stated strategy no dividend will be payable
for this period.
Sales and Marketing
We believe our supply agreements with Sprint and AT&T should help establish
further relationships with other Tier one carriers. Our agreement with AT&T
includes Portico as well as Citel's PBXgateway and EXTender product lines. Once
testing has been completed,the next step is for the carriers to formally
roll-out their hosted VoIP program with Citel an integral part of the marketing
push. We are working closely with their program managers and sales departments
to achieve this goal. The carriers have recognised that the Citel Portico can
be a critical element in reducing their customers' cost base and they are
involving us with their pipeline of opportunities, many of which are public or
government entities that would benefit from a migratory VoIP solution.
Additionally, the cost benefit analysis of migrating their existing Centrex
customers over to VoIP is very compelling.
As previously mentioned towards the end of the financial year, the Company
increased its focus and sales resources targeting Tier two and three carriers
and direct sales efforts to large public and private enterprises. To this end,
we have established a strong direct sales team and as a result, increased our
unit shipments of Portico and are beginning to see significant growth in our
pipeline.
Product Development
We announced that Portico is now compliant with key Internet protocol (IP)
telephony solutions from Avaya (NYSE:AV), a leading global provider of business
communications applications, systems and services. Portico has now been
compliance-tested by Avaya for compatibility with Avaya Communication Manager IP
telephony software and the Avaya Converged Communication Server, an application
that enables SIP (Session Initiation Protocol) services and extends the value of
a company's investment in its network. Businesses with multiple locations and
PBX handsets from multiple vendors can now connect seamlessly to Avaya's robust
SIP-based IP platform, reduce total costs and minimize the disruption to their
business as they migrate to a VoIP network.
Citel is a member of the Avaya Developer Connection Program, an initiative to
develop, market and sell innovative third-party products that interoperate with
Avaya technology and extend the value of a company's investment in its network.
As a member of the program, Citel is eligible to submit products for
compatibility testing by the Avaya Solution Interoperability and Test Lab in
Lincroft, N.J., USA.
During the year, we also rolled out private-labeled low density extenders to two
major PBX manufacturers, enabling the services of an existing PBX to be extended
to branch offices, home-workers and mobile telephones, either over a wide area
data network or external public telephone network. The solution centralises,
across the distributed enterprise, control of call handling and management of
telephone services, including single dialing plan, voicemail services and
customer relationship management services.
We continue to strive to increase our intellectual property. We have two
patents and two seminal patents pending. Our research and development team
invests in the analysis, definition and subsequent documentation of the
telephone interface information which Citel presents as the most significant
barrier to entry into our market.
Outlook
Citel continues to pursue its strategy of securing supply contracts for the
provision of the Portico product with major carriers. In addition, the Company
has increased its sales and marketing resources targeting the Tier two and three
carriers as well as large public and private enterprises. We expect that
revenues from existing supply agreements together with the results from the
increased focus on Tier two and three carriers and direct sales will be
reflected in the current fiscal year. We have begun the new financial year
positively with a significant increase in the level of the Portico shipments and
we anticipate that our success through the direct sales channel will motivate
Tier one carriers to become more aggressive in selling Portico to their
customers. Citel continues to have no significant direct competitor for this
migratory VoIP solution.
M Robinson C Heintzelman
Chief Executive Officer Chairman
Citel plc
Group profit and loss account
For the year ended 31 March 2007
2007 2006
Note #'000's #'000's
(restated)
Turnover 2 2,492 4,021
Cost of sales (948) (1,687)
------------- --------------
Gross profit 1,544 2,334
Other operating charges 2 (5,219) (5,555)
------------- --------------
Operating loss (3,675) (3,221)
--------------------------------
Interest receivable/(payable) | 117 (104)|
Finance costs of conversion of debt | (741) - |
--------------------------------
Net interest (624) (104)
------------- --------------
Loss on ordinary activities before taxation (4,299) (3,325)
Tax credit on loss on ordinary activities 213 107
------------- --------------
Loss on ordinary activities (4,086) (3,218)
============= ==============
Net loss per share on ordinary activities
-basic and diluted 3 (21.0p) (31.8p)
Citel plc
Group balance sheet
At 31 March 2007
2007 2006
#'000's #'000's
Fixed assets
Intangible assets 548 629
Tangible assets 153 177
------------- --------------
701 806
------------- --------------
Current assets
Stocks 589 450
Debtors 1,231 1,469
Cash at bank 4,595 1,545
------------- --------------
6,415 3,464
------------- --------------
Creditors: amounts falling due within one year (2,136) (3,850)
------------- --------------
Net current assets/(liabilities) 4,279 (386)
------------- --------------
Total assets less current liabilities 4,980 420
Creditors: amounts falling due after more than one year - (1,463)
------------- --------------
Net assets/(liabilities) 4,980 (1,043)
============= ==============
Capital and reserves
Called up share capital 825 384
Share premium account 8,723 20,545
Merger reserve 20,545 -
Other reserve 741 -
Profit and loss account (25,854) (21,972)
------------- --------------
Shareholders' funds 4,980 (1,043)
============= ==============
Citel plc
Group cash flow statement
For the year ended 31 March 2007
2007 2006
Note #'000's #'000's
Net cash outflow from operating activities 4 (3,673) (1,384)
Returns on investments and servicing of finance
Net interest received/(paid) 102 (104)
Taxation received 165 11
Capital expenditure
Payments to acquire tangible fixed assets (39) (102)
Acquisitions and disposals
Purchase of a business (80) -
------------- --------------
Cash outflow before financing (3,525) (1,579)
------------- --------------
Financing
Issue of equity share capital 8,208 -
Expenses of issuing equity share capital (1,095) -
Net (payments)/receipts of borrowings (864) 2,051
------------- --------------
Net cash inflow from financing 6,249 2,051
------------- --------------
Increase in cash 2,724 472
============= ==============
Citel plc
Statement of total recognised gains and losses
For the year ended 31 March 2007
2007 2006
#'000's #'000's
(restated)
Loss on ordinary activities (4,086) (3,218)
Currency losses on foreign currency net investments (24) (140)
Prior year adjustment (17) -
------------- --------------
Total loss (4,127) (3,358)
============= ==============
Reconciliation of movements in shareholders' funds
For the year ended 31 March 2007
2007 2006
#'000's #'000's
(restated)
Loss on ordinary activities (4,086) (3,218)
Currency losses on foreign currency net investments (24) (140)
Proceeds of ordinary shares issued for cash 8,200 -
Associated expenses (1,095) -
Conversion of convertible loan stock 2,705 -
Exercised warrants associated with convertible loan stock 87 -
Adjustment in respect of share based payment 228 17
Exercise of share options 8 -
------------- --------------
Increase/(decrease) in shareholders' funds 6,023 (3,341)
Opening shareholders' funds (1,043) 2,298
------------- --------------
Closing shareholders' funds 4,980 (1,043)
============= ==============
Citel plc
Notes to the financial statements
For the year ended 31 March 2007
1. Basis of presentation
The financial statements have been prepared under the historical cost convention
under United Kingdom Generally Accepted Accounting Practices and in accordance
with the Companies Act 1985 and applicable United Kingdom accounting standards.
A new parent company Citel plc, was incorporated on 28 January 2006 to be the
vehicle for capital raising and admission to the Alternative Investment Market.
This company acquired the whole of the issued share capital of the former parent
company, Citel Technologies Limited, by way of a share for share exchange. This
has been accounted for using merger accounting principles and accordingly the
comparative figures have been prepared as if the Group had existed throughout
that period. The effective date of the merger was 20 June 2006. The results of
the Group comprise the results of Citel plc consolidated with the results of the
merged Group from 1 April 2006.
The principal accounting policies of the Group have remained unchanged from the
previous year, apart from the adoption of FRS 20 "Share Based Payments"
FRS 20 requires companies that grant share options to their directors or
employees to estimate the fair value of those options and to recognise that
value as an expense over the period until the options can be exercised
unconditionally by the director or employee. The company uses the Black Scholes
Merton method and utilises an average volatility ratio for 5 comparable publicly
traded companies. Forfeiture rates are based on history. Expense for the year
ended 31 March 2007 is #228,000. Amounts expensed for the year ended 31 March
2006 of #17,000 have been treated as a prior year adjustment on the comparative
figures. There is no impact on net assets or cash flows as a result of this
adjustment.
2. Turnover and functional operating charges
2007 2006
#'000's #'000's
The geographical split of turnover is as follows
North America 2,279 3,579
Rest of the world 213 442
------------- --------------
2,492 4,021
============= ==============
As the Group's assets and other resources generate turnover across all
geographic segments, the directors believe that any attempt to allocate either
the loss before tax or net assets would be highly subjective and of limited
value.
Operating charges
Research and development 2,293 2,508
Administration and other 2,926 2,594
Exceptional item - impairment of goodwill - 453
------------- --------------
5,219 5,555
============= ==============
3. Loss per share
The calculation of basic loss per share is based on Group loss on ordinary
activities divided by weighted average number of outstanding shares during the
year. The calculation of diluted loss per share adjusts both loss on ordinary
activities and weighted average number of shares for dilutive effects of
convertible debt subsequently converted and employee share option schemes.
The calculations in respect of 2006 are restated to take account of the share
consolidation as if such share consolidation had been undertaken as at 1 April
2006. The share consolidation occurred coincident with the merger on 20 June
2006. Each of the Company's preference "A" shares was converted into one
ordinary share, and every 38 ordinary shares of #0.001 each were consolidated
into one ordinary share of #0.038 each.
2007 2006
#'000's #'000's
Loss on ordinary activities (4,086) (3,218)
================ ==============
No. No.
Weighted average number of outstanding shares 19,403,103 10,117,913
================ ==============
Basic and diluted loss per share (ordinary loss /
outstanding shares) (21.0p) (31.8p)
================ ==============
4. Notes to the statement of cash flows
(a) Reconciliation of operating loss to net cash outflow from operating activities
2007 2006
#'000's #'000's
(restated)
Operating loss (3,675) (3,221)
Depreciation 72 81
Amortisation and impairment 208 735
(Increase)/decrease in stocks (100) 231
Decrease in debtors 220 596
(Decrease)/increase in creditors (626) 177
Other non cash charges - share based payments 228 17
------------- --------------
Net cash outflow from operating activities (3,673) (1,384)
------------- --------------
5. Publication of non-statutory accounts
The financial information set out in this preliminary report does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. The
figures for the year ended 31 March 2007 have been extracted from the Statutory
Financial Statements of Citel Plc, which will be filed with the Registrar of
Companies. The auditor's report on those financial statements is unqualified.
The complete annual report will be distributed to all shareholders shortly and
copies will be available from the Company's website at Citel.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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