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Datrontech Group PLC (DTR)

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Wednesday 15 September, 1999

Datrontech Group PLC

Interim Results

DATRONTECH GROUP PLC
15 September 1999
                       DATRONTECH GROUP PLC
                       
                        Interim Statement
                 for the period to 4 July 1999

RESULTS

The results for the half-year were very disappointing.

The loss before tax and exceptional items of £700,000
includes trading losses of £922,000 from the Group's
Eastern European companies.  Trading in these companies
deteriorated in the second quarter after early signs of
some improvement and as a result the Board has decided to
run down and close these companies, with the exception of
PC Direct in Poland which remains profitable.  The
additional total costs of closure, not included in these
accounts, are estimated to be in the range of £2-2.5m plus
a write off of goodwill of £737,000.

In the UK trading was mixed.  Summits performance was
unsatisfactory and it traded at a loss in the first few
months of the year.  The operation at Colchester was closed
in May and the companys operations have been transferred
to Basingstoke.  As a result the administration costs of
the company have been substantially reduced due to the
sharing of facilities and support staff with our other
Basingstoke companies.  A new General Manager has been
appointed who joined Summit on 6 September.  The company
has been repositioned in the storage market and the costs
of closure, staff redundancies and provisions for stocks of
discontinued lines and some bad debts totalling £1,654,000
are included in the exceptional items.

The loss of £1,232,000 on disposal of a subsidiary
undertaking is the loss on the disposal of RDT, which
includes a write-back of goodwill of £2.6m and therefore
has a positive impact on shareholders funds.

The shareholders funds at 4 July 1999 of £3,589,000 were
relatively unchanged compared with 4 January 1999 at
£3,702,000.  Operational cash flow for the half-year was
positive at £3,245,000 compared to an outflow of £2,116,000
for the same period in 1998.  Net bank debt reduced by
£2,574,000 to £15,551,000 at 4 July 1999 with total net
interest bearing debt reduced by £4,051,000 to £20,874,000
at 4 July 1999.

The Directors recommend that no dividend be paid.

COMMENTS ON TRADING

Following the sale of RDT and the closure of the Central
European companies the Group will comprise the UK companies
based at Basingstoke, ICP in the Netherlands, C Connect in
Switzerland and PC Direct in Poland.

In common with many competitors, trading in quarter 1 was
more buoyant than in quarter 2.  Most of the drop in sales
compared with the corresponding period in 1998 is a result
of disposals.  The sale of RDT, Xenon and Datrontech Hong
Kong accounts for £18.4m of the total drop in sales of
£21.1m.  In the remaining companies, Data Connectivity and
Datrontech Retail both achieved sales growth offset by a
drop in Datrontech UK arising from a change in a major
suppliers marketing policies and small reduction in sales
in Summit and the European Companies.  There is
considerable uncertainty in the industry about the
potential effect of Year 2000 on demand from Datrontechs
main market - the small company sector.
Nevertheless our remaining companies are sound and should
be capable of yielding improving results in the future.


FUTURE DIRECTION OF THE GROUP

The overall strategy is to create a group with sound growth
prospects, which is well managed and financially stable.
Particular priority will be given to cash generation and
the strengthening of the balance sheet.  This will almost
certainly mean a further reduction in the scale of the
Groups activities to further strengthen its finances
before growth can be resumed.  Priority will also be given
to profit growth by ensuring that costs are reduced in line
with the reduced scale of the Group as well as by a focus
on higher margin business.

The Groups bankers agree with the Boards strategy and
continue to give the Group their full support.


MANAGEMENT

Philip Congdon, Group Financial Director, has resigned his
Board position but he will work with the Group for the time
being to ensure a smooth hand-over to his successor and to
assist on a number of specific projects.  David Holloway,
who has experience with a number of public companies, is
appointed as Group Financial Director with effect from 15
September 1999.

The Board join with me in expressing to Philip our good
wishes for the future.


CONCLUSION

The programme of reducing the size of the Group is designed
to establish a sound base as a precursor to re-establishing
sustained profit growth.  The first task of the executive
will be to complete this process of restructuring.  The
Board appreciates the support of its shareholders and it
believes that the changes it is making represent the best
way forward for the Group.



Enquiries:

Ray Way, Chairman                         01256 360044
Mark Mulford, Chief Executive Officer     01256 360044

Tim Anderson                              0171 466 5000
Buchanan Communications  





Consolidated Profit and Loss Account

                           
                                26 weeks           26 weeks   Period 
                               to 4 July          to 5 July   ended 
                                    1999               1999   4 
                                                             January
                                                              1999  
                                                                      
                        
                     Before    Exceptional  Total
                  exceptional  items
                     items                    
                                                                          
                       £'000     £'000     £'000     £'000     £'000
Turnover                                                                  
Continuing ops.     111,075         -   111,075    115,503  242,639
Discontinued          1,704         -     1,704    18,429    22,416
                   ---------    ------   -------    -------  -------
                    112,779         -   112,779    133,932  265,055
Cost of sales      (100,259)   (1,049) (101,308)  (118,561)(235,008)
                   ---------    ------   -------    -------  -------           
                         
Gross profit (loss)  12,520    (1,049)   11,471     15,371   30,047
Operating expenses  (12,484)     (605)  (13,089)   (12,351) (26,882)
                              
                                                                          
Operating (loss) profit                                                   
Continuing operations  (123)   (1,654)   (1,777)     2,050    2,734
Discontinued            159         -       159        970      431
                       ------   ------    ------     ------  ------
                         36    (1,654)   (1,618)     3,020    3,165
(Loss) profit on                                                          
disposal of subsidiary        
undertaking               -    (1,232)   (1,232)       359      432

Profit on disposal of     -       158       158         -        -             
associated undertaking    
Share of associate's    156         -       156         -       604
operating profit
                      ------   ------    ------      ------   -----            
                                   
Profit (loss) before    192    (2,728)   (2,536)     3,379    4,201
tax and interest
                                                                          
Net interest payable   (892)        -      (892)     (762)   (2,156)
                                                                          
(Loss) profit on                                                          
ordinary activities    ------  ------    ------     ------   ------
before taxation        (700)   (2,728)   (3,428)    2,617     2,045
                                                                          
Tax on (loss) profit on                                                   
ordinary activities     133       520       653     (777)    (1,175)
                                                                          
(Loss) profit on                                                          
ordinary activities
after taxation being
(loss) profit for     ------   ------    ------    ------     -----
the period             (567)   (2,208)   (2,775)   1,840       870

Dividends paid and                                  (417)     (888)
proposed
                      ------   ------    ------    ------     -----            
                                                              
Retained(loss)profit   (567)   (2,208)   (2,775)   1,423       (18)
                      ------   ------    ------    ------     -----            
                                        
(Loss) earnings per   (1.4p)    (5.3p)    (6.7p)     4.6p       2.2p
share

Dividends per share                          0.0p    1.0p       1.0p



Consolidated Balance Sheet as at

                                   4 July     5 July     4 January
                                     1999       1998     1999
                                    £'000      £'000       £'000
Fixed assets                                                             
Tangible                             4,250      5,012      5,119
Investments                            126          -        893
                                     -----      -----      -----
                                     4,376      5,012      6,012
                                                                         
Current assets                                                           
Stock                               14,637     21,203     16,999
Debtors                             34,444     34,435     37,541
Cash at bank                         8,368      1,082      2,910
                                    ------     ------     ------
                                    57,449     56,720     57,450
                                                                         
Creditors                           ------     ------     ------               
                                           
Amounts falling due                (51,189)   (53,248)   (51,135)
within one year
Net current assets                   6,260      3,472      6,315
                                    ------     ------     ------               
                                           
Total assets less                   10,636      8,484     12,327
current liabilities
                                                                         
Creditors                                                                
Amounts falling due                 (7,047)    (5,342)    (7,621)
after more than one
year

Provision for                             -      (505)    (1,004)
liabilities and
charges
                                    ------      ------    ------               
                                                      
Net assets                           3,589      2,637      3,702
                                    ------      ------    ------               
                                                          
                                                                         
Capital and                                                      
reserves
Called up share                      2,131      2,037      2,065
capital
Other reserves                       1,458        600      1,637
                                    ------      ------     -----
Shareholders' funds                  3,589      2,637      3,702
                                    ------      ------     -----




Consolidated Cash Flow Statement

                                26 weeks   26 weeks     Period ended
                               to 4 July  to 5 July     4 January
                                    1999       1998     1999
                                   £'000      £'000      £'000
                                                                         
Net cash inflow                    3,245     (2,116)     2,828
(outflow) from
operating
activities
                                                                         
Returns on                          (731)      (762)    (1,815)
investments and
servicing of
finance
                                                                         
Taxation                            (412)      (708)    (3,031)
                                                                         
Capital expenditure                 (893)      (636)    (2,105)
                                                                         
Acquisitions and                   1,737     (1,485)    (3,999)
disposals
                                                                         
Equity dividends                    (413)    (1,637)    (2,112)
paid
                                  ------     ------     ------                 
                                           
Cash inflow                        2,533     (7,344)   (10,234)
(outflow) before
use of liquid
resources and
financing
                                                                         
Financing                             (2)       (77)     6,207
                                                                         
Decrease (increase)                2,531     (7,421)    (4,027)
in overdraft in
period
                                                                         
Reconciliation of                                                      
net cash flow to
movement in net
debt
                                                                         
Increase (decrease)                2,531    (7,421)    (4,027)
in cash in the
period
                                                                         
Cash outflow                           2        85     (6,198)
(inflow) from
decrease (increase)
in debt and lease
financing
                                   -----    ------      ------
Change in net debt                 2,533    (7,336)    (10,225)
resulting from cash
flows
                                                                         
Loan disposed of                     525        -          -              
with subsidiary
undertaking
                                                                         
Translational                       (484)      (39)        86
differences
                                   -----     -----     ------                  
                    
Movement in net                    2,574    (7,375)   (10,139)
debt
                                                                         
Net debt at                      (18,125)   (7,986)    (7,986)
beginning of period
                                  ------    ------     ------                  
                                                       
Net debt at end of               (15,551)  (15,361)   (18,125)
period                            ------    ------     ------





Notes to the Interim Results


1.Accounting policies

The unaudited results for the half-year have been prepared
on a consistent basis with the accounting policies
disclosed in the Groups 1998 Annual Report.

The financial information for the period ended 4 January
1999 has been extracted from the statutory accounts for the
period which have been delivered to the Registrar of
Companies and on which the auditors gave an unqualified
report.

The financial information contained in this statement does
not constitute statutory accounts within the meaning of
section 240 of the Companies Act 1985.


2. Exceptional items

Exceptional items consist of the following:

i)The operation of Summit Peripherals were transfered
from Colchester to Basingstoke in May resulting in closure 
costs, staff redundancies, provision for stocks of 
discontinued lines and some bad debts totalling £1,654,000. 


ii) On 2 July 1999 RD Trading Ltd was sold to 
Computacenter(UK) Ltd resulting in a loss on disposal 
of £1,232,000 the disposal included a rightback of 
goodwill of £2.6m.  

iii) On 1 April 1999 the Group sold its 49% interest in DMC
Holding Ltd to Memory Corporation plc resulting in a gain
on disposal of £158,000.

3.Taxation

Taxation has been provided at an estimated effective rate
of 31% on the result before tax arising in the UK.
Estimated rates of taxation have also been applied as
appropriate to the results arising from the overseas
subsidiaries.


4.Earnings per share

The calculation of the (loss) earnings per share is based
on the (loss) profit for the period and on the weighted
average number of ordinary shares in issue during the
period being 41,629,581 ordinary shares 
(1998:39,591,939).

5.Reconciliation of movements in shareholders' funds

                            26 weeks    26 weeks   Period ended   
                           to 4 July   to 5 July      4 January
                                1999        1998           1999
                             ------       ------    ------                     
                                               
(Loss) profit for the        (2,775)      1,840        870
financial period
                                                           
Dividends paid and proposed        -      (417)       (888)
                                                           
Retained (loss) profit for   (2,775)      1,423        (18)
the financial period
                                                           
(Loss)/gain on foreign         (603)       (63)        139
exchange translation                                                           
New shares issued               750      1,932       2,466
                                                           
Reduction in unissued share  (2,102)    (1,814)     (2,712)
capital
Adjustments to acquisitions   2,016       (629)       (817)
from prior periods
                                                           
Add goodwill written back     2,601          -       2,856
                              ------     ------     ------                     
                           
Net (reductions in)            (113)        849      1,914
additions to shareholders'
funds
                                                           
Opening shareholders' funds   3,702      1,788       1,788
                             ------     ------      ------
Closing shareholders' funds   3,589      2,637       3,702
                             ------     ------      ------

6. Approval of Interim Report

This interim report was approved by a meeting of the board
of directors held on 14 September 1999.

A copy of this report is being sent to all shareholders.
Copies are available to the public on request from the
Companys registered office: Datrontech House, Lutyens
Close, Chineham, Basingstoke Hampshire RG24 8AH.


Independent Review Report by the Auditors to Datrontech
Group Plc.

Introduction

We have been instructed by the company to review the
financial information set out on pages 4 to 8 and 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.  The Listing Rules of the
London Stock Exchange 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.

Review work performed

We conducted our review in accordance with guidance
contained in Bulletin 1999/4 issued by the Auditing
Practices Board.  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 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 4 July
1999.


Arthur Andersen
Chartered Accountants
Reading


                                                                                      

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