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Knowledge Support (KSS)

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Wednesday 16 April, 2003

Knowledge Support

Final Results

Knowledge Support Systems Group Plc
16 April 2003

           Knowledge Support Systems Group plc ('KSS' or the 'Group')

    Preliminary Announcement of Results for the Year Ended 31 December 2002

KSS, a leading supplier of price management and optimisation systems and
services for the petroleum, mass and convenience retail industries, announces
its results for the year ended 31 December 2002.



The revenue for the year ended 31 December was £1.562m, compared with £1.021m,
for same period last year.  The net loss was £3.363m  compared with a net loss
of £8.996m. last year.  The Group ended the year with £21.539m of cash resources
compared to £24.825m at the beginning of the year.

Board Changes

There have been a number of Board changes in 2002.  I was appointed
non-executive Chairman in March 2002, following the death of the founder and
then Executive Chairman, Professor Madan Singh.

David Mushin, appointed as Chief Executive in September 2001, was dismissed on
24 June 2002.  Since that time, Iain Cockburn has most ably continued to act as
interim Chief Executive in addition to his responsibility as Finance Director.

On 25 October 2002, Peter Horsthuis joined the Board as a non-executive
director.  Mr Horsthuis is also a director of Newbrook Limited which hold a
beneficial interest in 45.44% of the shares of  KSS.


2002 has been a year of significant change for the Group.  Aside from the above
mentioned management changes, the Board has worked hard to consolidate the
Group's operational and financial position.     In September 2002, with the
Interim Results, we announced that the new management team's efforts had led to
a much clearer strategic and operational focus and that the Board was continuing
to review other options to improve shareholder value.

On 17 January 2003, the Board announced that, as part of the Strategic Review
and in light of an anticipated improvement in the Group's outlook, it had
reassessed the funding requirements for the business going forward.  At that
time, a return of excess cash to shareholders was identified as one possible way
of enhancing value.

As announced on 3 March 2003, the Group has entered into discussions with
various  parties regarding alliance partnerships and a sale or merger of the
Group.  The Group continues to pursue discussions with several parties,
including potential management buy-out options, that may or may not lead to an
offer being made either for the business and assets of the Group or for an offer
for the entire issued share capital of the Company. While there can be no
certainty that any such offer will be forthcoming, the Board will keep
shareholders informed of developments as appropriate and further announcements
concerning the most appropriate route should be made to shareholders within the
next few weeks.

In the meantime the Group continues to make progress in further building both
divisions, despite difficult trading conditions in the Retail and Petroleum
markets.  It is the hope of the Board that the uncertainties that exist in these
markets will clear quickly to allow the Group to achieve its revenue targets for
the year.  The Board is encouraged by the completion of detailed business plans
for both divisions and the steady progress being demonstrated in executing these
plans.  We expect that the Petroleum division should achieve a profitable run
rate by the end of this year while the continued investment in the Retail
division is likely to bear longer term benefit for shareholder value.

Trevor Goul-Wheeker

Non-Executive Chairman

15 April 2003


Profit and Loss Account

Revenues for the year were £1.562m compared to £1.021m in the prior year.
Licence revenues increased from £0.619m to £0.881m.  Professional services
revenues arising from implementation and evaluation revenues increased to
£0.519m from £0.243m.  In 2002 25% of our revenue arose from customers in the US
and Canada, compared to 1% in 2001.

Operating expenses decreased to £7.386m for the year compared to £12.450m for
the prior year or £10.897m excluding exceptional re-structuring costs. The
headcount at the end of the year was 79.

Interest income for the year was £0.933m compared to £1.494m for the previous
year.  The income was derived from the investment of surplus funds in various
money market funds and cash deposits at market rates.  The average rate of
return on invested cash was 4.0% compared to 5.3% in the previous year.

The Group incurred no charge to UK taxation due to trading losses.  The tax
credit of £0.361m represents claims for tax repayments on qualifying spend in
relation to research and development.

The loss of 4.55p per share is calculated using an average of 73.9m shares
(2001: 73.9m shares).

Cash flow and Net Funds

The decrease in net funds in the year was £3.286m compared to £7.688m in the
prior year.  The net cash outflow from operating activities was £4.658m compared
to £8.631m in the prior year, primarily reflecting the lower operating expenses
and the receipt of £1.000m of insurance proceeds relating to Professor Madan
Singh's death.

Capital expenditure for the year was negligible compared to £0.757m in the prior

Efforts continue to sub-lease the space in the Manchester office that was
vacated in October 2001 but conditions in the Manchester property market have
been difficult and no tenants have yet been found.  The restructuring provision
in relation to the lease costs for that space was £0.330m at the end of 2002.
Should no tenant be found this provision would cover all lease and service costs
through to the first lease break opportunity in June 2005.

The net funds at the end of the year were £21.539m compared to £24.825m at the
start of the year.  This balance is more than sufficient to meet the Group's
operating requirements.

Strategic Review

We have developed sound business plans for both the Petroleum and Retail
divisions that in the view of the Board achieve the right balance between the
level of investment in light of the opportunities that the Petroleum and Retail
sectors offer and the need to conserve the funds available to the business.

At the corporate level we have been actively engaged in exploring and searching
for alliance and partnership opportunities that would enhance shareholder value
in the short term.  Although Knowledge Support Systems Group plc may be capable
of executing its business strategy independently, we have been actively
evaluating opportunities where a sale or merger could provide an opportunity to
more rapidly enhance value or return the maximum amount of cash to shareholders.

In the meantime we are also finalising our review of other mechanisms for
returning surplus funds held by the Group to shareholders.  Further
announcements to shareholders concerning the most appropriate route should be
made within the next two to three weeks.


We signed four new licences for PriceNet in 2002, importantly securing our first
strong reference sites in both Europe and the USA.  We also continue to make
progress in our discussions with the multi-national fuels retailer with whom we
have signed a global framework agreement and aim to close further orders within
the course of 2003.

While we regarded the division's trading situation towards the end of 2002
increasingly favourably, we have experienced during the first quarter several
delayed orders for our products and services, largely due to the uncertainty
surrounding the Petroleum sector as a result of continued tensions in the Middle
East and the war in Iraq.  Pressure for structural reform of down-stream
retailing activities, where most of our products are deployed, has equally
impacted our business as the oil majors have delayed orders while they undergo a
restructuring of their global organisations including entire petroleum retail
network disposals and joint ventures.

                  We recognise that the rapid changes the petroleum industry is
undergoing are likely to have a significant and potentially very major impact on
KSS.  We are currently still of the view that the division provides a relevant
value proposition to this market and still aims to achieve  a profitable run
rate in the fourth quarter.  However, in the short term, progress in signing new
customers has been slower than expected.


We continue to make progress in the Retail division.  The division has refined
its product and solution vision and believes it now has an offering that
reflects and addresses the needs of and issues faced by retailers in achieving
improvements in pricing process and controls.

We have a clear strategy for product development and importantly are working
with customers to deliver and implement that solution.  The ability to focus the
development around specific customer opportunities represents a major step
forward for the Retail division.

We are very pleased to be working with one particular major US retailer and are
very encouraged at the value that we believe we can bring to this client.  We
are confident that we can deliver, implement and integrate a robust and scalable
solution that will allow them to achieve their improvement goals.  A successful
conclusion to this project will provide the Group with a first reference site
that will validate our product strengths and solution vision.

In the broader retail markets, interest in the solutions that support and
improve the price setting process in large retailers continues to be strong.  We
continue to believe that our consultative approach combined with our PriceStrat
product that can be delivered and integrated on-site provides a solution option
that is clearly differentiated from competing offerings.

In light of the difficult trading environment experienced by many European and
US retailers, we are in no doubt that it will be difficult to convert enquiries
and pilot work into tangible customer commitments and firm orders for large
licence contracts.  Hence the Retail division is likely to require continued
investment for the foreseeable future.  However, our present view is still that
the division's offering to the market is sound and that the current investment
is fully in the interest of shareholders.

Meanwhile, the Retail division continues to work hard to develop its reach and
presence within the industry.


As previously stated we have ceased direct sales and marketing efforts in the
Telecommunications area.  To compound the difficult trading condition in the
telecommunications market, our sole distribution partner Alcatel is the subject
of a legal claim from French mobile telecommunications operator Societe
Francaise du Radiotelephone (SFR)  in connection with a Telprice licence sold
to, and implemented at, SFR by Alcatel.  Although KSS is not a direct party to
the contractual dispute, KSS has been named by SFR as a defendant and is also
subject to a claim for financial loss.

KSS will provide Alcatel with support and technical assistance if required to
defend the claim against Alcatel and to contest any potential liability for KSS.
  As the outcome or course of action for this claim is uncertain at this time,
the Board cannot clearly assess the potential liability for KSS.    At a
minimum, KSS will incur legal fees throughout 2003 to defend its position.  It
is not possible at this stage to assess the likely level of these expenses.  We
have referred the matter to our insurers and are uncertain at this stage whether
this claim and the legal costs will be covered by our professional indemnity

Management and Staff

I would like to take this opportunity to thank the management and staff for
their support, commitment and efforts in this last year.


The Group is experiencing an exceptionally difficult trading environment, with
marked changes in demand from one quarter to the next.  Given the ongoing
tensions in the Middle East and a wave of restructuring in the Petroleum and
Retail industries, the Group's outlook is currently subject to a high degree of
uncertainty.  At the same time, considerable progress has been made in both
divisions and trading and financial prospects since  2002 has been much

Given the uncertainty in our target markets, exacerbated by a volatile software
and services industry, several options to reduce risk and provide short-term
value to our shareholders are currently being explored.  We expect to finalise
this process within the next few weeks and will provide an update to
shareholders as soon as possible.

Iain Cockburn

Interim Chief Executive Officer and Finance Director

Consolidated profit and loss account
for the year ended 31 December 2002
                                                   Note         2002                            2001
                                                                £000         £000               £000               £000

Turnover from continuing operations                  1                      1,562                                 1,021
Cost of sales                                                                (15)                                 (164)

Gross profit                                                                1,547                                   857

Administrative expenses:
   Exceptional costs                                              42                         (1,553)
   Other costs                                               (7,386)                        (10,897)

                                                                          (7,344)                              (12,450)
Other operating income                                                        122                                   331
Other operating income - exceptional                                        1,000                                     -

Operating loss from continuing operations                                 (4,675)                              (11,262)

Interest receivable                                                           933                                 1,494

Loss on ordinary activities before taxation                               (3,742)                               (9,768)

Taxation on loss on ordinary activities              6                        379                                   772

                                                                          (3,363)                               (8,996)

Loss per ordinary share - basic                      2                    (4.55)p                              (12.17)p

Loss per ordinary share - diluted                    2                    (4.55)p                              (12.17)p

There were no material differences between the reported profits and historical
cost profits on ordinary activities before taxation in either of the above
financial years.

Consolidated balance sheet
at 31 December 2002
                                                     2002                                           2001
                                              £000                 £000                   £000                     £000
Fixed assets
Tangible assets                                                     515                                           1,021
Investments: own shares                                              14                                               -

                                                                    529                                           1,021
Current assets
Debtors                                      1,881                                       1,889
Investments                                 21,250                                      23,707
Cash at bank and in hand                       467                                       1,161

                                            23,598                                      26,757
Creditors: amounts falling due
within one year                             (1,197)                                     (1,261)

Net current assets                                               22,401                                          25,496

Total assets less current                                        22,930                                          26,517

Creditors: amounts falling due
after more than one year                                           (12)                                            (49)

Provisions for liabilities and                                    (330)                                           (547)

Net assets                                                       22,588                                          25,921

Capital and reserves
Called up share capital                                             148                                             148
Share premium account                                            37,391                                          37,370
Profit and loss account                                        (14,951)                                        (11,597)

Equity shareholders' funds                                       22,588                                          25,921

These financial statements were approved by the board of directors on (date) and
were signed on its behalf by:

I D Cockburn

Consolidated cash flow statement
for the year ended 31 December 2002

                                                                    Note             2002                          2001
                                                                                     £000                          £000
Net cash outflow from continuing operating activities                  3           (4,658)                       (8,631)

Returns on investments and servicing of finance
Interest received                                                                     609                         1,690
Interest paid                                                                           -                             -

Net cash inflow from returns on investments and servicing of
finance                                                                               609                         1,690

Taxation received/(paid)
UK taxation                                                                           826                             -
US taxation                                                                          (38)                          (10)

Net cash inflow/(outflow) from taxation                                               788                          (10)

Capital expenditure
Purchase of tangible fixed assets                                                    (25)                         (778)
Proceeds from sale of tangible fixed assets                                             5                            21
Purchase of own shares                                                               (24)                             -

Net cash outflow from capital expenditure                                            (44)                         (757)

Net cash outflow before management of liquid resources                            (3,305)                       (7,708)

Management of liquid resources
(Increase)/decrease in short-term deposits                                          (266)                         1,908
Purchase of shares held in money market                                                 -                       (3,000)
Sale of shares held in money market                                                  2432                         9,500
Cash released from short term deposits                                                291                             -

Net cash inflow from management of liquid resources                   5             2,457                         8,408

Cash (outflow)/inflow before financing                                              (850)                           700

Proceeds from issue of ordinary share capital                                          21                            20

Net cash inflow from financing                                                         21                            20

(Decrease)/increase in cash in the year                               5             (829)                           720

Consolidated statement of total recognised gains and losses
for the year ended 31 December 2002
                                                                                    2002                           2001
                                                                                    £000                           £000

Loss attributable to members of the company                                      (3,363)                        (8,996)
Exchange translation differences                                                       9                           (35)

Total recognised gains and losses for the year                                    (3,354)                        (9,031)

Reconciliation of movements in shareholders' funds
for the year ended 31 December 2002

                                       2002                    2001
                                       £000                    £000

(Loss)/profit for the financial     (3,363)                 (8,996)
Net proceeds from issue of               21                      20

                                    (3,342)                 (8,976)
Exchange translation difference           9                    (34)

Net  (reduction in)/addition to     (3,333)                 (9,010)
shareholders' funds
Opening shareholders' funds          25,921                  34,931

Closing shareholders' funds          22,588                  25,921

Notes to the Financial Statements

Basis of reporting

            This preliminary statement of annual results which covers the year
to 31 December 2002 has been agreed by the Group's auditors and is consistent
with the full financial statements.

            The abridged preliminary Group accounts for the year ended 31
December 2002 are not statutory accounts and have been extracted from the full
statutory accounts for the year ended 31 December 2002.  The full statutory
accounts for the year on which the auditors report is unqualified will be
delivered to the Registrar of Companies in due course.

1          Analysis of turnover and loss on ordinary activities before taxation

All turnover and results are derived from the Group's principal activity.
Analyses of operations by geographical origin, customer location and type of
activity are shown below:

Turnover by geographical origin
                                       2002                                                   2001
            Turnover          (Loss)/profit        Net assets         Turnover       (Loss)/profit       Net assets
                                 before tax                                             before tax
                £000                   £000              £000             £000                £000             £000

UK             1,337                (3,788)            22,042            1,013            (10,573)           25,352
US               225                     46               546                8                 804              569

Total          1,562                (3,742)            22,588            1,021             (9,769)           25,921

Turnover by customer location

                                                           2002                         2001
                                                           £000                         £000

United Kingdom                                              270                           84
Rest of Europe                                              392                          455
USA & Canada                                                838                            8
Other                                                        62                          474

                                                          1,562                        1,021

Turnover by activity

                                                           2002                         2001
                                                           £000                         £000

Licences                                                    881                          619
Maintenance income                                          162                          159
Professional services                                       519                          243

                                                          1,562                        1,021

2          Loss per share

            Losses and number of shares used in the calculations of loss per
ordinary share are set out below:
                                                                          2002                          2001
                                                                          £000                          £000

Loss after tax                                                         (3,363)                       (8,996)

                                                                 No. of shares                 No. of shares

Weighted average number of shares                                   73,907,545                    73,942,679

Loss per share                                                         (4.55)p                      (12.17)p

                                                                          2002                          2001
                                                                          £000                          £000

Loss after tax                                                         (3,363)                       (8,996)

                                                                 No. of shares                No. of shares

Weighted average number of shares - basic                           73,907,545                    73,942,679
Weighted average effect of share options                                     -                             -

Weighted average effect of shares - diluted                         73,907,545                    73,942,679

Loss per share                                                         (4.55)p                      (12.17)p

The weighted average number of shares has been adjusted for investment in own
shares held during the year.

3      Reconciliation of operating loss to net cash flow from operating activities

                                                2002                                          2001

                                                                £000                         £000
Operating loss:
      Normal                         (4,717)                                      (9,709)
      Exceptional                         42                                      (1,553)
                                                             (4,675)                                   (11,262)

Depreciation                                                     504                                        849
Loss/(profit) on sale and                                          2                                        655
impairment of fixed assets
Amortisation of fixed                                             10                                          -
asset investments
(Increase) /decrease in                                         (95)                                        796
(Decrease)/increase  in                                        (404)                                        331

Net cash outflow from                                        (4,658)                                    (8,631)
operating activities

4            Reconciliation of net cash flow to movement in net funds

                                                      Note     2002                           2001

                                                               £000                           £000
(Decrease)/increase in cash in the year                        (829)                           720
Cash inflow from decrease/(increase in liquid
resources                                                    (2,457)                        (8,409)

Change in net funds resulting from cash flows                (3,286)                        (7,689)

Movement in net funds in the year                            (3,286)                        (7,689)
Net funds at the start of the year                           24,825                         32,514

Net funds at the end of the year                             21,539                         24,825

5            Analysis of net funds

                             At 31 December              Cash flows                    At 31 December
                                       2001                                                    2002
                                       £000                    £000                            £000

Cash                                  1,161                    (694)                           467
Overdrafts                             (43)                    (135)                          (178)

Current asset investments            23,707                  (2,457)                         21,250
                                     24,825                  (3,286)                         21,539

6           Taxation
            Analysis of charge/(credit) in the year
                                                                           2002                   2001
                                                                           £000                   £000

Current tax:
UK Corporation tax on loss for the year                                   (362)                  (491)
Adjustments in respect of previous periods                                  (3)                  (335)

Foreign tax                                                                (14)                     53

Total current tax                                                         (379)                  (773)

Deferred tax:
Origination and reversal of timing differences                                -                      -
Total deferred tax                                                            -                      -

                                                                          (379)                  (773)

Factors affecting tax charge/(credit) for year
                                                                               2002                     2001
                                                                               £000                     £000

Loss on ordinary activities before tax                                      (3,742)                  (9,768)
Loss on ordinary activities multiplied by the standard rate of
corporation tax in the UK of 30%                                            (1,123)                  (2,930)

Effects of:
Income not taxable                                                            (209)                    (966)
Depreciation for the period in excess of capital allowances                     115                      129
Movement in short-term timing differences                                      (21)                     (11)
Foreign tax                                                                    (14)                       53
Repayment of Research & Development tax credit at 16%                           317                      429
Utilisation of tax losses                                                       559                    2,858
Adjustment in respect of prior years                                            (3)                    (335)

Current tax credit for period                                                 (379)                    (773)

            The Group is carrying forward £12,070,810 of tax losses.  No
deferred tax asset has been recognised in the current year given the uncertainty
over future taxable profits against which these can be relieved.  This will be
reassessed at 31 December 2003 in line with FRS 19.

7            Contingent Liabilities

(i)         A partner of the Group,  Alcatel, is the subject of a legal claim
from Societe Francaise du Radiotelephone (SFR) in connection with a Telprice
licence sold to SFR by Alcatel. Although KSS was not a direct party to that
contractual dispute, KSS has been named by SFR in their claim for financial
loss.  KSS will provide Alcatel with support and technical assistance they
require to defend both the claim against them and to contest any potential
liability for KSS.

Although the outcome or course of action for this claim is uncertain at this
time, the Board, having taken legal advice, does not believe the SFR claim has
sufficient merit to be successful.  If the claim were successful, the Company is
unable at this time to quantify the financial effects of the claim.

KSS will however in the course of 2003 be required to incur legal fees to defend
this claim in 2003. It is again not possible at this stage to judge or assess
the potential level of these fees.

(ii)        The Company has received a employment tribunal claim from David
Mushin alleging a potential loss of  £250,000.  It is the intention of the Board
to rigorously defend this claim. The Board has taken legal advice and based this
advice the Board considers that the process undertaken and the grounds for
dismissing David Mushin were sound and that the basis of his claim is without

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