Final Results

Clarity Commerce Solutions PLC
23 July 2004



CLARITY  COMMERCE  SOLUTIONS  PLC

FINAL RESULTS FOR THE YEAR ENDED 31 MARCH 2004

GROUP CHAIRMAN'S  STATEMENT



This year has seen the continued growth of the Group through acquisitions which
have taken us into new  markets.



Highlights for the Group for the past financial year are:



  • Turnover, increase of 83%.
  • Profit before tax and impairment of goodwill, increase of 95%.
  • Adjusted EPS of 4.10p, an increase of 76%.
  • Cash generated from operating activities of £2.3m.
  • July 2003, acquisition of ticketing and cinema division.
  • September 2003, acquisition of helpdesk and training division.
  • Continued integration of common operations across subsidiary companies.
  • Substantial software development investment, creating a new product with
    significant potential.



Financial Review



The Board is pleased to report that the Group made excellent progress during the
year ended 31 March 2004, increasing its revenues by 83% to £13,325,000 (2003:
£7,263,000) and producing a profit before taxation and impairment of goodwill of
£744,000 (2003: £382,000). This result, an increase of 95% on last year, has
been produced during a year when the Group has made substantial acquisitions,
developed an integrated software portfolio, and integrated key service and
support functions.



The core business has been engaged in developing the new integrated software
portfolio for the cinema market, and its account management team are also now
involved in this market place. As a result of this integration the
representative measure of continuing profits versus acquisition based profits
cannot readily be derived from the headline reported figures.



Adjusted earnings per share increased by 76% to 4.10p, (2003: 2.33p).



The Group generated cash from operating activities during the financial year of
£2,290,000 (2003: outflow £319,000) and Net Cash Balances increased to
£2,122,000 (2003: £453,000).



The acquisitions have been successfully integrated into the Group's integrated
accounting system across all UK and overseas offices and whilst turnover has
doubled from last year, stocks and debtors have been maintained and cash
generation has been strong.



The turnover for this year includes 42% recurring revenue in respect of support
services, up from 16% in the previous financial year.



The Board is encouraged by the opportunities available and believes that it will
continue to increase shareholder value during the current year.



Acquisitions



The acquisition of the cinema ticketing software business from US based
Ticketmaster introduced a substantial international company into the Group
contributing significant revenues. It has also created synergies and cross
selling opportunities within the Group.



The acquisition of our helpdesk and training division was a strategic move for
the Group, allowing us to boost the capability, quality and scale of our support
services.



It is the Board's strategy to continue to expand the business through
acquisitions which add value to the Group as a whole, and which provide cross
selling opportunities.





Software Investment



The acquisitions have opened new markets for the Group, and the opportunities
that this has created has led the Group to substantially increase investment
into new software development ahead of plan. As a result, the Group will be in
an excellent position to provide a range of integrated software solutions that
meet the needs of a diverse and demanding marketplace.



Current Trading and Prospects



The Group has made an encouraging start to the new year with trading in line
with expectations.



The Board has confidence that the Group will continue to grow through
acquisition in accordance with its stated strategy, and add value through the
opportunities they bring.



The Board also believe that they will see organic growth in each of the market
spaces they occupy during the year.



The Board would like to thank all the 198 staff that now comprises the Clarity
Group for their contribution towards the Group's continued success.



ALR Morton

Group Chairman



CHIEF EXECUTIVE'S STATEMENT





Software Portfolio



Our strategy is for the development of one single software solution spanning a
variety of leisure, hospitality and entertainment markets.



Strong progress has been made during this financial year in respect of
integrating the ticketing and cinema management software within our product
portfolio, and we have been able to demonstrate this solution to a number of
customers.



The benefits of this integrated strategy are becoming apparent, as we are able
to offer the benefit of a wider range of software modules to all customers.



Services



The formation of a discrete services division came relatively late in our
financial year. However, the improvement in service levels to customers can
already be measured.



This division provides training, documentation, helpdesk and support services to
a variety of retailers, as well as to the Group's own software customers.



Acquisitions



The acquisition of the ticketing software division has provided the Group with
entry into a new cinema market. Many of our clients in this sector are
international, and we now provide software to 80% of the UK cinema market, as
well as substantial parts of the French and German markets, and a small
percentage of the USA.



Since acquisition, the Group has rationalised the business, bringing it into
profit. A key focus for the entire Group has been the development of the next
generation of software for this cinema and ticketing market, under one
integrated Group software product.



The cinema market has significant potential for Clarity, as these customers are
interested in many of the features in our existing software range, and in our
business intelligence software capabilities. Clarity has moved swiftly to
exploit this opportunity, with its existing skills and products.



Our new services division is a helpdesk, training and implementation company
with an excellent reputation, based close to London. They operate globally,
providing a multi-lingual support service, and already have significant clients
in the hotel, hospitality and retail markets.



The Group's bankers, the Bank of Scotland, have once again been highly
supportive in achieving the Group's acquisition aims.



Integration and Group Structure



During the past year, the Group started the process of integrating key parts of
its subsidiary companies in order to create operating efficiencies and a
co-ordinated approach to product delivery. Key achievements include hospitality
helpdesk integration into our services division, and the development of one
unified cinema and hospitality software product.



In line with this, a single Clarity brand is being increasingly used in each
market sector.



All Group companies now have their financial information contained on one fully
integrated financial system which can be accessed remotely to provide management
with much improved business controls.



Looking Forward



The Clarity Group is now very well placed to exploit new market opportunities,
with:



  • A new integrated software solution
  • A dedicated services division
  • Presence in a number of market sectors
  • Increasing global geographical presence
  • Strong management and financial controls
  • A high recurring revenue stream and cash generation





None of these achievements would have been met without considerable effort and
dedication from the people within the Clarity Group.



Building from our current position, it is the Board's intention to continue to
develop the business in a way that adds long term value, accompanied by ongoing
growth in profits.



We see opportunities in a number of new markets, and will continue to follow our
policy of adding value through strategic acquisition.



Graham York

Chief Executive





Clarity Commerce Solutions plc.

Consolidated Profit and Loss Account FoR the Year Ended 31 March 2004


                                                                                    Year ended           Year ended
                                                                                 31 March 2004        31 March 2003
                                                                                        £' 000               £' 000
Turnover

- continuing operations                                                                 6,335                7,263
- acquisitions                                                                          6,990                    -
                                                                                    ----------           ----------
                                                                                       13,325                7,263
Cost of sales                                                                          (5,052)              (3,174)
                                                                                    ----------           ----------
Gross Profit                                                                            8,273)               4,089
Operating costs                                                                        (7,680)              (3,776)
                                                                                    ----------           ----------
Operating profit                                                                          593                  313

Operating profit/(loss) split between:
- continuing operations                                                                   (25)                  313
- acquisitions                                                                             618                    -
                                                                                    ----------           ----------
                                                                                           593                  313

Operating profit from continuing operations before
  impairment of goodwill                                                                  208                  380

Continuing operations - impairment of goodwill                                           (233)                 (67)

Operating profit from acquired operations                                                 618                     -

                                                                                    ----------           ----------

Operating profit after impairment of goodwill                                             593                  313)


Interest receivable                                                                       322                 198
Interest payable                                                                         (404)               (196)
                                                                                    ----------           ----------
                                                                                         (82)                    2)
                                                                                    ----------           ----------
Profit on ordinary activities before taxation                                             511                  315

Taxation on profit on ordinary activities                                                (131)                 (58)
                                                                                    ----------           ----------
Retained profit for the year                                                              380                  257)

                                                                                    ----------           ----------
Profit on ordinary activities before impairment of goodwill and
   taxation                                                                                744                  382
Impairment of goodwill                                                                   (233)                 (67)
                                                                                    ----------           ----------
Profit on ordinary activities before taxation                                              511                  315
                                                                                    ----------           ----------

Profit per ordinary share

- basic                                                                                  2.54p                1.85p
- diluted                                                                                2.49p                1.84p
- adjusted basic                                                                         4.10p                2.33p
Dividends per share                                                                        -                   -



Clarity Commerce Solutions plc.

Consolidated Balance Sheet as at 31 March 2004


                                                                                          As at               As at
                                                                                  31 March 2004       31 March 2003
                                                                                          £'000              £' 000
Fixed assets

Intangible assets                                                              10,322              8,444
Tangible assets                                                                   518                310
                                                                                         10,840             8,754
Current Assets

Stocks                                                                            501                481
Debtors                                                                         4,023              3,173
Cash at bank and in hand                                                        2,122                453
                                                                           ----------           ----------
                                                                                6,646              4,107

Creditors: amounts falling due within one year                                (5,973)             (2,591)

Net current assets                                                                        673               1,516
                                                                                     ----------          ----------
Total assets less current liabilities                                                  11,513              10,270

Creditors: amounts falling due after more than one year                                (2,492)             (2,521)
                                                                                     ----------          ----------
                                                                                        9,021               7,749
                                                                                     ----------          ----------
Capital and reserves
Called up share capital                                                                 3,985               3,481
Share premium account                                                                   5,833               5,287
Shares to be issued                                                                       125                 125
Profit and loss account                                                                  (922)             (1,144)
                                                                                     ----------          ----------
Equity shareholders' funds                                                               9,021              7,749

                                                                                     ----------          ----------




Clarity Commerce Solutions plc.

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2004


                                                                                         2004             2003
                                                                                        £'000            £'000
Net cash inflow / (outflow) from operating activities                                   2,290             (319 )
Returns on investments and servicing of finance
Interest received                                                                         322              198
Interest paid                                                                            (396 )           (200 )
Interest element of hire purchase and finance leases                                       (8 )             (5 )
                                                                                       ----------      ----------
Net cash outflow from returns on investments and servicing of
   finance                                                                                (82 )             (7 )

Taxation                                                                                 (161 )            (31 )
Capital expenditure and financial investment
Purchase of tangible fixed assets                                                        (151 )            (14 )
Sale of tangible fixed assets                                                              41               14
                                                                                       ----------      ----------
Net cash (outflow) / inflow from capital expenditure and
   financial investment                                                                  (110 )              -

Acquisitions
Purchase of subsidiary undertakings                                                    (2,989 )           (522 )
Cash at bank acquired with subsidiaries                                                   767               13
                                                                                       ----------      ----------
Net cash outflow from acquisitions                                                     (2,222 )           (509 )
                                                                                       ----------      ----------
Net cash outflow before management of liquid resources and
   financing                                                                             (285 )           (866 )
                                                                                       ----------      ----------
Management of liquid resources
Movement in blocked cash collateral account                                             (118)              230

Financing
Issue of share capital (net of costs)                                                     750                -
New secured loan                                                                        1,540              197
Repayment of loan notes                                                                  (110 )           (412 )
Capital element of finance leases                                                         (32 )            (12 )
Bank loan repayments                                                                     (194 )              -
                                                                                       ----------      ----------
Net cash inflow / (outflow) from financing                                              1,954             (227 )
                                                                                       ----------      ----------
Increase / (decrease) in cash                                                           1,551             (863 )
                                                                                       ----------      ----------



Notes to the Financial Statements:



 1. UK Corporation Tax has been provided on the results for the year at 30% and
    overseas tax at applicable rates.



 2. The Directors do not recommend the payment of a dividend.



 3. Earnings per ordinary share:



Basic profit per share for the year ended 31 March 2004 is calculated by
dividing the profit for the year of £380,000 (2003: £257,000) by 14,957,917
(2003: 13,927,402) 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 £380,000
(2003:£257,000) by the weighted diluted average number of shares being
15,246,514 (2003: 14,082,856).



The adjusted basic earnings per share for the period ended 31 March 2004 is
calculated by dividing the profit for the year before impairment of goodwill of
£613,000 (2003: £324,000) by 14,957,917   (2003: 13,927,402) being the weighted
average number of shares in issue during the year.



 4. Goodwill represents the difference between the fair value of the net assets
    of subsidiary undertakings at the date of acquisition and their purchase
    price.



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 reviewed the estimate of economic life and concluded that the previous
estimates were no longer appropriate.



As a result of the review, goodwill is now assumed to have an indefinite life
and the accounts therefore depart from the specific requirements of the
Companies Act 1985 Schedule 4:21 to amortise goodwill over a finite life in
order to give a true and fair view. The departure is in compliance with FRS 10 -
'Goodwill and Intangible Assets'.



In arriving at this change of policy the Directors considered a number of areas
inclusive of the nature of the business, the durability of the product range and
the continued expansive nature of the Group.  Each acquisition is assessed with
reference to the quality and sustainability of the product range, the quality of
the customer base and the potential for the development and continuation of long
term relationships and the ability to develop value for the group across the
product portfolio and network of offices.



Goodwill is now subject to an annual impairment review and whenever events or
changes in circumstances indicate that the carrying value may not be recoverable
an impairment charge is reflected in the profit and loss account.



Impairment of goodwill is evaluated by comparing the present value of the
expected future cash flows, excluding finance and tax (the 'value in use'), to
the carrying value of the underlying net assets and goodwill. If the net assets
and goodwill were to exceed the value in use, an impairment would have deemed to
have occurred and the resultant write down in the goodwill would be charged to
the profit and loss account immediately.



The Directors have undertaken a detailed review of each area of the business and
have as a result of this review concluded that an impairment of goodwill has
taken place.  The resultant charge to the profit and loss account for the year
ended 31 March 2004 is £233,000 (2003: £66,500).  This relates primarily to the
remaining goodwill arising from the acquisition of Formative Systems, the
loyalty software business, which has not traded in the year and Microtrain, the
training and implementation  arm of the group, which has seen operations
combined with the other service providers within the group.



5.      The Annual General Meeting will be held on 2nd September 2004.



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.



END


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