Final Results

Eurolink Managed Services PLC 27 May 2004 To be embargoed, not to be released until 7.00am 27 May, 2004 Eurolink Managed Services Plc ('the Group' or 'the Company') Preliminary Results for the year ending 31st March 2004 Chairman's Statement Introduction and Results The results for the year ending 31st March 2004 are in line with our expectations. Turnover for the year was lower at £7.36m (2003 - £9.15m) and the pre-tax loss for the year was £196,000 (2003 - £204,000 profit), which included exceptional items of £68,570. The Group was able to respond quickly to lowered revenues by reducing overheads which enabled us to achieve a modest profit in the last 3 months of the year. Your Directors are not proposing the payment of a dividend. Business Review The Group continued to receive good levels of business from its major clients throughout the year, based on continued excellence in delivered software, timely delivery and strong control of development budgets. As a result of this track record and following protracted negotiations, earlier this year (as previously announced), the Group secured a 3-year contract with one of its major clients, Northern Rock plc. This is the largest single contract awarded to the Group since its formation. The anticipated downturn in 'old technology' projects has been compensated by a steady growth in the new technology areas. However, the Group infrastructure has been generally under-utilised throughout the year, due to a lack of fully outsourced projects. The challenges in the second half of the year have been to maximise the profitability of retained business and to minimise costs whilst ensuring the Group retains the ability to respond to new business opportunities. Optimised staffing levels and reduced operational costs leave the Group well positioned for the coming year. Outlook The Northern Rock Plc contract, mentioned above, provides the Group with an excellent foundation for growth in the current year. Long-term contracts already in place will enable us to optimise staff levels and minimise overheads. Despite significant challenges remaining in a highly competitive and price sensitive market sector, the Board is confident that the Group is in a position to produce improved results in the coming year. The first half of the current year has started well, with increased levels of committed business, a number of prospective projects in the pipeline and the full benefits of a reduced cost base being realised. There are good indications that there will be growth in both old and new technology projects in this period. The Group will be concentrating on a number of sales initiatives to ensure that these levels of business will be maintained or expanded in the second half of the year. In particular, the focus will be on new client development and growth. I should like to take this opportunity to thank David Wood and all his colleagues for all their hard work in achieving this improved base from which the Company can grow. I should also like to thank my colleagues on the Board and our Advisors for their helpful and constructive advice. Consolidated Profit and Loss Account for the year ended 31st March 2004 Note 2004 2003 £'000 £'000 Group Turnover 7,365 9,152 Cost of sales 5,833 7,106 ---------- --------- Gross Profit 1,532 2,046 Administrative expenses 1,694 1,792 ---------- --------- Operating (loss)/profit (162) 254 Interest receivable - 1 Interest payable and similar charges (34) (51) ---------- --------- (Loss)/profit on ordinary activities before taxation (196) 204 Taxation 2 (54) 77 ---------- --------- Retained (loss)/profit for the financial year (142) 127 ========== ========= (Loss)/earnings per share (pence) - basic and diluted 3 (1.36) 1.22 ========== ========= Consolidated Balance Sheet as at 31st March 2004 2004 2003 £'000 £'000 Fixed assets 208 256 -------- -------- Tangible assets Current assets 1,938 2,368 Debtors - 3 -------- -------- Cash at bank 1,938 2,371 Creditors: amounts falling due within one year 1,253 1,585 -------- -------- Net Current assets 685 786 -------- -------- Total assets less current liabilities 893 1,042 Provisions for liabilties and charges Deferred taxation 19 26 -------- -------- 874 1,016 ======== ======== Capital and reserves Called up equity share capital 208 208 Share premium account 103 103 Profit and loss account 563 705 -------- -------- Shareholders' funds 874 1,016 ======== ======== Consolidated Cash Flow Statement for the year ended 31st March 2004 Note 2004 2003 £'000 £'000 Net cash flow from operating activities A 283 (572) Returns on investments and servicing of finance B (34) (50) Taxation B (65) (63) Capital expenditure and financial investment B (29) (23) ---------- --------- Cash inflow/(outflow) before financing 155 (708) Financing B (13) (43) ---------- --------- Increase/(decrease) in cash in the period 142 (751) ========== ========= Reconciliation of net cash flow to movement in net debt 2004 2003 £'000 £'000 Increase/(decrease) in cash in the period 142 (751) Cash outflow in respect of hire purchase 13 43 ---------- --------- Change in net debt C 155 (708) Net debt at 1st April 2003 (346) 362 ---------- --------- Net debt at 31st March 2004 (191) (346) ========== ========= Notes to the Cash Flow Statement A. Reconciliation of operating (loss)/profit to net cash (outflow)/inflow from operating activities 2004 2003 £'000 £'000 Operating (loss)/profit (162) 254 Depreciation 62 64 Loss on disposal fixed assets 15 - Decrease/(increase) in debtors 474 (438) Decrease in creditors (106) (452) ---------- ---------- Net cash inflow/(outflow) from operating activities 283 (572) ========== ========== B. Analysis of cash flows for headings netted in the cash flow Returns on investment and servicing of finance 2004 2003 £000 £000 Interest received - 1 Interest paid (31) (45) Interest element of hire purchase (3) (6) ---------- ---------- Net cash outflow from returns on investments and servicing of finance (34) (50) ========== ========== Taxation 2004 2003 £000 £000 Taxation (65) (63) ========== ========== Capital expenditure 2004 2003 £000 £000 Payments to acquire tangible fixed assets (29) (23) ---------- ---------- Net cash outflow from capital expenditure (29) (23) ========== ========== Financing 2004 2003 £000 £000 Capital element of hire purchase (13) (43) ---------- ---------- Net cash outflow from financing (13) (43) ========== ========== C. Analysis of net debt At Cash flows At 1st April 31st March 2003 2004 £000 £000 £000 Cash in hand and at bank 3 (3) - Overdrafts (336) 145 (191) --------- ---------- ---------- (333) 142 (191) --------- ---------- ---------- Hire purchase agreements (13) 13 - --------- ---------- ---------- Total (346) 155 (191) ========= ========== ========== Notes to the Preliminary Results 1. Publication of non-statutory accounts The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985 The financial statements for the year ended 31 March 2004 have been extracted from the Group's financial statements to that date which have received an unqualified auditor's report but have not yet been delivered to the Registrar of Companies. 2. Tax on (loss)/profit on ordinary activities (a) Analysis of charge in the year 2004 2003 £000 £000 Current tax: In respect of the year: UK Corporation tax based on the results for the year at 30% (2003 - 30%) (44) 85 Over provision in prior year (3) (4) -------- -------- Total current tax (47) 81 Deferred tax: Decrease in deferred tax provision Capital allowances (7) (4) -------- -------- Tax on (loss)/profit on ordinary activities (54) 77 ======== ======== (b) Factors affecting current tax charge The tax assessed on the (loss)/profit on ordinary activities for the year is higher than the standard rate of corporation tax in the UK of 30% (2003 - 30%). 2004 2003 £000 £000 (Loss)/profit on ordinary activities before taxation (196) 204 ======== ======== (Loss)/profit on ordinary activities multiplied by the standard (59) 61 rate of tax Expenses not deductible for tax 10 21 Depreciation for period in excess of capital allowances 8 3 Adjustments in respect of prior periods (3) (4) Marginal rate relief (3) - -------- -------- Total current tax (47) 81 ======== ======== 3. Earnings per Share 2004 2003 pence pence (Loss)/earnings per ordinary share - basic and diluted (1.36) 1.22 ======== ======== Earnings per share have been calculated on the net basis on the loss/profit on ordinary activities after taxation of £(142,000) (2003 - £127,000) using the average number of ordinary shares in issue of 10,400,000 (2003 - 10,400,000)). The share options are non-dilutive. 4. Copies of the Report and Accounts will be sent to shareholders in due course and will be available from the head office of the Company, Eurolink Managed Services Plc, Queen Square House,15 Queen Square, Brighton BN1 3FD Further Enquiries: Eurolink Managed Services Plc David Wood Tel: 01273 200100 John East & Partners Limited Jeffrey Coburn Simon Clements Tel: 020 7628 2200 This information is provided by RNS The company news service from the London Stock Exchange

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