Preliminary Results

Eckoh PLC 18 June 2007 18 June 2007 Eckoh plc Preliminary results for the year ended 31 March 2007 Eckoh plc ('Eckoh' or 'the Group'), the UK's largest provider of hosted speech recognition services, reports its financial results for the year to 31 March 2007. Restated Year ended Year ended 31 March 2007 31 March 2006 Â£'000 Â£'000 Turnover 103,376 127,084 --------------------------------- ----------- ----------- Total continuing operations 86,841 64,880 Discontinued operations 16,535 62,204 --------------------------------- ----------- ----------- Gross profit 14,892 24,388 --------------------------------- ----------- ----------- Total continuing operations 11,833 11,549 Discontinued operations 3,059 12,839 --------------------------------- ----------- ----------- Operating loss/(profit) (1,043) (367) --------------------------------- ----------- ----------- Total continuing operations (310) (817) Discontinued operations (733) 450 --------------------------------- ----------- ----------- Profit before taxation 8,418 1,036 Adjusted profit before taxation* 1,944 1,951 --------------------------------- ----------- ----------- Total continuing operations 1,455 (436) Discontinued operations 489 2,387 --------------------------------- ----------- ----------- Profit for the year 8,366 1,166 Basic earnings per share 3.2p 0.4p Cash and short-term investments 9,601 12,737 *Profit before taxation, intangible asset amortisation and exceptional items In July 2006 the Group announced the disposal of its entire holding in Symphony Telecom Holdings plc ('Symphony'). In this release, the discontinued operations refer to the contribution made by Symphony. The total continuing operations refer to contribution made by Speech Solutions, Client IVR and Connection Makers divisions. Financial highlights: â€¢ Turnover from continuing operations increased by 34% to Â£86.8m (2006: Â£64.9m) â€¢ Adjusted profit before tax1 from continuing operations increased to Â£1.5m (2006: loss of Â£0.4m) â€¢ Gross margin for continuing operations amounted to 14% (2006: 18%) â€¢ Speech Solutions division revenues increased by 19% to Â£6.3m (2006: Â£5.3m) and gross margin amounted to 62% (2006: 56%) â€¢ The Client IVR division revenues increased by 50% to Â£71.3m (2006:Â£47.7m) and gross margin amounted to 5% (2006: 6%) â€¢ Cash and short term investment amounted to Â£9.6m (2006: Â£12.7m) following a cash outflow of Â£10.2m in relation to the share buyback and tender offer being offset by an inflow of Â£7.0m from the disposal of Symphony Operational highlights: Speech Solutions â€¢ Three contracts announced today: new seven-year contract with a major UK logistics group, new three-year contract with United Utilities and a three-year contract renewal with O2 â€¢ Virtually no client churn in the year and contract terms are increasing with three-year terms and longer being typical â€¢ Strong new business generation during the year, particularly in the second half, notable wins include AXA PPP healthcare, BAA, Parcelforce Worldwide, and BSkyB â€¢ Significant long-term contract renewals with ATOC, Vue, and William Hill, three of the top four Speech Solutions clients Client IVR â€¢ Eckoh continues to be one of the largest players in the UK market â€¢ Eckoh to invest in becoming a 'best practice' provider of interactive services for media owners â€¢ New contracts to be negotiated to reflect the market conditions and the service that Eckoh provides Nik Philpot, Chief Executive Officer, commented today: 'In 2006 we took steps to restructure and reorganise the Group so that we could focus more of our efforts on the high margin, high growth speech solutions market. This is already paying dividends in the excellent results announced today. We have secured a number of exciting new long term contracts, retained our key existing clients and significantly improved our overall margins in this area. The recent issues concerning the interactive television market have had a significant impact on response levels, which are currently much lower throughout the sector. Whilst these issues will inevitably reduce the revenues in our Client IVR division, the very low margin nature of these revenues means that they will have a much less significant impact on gross profits. For this activity to remain part of our core business we intend to improve our margins by negotiating new contracts with media clients and positioning ourselves as a best practice service provider. Looking ahead, Eckoh is confident of maintaining its position as the market leader in the UK for hosted speech recognition solutions. We have entered 2007 with a strong sales pipeline that also reflects the growing maturity and opportunity in this sector. We remain committed to extending our footprint into other European territories and have the necessary resources to achieve this. The Speech Solutions business continues to be the long term focus of the Group and is where the Board believes the best value for shareholders will be realised.' For further enquiries, please contact: Eckoh plc Nik Philpot, Chief Executive Officer Adam Moloney, Group Finance Director Jim Hennigan, Executive Director www.eckoh.com Tel: 01442 458 300 Corfin Communications Harry Chathli, Neil Thapar, Ben Hunt Tel: 020 7929 8989 Seymour Pierce Jonathan Wright Tel: 020 7107 8050 Introduction The past 12 months have been a period of significant change for Eckoh. Following the sale of its 64.64% holding in Symphony Telecom Holdings plc ('Symphony') in July 2006, Eckoh has consolidated its business around its two core divisions, Speech Solutions and Client IVR. The Group has made excellent progress in these core areas, resulting in a strong financial performance. Turnover from continuing operations has increased by 34% to Â£86.8m (2006: Â£64.9m) and profit before tax excluding intangible asset amortisation, exceptional items has improved from a loss of Â£0.4m to a profit of Â£1.5m. The sale of Symphony generated Â£11.0m cash proceeds before expenses of Â£0.8m, and a profit of Â£8.7m for the Group. Â£10.2m of cash generated was used to acquire shares in Eckoh, including a Â£7m tender offer to shareholders which concluded in February. The increase in profitability and reduction of shares in circulation has resulted in earnings per share increasing from 0.4p to 3.2p. Eckoh will continue with a strategy of concentrating on the core parts of the business and the Speech Solutions division in particular. Developments in North America where Microsoft, Google and Nuance have all made significant investments in speech recognition and managed service operations have confirmed the belief of the directors that huge value exists within this market. Eckoh continues to have substantial cash reserves and will look to expand the Speech business throughout Europe to further establish a clear leadership in the European Speech Recognition market. Continuing operations 1. Eckoh The Speech Solutions and Client IVR divisions both operate under the common Eckoh brand and many employees are shared across both activities. However, the nature of the businesses, their margins and their opportunities for growth are quite different and on that basis we continue to report their results separately. 1.1 Speech Solutions Eckoh is the UK's largest provider of hosted speech recognition solutions with the broadest client portfolio and sector penetration. Our services are used by a wide range of mass market organisations to serve millions of customers and our clients include BT, National Rail Enquiries, Parcelforce Worldwide, AXA PPP healthcare, TD Waterhouse and Scottish Power. We are extremely pleased to be announcing today three contracts. In conjunction with Eckoh's partner TFCC, we have signed a new three-year contract to provide advanced power outage services to United Utilities. This is the fourth substantive contract for the Eckoh/TFCC partnership. Additionally, along with our partner, BT, we are delighted to have signed a new seven-year contract with a major UK logistics company, further disclosure on this agreement will be made later in the year. Finally, our client of three years O2, has renewed its contract for age verification services for the next three years and increased the scope to include self-service via the web as well as the telephone. Today's announcements are a continuation of last years' excellent progress made within Speech Solutions as major consumer-facing organisations adopt outsourced and advanced technology from Eckoh to enhance their service levels without needing to increase headcount or reduce cost by moving to offshore locations. The division increased its revenue by 19% to Â£6.3m (2006: Â£5.3m). More significantly, the division's gross profit increased by 33% to Â£3.9m (2006: Â£2.9m) contributing to strong improvement in the gross margin from 56% to 62%. The result also reflects the impact of operational gearing, with direct costs increasing by only 13% to Â£2.7m (2006: Â£2.4m) validating our belief in the hosted model operated by the division. As a result, the Speech Solutions division more than doubled its contribution to the group overheads to Â£1.2m (2006: Â£0.5m) and is anticipated to become the most profitable part of the group in 2008. It is also pleasing that the division continued to experience virtually no churn in its client base, illustrating the value that the managed solutions provided to clients. During the period some of the largest clients, notably William Hill, National Rail Enquiries and Vue Cinemas, were all retained on new long term contracts. The decision to outsource services to Eckoh tends to be part of a long term strategy and contract terms are typically being signed on three-year terms or longer. New contracted clients won in the period include the British Airports Authority (a three-year contract for flight information services), Parcelforce Worldwide (a three-year agreement for order tracking and re-delivery) and AXA PPP healthcare (a five-year contract for a sickness management solution). The Group has an exclusive alliance with BT to provide its top corporate customers with hosted speech recognition services and is evaluating entering into similar alliances with high profile technology companies to accelerate sales growth further. The first of these, which was announced earlier this month, is with Genesys, a world leading provider of contact centre software. Eckoh's clients will be able to take advantage of a number of technological advances encapsulated in Genesys' technology, which will supplement Eckoh's hosted solutions. These include more advanced computer telephony integration (CTI) capabilities, which allows customer data and calls to be transferred between agents and applications and between locations without any additional telephony charge. In addition, IVR solutions may be built using the Voice XML standard. Eckoh will benefit from exposure to Genesys' extensive global client base of more than 4,000 companies in 80 countries. The service that Eckoh provides typically centres on speech recognition as the primary technology. It is noticeable however, that many clients are looking for a consistent and common approach in how their customers contact them through channels other than the telephone, and to that end are starting to look to Eckoh to provide a broader solution that may encompass internet and mobile technologies. Eckoh has significant technical expertise in these areas which means that it can usually accommodate the client's requirements and provide greater protection in the long term as competition increases. The increasing level of interest in the Eckoh speech offering has led to a strong sales pipeline which is expected to lead to further growth in 2008 and future years. Our belief in the technology and the model we operate is reinforced by exciting recent developments in the United States, a market more mature than Europe. Microsoft has acquired Tellme Networks Inc, a hosted speech solutions provider, for a reported $800m. Google, Yahoo and Nuance are also all investing heavily in speech recognition with further consolidation anticipated in the sector. Eckoh is confident of remaining the market leader in the UK, the largest single market in Europe for hosted speech services, and remains committed to extending its footprint into other European territories for which it believes it has the necessary resources. The Speech Solutions business continues to be the long term focus of the group, and where the Board believes the best value for shareholders will be realised. 1.2 Client IVR Eckoh is one of the UK's largest providers of IVR and mobile interactive services to media owners, delivering an end-to-end solution from design through to development and implementation and then on to hosting and reporting. The Client IVR division has seen a 50% increase in revenue to Â£71.3m (2006: Â£47.5m), predominantly as a result of the launch of ITV Play shortly before the start of the financial year. Gross profit increased by 13% to Â£3.5m (2006: Â£3.1m) reflecting a gross margin of 5% (2006: 6%) and the increased revenue did not impact the direct expenses which increased marginally to Â£2.3m (2006: Â£2.4m). Contribution to central overheads from the division increased to Â£1.0m (2006: Â£0.7m). Call volumes into participation TV formats such as those shown by ITV Play were much higher in the first half of the year, but have subsequently declined. In the fourth quarter consumer confidence in TV programmes which use premium rate services was severely dented and as a result participation was much lower. This trend has continued into the beginning of this year, and hence Client IVR revenues are expected to be significantly lower than last year. The adverse publicity surrounding the interactive television market and the potential increase in risk has led Eckoh to review its involvement in the sector. Eckoh has worked closely with regulators ICSTIS and Ofcom, assisted Deloittes in a review of all ITV programming and appointed KPMG to perform an independent review of all of its premium rate services in the media sector. As a result, we firmly believe that none of our competitors in the sector have the level of compliance expertise or the experience and scale of resource that Eckoh now possesses. For Eckoh to continue to remain involved, it is imperative that either a higher proportion of the revenue is retained or fee based contracts are implemented to support the 'best practice' service that Eckoh is now obliged to provide. Hence, it is the Company's intention to re-negotiate its contracts, and to that end it has already started discussions with its largest clients. The technical and operational expertise that Eckoh now has in this sector is un-paralleled on a global basis. Whilst the UK market is relatively mature, around the world there are many emerging markets which are looking to capitalise on the opportunities that interactivity can provide. Eckoh is not only able to assist in setting up these services but is also able to advise on ways of operating them that can reduce the associated risks. Over recent months, Eckoh has had many discussions with broadcasters and production companies from outside the UK regarding similar participation TV formats. It is possible that international opportunities may provide a positive counter balance to any reduction in the UK market, however, the focus on maximising the Speech Solutions opportunity must remain the primary focus for management. Regulatory Review of the Interactive Television Market The last six months have seen a number of high profile investigations and regulatory reviews commence into the use of premium rate calls and text messages in the interactive television sector. This began late last year with a Select Committee of MP's reviewing the quiz TV market and intensified in February 2007, when a number of major television shows became the subject of media scrutiny following disclosure of the way in which a number of operations were managed exposing flaws in certain procedures. As a result of the media coverage both ICSTIS, the regulatory body that governs the premium rate sector, and Ofcom, the independent regulator and competition authority for the UK communications industries, have instigated wide-ranging reviews into the way these services are operated and it is anticipated that they will recommend changes to the codes of conduct. ICSTIS is continuing its investigation into the 'You Say, We Pay' competition on Channel 4's 'Richard & Judy Show' and Eckoh is cooperating fully with the investigation. The conclusion of this investigation is expected in early July 2007. There are no other ongoing ICSTIS investigations involving formal breaches of the ICSTIS Code which involve Eckoh. In September 2007 the new Gambling Act 2005 will come into full effect and it is likely to result in further changes to the way that premium charged competitions are operated. The new Act requires that competitions must either have a significant degree of skill, a genuine free entry route or be provided by a licensed lottery provider. It is as yet unclear which of these three options will be generally adopted by the industry which currently generates significant revenues from these services. These significant changes in the market have prompted Eckoh to invest in becoming a 'best practice' provider of IVR services for media owners. Eckoh has already appointed KPMG to conduct a comprehensive review of all of its media services to ensure that these are not only operating in a fully compliant manner but that these services could be used as a benchmark for future regulation. As a result, Eckoh's intention is to improve on the very low margin that it currently obtains from this activity by renegotiating its contracts and thereby providing a superior level of service to media owners who want to ensure that their interactive services operate without the risk of non-compliance with current and future regulations. 2. Connection Makers Connection Makers provides dating and chat services which are accessed over the phone, via mobile and through the internet. These services are advertised or distributed directly in newspapers, magazines or on television, and are provided to clients on a revenue share basis. The last 12 months has seen a decline in the business as the average selling price of services has reduced significantly through aggressive competition and the lack of availability of suitable television and press advertising that is necessary to drive critical mass. In addition, there have been a number of regulatory changes, particularly in the mobile market, which has impacted the effectiveness of the advertising. As a result, revenues for the period were down to Â£9.3m (2006: Â£12.1m). Gross margin was stable at 48% (2006: 46%), resulting in gross profit of Â£4.5m (2006: Â£5.5m). Direct expenses within the division increased slightly to Â£3.1m (2006: Â£3.0m), leading to a contribution to central overheads of Â£1.3m (2006: Â£2.5m). The signs of recovery which were seen at the beginning of the second half were unfortunately impacted by the media coverage in the last quarter reducing consumer confidence in premium rate services in general and their propensity to use them. The impact has not however been as significant as the participation TV market and volumes are returning to more normal levels. As previously stated, Connection Makers operates as a stand-alone entity with an experienced management team. The Board continues to review all options for this business. 3. Discontinued Operations Eckoh's results include those for the discontinued Symphony operation for the period prior to its disposal on 18 July 2006. During that period, Symphony reported an operating loss of Â£0.7m (2006: profit of Â£0.5m). Included within the operating loss are exceptional costs comprising expenditure incurred by Eckoh in relation to the restructuring and simplification of the Eckoh business following the disposal of Symphony Telecom Holdings plc to Redstone plc, and by Symphony in relation to the disposal. Continuing operations will benefit from the restructuring with an annual cost saving of around Â£0.5m going forward. 4. Outlook The Group made a solid start to the new year and trading in the first quarter has been in line with management expectations. In the first quarter of the year the Client IVR division has continued to be affected by lower consumer demand for premium rate interactive services across the media sector. Whilst this will impact the division's revenues, the impact on overall profitability is likely to be much less significant due to the current low margin business model. Management are intending to improve the low margin through negotiation of new contracts and by positioning the business as a best practice provider in the media sector. The Speech Solutions division has excellent revenue visibility and with a strong sales pipeline, Eckoh is confident of maintaining its position as the market leader in the UK for hosted speech recognition solutions. The Group remains committed to extending its footprint into other European territories and has the necessary resources to achieve this. The Speech Solutions division continues to be the long term focus of the Group and is where the Board believes the best value for shareholders will be realised. Despite the challenging conditions in Client IVR, the Group as a whole remains well positioned, with a strong balance sheet, to benefit from long term growth in the Speech Solutions business. As a result the Board remains confident of delivering shareholder value in both the current financial year and beyond. Consolidated profit and loss account for the year ended 31 March 2007 Restated Year ended Year ended 31 Mar 2007 31 Mar 2006 audited audited Note Â£'000 Â£'000 Turnover 103,376 127,084 ------------------------------------- -------- -------- Total continuing operations 86,841 64,880 Discontinued operations 16,535 62,204 ------------------------------------- -------- -------- Cost of sales (88,484) (102,696) -------- -------- Gross profit 14,892 24,388 ------------------------------------- -------- -------- Net operating expenses before intangible asset amortisation and restructuring costs (13,753) (22,232) Amortisation of intangible assets (755) (2,165) Exceptional items relating to continuing operations (646) - Exceptional items relating to discontinued operations (781) (358) ------------------------------------- -------- -------- Net operating expenses (15,935) (24,755) -------- -------- ------------------------------------- -------- -------- Operating profit/(loss) before intangible asset amortisation and exceptional items 1,139 2,156 ------------------------------------- -------- -------- Total continuing operations 574 (613) Discontinued operations 565 2,769 ------------------------------------- -------- -------- Operating (loss)/profit (1,043) (367) ------------------------------------- -------- -------- Total continuing operations (310) (817) Discontinued operations (733) 450 ------------------------------------- -------- -------- Profit on disposal of subsidiary operations 8,656 1,388 Profit on disposal of fixed asset investment - 300 Costs of group restructuring - (80) Net interest receivable/(payable) and other similar items 805 (205) -------- -------- Profit on ordinary activities before taxation 8,418 1,036 Taxation (80) (166) -------- -------- Profit on ordinary activities after taxation 8,338 870 Minority interests 28 296 -------- -------- Profit for the period 8,366 1,166 -------- -------- Basic earnings per 0.25p share 2 3.2p 0.4p Diluted earnings per 0.25p share 2 3.1p 0.4p Statement of total recognised gains and losses for the year ended 31 March 2007 Restated Year ended Year ended 31 Mar 2007 31 Mar 2006 audited audited Â£'000 Â£'000 ------------------------------------- Profit for the period 8,366 1,166 ------------------------------------- Exchange adjustments offset in reserves (63) (34) ------------------------------------- -------- -------- Total recognised gains for the year 8,303 1,132 ------------------------------------- -------- Prior year adjustment: FRS 20 share option charge (109) ------------------------------------- -------- Total gains recognised since last annual report 8,194 ------------------------------------- -------- Consolidated balance sheet as at 31 March 2007 31 March 31 March 2007 2006 audited audited Note Â£'000 Â£'000 Fixed assets Intangible fixed assets 190 8,604 Tangible fixed assets 1,148 1,498 Investments 288 288 -------- -------- 1,626 10,390 Current assets Stock 17 479 Debtors: amounts falling due within one year 8,644 22,537 Debtors: amounts falling due after more than one year 3,273 - Short-term investments 2,000 3,000 Cash at bank and in hand 7,601 9,737 -------- -------- 21,535 35,753 Creditors: amounts falling due within one year (13,946) (32,277) -------- -------- Net current assets 7,589 3,476 Total assets less current liabilities 9,215 13,866 Creditors: amounts falling due after more than one year - (1,493) Provisions for liabilities and charges (516) (172) -------- -------- Net assets 8,699 12,201 -------- -------- Capital and reserves 3 Called up share capital 491 681 Capital redemption reserve 198 - Share premium account 477 227 Profit and loss account 7,533 9,366 -------- -------- Total shareholders' funds 4 8,699 10,274 Minority interests - 1,927 -------- -------- Capital employed 8,699 12,201 -------- -------- Consolidated cash flow statement for the year ended 31 March 2007 Year ended Year ended 31 March 2007 31 March 2006 audited audited Note Â£'000 Â£'000 Net cash inflow from operating activities 6 1,083 3,232 Return on investments and servicing of finance Interest received 803 286 Interest paid (83) (335) Loan issue costs - (298) -------- -------- 720 (347) -------- -------- Taxation (162) (362) Capital expenditure and financial investment Purchase of tangible fixed assets (990) (1,023) Expenditure on intangible fixed assets (286) (186) Proceeds on disposal of tangible fixed asset - 12 Disposal of trade investment - 300 -------- -------- (1,276) (897) -------- -------- Acquisitions and disposals Purchase of subsidiary undertakings - (9,722) Net cash acquired with subsidiary undertakings - 796 Contingent consideration paid in respect of a prior year acquisition - (50) Costs of group restructuring - (80) Net cash disposed with subsidiary undertakings (3,165) (107) Additional proceeds from disposal of operations in a prior year - 108 Proceeds on disposal of subsidiary undertaking 10,188 3,400 -------- -------- 7,023 (5,655) -------- -------- Cash inflow/(outflow) before use of liquid resources and financing 7,388 (4,029) Management of liquid resources Decrease in short-term investments 1,000 4,000 Financing Issue of shares 258 82 Share buyback and tender offer (10,247) - Loan raised - 6,000 Loan repaid (400) (2,560) Capital element of finance lease rental payments (14) (9) -------- -------- (10,403) 3,513 -------- -------- -------- -------- (Decrease)/increase in cash in the period (2,015) 3,484 -------- -------- Notes to the full-year results 1. Basis of preparation The preliminary results for the year ended 31 March 2007 have been prepared using accounting policies consistent with those set out in the Company's consolidated 2006 statutory accounts with the exception of FRS 20 which has been adopted in the current year. These statements do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The statements have been extracted from the audited consolidated financial statements of the Group for the year ended 31 March 2007 which have not yet been filed with the Registrar of Companies. The auditors' reports on those accounts were unqualified and did not contain any statement under section 237 of the Companies Act 1985. Changes in accounting policy The Company has adopted FRS 20, Share-based payments for the year ended 31 March 2007. As a result of this, a change is made to the profit and loss account to reflect the calculated fair value of employee share options. The charge is calculated at the date of grant of the options and is charged over the vesting period. As a result of the adoption of FRS 20 in the current year the comparatives have been restated. The results for the year ended 31 March 2007 were approved by the Board on 15 June 2007 and will be posted on the Company's web site, www.eckoh.com, on 18 June 2007. 2. Earnings per ordinary share of 0.25p each Basic earnings per share Basic earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares of 263,382,969 (2006: 271,957,745) in issue during the year and the profit for the year, after minority interests, of Â£8.366m (2006: Â£1.166m). Diluted earnings per share In calculating diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to include the dilutive effect of potential ordinary shares. The potential ordinary shares represent share options granted to employees where the exercise price is less than the market price of ordinary shares as at 31 March 2007. 2007 2006 Restated Restated Restated Earnings Weighted earnings weighted earnings attributable average attributable average per to ordinary number of Earnings to ordinary number of share shareholders shares per share shareholders shares (number in (number in Â£'000 thousands) (pence) Â£'000 thousands) (pence) -------------- -------- -------- -------- ------------ ---------- ------- Basic earnings per share 8,366 263,383 3.2p 1,166 271,958 0.4p Dilutive effect of share options - 5,152 - - 2,465 - ----------------- -------- -------- -------- -------- -------- ------- Diluted earnings per share 8,366 268,535 3.1p 1,166 274,423 0.4p ----------------- ------- ------- -------- -------- -------- ------- 3. Share capital and reserves Ordinary Capital Share Profit share redemption premium and loss capital reserve account account Â£'000 Â£'000 Â£'000 Â£'000 At 1 April 2006 681 - 227 9,366 Profit for the period - - - 8,366 Share option charge - - - 111 Exchange adjustments offset in reserves - - - (63) Shares issued in respect of share options exercised 8 - 250 - Share buyback and tender offer (198) 198 - - ------- ------- ------ ------- At 31 March 2007 491 198 477 7,533 ------- ------- ------- ------- 4. Reconciliation of movement in shareholders' funds Restated Year ended 31 Year ended 31 March 2007 March 2006 Â£'000 Â£'000 Opening shareholders' funds 10,274 8,951 Profit for the period (see note 5) 8,366 1,166 Share option charge 111 109 Employee share options exercised 258 82 Exchange adjustments offset in (63) (34) reserves Share buyback and tender offer (10,247) - ------- ------- Closing shareholders' funds 8,699 10,274 ------- ------- 5. Impact of FRS 20, Share-based payment Restated Year ended 31 March 2006 Â£'000 Profit for the period as reported in 2006 annual report 1,275 Share option charge relating to the implementation of FRS 20 (109) ------- Profit for the period (see note 4) 1,166 ------- 6. Net cash (outflow)/inflow from operating activities Restated Year ended Year ended 31 March 2007 31 March 2006 Â£'000 Â£'000 Operating loss (1,043) (367) Depreciation of tangible fixed assets 819 1,028 Amortisation of intangible fixed assets 755 2,165 Share option charge 111 109 (Increase)/decrease in stock (21) 110 Decrease/(increase) in debtors 3,949 (8,654) (Decrease)/increase in creditors/provisions (3,487) 8,841 ------- ------- 1,083 3,232 ------- ------- 7. Adjusted profit before taxation Restated Year ended Year ended 31 March 2007 31 March 2006 Â£'000 Â£'000 Profit before taxation 8,418 1,036 Adjust for: Profit on disposal of subsidiary operations (8,656) (1,388) Profit on disposal of fixed asset investment - (300) Costs of group restructuring - 80 Amortisation of intangible fixed assets 755 2,165 Exceptional items relating to continuing operations 646 - Exceptional items relating to discontinued operations 781 358 ------- ------- Adjusted profit before taxation 1,944 1,951 ------- ------- This information is provided by RNS The company news service from the London Stock Exchange

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