Final Results

Clarity Commerce Solutions PLC 20 June 2002 CLARITY COMMERCE SOLUTIONS PLC PRELIMINARY ANNOUNCEMENT OF RESULTS FOR THE YEAR ENDED 31 MARCH 2002 CHAIRMAN'S STATEMENT Financial Review We are pleased to report that the Group has made excellent progress during the year ended 31 March 2002 and moved into a profit before taxation and amortisation of £222,000 (Restated 2001:loss £841,000). This result has been accomplished during a very difficult time in the market in which the group operates and demonstrates the strength of the Group's products and services. The Group has grown its turnover by 117% to £7,620,000 (Restated 2001: £3,518,000) and made an operating profit before goodwill amortisation, exceptional items and interest of £681,000 (Restated 2001: Loss £758,000). After deducting goodwill amortisation, exceptional items and interest, the loss for the year before taxation was £221,000, (Restated 2001: loss £1,145,000). Adjusted earnings per share were 1.84p (Restated 2001: Loss per share 9.82p). Net cash balances at the year end amounted to £ 1,546,000 (Restated 2001: £518,000). The exceptional items related to the restructuring within the Group, primarily involving the integration of a product into the Group's core product portfolio and a specific bad debt provision. These costs are non-recurring. The Group made significant progress during the second half of the year, moving from a loss before goodwill amortisation of £103,000 in the first half compared to a profit before goodwill amortisation of £325,000 in the second half of the year. This last year has undoubtedly seen a reduction in capital spend by many operators in the marketplace, driven in part as a result of the consequences of the tragic events of last September as well as the general downturn in the markets. Despite that, the Group has been able to win some key contracts. Notable amongst these is the contract with the Laurel Pub Company. Total revenues from this contract for Clarity and Microtrain will amount to £3,300,000, of which £2,700,000 were recognised in this financial year. Microtrain secured the installation services and this has demonstrated the synergy between the Group companies. It has also been encouraging to see continued investment into software solutions from our current customers. Rights Issue and Acquisition of Flex In October 2001, Clarity successfully completed a Rights Issue and simultaneously acquired Flex Systems, a software company specialising in solutions for the sports and leisure marketplace. Following strong response from institutions and private equity funds, £2,600,000 was raised, demonstrating very encouraging investment support for the Group. The Bank of Scotland was appointed as the Group's bankers at this time, and they have proven to be very supportive in helping Clarity achieve its aims. The acquisition of Flex provided an entrance for the Group into the market for sports and leisure club management software. Flex provides solutions in nearly 400 sites to 71 customers and focuses strongly on the local authority marketplace. Flex has been consistently profitable, and the management, staff and products are welcome additions to the Clarity Group. Medium term development plans include the integration of Flex software with Clarity, thereby offering a single solution to the sports and leisure sector encompassing both companies products. Current Trading and Prospects The profile of the Group has been raised significantly over the last year, assisted by our PLC status and by the contract secured with Laurel. The Group is confident that its portfolio of products and services provides it with a key competitive advantage, and that we have a number of opportunities in our target hospitality market sectors. We recognise that capital spend is still being deferred by some companies (particularly in the restaurant marketplace), and that recovery has been slow. However, the underlying Group prospects are strong, and we have a good base of contracted and recurring revenue. The Board has confidence that the Group will make further progress in the next financial year. In continuing this development we owe recognition to the continuing dedicated effort of the Group's staff and management. A L R Morton Chairman CHIEF EXECUTIVE'S STATEMENT This last year has seen our credibility, revenues and profitability grow substantially. The timing of our Rights Issue and the prolonged acquisition process, both completed in October 2001, occupied considerable management time and resource. Clarity Retail Systems The Laurel contract has provided demonstrable benefit to Clarity. It has generated increased motivation within the company, has proved the robustness and functionality of our software, and has directly resulted in enquiries from other substantial operators. The Laurel Pub Company operates 620 sites across the UK. Clarity was selected as their partner of choice to install central and site based software after a detailed selection process. In addition, Microtrain also benefited by being awarded the contract for roll-out of the systems, currently being carried out at a rate of 40 sites per week. The speed under which this contract has been fulfilled has, to a certain extent, affected other areas of the business. However, key milestones have been achieved during this period, covering market awareness, product development and existing customer sales. This year has seen us secure business with the Hartford Group, Cafe Grand Prix, the National Union of Students and a number of other operators, as well as continuing the successful implementation of infrastructure software for the Spirit Group (formerly Punch). Clarity continues to develop new products to compliment its existing range. This past year has seen the release of Staff Management software, a new product offering retailers the ability to manage personnel records, procedures and wage costs across an estate of outlets. Although it has been evident that clients are being far more circumspect over large financial commitments, recovery appears to be underway, and some operators are discussing replacing older systems. Flex Systems Since the acquisition of Flex in October 2001, it has continued to increase revenue and profit, and the management team has made a valid contribution to Group activities. Since October 2001, Flex has gained seven new customers, of which five are local authorities and two are private sector leisure providers. Further sales were signed for additional sites by Braintree and Gloucester, existing local authority customers. Six other local authorities indicated their long term confidence in Flex by upgrading their systems, including Flex's largest theatre venue customer, the Fairfield Halls in Croydon. Product development has continued with enhancements to the membership and direct debit modules, as well as creating internet booking facilities and an online payments module for LeisureFlex. Both modules are now installed in Flex's biggest customer, Birmingham City Council, Ipswich Borough Council and others. This software development is key to local government in meeting its central government directive to increase electronic based services to members of the public. A strategy has been finalised for the ongoing development of the Flex software, and integration of this with the Clarity product range. We see this integration as key to the future development of Flex, allowing both companies to benefit from the ability to offer a wider range of software to customers. Microtrain The Laurel contract has demonstrated the synergies within the Group companies and has also provided positive reassurance to large clients of the Group's ability to deliver on large contracts. The management of Microtrain has been very effective in not only winning business from Laurel alongside Clarity but in delivering on time. We are pleased that we have this skilled resource implementing the Clarity product in the field. Microtrain has continued to maintain a strong reputation for quality within the industry. The company continues to provide substantial resources to Six Continents Retail (formerly Bass) and is actively seeking new opportunities on a number of fronts. Employees The Group currently employs 133 staff, of which 43 are currently employed on fixed duration contracts relating to the Laurel contract. The board views the Group's staff and management as its primary asset. In the next twelve months, we intend to focus on employee share ownership and option programs that encourage retention and continued focus on generating profit. The board does not anticipate the number of core staff increasing greatly in the near future, and believes that it now has the infrastructure to sustain growth. Trading Relationships The Laurel contract involved the supply of Clarity software operating on IBM hardware and in total well over 2,500 terminals will have been installed. This partnership has been successful and IBM is now our platform of choice. Clarity is working very closely with IBM as one of its approved business partners, and both companies see this relationship being of great importance to our joint aims within the hospitality marketplace. Acquisition Strategy The recent contract jointly secured by Clarity and Microtrain demonstrates the synergy that the Board intends to achieve between the Group companies. Although not acquisition led, the Group will continue to evaluate acquisition opportunities aimed at providing additional market opportunities, and further enhancing shareholder value. Outlook The directors believe that there are significant opportunities within the hospitality sector, despite the slowdown that has taken place. In addition to increasing awareness of the Group through key contract wins which have endorsed the maturity and robustness of our software, we have controlled costs in areas such as product development and marketing. The combination of these factors provides the board with every confidence that the Clarity Group will continue to be a growing force in its sector, and that the key elements required to achieve this are in place. G York Chief Executive Clarity Commerce Solutions plc Consolidated Profit and Loss Account From the Year Ended 31 March 2002 Restated Year ended Year ended 31 March 31 March 2002 2001 £'000 £'000 Turnover - continuing operations 6,703 3,518 - acquisitions 917 - ------- -------- 7,620 3,518 Cost of sales (3,645) (1,881) Gross Profit 3,975 1,637 Operating costs (4,118) (2,699) Operating loss (143) (1,062) Operating loss is split between: - continuing operations (563) (1,062) - acquisitions 420 - ------- ------- (143) (1,062) Operating profit/loss before goodwill amortisation and exceptional items 681 (758) Goodwill amortisation (443) (304) Exceptional items (381) - Operating profit after goodwill amortisation and exceptional items (143) (1,062) Interest receivable 22 15 Interest payable (100) (98) (78) (83) Loss on ordinary activities before taxation (221) (1,145) Taxation on loss on ordinary activities (35) - Retained loss for the period (256) (1,145) Loss per ordinary share - basic and diluted (2.51p) (15.82p) - adjusted basic 1.84p (9.82p) Consolidated Balance Sheet as at 31 March 2002 Restated As at As at 31 March 31 March 2002 2001 £'000 £'000 Fixed assets Intangible assets 7,287 4,569 Tangible assets 363 190 7,650 4,759 Current Assets Stocks 645 215 Debtors 2,564 1,268 Cash at bank and in hand 1,546 555 4,755 2,038 Creditors: amounts falling due within one year (3,196) (1,388) Net current assets 1,559 650 Total assets less current liabilities 9,209 5,409 Creditors: amounts falling due after more than one year (1,842) (1,045) ------- -------- 7,367 4,364 Capital and reserves Called up share capital 3,481 2,361 Share premium account 5,287 3,148 Profit and loss account (1,401) (1,145) Equity shareholders' funds 7,367 4,364 Consolidated Cash Flow Statement for the period ended 31st March 2002 2002 2001 £'000 £'000 Net cash outflow from operating activities (871) (922) Returns on investments and servicing of finance Interest received 22 15 Interest paid (38) (80) Interest element of hire purchase and finance leases (2) (8) ------ ----- Net cash outflow from returns on investments and servicing of finance (18) (73) Taxation (39) (88) Capital expenditure and financial investment Purchase of tangible fixed assets (52) (73) Sale of tangible fixed assets 19 162 ----- ----- Net cash (outflow)/inflow from capital expenditure and financial (33) 89 investment Acquisitions Purchase of subsidiary undertakings (498) (1,438) Cash at bank acquired with subsidiary 344 246 ------- -------- Net cash outflow from acquisitions (154) (1,192) ------- ------- Net cash outflow before management of liquid resources and financing (1,115) (2,186) Management of liquid resources Deposit in blocked cash collateral account (1,733) - Financing Issue of share capital (net of costs) 2,359 2,890 Issue of loan notes - 399 Repayment of loan notes - (490) Capital element of finance leases (15) (54) Bank loan repayments (201) (41) -------- -------- Net cash inflow from financing 2,143 2,704 ------- ---- Decrease/increase in cash (705) 518 ------- ---- Notes to the Financial Statements: 1. UK corporation Tax has been provided on the results for the year at 30% 2. The Directors do not recommend a payment of a dividend. 3. Earning per ordinary share: Basic loss per share for the period ended 31 March 2002 is calculated by dividing the loss for the period of £256,000 by 10,181,479 being the weighted average number of shares in issue during the period. The adjusted basic earnings per share for the period ended 31 March 2002 is calculated by dividing the profit for the period before amortisation of goodwill of £187,000 by 10,181,479 being the weighted average number of shares in issue for the period ended 31 March 2002. The share options in place have no dilutive effect on the basic earnings per share calculation. 4. The Annual General Meeting will be held on 29 July 2002 at 3.30 pm, at the offices of Clarity Commerce Solutions plc, No. 1 Netherhampton Business Centre, Netherhampton, Salisbury, Wiltshire SP2 8PU. 5. The Annual Report and Accounts will be posted to shareholders shortly. Further copies will be available on request from the Company's Registered Office: Clarity Commerce Solutions plc, No.1 Netherhampton Business Centre, Netherhampton, Salisbury, Wiltshire SP2 8PU. 6. The financial information set out above does not comprise the Company's full statutory accounts within the meaning of Section 240 of the Companies Act 1985. 7. The results for 2001 have been restated for a prior year adjustment of £34,000. This arises due to a change in accounting policy in respect of maintenance and support revenue. This is now taken to income over the underlying agreement, rather than being accounted for on invoicing. This information is provided by RNS The company news service from the London Stock Exchange

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