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SBS Group (SBG)

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Monday 29 November, 1999

SBS Group

Final Results - Pre-tax Profit Up 49%

26 November 1999

                      SBS Group plc
  SBS Group plc, the AIM-listed specialist IT staffing
    business, today announces its audited results for
             the year ended 31 August, 1999.


* Turnover increased by 49% to £53.31m (1998: £35.86m).

* Operating profits after exceptional items rose by 46%
  to £2.54m (1998: £1.74m).

* Profit before taxation after exceptional items rose by
  49% to £2.22m (1998: £1.49m).

* Earnings per share increased by 36% to 16.9p (1998:
  12.4p post exceptional items).

* Final dividend of 2.6p (1998: 2.2p) making a total
  distribution for the year of 4.1p (1998: 3.2p).

* Acquisition in October of Applied Concepts Inc. (ACI),
  a New York-based IT staffing business specialising in
  the fast-growing telecommunications industry, for a
  maximum consideration of  $10.6m (£6.4m).

Commenting on the outlook, John Davies, SBS's Chairman,

'We  have a well-established business, a blue-chip client
base  and  a track record of identifying, completing  and
integrating quality acquisitions.  More recently, we have
acquired   a   significant    foot-hold   in    the    US
telecommunications industry.

'In common with others in the IT industry, we have had to
endure   the   short-term   side-effects   of   the   Y2K
microclimate  which is likely to result in a  decline  in
earnings  in the first half of the current year,  but  we
expect  a  return to organic growth in the  second  half.
This,  taken together with a ten month contribution  from
the recently acquired Applied Concepts Inc., leads us  to
expect a satisfactory outcome for the year as a whole'.

For further information, please contact:

SBS Group plc
Gary Jones, Chief Executive
(On 29 November only) 0207 253 2252
(Thereafter) 0207 240 7575
Philip Holt, Group Finance Director

Ludgate Communications
Tim Davis
0207 253 2252

Chairman's Statement

Financial Results

It  gives  me pleasure to report another successful  year
for SBS on the Alternative Investment Market. We have now
completed  our  thirtieth  year  in  business  and  I  am
delighted  to announce another record year of profit  and

The  improvement is due to both organic growth and a full
year's  contribution from the two acquisitions made  last
year,  the JCC Group and QRL. Turnover increased  by  49%
from  £35.86m to £53.31m. This also reflects an  increase
of  40%  in the average number of contractors across  the
Group and an overall increase of 5% in average contractor
rates.  Operating profits rose by 46% from  £1.74m  (post
exceptional item) to £2.54m and profit before taxation by
49% from £1.49m (post exceptional item) to £2.22m.

Fully  diluted earnings per share have increased  by  38%
from  11.7p (post exceptional item) to 16.1p. Given  this
excellent  performance  and the  Group's  potential,  the
Directors  are  recommending  the  payment  of  a   final
dividend  of 2.6p per share, which, when taken  with  the
interim  dividend  of  1.5p  per  share,  makes  a  total
distribution  for  the  year  of  4.1p  per  share.  This
represents an increase of 28% on last year. The  dividend
will be payable on 28 January 2000 to shareholders on the
register at 10 December 1999.

Shareholders'  funds stood at £2.38m at  31  August  1999
compared  with  the prior year figure of £1.24m.  Gearing
fell to 112%, compared to 254% at 31 August 1998.

Trading Overview

As  noted in our interim statement the first half of  the
year  was  outstandingly successful. The two acquisitions
made in 1998 both contributed strongly and in addition we
achieved excellent organic growth in our core business.

During the second half of the year, however, parts of the
Group encountered slower demand due to the so-called 'Y2K
microclimate'. This phenomenon whereby clients  who  have
completed the overhaul of their IT systems ahead  of  the
new  millennium have frozen new development projects, has
affected most of the information technology sector.

We  believe that as a result of the focus on Y2K  issues,
there  has  been  a significant build-up  of  less  time-
sensitive  projects  that in due course  will  provide  a
pipeline  of opportunities. Our view is that  demand  for
our  contract staff will show a steady improvement during
the  first  half  of 2000, with a return to  more  normal
levels of growth in the second half.

Daily rates of pay to our IT contractors have been steady
during the fiscal year showing an increase in the  UK  of
about 7% over 1998 rates.

Board and Employees

In October of last year, we welcomed Philip Holt as Group
Finance Director and as a main Board Director.

At the end of August, we employed 108 staff. On behalf of
the  Board,  I  would like to thank them  all  for  their


In  October,  we  announced the  acquisition  of  Applied
Concepts   Inc.  (ACI),  a  New  York-based  IT  staffing
business     specialising     in     the     fast-growing
telecommunications industry, for a maximum  consideration
of $10.6m (£6.4m).

Established  in  1979, ACI had 90 contractors  on  direct
assignment and an additional 140 through its 'partnering'
programme at the time of the acquisition.

In  the  year ended 31 October 1998, ACI had turnover  of
$7.0m  (£4.3m) and adjusted earnings before  taxation  of
$0.3m  (£0.2m). As at 31 October 1998, ACI had net assets
of  $0.65m  (£0.4m). The acquisition which was funded  by
bank  borrowings is expected to be earnings enhancing  in
the  current  financial  year  (before  amortisation   of

We  welcome  the  President of  ACI,  Alan  Waksman,  his
colleagues and their contractors to the Group.


We  have a well-established business, a blue-chip  client
base  and  a track record of identifying, completing  and
integrating quality acquisitions.  More recently, we have
acquired   a   significant    foot-hold   in    the    US
telecommunications industry.

In  common with others in the IT industry, we have had to
endure   the   short-term   side-effects   of   the   Y2K
microclimate  which is likely to result in a  decline  in
earnings  in the first half of the current year,  but  we
expect  a  return to organic growth in the  second  half.
This,  taken together with a ten month contribution  from
the recently acquired Applied Concepts Inc., leads us  to
expect a satisfactory outcome for the year as a whole.

John M. Davies
26 November 1999

Chief Executive's Report

Group Activities

SBS Group is a leading international IT staffing business
operating  across three major geographical  markets;  the
United Kingdom, Continental Europe and North America.
Group  turnover and pre-tax profit for the past year  can
be analysed as follows:

Turnover to 31 August

                         1999     1998       1999    1998
                           £m       £m          %       %
United Kingdom          28.57    21.56       53.6    60.1
Continental Europe      17.23     9.69       32.3    27.0
North America            7.51     4.61       14.1    12.9

Profit before tax to 31 August

                         1999    1998*       1999    1998
                           £m       £m          %       %
United Kingdom           1.18     0.84       53.2    53.5
Continental Europe       0.61     0.52       27.5    33.1
North America            0.43     0.21       19.3    13.4

* 1998 profits are stated before exceptional item

United Kingdom

Demand for IT contractors was strong in the first half of
our  fiscal year but softened in the second half. We  had
anticipated  a  weakening market during 1999  during  the
summer;  in the event demand started to slow in the  late

During 1997 and 1998, demand for IT contractors increased
strongly. This demand was fuelled by preparations for the
introduction  of the Euro at the beginning of  this  year
and by eradication of the so-called millennium 'bug'.  It
was  obvious  that this extraordinary demand  would  slow
during  1999: although the widely forecast recession  did
not  occur,  there  has  been  a  marked  reluctance   by
customers  to invest further in IT systems ahead  of  the
new millennium. We believe that demand for IT contractors
in  the  UK will progressively return to the more  normal
levels  of  growth  experienced in the mid-1990's  during

Our  Manchester office, which we opened in February 1998,
performed  well  in the second half and made  a  positive
contribution to operating profit in the final months.

Our  teacher  supply  business, Head Line,  improved  its
turnover  and  profit  before tax to  £1.12m  and  £0.04m
respectively. The second half comparison with 1998, since
it  became  part  of the Group, shows a 45%  increase  in
turnover  and  a  twenty two-fold increase  in  operating

Continental Europe

Our  European business followed a similar pattern  during
the  year to the UK. Although the Rotterdam and St Albans
offices showed modest growth in the number of contractors
during  the  year,  the part of the  London  office  that
concentrated  on higher-value services to  the  financial
sector  in  Germany suffered from a dearth of development
projects.  In  March, we opened an additional  office  in
Frankfurt  and have now transferred this latter  business
to  that  office. We believe that we are well  placed  to
enjoy growth in Continental Europe during 2000.

North America

The  North  American  business  produced  strong  organic
growth  throughout the year, with turnover and  operating
profit  in  US  dollar terms improved  by  61%  and  190%
respectively  over  1998. The number  of  IT  contractors
working  through our offices in Connecticut and New  York
is at record levels and with the addition of the acquired
business   of   Applied  Concepts,  Inc.  we   anticipate
excellent results from this subsidiary in the future.


No  acquisitions were made during the year but subsequent
to  the  year end, SBS announced its intention to acquire
Applied Concepts, Inc., a highly complementary and  well-
established  business based in New York. The  acquisition
was  completed  on  26 October 1999.  Alan  Waksman  will
continue  to  run the ACI business as part of  SBS  Group
Inc.  until 31 October 2000 and thereafter, SBS  has  the
option to retain him as a consultant.

We  expect  the acquisition of ACI will more than  double
our North American business in the coming year and brings
with  it  major  new  clients  in  the  fast-growing   US
telecommunications market including AT&T, Bell  Atlantic,
Lucent and Telcordia.

Client Base

New  clients  won  during the year  include  Eircell,  HJ
Heinz,  National  Australia Group and Nokia  in  the  UK;
AT&T,  Chello  Broadband,  Dresdner  Bank  and  UPM   Net
Services  in Continental Europe; and NASDAQ,  Pepsi  Cola
and Salomon Smith Barney in the US.

During the year we supplied IT contractors to nearly  400
clients across Europe and North America.

Share Options

A  total of 50,000 share options were granted during  the
year  and  it  remains  our  policy  to  encourage  share
ownership  at  all levels. With this in mind  it  is  the
Board's  intention  to  grant further  options  over  its
shares to a number of key employees in the near future.

The Internet

During  the period, we completed a substantial  re-launch
of  the  Group's internet site, which now brings together
each   of  the  Group's  operations  under  one  internet
address.  Given the international nature of our  business
and  the  fact  that  over 95% of the  responses  to  job
advertisements  on both the internet and the  trade  press
come  via  e-mail,  this has been a significant  project,
that will enhance day-to-day efficiency.

UK Personal Service Companies and IR35

In  the UK, in common with all IT staffing companies, SBS
makes  payments  to the vast majority of its  contractors
via  what  the  Government regards as  'Personal  Service
Companies'   (PSCs).   These  are  companies   owned   by
individual contractors that remunerate the contractor and
any other shareholders in a tax efficient manner.

In  his  March 1999 Budget speech, the Chancellor of  the
Exchequer  announced  that  changes  would  be  made   to
legislation  to counter what he regards as tax  avoidance
in   the  area  of  'personal  service  provision'.  This
intention  was  set out in the Budget Day  press  release

Since the announcement, the Inland Revenue have consulted
with  interested parties and as a result of  overwhelming
opposition to the original proposals, the Government have
reconsidered.  In September it published a  revised  IR35
entitled    'Personal    Services    Provided     through
Intermediaries   -   Preventing   Avoidance,   Preserving

The  new  rules will come into effect in April 2000.  The
Government  states  that  its  anti-avoidance   objective
remains  unchanged, but that it has simply  modified  the
means  of  attaining  this objective by  introducing  the
following changes:

* Traditional test of employment to apply: the
  traditional case-law test will be used to determine
  employment or self-employment
* Burden shifts to PSCs: the responsibility for
  determining whether PAYE and National Insurance
  contributions are due is transferred from the client
  (or agency) to the PSC. This means that SBS will still
  be entitled to make gross payments to contractors
  working for PSCs
* Allowable Expenses: employee expenses, pension
  contributions and 5% of the payment from the client (or
  agency) to cover the costs of running the service
  company may all be deducted by the PSC from the
  worker's income on which PAYE and National Insurance
  contributions are payable
* Exclusions: individuals not in business and contracting
  with an intermediary on a personal basis are
  specifically excluded
* Failure to comply: the Inland Revenue will seek to
  collect from the PSC any unpaid tax or National
  Insurance contributions and any interest due. Penalties
  may be payable in cases of negligent or fraudulent

Despite  strong opposition to the measures in parliament,
particularly  in  the House of Lords,  the  revised  IR35
legislation has been included in the Welfare  Reform  and
Pension  Bill  and is likely to be implemented  next  tax
year beginning 6 April 2000.

While  it is difficult to predict accurately the  effects
of the new legislation, the following results are likely:

* Many contractors and their advisors will press their
  cases to be excluded from IR35 legislation
* There may be upward pressure on rates from contractors
  seeking to mitigate their higher costs
* Some contractors will be attracted to work overseas
* Contractual arrangements between SBS and contractors
  will need to be examined in the light of the new

We are keeping a close watch on developments as there may
yet be more changes before next April. However, we do not
believe  that the legislation will cause any  fundamental
changes to the way in which our industry operates.


Although  trading  in  the UK and Continental  Europe  is
likely  to  be subdued over the first half of the  fiscal
year we are expecting a recovery in the second half.

Our  North  American business, due to  excellent  organic
growth, has expanded rapidly over the last year. Together
with  our  new  acquisition, ACI, we  anticipate  another
strong contribution for the current year.

In  the past year we have witnessed substantial growth in
our  business  with  companies in the  telecommunications
sector.  Our clients now include AT&T, Cable &  Wireless,
Cellnet,  Eircell, Energis, Lucent, MCI Worldcom,  Nokia,
Nortel,  the  Southern  New  England  Telephone  Company,
Vodafone  AirTouch  and  World  Telecom.  Including   the
business  of  our latest acquisition, ACI, we  anticipate
that  around  25% of Group turnover will be derived  from
this fast-growing sector in the next year.

Gary Jones
Chief Executive
26 November 1999
                      SBS GROUP PLC
                Year ended 31 August 1999

                                           1999      1998
                                Notes      £000      £000
Turnover                            2    53,305    35,856
Cost of sales                           (43,975)  (29,296)
Gross profit                              9,330     6,560
Administrative expenses                  (6,794)   (4,731)
Exceptional administrative                               
expenses                                      -      (87)
Other operating income                        -         1
Operating profit                          2,536     1,743
Interest receivable and                                  
similar income                               48        31
Interest payable and similar                             
charges                                    (365)      289)
Profit on ordinary activities                            
before taxation                     2     2,219     1,485
Tax on profit on ordinary                                
activities                          3     (723)     (511)
Profit for the financial year             1,496       974
Dividends                           4      (363)     (282)
Retained profit for the                                  
financial year                            1,133       692
Earnings per share before                                
exceptional items                   5     16.9p     13.1p
Earnings per share                  5     16.9p     12.4p
Fully diluted earnings per          5                    
share                                     16.1p     11.7p

All amounts relate to continuing operations.

The  comparative  figure for fully diluted  earnings  per
share has been restated in accordance with FRS14.
                Year ended 31 August 1999

                                             1999    1998
                                             £000    £000
Profit for the year                         1,496     974
Currency translation differences on                      
foreign currency net investments               22     (5)
Total recognised gains and losses           1,518     969
relating to the year

                      SBS GROUP PLC
                Year ended 31 August 1999
                                            1999     1998
                                            £000     £000
Profit for the year                        1,496      974
Dividends                                   (363)    (282)
                                           1,133      692
Other recognised gains and losses                        
relating to the year                          22      (5)
Goodwill on acquisitions                     (8)  (4,381)
New share capital subscribed                   -    4,313
Net additions to shareholders' funds       1,147      619
Equity shareholders' funds at 1                          
September 1998                             1,237      618
Equity shareholders' funds at 31 August                  
1999                                       2,384    1,237

                      SBS GROUP PLC
                     31 AUGUST 1999
                                     1999              1998
                         Notes    £000     £000     £000     £000
Fixed assets                                                     
Tangible assets                             395               490
Investments                                   5                 -
                                            400               490
Current Assets                                                   
Property held for                                               -
resale                             116                 -
Debtors                          9,839             9,446         
Cash at bank and in                                              
hand                               993               649
                                10,948            10,095         
Amounts falling due                                              
within one year                 (7,822)           (7,571)
Net current assets                        3,126             2,524
Total assets less                                                
current liabilities                       3,526             3,014
Amounts falling due                                              
after more than one                                              
year                                     (1,126)           (1,753)
Provision for                                                    
liabilities and charges                     (16)              (24)
Net assets                                2,384             1,237
Capital reserves                                                 
Called up share capital                     177               177
Share premium account                     5,493             5,493
Profit and loss account                  (3,286)           (4,433)
Equity shareholders'                                             
funds                                     2,384             1,237

Approved by the Board of Directors on 26 November 1999

G W Jones Director
P J E Holt     Director

                      SBS GROUP PLC
                Year ended 31 August 1999
                                      1999             1998
                           Notes    £000   £000     £000     £000
Net cash inflow from                                             
operating activities                      1,949               588
Return on investments and                                        
servicing of finance
Interest received                     48              31         
Interest paid                       (359)           (279)         
Interest element of                                              
finance lease payments                (6)            (10)
Net cash outflow from                                            
return on investments and                                        
servicing of finance                      (317)             (258)
UK corporation tax paid            (590)           (102)         
Overseas tax paid                  (104)            (63)         
Tax paid                                  (694)             (165)
Capital expenditure and                                          
financial investments
Sale of tangible fixed                                           
assets                                56               6
Purchase of tangible fixed                                       
assets                              (176)           (141)
Purchase of other                                                
investments                          (5)               -
Net cash outflow from                                            
capital expenditure and                                          
financial investments                     (125)             (135)
Acquisitions and disposals                                       
Purchase of subsidiary               (8)         (3,588)         
Net cash acquired with                -              66         
Net cash outflow from                                            
acquisitions and disposals                  (8)           (3,522)
Equity dividends paid                     (328)             (156)
Net cash inflow/(outflow)                                        
before use of liquid                                             
resources and financing                     477           (3,648)
Net proceeds from issue of                                       
shares                                 -           2,698
Capital element of finance                                       
lease payments                      (59)            (41)
Net   repayment  of  short                                       
term loans                         (781)           (598)
Increase  in  medium  term                                       
loans                                  -             333
                                          (840)             2,392
Decrease in cash                          (363)           (1,256)
                      SBS GROUP PLC
                  NOTES TO THE ACCOUNTS


The  financial information for the year ended  31  August
1999  does  not constitute statutory accounts within  the
meaning  of  section 240 of The Companies Act  1985.  The
financial  information has been extracted from  statutory
accounts  for the year ended 31 August 1999 on which  the
Company's  auditors  have given an  unqualified  opinion.
Full  financial  statements will be  available  from  the
Company  Secretary at SBS Group plc, 19th  Floor,  Centre
Point,  103 New Oxford Street, London WC1A 1DY on  Friday
10 December 1999.


The Group engages in a single class of business.

The  geographical  analysis of  turnover,  profit  before
taxation and net assets is as follows:

                                           1999      1998
                                           £000      £000
By origin and destination:                               
United Kingdom                           28,564    21,558
Continental Europe                       17,230     9,686
North America                             7,511     4,612
                                         53,305    35,856
Profit before taxation                                   
United Kingdom                            1,180       793
Continental Europe                          605       493
North America                               434       199
                                          2,219     1,485
Net assets                                               
United Kingdom                            1,052       768
Continental Europe                          473        62
North America                               859       407
                                          2,384     1,237


                                           1999      1998
                                           £000      £000
UK  corporation tax at 30.6% (1998:         529       407
31%) based on profits for the year
Overseas taxation                           202       101
Deferred taxation                           (8)         3
                                            723       511

                                            1999     1998
                                            £000     £000
Interim  dividend proposed on  30  March                 
1999  of 1.5p per share (1998: 1p)  paid                 
on 23 July 1999                              133       87
Final  dividend proposed on 26  November                 
1999  of  2.6p  per share  (1998:  2.2p)                 
payable on 28 January 2000                   230      195
                                             363      282


The  calculation  of earnings per share  is  based  on  a
profit of £1.49m (1998: £0.97m) and a weighted average of
8,848,975 (1998: 7,870,742) shares in issue.

The  calculation of fully diluted earnings per  share  is
based  on  an adjusted profit of £1.49 m (1998:  £0.98m).
The  number of shares used to calculate diluted  earnings
per  share  incorporates the weighted average  number  of
shares in issue 8,848,975 (1998: 7,870,742) plus dilutive
potential  ordinary shares arising from share options  of
446,396 (1998: 460,771).

The  comparative figures for fully diluted  earnings  per
share have been restated in accordance with FRS14.

                            1999       1999   1998       1998
                                      Fully             Fully
                                    diluted           diluted
                           Pence      Pence  Pence      Pence
Earnings per share          16.9       16.1   12.4       11.7
Exceptional  administrative                                  
expense                        -          -    0.7        0.7
Earnings  per share  before                                  
exceptional items           16.9       16.1   13.1       12.4


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