Final Results

Clarity Commerce Solutions PLC 21 July 2003 For immediate release 21st July 2003 CLARITY COMMERCE SOLUTIONS PLC Preliminary Results Year Ended 31 March 2003 Results in line with Market's Expectations Clarity Commerce Solutions plc ('Clarity'), the AIM listed UK software company which provides software solutions to the UK leisure and hospitality markets, announces Preliminary Results for the year ended 31 March 2003. In his Statement to shareholders, Chief Executive Graham York, said: 'All group companies continue to make progress and our pre-tax profits continue to increase despite continuing adverse conditions in the IT sector. We are better placed than ever to take advantage of improved trading conditions.' Highlights • Profit before tax and amortization up 72% to £382,000 (2002: £222,000). • Change in sales mix, significant shift to higher margin software sales. • Turnover of £7.26m (2002: £7.62m). • Adjusted earnings per share 2.33p (2002: Loss per share 1.84p). • Two acquisitions: Vision IPR in August 2002 from receivership and Edinburgh-based Romulus Enterprises in March 2003 for minimum of £240,000 and maximum of £5m. • Acquisitions provide entry into new sectors: private sector health and fitness clubs, business intelligence software customers, increased presence in existing markets. • Development of additional software modules to existing product range. • Completion of roll-out to Laurel Pub Company estate, roll-outs with other regional brewers. • Significant take up of internet booking system in local authority sites • Contract gains in the public and private sectors. Regarding prospects, Chairman Bob Morton, said: 'The Board has confidence that the Group will continue to increase profits, as well as adding value to the business through further complementary acquisitions.' CLARITY COMMERCE SOLUTIONS PLC CHAIRMAN'S STATEMENT Financial Review The Group has continued to make excellent progress during the year ended 31 March 2003 and has increased its profit before taxation and impairment of goodwill to £382,000 from £222,000 in 2002 (Restated 2001: loss £841,000). Whilst we have been experiencing a difficult market, no material contracts have been lost but they have been slower coming through owing to pressures on our clients' businesses. Although the Group's profit before tax and impairment of goodwill has increased by 72%, turnover has marginally reduced from £7,620,000 to £7,263,000. This is due to a change in the sales mix as a result of a significant shift by the Company to higher margin software sales, against lower margin hardware sales. After deducting goodwill amortisation, exceptional items and interest, the profit for the year before taxation was £315,000, (2002: loss £221,000). Adjusted earnings per share were 2.33p ( 2002: Loss per share 1.84p). Net cash balances at the year end amounted to £453,000 (2002: £1,546,000). As last year, the Group made significant progress during the second half of the year, moving from a loss before taxation and impairment of goodwill of £152,000 in the first half to a profit before impairment of goodwill and taxation of £534,000 in the second half of the year. Whilst the pressure on capital IT spend has continued and clients are seeking to optimise the life of their existing systems, the company has been able to secure significant new contract wins. Clarity has secured roll-out programmes with two regional brewers and Flex Systems has gained several new contracts and introduced its web-based booking software into large venues with considerable success. The Company has continued to develop additional software modules to existing, well proven products to provide add-on sales opportunities. Two acquisitions - Vision IPR and Romulus Our existing Group company, Flex Systems, specialises in facilities management software for the sports and leisure marketplace. In August 2002, the Group also acquired the IPR and customers of Vision Software from the administrators of Quadranet plc. Vision provides membership and prospecting software for heath and fitness clubs and its first order matched the price paid for the assets. Both Flex and Vision look forward to the synergies that their two products will offer the market. In March 2003, the Group acquired the business of Romulus, a provider of customised analytical software and training facilities to enable users to gain timely information from their database about their business and to facilitate instant decision making. The Bank of Scotland was, once again, very supportive in helping Clarity achieve its aims, as were Clarity's brokers Williams de Broe, and our principal legal advisors Hammonds. Current Trading and Prospects The Board has confidence that the Group will continue to grow its profits as well as adding value to the business through complementary acquisitions. In maintaining this development the Board would like to thank its staff and management for their constant efforts and for the continuing support of its investors. A L R MORTON Chairman CHIEF EXECUTIVE'S STATEMENT 2003 During the year our sales strategy has moved towards multi-site clients. Our acquisitions continue to make progress, and our profit before taxation continues to grow in line with management expectations. There has been a slowing of IT spend in some areas of the market place in which the Group operates. Many prospective clients are trying to optimise their original investment, resulting in delays in making investment decisions. Despite these adverse conditions the Board are confident that the Group can continue to develop its business profitably, and we believe that the IT spending patterns are improving in the markets in which the Group operates. Clarity Retail Systems Clarity Retail provides infrastructure software and hardware solutions primarily aimed at the pub and restaurant marketplace, and has secured a number of new contracts for multi-site operators during the year. Recurring revenue continues to grow steadily in line with new customer contracts and additional sales to the existing base. With an established product range and a workforce experienced in multi-site delivery and support, the company has been able to carry out ongoing reductions in overheads, along with more efficient ways of delivering its product to marketplace. Clarity Retail has sales opportunities within other Group company markets and client bases which are actively being explored. Clarity continues to research new product opportunities, as well as providing development support to other subsidiary companies. Microtrain During the year under review Microtrain completed the roll-out of the Clarity solution into the Laurel Pub estate, reaching a peak of over 40 sites a week being implemented. Since then Microtrain has maintained its presence within Laurel, but at a lower level than during the roll-out. Placement of Microtrain personnel has also been increased in the Spirit Group, and the company continues its significant presence in Mitchells and Butlers (following the demerger of Six Continents). Microtrain is now positioned to handle the roll-out work from Clarity, as the delivery arm of Clarity's activity with multi-site operators. Flex Systems Flex provides sports and leisure facility management software solutions, with particular focus on local authority sites and strong multi-site wide area network capability. Underlying growth has been good. We are encouraged by the record number of new customers gained throughout the year in both the public and private sectors. There is also significant take up of the internet booking system among Flex customers, who also report that a high volume of facility bookings are going on line as a result. The directors of Flex are confident that the business can continue to develop market share. Vision Vision is a software product providing membership management and prospecting tools to health and fitness clubs in the private sector. It was purchased out of receivership in August 2002 and has retained its previous customers, Next Generation and Virgin Active. Vision has since secured further orders from existing customers and continues to develop new prospects. Romulus Romulus was acquired in March 2003, having been a supplier to the Clarity Group for some time. The company, located in Edinburgh, provides analytical business intelligence software, primarily based around products supplied by Cognos Inc. Clients operate in a variety of industry sectors including construction, travel, distribution and hospitality. A notable contract in the hospitality sector was the supply of business intelligence and decision making software to the Laurel Pub Company alongside Clarity systems. The terms of the acquisition are based on a three year earn out period. Both the directors of Romulus and Clarity expect the business to deliver growing profits during that period. Group During the last year the Group developed its systems and management structure. This has included the appointment of a Managing Director for Clarity Retail to allow the Board to focus on wider Group issues, including its growth strategy. A new accounting and management information package has been installed and is now being used for all its subsidiary companies. This is providing improved financial information more rapidly and benefits are already being seen. The Board continues to seek new acquisitions, which are complementary to our existing businesses and markets. During the current financial year, the company expects to continue to grow both organically and through acquisitions. The Directors believe that there are increasing opportunities within its broadening leisure marketplace, and scope to continue building an integrated business model. G York Chief Executive Clarity Commerce Solutions plc. Consolidated Profit and Loss Account From the Year Ended 31 March 2003 ----------------------------------------- ---------- ---------- Year ended Year ended 31 March 2003 31 March 2002 ----------------------------------------- ---------- ---------- £' 000 £' 000 ----------------------------------------- ---------- ---------- Turnover ----------------------------------------- ---------- ---------- - continuing operations 6,977 7,620 ----------------------------------------- ---------- ---------- - acquisitions 286 - ----------------------------------------- ---------- ---------- 7,263 7,620 ----------------------------------------- ---------- ---------- Cost of sales (3,174) (3,645) ----------------------------------------- ---------- ---------- Gross Profit 4,089 3,975 ----------------------------------------- ---------- ---------- Operating costs (3,776) (4,118) ----------------------------------------- ---------- ---------- Operating profit/(loss) 313 (143) ----------------------------------------- ---------- ---------- ----------------------------------------- ---------- ---------- Operating profit/(loss) split between: ----------------------------------------- ---------- ---------- - continuing operations 278 (143) ----------------------------------------- ---------- ---------- - acquisitions 35 - ----------------------------------------- ---------- ---------- 313 (143) ----------------------------------------- ---------- ---------- Operating profit before goodwill amortisation and exceptional items 380 681 Impairment / amortisation of goodwill ( 67) (443) Exceptional items - (381) Operating loss after goodwill amortisation and exceptional items 313 (143) ----------------------------------------- ---------- ---------- ----------------------------------------- ------------ ---------- Interest receivable 198 22 ----------------------------------------- ------------ ---------- Interest payable (196) (100) ----------------------------------------- ------------ ---------- 2 (78) ----------------------------------------- ---------- ---------- Profit/ (Loss) on ordinary activities before taxation 315 (221) ----------------------------------------- ---------- ---------- Taxation on profit/(loss) on ordinary activities (58) (35) ----------------------------------------- ---------- ---------- Retained profit/(loss) for the year 257 (256) ----------------------------------------- ---------- ---------- ----------------------------------------- ---------- ---------- Profit/(loss) per ordinary share ----------------------------------------- ---------- ---------- - basic 1.85p (2.51p) ----------------------------------------- ---------- ---------- - diluted 1.84p (2.51p) ----------------------------------------- ---------- ---------- - adjusted basic 2.33p 1.84p ----------------------------------------- ---------- ---------- Dividends per share - - ----------------------------------------- ---------- ---------- Clarity Commerce Solutions plc. Consolidated Balance Sheet as at 31 March 2003 As at As at 31 March 2003 31 March 2002 £'000 £' 000 Fixed assets Intangible assets 8,444 7,287 Tangible assets 310 363 8,754 7,650 Current Assets Stocks 481 425 Debtors 3,173 2,783 Cash at bank and in hand 453 1,546 4,107 4,754 Creditors: amounts falling due within one year (2,591) (3,195) Net current assets 1,516 1,559 Total assets less current liabilities 10,270 9,209 Creditors: amounts falling due after more than one (2,521) (1,842) year 7,749 7,367 Capital and reserves Called up share capital 3,481 3,481 Share premium account 5,287 5,287 Shares to be issued 125 - Profit and loss account (1,144) (1,401) Equity shareholders' funds 7,749 7,367 Clarity Commerce Solutions plc. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2003 2003 2002 £'000 £'000 ------------------------------------ ----------- ----------- Net cash outflow from operating activities (319) (871) ------------------------------------ ----------- ----------- Returns on investments and servicing of finance ------------------------------------ ----------- ----------- Interest received 198 22 ------------------------------------ ----------- ----------- Interest paid (200) (38) ------------------------------------ ----------- ----------- Interest element of hire purchase and finance (5) (2) leases ----------- ----------- ------------------------------------ ------------------------------------ ----------- ----------- Net cash outflow from returns on investments and (7) (18) servicing of finance ----------- ----------- ------------------------------------ Taxation (31) (39) ------------------------------------ ----------- ----------- Capital expenditure and financial investment ------------------------------------ ----------- ----------- Purchase of tangible fixed assets (14) (52) ------------------------------------ ----------- ----------- Sale of tangible fixed assets 14 19 ------------------------------------ ----------- ----------- Net cash inflow/(outflow) from capital expenditure - (33) and financial investment ----------- ----------- ------------------------------------ Acquisitions ------------------------------------ ----------- ----------- Purchase of subsidiary undertakings (522) (498) ------------------------------------ ----------- ----------- Cash at bank acquired with subsidiary 13 344 ------------------------------------ ----------- ----------- Net cash outflow from acquisitions (509) (154) ------------------------------------ ----------- ----------- Net cash outflow before management of liquid (866) (1,115) resources and financing ----------- ----------- ------------------------------------ Management of liquid resources ------------------------------------ ----------- ----------- Movement in blocked cash collateral account 230 (1,733) ------------------------------------ ----------- ----------- Financing ------------------------------------ ----------- ----------- Issue of share capital (net of costs) - 2,359 ------------------------------------ ----------- ----------- New secured loan 197 - ------------------------------------ ----------- ----------- Repayment of loan notes (412) - ------------------------------------ ----------- ----------- Capital element of finance leases (12) (15) ------------------------------------ ----------- ----------- Bank loan repayments - (201) ------------------------------------ ----------- ----------- Net cash (outflow)/inflow from financing (227) 2,143 ------------------------------------ ----------- ----------- Decrease in cash (863) (705) ------------------------------------ ----------- ----------- 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 profit/(loss) per share for the year ended 31 March 2003 is calculated by dividing the profit for the year of £257,000 (2002: loss of £256,000) by 13,927,402 (2002: 10,181,479) being the weighted average number of shares in issue during the year. A proportion of the deferred consideration on the acquisition of Romulus is to be settled by the issue of ordinary shares. The weighted average number of ordinary shares in issue has been adjusted to assume conversion of these shares to be issued as well as all dilutive potential ordinary shares. Diluted earnings per share is calculated by dividing the profit for the year of £257,000 by the weighted diluted average number of shares being 13,935,262. The adjusted basic earnings per share for the period ended 31 March 2003 is calculated by dividing the profit for the year before amortisation of goodwill of £324,000 (2002: £187,000) by 13,927,402 (2002: 10,181,479) being the weighted average number of shares in issue during the year. 4. In each year up to and including 31 March 2002, goodwill was amortised on a straight-line basis through the profit and loss account over 10 or 20 years, being the Directors' previous estimate of its useful economic life in line with the requirements of Financial Reporting Standard 10 'Goodwill and Intangible Assets'. In the preparation of the accounts for the year ended 31 March 2003 the Directors have reviewed the estimate of economic life and concluded that it is now inappropriate. As a result, goodwill is now assumed to have an indefinite life and the accounts therefore depart from the specific requirement of the Companies Act 1985 Schedule 4:21 to amortise goodwill over a finite life in order to give a true and fair view. This departure is in compliance with FRS 10. Goodwill is now subject to an impairment review annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment charge for £67k was required at 31 March 2003. The effect of this change in estimate has been to increase the profit attributable to shareholders for the year ended 31 March 2003 by £433,000. 5.The Annual General Meeting will be held on 20 August 2003. 6.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. 7.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. ENDS Clarity Commerce Solutions plc Graham York Chief Executive Officer Peter Walker Business Development Director Tel:01722 746 200 Fax:01722 746 224 Binns & Co PR Ltd Peter Binns / Sam Allen Tel:020 7786 9600 This information is provided by RNS The company news service from the London Stock Exchange

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