Ultima Networks PLC
30 April 2001
During 2000 the financial performance of the Group was disappointing and
fell short of the Board's expectations, particularly in the second half
of the year.
Total sales for 2000 of £6.95 million were 45% lower than the £12.54
million achieved in 1999. The loss before tax was £0.86 million as
compared to £0.78 million in the previous year. However the loss for the
year is stated after an exceptional credit to the profit and loss account
in respect of a reduction in the provision for onerous lease commitments
of £0.88 million. Excluding the effect of the exceptional item the loss
before tax would have been £1.74 million for the year. The loss per
share of 0.45p compares to a loss per share of 0.44p in 1999.
Group borrowings at 31 December 2000 were £3.83 million as compared to
£3.31 million at 31 December 1999. Included in those figures are bank
borrowings of £2.65 million as compared to £2.07 million at 31 December
The Board is not recommending the payment of a dividend.
The sales of the Networking Division were £5.85 million compared to
£10.75 million in 1999. This resulted in an operating loss of
£0.96 million compared to an operating profit of £0.17 million in 1999.
Our Networking Services operation, UTN Solutions, achieved sales of
£4.32 million compared to £8.59 million in 1999. This resulted in an
operating loss of £0.25 million compared to an operating profit of £0.28
million in 1999. In line with many other companies in the sector, UTN
Solutions experienced a reduction in sales as the anticipated upturn in
IT expenditure following the millennium failed to materialise. The effect
of the slower than anticipated trading conditions was further compounded
by the absence of some of the larger projects completed in 1999. However
some significant new contracts for networking infrastructure were
implemented across a broad range of industry sectors during the year.
The Networking Products operation, through our Canadian subsidiary
SilCom, achieved sales of £1.53 million compared to £2.16 million in
1999. This resulted in an operating loss of £0.71 million compared to
£0.11 million in 1999. This is after expenditure of approximately £0.50
million on research and development. As predicted, the market for
SilCom's legacy Token Ring networking products showed further decline.
Silcom continued its development of specialist monitoring and management
products for the cable television (CATV) marketplace in conjunction with
two North American partners. These products are designed to conform to the
evolving industry standard aimed at providing a common communications
protocol between cable television equipment from different manufacturers.
Unfortunately this standard is taking longer than expected to be
finalised resulting in delays in the roll out of SilCom's products,
something beyond the control the Group.
The sales of the Software Division were £1.10 million compared to £1.79
million in 1999. However, a reduction in overhead costs and increased
margins meant the operating loss was reduced to £0.14 million from £0.26
million in the previous year. Software development expenditure for the
division was approximately £0.20 million for the year.
Integrated Publishing Systems, our publishing software company, secured
several major new orders. These included one from a regional newspaper
and two from magazine publishers, the first such significant
installations into this particular sector of the marketplace.
Cognito Software, our legal software company, continued to expand its
software product portfolio for the legal marketplace with the
development of several new applications for Case Management, including
debt collection, matrimonial and conveyancing. The company also signed a
partnership deal with Philips to sell their voice recognition product
into solicitors' practices. The product, which has been specifically
designed for the legal marketplace, can be integrated, into Cognito's
case management software and offers major cost savings to solicitors by
further automating the normally time consuming production of documents
and standard forms.
Group overheads for the year were £0.24 million, before an exceptional
credit to the profit and loss account of £0.88 million, compared to £0.36
million last year. The reduction reflects the policy of cutting overheads
wherever possible. As stated, the exceptional credit to the profit and loss
account is due to a reduction in the provision for onerous lease commitments
following a reduction in the outstanding lease term on one property from 79
years to 15 years and a review of the assumptions made regarding the level of
future rental income received on properties leased to third parties.
The results for 2000 reflect slower than anticipated trading and the
ongoing legacy costs principally attaching to surplus properties within
the Group. In the light of the results the Board undertook a strategic
review of the business and subsequently implemented significant changes
to refocus efforts and resources on the Group's core business whilst
achieving significant overhead cost reductions, estimated at £0.4
million on an annualised basis.
As part of this review it was decided that SilCom was no longer core to
the Group's activities. Whilst the CATV products have the potential to
generate significant future revenues, further ongoing investment in
product development in excess of £0.50 million per annum is required as
well as significant marketing costs to bring the product to market. In
the absence of any synergy with the networking businesses in the UK the
Board believes that shareholder value will be maximised through the
disposal of SilCom and its CATV business.
The Board is also addressing the issue of surplus properties within the
Group, both freehold and leased. It is the Board's intention that such
properties should be disposed of at the earliest opportunity.
The UK Networking Services business is now seen as the Group's core
activity with enormous potential for the future. Steps have already been
taken to streamline and restructure the business in order to make more
efficient use of existing resources. The business will continue to
develop new networking solutions based around internet services and
network security using ADSL technology, which is seen as a major growth
area for the future. It will also offer customers products that exploit
the new Voice Over IP technology which represents the next exciting step
in the convergence of data and voice communications.
Despite the increase in the Group's net liabilities due to the losses
incurred in the year, the financial statements have been prepared on the
going concern basis in anticipation of the successful implementation of
the board's strategy of disposal of non-core and surplus assets in 2001.
This strategy is seen as an important factor in securing long-term
financial stability of the Group and will enable it to focus its
resources and efforts into an expanding Networking Services marketplace.
I would like to take this opportunity to thank all our employees and
management for their continuing dedication and commitment to the Group.
Humayun A Mughal
30 April 2001
ULTIMA NETWORKS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31st December 2000
TURNOVER 1 6,952 12,541
Cost of Sales (4,481) (8,203)
GROSS PROFIT 2,471 4,338
Net Operating Expenses before exceptional items (3,815) (4,781)
Exceptional credit on provision for onerous leases 2 881 -
Total Net Operating Expenses (2,934) (4,781)
OPERATING LOSS (463) (443)
Interest payable and similar charges (402) (340)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (865) (783)
Taxation on loss on Ordinary Activities 3 -
UNRECOVERED LOSS FOR THE FINANCIAL PERIOD (865) (783)
LOSS PER SHARE 4 (0.45)p (0.44)p
DILUTED LOSS PER SHARE 4 (0.45)p (0.44)p
CONSOLIDATED BALANCE SHEET
at 31st December 2000
£'000 £'000 £'000 £'000
Tangible assets 2,493 2,719
Stocks 310 371
Debtors 1,066 2,163
Cash at bank and in hand 554 307
Creditors : Amounts due
within one year (6,854) (5,610)
Net current liabilities (4,924) (2,769)
Total assets less current liabilities (2,431) (50)
Creditors: Amounts due after one year (501) (1,177)
Provisions for liabilities and charges (1,138) (1,948)
Net liabilities (4,070) (3,175)
Capital and Reserves
Called up equity share capital 7,434 7,434
Share premium account 5,520 5,520
Acquisition reserve 1,334 1,334
Profit and loss account (18,358) (17,463)
Deficit of Shareholders' funds - Equity (4,070) (3,175)
CONSOLIDATED CASH FLOW STATEMENT 2000 1999
Cash outflow from operating Activities (90) (43)
Returns on Investments
and Servicing of Finance (295) (315)
Taxation 5 187
and Financial Investment (136) 88
Acquisitions - (65)
Cash outflow before Financing (516) (148)
- Issue of shares - 550
- Costs associated with issue of shares - (131)
- issue of loan notes - 1,101
- Reduction in debt (57) (612)
Net cash (Outflow)/Inflow from Financing (57) 908
(Decrease)/Increase in Cash in the Year (573) 760
1 SEGMENTAL ANALYSIS 2000 1999
Continuing operations 5,853 10,750
Continuing operations 1,099 1,791
Total 6,952 12,541
Loss on ordinary activities before interest
Continuing operations (962) 171
Continuing operations (144) (259)
Group overheads 643 (355)
Total (463) (443)
2 EXCEPTIONAL CREDIT
The exceptional credit relates to a reduction in the provision for onerous lease
commitments following a reduction in the outstanding lease term on one property
from 79 years to 15 years and a review of the assumptions made regarding the
level of future rental income receivable on properties leased to third parties.
Taxation on loss on ordinary activities:
UK - -
Overseas - -
4 LOSS PER SHARE
The loss per ordinary share has been calculated on the weighted average number
of shares in issue during each year.
5 OTHER INFORMATION
This preliminary statement, which has been agreed with the auditors,
does not constitute the Company's statutory financial statements for the year
ended 31st December 2000. Statutory financial statements for 1999 have
been delivered to the Registrar of Companies, whereas those for 2000 will be
delivered after approval at the Annual General Meeting. The auditors have
reported on those financial statements; their reports were unqualified
and did not contain a statement under Section 237(2) or (3) of the
Companies Act 1985.
The Annual Report will be posted to shareholders as soon as practicable and will
be available to the public from the Company's registered office at Ultima
Networks PLC, Akhter House, Perry Road, Harlow, Essex CM18 7PN.