Final Results

Eckoh Technologies PLC 01 June 2004 1 June 2004 Eckoh Technologies plc Preliminary announcement "Significant increase in Speech Solutions turnover and new contracts announced" Highlights of the Year 6 months ended 6 months ended Year ended Year ended 30 Sept 2003 31 March 2004 31 March 2004 31 March 2003 (£'000) Turnover 25,665 36,839 62,504 55,085 Continuing operations 21,788 20,641 42,429 42,332 Acquisitions 2,086 15,674 17,760 - Total continuing operations 23,874 36,315 60,189 42,332 Discontinued operations 1,791 524 2,315 12,753 Operating (loss)/profit* (708) 125 (583) (159) Operating loss (1,031) (1,422) (2,453) (7,472) (Loss)/profit before taxation (1,294) 197 (1,097) (9,082) Cash and short-term investments 10,239 11,985 * before intangible asset amortisation and impairment and restructure costs Twelve months ended 31 March 2004 • Total turnover up 13% to £62.5m (2003 - £55.1m) - includes £17.8m from acquisitions • Reduction in operating loss* from continuing operations to £0.6m (2003 - £1.9m) • Pre-tax losses reduced by £8.0m to £1.1m • Speech Solutions turnover up 59% to £3.2m, gross profit up 86% to £1.7m with margins increasing to 53% (2003 - 46%) • Successful acquisition and integration of Intelliplus Group plc ("Intelliplus") • £10.2m of cash and short-term investments at year-end • EBITDA before exceptional items and restructuring costs of £0.8m (2003 - £1.2m) Six months ended 31 March 2004 • Operating profit* of £0.1m compared to £0.7m loss in H1 • Speech Solutions turnover up 86% to £1.8m from H2 2003 • Disposal of trade investment in Rivals Digital Media Limited to UK Betting plc for £0.7m • Exceptional gain of £0.6m on settlement of loan acquired with Intelliplus • EBITDA before exceptional items and restructuring costs of £0.7m (2003 - £0.7m) • Extension of exclusive BT speech alliance to December 2006 • Appointed as IVR telephony partner to ITV from March 2004 • Won £6m of new Speech Solutions business over 3 years Current Developments • Eckoh/BT speech alliance announced 3-year speech contract with UGC Cinemas in April 2004 • Delivered speech recognition based cinema information service to Vue (formerly Warner Village Cinemas) during May 2004 • Agreement to deliver a speech-enabled share price service to the London Stock Exchange from June 2004 Martin Turner, Chief Executive Officer, commented today: "The acquisition of Intelliplus in September helped second half turnover rise to £36.8m, with annualised call volumes in the group doubling year-on-year to over 500 million minutes. Eckoh made a profit before tax and goodwill charges of £284,000 for the year and generated a positive cash flow from its operating activities. These results are in line with market expectations. Our speech division continues to make excellent progress with significantly increased revenues and margin. We recently announced a 3-year contract with UGC Cinemas and today we are pleased to announce the delivery of a new speech-driven information and cinema ticket booking service for Vue and an agreement with the London Stock Exchange to supply a speech-enabled share price service. Last December we extended our partnership with BT until 2006 and we can report a strengthening pipeline of new and prospective business from both the BT channel and our direct sales as we move into the new financial year." For further enquiries, please contact Eckoh Technologies plc Martin Turner, Chief Executive Officer Nik Philpot, Chief Operating Officer Brian McArthur Muscroft, Group Finance Director www.eckoh.com Tel: 01442 458 355 Buchanan Communications Jeremy Garcia Tel: 020 7466 5000 Operating Review Interactive Services Speech Solutions Division The Speech Solutions division enjoyed a year of excellent growth delivering sales of £3.2m, a 59% increase on last year, with the second half delivering revenues of £1.8m an 86% increase on the same period last year. We achieved this by a combination of successfully nurturing key existing relationships and providing a number of high profile clients with market leading speech applications. Coming into the new financial year we are excited about the sales prospects as the market opportunity for delivering hosted speech solutions appears to be expanding as potential customers become better informed of the benefits the technology could bring to their businesses. We have seen advanced speech recognition ("ASR") becoming established as a mainstream technology within UK call and contact centres, and a key component of front-end automation including stand-alone "self-service" applications. Call centre operations are under mounting pressure to reduce costs, increase efficiency and deliver improved levels of customer service. We believe that a combination of front-end automation, self-service applications and smaller teams of live agents is the way forward for UK call centres, particularly those handling front-line customer service, and we are well placed to capitalise on these requirements. Our relationship with BT has gone from strength to strength and in December 2003 we extended the exclusive alliance for a further two years to the end of 2006. We delivered speech solutions to two major BT clients last year - TD Waterhouse and UGC Cinemas. We are confident that we can build on this early success with an expected increase in the number of implementations this coming year. We have also achieved excellent client wins through our direct sales efforts. The RNIB Talking Books and Product Ordering Services were commissioned and delivered, and our existing client, Auctionworld, has recently launched a new live-to-air channel called Chase It on Sky for which we have delivered a new end-to-end telephone bidding solution. The William Hill service continues to grow in usage and capability, consolidating their position as one of the world's leading bookmakers. Today we are pleased to announce two new client wins. A second major cinema chain, Vue (formerly Warner Village Cinemas), has recently gone live with an automated film information and ticket-booking service and we have secured an agreement with the London Stock Exchange to provide a speech-enabled real time share quote service covering all FTSE and AIM companies. We have continued to grow our hosting platform size and capability, particularly with the implementation of increased capacity into a BT hosting facility. Our overall capacity is now in excess of 8,000 lines - 5,000 of which have speech recognition capability. This makes our speech platform one of the largest worldwide. Our order pipeline continues to strengthen and, based on contracted business, we are confident of good progress next year. IVR Division Eckoh's IVR division, trading as Eckoh Communications, is now one of the largest IVR and SMS providers in the UK, with second half turnover exceeding £22m. We offer a wide range of traditional touch-tone and SMS services to the broad media sector. Such services include mass-market voting applications for audience participation TV shows, entertainment services and phone-based competitions. The division continues to generate significant cash flows for the group as a whole. Last year we said we would seek ways to increase our share of call termination payments in order to protect our gross margins and remain competitive. In September 2003 this was achieved through the acquisition of Intelliplus, which provided us with a fully switched network infrastructure under a Managed Service agreement with BT Wholesale. Since then we have been working hard to integrate the two IVR operations under the Eckoh brand, streamline management and create a business capable of achieving profitable growth in the competitive media market. Under the management of Paul Parry, this has progressed well, with the enlarged operation now run from a single location in Hemel Hempstead. We work with a number of prominent media owners such as ITV, the BBC, EMAP, Johnston Press and Northcliffe Newspapers. The services we deliver range from simple high volume voting applications through to sophisticated services such as the recent Who Wants To Be A Millionaire telephone game. The highlight of the year was being appointed as ITV's preferred provider of telephony services in January 2004. The merger of Granada and Carlton meant that ITV for the first time were able to tender for service across all its key formats and we believe that this new contract is the single biggest in the media market. This contract commenced in March 2004 and covers existing formats such as This Morning, CiTV, Stars in their Eyes and Trisha as well as new shows like Speed Sunday and Hell's Kitchen. We have developed a versatile reporting tool for broadcasters called VISTA (Viewer Interaction Statistical Analysis) which collects and aggregates data in real time from a variety of sources such as fixed line, mobile and interactive television. This allows production teams, and in particular those working on live shows, instant access to viewer's responses, which can then be fed back to the viewers on screen using a variety of graphics. VISTA has already been used by ITV on live shows like "Stars in their Eyes". We also provide number ranges, connectivity and hosting to third party IVR service providers and while associated volumes of switched telephone traffic can be high, margins are typically low. Nevertheless, service provider traffic utilises spare capacity on our network, and makes a valuable contribution towards minimum commitment levels under our service contract with BT. Finally we market various entertainment services in our own right and in July participated in the re-launch of L!VE TV on Sky Digital Television. L!VE provides us with a flexible and low cost environment to test, promote and showcase our interactive products and services. Convergence Together, our Speech and IVR divisions offer: • High volume call handling capability • Intelligent call management and routing • Hosted speech and advanced IVR solutions • Integration into live agent and CRM environments Both divisions already share common technical resources, including our call processing platform and network connectivity. Over the next twelve months we expect to see increased convergence as we more vigorously cross-sell our products. Many of our traditional IVR media clients are seeking more innovative interactive services, including those using advanced speech recognition technology, and from these more complex applications we can generate higher gross margins and differentiate ourselves in the market. Network Services Eckoh's Network Services division is a leading independent reseller of telecommunications and data products to SMEs in the UK and Ireland and now includes both Symphony Telecom and Intelliplus' Freecom business. Freecom has built a successful business selling a full range of complementary internet products and data services, including web-site design, e-commerce solutions, hosting and search engine optimisation. The operation (including outbound telesales) is based in Warrington, with a second office in Birmingham. The division's strategy remains one of selling a broad product portfolio as a " one-stop-shop" service provider, via established distribution channels. The acquisition of Freecom helped accelerate our move into internet and data service provision, and we now have an enlarged customer base of around 13,000 SMEs with significant planned cross-selling opportunities to be realised. We continue to expand our distribution capabilities to attract new business. This year we increased our dealer base and direct sales force, particularly in the area of wireless services, and also opened a new joint venture with an established hardware reseller. The enlarged division continues to grow, and is both profitable and cash generative with a total annual turnover of £22.8m in 2004, generating a gross margin of £7.4m. We are pursuing consolidation opportunities for Network Services, and have recently seen a number of significant transactions in the market at attractive valuations as network operators acquired resellers to secure downstream distribution into the SME market. We see this as a highly encouraging sign that confidence is returning to the traditional telecommunications market. Other Developments During the year we closed our consumer mobile wholesale operation, which last year generated over £2m of contribution to the group. Since last May, the consumer mobile phone market has become increasingly volatile and unpredictable. This is reflected in the significantly reduced level of trade in the first half of the year and therefore we decided to discontinue the operation and focus management time and attention on developing our core business. As part of a sale of Rivals Digital Media Ltd to UK Betting plc in December 2003, we received £0.7m for our 40% shareholding. Financial Review The Financial Results for the year reflect significant progress in the Speech Solutions division, solid operating performances from Eckoh's traditional IVR and Network Services businesses and the impact of the acquisition of Intelliplus Group plc and the closure of the Mobile Wholesale operation. Turnover and gross profit Group turnover for the year was £62.5m, an increase of 13% from last year (2003 - £55.1m). This includes turnover of £17.8m from Intelliplus since its acquisition in September 2003 and £2.3m (2003 - £11.8m) from the discontinued Mobile Wholesale operation. Excluding the acquisition and discontinued operations, turnover increased marginally to £42.4m from £42.3m last year. The Group generated a gross profit of £17.2m (2003 - £18.2m), representing a 28% gross margin (2003 - 33%) - the decrease largely reflecting the loss of the higher margin Mobile Wholesale operation and the acquisition of the lower margin Intelliplus business. The Speech Solutions division generated £3.2m of turnover during the year, up 59% from the previous year. Turnover is a combination of set-up charges, monthly maintenance fees and, in most cases, a share of end-user call revenues. Gross profit was up 86% to £1.7m from last year, with margins increasing to 53% (2003 - 46%). IVR turnover is generated either through the management of client traffic across a switched network infrastructure or by users accessing the Company's call-processing platform using a fixed line or mobile telephone. Turnover of £34.2m (2003 - £20.6m) includes £15.8m relating to Intelliplus. Excluding Intelliplus, turnover declined to £18.4m from £20.6m in 2003, following a delay between the expiry of the high turnover Granada contract in July 2003 and the launch of the enlarged ITV service in January 2004. However gross margin improved significantly to 29% from 26% as media spend in the own-brand market was reduced and the benefit of migrating own-brand traffic over the switched network was realised. Network Services turnover includes revenue generated by the Group's wholly-owned subsidiaries, Symphony Telecom and Freecom.net Limited (acquired as part of the Intelliplus transaction), and six 50%-owned joint ventures which are fully consolidated in the Group's financial statements in accordance with UK GAAP. The division has a SME customer base of approximately 13,000. Turnover, excluding Freecom, increased by 6% to £20.8m (2003 - £19.7m), whilst gross margin remained reasonably stable at 29% (2003 - 30%). Following a period of significant uncertainty in the consumer mobile market as the Mobile Network Operators adjusted their distribution strategies, in September 2003 the decision was made to exit this activity and focus management time and attention on the development of Eckoh's core businesses. Turnover of £2.3m was therefore significantly less than last year (2003 - £11.8m) and is disclosed as discontinued operations. Gross margin, which excludes commission expenditure, of 45% was generated up until its closure (2003 - 48%). Net operating expenses Net operating expenses consist of direct operating expenses, group overheads, restructuring costs and goodwill amortisation and impairment. Direct operating expenses are those costs directly related to operating activities and include selling and distribution costs and fixed asset depreciation. During the year £1.1m (2003 - £4.3m) of direct operating expenses were incurred in relation to the discontinued Mobile Wholesale division and £2.9m to Intelliplus. Excluding these costs, direct operating expenses increased by 11% to £10.4.m for the year (2003 - £9.4m). Group overheads include corporate costs, the cost of central support functions such as Finance and IT and head office costs. Through the continued drive for cost savings and efficiencies, group overheads have significantly reduced to £3.4m from £4.7m last year. The move to AIM and the share consolidation in 2003 have contributed to this reduction. Restructuring costs of £0.5m predominantly relate to the integration of Intelliplus into the Group and related restructuring of the IVR division. Intangible asset amortisation and impairment totalled £1.4m for the year (2003 - £7.3m). This predominantly relates this year to goodwill on acquisition of Intelliplus. Discontinued operations For the period up until closure, Mobile Wholesale made a loss of £18,000 (excluding closure costs) compared to a profit of £2.2m for last year. These results are disclosed as discontinued operations, with the loss on closure of £0.4m disclosed as an exceptional item below operating profit in the profit and loss account. Other operations discontinued in previous years generated nil profit during the year (2003 - loss of £0.5m). Gain on disposal of/(provision against) trade investment On 29 December 2003 Eckoh announced that it had disposed of its 40% trade investment in Rivals Digital Media Limited to UK Betting plc. Consideration of £0.7m was received - half in cash and half in UK Betting plc shares, which were subsequently disposed of. The resultant profit is disclosed as an exceptional gain in the profit and loss account. Due to uncertainty over its realisability, this investment had been written down to nil during the previous year. Discount on loan redemption At the time of acquisition Intelliplus held a 49% investment in the issued share capital of Avorta Limited ("Avorta"). On 24 December 2003 Eckoh acquired a further 44%, and on 31 January 2004 the remaining 7% of the issued share capital of Avorta from Systems Union plc and a former Director respectively. Total consideration of £0.7m was paid for the shares. Subsequent to acquiring the entire issued share capital a loan note between Avorta and Intelliplus Group plc was cancelled, resulting in a net gain of £0.6m which has been disclosed as an exceptional item. Operating Loss and Net Loss The operating loss for the year was £2.5m (2003 - £7.5m), which is after charging £1.4m of goodwill amortisation, predominantly in relation to the Intelliplus acquisition, and £0.5m of restructuring costs. Excluding goodwill amortisation and impairment and restructuring costs, Eckoh reduced operating losses from continuing operations to £0.5m for the year, from £1.9m in 2003. Intelliplus recorded a small operating loss for the period since its acquisition, with the synergies from the combined IVR businesses being reflected in continuing operations. The discontinued Mobile Wholesale business, which had generated a significant £2.2m operating profit in 2003 only managed a break-even result (before closure costs) for the year. Minority interests represent the interests of Eckoh's joint venture partners in the profit or loss of each joint venture company during the relevant accounting period. Minority interests are computed with reference to shares owned by the joint venture partners. The Company owns at least 50% of the voting shares in each joint venture company, and they are fully consolidated on the basis of the actual exercise of dominant influence. As at 31 March 2004, there were 6 active joint ventures (2003 - 6). Eckoh has incurred a cumulative net loss from trading operations since inception. Due to the uncertainty surrounding the future benefits of the net tax losses carried forward, the Group has not recognised a deferred tax asset. The Group recorded a loss of £1.0m (2003 - £9.1m), or 0.4p per share, for the year ended 31 March 2004 (2003 - 4.4p). Excluding the effect of intangible asset amortisation and impairment, restructuring costs and exceptional items, the adjusted loss for the year was £0.2m compared to an adjusted profit of £0.2m last year. Eckoh has never paid or declared a dividend. Second half results During the six months ended 31 March 2004, total continuing operations generated turnover of £36.3m (H2 2003 - £21.4m), a 26% gross margin (H2 2003 - 27%) and a £0.1m operating loss before goodwill amortisation and restructuring costs (H2 2003 - £0.9m). Speech Solutions turnover for the second half-year was £1.8m, up from £1.0m for the same period last year. Gross margin improved to 52% (H2 2003 - 39%). IVR turnover of £22.2m included £14.0m of Intelliplus turnover. The Intelliplus switch-based operation generates lower margins than Eckoh's traditional IVR products, which resulted in the blended IVR gross margin decreasing to 19% from 24% last year. Excluding Freecom, Network Services turnover of £10.6m was 9% higher than last year (H2 2003 - £9.7m), with margins unchanged at 29%. Freecom contributed a further £1.7m of turnover at a 70% margin. Balance sheet Equity shareholders' funds increased from £11.6m last year to £18.4m at the year-end. The increase mostly relates to the issue of 62,157,699 shares as consideration for Intelliplus. The premium on these shares has been credited to a merger reserve, which is being released to the profit and loss account in proportion to the associated goodwill amortisation. In August 2003 Eckoh undertook a share consolidation and subsequent share division, resulting in a significant reduction in the shareholder base. This has contributed towards annual corporate cost savings. In September 2003, following a successful court application, the balance on the share premium account at 31 March 2003 was cancelled, resulting in the transfer of £72.5m to distributable reserves. Net current assets of £6.8m at 31 March 2004 were £3.1m lower than last year, mainly as a result of the assumption of Intelliplus' significant net current liabilities, which totalled £2.7m on acquisition. Intangible fixed assets of £10.4m at the year-end (2003 - £0.1m) mainly consist of goodwill on the acquisition of Intelliplus. Share consideration totalling £7.7m was paid with a further £0.6m of deal-related costs being incurred. The fair value of the net liabilities acquired was £2.9m, resulting in goodwill on acquisition of £11.2m. The goodwill is being amortised over 5 years. Cash Flow Statement Eckoh's cash and short-term investment balances reduced from £12.0m to £10.2m during the year. The Group generated cash from its operating activities of £0.1m (2003 - outflow of £1.1m) Following the acquisition of Intelliplus there was a £2.1m cash outflow in respect of the repayment of loans and settlement of a factoring arrangement. Capital expenditure during the year totalled £0.5m (2003 - £1.4m), which included expenditure relating to the building of a speech-enabled call-processing platform and related infrastructure at BT's hosting centre in St Albans. The Intelliplus acquisition costs of £0.6m were offset by £0.7m net proceeds received from the disposal of the Rivals investment. Short-term investments generated £0.4m of interest (2003 - £0.4m). Outlook The new financial year has started well, with the group trading in line with our expectations. In particular, our recent announcements of substantial speech contracts with UGC and the London Stock Exchange and the launch of a self-service solution for Vue (Warner Village Cinemas) are very exciting developments, and serve to further validate our strategy in this area. Moving forward, we have a strong pipeline of new and prospective business and believe that this will continue to fill as major corporations appreciate the significant benefits that advanced speech recognition and self-service applications can bring to their customer contact strategies. Consolidated profit and loss account for the year ended 31 March 2004 Year Year ended ended 31 March 31 March 2004 2003 Note unaudited audited £'000 £'000 Turnover 62,504 55,085 Continuing operations 42,429 42,332 Acquisitions 17,760 - Total continuing operations 60,189 42,332 Discontinued operations 2,315 12,753 Cost of sales (45,333) (36,920) Gross profit 17,171 18,165 Net operating expenses before intangible asset amortisation and impairment (17,754) (18,324) and restructuring costs Amortisation of intangible assets (1,381) (1,657) Impairment of intangible assets - (5,656) Restructuring costs (489) - Net operating expenses (19,624) (25,637) Operating (loss)/profit before intangible asset amortisation and (583) (159) impairment and restructuring costs Continuing operations (533) (1,885) Acquisitions (32) - Total continuing operations (565) (1,885) Discontinued operations (18) 1,726 Operating (loss)/profit (2,453) (7,472) Continuing operations (924) (9,198) Acquisitions (1,511) - Total continuing operations (2,435) (9,198) Discontinued operations (18) 1,726 Gain on disposal of/(provision against) trade investment 662 (2,000) Loss on closure of discontinued operation (424) - Gain on disposal of hardware services operation 208 - Net interest receivable 357 390 Discount on loan redemption 553 - Loss on ordinary activities before taxation (1,097) (9,082) Taxation 73 (20) Loss on ordinary activities after taxation (1,024) (9,102) Minority interests (24) 19 Loss for the year (1,048) (9,083) (Loss)/earnings per ordinary share 2 Basic and diluted loss per share (0.4p) (4.4p) Basic and diluted (loss)/earnings per share before intangible asset (0.1p) 0.1p amortisation and impairment, restructuring costs and exceptional items Statement of total recognised gains and losses for the year ended 31 March 2004 Year Year ended ended 31 March 31 March 2004 2003 unaudited audited £'000 £'000 Loss for the year (1,048) (9,083) Exchange adjustments offset in reserves 37 75 Total recognised losses for the year (1,011) (9,008) Consolidated balance sheet as at 31 March 2004 31 March 2004 31 March 2003 unaudited audited Note £'000 £'000 Fixed assets Intangible fixed assets 10,422 100 Tangible fixed assets 1,729 1,980 12,151 2,080 Current assets Stock 62 687 Debtors 10,873 6,526 Investments - short term deposits 6,500 9,510 Cash at bank and in hand 3,739 2,475 21,174 19,198 Creditors: amounts falling due within one year (14,405) (9,333) Net current assets 6,769 9,865 Total assets less current liabilities 18,920 11,945 Creditors: amounts falling due after more than one year (59) (4) Provisions for liabilities and charges (454) (342) Net assets 18,407 11,599 Capital and reserves 3 Called up share capital 678 519 Shares to be issued - 38 Share premium account 122 72,461 Merger reserve 6,734 - Profit and loss account 10,839 (61,429) Total equity shareholders' funds 4 18,373 11,589 Minority interests 34 10 Capital employed 18,407 11,599 Consolidated cash flow statement for the year ended 31 March 2004 Year Year ended ended 31 March 31 March 2004 2003 unaudited audited Note £'000 £'000 Net cash inflow/(outflow) from operating activities 5 130 (1,109) Return on investments and servicing of finance Net interest 357 411 Taxation 87 121 Capital expenditure and financial investment Purchase of tangible fixed assets (474) (1,350) Expenditure on intangible fixed assets (57) - Proceeds from sale of tangible fixed assets - 10 Disposal of trade investment 662 - 131 (1,340) Acquisitions and disposals Consideration received/(paid) in respect of prior period disposals/acquisitions - (637) Refund of consideration paid in respect of prior year acquisitions - 500 Purchase of subsidiary undertaking (616) - Net cash acquired with subsidiary undertakings 149 - (467) (137) Cash inflow/(outflow) before use of liquid resources and financing 238 (2,054) Management of liquid resources Decrease in short-term investments 3,010 990 Financing Issue of shares 126 5 Share issue costs - (7) Loan repayments (2,071) - Capital element of finance lease payments (39) (59) (1,984) (61) Increase/(decrease) in cash in the year 1,264 (1,125) Notes to the preliminary results 1. Basis of preparation The financial statements for the year ended 31 March 2004 have been prepared using accounting policies consistent with those set out in the Company's consolidated 2003 statutory accounts. These statements do not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 and are unaudited. Financial information for the year ended 31 March 2004 has been extracted from the accounting records of the Group. The balances and results as at 31 March 2003 have been extracted from the statutory accounts, which have been filed with the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985. The preliminary results for the year ended 31 March 2004 were approved by the Board on 28 May 2004 and will be posted on the Company's web site, www.eckoh.com, on 1 June 2004. 2. Earnings/(loss) per ordinary share of 0.25p each Year Year ended ended 31 March 31 March 2004 2003 £'000 £'000 (Loss)/profit for the year before the following: (177) 230 Intangible asset amortisation and impairment (1,381) (7,313) Restructuring costs (489) - Loss on closure of discontinued operation (424) - Gain on disposal of hardware services operation 208 - Discount on loan redemption 553 - Gain on disposal/(provision against) trade investment 662 (2,000) Profit/(loss) for the year (1,048) (9,083) Weighted average number of shares in the year: Basic and diluted 237,801,055 207,188,362 The dilutive effect of share options in issue and shares to be issued is not material enough to impact on the disclosed earnings per share for the year ended 31 March 2004. In addition no dilution of losses per share will arise due to losses in the year. 3. Share capital and reserves Ordinary Shares to Share Merger Profit share be issued premium reserve and loss capital account account £'000 £'000 £'000 £'000 £'000 At 1 April 2003 519 38 72,461 - (61,429) Loss for the year - - - - (1,048) Net exchange adjustments - - - - 37 Cancellation of share premium account - - (72,461) - 72,461 Shares issued in connection with the acquisition of 155 - - 7,552 - a subsidiary undertaking Shares issued under the share option schemes 4 - 122 - - Movement in fair value of contingent share - (38) - - - consideration for acquisitions in prior years Realisation of merger reserve - - (818) 818 At 31 March 2004 678 - 122 6,734 10,839 4. Reconciliation of movement in equity shareholders' funds Year Year ended ended 31 March 31 March 2004 2003 £'000 £'000 Opening equity shareholders' funds 11,589 20,676 Loss for the year (1,048) (9,083) Share consideration for acquisition of subsidiary undertaking 7,707 - Net movement in contingent share consideration (38) (77) Employee share options exercised 126 5 Share issue costs charged to share premium account - (7) Exchange adjustments offset in reserves 37 75 Closing equity shareholders' funds 18,373 11,589 5. Net cash inflow/(outflow) from operating activities Year Year ended ended 31 March 31 March 2004 2003 £'000 £'000 Operating loss (2,453) (7,472) Depreciation and impairment of tangible fixed assets 1,339 1,327 Amortisation and impairment of intangible fixed assets 1,381 7,313 Decrease/(increase) in stock 625 (186) Decrease in debtors 598 2,866 Decrease in creditors/provisions (1,412) (4,952) Loss/(gain) on disposal of tangible fixed assets 52 (5) 130 (1,109) This information is provided by RNS The company news service from the London Stock Exchange

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