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Ultima Networks plc (UTN)

  Print      Mail a friend       Annual reports

Tuesday 19 April, 2005

Ultima Networks plc

Final Results

Preliminary Statement of Results
Year ended 31 December 2004

Chairman's Statement

I  am  pleased  to  report the Group continues to make very good  progress.  The
operating  profit for the Group has increased by 141% to £519,000 from  £215,000
in  the previous year and ignoring the exceptional operating items in 2003,  the
operating  profit for the Group has actually increased by 176%  (2004:  £519,000
from  2003:  £188,000). Group sales have increased by more than 7% to £1,906,000
(2003:  £1,770,000)  and Group overheads were reduced by 9% to  £843,000  (2003:
£925,000). Therefore, I am pleased to report our objectives for 2004  have  been

The IT and related services division contributed an operating profit of £216,000
(2003:  £75,000), an increase of 188% over 2003. This was due in the main  to  a
very  impressive  performance  from legal software systems  subsidiary,  Cognito
Software  Limited ("Cognito"). This was achieved as a result of  better  margins
and  judicious  cost  control.  The new, fully  integrated,  trust  and  probate
software solution, Custodiens® should continue this positive trend.

The renewable energy and other products division contributed an operating profit
of  £303,000 (2003: £113,000), an increase of 168% over 2003. The completion  of
the  balance  of  the  contract  to install "Grid connected  Solar  Plants"  for
Hertfordshire  County Council, plus a full year contribution from energy  saving
lamps and educational electronic kits, were the most significant factors in  the
profit improvement.

New  business  opportunities in the Telecoms sector are being  actively  pursued
through the investment in the new telecoms start-up subsidiary C2 Communications
Limited  ("C2"). In February 2005, the minority shareholders in C2  were  bought
out  to  allow  for more flexible development plans for this subsidiary  in  the
future.  In  2005, C2 is expected to make a positive contribution to both  Group
sales  and  profits through the provision of IP telephony, other data and  video
services to a range of UK and international customers.

In  March  2004,  the  company repaid £885,000 to 8% loan  note  holders,  being
capital of £584,000 and all outstanding interest up to 1 March 2004 of £301,000.
To  finance  this, additional loans of £500,000 and £250,000 were arranged  with
Lloyds Bank Plc and major shareholder Akhter Group plc respectively.

Pre-tax profit showed an increase of 169% reaching £313,000 against £185,000  in
the  previous year. The tax charge of £28,000 (2003: £16,000) is all in  respect
of  deferred  tax  as  the Group has used only a small part of  its  substantial
accumulated tax losses brought forward from earlier years, no corporation tax is
payable by the Group.

The  profit  for the financial year after taxation is £285,000 compared  with  a
profit of £169,000 for 2003.

Our  main objectives in 2005 are to increase the market share of the established
IT  and  related  services  businesses  and  build  the  new  telecoms  business
profitably.  We expect this to be achieved by organic growth and the acquisition
of  suitably  complimentary businesses, particularly in the legal  and  telecoms

Given  the  Company's current size and its strategy for development and  growth,
the  Board believes that it is appropriate to move the Company's listing to  the
Alternative Investment Market ("AIM") of the London Stock Exchange plc where the
transaction costs for acquisitions and disposals are significantly lower than on
the Official List of the UK Listing Authority. The Board believes that a move to
AIM  would be in the best interests of shareholders and therefore advises of the
intention to give notice in accordance with paragraph 1.22 of the Listing  Rules
of  the  UK Listing Authority for the listing of its entire issued share capital
on  the  Official List, comprising 204,394,191 ordinary shares of 1p  each  (the
"Shares"), to be cancelled.

Therefore,  once  notice has been given, the Board will also  be  submitting  an
application  to  the  London Stock Exchange plc for all  of  its  Shares  to  be
admitted  to  trading on AIM and for the listing of its Shares on  the  Official
List  to be cancelled at the same time. It is anticipated that this will  happen
before the end of May 2005.

Humayun A Mughal

Operational Overview

IT and related services

Integrated Publishing Systems Limited ("IPS") & Cognito - Publishing  and  legal

Sales  revenues  were £943,000 (2003: £861,000) producing operating  profits  of
£342,000  (2003:  £185,000).  Higher margins were achieved  from  new  sales  of
software systems and support on reduced operating costs. IPS continues to make a
positive profit contribution and Cognito continues its increasing profits trend,
which  should  be  further  consolidated  by  the  release  of  its  new,  fully
integrated, trust and probate software solution, Custodiens®.

UTN Solutions Limited ("UTN") & SilCom Manufacturing Inc ("Silcom") - Networking
services and production

Sales  revenues  were  £155,000 (2003: £318,000) producing operating  losses  of
£128,000  (2003: Losses £110,000). Networking business in the UK and Canada  was
very  slow.  To further reduce costs, we are relocating the Wireless  production
facility  to  Pakistan from Canada, a move which is expected to be completed  by
the  first  half  of  2005. Research and development of the Wireless  networking
products will continue in Canada. New products are being introduced in the UK.

C2 - Telecoms products and services

Sales  revenues  were £140,000 producing operating profits of  £2,000  for  this
telecoms start-up subsidiary, which only traded for part of the second  half  of
the year. Going forward this subsidiary is expected to make a major contribution
to the Group providing IP telephony, other data and video services.

Renewable energy and other

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

Sales  revenues  were £668,000 (2003: £591,000) producing operating  profits  of
£303,000 (2003: £113,000). The increase in sales revenues and operating  profits
was  mainly  due  to a full year contribution from the supply of  energy  saving
lamps and educational electronic kits.

Financial Review

* Group  turnover was up by over 7% at £1,906,000 (2003: £1,770,000) due  to  an
  increase  in  business from Renewable energy and other of  £77,000  and  IT  &
  related services of £59,000.

* Gross  margin  for  the year was 71% compared with 63% in  2003  due  to  high
  margin sales of new software and support services from Cognito and IPS.

* Group net operating expenses were reduced by 9% to £843,000 (2003: £925,000).

* Profit  on  ordinary activities before tax for the year was £313,000  compared
  with £185,000 in 2003.

* Earnings per share increased to 0.14p (2003: 0.09p).

* Consolidated  balance sheet now positive with net assets  of  £836,000  (2003:
  net  liabilities £789,000) due to the freehold properties being revalued  this

* Loan note capital of £584,000 and all outstanding interest to 1 March 2004  of
  £301,000 repaid to loan note holders.

* Net debt reduced by £272,000 to £3,089,000 (2003: £3,361,000).

Consolidated profit and loss account
for the year ended 31 December 2004

                                          2004             2003
                                          £000             £000

Turnover                                 1,906            1,770

Cost of sales                             (544)            (657)

Gross profit                             1,362            1,113
Selling and administration expenses       (843)            (925)

Exceptional operating items                 -                27

Net operating expenses                    (843)            (898)

Operating profit                           519              215

Exceptional non-operating items             -               175

Profit on ordinary activities              519              390
before interest

Net interest payable and                  (206)            (205)
similar charges

Profit on ordinary activities              313              185
before taxation

Tax on profit on ordinary                  (28)             (16)

Profit for the financial year              285              169

Basic earnings per share                   0.14p           0.09p

Diluted earnings per share                 0.14p           0.09p

All operations are continuing.

Consolidated balance sheet
at 31 December 2004

                                    2004                   2003
                               --------------        ----------------
                               £000      £000        £000        £000
Fixed assets
Tangible assets                         4,121                   3,082

Current assets
Stocks                          130                   131
Debtors                         416                   628
Cash at bank and in hand        237                    85

                                783                   844
Creditors: amounts falling   (1,576)               (2,583)
due within one year

Net current liabilities                  (793)                  (1,739)

Total assets less current               3,328                    1,343

Creditors: amounts falling             (2,492)                  (2,132)
due after more than one

Net assets/ (liabilities)                 836                     (789)

Capital and reserves

Called up share capital                 7,551                    7,434
Share premium account                   5,598                    5,520
Revaluation reserve                     2,142                    1,080
Other reserves                          1,334                    1,334
Profit and loss account               (15,834)                 (16,157)

Shareholders' funds                       791                     (789)
Minority interest                          45                       -
                                         -----                   -----
                                          836                     (789)

Consolidated cash flow statement
for the year ended 31 December 2004

                                           2004              2003
                                           £000              £000
Cash flow statement

Cash inflow from operating                  301               290

Returns on investments and                 (206)             (205)
servicing of finance

Taxation                                     -                 -

Minority interest                            45                -

Capital expenditure and                     (63)              121
financial investment

Cash inflow before                           77               206
management of liquid
resources and financing

Financing                                    75              (220)

Increase/ (decrease) in cash                152               (14)
in the year

Reconciliation of net cash flow to movement in net debt

                                           £000               £000

Increase/ (decrease) in cash                152               (14)
in the year

Cash outflow from decrease                  120               220
in debt and lease financing

Decrease in net debt from                   272               206

Movement in net debt in the year            272               206

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

Net debt at the end of the year          (3,089)           (3,361)

Consolidated statement of total recognised gains and losses
for the year ended 31 December 2004

                                           2004            2003
                                           £000            £000

Profit for the financial year               285            169
Currency translation differences on          16            (23)
foreign investment
                                           _____          _____

Total recognised gains and losses           301            146
relating  to the financial year            _____          _____

Reconciliation of movement in shareholders' funds
for the year ended 31 December 2004

                                             Group              Company
                                         -------------        ------------
                                         2004     2003        2004    2003
                                         £000     £000        £000    £000

Profit/(loss) for the financial year      285      169          72    (747)

Issue of ordinary share capital           195       -          195      -

Revaluation of Freehold property        1,084       -        1,084      -

Currency translation                       16      (23)         -       -
differences on foreign currency

Net increase/(decrease) to              1,580      146       1,351    (747)
shareholders' funds

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

Closing shareholders'                     791     (789)      2,746    1,395


                                           2004        2003
                                           £000        £000

Operating profit                            519         215
Exceptional gain                             -          175
Foreign currency translation                 16          -
Depreciation charge                          86          99
Loss/(profit) on disposal of  fixed          22        (152)
Decrease in stocks                            1          25
Decrease/(increase) in debtors              184        (130)
(Decrease)/ increase in creditors          (527)         58

                                            ____       ____

Net cash inflow from operating              301         290
                                            ____       ____

                                           2004        2003
                                           £000        £000

Returns on investment and servicing
of finance
Interest paid                              (209)       (205)
Interest received                             3           -
                                           _____       _____

Net cash outflow from returns on           (206)       (205)
investment and servicing of finance
                                           _____       _____

Capital expenditure and financial investment

Purchase of tangible fixed assets           (63)       (131)
Sale of tangible fixed assets                 -         252
                                           _____       _____

Net cash (outflow)/ inflow from capital     (63)        121
expenditure investment
                                           _____       _____


Issue of ordinary share capital             195          -
Bank loan draw downs                        500          -
Other loan draw downs                       250          -
Repayment of bank loans                    (196)       (145)
Repayment of other loans                    (90)        (75)
Repayment of loan notes                    (584)         -
                                           _____       _____

Net cash inflow/ (outflow) from              75        (220)
                                           _____       _____

                                      At                         At
                                  beginning        Cash        end of
                                   of year         Flow         Year
                                  ---------      --------     --------
                                     £000          £000         £000

Cash at bank and in hand               85           152          237
Bank loans and overdrafts          (1,563)         (304)      (1,867)
Other loans                          (782)         (160)        (942)
                                   ______         ______       ______

                                   (2,260)         (312)       (2,572)
Loan notes                         (1,101)          584          (517)
                                   ______         ______       ______

Total                              (3,361)          272        (3,089)
                                   ______         ______       ______


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:

                                            2004              2003
                                            £000              £000
United Kingdom                             1,840             1,687
North America                                 66                83
                                          ______            ______

Total                                      1,906             1,770

IT and related services                    1,238             1,179
Renewable energy and other                   668               591
                                          ______            ______

Total                                      1,906             1,770
                                          ______            ______

                                            2004              2003
                                            £000              £000
IT and related services                      216                75
Renewable energy and other                   303               113
                                          ______            ______

                                             519               188

Exceptional items                             -                 27
Exceptional non - operating                   -                175
                                          ______            ______

Total                                        519               390
                                          ______            ______

                                            2004              2003
                                            £000              £000

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

Current taxation                               -                -

Deferred taxation
Net origination of timing differences          28               16
                                            _____            _____

Tax charge on profit on ordinary activities    28               16
                                            _____            _____

Dividends on Equity Shares

The Directors do not propose the payment of a dividend (2003: Nil).

Earnings per Share
                                              2004            2003

Weighted average number of ordinary       204,394,191    192,744,191
shares in issue during the year

Earnings attributable to shareholders        £285,000       £169,000

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

Earnings  attributable to shareholders include the retained profit for the  year
after taxation.


This  preliminary statement was approved by the directors on 19 April  2005.  It
has been agreed with the auditors, but does not constitute the Group's statutory
accounts  for the year ended 31 December 2004. Statutory accounts for  the  year
ended  31  December  2003  have been delivered to the  Registrar  of  companies,
whereas  those for 2004 have been approved, audited but not filed. The  auditors
have  reported  on the statutory accounts for the year ended 31  December  2004;
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 2004 will be posted to shareholders by 29 April 2005  and
will  be available to the public from the Company's registered office at  Ultima
Networks PLC, Akhter House, Perry Road, Harlow, CM18 7PN and website www.ultima-


Rob Piper, Finance Director, tel; 01279 821200

Alan MacKenzie, ARM Corporate Finance, tel; 020 7512 1019