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ITO Intechnology

24.00
0.00 (0.00%)
Last Updated: 01:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Intechnology LSE:ITO London Ordinary Share GB0001388932 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 24.00 0.00 01:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Final Results

08/06/2006 8:02am

UK Regulatory


RNS Number:2421E
InTechnology PLC
08 June 2006

8th June 2006


                                InTechnology plc

              Preliminary results for the year ended 31 March 2006

InTechnology plc ("InTechnology" or "the Company") the UK's leading provider of
data storage, security and network solutions and managed services, announces its
unaudited final results for the year ended 31 March 2006.

Operational performance

*   UK Specialist Distribution division:
    o Strong operating profit recovery in H2, following reorganisation
      programme

*   Managed Services division:
    o Increased turnover and first full year operating profit before
      amortisation of goodwill and exceptional items
    o Creation of new Managed Voice Services business to concentrate on voice
      IP and related network services

*   Continental European distribution business
    o Disposal on 31 March 2006
    o Cash inflow during the financial year resulting from the sale will
      eliminate much of the Group's debt

Financial performance

*  Total turnover from continuing operations declined to #215.0m (2005: #220.3m)

*  Operating profit from continuing operations before amortisation of goodwill 
   and exceptional items increased to #6.0m (2005: #4.0m)

*  H2 operating profit from continuing operations before amortisation of
   goodwill and exceptional charges increased to #4.8m from  #1.2m in H1

*  Operating loss from continuing operations for the year of #0.9m (2005: #0.4m) 
   due to exceptional costs of #2.4m incurred to reduce operating cost base

*  The pre-tax loss from discontinued European operations accounted for
   #9.0m (2005: #0.2m profit) of the Group loss of #12.1m (2005: #2.5m loss)

*  Cash balances at the year end increased to #12.7m (2005: #10.5m) and net debt 
   reduced to #19.5m (2005: #22.2m)


For further information:

InTechnology plc                                             01423 877 442/3
Peter Wilkinson / Andrew Kaberry

Financial Dynamics                                           020 7831 3113
James Melville-Ross / Juliet Clarke


Note to editors:

InTechnology plc is a 23-year old AIM listed public Company, employing 360
people in the UK.  InTechnology provides IT infrastructure solutions, products
and services to business, through a network of value-added resellers, systems
integrators and consultants.

The Company's offering unifies all areas of IT infrastructure to help
organisations:

*    Store data in the face of 100% year-on-year growth in data volumes
*    Manage data for optimum business efficiency and reduced operational cost
*    Protect data against ever increasing threats from malicious attack to data 
     loss
*    Network data to maximise network computing opportunities
*    Liberate corporate data to maximise its value for the organisation


More details about InTechnology (LSE, AIM: ITO) are available at
www.intechnology.co.uk


Chairman's Statement


The past year has seen some important changes for InTechnology and I am pleased
that the Company has ended the year in a strong position for sustained growth
and profitability in the future.

The reorganisation programme which we initiated in the first half of the year
enabled us to achieve operating profit before amortisation of goodwill and
exceptional items in our continuing operations of #6.0m (2005: #4.0m) despite a
fall in turnover to #215.0m (2005: #220.3m).  Total Group turnover was #284.7m
(2005: #283.5m) and the operating loss for the Group after the restructuring was
#6.2m (2005: #0.3m loss).

Our Managed Services Division has shown robust performance with an increase in
sales to #25.3m (2005: #22.1m), operating profit before amortisation of goodwill
and exceptional items of #1.8m (2005: #2.0m loss), and an expanding range of
services.  The operating loss for the Division was #1.5m (2005: #4.3m).  In
order to build on the rapidly-growing market in IP telephony, we have set up a
new team to increase sales focus in this area.  Other parts of the Division have
been re-organised for maximum effectiveness and customer satisfaction.
Organisations of all sizes subscribe to these services in order to achieve
efficiency gains and mitigate risk in the management of the IT infrastructure
which underpins their operations.

Pressure on margins in our UK Specialist Distribution Division has been severe
and we therefore implemented a cost control programme in the first half of the
year. In the second half of the year we achieved operating profit growth
compared with the first half of the year, which we plan to build on in the year
ahead.

Our European Specialist Distribution business delivered disappointing results
throughout the year and on 31 March 2006 it was sold to Magirus International
GmbH.  This will allow us to focus management effort in the UK.

The clear objectives for the coming year are to continue to grow our Managed
Services business and to focus on key areas of profitability in our UK
Specialist Distribution business.

I would like to thank the staff whose loyalty, energy and professional skills
have kept pace with the many developments in the Company in the past year and
also our partners in all areas of the business.

I look forward to an exciting and successful year ahead.



Lord Parkinson
Chairman

8 June 2006



Chief Executive's Review

Overview

At the time of our interim results last year we reported that significant
efforts would be taken in the second half of the year to focus on the parts of
the business that are performing well and to take action to correct those parts
of the business where we saw continued margin pressure.  These efforts were
focused on three areas:

 1. To increase the trading profitability of our Managed Services division and to
    seek new opportunities for growth
 2. To improve profitability in our UK Specialist Distribution business
 3. To review the strategic options available to us with our European Specialist
    Distribution business

I am pleased to report that we achieved encouraging results in all three areas,
resulting in a strong recovery in our continuing operations in the second half
of the year, which reported  operating profits before amortisation of goodwill
and exceptional charges of #4.8m (first half year of the year: #1.2m).  Full
year operating loss from continuing operations was #0.9m (2005: #0.4m loss)
largely as a result of exceptional costs of #2.4m (2005: #nil) incurred to
reduce our operating cost base.

Managed Services' revenues grew 14 per cent to #25.3m (2005: #22.1m) and we have
recently embarked on a number of exciting new initiatives in this division.

UK Specialist Distribution revenues declined 4 per cent to #189.6m (2005:
#198.3m) but the second half year's performance was encouraging, helped by cost
cutting and revenue growth.

The European Distribution companies were sold on 31 March 2006 after growing
revenues but incurring operating losses as margin pressures intensified.  The
resulting cash inflow from the sale in the new fiscal year will substantially
reduce Group debt.  The pre-tax loss from discontinued European operations
accounted for #9.0m (2005: #0.2m profit) of the Group pre-tax loss of #12.1m
(2005: #2.5m loss).

We exited the year in good shape, the reward for spending a considerable amount
of management time on eliminating losses and driving greater efficiencies.  We
have established a platform of profitability and we look forward to devoting all
our management effort to achieving our plans for future revenue growth and
increased profitability.

Managed Services

We were very pleased this year with the continued growth and regular quarterly
operating profit before amortisation of goodwill and exceptional items of the
Managed Services Division, a goal which we have been targeting for a number of
years.  Operating profit before amortisation of goodwill and exceptional charges
was #1.8m (2005: #2.0m loss).  Operating loss was #1.5m (2005: #4.3m).  At 31
March 2006 contracted recurring annualised revenues had increased by 23% to
#28.3m (2005: #23.0m).

However, it has become obvious over the past few months that the Division has
suffered from our attempts to integrate it alongside a distribution business.
This has resulted in the Division having a number of separated departments,
causing a lack of efficiency, cohesion and vision.

Over the past 3 months this has been addressed and we have made a number of
changes to rectify matters:

Currently spread across three separate buildings in Harrogate, by the end of
June 2006, all the head office Managed Services employees will reside in a
single office adjacent to our Northern data centre, also in Harrogate.

The sales force has been split into a new business team and a customer care
team.  This will allow us to better focus our efforts on building a new client
base whilst also improving the relationship and interaction with our existing
customers. We have invested in new CRM and ERP systems to support this important
part of the business.

We have strengthened our position in the IP Voice market by creating a new sales
division of highly skilled and experienced telephony experts and have enhanced
our portfolio. This focus on an exciting, rapidly-growing market creates
significant opportunities for us and we will continue to look at expanding the
number of services which we offer.

It is encouraging that the Division now achieves a gross margin value in excess
of 80 per cent of that earned by UK Specialist Distribution, and this year we
expect it to exceed that earned in Distribution.  Moreover, many direct
operating costs such as network and data centres are fixed and so higher
services revenues will continue to improve operating margins.  Our strategic
objective of the Division earning operating margin percentages in excess of
Distribution will be achieved over the next few years.  During the year, we have
achieved significant contract wins including Galliford Try PLC, Barker &
Stonehouse, London Borough of Bromley, Carl Bro Limited, Denton Wilde Sapte,
Devonshire Claims Services Holdings Limited, Colemans CTTS, Carey Jones
Architects and The Financial Training Company (Kaplan Inc).

We have had substantial success with our VBAK service and we have launched a
pay-as-you-go ILM ('Information Lifecycle Management') service for archiving
email and file system data.

This year we will be launching our new Managed Exchange service, which offers
medium sized business an enterprise class e-mail service with 99.9%
availability.

Specialist Distribution (UK)

Despite a difficult first half of the year, with gross margins being squeezed by
vendors and customers, the second half year's performance was encouraging,
helped by cost cutting and revenue growth.

Our relationship with IBM continues to grow from strength to strength and our HP
business increased profitability in the second half of the year.  We were
extremely encouraged by the growth we achieved with NetApp and Symantec
(formerly Veritas).

Our security business had an excellent year, despite withdrawing from certain
high volume but low margin business.

We have created a new quote and configuration team and a new internal sales
team, which have both proven to be extremely successful in the second half of
the year and have given us great encouragement for the future.  Further
achievements this year included winning the following awards:

Symantec Master Reseller of the Year 2005
CA EMEA Storage Partner of the Year 2005
Nortel Distributor of the Year 2005
World's largest Check Point and Nokia Training Provider 2005
Check Point's Most Outstanding Authorised Training Provider in EMEA award 2005
Juniper Authorised Training Centre of Excellence 2005

Specialist Distribution (Europe)

Our European Distribution businesses were sold on 31 March 2006 and are shown as
discontinued operations in the consolidated financial statements.

Turnover increased by 10 per cent to #69.8m (2005: #63.2m), but reduced gross
margins resulted in operating losses before exceptional reorganisation charges
and amortisation of goodwill.  We had provided an exceptional charge in the
unaudited Interim results for the period ended 30 September 2005 in order to
radically reduce on-going operating costs.  Shortly afterwards we were
approached by some of the European management team to undertake a management
buy-out, which eventually failed.  However, this prompted a number of European
trade enquiries resulting in the sale of the subsidiaries to Magirus
International GmbH, a German distributor.  The provisional loss on disposal is
estimated to be #3.7m as the final consideration is dependent on collection of
accounts receivable and the valuation of inventories and will be finalised on 31
March 2007.  However, the sale also includes repayment of the inter-company
trade debt accounts of #15.8m, which had continued to increase reflecting strong
revenue growth in Spain and Italy where long trade credit periods are normal,
whereas security products were purchased in the UK on monthly credit terms.

Debt

At 31 March 2006 cash balances and net debt respectively were #12.7m and #19.5m
(2005: #10.5m and #22.2m).

The cash inflow during the coming year from the sale of the European
subsidiaries is approximately #19m and will eliminate much of the Group's debt.

Board

On 23 May, we appointed Mark Lower, the Managing Director of our recently
launched Managed Voice Services division, to the Board.  He joins from next
generation telecommunications company Evoxus, where he was CEO.  Under his
management, Evoxus, a spin off from BT, grew turnover from #3m to #20m in 3
years.  He previously worked at BT for 22 years, leaving the company as
Commercial & New Business Director of BT Wholesale.

Outlook

We ended the year in good shape, having just completed a period when we have
made some difficult decisions.  Our UK Specialist Distribution Division
benefited in the second half of the year from cost reduction and revenue growth
and whilst market conditions will remain tough there is still an opportunity to
increase profits and generate positive cash flow.

We are very fortunate to have a Managed Services Division with recurring
revenues where we can now focus more of our efforts, selling high margin
proprietary services; we believe, as discussed previously, that this Division
will continue to be successful and profitable in the year ahead.

Also, following the disposal of the loss-making division, the Group's senior
management team can now focus its attention on profit making.  We are confident
that we will deliver increased profits in the future.

Peter Wilkinson
Chief Executive Officer
8 June 2006


Consolidated profit & loss account
For the year ended 31 March 2006
                                                                              2006                 2005
                                                                       (Unaudited)            (Audited)
                                                              Note           #'000                #'000

Turnover
Continuing operations                                                      214,966              220,339
Discontinued operations                                                     69,763               63,183
                                                                 2         284,729              283,522
Cost of sales                                                            (235,656)            (230,579)
Gross profit                                                                49,073               52,943

Net operating expenses before depreciation,
amortisation of goodwill and exceptional items                            (39,359)             (42,204)
Depreciation                                                               (5,716)              (6,388)
Amortisation of goodwill                                                   (4,732)              (4,635)
Exceptional costs of reorganisation:
     - Continuing operations                                     3         (2,387)                    -
     - Discontinued operations                                   3         (3,104)                    -

Net operating expenses                                                    (55,298)             (53,227)

Group operating (loss)/profit
Continuing operations                                                        (885)                (403)
Discontinued operations                                                    (5,340)                  119
Group operating loss                                             2         (6,225)                (284)

Loss on sale of subsidiary undertakings                          4         (3,661)                    -
Net interest payable                                                       (2,226)              (2,181)
Loss on ordinary activities before taxation                               (12,112)              (2,465)

Tax on loss on ordinary activities                               5             451                (110)
Loss sustained for the financial year                                     (11,661)              (2,575)

Loss per share (pence)
Basic and diluted                                                6          (8.26)               (1.84)


There is no difference between the loss on ordinary activities before taxation
and the loss sustained for the financial year and their historical cost
equivalents.


Consolidated statement of total recognised gains and losses
for the year ended 31 March 2006

                                                                                     2006                 2005
                                                                              (Unaudited)            (Audited)
                                                                                    #'000                #'000

Loss sustained for the financial year                                            (11,661)              (2,575)
Unrealised gain on revaluation of land & buildings                                      -                1,754
Exchange gain on translation of overseas subsidiaries                                   -                  172
Exchange loss on translation of hedging loan                                            -                (172)
Total recognised gains and losses relating to the year                           (11,661)                (821)




Consolidated balance sheet
As at 31 March 2006

                                                                  2006                2005
                                                           (Unaudited)           (Audited)
                                                Note             #'000               #'000
Fixed assets
Intangible assets                                               65,104              74,813
Tangible assets                                                 10,424              14,773
                                                                75,528              89,586

Current assets
Stocks                                                           6,622              13,179
Debtors - due within one year                                   89,247             105,399
Cash at bank and in hand                                        12,719              10,488
                                                               108,588             129,066

Creditors - amounts falling due

within one year                                              (100,285)           (118,174)
Net current assets                                               8,303              10,892
Total assets less current liabilities                           83,831             100,478

Creditors - amounts falling due after

more than one year                                             (4,015)             (9,001)
Net assets                                       2              79,816              91,477

Capital and reserves
Called up share capital - equity                                 1,411               1,411
                                  - non-equity                     480                 480
Share premium account                                          188,668             188,668
Revaluation reserve                                              1,754               1,754
Profit and loss account                                      (112,497)           (100,836)
Shareholders' funds (including

non-equity interests)                                           79,816              91,477

Shareholders' funds comprise:
Equity interests                                                77,576              89,237
Non-equity interests                                             2,240               2,240
                                                                79,816              91,477


Consolidated cash flow statement
for the year ended 31 March 2006

                                                                                            2006              2005
                                                                                     (Unaudited)         (Audited)
                                                                       Note                #'000             #'000

Net cash inflow/(outflow) from operating activities                     7                 10,667           (2,000)

Returns on investments and servicing of finance
Interest received                                                                             92               160
Interest element of finance lease payments                                                 (232)             (282)
Interest paid                                                                            (2,008)           (2,033)

Net cash outflow from returns on investments and
servicing of finance                                                                     (2,148)           (2,155)

Taxation paid                                                                              (822)           (1,135)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                                        (2,077)           (6,106)
Sale of tangible fixed assets                                                                 67             1,542
Net cash outflow from capital expenditure and
financial investment                                                                     (2,010)           (4,564)

Acquisitions and disposals
Purchase of subsidiary undertakings (including costs)                                          -             (980)
Cash disposed of on sale of subsidiary undertakings                                      (2,185)                 -
Net cash outflow for acquisitions and disposals                                          (2,185)             (980)

Net cash inflow/(outflow) before financing                                                 3,502          (10,834)

Financing
Issue of ordinary share capital                                                                -               275
Net increase in borrowings                                                                   431             6,615
Capital element of finance lease payments                                                (1,706)           (1,991)
Net cash (outflow)/inflow from financing                                                 (1,275)             4,899

Increase/(decrease) in cash in the year                                                    2,227           (5,935)



Notes to the Preliminary Announcement
For the year ended 31 March 2006

1 Basis of preparation

The unaudited financial information included in this Preliminary Announcement
does not constitute statutory accounts within the meaning of section 240 of the
Companies Act 1985.  The financial information has been prepared on the basis of
accounting policies consistent with those set out in the statutory Annual Report
and Accounts for the year ended 31 March 2005 which have been filed with the
Registrar of Companies and on which the auditors gave an unqualified opinion,
with the exception of the adoption of FRS 21 'Events after the balance sheet
date' and FRS 22 'Earnings per share'.  The Annual Report and Accounts for the
year ended 31 March 2006, on which the auditors have still to report, will be
delivered to the Registrar of Companies and will be posted to shareholders on 5
July 2006.  Further copies are available on request from the registered office
of the Company at Nidderdale House, Beckwith Knowle, Otley Road, Harrogate, HG3
1SA.

2 Segmental information

                                   Turnover                  Turnover           Group operating (loss)/profit
                                      by                        by                            by
                                  destination                 source                        source
                                    2006       2005            2006        2005            2006           2005
                             (Unaudited)  (Audited)     (Unaudited)   (Audited)     (Unaudited)      (Audited)
                                   #'000      #'000           #'000       #'000           #'000          #'000

Geographical analysis
United Kingdom                   210,944    217,761         214,966     220,339           (885)          (403)
Continental Europe                72,488     64,970          69,763      63,183         (5,340)            119
North America                        555        207               -           -               -              -
S and Cen America                    151          -               -           -               -              -
Africa                               455         68               -           -               -              -
Asia                                 136        516               -           -               -              -
Total                            284,729    283,522         284,729     283,522         (6,225)          (284)

                                   Turnover                       Group operating profit/(loss)
                                                          Before goodwill        After goodwill amortisation
                                                           amortisation
                                                       and exceptional items        and exceptional items
                                    2006       2005            2006        2005            2006           2005
                             (Unaudited)  (Audited)     (Unaudited)   (Audited)     (Unaudited)      (Audited)
                                   #'000      #'000           #'000       #'000           #'000          #'000

Business analysis
Specialist Distribution          259,395    261,449           2,228       6,321         (4,763)          3,967
Managed Services                  25,334     22,073           1,769     (1,970)         (1,462)        (4,251)
Total                            284,729    283,522           3,997       4,351         (6,225)          (284)


Net assets                                                   Including                    Excluding
                                                             goodwill                      goodwill
                                                               2006        2005            2006           2005
                                                        (Unaudited)   (Audited)     (Unaudited)      (Audited)
                                                              #'000       #'000           #'000          #'000

Geographical analysis
United Kingdom                                               79,939      78,586          14,835          9,031
Continental Europe                                            (123)      12,891           (123)          7,633
Group Total                                                  79,816      91,477          14,712         16,664

Business analysis
Specialist Distribution                                      45,069      55,926          12,638         16,067
Managed Services                                             22,028      25,063        (10,645)        (9,891)
                                                             67,097      80,989           1,993          6,176
Cash                                                         12,719      10,488          12,719         10,488
Group Total                                                  79,816      91,477          14,712         16,664


The segmental analysis above excludes net interest payable of #2,226,000 (2005:
#2,181,000) which is not analysed by business segment.

3 Exceptional costs of reorganisation

The exceptional costs of reorganisation for continuing operations of #2,387,000
(31 March 2005: #nil) relate to headcount reductions of #1,255,000, property
related costs of #760,000 and fixed asset write-offs of #372,000.
Reorganisation costs of #2,017,000 (31 March 2005: #nil) have been paid in the
year.  The corporation tax effect of these costs is a credit of #600,000.

The exceptional costs of reorganisation for discontinued operations of
#3,104,000 (31 March 2005: #nil) relate to headcount reductions of #1,627,000,
property related costs of #787,000, fixed asset write-offs of #357,000,
provision for on-going support services of #206,000 and legal and professional
fees of #127,000.  Reorganisation costs of #784,000 (31 March 2005: #nil) have
been paid in the year.  The corporation tax effect of these costs is a credit of
#43,000.

4 Loss on sale of European Operations

On 31 March 2006 the Group substantially ended its European operations by
selling Allasso SAS, Allasso GmbH, Allasso Iberia SAU, Allasso Italia Srl and
Allasso Benelux bv ('Allasso Europe') for provisional consideration of
Euro7,573,000 (#5,285,000) and also repayment of inter-company debt of Euro22,700,000
(#15,800,000).  Consideration may be subject to change dependent on collection
of accounts receivable and the valuation of inventories and will be finalised on
31 March 2007.  This resulted in a provisional loss on disposal of Euro5,246,000
(#3,661,000).  As a result of the material change in the nature and focus of the
Group's operations that this disposal represented, the European operations have
been shown as discontinued operations in the financial statements.  The
corporation tax effect of this disposal is a charge of #62,000.

5 Tax on loss on ordinary activities
                                                                                            2006             2005
                                                                                     (Unaudited)        (Audited)
                                                                                           #'000            #'000
Tax charge comprises:
United Kingdom corporation tax at 30% (2005: 30%)
Current                                                                                    (600)            (952)
Over provision in respect of prior years                                                     207              265
UK current tax                                                                             (393)            (687)
Overseas current tax                                                                        (62)            (337)
Overseas over provision in respect of prior years                                              7               19
Total current tax                                                                          (448)          (1,005)
Deferred tax current year - origination and reversal of timing differences                  (47)              256
Deferred tax in respect of prior years                                                       946              639
                                                                                             451            (110)

The tax credit/(charge) is higher (2005: higher) than the standard rate of
corporation tax in the UK.  The differences are explained as follows:

                                                                                            2006             2005
                                                                                     (Unaudited)        (Audited)
                                                                                           #'000            #'000

Loss on ordinary activities before taxation                                             (12,112)          (2,465)

At standard rate of corporation tax of 30% (2005: 30%)                                   (3,634)            (740)

Effects of:
Amortisation of goodwill                                                                   1,409            1,391
Expenses not deductible for tax purposes                                                       3              171
Adjustment to tax charge in respect of previous periods                                    (214)            (284)
Capital allowances for year lower than depreciation                                          489              255
Other permanent differences                                                                  473                -
Overseas tax rates/losses not used                                                             -              100
Deferred tax not recognised                                                                  879                -
Loss on sale of subsidiaries                                                               1,104                -
Disallowable exceptional costs                                                               475                -
Utilisation of losses                                                                      (536)                -
Other timing differences                                                                       -              112
                                                                                             448            1,005


At 31 March 2006, the Company had accumulated tax losses of #1,188,000 (2005:
#2,973,000) which are available for offset against future trading profits of
certain Group operations, subject to agreement with the relevant tax
authorities.

6 Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders of #11,661,000 (2005: #2,575,000) by the weighted average number of
ordinary shares in issue during the year of 141,111,944 (2005: 139,575,879).

The adjusted basic earnings per share has been calculated to provide a better
understanding of the underlying performance of the Group as follows:

                                                                  2006                          2005
                                                           Basic and diluted              Basic and diluted
                                                             (Loss)/     (Loss)/          (Loss)/        (Loss)/
                                                            earnings    earnings         earnings       earnings
                                                                       per share                       per share
                                                         (Unaudited)   (Audited)      (Unaudited)      (Audited)
                                                               #'000       pence            #'000          pence
Loss attributable to ordinary shareholders                  (11,661)      (8.26)          (2,575)         (1.84)
Amortisation of goodwill                                       4,732        3.35            4,635           3.32
Exceptional costs of reorganisation (note 3)                   4,848        3.44                -              -
Loss on sale of subsidiary undertakings (note 4)               3,723        2.64                -              -
Adjusted basic earnings per share                              1,642        1.17            2,060           1.48


The loss attributable to ordinary shareholders and the weighted average number
of ordinary shares for the purpose of calculating the diluted earnings per
ordinary share are identical to those used for basic earnings per ordinary
share.  This is because the exercise of share options would have the effect of
reducing the loss per ordinary share and is therefore not dilutive under the
terms of FRS 22 'Earnings per share'.

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


                                                                              2006            2005
                                                                             #'000           #'000
                                                                       (Unaudited)       (Audited)

Operating loss                                                             (6,225)           (284)
Depreciation of tangible fixed assets                                        5,716           6,388
Goodwill amortisation                                                        4,732           4,635
Exceptional costs of reorganisation - fixed asset depreciation                 332               -
Loss/(profit) on disposal of tangible fixed assets                             331           (262)
Exchange movements                                                               5              14
Decrease/(increase) in stocks                                                5,227         (2,368)
Increase in debtors                                                        (2,844)        (12,901)
Increase in creditors and provisions                                         3,393           2,778
Net cash inflow/(outflow) from operating activities                         10,667         (2,000)



8 Analysis of net debt

                           At 1 April     Cashflow    Disposals     Exchange    Other non-cash      At 31 March
                                 2005                              movements           changes             2006
                            (Audited)  (Unaudited)  (Unaudited)  (Unaudited)       (Unaudited)      (Unaudited)
                                #'000        #'000        #'000        #'000             #'000            #'000

Cash at bank and in
hand                           10,488        2,227            -            4                 -           12,719
Finance leases                (2,544)        1,706           13            -             (656)          (1,481)
Debt due after more
than one year                 (7,968)        4,252            -          (8)                 -          (3,724)
Debt due within one
year                         (22,176)      (4,683)            -         (32)              (75)         (26,966)
Net debt                     (22,200)        3,502           13         (36)             (731)         (19,452)




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

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