Interim Results

Eurolink Managed Services PLC 10 December 2001 EUROLINK MANAGED SERVICES PLC Interim Statement for the six months ended 30 September 2001 Chairman's Statement Introduction and Business Review In my August statement I stated that the Group will be well placed to achieve revenue growth in the second half of the year after bearing the additional infrastructure and personnel costs put in place, in anticipation of that growth. I am pleased to report that, despite world events and a weak IT market we are set to achieve this objective, with business activity improving significantly as we go into the second half. Several new clients have been introduced during the first half with anticipated long term business and as I write this report we are increasing our chargeable staff by over 15% with new project work gained. We believe our strategy to preserve the investment in infrastructure, particularly on the personnel side, which has been developed over the last two years or so, is proving beneficial to gaining this additional business as we move forward. In this first six months, turnover has increased slightly, although a changing mix of project work from clients has resulted in a lower gross margin this period. This, together with the increase in sales personnel and marketing costs, the benefits of which are yet to be realised, has, as expected, impacted the figures for the first six months. The Group has capacity to accommodate a further significant increase in chargeable staff without increasing infrastructure costs and the Group maintained some £0.37 million cash in hand at the period end in readiness for the increased working capital requirements in this next period. Results Turnover for the period was £4.13 million (2000 £4.03 million), with operating profit at £0.03 million (2000 £0.20 million). The introduction of FRS 19 on the treatment of deferred taxation has resulted in a tax charge considerably in excess of the profit for the period and consequently there is a loss per share of 0.38p (2000 earnings of 1.16p). Outlook Whilst noting the general market sentiment towards the IT sector, we have a positive outlook on the second half on the basis of new business already gained and on the quality of the pipeline of opportunities being developed. We are confident of being well positioned to further increase revenues and profits when markets recover generally. David Wood Chairman 7 December 2001 Group profit and loss account for the six months ended 30 September 2001 Audited Unaudited six twelve months to 30 September months to 2001 2000 31 March 2001 £'000 £'000 £'000 Turnover 4,131 4,027 8,269 Cost of sales (3,247) (3,082) (6,292) -------- -------- ------- Gross profit 884 945 1,977 Administrative expenses (855) (749) (1,514) -------- ------- -------- Operating profit 29 196 463 Net interest payable (22) (23) (73) -------- -------- -------- Profit on ordinary activities 7 173 390 before taxation Taxation on profit from ordinary activities (47) (52) (123) (note 2) -------- --------- -------- (Loss)/Profit for the financial period (40) 121 267 --------- --------- --------- Earnings per share basic and diluted (0.38)p 1.16p 2.57p ===== ===== ===== All disclosures relate only to continuing operations. There are no recognised gains or losses other than the (loss)/profit for the period. Group balance sheet at 30 September 2001 Unaudited Audited 30 September 30 31 March September 2001 2000 2001 £'000 £'000 £'000 Fixed assets Tangible assets 326 453 382 Current assets Gross debtors 1,754 2,475 1,823 Less advances received (618) (897) (431) --------- --------- --------- Debtors 1,136 1,578 1,392 Cash at bank and in hand 379 6 211 -------- --------- --------- 1,515 1,584 1,603 Creditors: amounts falling due (1,009) (1,196) (1,091) within one year -------- --------- --------- Net current assets 506 388 512 -------- --------- -------- Total assets less current liabilities 832 841 894 Creditors: amounts falling due after more (30) (128) (85) than one year Provisions for liabilities and charges (33) - - -------- -------- -------- 769 713 809 ===== ===== ===== Capital and reserves Called up share capital 208 208 208 Share premium account 72 122 72 Profit and loss account 489 383 529 -------- -------- -------- Equity shareholders' funds 769 713 809 ===== ===== ===== Approved by the Board on 7 December 2001 David Wood Chairman Group cash flow statement for the six months ended 30 September 2001 Unaudited six Audited months to twelve 30 30 months to September September 31 March 2001 2000 2001 £'000 £'000 £'000 Net cash inflow from operating activities 351 64 428 Returns on investments and servicing of finance Interest paid Interest paid (22) (23) (73) UK corporation tax (93) (61) (107) Net capital expenditure and financial investment 8 (197) (165) -------- -------- -------- Net cash inflow/(outflow) before financing 244 (217) 83 -------- --------- --------- Financing Repayment of capital element of finance lease (76) (23) (65) contracts -------- -------- -------- Net cash outflow from financing (76) (23) (65) -------- -------- -------- Increase/(Decrease) in cash in the period 168 (240) 18 ===== ===== ===== Reconciliation of operating profit to net cash flow from operating activities Operating profit 29 196 463 Depreciation charges 36 34 77 Loss on sale of tangible fixed assets 12 10 6 Decrease/(Increase) in debtors 256 (392) (206) Increase in creditors 18 216 88 -------- -------- -------- Net cash inflow from operating activities 351 64 428 -------- -------- -------- Reconciliation of net cash flow to movement in net debt Opening net funds 47 63 63 Increase/(Decrease) in cash in year 168 (240) 18 Capital element of finance leases and hire 76 23 65 purchase contracts New finance lease and hire purchase contracts - (98) (99) -------- -------- -------- Closing net funds/(debt) 291 (252) 47 -------- -------- -------- Notes to the interim statement 1. Preparation of interim report The financial information for the six month period ended 30 September 2001 is unaudited and does not constitute statutory accounts within the meaning of the Companies Act 1985. Except for the change in accounting for deferred tax, the accounts have been prepared using accounting policies consistent with those set out in the Group's statutory accounts for the period ended 31 March 2001. Following the introduction of FRS 19, Deferred tax, full provision is made for deferred tax assets and liabilities arising from timing differences between recognition of gains and losses in the financial statements and their recognition in a tax computation. There are no material prior period adjustments arising from the application of FRS 19. The financial information for the period ended 31 March 2001 has been extracted from the statutory accounts of Eurolink Managed Services plc which contained an unqualified audit report and which have been filed with the Registrar of Companies. 2. Tax Unaudited Unaudited Audited six months to six months to twelve months to 30 September 30 September 31 March 2001 2000 2001 £'000 £'000 £'000 United Kingdom corporation tax 14 52 123 Deferred tax 33 - - -------- -------- -------- 47 52 123 -------- -------- -------- 3. Earnings per share The calculation of basic (loss)/earnings per ordinary share is based on a (loss)/profit on ordinary activities after taxation of £(40,000) (September 2000: £121,000; March 2001: £267,000). The weighted average number of shares in issue during the year and throughout the previous year was 10,400,000. There is no difference between the basic and fully diluted (loss)/profit per share. 4. Share options Notional gains on options in issue under the companies share option scheme are subject to national insurance costs. At 30 September 2001 no provision was required. 5. Copies of report The Interim Report will be posted to all shareholders and will be available on request from the Company Secretary, Queen Square House, 15 Queen Square, Brighton, BN1 3FD for a period of one month from the date of this announcement. INDEPENDENT REVIEW REPORT TO EUROLINK MANAGED SERVICES PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 September 2001 on pages 2 to 4. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the directors. Where a company is fully listed, the directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. The directors of Eurolink Managed Services plc have voluntarily complied with this requirement in preparing the interim review report. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom by auditors of fully listed companies. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2001. BDO STOY HAYWARD Chartered Accountants Brighton 7 December 2001

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