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Total Office Grp PLC (TOG)

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Thursday 30 September, 1999

Total Office Grp PLC

Interim Results

TOTAL OFFICE GROUP PLC
30 September 1999


Interim results for the six months ended 31 May 1999                          

CHAIRMAN'S STATEMENT

During the six months ended 31 May 1999, we completed a major restructuring of
our UK operations and a full review of our overseas businesses.  In
conjunction with the restructuring, we have been negotiating with Steelcase,
the Group's principal supplier, over the disposal of our regional businesses
in Leeds, Newcastle and Cambridge.  We had expected to have completed this
disposal by the time of the announcement of these results, which we delayed
pending completion, and are disappointed not yet to have achieved this target.

As I noted at the time of the Annual General Meeting, the results for the
period have been adversely affected by either discontinued, one-off or prior
year costs, outside Moscow and Baku, of approximately £1.9 million and trading
losses in Moscow and Baku of approximately £0.7 million.  Turnover for the
period amounted to £29.7 million (1998: £34.5 million).  The loss before
taxation amounted to £3.1 million (1998: profit £1.4 million) and the loss per
share was 18.0p (1998: earnings per share of 5.3p).  The Directors have not
declared a dividend for the period (1998: dividend of 1.8p, net).  These
results are disappointing and reflect both the restructuring costs and the
costs of completing and exiting from non-core activities.

The table below shows, on a pro forma basis, how the individual underlying
businesses performed in the period.

Pro forma Operating Profit Analysis  (£'000s)                                 
                                                                        
                  UK     UK       UK     Western   Eastern  Corporate  Total
                  South  Regions  Total  Europe    Europe   Overhead   Group  
         
Reported operating
 profit/(loss)    (786)   270     (516)  (438)      (721)    (1,319)   (2,994)

Add back:
                                                 
Exceptional costs  163      0      163     26        424        489     1,102
Non-recurring
 costs             949    101    1,050     60        297         78     1,485

Underlying operating
 profit/(loss)
                   326    371      697   (352)         0       (752)     (407)

Operating profit for the six months ended 31 May 1998

                   673    432    1,105   (111)       913       (422)    1,485


As a result of our strategic review, the Directors have concluded that the
most appropriate strategy is to restructure further our businesses in order to
improve efficiency and client service, to realign our activities more closely
with Steelcase and, through a programme of disposals, to return our Steelcase
dealerships into the private sector.  The agreement of Steelcase is critical
to the implementation of this strategy and we are continuing our discussions
with Steelcase with a view to securing this as soon as possible. 

Our principal trading activity, under the name of 'Vitalis', is beginning to
perform satisfactorily in London and the Thames Valley following restructuring
and reorganisation around a central team in the London office.  While this
business has not yet generated the results expected, it continues to represent
the area of our greatest potential and it is a pleasure to report the
achievement of the ISO 9001 accreditation for our interior design and fit-out
business following significant commitment from our staff.

The performance of our businesses overseas has continued to be disappointing,
as a result of which we have closed our operations in both Moscow and Baku. 
We have worked closely with Steelcase on completing a particularly onerous
contract in Spain and the Directors now expect this business to generate a
small return on our investment.  Our Frankfurt dealership has established
itself in the market and we are working with Steelcase to find a new ownership
structure.

We are currently renegotiating the appropriate reduction of our facilities
with our bankers once the proposed disposal of the regional businesses is
completed, in conjunction with discussions with Steelcase on the credit terms
that will apply thereafter.  Assuming the successful conclusion of these
discussions and the disposal of our regional businesses at a satisfactory
valuation, the Directors would expect to complete the implementation of our
strategy over the coming months.  

Michael Garner       
Chairman       
30 September 1999
 

CONSOLIDATED PROFIT & LOSS ACCOUNT
for the six months ended 31 May 1999
                                  6 mths to      6 mths to    12 mths to
                                31 May 1999    31 May 1998   30 Nov 1998
                                  Unaudited      Unaudited       Audited
                                      £'000          £'000         £'000
Turnover                                   
From continuing operations           29,664         33,747        64,051
From acquisitions                         -            768         4,876
                                                                              
Total turnover                       29,664         34,515        68,927
                                   
Cost of sales                       (25,103)       (26,680)      (54,247)
                                     
Gross profit                          4,561          7,835        14,680
Exceptional costs                    (1,102)             -             -
Other operating expenses (net)       (6,453)        (6,350)      (14,389)
                                                                              
Total operating expenses (net)       (7,555)        (6,350)      (14,389)
                                                                              
Operating profit/(loss)                                   
From continuing operations           (2,994)         1,596           355
From acquisitions                         -           (111)          (64)
                                                                              
Total operating profit/(loss)        (2,994)         1,485           291
                      
Income from other fixed asset 
 investments                              -             58            44

Interest receivable                      45             18            94

Amounts written off fixed asset      
 investments                              -            (24)          (47)
Interest payable and similar charges   (138)          (120)         (340)
                                                                              
Profit/(loss) on ordinary activities
 before taxation                     (3,087)         1,417            42

Tax on profit on ordinary activities      -           (505)         (149)
                                                                              
Profit/(loss) on ordinary activities
 after taxation                      (3,087)           912          (107)
Dividends, paid and proposed              -           (309)         (309)
                                                                              
Retained profit/(loss)
 for the period                      (3,087)           603          (416)
Retained profit/(loss),
 beginning of period                 (1,514)         3,098         3,098
Exchange reserve movement in the year   (80)             -            32
Amortisation of other reserves            -           (107)       (4,228)
                                                                              
Retained profit/(loss),
 end of period                       (4,681)         3,594        (1,514)
                                                                             
Earnings per share                    (18.0p)          5.3p         (0.6p)
                                   
Dividend per share (actual)             Nil            1.8p          1.8p
                                   
 
CONSOLIDATED BALANCE SHEET
at 31 May 1999       
                                31 May 1999    31 May 1998   30 Nov 1998
                                  Unaudited      Unaudited       Audited
                                      £'000          £'000         £'000
Fixed assets                     
Tangible assets                       2,657          2,758         2,868
Investments                           1,095          1,118         1,095
                                                                  
                                      3,752          3,876         3,963

Current assets                     
Stocks and work in progress           3,311          2,384         2,943
Debtors                              12,674         16,479        14,272
Cash at bank and in hand                  -          5,271         3,460
                                                                  
                                     15,985         24,134        20,675
Creditors: amounts falling 
due within one year                 (18,164)       (21,620)      (19,594)
                                                                  
Net current assets/(liabilities)     (2,179)         2,514         1,081
                                                                  
Total assets less current liabilities 1,573          6,390         5,044

Creditors: amounts falling due after 
one year                             (1,324)        (1,784)       (1,628)
                                                                  
Net assets                              249          4,606         3,416
                                                                             
Capital and reserves
Share capital                         1,028          1,028         1,028
Share premium                         3,902          3,902         3,902
Other reserves                            -         (3,918)            -
Profit and loss account              (4,681)         3,594        (1,514)
                                                                  
Equity shareholders' funds              249          4,606         3,416

                                                              
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 May 1999

                                    6 mths to      6 mths to    12 mths to 
                                  31 May 1999    31 May 1988   30 Nov 1998
                                    Unaudited      Unaudited       Audited
                                        £'000          £'000         £'000
                     
Net cash (outflow)/inflow from operations                     
Operating profit                       (2,994)         1,485           291
Depreciation less profit on 
disposal of assets                        632            605         1,202
(Increase)/decrease in stocks 
and work in progress                     (368)          (405)         (964)
(Increase)/decrease in debtors          1,598         (3,571)       (1,476)
Increase/(decrease) in creditors       (2,094)         5,893         5,161
                                                                  
                                       (3,226)         4,007         4,214
Returns on investments and 
servicing of finance                     
Interest received                          45             18            94
Interest paid                            (138)          (120)         (259)
                                                                  
                                          (93)          (102)         (165)
                     
Taxation                                    -            (56)         (831)
                     
Capital expenditure and financial investment                     
Purchase of fixed assets                 (491)          (988)       (2,011)
Sales of fixed assets                      45             69           385
Purchase of own shares                      -           (361)         (361)
                                                                  
                                         (446)        (1,280)       (1,987)
                     
Acquisitions and disposals                  -           (519)         (690)
                     
Equity dividends paid (net of receipts)     -           (509)         (786)
                                                                  
Net cash (outflow)/inflow before use of 
liquid resources and financing         (3,765)         1,541          (245)
                     
Financing                     
Net drawdown/(repayment) of term loans   (147)           115           (18)
Net movement on capital element of hire 
purchase and finance lease contracts     (192)            10          (102)
                                                                  
Net cash (outflow)/inflow from financing (339)           125            84
                                                                  
(Decrease)/increase in cash            (4,104)         1,666          (161)
                                                               
 
NOTES TO THE ACCOUNTS
       
1.  The figures for the six months ended 31 May 1999 and 31 May 1998 are
unaudited. The figures for the profit and loss account for the year ended 30
November 1998 and for the balance sheet at that date are extracted from the
statutory accounts which include an unqualified audit report and have been
delivered to the registrar of companies.

2.  The interim figures have been prepared applying the same accounting
policies to be used in the  audited accounts for the full year.

3.  Earnings per share have been calculated by dividing the loss or profit
after taxation by the average number of shares in issue of 17,186,023. 

4.  Actual dividend per share represents dividend payments made on the
ordinary and 'A' ordinary shares in the periods under review.  

5.  The analysis of information relating to the Group's three geographical
locations is as follows -

                                         6 mths to    6 mths to    12 mths to 
                                       31 May 1999  31 May 1998   30 Nov 1998 
                                         Unaudited    Unaudited       Audited
                                             £'000        £'000         £'000
                     
Turnover by destination and origin                     
UK                                          25,470       27,910        51,273
Eastern Europe                                 872        5,837        12,778
Western Europe                               3,322          768         4,876
                                                                  
Total Group                                 29,664       34,515        68,927
                                                                  
                     
Operating profit/(loss)                     
UK                                            (353)       1,105         2,239
Eastern Europe                                (297)         913            41
Western Europe                                (412)        (111)         (109)
Common costs                                  (830)        (422)       (1,880)
Exceptional costs                           (1,102)           -             -
                                                                  
Total Group                                 (2,994)       1,485           291
                                                                  
An analysis of underlying operating profits and losses prior to exceptional
and non-recurring costs by geographical location is included in the Chairman's
Statement.

6.  The investments shown in the balance sheet of £1,095,000 represent the
holding of 1,769,408 shares of the company by the Total Office Employee
Benefit Trust.  They are shown at cost less a write down to reflect the option
prices relative to the options outstanding.  Accounting practice suggests that
if the directors believe that any difference between the cost and the market
value of these shares represents a permanent diminution in value, a provision
should be made.  As discussed in the Chairman's statement, the group has
embarked on a strategy of disposals, though at this point the outcome of this
strategy is uncertain.  If an adjustment were made to reduce the book value of
the shares to their current market value, both investments and net assets
would reduce by £777,000, and the loss before taxation would increase to
£3,884,000.  It is anticipated that the outcome of the strategy will be
clearer at the time of the full year announcement and that any provision
required will be made at that time.

7.  We have been reviewing the compliance of all our systems to the Year 2000
date change for a number of years.  All known problems have now been rectified
by our system providers and we do not anticipate any failures which will
impact on our business over the next six months.


Independent review report by KPMG Audit Plc to Total Office Group plc       

Introduction

We have been instructed by the company to review the financial information set
out above and we have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The AIM Rules
of the London Stock Exchange require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where they are to be
changed in the next annual accounts in which case any changes, and the reasons
for them, are to be disclosed.

Review work performed

We conducted our review in accordance with  guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing
Practices Board. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the accounting
policies and presentation have been consistently applied unless otherwise
disclosed.  A review was substantially less in scope than an audit performed
in accordance with Auditing Standards and therefore provides a lower level of
assurance than an audit.  Accordingly we do not express an audit opinion on
the financial information.       

Financing arrangements

In forming our review conclusion, we have considered the disclosures made in
the Chairman's Statement concerning the current status of the negotiation of
the Group's financing arrangements.  In view of the significance of these
negotiations to the future of the Group, we consider that this should be drawn
to your attention although our review conclusion is not qualified in this
respect.

Review conclusion
       
On the basis of our review we are not aware of any material modification that
should be made to the financial information as presented for the six months
ended 31 May 1999.       

KPMG Audit Plc
Chartered Accountants       
Leeds       
30 September 1999 

                                                                                                                                                                                                               

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