Interim Results

Eurolink Managed Services PLC 30 November 1999 EUROLINK MANAGED SERVICES PLC Interim results for the six months ended 30 September 1999 Chairman's Statement Introduction It is my pleasure to present the first interim report of the Company since its introduction to AIM in the summer of this year. The results for this six month period are in accordance with expectation at the time of flotation and should be viewed in the context of the significant developments which the Company's operating subsidiary, RDF Consulting Limited, has undertaken to position itself for growth in the IT market. Results Turnover for the period was £4.07m (1998 £4.12m) with profit before tax £0.19m (1998 £0.62m). Earnings per share were 1.29p (1998 3.92p). As indicated in the admission document, a dividend is not being recommended. Business review During this period the Company has maintained turnover levels by growing its customer base. As expected, activity levels at certain clients have reduced, partly as the burden of Year 2000 work has eased. We have brought in several new clients since this time last year, for whom we have undertaken a range of initial assignments, and we see good opportunities arising from this wider client base. Gross margin is as budgeted with the change from last year arising principally from the different mix of customers, increased IT consultants costs and commission for the introduction of new IT resources, a specific cost which we did not have last year. The significant developments referred to above included investment in the infrastructure of the business, which commenced in the second half of the last financial year. The full impact of these costs is being felt this year, and is reflected in the increase in administrative expenses. We expect to see the full benefit of this expenditure over the next twelve to eighteen months. The costs related to the need for support staff in the areas of business services, finance and sales, and to the need for office space in Livingston, Scotland and additional space in Brighton. The additional premises are necessary to be able to offer clients one of the key features of our service, which is an off-site development facility, and enable the Company to respond quickly to client needs. Outlook With the ability substantially to increase the volume of business without the need to incur additional infrastructure costs, the Company is well placed to benefit from the effort currently being expended to develop existing and new business. At the present time we believe many organisations with substantial IT development requirements are reviewing the manner in which they resource those requirements, and are seeking more cost effective and flexible resourcing solutions, particularly after the significant costs incurred addressing the Year 2000 issue through the more traditional resourcing channels. Whilst confident that the Company is positioning itself well as a cost-effective source of professional teams for IT development, your Board considers that major new orders are unlikely to be secured over the next few months, because of the uncertainty that still surrounds the millennium date change. Consequently, your Board does not expect significant improvement in trading performance in the second half of the financial year ending March 2000. We see good opportunities for growth and improved profitability in the next financial year. Anthony G Antoniades Chairman 29 November 1999 GROUP PROFIT AND LOSS ACCOUNT for the six months ended 30 September 1999 Pro-forma Unaudited Unaudited and not Audited Six months reviewed twelve to 30 six months months to September 30 September 31 March 1999 1998 1999 £ '000 £ '000 £ '000 Turnover 4,069 4,116 8,323 Cost of sales (3,238) (3,031) (6,454) --------- ---------- --------- Gross profit 831 1,085 1,869 Administrative expenses (639) (433) (988) ---------- ---------- --------- Operating profit 192 652 881 Net interest payable (3) (29) (36) ---------- ---------- --------- Profit on ordinary 189 623 845 activities before tax Tax (59) (227) (310) --------- --------- --------- Profit on ordinary 130 396 535 activities after tax Dividend - - (300) --------- -------- -------- Retained profit for the 130 396 235 period ======= ======= ======= Earnings per share 1.29p 3.92p N/a ======= ======= ======= GROUP BALANCE SHEET At 30 September 1999 Pro-forma unaudited and not Unaudited reviewed Audited 30 September 30 September 31 March 1999 1998 1999 £ '000 £ '000 £ '000 Fixed assets Tangible assets 277 149 188 -------- -------- -------- Current assets Debtors 1,408 1,074 1,335 Cash at bank 163 107 - --------- ---------- --------- 1,571 1,181 1,335 --------- ---------- --------- Creditors - amounts falling due within one year Borrowings (41) (8) (50) Other creditors (1,217) (888) (1,196) --------- --------- --------- - (1,258) (896) (1,246) --------- --------- --------- Net current assets 313 285 89 Total assets less current 590 434 277 liabilities Creditors - amount falling due after one year Borrowings (87) (38) (42) --------- -------- --------- 503 396 235 ====== ====== ====== Capital and reserves Share capital 208 - - Share premium 130 - - Profit & loss 165 396 235 account --------- --------- --------- 503 396 235 ====== ====== ======= GROUP CASH FLOW for the six months ended 30 September 1999 Pro-forma unaudited and not Audited Unaudited reviewed twelve six months to six months to months to 30 September 30 September 31 March 1999 1998 1999 £ '000 £ '000 £ '000 Net cash flow from operating 111 263 496 activities Returns on investments and servicing of finance Interest Paid (3) (29) (36) Net capital expenditure and (119) (173) (252) financial investment Equity dividends paid - - (300) ---------- --------- --------- Net cash flow outflow before (11) 61 (92) financing ---------- --------- --------- Financing Issue of shares 400 - - Expenses of issue (262) - - Capital element of finance leases and hire purchase contracts 73 46 55 ---------- --------- --------- Net cash inflow from 211 46 55 financing ---------- --------- --------- Increase/(decrease) in cash 200 107 (37) ---------- --------- --------- Reconciliation of operating profit to net cash flow from operating activities Operating profit 192 652 881 Depreciation charges 30 24 60 Loss on sale of tangible - - 3 fixed assets Increase in debtors (73) (1074) (1,335) Decrease in creditors (38) 661 887 --------- --------- --------- Net cash inflow from 111 263 496 operating activities ===== ===== ===== Reconciliation of net cash flow to movement in net debt Opening net debt (92) - - Increase/(decrease) in cash 200 107 (37) in year Capital element of finance leases and hire purchase (73) (46) (55) contracts --------- --------- --------- Closing net funds/(debt) 35 61 (92) ===== ====== ====== NOTES TO THE INTERIM STATEMENT Preparation of interim report The financial information for the six month period ended 30 September 1999 is unaudited and 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 1999. The pro-forma financial information for the six month period ended 30 September 1998 is prepared from the separate management accounts of RDF Consulting Limited and has not been reviewed or audited. Eurolink Managed Services Limited did not have any activity during this period and acquired the share capital of RDF Consulting Limited on 1 March 1999. However the figures are presented as if the acquisition occurred on 1 September 1997. The financial information for the period ended 31 March 1999 has been extracted from the statutory accounts of Eurolink Managed Services Limited and RDF Consulting Limited for that period which contained unqualified audit reports and which have been filed with the Registrar of Companies. Tax The tax charge for the six months ended 30 September 1999 has been calculated using the 'discrete' approach and represents the charge applicable for the six month period. 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. The comparative earnings per share for the period ended 30 September 1998 have been calculated on the same basis notwithstanding that the changes in share capital took place subsequent to that date. Copies of report The Interim Report will be posted to all shareholders and will be available on request from the Company Secretary, 1 Queen Square, Brighton, BN1 3FW. Year 2000 compliance The company has reviewed its computer systems for the impact of the Year 2000 date change. The issue is complex and no business can guarantee that there will be no Year 2000 problems. However, the board believes that its plans, the resources allocated and actions implemented are appropriate to address the issue. External costs in addressing the issue were minimal. INDEPENDENT REVIEW REPORT TO EUROLINK MANAGED SERVICES PLC Introduction We have been instructed by the company to review the financial information set out on pages 3 to 6 (the unaudited proforma information for the period to 30 September 1998 is beyond the scope of our review) and we have read other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 1999. BDO Stoy Hayward, Chartered Accountants, Brighton 29 November 1999

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