Information  X 
Enter a valid email address

ISA International (ISA)

  Print      Mail a friend       Annual reports

Tuesday 07 May, 2002

ISA International

Final Results

ISA International PLC
7 May 2002


           ISA International plc ('ISA' or 'the Group')
                                 
      PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2001
                                 
BOARD STATEMENT

2001  has  seen  the  Group make further progress  towards  profit
recovery following the problems of 1999 and 2000.  Revenue grew by
22  per cent. to £361.6 million (2000: £296.8 million) as a result
of  continuing strong performance in the UK and Scandinavia allied
to  significant increases in Continental Europe.  During the first
nine  months  of  the  year,  the  return  to  profitability   was
significantly held back by the lack of sufficient cash  resources.
This was in part addressed by the investment of £6.9 million (net)
in   September   2001   by   Daisytek  International   Corporation
('Daisytek'),  a  US  based,  quoted,  wholesale  distributor   of
computer  and  office  supplies.  For the  full  year,  the  Group
recorded  a  pre-exceptional operating  profit  (before  share  of
associates) of £1.4 million (2000: loss of £0.6 million), of which
approximately £0.9 million was generated in the final  quarter  of
the   year.   However,  the  Group's  indebtedness  has  increased
significantly  leading to a higher level of gearing and  increased
interest  expense. The long-term financing of the Group  therefore
still remains a concern.

OFFER ANNOUCEMENT

The  Board  announced on 16 April 2002 that it was in  discussions
with  Daisytek regarding a possible cash offer to shareholders  at
7.5p per share, with a Daisytek share alternative at or around 10p
per share. Today the details of that offer (the 'Offer') are being
announced, although the making of the Offer and the posting of the
Offer  Document are conditional upon the approval and  signing  by
the  Board of the audited consolidated financial statements of the
Group  for  the year ended 31 December 2001, that those  financial
statements  do  not  vary  in  any  material  respect  from   this
preliminary announcement and that the audit opinion in respect  of
those financial statements is not subject to any qualification nor
refers  to any fundamental uncertainty save in respect of  matters
identified  in this preliminary announcement. In recommending  the
Offer  by  Daisytek, the Board has considered a number of factors,
which  are  detailed  further below,  relating  to  the  financial
position of the Group, the short term requirement for capital  and
the  financing  options  available  which,  under  the  terms   of
Daisytek's  investment, are very restricted without  its  support.
The  Board  has concluded that the Offer provides the only  viable
solution  to  ensure  the  continuation  of  ISA's  business,  and
provides an acceptable exit for shareholders in the circumstances.
Daisytek  has provided £3.0 million of interim funding to  support
the business during the Offer process.

INVESTMENT BY DAISYTEK

In  late 2000, the Board identified that the Group's balance sheet
had  been  severely  weakened by the losses  attributable  to  the
outsourced  European  logistics  arrangement  made  in  1999.  The
related   increase   in   debt  combined  with   working   capital
requirements  to  finance  growth was  likely  to  jeopardise  the
recovery  process.  The Board therefore began  to  seek  potential
funding sources and was later able to announce that a funding  and
strategic partner had been found in Daisytek.

Following shareholders' approval on 3 September 2001, the  Company
issued  8  million  Convertible Cumulative  Redeemable  Preference
Shares   at  £1  per  share  ('Preference  Shares')  to  Daisytek,
providing a net £6.9 million cash injection to the business and an
initial  strengthening of the balance sheet.  It  was  anticipated
that   this   funding,  combined  with  the  associated  Strategic
Alliance,  would lead to an increased level of supplier credit  in
support  of  the continuing revenue growth. However, although  the
investment strengthened ISA's balance sheet, it did not materially
change  the availability of trade credit, nor did it allow ISA  to
increase its bank facilities.

FINANCIAL RESULTS

Revenue  for the year ended 31 December 2001 increased by  22  per
cent.  to  £361.6  million (2000: £296.8 million).  Gross  profit,
excluding  exceptional  costs in 2000, grew  by  £5.3  million  to
£53.2  million  (2000: £47.9 million).   The fall in  the  overall
gross  margin is predominantly a function of the change  in  sales
mix by business channel. Our end user business has grown by 15 per
cent.  year  on  year  but the lower margin wholesale  and  retail
channels have grown faster, primarily due to the recovery  of  our
Continental European businesses where these channels are a  larger
proportion of the sales mix.

Exceptional  items, excluding our share of associates,  were  £1.7
million  (2000: £7.7 million). In 2001, the principal  exceptional
items  were the relocation of the UK National Distribution  Centre
(£0.9   million)   and  central  and  German   senior   management
settlements  (£0.6  million). Further exceptional  items  of  £2.6
million  (2000: £1.2 million) were incurred through our associate,
Kaye  Office Supplies Limited ('Kaye'), which trades as  Kingfield
Heath.   Including exceptional items, the loss on disposal of  the
Group's  32  per  cent. holding in EXY Group Limited  ('EXY')  and
amortisation of goodwill, the associates added £2.5 million to the
loss before interest and tax (2000: £0.5 million loss).

Net  interest  charges increased by 28 per cent. to  £3.9  million
(2000:  £3.1  million) reflecting the higher level  of  net  debt,
despite a reduction in the average rate of interest for the  year.
Kingfield  Heath contributed £1.1 million (2000: £1.1 million)  to
the  Group's  overall  interest charge.   A  tax  charge  of  £0.6
million  (2000:  £0.4 million) arises as the tax  due  in  profit-
making territories exceeds the tax relief available in loss-making
areas. The total loss after tax reduced from £12.4 million in  the
previous  year to £7.4 million in 2001. After accruing a  dividend
of  £0.2  million on the Preference Shares, £7.6 million has  been
transferred from reserves.

INDEBTEDNESS AND WORKING CAPITAL

The strong sales growth coupled with the reduced commercial credit
lines  referred to earlier has increased the Group's  indebtedness
and level of banking facilities required.  Net debt at 31 December
2001  was £37.3 million, an increase of £11.5 million on the prior
year.   Net  working capital increased by £10.9 million reflecting
the  growth in stock and trade debtors to support the 22 per cent.
increase in revenue.  However, trade creditors remained relatively
flat year on year despite the revenue increase as the credit terms
available  to  the  Group were tightened.  This  can  be  seen  by
average creditor days reducing from 47 to 39 days.

In  October  2001,  the  Group invested £3.2  million  (which  was
advanced  by  Daisytek) to maintain its 47 per cent.  interest  in
Kaye.    Daisytek  also  provided  cash  and  trading   facilities
amounting to £0.9 million at 31 December 2001, resulting in  total
advances of £4.1 million by Daisytek in the final quarter of 2001.
Subsequent to the year end, debt has increased further due to  the
usual  seasonal movement in working capital, and to support  this,
Daisytek provided a further £4.8 million of finance.  Daisytek has
also  provided  an additional £3.0 million of interim  funding  to
support  ISA during the Offer process.  Despite the issue  of  the
Preference  Shares, the losses incurred during 2001  have  reduced
net  assets  to £11.9 million (2000: £12.7 million)  resulting  in
gearing of 313 per cent. at 31 December 2001.

GOING CONCERN

The  accumulated losses and the growth achieved by the Group  have
placed a significant strain on the Group's capital resources.   In
this  respect, your attention is drawn to notes 1 and  12  to  the
Financial  Information.   We operate  in  a  market  where  robust
financing can lead to significant competitive advantage.  In  this
environment the Board believes that, without a solid balance sheet
and  the  availability of adequate credit lines,  both  trade  and
bank,  then it will be extremely difficult to return the Group  to
sustainable profitability.

The  subsequent funding amounting to £11.9 million  received  from
Daisytek  since  its  £8.0 million (£6.9  million  net  of  costs)
investment in September 2001 has in part bridged the financing gap
that  has  arisen.   Under the terms of a loan facility  agreement
entered  into by ISA and Daisytek, a significant proportion  (£7.9
million)  of  this funding is due to be repaid to Daisytek  on  30
June  2002.  If ISA does not repay the loans which are due  to  be
repaid on 30 June 2002, ISA must immediately seek to undertake  an
equity issue to Daisytek (subject to clawback for shareholders) to
raise  sufficient  funds  to repay the  full  amount  advanced  by
Daisytek,  any  Special  Dividend (as  defined  in  the  Company's
Articles  of  Association) called for by Daisytek and  to  provide
further  funds  not to exceed £10 million to satisfy  the  ongoing
requirements of the Group.

The Group is currently operating at or around the maximum limit of
its  borrowing facilities and the Board anticipates that  existing
facilities  will  be  insufficient to cover  the  Group's  trading
requirements  in  the coming months. Though remaining  supportive,
negotiations  with  the  Group's  principal  bankers   have   been
unsuccessful in materially increasing the level of facilities.  It
is  the  Board's  view  that a significant  capital  injection  is
required  within  the  next few months.  Daisytek  has  agreed  to
underwrite  an  equity issue by the Company in the  event  of  the
Offer  being declared unconditional.  If the Offer is not declared
unconditional and the capital required is not forthcoming,  it  is
highly  unlikely that the Group would be able to continue to  meet
its obligations as they fall due.

Under the terms of the Preference Shares, Daisytek was entitled to
receive  a  preference dividend of £141,278 on 1 April 2002  which
was  not  paid.  If a preference dividend is not paid on  the  due
date   and  remains  in  arrears  for  more  than  14  days,  this
constitutes  an  event  of default under  the  provisions  of  the
Company's  Articles  of  Association unless  waived  by  Daisytek.
Daisytek  agreed  to  defer  the  outstanding  payment  but   this
agreement  expired  on  6 May 2002, at which  point  an  event  of
default occurred.

The  consequences  of the event of default are  that  Daisytek  is
entitled  to  exercise voting rights in respect of its  Preference
Shares  such  that  it may cast a majority of  the  votes  at  any
general   meeting  of  the  Company;  it  may  appoint  additional
directors to the Board so that up to 50 per cent. of the Board  is
appointed  by  Daisytek; and it may within 120 days call  for  the
payment of a Special Dividend.

If called for, the Special Dividend is to be satisfied either by a
cash  payment equivalent to the Kaye Value (as defined below)  or,
with  the  consent of Daisytek, a distribution of  assets  of  the
Company  equivalent in value to the Kaye Value.   The  Kaye  Value
means the value of the Company's shareholding in Kaye at the  time
when  payment of the Special Dividend is required less  the  costs
incurred  by  the  Company in subscribing or  otherwise  acquiring
further  shares  in Kaye after 9 August 2001,  such  value  to  be
determined by ISA's auditors if not agreed with Daisytek.

Daisytek  has  agreed  to  not exercise  its  right  to  vote,  as
described  above, until the earlier of 30 June 2002  or  the  date
when clearance is obtained from German competition authorities  in
relation  to the Offer by Daisytek.  It has also waived its  right
to  call  for  a  Special Dividend until  30  June  2002  and  has
indicated  that  it does not presently intend to  appoint  further
directors to the Board of the Company.

Due to the level of debt in the balance sheet and the reduction of
net assets following the results of 2001, the Financial Statements
for  31  December 2001 cannot yet be finalised and  we  draw  your
attention  to note 2 to the Financial Information.   If they  were
audited,  then  the  restrictions on borrowing  in  the  Company's
Articles of Association would operate so that the Directors  could
not  permit any further borrowing whatsoever without the  approval
of  shareholders by means of an Ordinary Resolution at  a  General
Meeting.   The Board has today sent notice to shareholders  of  an
Extraordinary General Meeting ('EGM') to be held on 22 May 2002 to
deal  with this matter. Irrevocable undertakings to vote in favour
of the resolution at the EGM have been received in respect of 51.1
per  cent. of the votes eligible to be cast at the EGM,  which  is
sufficient to ensure that the resolution is passed.  Full  details
are  contained  within the circular which contains the  notice  of
EGM.

OPERATIONAL REVIEW

ISA  deploys  the Hybrid business model in selling  to  the  three
principal sales channels:

* Direct  - Corporate, Government, Education, Health  and  SME
  customers (End User)

* Wholesale  -  Contract Stationers and Computer Supplies  Re-
  sellers

* Retail  -  Major  Supermarket Chains and  Computer  Supplies
  Retailers

The business model maximises growth opportunities in both existing
and  emerging  markets; leverages Original Equipment  Manufacturer
distribution agreements; balances sales volume with sales margin -
all within a low cost infrastructure.

Revenue  has grown 22 per cent. year on year against a  background
of  slowing demand as the key European economies experience  lower
growth  levels. We have been able to increase market share as  our
competitors  adjust their business models to a  lower  growth  and
lower margin environment.  However, we have not pursued a strategy
of  chasing  volume at any price.  Conversely we  have  sought  to
increase our customer base by offering a good level of service  at
a  competitive  price,  leveraging  the  infrastructure  developed
during the last 24 months.

In  late  2000  we formed a Pan-European Sales team  dedicated  to
providing  Corporate customers with a high quality and  consistent
service   through  a  network  of  ISA  companies  and   strategic
partnerships. By the end of 2001 this division had gained  16  new
Pan-European  customers  with estimated  annual  revenues  of  £23
million.

We  have seen the level of business being conducted electronically
double  this year and it now represents more than 12 per cent.  of
our total sales value. The solutions we have developed have proven
to  be  very  successful  in gaining new  customers  who  see  the
benefits  of  conducting business this way. This increase  in  the
level of electronic sales traffic is one of the key reasons why we
were  able to hold the increase in overheads, prior to exceptional
items,  to 7 per cent., substantially below the rate of growth  in
revenue.

UK & Ireland

* Revenue  increased by 27 per cent. to £141.5 million  (2000:
  £111.4 million)

* Operating profits pre exceptional items increased by 26  per
  cent. to £5.6 million (2000: £4.4 million)

A  continuing  strong  performance from the  UK  and  Ireland  saw
significant  revenue  growth translate  into  incremental  profit.
Despite tough pricing conditions, the UK division's ability to use
the Hybrid business model to maintain an operating return on sales
at  3.9 per cent. is very pleasing.  This growth has been achieved
across  all  channels, though we have seen a  spectacular  59  per
cent. volume rise in the retail channel. This channel now accounts
for  11  per cent. of total sales (2000: 8 per cent.). Within  our
end user division we have seen a substantial increase in turnover,
22  per  cent. year on year. This has been driven by  a  focus  on
attracting  large  corporate accounts with a good  product  range,
including  a  limited selection of general office  supplies,  high
levels  of  service and the ability to reduce customer procurement
cost.   Our  wholesale  channel  has  also  seen  a  very   strong
performance, increasing revenues by 26 per cent..

To support the continuing profitable growth of the UK business, we
successfully relocated the National Distribution Centre at the end
of  2001  to  a  new 114,000 sq.ft. state-of-the-art  facility  at
Wakefield, West Yorkshire. This unit is more than double the  size
of  the  previous  facility. There was no  service  disruption  to
customers  during  the relocation and we are already  seeing  many
benefits  in  terms  of cost, efficiency and  levels  of  customer
service.  One-off  costs of £0.9 million relating  to  this  move,
including  asset write-offs and provisions for future expenditure,
have been recognised in the 2001 accounts.

Continental Europe

* Revenue  grew  24 per cent. to £175.7 million (2000:  £141.6
  million)

* Operating  losses  pre exceptional items decreased  to  £4.2
  million (2000: £4.4 million)

The increase in revenue from this region is extremely encouraging,
a  clear  indication  that  we have been successful  in  regaining
customer confidence following the problems of 1999 and 2000.

The turnaround of the French and German businesses is in progress,
albeit  slower  than the Board had anticipated.  The  shortage  of
cash  during  the first nine months of the year directly  affected
the   French   and  German  businesses  as  discount  and   rebate
opportunities  were  missed.  Also,  we  have  not  been  able  to
significantly increase the levels of profitability during the year
due  to  very  aggressive pricing in the market,  particularly  in
Germany.   In  order to address this lower margin environment,  we
reduced  the  German headcount by approximately 10  per  cent.  in
October 2001. With the cost base reset and with additional funding
in  place,  it is pleasing to report that the levels of losses  in
the   European  businesses  substantially  reduced  in  the  final
quarter.

In  France  we successfully opened a new 64,000 sq. ft.  warehouse
and  office  facility at the end of March 2002 within 1km  of  our
previous  location. This more than trebles our warehouse  capacity
in  France  enabling us to provide a broader range of services  to
the Paris region.

Further  year  on  year volume growth in Europe during  the  first
quarter  of  2002  has delivered a significantly  improved  result
compared  with  the  previous  year  and  a  continuation  of  the
encouraging performance seen in the last quarter of 2001.

Scandinavia

* At  constant exchange rates, turnover grew 4 per  cent.  to
  £44.4 million

* Operating  profits more than doubled to £1.1 million  (2000:
  £0.5 million)

Within  a relatively low growth region, our strategy has  been  to
focus on margin improvement and productivity gains. In Norway this
strategy,  supported by a doubling of the sales volume in  general
office  products has helped it to return to profitability after  a
period of losses - now delivering a 1.2 per cent. return on sales.
In  Sweden,  the  profit  growth was less  spectacular  but  still
satisfactory at 17 per cent., producing an increase in the  return
on  sales from 2.7 per cent. to 3.2 per cent.. Sweden continues to
set  the  benchmark for the Group in sales ordered electronically,
consistently achieving a level of around 30 per cent. by value.

KINGFIELD HEATH

The  Group's  47  per  cent.  holding in  Kaye  (which  trades  as
Kingfield Heath), the second largest wholesaler of general  office
supplies  in  the  UK,  contributed an operating  profit  of  £0.6
million  before our share of their exceptional items amounting  to
£2.6  million. In a difficult market, Kingfield Heath revenue  was
static  at  £206.9  million.  Profitability suffered  due  to  the
competitive  state  of the market, the location closure  programme
and   the   commissioning  of  Arrow,  the  new   state-of-the-art
Distribution  Centre  at Lutterworth in Leicestershire.  This  was
opened  in  November  2001 and after a few  teething  problems  is
operating  satisfactorily.  The  majority  of  exceptional   items
booked  by Kingfield Heath in 2001 relate to this project and  the
related  branch  closure  plan. It  is  anticipated  that  further
exceptional items will be incurred during 2002 as the remainder of
this plan is implemented.

During  2001,  Kaye  replaced its Chairman,  Chief  Executive  and
Finance Director and simplified its senior management structure to
meet current business challenges.

To  assist  the  business in completing the Arrow project  and  to
provide sufficient funds to carry out the remainder of its  plans,
the Group participated in the refinancing exercise that took place
in  October 2001, investing a further £3.2 million to maintain the
Group's equity holding at 47 per cent..  Earlier in the year,  the
Group had taken the opportunity to increase its holding from 46.85
per  cent. to 47.0 per cent. by purchasing shares offered for sale
by a director of Kaye.

An  impairment  review  has  been  performed  in  respect  of  the
investment  in  Kaye. The recoverable amount of the  goodwill  has
been  assessed by reference to the net present value of  estimated
future  cash  flows, incorporating the planned costs and  expected
benefits  of the reorganisation (that was planned at the  time  of
the  acquisition  of  the Group's interest in  Kaye  and  that  is
currently  in  process) and applying a discount  rate  of  10  per
cent..   The Board has concluded that no provision is required  in
relation to this investment.

DISPOSALS

We  exchanged contracts in late December 2001 for the sale of  our
32 per cent. holding in EXY Group Limited ('EXY'), whose principal
trading  activities  consist  of the  recycling,  manufacture  and
distribution  of  consumable office products. Total  consideration
was  £0.8 million, of which £0.4 million was received in  cash  in
February  2002,  with  the  balance  in  the  form  of  non-voting
redeemable  7  per  cent. preference shares, redeemable  in  equal
tranches  on  30  April  2002  and  31  August  2002.   The  first
redemption  took  place on 30 April 2002.  In the  year  ended  31
December  2001,  EXY  contributed  £0.3  million  to  the  Group's
consolidated profit before tax.

On  22  January  2002  we  completed  the  sale  of  our  Austrian
subsidiary, Supplies Team EDV-Zubehor Handel GmbH ('ST  Austria').
Total  cash  consideration  of  approximately  £1.4  million   was
received  of  which £0.7 million was applied to settle intra-group
balances.  In  the  year ended 31 December 2001,  ST  Austria  had
revenue of £7.4 million and a profit before tax of less than  £0.1
million.  Net assets of ST Austria at 31 December 2001  were  £0.5
million.   Our Austrian business had a minor share of a small  and
low  growth market and therefore was unlikely to provide the Group
with an adequate level of return in the medium-term.

BOARD CHANGE

After three years as Chairman, David Heap left the Board by mutual
consent on 31 December 2001.

DIVIDENDS

The Board does not propose an ordinary dividend for the year ended
31 December 2001.

OUTLOOK AND OFFER CONSIDERATIONS

The  Group  has  made significant progress on the road  to  profit
recovery  from  the  events of 1999 and 2000.  However,  this  has
placed  a  heavy burden on the balance sheet and it  remains  very
stretched,  with the level of debt and therefore interest  expense
restricting further substantive progress. The Group's business  is
characterised   by  volume  growth  and  low  margins,   demanding
significant cash resources with the correct balance of equity  and
debt.

The  UK  and Scandinavian operations continue to perform  in  line
with  expectations and the recovery in the European businesses  is
progressing  well as they have received substantial  funding  from
the  Group. Assuming the funding issues can be addressed,  we  now
have  in  place an infrastructure platform where we  can  leverage
future growth.

Though  the Group has, in an operational sense, turned the  corner
following  the  problems of 1999 and 2000,  it  remains  extremely
vulnerable  due  to  an  undercapitalised balance  sheet.  Without
adequate  funding, it is highly unlikely that the  Group  will  be
able to continue to meet its obligations as they fall due and  the
prospects  for creating shareholder value are extremely difficult.
The Board believes that the Offer from Daisytek is the only viable
solution to refinance the business and without the Offer  and  the
subsequent  financing support from Daisytek, the  ability  of  the
Group to continue to trade is at risk.
                     

  
For further information:

ISA International plc                                01274 306 787
Mike Murphy, Chief Financial Officer
                                 
Weber Shandwick Square Mile                          020 7950 2800 
Terry Garrett/Louise Robson/Stephanie Smart 



                       ISA INTERNATIONAL plc
                    GROUP PROFIT & LOSS ACCOUNT
                FOR THE YEAR ENDED 31 DECEMBER 2001





                                                     2001          2000
                                        Note         £000          £000
                                                Unaudited       Audited
                                           
 Turnover                                  5      361,554       296,803
                                                _________      ________ 
 Cost of sales  - normal                         (308,333)     (248,916)
                - exceptional              6            -        (2,836)
                                                _________      ________       
  
                                                 (308,333)     (251,752)
                                                _________      ________ 
 Gross profit                                      53,221        45,051
                                                _________      ________ 
 Operating expenses                                   
 Distribution costs  - normal              7      (30,527)      (27,308)
                       (2000: as restated)                     
                     - exceptional         6       (1,013)       (3,165)
                                                _________      ________ 
                                                  (31,540)      (30,473)
                                                _________      ________ 
 Administrative expenses - normal          7      (21,301)      (21,177)
                         (2000: as restated)                            
                         - exceptional     6         (709)       (1,701)
                                                _________      ________ 
                                                  (22,010)      (22,878)
                                                _________      ________ 
 Operating loss                                      (329)       (8,300)
 Share of associates' operating         
  profit (2000: as restated)                        1,001         1,527
 
 Share of associates' exceptional          
  items (2000: as restated)                7       (2,636)       (1,245)
 
 Loss on disposal of associate                        (71)            -
  
 Amortisation of goodwill arising        
  on associates                                      (814)         (799)
                                                _________      ________ 
 Loss on ordinary activities           
  before interest & taxation                       (2,849)       (8,817)
 
 Interest receivable                                  128           115
 
 Interest payable and similar        
  charges (2000: as restated)              7       (4,069)       (3,199)
                                                _________      ________ 
 Loss on ordinary activities           
  before taxation                                  (6,790)      (11,901) 
  
 Tax on loss on ordinary activities        8         (631)         (449)
                                                _________      ________ 
 Loss on ordinary activities after taxation        (7,421)      (12,350)
 Dividends - Non-equity                              (208)            -
                                                ==========     =========
 Transfer from reserves                            (7,629)      (12,350)
                                                ==========     =========
 Losses per ordinary share                 9               
 Basic                                              (13.0)p       (21.4)p
 Before exceptional items 
 (2000: as restated)                       7         (6.1)p        (5.9)p
 Diluted                                            (13.0)p       (21.0)p
                                             


                       ISA INTERNATIONAL plc
                        GROUP BALANCE SHEET
                        AT 31 DECEMBER 2001


                                                         2001         2000
                                                         £000         £000
 Fixed assets                                       Unaudited      Audited
                                            
  Intangible assets - goodwill                         13,965       14,993
  Tangible assets                                       5,777        6,085
  Investments                                           2,297        2,609
                                                     _________     ________ 
                                                       22,039       23,687
                                                     _________     ________
Current assets                                      
  Stocks                                               22,320       18,488
  Debtors                                              56,116       46,268
  Cash at bank and in hand                              4,178        4,153
                                                     _________     ________
                                                       82,614       68,909
 Creditors due within one year                        (88,521)     (79,233)
                                                     _________     ________
 Net current liabilities                               (5,907)     (10,324)
                                                     _________     ________
 Total assets less current liabilities                 16,132       13,363
                                                     _________     ________   
 
 Creditors due after more than one year                (4,202)        (544)
 Provisions for liabilities and charges                     -          (81)
                                                     _________     ________
 Net assets                                            11,930       12,738
                                                     _________     ________   

 Capital and reserves                                 
  Called up share capital                               3,739        2,939
  Share premium account                                 7,154        1,041
  Other reserves                                        5,069        5,069
  Profit and loss account                              (4,032)       3,689
                                                     _________     ________
 Shareholders' funds                                   11,930       12,738
                                                     _________     ________
  Equity interests                                      5,017       12,738
  Non-equity interests                                  6,913            -
                                                     _________     ________
 Total shareholders' funds                             11,930       12,738
                                                     _________     ________
                    
                                                          
            RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
                                                          
                                                         2001         2000
                                                         £000         £000
                                                    Unaudited      Audited
       
 Loss on ordinary activities after taxation            (7,421)     (12,350)
 Dividends - Non-equity                                  (208)           -
 New share capital issued                               6,913            9
 Adjustment to unrealised gain on disposal of 
  subsidiary                                                -         (182)
 Translation differences on foreign currency net                   
  investments                                             (92)        (808)
                                                      _________     ________
 Net deduction from shareholders' funds                  (808)     (13,331)
 Opening shareholders' funds                           12,738       26,069
                                                      _________     ________
 Closing shareholders' funds                           11,930       12,738
                                                      _________     ________


                       ISA INTERNATIONAL plc
                     GROUP CASH FLOW STATEMENT
                FOR THE YEAR ENDED 31 DECEMBER 2001


                                                         2001         2000
                                                         £000         £000
                                                    Unaudited      Audited
                                            
                                                          
                                                          
 Net cash (outflow)/inflow from operating activities  (9,159)        2,427
                                                    _________     ________    

 Returns on investments and servicing of finance      (3,147)       (1,639)
                                                    _________     ________
 Taxation                                               (915)          (55)
                                                    _________     ________    
 
 Capital expenditure and financial investment
 Purchase of tangible fixed assets                    (1,903)       (3,209)
 Sale of tangible fixed assets                            91           226
                                                     _________     ________
                                                      (1,812)       (2,983)
                                                     _________     ________
 Acquisitions and disposals                           (3,285)         (161)
                                                     _________     ________
 Equity dividends paid                                     -            -
                                                     _________     ________   

 Net cash outflow before financing                   (18,318)       (2,411)
                                                     _________     ________
 Financing                                            
 Proceeds from preference shares issued                6,913             -
 Issue of ordinary share capital                           -             9
 New loans                                             3,982             -
 Capital element of hire purchase payments              (358)         (443)
                                                     _________     ________
                                                      10,537          (434)
                                                     _________     ________   

 Decrease in cash in the year                         (7,781)       (2,845)
                                                     _________     ________
         
 Analysis of movement in net debt                     
 Balance at beginning of the year                    (25,834)      (22,351)
 Decrease in cash in the year                         (7,781)       (2,845)
 Cash outflow from decrease in lease financing           358           443
 New loans                                            (3,982)            -
 New hire purchase contracts                               -          (261)
 Effect of foreign exchange rate changes                 (74)         (820)
                                                     _________     ________
 Balance at end of the year                          (37,313)      (25,834)
                                                     _________     ________
                                                          

NOTES TO THE FINANCIAL INFORMATION

1.Basis of preparation

  The  unaudited  financial  statements  are  prepared  under  the
  historical  cost  convention and in accordance  with  applicable
  accounting standards.

  The  unaudited  financial statements have  been  prepared  on  a
  going   concern  basis  which  the  Directors  believe   to   be
  appropriate  for the reasons summarised below  and  set  out  in
  more detail in note 12 of this preliminary announcement.

  The  Directors have prepared cashflow forecasts for  the  period
  up  to  31  December  2003 which show that  the  Group  requires
  further  funding  in  order to be able to continue  as  a  going
  concern.   As  set out in the Board's statement,  an  Offer  has
  been  announced   for the Group by Daisytek  and,  as  explained
  below,  the  Directors  believe that the  various  matters  that
  cause  the Group to require further funding will be resolved  as
  a  consequence of the Offer having been announced and under  the
  terms of the loan agreement with Daisytek.

  Having  taken  all  of  the factors set  out  in  note  12  into
  consideration,  the  Directors  have  prepared   the   unaudited
  financial  statements on the basis of a going  concern  as  they
  expect  that either the Offer will become unconditional  in  due
  course  or  that, if it does not, then the resolutions described
  in  that  note  to effect a fund raising in the form  of  equity
  shares  would  be passed.  Under either of these  circumstances,
  the  Directors  believe that the necessary  funds  would  become
  available to the Group.
  
  However,  there  can  be no certainty about  these  events  and,
  without   the  continued  financial  support  of  Daisytek,   in
  whatever  form, it is unlikely that the Group would be  able  to
  continue   to  operate  as  a  going  concern.   The   unaudited
  financial statements do not include any adjustments that may  be
  necessary  in  these circumstances such as the revision  of  the
  carrying   values  of  assets,  the  requirement   for   further
  provisions  for additional liabilities that may  arise  and  the
  reclassification  of fixed assets and long-term  liabilities  as
  current.
  
2.The  Articles  of  Association of  the  Company  provide  for  a
  maximum  borrowing limit for the Group of no more than  3  times
  the  amount  of  the  Group's  consolidated  share  capital  and
  reserves  as  shown  in the latest audited consolidated  balance
  sheet  of  the Group.  The Articles of Association provide  that
  subsequent  issues  of capital can be incorporated  in  the  net
  asset  measure.   As at 31 December 2001 the draft  consolidated
  balance  sheet  has  net borrowings of £37.3 million  and  share
  capital  and reserves of £11.9 million, after including the  net
  proceeds  of  £6.9  million  received  from  the  investment  by
  Daisytek  in  September 2001.  If the 2001 accounts were  signed
  off   the  Company  would  be  immediately  in  breach  of  this
  borrowing  limit and would not be able to further  increase  its
  borrowings.   Shareholders  have  been  asked  to  sanction   an
  increase  in the borrowing powers from 3 to 5 times the  Group's
  consolidated  share  capital and reserves and  an  Extraordinary
  General  Meeting  has been called for 22 May  2002.  Irrevocable
  undertakings to vote for the resolution have been received  from
  the  holders of 51.1 per cent. of the votes eligible to be  cast
  at  the  EGM,  which is enough to ensure that the resolution  is
  passed.   Upon conclusion of the EGM it is anticipated that  the
  Statutory  Accounts  for 2001 will be duly signed  and  that  no
  breach will have occurred.

3.An  impairment  review  has been performed  in  respect  of  the
  investment  in  Kaye  Office  Supplies  Limited  ('Kaye').   The
  recoverable  amount  of  the  goodwill  has  been  assessed   by
  reference   to  the  net  present  value  of  estimated   future
  cashflows incorporating the planned costs and expected  benefits
  of  the  reorganisation (that was planned at  the  time  of  the
  acquisition  of   the  Group's interest  in  Kaye  and  that  is
  currently  in process) and applying a discount rate  of  10  per
  cent..

4.There  has been no change to any of the accounting policies  set
  out in the 2000 Statutory Accounts.

5.The  segmental analysis of turnover and operating profit/(loss),
  before exceptional items, by origin is as follows:

                                       Turnover        Operating profit/(loss)
                                                          before exceptional
                                                               items
                                    2001        2000     2001         2000
                                    £000        £000     £000         £000

 United Kingdom and Ireland      141,481     111,421    5,589        4,430
 Scandinavia                      44,416      43,798    1,072          504
 Continental Europe              175,657     141,584   (4,165)      (4,348)
 Unallocated central costs             -           -   (1,103)      (1,184)
                                ________     _______   _______      ________
                                 361,554     296,803    1,393         (598)
                                ________     _______   _______      ________

6.The exceptional items consist of the following:

                                                          2001      2000
                                                          £000      £000
 Cost of sales                                      
 Stock losses and customer claims                            -     2,836
 Distribution costs                                    _______    _______
 Relocation of distribution centre                         939         -
 Duplicated costs during logistics transfer                  -     1,745
 Contract termination costs                                 74     1,420
                                                       _______    _______
                                                         1,013     3,165
                                                       _______    _______
Administrative expenses                               
 Board and senior management settlements                   592       513
 Property and location rationalisation                     117       270
 Non-recoverable debts                                       -     1,197
 Exceptional bad debts                                       -      (279)
                                                       _______    _______
                                                           709     1,701
                                                       _______    _______
 Total before share of associates                        1,722     7,702
 Share of associates                                     2,636     1,245
                                                       _______    _______
                                                         4,358     8,947
                                                       _______    _______

7.The   definition   of  distribution  costs  and   administrative
  expenses  has  been  refined  to  apply  a  consistent   measure
  throughout   the  Group,  following  the  termination   of   the
  outsourced   logistics  contract  and  an  ongoing  project   to
  standardise accounts coding structures. The comparative  figures
  for  2000  have  been restated to take account of  this  revised
  definition.

  The  allocation  of  the Kaye result for 2000 between  operating
  profit,  exceptional  items  and interest  was  altered  in  the
  period  between  the Group accounts being signed  and  the  Kaye
  accounts  being  signed, although the overall  result  for  this
  associate  remained the same as that previously  disclosed.  The
  comparative figures for 2000 have therefore been restated  as  a
  result of these amendments.

8.The  taxation charge comprises UK corporation tax £33,000 (2000:
  £736,000),  overseas  tax  charge  £505,000  (2000:  credit   of
  £5,000),  deferred  tax  credit  of  £52,000  (2000:  charge  of
  £52,000)  and  share  of associates tax charge  £145,000  (2000:
  credit of £334,000).

9.The  calculation of basic loss per ordinary share  is  based  on
  the  loss  after taxation and non-equity dividends of £7,629,000
  (2000:  £12,350,000)  and on 58.8 million (2000:  57.8  million)
  ordinary  shares being the weighted average number of shares  in
  issue   during  the  year.  The  calculation  of   loss   before
  exceptional  items  per ordinary share is based  on  a  loss  of
  £3,594,000  (2000: £3,647,000). The calculation of diluted  loss
  per  ordinary  share  is  based  on  58.8  million  (2000:  58.9
  million)  ordinary shares as the outstanding warrants and  share
  options have no dilutive effect.

10.Reconciliation of operating  loss to net  cash (outflow)/inflow 
   from operating activities

                                                         2001        2000
                                                         £000        £000
 Operating loss                                          (329)     (8,300)
 Depreciation                                           2,058       1,809
 Loss on disposal of fixed assets                           1          39
 (Increase)/decrease in stocks                         (3,832)        385
 (Increase) in debtors                                 (8,929)       (866)
 Increase in creditors                                  1,872       9,360
                                                       _______     _______
 Net cash (outflow)/inflow from operating activities   (9,159)      2,427
                                                       _______     _______

11.A  Statement of  Total  Recognised  Gains  and  Losses  is  not
  included  as  there have been no material movements  other  than
  those  reported in the Profit & Loss Account and the  unrealised
  gain on disposal of a subsidiary and translation differences  on
  foreign  currency net investments which are both  shown  in  the
  Reconciliation of Movements in Shareholders' Funds.

12.As  explained  in   note  1, 'Basis   of   preparation',   the
  Directors have prepared the unaudited financial statements on  a
  going   concern   basis,   having  regard   to   the   following
  circumstances:

  The  Directors have prepared cashflow forecasts for  the  period
  up  to  31  December  2003 which show that  the  Group  requires
  further  funding  in  order to be able to continue  as  a  going
  concern.   As  set out in the Board's statement,  an  Offer  has
  been  announced  for  the Group by Daisytek  and,  as  explained
  below,  the  Directors  believe that the  various  matters  that
  cause  the Group to require further funding will be resolved  as
  a  consequence of the Offer having been announced and the  terms
  of the loan agreement with Daisytek detailed below.

  The  Offer  is preconditional upon the approval and  signing  by
  the  board of the consolidated financial statements of the Group
  for  the  year  ended  31 December 2001,  that  those  financial
  statements  do  not  vary  in  any material  respect  from  this
  preliminary announcement and that the audit opinion  in  respect
  of   those   financial  statements  is  not   subject   to   any
  qualification nor refers to any fundamental uncertainty save  in
  respect of matters identified in this preliminary announcement.
  
  The  Group failed to make a payment of a preference dividend  of
  £141,278  that fell due on 1 April 2002.  The Preference  Shares
  are  held by Daisytek which provided the Group with a waiver  of
  this  non payment until 6 May 2002 and consequently an event  of
  default  has  occurred. Following an event  of  default  certain
  rights  accrue  to the preference shareholders, inter  alia  the
  right  to  call  for  a  Special Dividend  (as  defined  in  the
  Company's Articles of Association) within 120 days of the  event
  of  default.  The  amount  of  the Special  Dividend  is  to  be
  equivalent to the 'Kaye Value', defined by the Articles  as  the
  value,  at  the  date the Special Dividend is required,  of  the
  ordinary  shares, rights to shares or warrants of Kaye  held  by
  the   Company  less  the  costs  incurred  by  the  Company   in
  subscribing  or  acquiring  such shares,  rights  to  shares  or
  warrants  after 9 August 2001.  If the Kaye Value is not  agreed
  between the Company and Daisytek, it is to be determined by  the
  Company's auditors as an appropriate percentage of the value  of
  the  whole  of  the issued share capital of Kaye (provided  that
  the  value  of  any shares, rights to shares or  warrants  which
  have been sold by the Company shall be equal to the proceeds  of
  sale).   At 31 December 2001, the carrying value of Kaye in  the
  Company's  balance sheet was £21.8 million and the cost incurred
  by  the Company in subscribing for further shares in Kaye  after
  9  August 2001 (all of which shares were subscribed prior to  31
  December 2001) was £3.2 million.  However, the carrying value in
  the   Company's  balance  sheet  may  not  be  relevant  to  the
  valuation  process described above, which may  ascribe  a  lower
  value  to  the Company's interest in Kaye at the time  when  the
  payment  of  the Special Dividend is required.  Upon receipt  of
  notice  that  the Special Dividend is to be called  for,  it  is
  deemed as payable. The settlement of the Special Dividend is  by
  way   of   cash   or,  with  the  consent  of   the   preference
  shareholders,   by   the  distribution  in  specie   of   assets
  equivalent  to  the Special Dividend payable.  If  this  Special
  Dividend  was called for then, dependent upon its value,  it  is
  uncertain    whether   the   Company   would   have   sufficient
  distributable  reserves to make the payment. No  further  rights
  are  acquired by Daisytek in the circumstances where the Special
  Dividend  is  unable to be paid.  If this Special  Dividend  was
  called  for in cash, then it would be funded under the terms  of
  the  loan agreement set out below. Daisytek has waived the right
  to call for the Special Dividend prior to 30 June 2002.

  Under  a  loan agreement with Daisytek effective from 12 October
  2001,  borrowings  amounting  to  £7.9  million  fall  due   for
  repayment on or before 30 June 2002. If this repayment  has  not
  been  made,  then the Directors are obliged to  procure  that  a
  fund  raising  be  proposed to the members  in  the  form  of  a
  placing  of  ordinary  equity shares  to  Daisytek,  subject  to
  clawback  to the extent members subscribe as part of this  fund-
  raising.  The agreement prescribes that the amount to be  raised
  be  sufficient, net of expenses of the issue, to repay  in  full
  the  amounts  outstanding  under the loan  agreement,  any  cash
  payment  due in respect of the Special Dividend and  an  amount,
  to  be  determined  by  the  Directors,  to  provide  additional
  working  capital  for the Group (subject to  this  amount  being
  less  than  £10 million). If the Company is seeking  to  procure
  the   fund-raising  then  Daisytek  has   agreed  not  to   seek
  repayment  of  the  loans  (other than  following  an  event  of
  default), nor to seek payment of the Special Dividend if it  has
  been  called  for,  until 30 September  2002.  If  the  required
  resolutions  to effect this fund raising are not passed  at  the
  meeting  called  for  members  to  consider  them,  then  it  is
  unlikely  that  the Group would be in a position  to  repay  the
  amount owed to Daisytek or to pay the Special Dividend in cash.

  The  Group is currently operating at or around the maximum limit
  of  its borrowing facilities which it expects to continue to  be
  made available to the Group in the current circumstances of  the
  Offer  and associated terms of the loan agreement. Daisytek,  as
  part  of the terms of the Offer announcement, has provided  £3.0
  million  of  interim funding to support the cash  needs  of  the
  business  during  the Offer process. Consequently,  between  now
  and  30  September 2002 (the later of the likely dates when  the
  Offer,  if  made,  is expected to be declared unconditional  and
  the  date  when  any fund-raising proceeds are  expected  to  be
  received),  the Directors believe that the Group has  sufficient
  funds  to  be  able to continue to meet its debts as  they  fall
  due.

  Once  the Offer from Daisytek is made and becomes unconditional,
  the  Directors believe that, on the basis of current discussions
  with Daisytek, the following will occur:

  A  That  the  right to receive the Special Dividend will be waived.
  B  That either:
     - The repayment date of the loans due under the loan agreement
       with Daisytek will be extended with any further funding that is
       necessary also being made available from Daisytek; or
     
     - If the loans are required to be repaid, the required resolutions 
       to effect a fund-raising in the form of a placing of equity shares 
       will be passed and the funds necessary to provide sufficient 
       working capital to the Group, including funding the Special Dividend   
       payment if A does not happen, would be available.

  Should the Offer be made but not become unconditional, then  the
  Directors  believe that the Special Dividend will be called  for
  and  the  loans  will be required to be repaid.   Following  the
  event  of  default,  and taking account  of  the  voting  rights
  conferred by this, Daisytek would control 50 per cent. plus  one
  vote   of   the   voting  rights  of  the  Company.   In   these
  circumstances,  it is not certain that the required  resolutions
  to  effect  a  fund-raising in the form of a placing  of  equity
  shares would be passed since these resolutions require a 75  per
  cent.  majority.   Without the passing of these resolutions,  it
  is  unlikely that the Group would be able to continue as a going
  concern  and  consequently,  the  Directors  would  expect  the 
  resolutions to  be passed  as it would  be in Shareholders' best 
  interests to do  so, and  that  the  funds  necessary to provide
  sufficient  working capital  to  the  Group,  to repay the loans
  and  to  fund  any payment, if required, of the Special Dividend
  in cash, would be available.

  On  the basis of the information currently available to them the
  Directors  believe  that the Offer will be  made  and  will  not
  subsequently lapse.
  
  On  these bases, whether or not the Offer becomes unconditional,
  the  Directors believe that the Group will have sufficient funds
  for the foreseeable future.

  Should the Offer not be made, lapse, become unconditional but  B
  above  not  then  occur,  or not become  unconditional  and  the
  resolutions  to  effect a fund-raising in  the  form  of  equity
  shares  as  set out above not then be passed, then the Directors
  would   need  to  consider  what  other  funding  options   were
  available  to  them.   In these circumstances,  if  the  Special
  Dividend  became payable in cash, then it is unlikely  that  the
  Group  would  be  able to continue as a going concern.   If  the
  Special  Dividend were not payable the Group would still require
  additional  funding  and  the Directors would  seek  alternative
  forms  of funding but it is unlikely that such funding would  be
  available  and  any such funding would require  the  consent  of
  Daisytek in accordance with the Articles of Association.

13.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
  2000  is  based on the statutory accounts for that year.   These
  accounts,  upon which the auditors, Arthur Andersen,  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. The  auditors,  KPMG
  Audit  Plc, have not yet reported on the full statutory accounts
  for  the year ended 31 December 2001, which should be posted  to
  shareholders in  due course. After that time they  will also  be
  available at the Company's registered office: 66/70 Vicar  Lane,
  Bradford, West Yorkshire, BD1 5AG.




                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                                                                                    

a d v e r t i s e m e n t