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Tescom Software Testing Systems Ltd.: Introduction to AIM

Posted on: Monday, 11 July 2005, 06:00 CDT

Tescom Software Testing Systems Ltd ("Tescom" or "the Company"), the international quality assurance and software testing service provider, announces that dealings in its ordinary shares have today commenced on the Alternative Investment Market of the London Stock Exchange (AIM). The Company's ticker is "TSCM".

The Directors believe that the Introduction to AIM will provide the Company with the following benefits:

-- enhanced corporate profile and visibility with customers and alliance partners, particularly in the UK and Europe;

-- greater liquidity for investors through a dual listing on the Tel Aviv Stock Exchange (symbol: TSCM) and AIM;

-- assistance in the recruitment, retention and incentivisation of Tescom employees; and

-- improved ability to raise additional capital should this be required.

Tescom is an established and profitable international QA and Software Testing service provider with a 15 year trading history. Its services are focused on mitigating and managing the technological risks associated with the development, integration and implementation of software and IT applications. Tescom has long standing customer relationships with leading enterprises across a range of vertical sectors including finance, telecommunications, life sciences, industrial, retail and defence.

The Directors believe that there is potential for a substantial increase in the size of the outsourced QA and Software Testing market. This belief is founded on an increasing recognition by businesses of the importance and value of QA and Software Testing and the need to invest in it to deliver major IT projects on time and on budget. More than 50% of projects exceed budget or fall below requirements, while 90% finish late. There is also a growing market awareness and shift from using in-house personnel or IT Systems Integrators for QA and Software Testing, to outsourcing with independent, third party specialists such as Tescom to minimise the risk of failure of IT projects due to software bugs.

The Company has operations in Israel, the UK, the US, France, Singapore and Australia and reported profits before tax of $3.04 million on revenues of $45.76 million in the year ended 31 December 2004.

The Company has 15,943,099 million ordinary shares in issue giving it an approximate market capitalisation of GBP 14.7 million based on the closing price of NIS 7.45 on 7 July 2005.

Teather & Greenwood Limited is the Company's nominated adviser and broker.

Commenting on the Introduction, Ofer Albeck, Chief Executive of Tescom said: "We believe our listing on AIM will enhance our profile and visibility with customers and alliance partners, particularly in our key growth markets in the UK and Europe, and improve our ability to raise additional capital should this be required. The Company is already well positioned to benefit from the anticipated growth in the IT services market through its existing global presence, quality of customer base, bespoke service offering and experienced management team and we remain very excited about Tescom's future prospects in this evolving market."

Notes to Editors

Key Strengths

The Directors believe that Tescom has the following key strengths:

-- An independent and objective business well positioned to benefit from the growing market awareness and shift from customers using in-house personnel or IT Systems Integrators for QA and Software Testing, to outsourcing with independent, third party specialists such as Tescom;

-- An established international customer base of top-tier enterprises, which generate recurring revenues for Tescom;

-- Global expertise across specific vertical sector industries, business environments and applications, enabling Tescom to service the diverse requirements of its multi-national customer base on a consistent and timely basis;

-- A profitable global operation generating positive operating cash flow;

-- A proven, replicable business model pioneered in the Israeli market and, subsequently, successfully rolled-out in overseas markets; and

-- A capable and experienced management team with technical, managerial and financial expertise.

Market Overview and Opportunity

The global software and IT services market has now emerged from a recessionary period during 2002 and 2003 and the Directors believe there are strong signs that organisations are looking to increase investment in software applications, which will lead concurrently to greater investment in QA and Software Testing. The market is also highly fragmented and currently offers an opportunity for well-positioned providers to take a significant market share through sector consolidation.

In light of this outlook, the Directors believe that Tescom's key strengths will enable it to exploit market opportunities in the QA and Software Testing services arena, which are reflected in the following:

-- it has been estimated that the automated software quality tools market, which totalled $659 million in 2003, will grow to $1.339 billion in 2008 (i.e. at a compound annual growth rate of 15.2 per cent.) (Source: IDC, July 2004);

-- there is increasing acceptance of an outsourcing delivery model for QA and Software Testing services;

-- there is a growing awareness of the benefits of QA and Software Testing which is expected to comprise an increasingly higher proportion of overall IT budgets in the future; and

-- there are significant potential cost reductions for organisations that introduce QA and Software Testing methodologies into all phases of the software development cycle.

Current Trading and Prospects

In the three months ended 31 March 2005 the Group reported unaudited profits before tax of $1.04 million on revenues of $11.88 million. The results for the second quarter ended 30 June 2005 are expected to be announced in early August 2005.

The Directors believe that the Group is positioned for growth and will further benefit from the anticipated increase in size of the outsourced QA and Software Testing market. Principal future growth is anticipated to come from Europe, and, in particular, the UK, although Tescom will seek increasingly to build its presence in new geographical regions.

Source: Business Wire

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