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Kalamazoo Comp Grp. (KLMZ)

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Thursday 29 June, 2000

Kalamazoo Comp Grp.

Final Results

Kalamazoo Computer Group PLC
29 June 2000


              KALAMAZOO COMPUTER GROUP PLC
                            
  PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2000
                            
Kalamazoo Computer Group plc, the West Midlands based
supplier of specialist computer solutions, announces
preliminary results for the year ended 31 March 2000.

KEY POINTS

* Turnover from continuing operations increased by
  4.4% to £59.2 million (1999: £56.7 million).
  
* Profit before interest, tax and exceptional items,
  on continuing operations, £0.4 million (1999: loss £0.6
  million).

* Business focussed on areas of true core competencies
  following divestment of non-core activities.
  
* Strong performance in Continental European
  automotive operations with performance above budget at
  both sales and profit levels.
  
* Latest versions of the Elite product operating as
  fully installed operational systems in Germany and Spain.
  Currently being piloted in Belgium and scheduled for
  introduction to France and the Netherlands during
  financial year.
  
* e-Zoo.com to be launched as a new business
  leveraging off our existing capabilities to provide a
  range of business improvements, human resource
  improvement and technology services.  Strategic
  partnership established with IBM.
  
* Development capability and performance substantially
  improved and costs reduced.
  
* Heavy investment in staff training.  

* Commenting on prospects:

Malcolm Roberts, Chief Executive, said: 'The coming year
is one where market conditions will no doubt prove to be
difficult, but we are confident that Elite 4, as an
extremely high quality product, will help us gain
significant market share in Continental Europe when our
core markets begin to recover.'

Bob Jordan, Chairman, said: 'The Board believes that
market demand will improve in the medium term, at which
time the group will have the market penetration and
leading products to ensure a strong recovery in
performance.  In the meantime the Board is carefully
managing and reducing the Group's cost base.

Overall,  we  expect market conditions in this  financial
year  to  be  difficult  and the  prospects  are  modest.
Further,  given  the current tight constraints  operating
within the UK automotive dealers the Group will report  a
trading  loss  in the first half.  However we  expect  an
improvement towards the end of the financial year'.

For further information:

Bob Jordan, Chairman
Malcolm Roberts, Chief Executive
Kalamazoo Computer Group           +44 (0) 121 411 2345

Richard Darby
Suzanne Dunne
Buchanan Communications Ltd        +44 (0) 207 466 5000


CHAIRMAN'S STATEMENT

I  reported last year that we expected the financial year
1999/2000  to  be  a  year of improvement  in  underlying
operating performance. A return to profitability was  our
first  priority and I am delighted to be able  to  report
that  this  has  been achieved, despite difficult  market
conditions,  particularly in the  final  quarter  of  the
year.

During  the  year  we  continued to  execute  our  change
programme  and  we  focussed on our  core  activities  of
Automotive  and Desk Top Services.  A number of  non-core
activities  were  disposed  of,  including  The   Beeches
Management  Centre, the Group's 51% interest  in  Virtual
Showroom,  Answer and the Group's value  added  reseller,
Kalamazoo  Business Solutions. These disposals  generated
cash  of  £3.1 million before costs.  Associated goodwill
write off amounted to £5.5 million.

In  addition, as foreseen at the half year and as part of
the continuing Advantage 2000 programme, we continued our
reorganisation   of  our  UK  and  Continental   European
operations,  including the introduction of an  integrated
operational   and   financial   reporting   system.   The
exceptional costs associated with this were £2.9 million,
which  has resulted in a lower cost base particularly  in
the  UK.  UK  headcount reduced by over 150  people  with
staff  being released from all management and operational
grades,  with  further cost reductions  expected  in  the
first half of the current year.

The  financial  result for the year was a  profit  before
interest, tax and exceptional items of £0.4 million (last
year  loss  £0.6  million)  on turnover  from  continuing
operations  of  £59.2  million  (1999:  £56.7   million).
Exceptional  items,  including goodwill  written  off  on
disposals, amounted to £7.3 million (1999: £1.6 million),
resulting in an overall loss after taxation for the  year
of £7.3 million (1999:  loss £2.1 million).

In  the light of these results, the cautious outlook  for
the  business  in  the  current year  and  the  need  for
continued  investment,  the  Board  does  not  propose  a
dividend.

Board  Changes

A  number  of changes were made during the year at  Board
level.  The non-executive representation of Reynolds  and
Reynolds changed, with Bob Nevin and Mark Brown retiring,
replaced  by  Kurt  Olnhausen and Mike Gapinski.  In  the
executive  team, Margaret Ashworth replaced Ian  Davidson
as  Group  Finance Director and we also  appointed  Chris
Bill   to  the  Board  as  Director  of  Consulting   and
Technology Services. I would like to express my thanks to
those  directors who have left the Board and to  formally
welcome Margaret and Chris to the team.

Dennis Taylor, who has served as a non-executive director
for  over five years, including acting as Chairman of the
Remuneration  Committee  and  a  member  of   the   Audit
Committee,  will  not  be  seeking  re-election  at   the
forthcoming AGM. Dennis has been an excellent contributor
to the Board and we wish him well.

Trading Review

The   year   showed  significant  progress   within   our
Automotive  business.  Trading benefited  from  some  Y2K
activity,  although since the turn of the year the  level
of  new  business  won has been disappointing,  with  the
automotive  sector,  and  UK car dealers  in  particular,
encountering  difficult  trading conditions.  During  the
year  we have continued to rationalise our product range,
which  has helped our sales focus. We have also continued
the  development of our Elite product and there are fully
installed operational systems in Germany and Spain,  with
very   favourable  customer  response.  The  product   is
currently  being piloted in Belgium and is scheduled  for
introduction  in France and the Netherlands  during  this
financial  year.   Our subsidiary, COIN, enjoyed  another
excellent year, with revenue up 25% to £4.73 million.

Our  Desk  Top  operations  -  hardware  maintenance  and
software  support - benefited from Y2K activity.   Whilst
some  new  Y2K  compliant installations have  meant  that
customers  rely on first year warranty to provide  cover,
this  short  term issue is being counterbalanced  by  new
business gains.

New Employee Share Incentive Schemes

Shareholders will be aware that the Company operates a
number of share incentive schemes.  The Board believes
that in order to continue to retain and motivate the
Group's key personnel and to attract and retain further
high quality employees in the current highly competitive
environment further share incentives are required.
Resolutions will be proposed at the Annual General
Meeting to introduce a new scheme following modern
compensation practices and to amend the existing scheme.

Outlook

The  Group is now a focussed operation with a significant
share  in our major Automotive market. Our Elite  product
is  receiving acceptance in its trial markets of  Germany
and  Spain  as  a  package  of  exceptional  quality  and
innovation  and we believe it will prove to  be  best  in
class  for  a  number  of  years to  come.  However,  the
Automotive sector in the UK - and dealers in particular -
are   withholding  investment  in  their   infrastructure
pending  clarification of a number of issues  threatening
their   profitability.  These  issues  involve   consumer
confidence  arising from manufacturer  consolidation  and
concerns over Rover prior to its sale by BMW, new  market
entrants,  such as internet led dealerships, and  pricing
concerns  arising  from  the  review  undertaken  by  the
Competition   Commission  which  has  led   to   negative
sentiment in the sector.

The Board believes that market demand will improve in the
medium term, at which time the group will have the market
penetration and leading products to ensure a strong
recovery in performance.  In the meantime the Board is
carefully managing and reducing the Group's cost base.

Overall,  we  expect market conditions in this  financial
year  to  be  difficult  and the  prospects  are  modest.
Further,  given  the current tight constraints  operating
within the UK automotive dealers the Group will report  a
trading  loss  in the first half.  However we  expect  an
improvement towards the end of the financial year.

Robert Jordan
Chairman


CHIEF EXECUTIVE'S REVIEW

The  past 12 months have been another year of significant
change  at  Kalamazoo and, I am pleased to  say,  one  of
considerable progress. Our markets have faced a number of
significant threats and challenges and there has  been  a
massive  shift  in attitude towards new technologies  and
the application of e-business in particular.  We have had
to  continue re-shaping the business so that we are  able
to  seize  the  opportunities which are now beginning  to
present themselves.

Market overview

The  Group's core market, representing approximately  80%
of  Group  sales,  is  the European automotive  industry,
primarily at the dealer level with increasing involvement
in projects directly with manufacturers.

This  market  place,  in which Kalamazoo  has  a  leading
position,   has   faced  a  number  of  complex   issues,
particularly in the UK. These include the report  of  the
Competition   Commission,  continued   consolidation   of
manufacturers,  and  a  number  of  internet  led  dealer
initiatives  which  are  all contributing  to  car  sales
declining,  as the consumer assesses a market  where  car
prices  are  likely  to reduce over the  next  year.  The
impact  of  this  on the sector, and the  car  dealer  in
particular,   is  to  undermine  confidence   in   future
profitability. Much of our business requires a climate of
change,  so  the  market  turmoil represents  significant
opportunity  for  us,  but our  customers  need  a  sound
financial  platform  to  make  continued  investment   in
systems  and  technology. There is  substantial  evidence
that investment is presently being held back, although we
believe this situation will settle.

The  impact of this on our Automotive trading performance
has   been  mixed.  In  Continental  Europe,  the  market
pressures  have  been  less  severe  and  we  have   seen
performance above budget at both sales and profit levels.
This  was,  in part, as a result of a roll  out  of  over
1,200  new systems across Ford's European dealer network,
a  programme  that Kalamazoo was uniquely  positioned  to
carry out.

Our  penetration of the Continental European market  will
continue  to be strong as we have already begun  to  roll
out our new Elite 4 system:  the first production version
of  the  solution is now installed in Germany and  Spain.
Customer  response has been excellent and I am  convinced
that  we  have  developed a product  which  will  be  the
cornerstone of the Group's profitable growth.

In  the  UK,  millennium  issues  created  a  mixture  of
exciting  opportunities  and delayed  decisions.  We  saw
significant  gains in new business, particularly  in  the
first  nine months, although market conditions have  been
soft  in  the final quarter which has continued into  the
current financial year. This has been a major contributor
to  a  disappointing end to the year and whilst  we  were
pleased to deliver a much improved operating performance,
there is still a lot of progress to be made.  We continue
to build on our strategic partnership with IBM.

Our   subsidiary,  COIN,  which  provides   finance   and
insurance   systems  for  Ford  in  the   UK,   performed
particularly well and we believe the growth prospects for
this business are excellent.

Our  Desktop  Support business has performed  well  in  a
market   place   heavily  influenced  by   new   warranty
agreements   arising  from  Y2K  related  investment   by
customers. We perceive this as a market where we can make
real   gains,   as  the  desk  top  environment   becomes
increasingly business critical and as there are likely to
be  increased  outsourcing  opportunities  as  technology
changes rapidly.

e-Zoo.com

It  is  clear  that our main market is  changing  and  we
forecast   that   the  impact  of  e-business   will   be
revolutionary  throughout the automotive  sector  -  from
manufacturers seeking e-business process automation to  a
number  of  new  retail offerings to consumers  over  the
internet.

We  intend  to  be  at the forefront of this  revolution.
Building  on the strong Kalamazoo brand in the automotive
market place, we are launching a new business, e-Zoo.com,
to  ensure that we will have a position of leadership  as
this  gains  acceptance  in this market.   Our  strategic
partnership with IBM will play an important part  in  the
development of e-Zoo.com.

e-Zoo.com will be launched with its own identity and  its
own   management.   We  will  lever  off   our   existing
capabilities  - such as providing finance  and  insurance
applications over the internet - but are also  recruiting
to  strengthen  our  offering. We believe  this  business
offers outstanding growth opportunities.

Reshaping our Business

Kalamazoo  is  operating  in  an  exciting  and   dynamic
environment.  We  have had to change to  respond  to  the
massive  opportunities and challenges that lie  ahead.  I
believe that our business is particularly well placed  to
prosper in this environment.

The changes in the last twelve months have been dramatic.
We  have  focussed  our business on  our  areas  of  true
competence by divesting non-core activities at acceptable
prices. We have restructured our activities in the UK  to
reduce  our  cost  base and headcount. We  have  invested
heavily  in training and some 450 of our people  are  now
part  of a programme which will lead to a relevant formal
qualification.  Our  development team  has  improved  its
productivity  enormously, with redevelopment requirements
reduced  by over 95% because of our enhanced quality  and
project  management procedures, with the annual  cost  of
development reduced by approximately one third  over  the
last two years. We have finally established Elite 4 as  a
viable  product, specifically designed for  international
markets,   and  have  started  to  roll  it  out   across
Continental  Europe. We have introduced  e-Zoo.com  which
will be fully launched later this year.  We have focussed
our  efforts on managing our business, both in  enhancing
our  reporting  through  new  financial  systems  and  in
improving our working capital management.

The  year  ended  31  March  2000  has  been  a  year  of
significant  progress,  which  has  only  been   possible
because  of the fantastic efforts and commitment  of  our
people,  for  which I thank them all most sincerely.  The
coming year is one where market conditions will no  doubt
prove to be difficult, but we are confident that Elite 4,
as  an extremely high quality product, will help us  gain
significant market share in Continental Europe  when  our
core markets begin to recover.

Malcolm Roberts
Group Chief Executive

FINANCIAL REVIEW
A YEAR OF FOCUS AND BALANCE SHEET MANAGEMENT

In financial terms, this has been a year of focussing on
the core business of Kalamazoo, divesting non-core
activities, streamlining the business, improving working
capital management and initiating new management
information systems.

Results for the year

The results for the year can be summarised as follows:

                                 2000      1999
                                £'000     £'000

Sales                          62,781    65,870

Profit/(loss) before
 exceptional items                352      (563)

Exceptional items              (2,877)   (1,493)
Loss on sale of businesses     (4,384)     (127)

Interest                          (24)      (15)
                               ______     ______
(Loss) before tax              (6,933)   (2,198)
                               ======    ======

The performance of our Continental European operations
has been strong.  Sales and profit/(loss) before
exceptional items can be split between UK and Continental
European operations as follows:
                               2000         1999
                              £'000        £'000
Sales
    United Kingdom           37,969       43,501
    Continental Europe       24,812       22,369

Profit/(loss) before
    exceptional items

    United Kingdom           (2,515)        (779)
    Continental Europe        2,867          216

The Group's accounting policies and the format of the
segmental analysis are unchanged from last year.
Comparisons between 2000 and 1999 were not significantly
distorted by the effect of changes in exchange rates on
the translation of the results of the Group's overseas
subsidiaries for accounting purposes.

Rationalisation

The streamlining of activities both in the UK and in
Continental European operations together with the
disposal of some non-core activities has resulted in a
reduction in headcount in excess of 200 employees.  We
have sought to reduce the layers of senior management
within the Group and a number of senior managers
operating just beneath Board level have left the Company.
Severance and redundancy costs for the year amounted to
£1.892m (1999 - £1.179m), and reorganisation costs
amounted to £0.518m (1999 - £0.314m).

Sale of non-core businesses

During the year the Group sold the following businesses:

                   Proceeds   Gain/(loss)     Related 
                     before  before goodwill  goodwill
                      costs   write off       write off
                      £'000     £'000         £'000

The Beeches
 Management Centre    2,500     1,117          (533)

Virtual Showroom        150        13            -

Answer                 (175)     (404)       (3,339)

Kalamazoo Business
  Solutions             644       345        (1,583)

Balance Sheet and Cash

At 31 March 2000, the Group had net assets of £9.3
million (1999 - £11.6m) and cash of £3.0 million (1999 -
£6.5m). The cash balance in part reflects the benefit of
the sale of non-core activities offset by the cash
expended on business rationalisation.

Working Capital

Working capital has been a key area of management
attention during the year, with cash balances having come
under greatest pressure at the half year.  Careful
management of cash meant that the Group was cash positive
at the year end, and unborrowed, with a balance of £3
million.

Accounts receivable and management of the debtors' ledger
has been a key area of working capital management this
year.  A new Credit Control Manager has been appointed;
cash collection and resolutions of queries on the ledger
is improving.

Stock levels continue to be monitored and managed to
ensure optimum holding.  The newly appointed Supply Chain
Manager is working closely with suppliers, our sales
teams and our customers so that stock can be utilised in
the most effective manner.

Millennium compliance and the euro

The Group's millennium compliance programme was completed
on time. No material disruption has arisen from the non-
compliance of either a business critical system or third
party .

Following the introduction of the euro on 1st January
1999, the Group's operations transact in euro as
appropriate. Business systems in the euro zone will
progressively be euro-based during the transition period.
The estimated costs of this programme are not
significant.

Taxation

There is an overall tax charge for the Group of £400,000
which arises from tax due on Continental European
companies and a UK based company for which Group relief
is not available.

Currency Exposure

Sterling, when compared with Continental European
currencies, hardened by some 10% during the year.  This
had the effect of reducing the profitability of our
Continental European operations by some £100,000 when
consolidated into the Group results.

Any foreign denominated loans are fully hedged by use of
forward currency exchange contracts and there is
currently no Balance Sheet exposure.  At 31 March 2000
there was one such loan for DM2.5million.

Management Information Systems

During the year, our UK operations introduced a new
integrated operational management and financial reporting
system, focussed on the production of Key Performance
Indicators and Enterprise Reporting, with the objective
of providing management information based on materiality
and exception reporting. This is now being introduced
across the Group.


Margaret Ashworth
Group Finance Director
Consolidated Profit and Loss Account

                    Before         Total Before       Total
                    Excep-  Excep-       Excep- Excep-
                    tional  tional       tional tional
                     Items  Items        Items  Items      
For the year ended   2000   2000  2000   1999   1999  1999
31 March             £000   £000  £000   £000   £000  £000

Turnover

Continuing         59,199    -  59,199  56,679    - 56,679 
operations

Discontinued        3,752    -   3,752   9,269    -  9,269
operations 

Less: share of       (170)   -    (170)    (78)   -    (78)
joint ventures     ----------------------------------------                    
                    3,582    -   3,582   9,191    -  9,191
-----------------------------------------------------------
Total Group                                                 
turnover           62,781    -  62,781  65,870    - 65,870
===========================================================
Operating charges

Continuing         58,676 2,877 61,553  57,611 1,493 59,104
operations

Discontinued        3,766   -    3,766   8,866   -    8,866    
operations
-----------------------------------------------------------        
Total Group        62,442 2,877 65,319  66,477 1,493 67,970
operating charges                                        
===========================================================                    
                                        
Operating
profit/(loss)

Continuing           523(2,877)(2,354)  (932) (1,493)(2,425)
operations

Discontinued        (184)  -     (184)   325     -      325
operations
-----------------------------------------------------------
                     339(2,877)(2,538)  (607) (1,493)(2,100)

Share of operating
profit/(loss) in
                                                            
- joint ventures -
discontinued         (61)  -      (61)   (34)     -     (34)
operations

- associates -        74   -       74     78      -      78
continuing
operations  ------------------------------------------------
                      13   -       13     44      -      44
------------------------------------------------------------
                     352(2,877)(2,525)  (563) (1,493)(2,056)
            ===================        ==============          

Loss on sale of
business
discontinued

- surplus over net             1,071                     90
assets

- less goodwill               (5,455)                  (217)
previously
written off                   ------------------------------
                              (4,384)                  (127)
------------------------------------------------------------
Loss on ordinary
activities before             (6,909)                (2,183)
interest

Interest payable                 (24)                   (15)
------------------------------------------------------------
Loss on ordinary
activities before             (6,933)                (2,198)
taxation                             

Tax on loss on                  (400)                    84
ordinary
activities
------------------------------------------------------------
Loss on ordinary
activities after              (7,333)                (2,114)
taxation

Equity minority                   -                      67
interest
-----------------------------------------------------------
Loss for the
period
attributable to 
shareholders                  (7,333)                (2,047)
============================================================                   
                                         
Loss per share                (11.7p)                 (3.3p)
------------------------------------------------------------
Diluted loss per
share                         (11.7p)                 (3.3p)
------------------------------------------------------------
Loss per share
excluding                      (0.1p)                 (0.7p)
exceptional items
------------------------------------------------------------

Consolidated Balance Sheet

At 31 March                2000      2000     1999   1999
                           £000      £000     £000   £000
Fixed assets 

Tangible assets                     7,655           9,582
Investments
Investments in joint
ventures

Share of gross assets       -                   27
    
Share of gross                           
liabilities                 -                  (74)

Less provision made         -                   47
                                                   
Investments in                        146             106
associates
------------------------------------------------------------                   
                               
                                    7,801           9,688
Current assets                                     

Stocks                              3,872           4,246

Debtors                            13,898          16,888

Cash at bank and in hand            2,997           6,514
----------------------------------------------------------                     
                              
                                   20,767          27,648

Creditors: amounts
falling due within one            (18,191)        (24,498)
year 
---------------------------------------------------------                      
                             
Net current assets                  2,576           3,150
---------------------------------------------------------
Total assets less                  10,377          12,838
current liabilities
                                                   
Provisions for                     (1,126)         (1,274)
liabilities and charges
---------------------------------------------------------                      
                             
Net assets employed                 9,251          11,564
=========================================================
Financed by: 
Capital and reserves

Called up share capital             6,271          6,254
 Share premium account             22,942         22,942
 Revaluation reserve                5,036          5,102

Profit and loss account           (24,998)       (22,734)
---------------------------------------------------------
Total Equity                        9,251         11,564
Shareholders' funds 
=========================================================                      
                             
Reconciliation of movements in
Shareholders' funds
Year ended 31 March                  2000           1999
                                     £000           £000
Loss on ordinary 
activities after                   (7,333)        (2,047)
taxation                                

Dividends                               -             -
---------------------------------------------------------                      
                             
Loss for the year                  (7,333)        (2,047)

Share issues                           17            -

Reinstate goodwill on               5,455            217
disposal

Foreign exchange                     (452)           (20)
translations
---------------------------------------------------------
Net reduction in                   (2,313)        (1,850)
Shareholders' funds 

Opening Shareholders'              11,564         13,414
funds
---------------------------------------------------------                      
                             
Closing Shareholders'               9,251         11,564
funds                                            
=========================================================

Consolidated Cash Flow Statement

For the year ended 31 March    2000    2000   1999   1999
                               £000    £000   £000   £000

Cash flow from operating             (5,735)          333
activities 

Returns on investment and               (24)          (15)
servicing of finance
 
Taxation                                932          (136)

Capital expenditure and                (804)         (737)
financial investment

Acquisitions and disposals            2,619          (115)
----------------------------------------------------------
Cash outflow before financing        (3,012)         (670)
----------------------------------------------------------
Financing
  - issue of shares             17             -

  - reduction in debt         (188)          (230)

                                       (171)         (230)
----------------------------------------------------------
Decrease in cash in the year         (3,183)         (900)
----------------------------------------------------------
Reconciliation of net cash
flow to movement in net funds
                                                   
Decrease in cash in
  the year                  (3,183)         (900)

Cash outflow from 
decrease in debt
and lease financing            188           230

Change in net debt                   (2,995)       (670)
resulting from cash flows

Translation difference                 (334)        231
--------------------------------------------------------
Movement in net funds
in the year                          (3,329)       (439)                       
  
--------------------------------------------------------
Net funds at 1 April                  6,326       6,765
--------------------------------------------------------
Net funds at 31 March                 2,997       6,326
-------------------------------------------------------
Notes

1.   In addition to the loss for the year there is a
     foreign exchange translation loss of £452,000 which
     is included in the total recognised gains and losses
     for the year.

2.   The financial statements are prepared under the
     historical cost convention and in accordance with
     applicable UK accounting standards.  The financial
     information set out above does not constitute the
     Group's statutory financial statements for the years
     ended 31 March 1999 and 31 March 2000 but is derived
     from those statements.  The auditors have reported
     on those statements.  Their report was unqualified
     and did not contain statements under section 237(2)
     or (3) of the Companies Act 1985.  The accounts for
     the year ended 31 March 1999 have been filed with
     the Registrar of Companies and the accounts for the
     year ended 31 March 2000 will be filed in due
     course.
     
3.   The loss per share of 11.7p (1999 - loss 3.3p) is
     calculated on the loss on ordinary activities after
     taxation and minority interest of £7,333,000 (1999 -
     loss £2,047,000) and the average number of shares in
     issue is 62,614,731 (1999 - 62,539,186).

     The diluted loss per share of 11.7p (1999 - loss
     3.3p) is calculated on the loss on ordinary
     activities after taxation and minority interest of
     £7,333,000 (1999 - loss £2,047,000) and the average
     number of shares in issue is 62,614,731 (1999 -
     62,539,186) plus the number of shares that would
     have been issued on the conversion of all the
     dilutive potential shares into ordinary shares,
     267,142 (1999 - 228,315).

     The earnings per share, excluding exceptional items
     and the profit on disposal of discontinued business,
     of the Group are as follows:

                                        2000     1999

     Loss per share                   (11.7p)   (3.3p)
     Exceptional items - no tax 
     effect due to tax losses 
     carried forward                    4.6p     2.4p
     Profit on disposal of
     discontinued business
     net of goodwill previously
     written off                        7.0p     0.2p

     Loss per share excluding
     exceptional items and profit on
     disposal of discontinued business (0.1p)   (0.7p)

     The adjusted earnings per share has been calculated
     to eliminate the distortion caused by including
     exceptional items in 2000 and 1999.

4.   Exceptional items consist of rationalisation costs
     of £2,443,000 (1999 - £1,493,000) and potential
     acquisition costs of £434,000 (1999 - nil).

 5.  Reconciliation of operating profits to operating
     cash flows:
                                                         
                    2000
                    Continuing   Discontinued
                    Operations   Operations    Total
                    £000         £000          £000

Operating 
 (loss)/profit      (2,354)        (184)     (2,538)     
Depreciation charge    996          259       1,255
(Increase)/decrease
 in stocks             211           48         259     
Decrease/(increase) 
 in debtors           (411)       1,315         904  
Increase/(decrease)
 in creditors       (2,756)      (2,859)     (5,615)  
----------------------------------------------------
Net cash
 inflow/(outflow)
 from operating
 activities        (4,314)       (1,421)     (5,735) 
----------------------------------------------------
                    1999
                    Continuing   
                    Operations   Acquisitions  Total
                    £000            £000       £000

Operating 
 (loss)/profit      (2,425)          325      (2,100)     
Depreciation charge  1,075           307       1,382
(Increase)/decrease
 in stocks              76             2          78     
Decrease/(increase) 
 in debtors         (3,142)          314      (2,801)  
Increase/(decrease)
 in creditors        4,033          (259)      3,774  
-----------------------------------------------------
Net cash
 inflow/(outflow)
 from operating
 activities           (383)         (716)        333 
------------------------------------------------------
6.    Net cash inflow/(outflow) from operating
activities:
                                    2000        1999
 a) Returns on investments and 
    servicing of finance

 Interest received                   127          63
 Interest paid                      (151)        (77)
 Interest element of finance
   lease payments                      -          (1)
-----------------------------------------------------
Net cash outflow for returns on
investments and servicing
of finance                           (24)        (15)
-----------------------------------------------------
 b) Capital expenditure and
    financial investment
 
    Purchase of tangible
    fixed assets                    (804)       (843)
    Sale of tangible fixed assets     -          106
------------------------------------------------------
Net cash outflows for capital 
expenditure and financial
investment                          (804)       (737)
-----------------------------------------------------
 c) Acquisitions and disposals

Deferred consideration 
  from prior years                   -           (92)
 Sale of business                  2,619          -
 Net cash disposed of on sale        -           (23)
-----------------------------------------------------
 Net cash inflow/(outflow) for 
 acquisitions and disposals        2,619        (115)
-----------------------------------------------------
 d) Financing

 Issue of share capital               17           -
 Debt due within one year:
 Repayment of secured loan          (185)       (228)
 Capital element of finance
  lease payments                      (3)         (2)
-----------------------------------------------------
                                    (188)       (230)
-----------------------------------------------------
 Net cash inflow/(outflow)
 from financing                     (171)       (230)
-----------------------------------------------------

7.   Copies of the Annual Report are being mailed to
     Shareholders shortly and will be available to the
     public by application to the Company at: Legal and
     Secretarial Department, Kalamazoo Computer Group
     plc, Northfield, Birmingham, B31 2RW.

8.   The AGM of the Company will be held on 30 August
     2000.