Final Results

Vislink PLC 24 March 2004 Vislink plc Preliminary results for the year ended December 31, 2003 'The Group ended the year with net cash and a strong forward order book as a result of winning the Venezuelan national broadcaster's TV upgrade project in the fourth quarter. The Group's US broadcast business, MRC, has benefited from high levels of government spending and the continuing digital broadcast TV upgrades. However the UK and international markets have remained slow throughout the year for both the UK broadcast business and Hernis.' Highlights • The Group's order intake for the continuing operations increased to £97.89 million (2002 - £70.29 million) • The UK broadcast business won a $58.85 million (£32.88 million) turnkey project to modernise the infrastructure and distribution network of the Venezuelan national broadcaster • The Group's closing order book was £45.93 million (2002 - £16.31 million), which will benefit trading in both 2004 and 2005 • Sales for the year from continuing operations were lower at £67.97 million (2002 - £72.96 million) and operating profits from continuing operations before goodwill amortisation and exceptional rationalisation costs declined to £2.07 million (2002 - £4.18 million) • Reduced second half demand in the UK broadcast business led to the announcement in November 2003 that the UK activities were to be consolidated into one operational site to reduce its cost base. A provision for the associated rationalisation costs of £3.76 million has been made • The Group generated cash of £8.94 million (2002 - £4.84 million) including the net deposit from the Venezuelan contract of £7.45 million, which has eliminated gearing • Earnings per share, excluding goodwill amortisation and exceptional items, were lower at 0.96 pence (2002 - 1.85 pence) • The Board is recommending that the dividend is maintained at 0.2 pence per share Commenting on the results, Bob Morton, Chairman of Vislink plc, said: 'The Group has seen growth in the US broadcast business, continued profitability at Hernis despite weaker sales and orders, and addressed the weakness of the UK broadcast business. The Venezuelan contract and the increased order intake in the US broadcast business have given the Group a strong opening order book for 2004. Given the significant market opportunities for MRC and Hernis, the new product development programme and good progress on the VTV contract, the Board expects an improved trading performance for 2004.' - Ends - For further information on March 24, 2004, please contact: Ian Scott-Gall 01488 685500 Chief Executive, Vislink plc James Trumper 01488 685500 Group Finance Director, Vislink plc Chairman's Statement Introduction The Group ended the year with net cash and a strong forward order book as a result of winning the Venezuelan national broadcaster's TV upgrade project in the fourth quarter. The Group's US broadcast business, MRC, has continued to grow both its orders and sales, with 2003 proving to be another record year benefiting from high levels of government spending and the continuing digital broadcast TV upgrades. However the UK and international markets remained slow throughout the year for both the UK broadcast business and Hernis. As a result of the slow down in the UK broadcast business the Group is consolidating the UK activities into one operational site and reducing its cost base. This rationalisation of the business was announced in November 2003 and a provision for the associated costs of £3.76 million has been made. The reorganisation and rationalisation is in progress and the reduction in the cost base is expected to result in annualised savings of circa £3 million. Results for the Year The Group's order intake for the continuing operations was £97.89 million (2002 - £70.29 million). The increased order intake was due to the UK broadcast business winning a $58.85 million (£32.88 million) turnkey project to modernise and upgrade the infrastructure and distribution network of the Venezuelan national broadcaster, VTV (the 'VTV Contract'). The Group's closing order book was £45.93 million (2002 - £16.31 million), which will benefit trading in both 2004 and 2005. Sales for the year from continuing operations were lower at £67.97 million (2002 - £72.96 million). Sales during the second half of the year were reduced for the UK broadcast business, which suffered from a weak order flow from international markets in the second and third quarters. In addition Hernis' sales fell behind the previous years record level due to weaknesses in its Asian and Middle Eastern markets. Operating profits from continuing operations before goodwill amortisation and exceptional rationalisation costs were lower at £2.07 million (2002 - £4.18 million). Goodwill amortisation for the year was unchanged at £1.17 million. Net interest payable fell to £0.42 million (2002 - £0.73 million) as a result of the Group's positive cash flow. After the exceptional rationalisation costs of £3.76 million (2002 - £0.32 million), losses from discontinued businesses of £0.02 million (2002 - £0.63 million) and the loss on disposal of the business of £0.08million (2002 - £0.20 million), the Group made the pre-tax loss of £3.37 million (2002 - £1.14 million profit). The Group generated cash of £8.94 million (2002 - £4.84 million) including the net deposit from the VTV contract of £7.45 million, which has eliminated gearing. At year end the Group had net cash of £3.70 million (2002 - net debt of £4.99 million). Earnings per Share Earnings per share from continuing operations before goodwill and the exceptional rationalisation costs were 0.96p (2002 - 1.85p). The basic loss per share was 3.88p (2002 - earnings per share of 0.41p). Dividends The Board is recommending a maintained dividend of 0.2p per share. The dividend, subject to shareholder approval, will be paid on July 23, 2004 to shareholders on the register at July 2, 2004. Strategy and Prospects The Group's key strategies are to achieve sales growth through the development of the government, military and security markets and to create an operating profit return on sales, before goodwill and central costs, in excess of 10%. These objectives were met by MRC, which had another year of growth, with particular success in winning US government and military business for both microwave radios and satellite products. Further investment in new products and new sales channels for these markets is being made by MRC in 2004. The demand for MRC's products is expected to increase with the planned regulatory changes to the frequency band used by outside broadcasters. The US government regulator, the Federal Communications Commission, is making changes to the current broadcasters' radio channels in order to make them available for other wireless services. These changes are expected to generate incremental revenues for MRC, starting at the end of 2004 for a period of at least three years. The UK based broadcast business, which sells microwave, terrestrial TV transmitters and satellite products into international markets outside of the USA and in the UK, has suffered from weak markets throughout the year and as a result the business made an operating loss. The rationalisation of the business should see it return to profitability in the second half at the current level of trading. The broadcast businesses have a strong product development programme that will see new satellite and microwave products being launched at the National Association of Broadcasters show in April 2004. The focus of the development programme has been to produce new products that are smaller and lighter and match or exceed existing performance levels. Hernis' international markets have been slow in 2003 but demand from the local Norwegian oil and gas market for their new explosion proof camera housing has been good. The International Ship and Port Safety regulations coming into effect on July 1, 2004 will generate additional sales opportunities for Hernis and widen their CCTV marine security market. Hernis has developed new products specifically to address this new sector of the market. In summary, the Group has seen growth in the US broadcast business, continued profitability at Hernis despite weaker sales and orders, and addressed the weakness of the UK broadcast business. The VTV contract and the increased order intake in the US broadcast business have given the Group a strong opening order book for 2004. The UK rationalisation will be completed during the first half of 2004 and thereafter it is expected that the UK business will trade profitably. Given the significant market opportunities for MRC and Hernis, the new product development programme and good progress on the VTV contract, the Board expects an improved trading performance for 2004. ALR Morton Chairman March 24, 2004 Chief Executive's review Introduction The Group has continued to maintain its global market leadership in microwave products for the broadcast market through Microwave Radio Communications (MRC), our US based business and for mobile satellite products through our UK based businesses of Advent, Multipoint and Continental Microwave. Sales of broadcast quality microwave links and satellite communications products into the growing markets of public safety, homeland security and military communications, increased in the year by 20.2% to £12.17 million (2002 - £10.14 million). Hernis, our Norwegian based business with a growing worldwide reputation in the marine and petroleum industry markets for their specialised CCTV security systems experienced a satisfactory offshore domestic market but slower international markets compared with the previous year. Business review of 2003 The Group achieved some notable successes this year, particularly in winning the large Venezuelan contract and in the US where MRC had another year of profitable growth due to high levels of government expenditure and the continuation of the digital TV conversion programme in the domestic US market. MRC's order intake exceeded $54 million in 2003, up from $44.31 million in 2002. MRC has shown consistent growth from the annualised order intake level of circa $32 million at the time of its acquisition in 2000. The UK business, through Continental Microwave Limited ('CML'), won a $58.85 million (£32.88 million) contract with the national Venezuelan TV broadcaster (VTV) to upgrade their existing studios, distribution and transmission networks. The project is now underway and finance has been secured through a cash deposit and a confirmed letter of credit for the contract balance. CML will manage this project as well as supplying the microwave links and satellite equipment and sourcing third party product for installation in Venezuela. The contract has an eighteen month term and is expected to generate a return in line with the Group's stated objectives. The overall Group performance was affected in 2003 by a disappointing second half performance from the UK based broadcast business. In response to the weaker market demand, the last stage in the rationalisation of the UK Broadcast business was announced in November 2003 and is now being implemented. The rationalisation involves combining the separate UK facilities on to one site in Chesham. The cost to close the Luton factory, provide for redundancies and transfer the relevant operations to Chesham, amounts to £3.76 million. The rationalisation is expected to reduce the cost base by £2.5 million this year (circa £3 million annually) and return the UK business to profitability in the second half of 2004. The UK based business will remain the centre of excellence for the design and development of satellite products whilst the US based business will continue to be the centre of excellence for microwave radio products. Trading by market Sales from the continuing businesses were £67.97 million, 6.8% behind the £72.96 million sales in 2002. However, the total order intake for the Group increased to £97.89 million (2002 - £70.29 million). The Group's closing order book has increased to £45.93 million (2002 - £16.31 million) due to the VTV contract, which will benefit both 2004 and 2005. In the Broadcast businesses sales were £59.60 million (2002 - £63.18 million) and operating profits before goodwill and exceptional costs were lower at £2.45 million (2002 - £4.13 million). Sales into North America increased to £25.90 million (2002 - £24.07 million), notwithstanding the adverse currency translation in 2003. Sales into the Middle East grew by 18% due to the supply of both microwave links into Kuwait and satellite uplinks in the United Arab Emirates. In West Africa CML supplied both mobile and fixed microwave and satellite systems for the All Africa Games, hosted by Nigeria in October 2003. This contributed to the 32% sales growth in the region. In the first half of the year, demand from the UK and rest of Europe was in line with expectations as broadcasters and governments purchased equipment to provide TV coverage and tactical and strategic military communications for the Iraq conflict. However expenditure levels reduced in the second half of the year as purchasing decisions were deferred. There are signs that these are now being made and the market is improving. Sales into South America were down to £2.76 million (2002 - £7.03 million), however they will recover with the delivery of the VTV contract. Hernis sales were £8.37 million (2002 - £9.77 million). Sales into Europe were £4.58 million, marginally below the £5.21 million in 2002 as the rate of new build of ships has been slower than seen in early 2002. Sales in the Far East, normally a strong market for Hernis were depressed by the economic impact of the SARs outbreak, falling to £1.66 million (2002 - £2.46 million). The lower sales were mitigated to some extent by the introduction of new higher margin explosion proof CCTV camera stations. Hernis' operating profits for the year were £0.61 million (2002 - £1.10 million). Product development Expenditure on research and development for the continuing operations has been maintained at £3.65 million (2002 - £3.94 million). The Group has set a key strategic objective for new products to be lighter in weight and give higher performance. The increasing use of digital systems for outside broadcasts and the need for rapid deployment lightweight satellite antennas together with smaller electronic systems is a key requirement for our global customers. During 2003 the Group launched several new broadcast products that have enhanced its digital microwave links and satellite product range. Hernis has successfully introduced its new explosion proof range of products. The Group has in place a development programme to launch both a compact suitcase sized satellite antenna together with a modular system of lightweight electronics at this year's international broadcast show in April. This product has already attracted the attention of international broadcasters and is expected to generate growth in sales this year. In addition we have continued to develop the product range for the Strata microwave radio products for the multiple international frequencies required on a global basis. Significant resources have been committed to meeting the new R&TTE certification requirements in Europe. Hernis has developed an exciting new product, the Sea Touch system that uses touch screen display technology and integrates CCTV camera stations on board a vessel with alarms and sensors which monitor the ship's safety and security. This has been designed to meet the new International Maritime Organisation (IMO) regulations for the International Ship and Port Safety (ISPS) certification required by all vessels over 5,000 tonnes trading internationally. The opportunities for Sea Touch systems are significant for Hernis. Market opportunities The pace of change towards a digital broadcast environment is beginning to accelerate. The adoption of digital systems for video and data transmission systems increases the capacity of the radio spectrum over older analogue systems. This suits the regulators as it allows for new services to be introduced into the already crowded spectrum. In addition digital systems are ideal for radio transmission to and from moving vehicles and helicopters, as they provide uninterrupted signals, unlike analogue systems, which can suffer from interference when used in mobile applications. As the software and associated electronics offer improved performance and have become smaller with lower costs, microwave radio and satellite systems are finding new applications for tactical and strategic military communications and in the public safety and law enforcement markets. Whilst these markets are relatively new they will become strategic markets of the future. Whilst the main market opportunity continues to be the increasing adoption of broadcast quality digital video transmission on a global basis, the Group stands to benefit in a number of ways from the increasing demand for this technology. In the US market, MRC has benefited from the digital upgrade of fixed studio to transmitter links. Now that the upgrade programme is virtually complete for commercial Broadcasters, they are releasing funds to convert their outside broadcast systems to digital. The next major US opportunity involves an impending regulatory driven change. The main US regulator, the Federal Communications Commission (the FCC), has issued a 'rule and order' paper which brings into effect from December 2004 the transfer of the most commonly used broadcast part of the 2GHZ Broadcast spectrum away from the broadcasters to the new providers of wireless services and mobile satellite services. The new entrants will have to compensate the broadcasters for the cost of new digital equipment to be used in the reallocated broadcast spectrum. MRC expects to maintain its market share in supplying the new digital radios for the regulatory change and for the growth in outside digital broadcast systems. In addition the US law enforcement and public safety markets are seen as another growth market for the Group, as new channels to these markets are developed during 2004. In European markets the general economic climate is improving and it is expected that national digital TV transmissions systems will start to be installed, with Norway being an early leader. The Group also expects the introduction of the new range of lighter and smaller satellite products to generate growth for the UK based broadcast business. Hernis is also expecting to benefit from an increase in demand out of the regulatory driven changes that ship owners will have to make to on board security systems following the introduction of the new ISPS code that will come into effect on July 1, 2004. This will provide a market for the retrofit of existing ships without CCTV systems and increase the overall size of the marine shipping market for Hernis products. Summary The Group is well positioned to take advantage of the regulatory driven opportunities for growth, supported by new products. The increased use of digital broadcast systems and the demand from the government and security markets for the Group's products are expected to provide the platform for improved trading in both the short and longer term. IH Scott-Gall Chief Executive March 24, 2004 Group Profit and Loss Account for the year ended December 31, 2003 Before Before goodwill & goodwill & exceptional Goodwill & exceptional Goodwill & items exceptional items exceptional items Total items Total 2003 2003 2003 2002 2002 2002 Notes £'000 £'000 £'000 £'000 £'000 £'000 Turnover Continuing operations 67,966 - 67,966 72,955 - 72,955 Discontinued operations 1,425 - 1,425 6,589 - 6,589 1 69,391 - 69,391 79,544 - 79,544 Operating profit Continuing operations before exceptional rationalisation costs and goodwill amortisation 2,074 - 2,074 4,177 - 4,177 Exceptional rationalisation costs - (3,760) (3,760) - (318) (318) Continuing operations before goodwill amortisation 1 2,074 (3,760) (1,686) 4,177 (318) 3,859 Goodwill amortisation 1 - (1,167) (1,167) - (1,170) (1,170) Continuing operations 1 2,074 (4,927) (2,853) 4,177 (1,488) 2,689 Discontinued operations 1 (23) - (23) (626) - (626) Total operating (loss)/profit 2,051 (4,927) (2,876) 3,551 (1,488) 2,063 (Loss) on disposal of businesses 2 - (27) (27) - (195) (195) Impairment of long leasehold property 2 - (50) (50) - - - (Loss)/profit on ordinary activities before interest 2,051 (5,004) (2,953) 3,551 (1,683) 1,868 Interest receivable 38 - 38 106 - 106 Interest payable (456) - (456) (831) - (831) (Loss)/profit on ordinary activities before taxation 1,633 (5,004) (3,371) 2,826 (1,683) 1,143 Tax on (loss)/profit on ordinary activities 3 (666) 111 (555) (941) 211 (730) (Loss)/profit for the financial year 967 (4,893) (3,926) 1,885 (1,472) 413 Dividends 4 (202) - (202) (205) - (205) Transfer (from)/to reserves 765 (4,893) (4,128) 1,680 (1,472) 208 Basic (loss)/earnings per share 5 0.96p (4.84)p (3.88)p 1.85p (1.44)p 0.41p Diluted (loss)/earnings per share 5 0.95p (4.80)p (3.85)p 1.85p (1.44)p 0.41p Dividend per share 4 0.20p 0.20p Statement of retained profits Profit and loss account at January 1 2,048 3,048 Arising in the financial year (4,128) 208 Translation difference on foreign currency net investments (1,592) (1,208) Profit and loss account carried forward (3,672) 2,048 Statement of Total Recognised Gains and Losses for the year ended December 31, 2003 2003 2002 £000 £000 (Loss)/profit for the financial year (3,926) 413 Translation difference on foreign currency net investments (1,592) (1,208) (5,518) (795) Prior year adjustment in respect of FRS19 - 814 Total recognised gains and losses since last Annual Report (5,518) 19 There is no material difference between the reported results and the historical cost profits and losses. Reconciliation of Movements in Shareholders' Funds for the year ended December 31, 2003 2003 2002 £'000 £'000 Opening equity shareholders' funds as previously reported 32,700 32,879 Prior year adjustment in respect of FRS19 - 814 Opening equity shareholders' funds restated 32,700 33,693 (Loss)/profit for the financial year (3,926) 413 Dividends (202) (205) Value of share issues in the year - 223 Change in the value of shares to be issued - (216) Translation difference on foreign currency net investments (1,592) (1,208) Movement in the year (5,720) (993) Closing equity shareholders' funds 26,980 32,700 Group and Company Balance Sheets as at December 31, 2003 Group Company 2003 2002 2003 2002 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 18,091 19,851 - - Tangible assets 4,464 5,643 5 8 Investments 160 86 25,396 25,390 22,715 25,580 25,401 25,398 Current assets Stocks 9,099 12,086 - - Debtors 12,857 17,114 521 2,432 Cash at bank and in hand 9,540 4,189 83 446 31,496 33,389 604 2,878 Creditors - amounts falling due within one year 19,121 18,630 1,559 2,791 Net current assets/(liabilities) 12,375 14,759 (955) 87 Total assets less current liabilities 35,090 40,339 24,446 25,485 Creditors - amounts falling due after more than one year 5,567 6,947 17,578 18,045 Provisions for liabilities and charges 2,543 692 - - 26,980 32,700 6,868 7,440 Capital and reserves Called up share capital 2,552 2,552 2,552 2,552 Share premium account 205 205 205 205 Merger reserve 27,895 27,895 - - Profit and loss account (3,672) 2,048 4,111 4,683 Equity shareholders' funds 26,980 32,700 6,868 7,440 Group Cash Flow Statement for the year ended December 31, 2003 Notes 2003 2002 £'000 £'000 Net cash inflow from operating activities 6 11,824 5,923 Returns on investments and servicing of finance Interest received 38 106 Interest paid (476) (871) (438) (765) Taxation paid (1,223) (155) Capital expenditure Purchase of tangible fixed assets (1,137) (877) Purchase of investments (76) (84) Proceeds from sale of tangible fixed assets 35 118 (1,178) (843) Acquisitions and disposals Proceeds from sale of businesses 160 783 Equity dividends paid (205) (101) Net cash inflow before financing 8,940 4,842 Financing Repayment of bank loans (3,331) (3,818) Finance lease repayments - (8) (3,331) (3,826) Increase in cash 5,609 1,016 Reconciliation of Net Cash Flow to Movement in Net Cash/(Debt) for the year ended December 31, 2003 Notes 2003 2002 £'000 £'000 Increase in cash 5,609 1,016 Repayment of bank loans 3,331 3,818 Finance lease repayments - 8 Change in net debt resulting from cash flows 6 8,940 4,842 Effect of foreign exchange changes 6 (258) (323) Movement in net cash/(debt) 8,682 4,519 Opening net (debt) (4,985) (9,504) Closing net cash/(debt) 6 3,697 (4,985) 1. Segmental Analysis Turnover Operating Profit Net Assets Total Total Total Total Total Total 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 By business: Broadcast 59,599 63,183 2,451 4,130 11,100 14,429 Hernis 8,367 9,772 606 1,096 4,117 3,561 Central - - (983) (1,049) 11,763 14,783 67,966 72,955 2,074 4,177 26,980 32,773 Exceptional rationalisation costs (note 2) - - (3,760) (318) - - Goodwill amortisation - - (1,167) (1,170) - - Continuing operations 67,966 72,955 (2,853) 2,689 26,980 32,773 Discontinued operations 1,425 6,589 (23) (626) - (73) Total 69,391 79,544 (2,876) 2,063 26,980 32,700 Net assets within Central include group debt, capitalised goodwill and dividends. The exceptional rationalisation costs are allocated to the Broadcast businesses in both 2003 and 2002. Goodwill amortisation in the continuing operations is in respect of the businesses of Advent Communications, Multipoint Communications and Microwave Radio Communications all of which are within the Broadcast business. The discontinued operations relate to the image analysis business of Data Cell Limited. Turnover Analysis Discontinued Broadcast Hernis operations Total 2003 2002 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 By market: UK & Ireland 7,157 9,386 315 442 1,401 2,273 8,873 12,101 Rest of Europe 4,068 3,623 4,264 4,767 18 98 8,350 8,488 North America 25,899 24,072 1,271 1,846 5 4,007 27,175 29,925 South America 2,758 7,034 48 2 - - 2,806 7,036 Middle East 5,747 4,870 407 111 - - 6,154 4,981 Asia 8,724 9,447 1,662 2,457 - 59 10,386 11,963 Africa 5,012 3,802 19 14 - - 5,031 3,816 Other 234 949 381 133 1 152 616 1,234 59,599 63,183 8,367 9,772 1,425 6,589 69,391 79,544 By origin: UK & Ireland 28,903 35,827 - - 1,425 2,630 30,328 38,457 Norway - - 8,367 9,772 - - 8,367 9,772 North America 30,696 27,356 - - - 3,959 30,696 31,315 59,599 63,183 8,367 9,772 1,425 6,589 69,391 79,544 Net Assets Analysis Total 2003 2002 £'000 £'000 By market: UK & Ireland 12,644 18,890 Norway 4,117 3,937 North America 10,219 9,873 26,980 32,700 2. Exceptional items a) Operating exceptional items 2003 2002 £'000 £'000 Redundancy costs associated with the integration of the US broadcast business - 318 Provision for the rationalisation of the UK broadcast business - redundancy and relocation costs 945 - - fixed asset impairment and inventory write down 1,913 - - onerous property lease commitments 902 - 3,760 318 On November 27, 2003 the Group announced the operational rationalisation of the UK broadcast business. This involves the closure of the Luton manufacturing facility with the consolidation of manufacturing into the Chesham site and the scaling back of terrestrial broadcast transmitter production. b) Non-operating exceptional items 2003 2002 £'000 £'000 Loss on disposal of businesses 27 195 Impairment of long leasehold property associated with business disposed of 50 - 77 195 The loss on disposal of businesses relates to the sale of the image analysis business of Data Cell. The long leasehold property was sold on January 9, 2004 at its net book value of £475,000. 3. Taxation a) Analysis of tax charge in period 2003 2002 The tax charge for the year comprises: £'000 £'000 Current tax UK Corporation tax - at 30% (2002 - 30%) - - UK Corporation tax - adjustment in respect of prior years - (15) - (15) Overseas taxation - current 748 472 Overseas taxation - adjustments in respect of prior years (59) 192 Total current tax 689 649 Deferred tax Origination and reversal of timing differences UK tax (472) (127) Foreign tax 338 208 Total deferred tax (134) 81 Tax on ordinary activities 555 730 4. Dividends 2003 2002 £'000 £'000 Final dividend proposed of 0.20p per share (2002 - 0.20p per share) 202 205 5. Earnings per Ordinary Share Earnings per share is calculated by reference to a weighted average of 101,238,000 (2002 - 101,757,000) ordinary shares in issue throughout the year (excluding the shares held by the Employees' Share Ownership Plan) and on the loss for the financial year of £3,926,000 (2002 - profit of £413,000). Diluted earnings per share is after taking account of a further 620,000 (2002 - nil) shares being the dilutive effect of share options. Earnings per share before goodwill, exceptional items and discontinued activities excludes after tax amounts relating to goodwill and exceptional items of £4,893,000 (2002 - £1,472,000). At the date of issue of the report the total number of shares in issue were 102,073,000. Basic Diluted Basic Diluted 2003 2003 2002 2002 Basic and diluted (loss)/earnings per share (3.88)p (3.85)p 0.41p 0.41p Adjustment for goodwill and exceptional items 4.84p 4.80p 1.44p 1.44p Basic and diluted earnings per share before goodwill and exceptional items 0.96p 0.95p 1.85p 1.85p 6. Notes to the Statement of Cash Flows (a) Reconciliation of operating profit to net cash inflow from operating activities Total Total 2003 2002 £'000 £'000 Operating (loss)/profit (2,876) 2,063 Depreciation 1,519 929 Amortisation of goodwill 1,167 1,170 Provision against investments - 13 Loss on sale of fixed assets 35 12 Decrease in stocks 2,399 348 Decrease in debtors 4,388 1,186 Increase in creditors 3,462 969 Increase/(decrease) in provisions 1,730 (767) Net cash inflow from operating activities 11,824 5,923 (b) Analysis of net debt At Exchange At January 1, Cash flow movements December 31, 2003 2003 £'000 £'000 £'000 £'000 Cash at bank and in hand 4,189 5,609 (258) 9,540 Loans (9,174) 3,331 - (5,843) (4,985) 8,940 (258) 3,697 7. Directors Responsibilities The financial information for the year ended December 31, 2003 has been extracted from the full accounts of the Group, which contain an unqualified audit report and will be filed, in due course, with Companies House. The auditors have reported on those accounts; their report was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. 8. Report and Accounts Copies of the Report and Accounts will be sent to shareholders in due course and will then be available from the registered office at Marlborough House, Charnham Lane, Hungerford, Berkshire, RG17 0EY. This information is provided by RNS The company news service from the London Stock Exchange

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