Final Results

Eurolink Managed Services PLC 27 July 2000 EUROLINK MANAGED SERVICES PLC Results for the year ended 31st March 2000 Chairman's Statement Introduction On 7 April 2000 it was announced that, it had been agreed that it would be in the Group's best interests to appoint an independent non-executive chairman. Accordingly, Mr Antoniades who has a substantial beneficial interest in the company, resigned from the Board and I was appointed Chairman with effect from that date. In that capacity I report on the results of the Group for the year ended 31 March 2000. These are in accord with the expectations recorded in the Interim Statement after what has been an exceptionally difficult trading period for many IT service companies. Results Turnover for the financial year was £7.60m (1999 £8.32m) with profit before tax £0.34m (1999 £0.85m). Earnings per share were 2.21p (1999 5.35p). In accordance with the Group's policy for the financial year a dividend is not being recommended. Business Review During the latter part of 1999, activity levels at certain clients were reducing, partly as the burden of Year 2000 work eased. This trend continued for most of the year and was exacerbated by changes in some clients' sourcing policies. The Group responded to the challenge by business development initiatives, and during the year it gained a number of new clients and established significant business with several of these. However, as expected, because of the uncertainty surrounding the millennium date change, the flow of orders was slow and turnover was slightly reduced during the second half. The gross margin was improved in the second half through renegotiation of supplier contracts. This contributed to maintaining operating profit margins despite the investment in business infrastructure, in particular in the premises in Scotland, where the initial rent-free period expired in September 1999, and in an increase in support staff. The investments were essential to enable the Group to respond effectively to the increased business opportunities that were starting to emerge around the end of the financial year and to offer the off- site development facilities that are key to our service. Outlook The increase in demand has continued to be slow during the first quarter of the current financial year, particularly for projects on traditional IT platforms. However the Group has been active in using and developing its in-house skills in the e-commerce market, to provide additional services to existing clients and as a further product to offer to potential clients. The number of people on projects is now growing, and the Group has recently secured a significant order from an existing client, the benefit of which will be seen in the second half of the year. In addition to its core managed service product, the Group is actively seeking to develop an IT contract service, both by acquisition and from internal resources. This is seen as providing additional routes to the provision of the managed service, with opportunities typically being identified from initial contracting activity. The Directors are confident that the Group is positioning itself well as a cost-effective source of professional teams for IT development. The benefit of the current upturn in business is expected to be seen in the second half of the year. David Mann Chairman 27 July 2000 GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 March 2000 Year ended Year ended 31 March 31 March 2000 1999 £ '000 £ '000 Turnover 7,596 8,323 Cost Of Sales (5,932) (6,454) ---------- -------- Gross Profit 1,664 1,869 Administrative Expenses (1,287) (988) --------- -------- Operating Profit 377 881 Net Interest Payable (37) (36) ---------- -------- Profit on ordinary activities before tax 340 845 Tax (note 2) (113) (310) ---------- -------- Profit on ordinary activities after tax 227 535 Dividend - (300) --------- ------- Retained profit for the Period 227 235 ========== ====== Earnings per share - undiluted 2.21p 5.35p (note 3) ========= ======= Earnings per share - diluted 2.19p 5.35p (note 3) ========= ======== Group Balance Sheet At 31 March 2000 31 March 31 March 2000 1999 £ '000 £ '000 Fixed assets Tangible assets 300 188 Current assets Debtors 1,186 1,335 Cash at bank 193 - ------- -------- 1,379 1,335 ------- --------- Creditors - amounts falling Due within one year Borrowings (47) (50) Other creditors (957) (1,196) -------- -------- (1,004) (1,246) -------- -------- Net current assets 375 89 Total assets less current liabilities 675 277 Creditors - amount falling due after one year Due after one year Borrowings (83) (42) ------- ------- 592 235 ======== ======= Capital and reserves Share capital 208 Share premium 123 Profit & loss account 261 235 ------ ------ 592 235 ======= ======== GROUP CASH FLOW for the year ended 31 March 2000 Year ended Year ended 31 March 31 March 2000 1999 £ '000 £ '000 Net cash flow from operating activities 481 496 Returns on investments and servicing of finance Interest paid (37) (36) Corporation tax paid (246) Net capital expenditure and financial investment (173) (252) Equity dividends paid - (300) -------- -------- Net cash inflow/(outflow) before financing 25 (92) -------- -------- Financing Issue of ordinary shares less costs 130 - Capital element of finance lease contracts 75 55 ------- ------- Net cash inflow from financing 205 55 -------- -------- Increase/(Decrease) in cash 230 (37) -------- -------- Reconciliation of operating profit to net cash flow from operating activities Operating profit 377 881 Depreciation charges 61 61 Loss on sale of tangible assets 1 3 Decrease/(increase) in debtors 149 (1,335) (Decrease)/increase in creditors (107) 887 ------- -------- Net cash inflow from operating activities 481 496 ======== ======== Reconciliation of net cash flow to movement in net debt Opening net debt (92) - Increase/(decrease) in cash in year 230 (37) Capital element of finance leases and hire purchase contracts (75) (55) -------- -------- Closing net funds/(debt) 63 (92) ========= ======== NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. Preparation of preliminary announcement The financial information for each of the periods ended 31 March does not constitute statutory accounts within the meaning of the Companies Act 1985. It has been prepared using accounting policies consistent with those set out in the Group's statutory accounts for the period ended 31 March 2000. The financial information for the year ended 31 March 1999 is prepared from the separate audited statutory accounts of RDF Consulting Limited and Eurolink Managed Services plc, consolidated accounts not having been prepared. Eurolink Managed Services Limited did not have any activity during this period. The financial information for the period ended 31 March 2000 has been extracted from the statutory accounts of Eurolink Managed Services plc which contained an unqualified audit report and which will be filed with the Registrar of Companies in due course. 2. Tax The tax charge for the year ended 31 March 2000 has been calculated using the 'discrete' approach and represents the charge applicable for the year. 3. Earnings per share The calculation of earnings per share is based on the profit on ordinary activities after tax for each period and the weighted average number of ordinary shares in issue during the period, being 10,255,342. The earnings per share for the year to 31 March 1999 is based on the weighted average number of shares in issue during the year, adjusted for the sub-division of shares and the capitalisation of reserves, being 10,000,000. The diluted earnings per share is based on the profit after tax for each period and the weighted average number of shares in issue during the period being 10,341,795 (weighted average number of shares during the year together with 86,453 ordinary shares under option arrangements). 4. Copies of report The Annual Report will be posted to all shareholders and will be available on request from the Company Secretary, 1 Queen Square, Brighton, BN1 3FW.

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