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Ultima Networks PLC (ONZ)

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Friday 23 April, 2004

Ultima Networks PLC

Annual Report and Accounts

Ultima Networks PLC
23 April 2004

Chairman's Statement

The Group's objectives during 2003 were to complete the restructuring and focus
the  Group on areas of the business where profitability could be achieved. In
addition the Group was to explore new business opportunities particularly in the
renewable energy sector.

I am pleased to report we have made solid progress towards achieving our
objectives for the year.

The operating profit for the Group has increased to £215,000 from £131,000 in
the previous year. The restructuring of the Group has resulted in a number of
exceptional operating items in each of the last 2 years. If these items are
removed from the comparison then the underlying operating profit from continuing
activities has increased to £188,000 (2002: loss £27,000), being an increase of
£215,000 over the previous year.

As a result of a further year of rationalisation and investment in product
development the IT and Related Services division of the Group is now better
placed to exploit the opportunities in 2004. In particular Cognito Software will
introduce its Custodiens(R) product to enhance and complement the existing
portfolio of products and SilCom has received orders for its long range
free-space optical link to be used in internet networks in Pakistan.

As indicated in my report last year the Group has been exploring business
opportunities in renewable energy via a division set up within the holding
company for this purpose. The Group received its first significant contract from
Hertfordshire County Council worth over £450,000 for the supply and installation
of solar panels at 15 schools in the county. £282,000 has been invoiced in the
year. As this is the first major installation it will only produce a modest
contribution to profits. The Group is continuing to promote solar energy and
develop other opportunities in renewable energy applications, however growth
could be limited by the Group's manpower resources.

In March 2004 we announced that the Group's registrars had been instructed to
effect a repayment of the 8% loan notes and all outstanding interest up to 1st
March 2004. Unconnected loan note holders received a 100% capital repayment and
connected loan note holders received a 50% repayment of capital. Additional
facilities of £500,000 and £250,000 were arranged with Lloyds Bank PLC and major
shareholder Akhter Group plc respectively to fund the repayment. Going forward
the Group will benefit from having a lower interest rate on its loans.

The first quarter has started well particularly in the Software Division. The
objectives in 2004 are to continue to keep the structure of the existing
businesses under constant review and to focus on opportunities for profitable
growth. In addition we will continue to explore new business opportunities in
related fields.

Operational Overview

IT and related services

UTN Solutions & SilCom Manufacturing - Networking services and production

A difficult year with sales revenues reducing to £318,000 from £950,000 in 2002
as the division was reorganised and continued to incur operating losses.
Relocation of the production facility is being actively pursued with the
objective of reducing the costs of manufacture. A focused sales and marketing
plan is to be implemented to increase revenues in 2004. This coupled with lower
manufacturing costs should restore profitability.

Integrated Publishing Systems & Cognito Software - Publishing and legal software

Sales revenues were £861,000 (2002: £933,000) with operating profits relatively
stable. Integrated Publishing Systems continues to contribute positively to
operating profits via a low cost base. Cognito continued to invest in product
development and is anticipating growth in sales revenues and operating profits
in 2004 with the launch of its new Custodiens(R) product and ever increasing
recurring licence and support income.

Renewable energy and other

Ultima Networks PLC - Solar panels, energy saving lamps, educational electronic
kits and property

New business opportunities are being incubated as divisions of the holding
company and will be spun out as separate subsidiaries if successful. 2003 was a
successful year with sales revenues of £591,000 (2002: £143,000) and operating
profits before exceptional items of £113,000 (2002: operating loss £38,000). The
increase in sales revenues was mainly due to the supply and installation of
solar panels of £282,000 (2002: £31,000) and property income of £246,000 (2002:
£112,000). Gaining more new business in the supply and installation of solar
panels will be largely dependant upon sourcing competitively priced components.
New sales revenue streams were generated during the year from the supply of
energy saving lamps of £59,000 and educational electronic kits of £4,000. The
contribution to operating profits from these two new product lines is forecast
to increase substantially in 2004.

Financial Review

-   Group turnover was down 13% at £1,770,000 (2002: £2,026,000) as a
    result of lower IT and related services turnover of £1,179,000 (2002:
    £1,883,000), being only partly offset by new business turnover from 
    renewable energy and other of £591,000 (2002: £143,000).

-   Gross margin for the year was 63% compared with 67% in 2002 as a
    result of the expected lower margins on new products, being the supply and
    installation of solar panels.

-   Group operating expenses were reduced by 33% from £1,381,000 in 2002
    to £925,000 in 2003.

-   Exceptional operating items represent the difference between the
    actual payments made or to be made in settlement of the voluntary 
    arrangements and the estimated liability to the creditors within the scope 
    of the voluntary arrangements at the date of approval. There were credits of 
    £27,000 in 2003 and £158,000 in 2002.

-   The Cognito Software operations relocated to new premises during the
    year. New premises were purchased for £120,000 and the sale of the previous
    building generated net proceeds of £252,000. The gain on disposal of 
    £152,000 is included in Exceptional non-operating items.

-   Profit on ordinary activities before tax for the year was £185,000
    compared with £165,000 in 2002.

-   The tax charge of £16,000 represents timing differences on deferred
    tax and will not result in any payment of tax in 2004. The prior year tax 
    credit of £36,000 did not result in any receipt of tax.

-   During the year the Group paid £220,000 in repayments of bank and
    other loans. In March 2004 the Group repaid £584,000 of the total £1,101,000 
    8% loan notes and paid all outstanding interest up to date of £301,000.

Consolidated profit and loss account
for the year ended 31 December 2003

                                                                   2003                      2002
                                                                   £000                      £000

Turnover - continuing operations                                  1,770                     2,026

Cost of sales                                                     (657)                     (672)
                                                                 _______                   _______

Gross profit                                                      1,113                     1,354
                                                                 _______                   _______

Operating expenses                                                (925)                   (1,381)
Exceptional operating items                                         27                        158
                                                                 _______                   _______

Net operating expenses                                            (898)                   (1,223)
                                                                 _______                   _______

Operating profit - continuing operations                           215                       131

Exceptional non-operating items                                    175                       253

                                                                 _______                   _______

Profit on ordinary activities before interest                      390                       384

Interest payable and similar charges                             (205)                     (219)
                                                                _______                   _______

Profit on ordinary activities before taxation                     185                       165

Tax on profit on ordinary activities                             (16)                        36
                                                                _______                   _______

Profit for the financial year                                    169                        201
                                                                _______                   _______

Basic earnings per share                                        0.09p                      0.10p
                                                                _______                   _______

Diluted earnings per share                                      0.09p                     0.10p
                                                                _______                   _______

Consolidated balance sheet
at 31 December 2003

                                                    2003                      2002
                                                    £000         £000         £000          £000
Fixed assets
Tangible assets                                                 3,082                      3,148

Current assets
Stocks                                               131                       156
Debtors                                              628                       514
Cash at bank and in hand                              85                        99
                                                   _______                   _______

                                                     844                       769
Creditors: amounts falling due within one year   (2,583)                   (1,402)
                                                 _______                   _______

Net current liabilities                                       (1,739)                      (633)
                                                              _______                    _______

Total assets less current liabilities                           1,343                      2,515

Creditors: amounts falling due after more than one            (2,132)                    (3,450)
                                                              _______                   _______

Net liabilities                                                 (789)                      (935)
                                                              _______                   _______

Capital and reserves
Called up share capital                                         7,434                      7,434
Share premium account                                           5,520                      5,520
Revaluation reserve                                             1,080                      1,102
Other reserves                                                  1,334                      1,334
Profit and loss account - deficit                            (16,157)                   (16,325)
                                                             _______                    _______

Shareholders' deficit                                           (789)                      (935)
                                                             _______                    _______

Analysis of shareholders' deficit
Equity interests                                              (6,296)                    (6,442)
Non-equity interests                                            5,507                      5,507
                                                              _______                   _______

                                                                (789)                      (935)
                                                              _______                   _______

Consolidated cash flow statement

for the year ended 31 December 2003

                                                              2003                       2002
                                                              £000                       £000

Cash flow statement

Cash inflow/ (outflow) from operating activities               290                      (521)
Returns on investments and servicing of finance              (205)                      (219)
Taxation                                                         -                          1
Capital expenditure and financial investment                   121                        (1)
                                                            _______                   _______

Cash inflow/ (outflow) before management of
liquid resources and financing                                 206                      (740)
Financing                                                    (220)                        765
                                                            _______                   _______

(Decrease)/ increase in cash in the year                      (14)                         25
                                                            _______                   _______

Reconciliation of net cash flow to movement in net debt

                                                              £000                       £000

(Decrease)/ increase in cash in the year                      (14)                         25

Cash outflow/ (inflow) from decrease/ (increase)               220                      (765)
in debt and lease financing                                  _______                   _______

Decrease/ (increase) in net debt from cashflows                206                      (740)
                                                             _______                   _______

Movement in net debt in the year                               206                      (740)
Net debt at the start of the year                          (3,567)                    (2,827)
                                                           _______                   _______

Net debt at the end of the year                            (3,361)                    (3,567)
                                                           _______                   _______

Consolidated statement of total recognised gains and losses

                                                                   2003                      2002
                                                                   £000                      £000

Profit for the financial year                                       169                       201
Currency translation differences on foreign investment             (23)                        32
                                                                  _______                   _______

Total recognised gains and losses relating to the financial year    146                       233
                                                                  _______                   _______

Reconciliation of movement in shareholders' funds

                                                                    Group               Company

                                                        2003        2002        2003        2002
                                                        £000        £000        £000        £000

Profit/(loss) for the financial year                     169         201       (747)     (2,167)

Currency translation differences on foreign currency    (23)          32           -           -
                                                       _______    _______     _______    _______

Net increase/(decrease) to shareholders' funds          146          233       (747)     (2,167)

                                                      (935)      (1,168)       2,142       4,309
Opening shareholders' (deficit) / funds               _______    _______      _______    _______

Closing shareholders' (deficit) / funds               (789)        (935)       1,395       2,142
                                                     _______     _______      _______    _______

   Reconciliation of Operating Profit to Net Cash Inflow

                                                              2003                2002

Operating profit                                               215                 131
Exceptional non-operating gain                                 175                 253
Depreciation charge                                             99                  80
Profit on disposal of  fixed assets                          (152)                   -
Decrease/ (increase) in stocks                                  25               (124)
(Increase)/ decrease  in debtors                             (130)                 226
Increase/ (decrease) in creditors                               58             (1,087)
                                                             _______            _______     

Net cash inflow/ (outflow) from operating activities           290               (521)
                                                             _______            _______     

Analysis of Cash Flows
                                                              2003                2002
                                                              £000                £000

Returns on investment and servicing of finance
Interest paid                                                (205)               (219)
                                                             _______            _______     

Net cash outflow from returns on investment and servicing    (205)               (219)
of finance
                                                             _______            _______     

Capital expenditure and financial investment
Purchase of tangible fixed assets                            (131)                 (1)
Sale of tangible fixed assets                                  252                   -
                                                             _______            _______     

Net cash inflow/ (outflow) from capital expenditure            121                 (1)
                                                             _______            _______     

Bank loan drawdowns                                              -                1800
Repayment of bank loans                                      (145)                (92)
Repayment of other loans                                      (75)             (1,843)
Other loan drawdowns                                             -                 900
                                                            _______            _______     

Net cash (outflow)/ inflow from financing                    (220)                 765
                                                            _______            _______     

Analysis of Net Debt

                                           At beginning                          At end
                                              of year         Cash flow          of year
                                                £000               £000             £000

Cash at bank and in hand                          99               (14)               85
Bank loans and overdrafts                    (1,708)                145          (1,563)
Other loans                                    (857)                 75            (782)
                                             _______            _______          _______              

                                             (2,466)                206          (2,260)
Loan notes                                   (1,101)                  -          (1,101)
                                             _______            _______          _______             
Total                                        (3,567)                206          (3,361)
                                             _______            _______          _______              

Going Concern

The Group has net liabilities of £0.8 million and net current liabilities of
£1.7 million at 31 December 2003.  However, the Directors consider it
appropriate to prepare the accounts on the Going Concern basis based on
continued financial support of Akhter Group plc.

Segmental Reporting

Turnover represents sales of products and services to customers outside the
Group excluding value added tax or equivalent sales tax.  The analysis of
turnover by geographical destination is as follows:

                                                         2003                          2002
                                                         £000                          £000

United Kingdom                                          1,687                         1,924
North America                                              83                           102
                                                        _______                      _______   
Total                                                   1,770                         2,026
                                                        _______                      _______   
IT and related services                                 1,179                         1,883
Renewable energy and other                                591                           143
                                                        _______                     _______   
Total                                                   1,770                         2,026
                                                        _______                     _______   

                                                         2003                          2002
                                                         £000                          £000
Profit on Ordinary Activities before
IT and related services                                    75                            11
Renewable energy and other                                113                          (38)
                                                         _______                     _______   
                                                          188                          (27)

Exceptional operating items                                27                           158
Exceptional non-operating items                           175                           253
                                                         _______                    _______   
Total                                                     390                           384
                                                         _______                    _______   

Exceptional Operating Items

                                                                       2003              2002
                                                                       £000              £000
Gain on approval of Company Voluntary Arrangement ('CVA')
Ultima Networks PLC                                                      27                 -
SilCom Manufacturing Technology Inc                                       -                19
UTN Solutions (North) Limited                                             -               139
                                                                       _______         _______   
                                                                         27               158
                                                                       _______         _______   

The exceptional profits in the current year represent the difference between
actual payments made or to be made in settlement of the voluntary arrangements
and the estimate of the liability to the creditors within the scope of voluntary
arrangements at the date of approval.

Exceptional Non-Operating Items

                                                                       2003              2002
                                                                       £000              £000
Ultima Networks PLC

(i) Gain on disposal of freehold property                               152                 -

(ii) Gain on write back of balances owed to dormant subsidiaries         23                 -

(iii) Gain on liquidation of subsidiary                                   -               253
                                                                       _______          _______   
                                                                        175               253
                                                                       _______          _______   

(i)  On 11 August 2003 the company sold its freehold property, Flair House,
     Crediton. This property was used by the Cognito software operation, which
     relocated to new premises earlier in the year.

(ii)  The write-back of inter-company balances owed to dormant subsidiaries not

(iii) On 18 April 2002 a subsidiary of the Group, UTN Solutions (South) plc was
      placed in creditors voluntary liquidation. Consequently the company is no 
      longer under the control of the Group. The gain arising in 2002 reflected 
      the net liabilities of the company (excluding any inter-group balances) at 
      the date of liquidation no longer due from the Group. UTN Solutions 
     (South) plc ceased trading during 2001.

Dividends on Equity Shares

The Directors do not propose the payment of a dividend (2002: Nil).


                                                                       2003              2002
                                                                       £000              £000

Corporation Tax
Current tax on income for the year                                        -                 -
Adjustments in respect of prior years                                     -                68
                                                                       _______         _______   
Current taxation                                                          -                68

Deferred taxation
Net origination (reversal) of timing differences                         16             (104)
                                                                       _______        _______   
Tax charge/ (credit) on profit on ordinary activities                    16              (36)
                                                                       _______        _______   

There is no UK corporation tax charge for the year due to the availability of
trading losses brought forward and tax losses incurred during the year.  The
Group has significant trading losses carried forward which will impact on future
taxation charges.

Earnings per Share

The basic and diluted earnings per Ordinary Share has been calculated taking
into account the same weighted average number of Ordinary Shares and profit
attributable to shareholders.

Other Information

This preliminary statement, which has been agreed with the auditors, does not
constitute the Group's statutory financial statement for the year 31 December
2003. Statutory financial statements for 2002 have been delivered to the
Registrar of companies, whereas those for 2003 have been approved, audited but
not filed. The auditors have  reported on the financial statements for the year
ended 31December 2003; their report was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.

The Annual Report for 2003 will be posted to shareholders by 6 May 2004 and will
be available to the public from the Company's registered office at Ultima
Networks PLC, Akhter House, Perry Road.Harlow CM18 7PN.

                      This information is provided by RNS
            The company news service from the London Stock Exchange