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ISA International (ISA)

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Friday 31 March, 2000

ISA International

Final Results - Year Ended 31 December 1999

ISA International PLC
31 March 2000



                     ISA International plc
 'the international distributor of electronic office supplies'
                               
    Preliminary Results for the year ended 31 December 1999


1999  was  a  year  of  significant  change  for  ISA  as   we
implemented  a number of important organisational, operational
and  management  changes.  In our Annual Report  last  year  I
noted  that  the Group was undergoing a fundamental evaluation
of  the business and the way in which we operate.  During  the
course  of  1999 it became apparent that the number of  issues
were  greater and more serious in magnitude than had initially
been  identified. In addition to the significant cost  of  the
changes  we  have  made, implementing them  has  also  led  to
substantial disruption to some parts of our business.   Whilst
a number of these changes are still ongoing and will take some
time  to  complete, we believe the outcome will  position  ISA
well for the medium term.

Financial Results
Our   financial  statements  are  rather  complex  this   year
reflecting  the significant changes to the business  structure
that have been made.

For the year ended 31 December 1999 turnover for the Group was
£371.6   million  (1998:  £385.3  million).    Turnover   from
continuing businesses amounted to £288.0 million (1998: £301.8
million).  Profit before taxation and non-recurring items  was
£4.0   million  (1998:  £4.5  million).   Non-recurring  items
amounted  to  £6.9  million (1998: £1.8  million),  being:  the
result  of further rationalisation of our operating locations,
including  the  short  term impact of outsourcing  our  German
logistics operation; Board and senior management settlements; some
accelerated  IT depreciation; and the provision  for  potential
bad  debts arising in John Heath prior to disposal, which only
came  to  light  recently.   This amount  also  includes  £1.4
million  related  to  our  share of  the  non-recurring  items
charged by our associate, Kingfield Heath, for the first phase
of  the  integration of the enlarged branch  network  and  the
closure of surplus central functions.  As a result of the non-
recurring  items  and a high effective tax  rate,  losses  per
share   were  7.3  pence  (1998:  earnings  of  3.4  pence).
Earnings  per share prior to non-recurring items fell  to  4.1
pence (1998: 5.8 pence).

Dividend
The  Board does not propose a dividend for the year  ended  31
December 1999. The dividend policy of the Group remains  under
review  and  the  Board intends to return to  the  payment  of
dividends as soon as appropriate.

Operating Review
ISA  now operates in three geographical divisions: Continental
Europe; United Kingdom & Ireland; and Scandinavia, which are
all  focused on the distribution of electronic office supplies
('EOS').

Turnover  arising  from  Continental  Europe  fell  to  £150.1
million  (1998: £164.6 million) as the business was  disrupted
by  senior management changes and the relocation of our German
logistics.  Turnover from continuing operations in the UK  was
slightly  lower  than  in 1998 at £92.0 million  (1998:  £96.4
million).   Revenue grew slightly in the Direct  channel,  but
declined  in the Indirect or Wholesale channel.The Scandinavian  
division had a good year with turnover  increasing  to £46.0 
million (1998: £40.7 million).

Gross  margins remain under pressure across the EOS market  in
Europe.  However, despite this, and the significant disruption
to  our European business as the changes were implemented, the
overall  gross  margin,  before  exceptional  items,   in   our
continuing business was 17% (1998: 16.7%).

Work continues on reducing the fixed cost base of the business
and  good  progress has been made in 1999.  We aim to maintain
this progress in 2000. 

Trading   in   Kingfield  Heath,  our  associated   commercial
stationery  and office supplies company, for the last  quarter
of  the year was in line with the business plan produced  when
we acquired our shareholding in the group.

Disposals
The  disposal  in  September 1999  of  John  Heath  (Holdings)
Limited  to Kaye Office Supplies Limited, which now trades  as
Kingfield Heath, was strategically important to the Group.  It
allows the ISA business to focus on its core market area,  the
distribution of electronic office supplies, whilst retaining a
46.9%  holding  in  the Kingfield Heath  business.   Kingfield
Heath  is  expected to be a major contributor to  the  Group's
performance  in the foreseeable future. Through representation
on  the board, ISA maintains a careful review of progress  and
contributes to strategic policy decisions, although day to day
operational  management  of the Kingfield  Heath  business  is
carried out independently of ISA.  The cash generated  by  the
sale  of  John  Heath has enabled the Group  to  significantly
reduce debt by £14.1 million, ending the year with net debt of
£22.4 million.

On  22 November 1999, our small re-manufacturing business, The
Little  Red Book Company (UK) Limited, was sold to  EXY  Group
Limited  in  exchange for a 32% shareholding in  the  enlarged
company.

Strategy and the Internet
ISA  is  the  leading  supplier of  EOS  products  in  Europe.
Following  the  disposal  of John Heath  we  are  now  clearly
focused  and market ourselves primarily in the Direct channel,
with  a major presence in the end-user corporate market, while
at  the  same  time  being  supported  by  a  strong  Indirect
business.   This  balance is central  to  the  Group's  future
strategic  direction  and will provide a  solid  platform  for
future growth.

As  we broaden our service to our customers, leveraging on our
existing product range and service expertise, we recognise the
opportunity  that the Internet provides, and have  already  in
place a website (www.supplies-team.com) for selected customers
to place orders online.  We are currently working
on   a   significant  expansion  of  this  pilot  project   in
conjunction with Computer Sciences Corporation.   We  see  the
development  of  e-business  as being  a  vital  component  of
enabling  our customers and suppliers to trade with us in the way 
that  best suits  them. In  addition, we see e-business as an 
opportunity to provide  customers  with a broader range of products 
and  services. Order fulfilment can be a major problem for a large 
number  of e-commerce  related companies, however, we  believe  our  
long experience in this area positions us well.

Management
As  mentioned above, the operational and management  structure
of  the  Group  has  been simplified into  three  geographical
divisions:  Continental Europe; United Kingdom & Ireland;  and
Scandinavia.   General Managers have been  appointed  to  each
division  and  they all sit on an Executive  Management  Board
with  other senior Group management, which meets regularly  to
evaluate  progress  and  to  take  appropriate  action.   Each
division is responsible for the development of both its Direct
and Indirect sales channels.

In  January 2000, Bruce Robinson, who joined the Group in June
1999 as General Manager for the United Kingdom & Ireland,  was
promoted  to  the newly created Board position of Group  Chief
Operating  Officer, with day to day responsibility  for  Group
wide operating matters, reporting directly to me.

People
As the next stage of our staff development plan we have launched an
Investors  in  People  programme in  the  UK  business.   Once
successfully  implemented we intend that  this  will  then  be
extended  to  our European operations as a means of  improving
the  management, training, motivation and therefore  retention
of our staff.  

Inevitably during a time of significant change,
a  great  burden is placed on all our staff.  May I take  this
opportunity to thank each of them for their skill, support and
dedication in helping to implement these change programmes.

Current Trading and Prospects
Trading  in  the early part of 2000 has begun slightly  weaker
than  expected, partly due to a slow post Millennium pick  up.
A  number of the significant restructuring projects are  still
in  progress  and will hold back profitability  in  the  short
term.  These, together with the investment of resource in  our
e-commerce  solution,  are expected to negatively  impact  the
overall results for the year.

The  challenges facing the business when I joined in  October
1998 were enormous and we were able to overcome a large number
of  them during 1999.  Although, a number still remain, I'm
confident  that, with the progress made to date and  with  the
quality  senior management team we are building, we  are  well
positioned  to deal with them.  In particular,  I  am  excited
about the opportunity the Internet provides the Group over the
next  12 to 18 months.  ISA has a business model that is  well
suited to meet the e-commerce demands of the 21st Century.

David Heap                                       31 March 2000
Chairman and Chief Executive

 

For further information, please contact:

ISA International plc
David Heap, Chairman & Chief Executive           020 8614 7814
Mike Murphy, Group Finance Director               01274 306787

Square Mile Communications
Louise Robson                                    020 7601 1000



ISA International plc
Group Profit and Loss Account
For the year ended 31 December 1999

                                                             
                                             
                                  Continuing Discontinued
                                  Operations   Operations
                                        1999         1999     1999       1998
                          Note          £000         £000     £000       £000
                                                               
Turnover                     3       288,027       83,573  371,600    385,269
Cost of sales - normal              (239,206)     (62,215)(301,421)  (314,205)
Cost of sales -                      
exceptional                  4        (1,532)           -   (1,532)         -
                                ----------------------------------------------
Cost of sales                       (240,738)     (62,215)(302,953)  (314,205)
                                 ---------------------------------------------
Gross profit                          47,289       21,358   68,647     71,064
                                ----------------------------------------------
Distribution costs                   (18,481)     (10,225) (28,706)   (33,120)
                                                             
Administrative expenses              (28,123)      (7,205) (35,328)   (30,736)
                                                             
Amortisation of goodwill                (197)        (329)    (526)      (355)
Non-recurring items          4        (2,701)      (1,267)  (3,968)    (1,785)
                                ----------------------------------------------
Operating Expenses                   (49,502)     (19,026) (68,528)   (65,996)
                                ----------------------------------------------
                                
Operating(loss)profit                 (2,213)       2,332      119      5,068
Share of associates 
 - normal                                                      546          -
 - non recurring             4                              (1,366)         -
                                                           -------------------
(Loss)profit before interest & tax                            (701)     5,068

Interest charges (net)                                      (2,203)    (2,349)
                                                           -------------------
(Loss)profit before taxation                                (2,904)     2,719
Taxation                     5                                (987)    (1,004)
                                                           -------------------
(Loss)profit after taxation                                 (3,891)     1,715
Dividends                                                        -       (537)
                                                           ===================
Transfer(from)to reserves                                   (3,891)     1,178
                                                           ===================

(Losses)earnings per 
ordinary share               6                               (7.3)p      3.4p
Fully diluted (losses)                            
earnings per ordinary share                                  (6.6)p      3.1p
Earnings per share                              
before non-recurring items                                     4.1p      5.8p
                                                             
Dividend per ordinary share                                      -      1.01p




ISA International plc
Summarised Group Balance Sheet
As at 31 December 1999

                                             1999          1998
                                             £000          £000
Fixed assets
      Tangible assets                       4,706        12,695
      Goodwill                             15,437         8,660
      Investments                           3,262             -
                                        ------------  ------------  
                                           23,405        21,355
                                        ------------  ------------
Current assets                             
        Stocks                             18,873        37,759
        Debtors due within one year        45,968        67,835
        Cash at bank and in hand            1,860         6,346
                                        ------------  ------------
                                           66,701       111,940
        Creditors due within one year     (63,382)      (86,411)
                                        ------------  ------------
Net current assets                          3,319        25,529
                                        ------------  ------------
Total assets less current liabilities      26,724        46,884
                                        ------------  ------------
Creditors due after more than one year       (618)      (17,453)              
Deferred taxation                             (37)         (406)
                                        ============  ============
                                           26,069        29,025
                                        ============  ============          
Capital and reserves
       Share capital and share 
       premium account                      3,694         3,694
       Shares to be issued                  3,976         3,976
       Reserves                            18,399        21,355
                                        ============  ============
                                           26,069        29,025
                                        ============  ============
          
Reconciliation in Movement of Shareholders' Funds 
                                                    
                                             1999          1998
                                             £000          £000
                                                         
Retained (loss) profit for the year        (3,891)        1,178
New share capital issues                        -        12,505
New share capital to be issued                  -         3,976

Goodwill written back                           -           227
Unrealised gain on disposal of subsidiaries   815             -               
 Translation differences on foreign 
currency net investments                      120          (157) 
                                          ----------   -----------
Net (deduction from) addition to 
shareholders' funds                        (2,956)       17,729
Opening shareholders' funds                29,025        11,296
                                          ==========   ===========
Closing shareholders' funds                26,069        29,025
                                          ==========   ===========
                                                         
ISA International plc
Summarised Group Cash Flow Statement
For the year ended 31 December 1999

                                            1999          1998
                                            £000          £000
Net cash inflow (outflow) from                            
operating activities
Operating profit                             119         5,068
Depreciation                               3,898         3,745
Increase in working capital               (1,845)       (7,290)
                                         ---------     ---------            
                                           2,172         1,523
                                         ---------     ---------            
Returns on investment and  
servicing of finance                      (2,645)       (1,795)
                                         ---------     ---------            
Taxation paid                             (1,349)       (2,132)
                                         ---------     ---------            
Capital expenditure and financial                    
investment
Purchase of tangible fixed assets         (2,245)       (3,710)
Sale of tangible fixed assets              1,716           689
                                         ---------     ---------
                                            (529)       (3,021)
                                         ---------     ---------            
Acquisitions and disposals                           
Purchase of subsidiary undertakings          (99)       (3,807)
Net cash transferred with subsidiary  
undertakings                              (2,142)          763
Pre-sale dividend received                 2,500             -
Repayment of intra-group debt             16,500       (16,500)
Investment in associates                    (648)            -
                                         ---------     ---------
                                          16,111       (19,544)
                                         ---------     ---------          
Equity dividends paid                          -        (1,477)
                                         ---------     ---------            
Net cash inflow(outflow)     
before financing                          13,760       (26,446)
                                         ---------     ---------              
                                           
Financing                                            
New loan                                       -        16,500
Repayment of amounts borrowed            (16,500)         (445)
Capital element of hire purchase            
payments                                    (489)         (579)
                                        ----------    ----------
                                         (16,989)       15,476
                                        ----------    ----------             
                                        ==========    ==========
Decrease in cash in the period            (3,229)      (10,970)
                                        ==========    ==========          
                                                     
Analysis of movement in net debt                     
Balance at beginning of year             (36,432)       (8,516)
Decrease in cash in the year              (3,229)      (10,970)
Cash  outflow from movement in debt       16,989         1,024
Loans/hire purchase contracts disposed               
of with subsidiaries                          10             -
New loans                                      -       (16,500)
New hire purchase contracts                  (36)       (1,319)
Effect of foreign exchange rate changes      347          (151)
                                        ==========    ===========
Balance at end of year                   (22,351)      (36,432)
                                        ==========    ===========           
                                                     
ISA International plc                                            
Notes to the Financial Information
                                                                   
                                                                   
1.  There has  been no change to any of the accounting policies set out in    
    the 1998 statutory accounts.
    
                                                                   
2.  On 30 September 1999 the Company completed the disposal of John Heath     
    (Holdings) Ltd; i.e.the holding company of John Heath & Company Ltd. The  
    disposal proceeds were:
                                                                
             £16,500,000 repayment of intra-group debt
             £2,500,000 pre-sale dividend                               
             47% of the enlarged share capital of the aquiring company
         
On 22 November 1999 the Company completed the disposal of The Little Red Book
Company (UK) Ltd.  The disposal proceeds were: 32% of the enlarged share
capital of the aquiring company.
         
                                                                   
3.  The segmental analysis of turnover and operating profit by origin is as   
    follows:
    
                                                                   
                                       Turnover         Operating Profit   
                                    1999      1998      1999        1998 
                                    £000      £000      £000        £000 
                                                                 
United Kingdom Continuing         91,939   179,950       388       2,455 
               Discontinued       83,573         -     2,332         
Continental Europe               150,099   164,587    (3,889)      1,694
Scandinavia                       45,989    40,732     1,288         964
                                ------------------------------------------
                                 371,600   385,269       119       5,068 
                                ------------------------------------------    
  
                                                                   
4.  The non-recurring items consist of the following:                        
    
                                                                
                                      1999      1999      1999      1998 
                                      £000      £000      £000      £000 
                                   Contin-   Discon-                 
                                      uing    tinued

Exceptional cost of sales
Stock losses and customer claims     1,532         -     1,532         - 
                                  --------------------------------------------
Non-recurring operating expenses
Board and senior management                             
settlements                          1,305       120     1,425       706 
Property and location  
rationalisation                        838       151       989       863    
Exceptional bad debts                    -       996       996         - 
Accelerated IT depreciation            558         -       558       216 
                                  --------------------------------------------
                                     2,701     1,267     3,968     1,785 
                                  --------------------------------------------
Share  of associates                 1,366         -     1,366         - 
                                  --------------------------------------------
                                     5,599     1,267     6,866     1,785 
                                  --------------------------------------------
                                
5. The taxation charge comprises UK corporation tax £373,000 (1998: £700,000),
   overseas tax £605,000 (1998: £711,000), deferred tax credit of £(31,000)   
   (1998: £(407,000)) and share of associates tax £40,000 (1998: £nil).
    
6.  The calculation of loss per ordinary share is based on the loss  after    
    taxation  of  £3,891,000  (1998:  profit   of £1,715,000)  and  on  53.2  
    million (1998:  50.97  million) ordinary  shares,  being  the weighted    
    average  number  of shares in issue during the year. The calculation of   
    fully diluted  earnings per ordinary share includes 5.54 million shares   
    issued  on  9 March 1999 under the  terms  of  the acquisition of John    
    Heath (Holdings) Ltd. in 1998.



              
7.  Total recognised gains and losses since the last Annual Report are:       
                                                
    
                                              1999       1998         
                                              £000       £000        
                                                                  
(Loss)profit for the financial year         (3,891)     1,715         
Translation differences on foreign                                        
currency net investments                       120       (157)         
Unrealised gain on disposal of subsidiaries    815          -                 
                                            -------------------
                                            (2,956)     1,558         
                                            -------------------               
  
8.  The  preceding  financial information does not  constitute statutory      
    accounts  as  defined in  Section  240  of  the Companies Act 1985. The   
    financial information for the year to 31 December 1998 is based on the    
    statutory accounts for that year.  These accounts, upon which the auditors
    issued an  unqualified  opinion, and which did  not  contain  any         
    statement  under 237(2) or (3) of the Companies Act  1985, have  been     
    delivered to the Registrar of Companies.   This preliminary announcement  
    was approved by the  Board on 31 March 2000.
    
    The  auditors have not yet reported on the full  statutory accounts  for  
    the year ended 31 December 1999, which  will be  posted to shareholders in
    mid-April.  After that  time they  will  also be available at the         
    Company's  registered office:  66/70  Vicar Lane, Bradford, West          
    Yorkshire,  BD1 5AG.


                                                                                                                                         

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