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TELENT PLC: UNAUDITED RESULTS FOR THE FINANCIAL YEAR ENDED 31 MARCH 2007London –16 May 2007 – telent plc (LSE: TLNT) announced results for the financial year ended 31 March 2007.
Commenting on the results, John Devaney, Chairman said, “FY07 has been a successful first full year of operations for telent. Whilst Group results have been impacted by prior year business disposals and the expected decline in legacy System X revenues, the new executive team have delivered robust results in the ongoing Trading Activities and are proactively managing legacy liabilities. Initiation of a progressive dividend policy reflects the Board’s confidence in the Group’s future prospects.” Commenting on the results, Mark Plato, CEO said, “ We have had an excellent second half of the year with revenues up 10% on the first half and ahead of our expectations. Although markets remain very competitive the combination of our in depth technical expertise, strong customer focus and vendor-independence are leading to solid organic growth. Our decision to announce a progressive dividend policy reflects our confidence about opportunities in our current markets and our belief that we can accelerate growth by expanding into closely related markets . ” HIGHLIGHTS
Press enquiries: Investor and Analyst enquiries: IMPORTANT INFORMATION - Investor and Analyst Presentation and Conference Call Management will host a meeting for investors and analysts at 9am on Wednesday 16 May 2007 at The Lincoln Centre, 18 Lincoln’s Inn Fields, London, WC2A 3ED. The meeting can also be accessed via webcast at www.telent.com and on a conference call by dialing +44 (0) 20 8974 7900 quoting "telent Preliminary Results FY07". A replay facility will be available from 1pm on Wednesday 16 May for 14 days by dialling +44 (0) 20 7136 9233, access code 62296708.
Overview We have had a successful first full year of trading as telent plc. Performance in our Trading Activities was ahead of our expectations with sales of £309 million, adjusted operating profit 1 of £24 million and operating cash generated by Trading Activities of £29 million 2 . Our customers have welcomed the launch of telent as an independent provider of technology services. We have successfully bid for a number of major new orders with existing customers (eg O2 Airwave, Highways Agency, Cable & Wireless) and agreed extensions to existing contracts (eg Highways Agency, ALSTOM). In addition, we have been awarded new contracts with significant new customers (eg Easynet, Huawei). 1 See reconciliation to ‘Operating profit from Continuing Operations’ on page 7. 2 See ‘Cash Flow’ on page 17. Contract Wins In September 2006, we announced a significant new contract award from O2 Airwave to support the deployment of its Airwave Communication System as part of the National Firelink Programme. This ten-year, £13 million contract enables Fire and Rescue Services in the UK to use the new Tetra Radio Communications Service provided by O2 Airwave. In April 2007, we received further orders under this contract, totalling approximately £7 million to cover Scotland, Wales and the remaining English regions. Today, we announce that EADS, an expert in secure communications, has selected telent as preferred supplier to support the roll-out of the nationwide FiReControl project. Upon signature of this contract, worth circa £29 million over 8 years, telent will design and install state-of-the-art equipment in all of the Regional Control Centres (“RCCs”), and the 1,440 fire stations across England, as well as provide ongoing maintenance and support. In November 2006,we were awarded the Northwest Technology Maintaining Agent/Contractor (TechMAC) contract by the Highways Agency. This five-year contract was awarded at an initial value of £12 million to provide maintenance management. We have also extended our Midlands TechMAC contract for a further two years at an initial order value of £5 million. We deliver both of these contracts in partnership with WS Atkins. In addition, in the second half of the year, we received £12 million of orders for additional works under existing Roads contracts and a further £6 million of additional Rail projects. In Enterprise Germany, we have had a successful year in the transport sector. In April 2006, we signed a three-year renewal to our frame contract with Deutsche Bahn, which covers the delivery, installation and commissioning of wireline and wireless products and have also won further contracts during the year for regional signalling projects. In addition, we have won a series of contracts with German highways and waterways agencies for the provision and support of data networks. In Telco Services, we have booked orders of £15 million during the year under our new frame contract with Easynet to support their BSkyB Broadband rollout. We have recently signed an initial frame contract with telecom equipment vendor, Huawei, to provide installation and commissioning services for the deployment of Huawei’s Multi-Service Access Node into BT’s 21 st Century Network (“21CN”). This is a significant achievement for telent, demonstrating the strength of our vendor agnostic approach. We have also received a two-year frame contract to support Cable and Wireless in their ongoing site rationalisation programme. The contract provides for a number of services, including network planning, circuit migrations and re-provision, technical support, project management, customer equipment recovery as well as disposal and logistics support. In addition, we are preferred supplier in final contract negotiations with COLT, a leading supplier of data, voice and managed services to businesses and governments, for a multi-year project which will see telentfield engineers working alongside transferred COLT employees to plan, install, support and maintain customer communication systems across a multitude of networking platforms including SDH, Ethernet and IP. We are continuing discussions with BT Openreach as part of the ongoing re-tender of its infrastructure services contracts. Our current frame contract covers 3 of 12 regions. BT Openreach is intending to place new contracts aligned to its amended regional structure and has confirmed our short-listed position for a number of these regions . Strategy telent is a technology services business focused on the telecommunications and enterprise markets in the UK and Germany. Our customers generally rely on mission-critical communications and IT systems for the operation of their businesses. They typically require a services provider that has a deep understanding of their business environment and operations, and who can therefore add value by partnering with them to deliver services and apply technologies that improve the operational and financial performance of their business. We provide a broad range of services covering the design, build, maintenance, support and operation of network-based systems. These are typically delivered through multi-year contracts linked to defined service levels. In the markets we serve, we are differentiated by the combination of our deep technical capability, strong customer-service focus and technology independence. We are actively pursuing growth based on increasing share in our current markets, entering adjacent markets and broadening the range of technology services we provide. The delivery of this plan will involve a combination of organic growth and bolt-on acquisitions to gain access to new market segments or service capabilities. Trading Outlook telent is well positioned in a number of growing markets and we are currently pursuing tenders with particular focus on emergency services, transportation and network operator transformation programmes. telent has good domain knowledge within its sectors, strong technical expertise and a UK-wide field force which means it is well placed to secure this new business. We are targeting high single digit annual sales growth and expect this to be the main contributor to profitability improvements in the medium term. We expect mid-to-high single digit operating margins from our Trading Activities over the coming years and strong profit to cash conversion. Dividend In recognition of the Group’s prospects, the Board intends that a key element in the creation of shareholder value will be the payment of regular dividends. As a result, the Board is adopting a progressive dividend policy. This will be linked to the operating profit performance of the Trading Activities. In future years the Company intends to pay dividends at both the interim and full-year dates. It is anticipated that the interim payment will be approximately one-third of the total annual payment. For the financial year ended 31 March 2007, the Board is pleased to recommend a total dividend of 11.0 pence per share, to be paid in one payment on 17 October 2007 to shareholders on the register as at 21 September 2007. Group Results Group profit for the period amounted to £57 million comprising operating profit from Continuing Operations of £15 million, total investment income of £163 million, finance costs of £142 million, a loss from Discontinued Operations of £4 million, income from the disposal of available for sale investments of £4 million and a tax credit of £21 million. Operating profit from Continuing Operations of £15 million comprised adjusted operating profit from Trading Activities 1 of £24 million, exceptional items and liability management costs in total of £13 million and a £4 million net credit for share options mainly due to lapses. Further details are provided in Review of Continuing Operations (see page 7). Group cash was £749 million, including £514 million UK Pension Plan Escrow and £34 million other restricted cash. Group cash inflow for the period was £12 million. Further details are provided under Cash (see page 16).
1 See reconciliation to ‘Operating profit from Continuing Operations’ on page 7. Review of Continuing Operations A summary of the key financial results for our two main operating segments is set out in the table below and discussed in this section. A detailed review of our segmental operations is included in ‘Segment Review’ on page 9 below.
1 Representing operating profit before exceptional items, liability management costs (see page 8) and share option costs. 2 See note 4 to the un-audited accounts. 3 See note 5 to the un-audited accounts. Revenues We recorded revenues from Continuing Operations of £309 million compared to £312 million in the previous year, with the expected reduction in Telco Services revenues largely offset by solid growth in Enterprise Services. Second half revenue growth in Telco Services resulted from increased volumes under the Easynet frame contract, but this was not sufficient to offset the major impact, reported in the first half of the year, of prior year disposals (£12 million) and reduced System X volumes (£15 million). Within Enterprise, we have delivered solid growth in our Roads and Metro sectors as a result of increasing revenue streams from long-term contracts secured with the Highways Agency and Tube Lines. We also recorded increased sales to O2 Airwave. In our Rail sector, additional volumes under our contracts with Network Rail were offset by the successful completion of the West Coast Main Line project in the previous year. In Germany, the reduction in Enterprise Services revenues was predominantly the result of the one-off sale of spares stock under our Toll Collect contract in the previous year. Operating Profit Adjusted operating profit from Trading Activities 1 reduced from £27 million (8.7% of sales) to £24 million (7.8% of sales) with the impact of reduced System X volumes more than offsetting operating cost reductions, which were achieved by moving to a more appropriate overhead structure. These operating costs included a benefit from a discount of £2 million from our IT partner under an agreement signed in 2003. Operating costs also included costs associated with the facilities located in Germany and the UK, not sold as part of the Ericsson transaction for which we received £5 million of rental income in the year reported in other operating income. We recorded a net credit of £4 million within operating profit from Continuing Operations in respect of share option plans (FY06: £7 million charge). The IFRS 2 fair value charge of £3 million (FY06: £9 million) was more than offset by a £7 million credit in respect of option lapses mainly relating to employees leaving the Group following completion of the Ericsson transaction (FY06: £2 million credit). The reduction in the IFRS 2 fair value charge resulted primarily from the phasing of vesting dates used for accounting purposes, in particular with respect to tranche 5 options. We incurred net costs of £1 million in relation to liability management activities during the year. Operating costs of £8 million, associated with liability management, principally comprise salaries and associated costs for staff working on the legacy Legal Entity Rationalisation programme and professional fees. In addition, £1 million of non-cash foreign exchange losses were recorded, arising on the intercompany trading balances retained by telent in all territories. Good progress has been made during the year with respect to the ongoing legacy rationalisation programme and in significantly reducing the level of outstanding intercompany trading balances. These costs were largely offset by £8 million of income including rental income from our Italian facility, not disposed of to Ericsson (£2 million), release of provisions held in our captive insurance company following the latest actuarial review (£2 million) and refunds from the Export Credits Guarantee Department (“ECGD”) in respect of long-standing credit insurance claims, previously written off (£2 million). 1 See reconciliation to ‘Operating profit from Continuing Operations’ on page 7 Exceptional items within Continuing Operations amounted to a net charge of £12 million compared to a net credit of £11 million in the previous year. Of the £12 million, £9 million related to a pension settlement loss following the annuity purchase in respect of our legacy Marconi USA Employees’ Retirement Plan in the first half of the year. The net balance of £3 million comprised charges relating to professional fees in connection with the now lapsed scheme of arrangement with Holmar Holdings Limited (£4 million) and net restructuring costs of £3 million relating mainly to employee severance and onerous leases. These were partially offset by the net release of legacy provisions (£4 million). Movements in legacy provisions related primarily to the release of a provision held against an outstanding indirect tax claim dating back to the Marconi financial restructuring, now closed, a net increase in provisions relating to ongoing environmental litigation in the US and a net reduction in provisions relating to prior-year disposals as we settled outstanding claims and upon expiry of specific indemnity periods. Segment Review Continuing Operations comprises two operating segments: Telco Services and Enterprise Services. Our Telco Services offering covers a broad range of services for fixed and mobile network operators and Original Equipment Manufacturers (“OEMs”). This includes network build, optimisation and integration as well as network support, remote monitoring and on-site maintenance for multiple vendors’ equipment. In addition we provide cable installation, repair and maintenance including management of associated civil works for operators’ access networks and telephone exchanges. We also continue to provide maintenance and support services for the installed base of narrowband System X switches. The main customers of our Telco Services segment are UK telecommunications operators and equipment vendors including (in alphabetical order) BT, Cable & Wireless, Easynet, Ericsson and Virgin Media. BT remains our largest customer and accounted for 35% of our revenues for the year ended 31 March 2007 (31 March 2006: 49%). This reduction is partly due to installation and commissioning of ex-Marconi equipment now being contracted through Ericsson and reduced System X spend. Ericsson accounted for 12% of total revenue in the year. Enterprise Services comprises the provision of a broad portfolio of services ranging from consultancy through to whole-life turnkey management for enterprise network customers particularly in the government, transportation, emergency services and utilities sectors in the UK and Germany. Our Enterprise Services offering covers consultation, design, implementation, maintenance and operational support of mission critical integrated communications infrastructure and systems. These systems include transmission equipment (copper/fibre/radio), telephones, public address, customer information/visual displays, passenger assistance, closed circuit television, private mobile radio, road tolling and command and control systems. The main customers of our Enterprise Services segment are (in alphabetical order) Alstom, Anglian Water, Deutsche Bahn, Highways Agency, Krone, Mersey Fire, Network Rail, O2 Airwave, RWE, Tube Lines and Westinghouse. The results of our operating segments within Continuing Operations are set out below. This includes each segment’s share of the Group’s corporate costs.
Two major factors led to the £16 million reduction in Telco Service sales: i) reduced volumes of System X hardware and software (£15 million) as we completed last-time-buy orders in the previous year, and ii) business disposals and closures (£12 million). These were partially offset by growth in Installation & Commissioning and Support & Maintenance services. We agreed to fulfil a new customer order for System X equipment in the first half of the year, which is currently being delivered, but we continue to expect legacy services such as System X to decline over the next few years as customers invest in next generation networks. In the first half of the year we secured new contracts, which generated additional revenues in the year ended 31 March 2007. We won a contract with Easynet to support their BSkyB Broadband rollout. Under this contract we have r esponsibility for management, installation and commissioning, including all aspects of inventory control and ongoing first line maintenance support. We also continue to support BT by providing project management and infrastructure services for the transition of their exchanges to the Next Generation Network. We retain our preferred services partner status with Ericsson in the UK, supporting their wireline activities and providing installation, commissioning and maintenance services for the former Marconi products. Revenues from our four-year frame contract with BT Openreach remained stable year on year. We are continuing discussions with BT Openreach as part of the ongoing re-tender of its infrastructure services contracts. Our current frame contract covers 3 of 12 original regions. BT Openreach is intending to place new contracts aligned to its amended regional structure and has confirmed our short-listed position for a number of these regions. We have recently started a trial with BT Openreach for the recovery of their redundant copper network in the Midlands, which we believe could give rise to opportunities for similar activity in other regions. We recorded a £2 million reduction in adjusted operating profit from Trading Activities 1 year on year. This resulted from lower volumes of System X software and hardware partially offset by a reduction in year on year overhead costs achieved by putting in place a more appropriate structure for the ongoing telent business. A net benefit of £4 million (31 March 2006: £5 million) was recorded in the year through successful management of a number of business risks including lower than expected business separation costs post completion of the Ericsson transaction, allowing us to release contract and other accruals. 1 See reconciliation to ‘Operating profit from Continuing Operations’ on page 7
Enterprise Services revenues increased by £13 million driven by higher revenues in the UK, offset by reduced revenues in Germany. The reduced revenues in Germany were due to a one-off sale of spares stock of £4 million in the year to 31 March 2006 under our Toll Collect maintenance contract.
Revenues in the Roads sector continued to grow as we received a steady flow of variations to our existing long-term Roadside Communication System Regional Maintenance contracts and as we began to recognise revenues under our new TechMAC contracts. Revenues in the Rail sector were broadly flat year on year as additional revenues under our frame contract with Network Rail were offset by the impact of the successful completion early in the previous financial year of the West Coast Main Line contract. Adjusted operating profit from Trading Activities 1 reduc ed by £1 million compared to the year ended 31 March 2006. We delivered a strong performance in our Metro and Roads sector with significant margin improvements as a result of increased sales volumes and increased efficiencies. However, these were partially offset by i) margin pressure in Germany as a result of procuring former Marconi products through Ericsson and reselling them as part of our ongoing service contracts; ii) the creation of liquidated damages provisions due to contract programme delays; and iii) higher margins on the successful completion of the West Coast Main Line contract in the prior year.1 See reconciliation to ‘Operating profit from Continuing Operations’ on page 7 Other Financial Items Investment income of £163 million principally comprised an expected return on pension scheme assets of £129 million and interest received on the UK Pension Plan Escrow account of £24 million. Other interest income amounted to £10 million. Finance costs of £142 million related mainly to notional interest on pension scheme liabilities. The current tax credit on ordinary activities of £16 million mainly arose from the release of tax provisions in respect of prior years as certain historical tax issues are now concluded. In addition, we recognised a further £5 million of deferred tax assets, bringing total recognised deferred tax assets to £55 million. Further disclosures relating to our deferred tax asset position are set out in Note 9 to the un-audited accounts. Discontinued Operations Discontinued Operations comprises the results of our telecommunications equipment and international services businesses sold to Ericsson in January 2006. During the financial year, we completed deferred share and asset sales in Central and Latin America, Africa and China. Profit from these deferred closings were recorded within Discontinued Operations but were offset by a £9 million actuarial settlement loss following the transfer of employees from the UK Pension Plan to a new Ericsson pension plan. We have released Ericsson of its obligation to complete the acquisition of Marconi Middle East LLC (“MME”). Effective from 31 March 2007, telent has taken back management control of MME, whose operations are being wound down. Net assets of £2 million (of which cash and cash equivalents of £5 million) associated with this entity were re-consolidated into telent Group accounts as at 31 March 2007. Work is ongoing to complete legal formalities associated with the sale of shares and assets of the remaining entities in China and Malaysia. Balance Sheet Our balance sheet at 31 March 2007 can be summarised as set out in the table below.
Group Net Assets increased by £60 million to £650 million. The main movements in balance sheet items related to:
Pensions and Other Retirement Benefits IAS 19 valuation at 31 March 2007 Our net pension scheme deficit as at 31 March 2007 amounted to £65 million (31 March 2006: £59 million) comprising a net neutral position in our UK Pension Plan (which represents both assets and liabilities of £2,540 million) and liabilities of £65 million relating predominantly to the un-funded legacy pension liabilities we have retained in our German business (£64 million at 31 March 2007). Actuarial assessments of our defined benefit pension scheme liabilities and valuation of our pension scheme assets in accordance with IAS 19 were undertaken as at 31 March 2007. The movements in the Group net pension scheme deficit since 31 March 2006 are summarised in the table below:
The assumptions set for the IAS 19 valuations as at 31 March 2007 were subject to a full review. The principal assumptions for the UK Pension Plan are set out in the table below:
The life expectancy basis adopted assumes that males currently aged 65 would expect to live to 84, and females to 85. Full details of the assumptions adopted are set out in Note 17 to the un-audited accounts. The £87 million loss on assets in the UK Pension Plan was a result of changes in investment market conditions. The investment strategy seeks to protect the Plan by substantially matching movements in the value of assets and the value of liabilities. Accordingly, there was also a net fall in the value of liabilities. An experience loss of £30 million was recorded in the UK Pension Plan, which mainly reflects the difference between the 2007 pension increase of 4.20% and the long term pension increase assumption of 2.80% per annum for pensions in payment. A 15 basis point increase in the UK inflation rate assumption from 2.75% to 2.90% and a 5 basis point increase in the UK pension increase assumption for pensions in payment from 2.75% to 2.80% resulted in a net loss of £25 million, recorded through the SORIE. A 37 basis point increase in the discount rate assumption from 5.00% to 5.37% has led to a gain of £128 million, recorded through the SORIE. Following the changes introduced by the Finance Act 2004, which were effective from 6 April 2006, we have reviewed and revised the assumption regarding the level of Plan members expected to take advantage of tax-free cash commutation, which has resulted in a SORIE gain of £13 million. One of the most significant movements in the Group net deficit was a result of settlements. During the first half of the year, the Group finalised the annuity purchase to cover all the benefits owed under the Marconi USA Employees’ Retirement Plan. As a result of this, the Group’s liability for this plan was fully settled as at 31 March 2007 and the remaining assets held on the balance sheet were extinguished causing a £9 million loss. In addition, a £9 million loss has arisen following the transfer of ex-Marconi deferred members out of the UK Pension Plan to a new Ericsson pension plan in January 2007; this is a reversal of gains experienced since January 2006 in respect of transferring members. Service costs, plan contributions, benefit payments and net finance costs have been recognised in accordance with the actuarial assumptions set at the beginning of the year and published as at 31 March 2006. The Group also made an additional one-off contribution of £8 million to the UK Pension Plan to cover the costs relating to the implementation of a swap arrangement to protect the value of the £490 million UK Pension Plan Escrow between the time the payment was agreed in late 2005 and the actual payment in March 2006. At 30 September 2006, we recorded a £68 million net deficit for the UK Pension Plan. The improvement since September was mainly a result of changes to assumptions, in particular a 37 basis-point increase in the discount rate assumption and a 10 basis-point and 20 basis-point reduction respectively in the assumptions for inflation and increases in pensions in payment. UK Pension PlanWe have continued to work with the UK Pension Trustee to ensure the continued financial security of the UK Pension Plan. In particular, the Trustee and the Company continue to regularly monitor asset performance following implementation of an investment strategy earlier in the year, which targets for the UK Pension Plan to be fully funded by 2021, using the Trustee’s valuation assumptions, and taking into account the Pension Plan Escrow, which was set aside in March 2006 for the potential benefit of the UK Pension Plan. The investment strategy developed by the Trustee targets an overall portfolio return of 140 basis points above the gilt rate. The Pension Plan Escrow agreement outlines the basis on which cash may move in or out of the Escrow. The IAS 19 valuation is the basis used to determine any movements from the Escrow to the Plan. This is subject to an annual assessment carried out in March each year. As the IAS 19 valuation at 31 March 2007 recorded a net £nil deficit in the UK Pension Plan, there is no requirement for a further funding plan from the Escrow to be agreed with the Trustee. The next assessment will be carried out at March 2008. With effect from 1 April 2007, new employees are no longer offered membership of the G.E.C. 1972 Plan, but are instead eligible to join the defined contribution telent 2007 Pension Plan.
Cash Cash and cash equivalents as at 31 March 2007 amounted to £ 749 million compared to £739 million at 31 March 2006. This includes restricted cash balances as follows:
The largest restricted cash balance relates to cash held in an escrow account owned by telent but secured in favour of the Trustees of our UK Pension Plan. The £24 million increase to £514 million (31 March 2006: £490 million) relates to interest income received during the period. We have made good progress during the year in releasing previously restricted balances relating to collateral held against bonding facilities. Other restricted amounts relate to cash retained within our captive insurance company and amounts deposited in a High Court escrow account for the protection of creditors not included within the Scheme of Arrangement as part of the Group’s financial restructuring in 2003. Cash Flow The following table sets out a summary of the £12 million net cash inflow generated during the financial year. It separates out the cash flows from our ongoing trading activities from those cash flows relating to exceptional items, liability management activities and those incurred within Discontinued Operations.
The Group recorded a net cash inflow from operating activities before exceptional items of £7 million in the period. £29 million of cash generated by our ongoing Trading Activities was offset by cash outflows relating to exceptional items and liability management (£13 million) and Discontinued Operations (£9 million). The strong cash inflow from Trading Activities reflected a high level of operating profit to cash conversion with a strong focus placed on working capital management throughout the business. In particular, during the year, we have significantly reduced inventory holdings within our trading businesses. Cash utilised by operating activities within Liability Management and Discontinued Operations related mainly to the unwind of short-term liabilities retained following the disposal of businesses to Ericsson as well as the cash costs associated with the Legal Entity Rationalisation programme and with the administration of the UK Pension Plan. In addition, we paid £5 million of tax associated with the Ericsson transaction in Italy (recorded within operating cash utilised by Discontinued Operations). During the second half of the financial year, a number of one-off receipts relating to legacy items more than offset the Liability Management cash costs – in particular, we completed a transaction to factor VAT receivables in Italy (£9 million cash inflow) and we recovered £2 million from the ECGD in respect of legacy overseas debtors, previously written off. Cash outflows in relation to exceptional items totalled £36 million. Restructuring and litigation costs of £22 million principally related to redundancy as we paid £15 million of redundancy costs (of which £6 million was paid to staff previously employed within businesses sold to Ericsson and is therefore recorded within Discontinued Operations) during the year. Further payments of £7 million were incurred in relation to legacy litigation settlements, principally in the US. A further £10 million of the exceptional cash spend related to one-off pension-related payments; an £8 million special contribution to the UK Pension Plan (discussed further in ‘Pensions and Other Retirement Benefits’ on page 14); and a £2 million payment to finalise the purchase of the annuity for the Marconi USA Employees' Retirement Plan. In addition, cash spend on advisor fees in relation to the proposed acquisition by Holmar Holdings Limited amounted to £4 million; all of which was previously disclosed in the interim accounts. Group cash inflow from investing activities amounted to £40 million. Income from loans and deposits of £34 million comprised £24 million of interest arising on the Pension Plan Escrow account and £10 million on company cash balances. The impact of the Ericsson transaction was net £nil during the year as a whole as advisor fees and other cash costs were offset by net receipts in respect of deferred closings in China and Central & Latin America (£6 million in total) and the re-consolidation of Marconi Middle East LLC (£5 million). In addition, we generated £8 million mainly through the sale of legacy investments. Capital expenditure within our Trading Activities amounted to £2 million during the year.
Important Notice This report is prepared under International Financial Reporting Standards (IFRS) adopted by the European Union and therefore complies with Article 4 of the EU IAS Regulations. Forward Looking Statements It is possible that this announcement could or may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will, may, should, would, could or other words of similar meaning. Undue reliance should not be placed on any such statements because, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and telent's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. There are several factors which could cause actual results to differ materially from those expressed or implied in forward looking statements. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are delays in obtaining, or adverse conditions contained in regulatory approvals, competition and industry restructuring, changes in economic conditions, currency fluctuations, changes in interest and tax rates, changes in energy market prices, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, technological developments, the failure to retain key management, or the key timing and success of future acquisition opportunities. telent undertakes no obligation to revise or update any forward looking statement contained within this announcement, regardless of whether those statements are affected as a result of new information, future events or otherwise, save as required by law and regulation.About telent plc: telent plc supplies a broad range of telecommunications and IT network services to enterprises, equipment vendors, public sector organisations and network operators in the UK, Ireland and Germany, leveraging its accumulated knowledge of customers’ networks, its expert field force, its scale and reputation for quality. Formerly the UK and German services business of Marconi Corporation plc, the Company was renamed telent plc in January 2006 on the sale of the telecommunications equipment and international services business to Ericsson. The Company is listed on the London Stock Exchange under the symbol TLNT. Additional information about telent plc can be found at www.telent.com Copyright © telent plc 2007. All rights reserved. All brands and product names and logos are trademarks of their respective holders.
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