| Tue 11 Mar 2003, 15:11 | | Glotec - Temenos Announces Results For Quarter End |
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GLOBAL TECHNOLOGY LIMITED or ("Glotec")
(Incorporated in the Republic of South Africa)
(Registration number 1996/009809/06)
Share code GLT
ISIN ZAE000016820
TEMENOS ANNOUNCES RESULTS FOR QUARTER ENDED 31 DECEMBER 2002
Geneva, Switzerland, 11th March 2003. TEMENOS Group AG (SWX: TEMN), a global
vendor of integrated banking software, today announced their fourth quarter 2002
financial results.
Financial Highlights
- ILF signings of US$23.2 million, up 34% compared to Q4 2001
- Total revenues of US$ 20.1 million, down 42% compared to Q4 2001
- Licence revenues of US$ 6.3 million, down 61% compared to Q4 2001
- Service revenues of US$ 13.8 million, down 26% compared to Q4 2001
- Operating costs of US$ 47.0 million, up 36% compared to Q4 2001
- Operating loss of US$ 26.9 million, compared to a breakeven for Q4 2001
- Fully diluted EPS of US$ (0.62), compared to US$ (0.02) for Q4 2001
- Operating cash in flow of US$ 8.4 million compared to US$ 1.0 million for Q4
2001
Financial Review
Total revenues for Q4 2002 were US$20.1 million, down 42% compared to prior
year. The reduction in total revenues is due to the lower level of new business
closed during the first half of the year when compared to the same period last
year and a lower backlog of unrecognised licences at the beginning of the
quarter compared to one year ago. Q4 revenues were also reduced by US$1.4
million related to the treatment of Temenos Eastern Europe as a joint venture
instead of a subsidiary (discussed below).
Operating costs in Q4 2002 were US$47.0 million, compared to US$34.6 million for
Q4 2001, up 36%. Included in operating cost are one-off charges of US$10.7
million relating to balance sheet provisions. When adjusted for these one-off
charges operating costs were US$36.3 million, an increase of 5% compared to the
prior year: this net increase represents our investment in Corebanking, Russia
and Asia.
Software development costs for Q4 2002 were 82% higher than for the comparative
period, at US$9.9 million. When adjusted for amortisation and capitalisation,
the underlying cash cost of our development organisation has grown by 17%
compared to prior year. The increase is due to our investment in Corebanking,
partly funded by the transfer of a significant part of our development
activities to India.
Services costs in the quarter of US$12.9 million is 23% below the prior year as
a result of a lower use of external consultants. This has resulted in better
service margins in the quarter.
Sales and marketing costs of US$18.1 million in Q4 2002, 154% higher than in Q4
2001, include one-off charges totalling US$9.8 million. These charges relate to
a provision for the full amount of receivables from Global Technology, our South
African distributor totalling US$ 2.7 million, reflecting the increased
political and economic uncertainty in sub-Saharan Africa and costs totalling
US$4.1 million representing the impact of contract restructuring. This
restructuring leaves considerable potential future upside for additional cash
and revenues derived from these contracts. Also included in one off charges is
an amount of US$ 3.0 million relating to provisions which have been taken
against receivables and accrued revenues relating to two contracts with
financial institutions which are currently undergoing restructuring. We have
decided to provide against recoverability of these amounts that are legally due
but collectability is uncertain. When adjusted for these one-off charges, sales
and marketing costs are US$8.3 million, up 17% compared to prior year. The
increase in underlying cost is due to the investment in our sales infrastructure
during the second half of 2001 and the year 2002.
General and administrative costs amounted to US$5.7 million in Q4 2002, 14%
higher than in Q4 2001. Included in Q4 costs are US$0.9 million of one-off
charges related to restructuring. When adjusted for these, G&A costs were 4%
lower than the prior period.
An operating loss was recorded for the quarter of US$ 26.9 million compared to
breakeven for the same period last year. This includes a total of US$10.7
million of one-off charges. When adjusted for these items, the operating loss
for Q4 was US$16.2 million.
Historically, Temenos has recognised deferred tax assets under IAS 12. IAS 12
prescribes that deferred tax assets should be recognised for the carry forward
of unutilised tax losses to the extent that it is probable that future taxable
profit will be available against which the unused tax losses can be utilised. At
the time of finalising the 2002 accounts against a backdrop of considerable
political and economic uncertainty, management did not have the visibility to
conclude that future profits would be available to utilise these tax loss carry
forwards in the specific juristictions. As a result, the deferred tax asset was
expensed during the 4th quarter.
Following our acquisition of a 20% equity stake in Finantix in February 2002, as
announced during Q4 we have not exercised our option to acquire the remaining
80% as this would have been unduly dilutive to existing shareholders. With no
forecast upturn in economic conditions, we have decided to write down our cost
of investment in Finantix. This writedown has no cash effect in Q4 2002.
A net loss was realised for the quarter of US$ 33.4 million, compared to a loss
of US$0.8 million for the same period last year resulting in EPS of US$(0.62) on
a fully diluted basis, compared to US$(0.02) for Q4 2001.
An operating cash inflow of US$8.4 million in Q4 2002 compares to an US$0.9
million in Q4 2001. The quarter cash flow also benefited from upfront licence
payments from strong Q4 signings, resulting in our highest ever deferred revenue
figure of US$22.2 million, which will be recognised as licence revenues during
2003. A total favourable working capital movement of US$22.6 million was
achieved during Q4 relating to revenues, and an additional US$5.1 million
relating to operating expenses. Total cash at the end of Q4 was US$24.0 million.
In February 2003 we restructured our loan financing to extend repayment dates
for US$20m of debt into 2004, and to provide additional US$15 million of working
capital facilities to continue into 2004. As a result both of the positive
working capital movement during Q4 and the debt restructuring, available cash
increased from US$ 25.1 million as of September 30, 2002 to US$34.0 million as
of December 31, 2002.
Temenos Eastern Europe
We have a 51% stake in Temenos Eastern Europe, where the 49% shareholder takes
on operational responsibility for the day to day running of this operation. As a
result of the increased autonomy given to the management team during 2002, this
entity has been accounted for as a Joint Venture instead of a Subsidiary in
accordance with IAS. This has resulted in a reduction of US$1.5m to revenues, no
material impact on operating costs, a US$1.5m reduction to operating profit and
no effect on net earnings.
Business Review
The value of Initial Licence Fees (ILF) for agreements signed during the fourth
quarter of 2002 amounted to USD 23.2 million, 34% higher than in the fourth
quarter of 2001. ILF signings for the six months to December 31, 2002 were USD
34.4 million or 79% higher than during the comparative period in 2001, while ILF
signings for the full year 2002 amounted to USD 58.0 million, up 26% compared to
the prior year. 2002 ILF signings were the highest recorded in any fiscal year
in the history of TEMENOS.
Growth was particularly encouraging in the Asia-Pacific region, Russia, the
Middle East and western Europe, while performance in the US and Africa remained
weak.
During the quarter we closed deals with Bank Leumi in Switzerland, Friesland
Bank in Holland, Dunfermline Building Society in the United Kingdom, Saudi
Hollandi in Saudi Arabia, Jih Sun in Taiwan, IE Bank in the Philippines and a
number of credit unions in Ireland. We also completed a global licensing
agreement with Bank Leumi for the implementation of GLOBUS across its
international operations (not included in the ILF signings numbers above).
Business Outlook
Dealflow has continued satisfactorily at the start of 2003, and we are confident
that we will meet our signings targets for the first quarter. We continue to
remain cautious in the current environment of increased economic and political
uncertainty.
2003 Guidance
Our strong performance during the second half of 2002 allows us to reconfirm our
guidance for full year 2003 revenues of approximately USD 130 million.
Anticipated 2003 revenues originating from business closed during 2002 represent
74% of our target revenues. The remaining target revenues are expected to be
generated from signings during the first half of the year, while signings in Q3
and Q4 of 2003 will not
contribute significantly to 2003, as under our revenue recognition policy the
majority of associated revenues will be booked in later periods.
Operating costs are forecast at approximately USD 120 million while cash costs
are forecast to be not more than USD 104 million. Cash flows arising in 2003
from business that is already signed are projected to be approximately USD 112
million.
About TEMENOS
TEMENOS Group AG is a global leader in providing financial institutions with
integrated banking systems to support increased productivity and profitability
and that allow the institutions to respond quickly to changing market
conditions. TEMENOS" customers include a number of Tier 1 institutions across
the globe. TEMENOS has 33 offices in 20 countries and has installed over 500
systems since being founded in 1993. In June 2001, TEMENOS became a public
company, listed on the main segment of the SWX Swiss Exchange (TEMN).
