RNS Number:9070R
InTechnology PLC
11 November 2003

11 November 2003

                                InTechnology plc

           Interim Results for the six months ended 30 September 2003

InTechnology plc ("InTechnology" or "the Company"), the leading European
provider of data storage and security solutions, announces interim results for
the six months ended 30 September 2003.


Financial highlights

*  Total turnover increased to #78.7m (2002: #76.0m) including #15.1m
   contribution from Allasso

*  Gross profit increased substantially to #14.4m (2002: #10.8m)

*  EBITDA increased to #1.4m (2002: #1.3m)

*  Loss before tax reduced to #3.7m (2002 loss: #4.7m)

*  Net debt of #13.3m (2002: #6.4m net cash)


Operational highlights

*  Integration of Allasso into InTechnology progressing well; Netscreen
   signs with Allasso in UK

*  MDS cumulative contract wins of #50m up 85% year on year and 25%
   since the start of the financial year (30 September 2002: #27m, 31 
   March 2003: #40m)

*  Network Appliance signs InTechnology in September as its first ever
   UK distributor

*  Significant growth achieved in sales of storage software; up 
   106% year on year

*  Continued focus on cost reduction, removing approx #1.5m of
   annualised operating expense in the second half

*  SSS volumes down but gross margins improved

Commenting on the results, Charles Cameron, CEO of InTechnology said:

"Trading conditions remain tough in our specialist distribution activities but
the quality of current trading combined with new supplier signings and focus on
cost reduction mean that we expect to see an improved performance in the second
half.  Our Managed Data Services division is growing extremely well, both in
number of contracts won and the quality of our client base, (particularly in the
public sector) and we are working much more closely with leading systems
integrators.

Since August, we have made significant progress in integrating Allasso into
InTechnology and trading in this business has been in line with our
expectations.

The group outlook is more encouraging this autumn than it was six months ago,
though the market remains very competitive and margins are difficult to predict.
End-user markets appear to be stabilising and order volumes remain consistent,
if flat, in distribution with some opportunity for improvement on account of new
initiatives being launched with manufacturers.  Activity levels in managed
services are accelerating with the potential to engage in larger transactions
than we have seen in the past.


For further information:

InTechnology plc                                      020 7786 3400
Charles Cameron / Andrew Kaberry

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



Interim Results for the six months to 30 September 2003
Chairman's Statement


Overview

I am pleased to announce the interim results for InTechnology plc, showing a
continued strong performance in a challenging market.  In SSS we experienced an
absence of some of the large contracts we have seen in prior periods and some
supplier-specific issues adversely impacting our sales performance in the first
half.  However, this was balanced by an improved gross margin performance.  In
MDS we achieved another very encouraging result and have secured a number of
excellent new customer wins during the period.  Regarding Allasso, which we
acquired on 31 July, trading has been in line with our expectations and we have
made significant progress integrating the business into the Group.

Trading Performance

Turnover, including Allasso, increased to #78.7m during the period (2002:
#76.0m) and despite the tough trading conditions, gross profit increased by 33%
to #14.4m (2002: #10.8m).  This increase was due to improved mix and quality of
sales in our Storage Solutions and Services Division ('SSS') as well as two
months of contribution from Allasso.  Net operating expenses before amortisation
of goodwill and exceptional items grew to #15.7m (2002: #11.8m) primarily
reflecting two months of Allasso operating costs, a one off spend on our UK
network and investment in data centre-based storage devices.  Total net
operating expenses were #17.8m (2002: #15.5m).  Earnings before interest, tax,
depreciation, amortisation of goodwill and exceptional items improved marginally
to #1.4m (2002: #1.3m).  The Group reported a reduced operating loss of #3.4m
(2002: #4.6m) and a reduced loss on ordinary activities before taxation of #3.7m
(2002: #4.7m).

InTechnology's balance sheet remains strong with gross cash of #14.3m (2002:
#16.4m) and loan facilities totalling #27.6m (2002: #10.0m) provided by a
combination of IBM Global Finance, myself and other sources.  As at 30 September
2003, as a result of the acquisition of Allasso, InTechnology had a net debt
position of #13.3m (2002: #6.4m net cash).

SSS Division

In the period SSS achieved revenues of #57.7 million (2002: #72.3m) and
operating margins before amortisation of goodwill of 4.5% (2002: 5.1%).
Operating margins after amortisation of goodwill were 3.1% (2002: 3.9%).  In the
last six months we experienced logistical difficulties with a major vendor and
have also experienced a further decline in the volume of Sun shipments.
However, the contribution from higher margin software sales and rigorous focus
on the quality rather than quantity of new business leads has boosted gross
margins in the division to 12.2% (2002: 11.0%).

In 2002, we took significant operating costs out of this division while
maintaining its ability to handle revenues at least equivalent to the prior
year. The level of trading activity that we have seen throughout the second
quarter, combined with the signing of new vendors such as Network Appliance and
other vendor-related initiatives, encourages us in the view that we should not
be further reducing resources in this division.

We have substantially grown the sales of software during the period,
particularly IBM software, and the utilisation of our storage consultants by our
reseller partners has been consistently strong.  We expect software sales to
grow further as a proportion of this division's revenue during the second half.

Allasso Division

We completed the acquisition of Allasso on 31 July 2003 and have, therefore,
incorporated only two months of performance which includes a traditionally low
level of contribution in August.  Trading has been in line with our expectations
in this period during which Allasso reported revenues of #15.1m, gross profit of
#3.0m and an operating profit of #0.3m after including a number of restructuring
costs associated with the integration of Allasso's UK activities into
InTechnology.

In October we integrated Allasso UK into InTechnology and undertook a number of
initiatives:

  * Transfer of people and assets into a single UK entity, although Allasso
    will, of course, continue to trade as a stand alone security products brand
    in the UK as well as on the continent.
  * In Allasso UK we have also adopted a structure of dedicated vendor teams
    (similar to InTechnology's traditional approach) as well as maintaining
    account management teams.
  * We have centralised procurement for Allasso and InTechnology, removed
    duplicated functions and reorganised the sales structure to substantially
    increase the numbers of customer-facing staff.
  * On 3 November 2003 we moved Allasso UK onto the InTechnology management
    information system so as to materially simplify order processing and
    increase productivity.  Plans are in place to roll out the system to the
    rest of Europe by the year end.
  * Promotion of Frederic Ordronneau to Head of Continental European
    activities with Fabrice Martinez becoming the General Manager for France,
    and Niall McGrane, Sales Director for Allasso UK.
  * Initiated discussions with Vendors to plan distribution of storage
    products into continental Europe through Allasso's resellers.
  * Installed an IP network with dedicated fibre links connecting data centres
    and Allasso offices across Europe.

Following Allasso's integration, we will in future be combining Allasso UK's
results into our UK distribution activities within SSS, identifying all Group
international operations separately.

In September 2003, we signed a distribution contract with Netscreen for the UK,
one of the fastest growing providers of firewall devices for enterprises.  This
will be handled by a discrete team and will in no way diminish focus on existing
security Vendors.

MDS Division

The Managed Data Services Division ('MDS') has achieved another strong result
with revenues of #5.9m (2002: #3.7m) up 59% on the year.  We have secured a
number of significant customer wins during the period from both public and
private sectors including the Criminal Justice Department, Department for
Transport, the Parliamentary Communications Directorate, Arcadia, Casualty Plus,
Sitel, Civica and Tullet & Tokyo.

This brings the cumulative value of net contracts won to #50m at 30 September
2003, up from #40m in April and #27m a year ago.  The actual implementation of
these contracts lags the orders by up to six months largely as a consequence of
the time required to establish network connections for clients and the
complexity of large contracts with multiple sites.

Also during the first half we formally launched our "In Partnership" partner
programme for managed services with some 47 system integrators and consultants.
As the pace of contract wins has continued to pick up, so we have needed to
establish more formal working relationships with those partners that
consistently bring us business.  The launch of this programme was well attended
and reflects the increasing profile that InTechnology's managed storage and
network services are now having in the UK market.

Continued Cost Reduction

In this six month period we have continued to reduce costs and increase
operating performance.  Integrating Allasso into InTechnology, subletting unused
office space in Harrogate, reducing headcount and using alternative data storage
technologies in MDS will enable us to cut our ongoing operating costs by
approximately #1.5m on an annualised basis.

Outlook

The market's continuous data volume growth and requirement for data and network
security underpin all our activities across Europe.  We expect to see resilient
end-user demand in these markets to enable us to grow revenues in each division.

In the UK, our market share in storage solutions remains high.  The second half
of the year has started in line with expectations, with trading volumes similar
to last year but with tighter pricing.  We expect the increasing contribution
from software sales, consultancy revenue and the launch of new products such as
Network Appliance to enable us to mitigate the pressure on our operating
margins.

The performance of MDS at the start of the second half has been especially
encouraging with higher levels of run-rate orders than at any other time.  The
Division's prospects look stronger than at any time previously with healthy
levels of run-rate business, including the ability to sell new services into the
existing customer base.  A higher profile is now being achieved among partners
and end-users with the potential for larger contract wins than we have seen in
the past.

The integration of Allasso into InTechnology has progressed well.  We have
increased the number of customer facing personnel, reduced costs and removed
duplication of roles.  We have also introduced additional security products to
the existing Allasso range.  In continental Europe, Allasso has traded in line
with expectations and we are achieving broadly similar gross margins in each
territory across Europe.  We are opening a security distribution office in
Switzerland and will begin initial sales of storage products in France in the
second half of the year. The last calendar quarter of the year has traditionally
been reasonably strong and we look forward to consistent performance from
Allasso.

Overall, whilst Group margins remain difficult to predict, we are performing in
line with expectations in distribution and we are performing especially well in
Managed Services.


Peter Wilkinson
Executive Chairman
11 November 2003



Consolidated profit & loss account
For the 6 months ended 30 September 2003


                                                  6 months ended       6 months ended      Year ended
                                               30 September 2003    30 September 2002        31 March
                                                                                                 2003
                                                     (Unaudited)          (Unaudited)       (Audited)
                                         Note              #'000                #'000           #'000

Turnover                                    2
Continuing operations                                     63,647               75,957         156,899
Acquisition                                               15,082                    -               -

                                                          78,729               75,957         156,899

Cost of sales                                           (64,359)             (65,129)       (133,642)

Gross profit                                              14,370               10,828          23,257

Net operating expenses before
 depreciation, amortisation of 
 goodwill and exceptional items                         (13,009)              (9,493)        (19,314)
Depreciation                                             (2,648)              (2,330)         (4,885)
Amortisation of goodwill                                 (2,118)              (1,996)         (3,980)
Exceptional costs of German subsidiary                       -                (1,645)         (1,645)

Net operating expenses                                  (17,775)             (15,464)        (29,824)


Group operating (loss)/profit
Continuing operations                                    (3,656)              (4,636)         (6,567)
Acquisition                                                  251                  -               -

Group operating loss                                     (3,405)              (4,636)         (6,567)

Net interest payable                                       (247)                 (47)           (108)

Loss on ordinary activities before          
taxation                                    2            (3,652)              (4,683)         (6,675)

Tax on loss on ordinary activities          3                111                  -             (367)

Loss sustained for the period             6,7            (3,541)              (4,683)         (7,042)

EBITDA                                                     1,361                1,335           3,943

Loss per share (pence)                      4
Basic and diluted                                         (2.56)               (3.39)          (5.10)

Adjusted loss per share (pence)             4
Basic and diluted                                         (1.03)               (0.75)          (1.03)



EBITDA comprises earnings before interest, taxation, depreciation, amortisation
of goodwill and exceptional items.

All of the activities of the Group relate to continuing operations.

There is no difference between the loss on ordinary activities before taxation
and the loss sustained for the period ended 30 September 2003 and their
historical cost equivalents.


Consolidated balance sheet
As at 30 September 2003
                                                          30 September      30 September        31 March
                                                                  2003              2002            2003
                                                           (Unaudited)       (Unaudited)       (Audited)

                                                    Note         #'000             #'000           #'000
Fixed assets
Intangible assets                                               78,362            70,948          68,964
Tangible assets                                                 13,372            11,703          12,179
                                                                91,734            82,651          81,143

Current assets
Stock                                                           13,605            13,021           9,225
Debtors                                                         61,016            43,825          35,542
Cash at bank and in hand                                        14,335            16,433          18,155
                                                                88,956            73,279          62,922

Creditors - amounts falling due within one year               (65,882)          (49,371)        (45,109)

Net current assets                                              23,074            23,908          17,813

Total assets less current liabilities                          114,808           106,559          98,956

Creditors - amounts falling due after more than               
one year                                                      (20,805)           (6,001)         (1,300)

Provision for liabilities & charges                               (95)             (750)           (209)

Net assets                                                      93,908            99,808          97,447

Capital and reserves
Called up share capital - equity                                 1,382             1,381           1,381
                        - non-equity                               480               480             480
Share premium account                                          188,392           188,391         188,391
Profit and loss account                                       (96,346)          (90,444)        (92,805)

Shareholders' funds (including non-equity interests)            93,908            99,808          97,447

Shareholders' funds comprise:
Equity interests                                       7        91,668            97,568          95,207
Non-equity interests                                   7         2,240             2,240           2,240
                                                                93,908            99,808          97,447



Consolidated cash flow statement
For the 6 months ended 30 September 2003

                                                        6 months ended     6 months ended    Year ended
                                                          30 September  30 September 2002 31 March 2003
                                                                  2003
                                                           (Unaudited)        (Unaudited)     (Audited)
                                                  Note           #'000              #'000         #'000

Net cash (outflow)/inflow from operating             
activities                                           8         (3,631)            (4,352)         2,356

Returns on investments and servicing of finance
Interest received                                                  186                229           451
Interest element of finance lease payments                        (93)               (30)         (105)
Interest paid                                                    (340)              (246)         (454)
Net cash outflow from returns
on investments and servicing of finance                          (247)               (47)         (108)

Taxation paid                                                    (511)              (557)         (676)

Capital expenditure and financial investment
Purchase of tangible fixed assets                              (2,836)            (1,845)       (3,911)
Sale of tangible fixed assets                                       30                941           187
Net cash outflow from capital expenditure and                  
financial investment                                           (2,806)              (904)       (3,724)

Acquisitions
Purchase of subsidiary undertakings (including                
costs)                                                        (18,748)                -             -
Net cash at bank acquired with purchase of                       
subsidiary undertakings                                          2,731                -             -
Net cash outflow from acquisitions                            (16,017)                -             -


Net cash outflow before financing                             (23,212)            (5,860)       (2,152)

Management of liquid resources
Decrease in short term deposits with financial                     
institutions                                                       -                5,000        10,000

Financing
Issue of ordinary share capital                                      2                -             -
Net secured loan advances/(repayments)                          19,295              (794)       (2,199)
Net finance lease advances/(repayments)                             95              (232)         (813)
Net cash inflow/(outflow) from financing                        19,392            (1,026)       (3,012)

(Decrease)/increase in cash in the period            9         (3,820)            (1,886)         4,836




Notes to the interim financial information
For the six months ended 30 September 2003


1. Basis of preparation

The financial information included in this interim statement for the 6 months
ended 30 September 2003 does not constitute statutory accounts within the
meaning of section 240 of the Companies Act 1985 and is not audited or reviewed.
The financial information has been prepared on the basis of accounting
policies consistent with those set out in the statutory accounts for the year
ended 31 March 2003.  The financial information relating to the year ended 31
March 2003 has been extracted from the statutory accounts for that year which
have been filed with the Registrar of Companies and on which the auditors gave
an unqualified opinion.

This interim statement will be posted on the Company's website, in addition to
the paper version.  The maintenance and integrity of the InTechnology website is
the responsibility of the directors and work carried out by the auditors does
not involve consideration of these matters.  Legislation in the United Kingdom
governing the preparation and dissemination of the financial information may
differ from legislation in other jurisdictions.


2. Segmental information

             Turnover by destination               Turnover by source                Operating (loss)/profit 
                                                                                             by source    

             6 months     6 months      Year     6 months     6 months      Year         6 months    6 months      Year 
                ended        ended     ended        ended        ended      ended           ended    ended 30     ended 
         30 September 30 September  31 March  30 September 30 September  31 March    30 September   September  31 March 
                 2003         2002      2003          2003         2002      2003            2003        2002      2003 
           (Unaudited)  (Unaudited) (Audited)   (Unaudited) (Unaudited)  (Audited)     (Unaudited) (Unaudited) (Audited)
                #'000        #'000     #'000         #'000       #'000      #'000           #'000       #'000     #'000 
                                                                                                                      
Geographical
analysis                                                                              
                 
United Kingdom 69,744       75,701   155,089        70,064      75,947    156,888          (3,477)     (2,991)   (4,922)
 Continental    8,980          248     1,313         8,665          10         11               72     (1,645)   (1,645)
  Europe          
North America       5            8       497             -           -          -                -          -         - 

  Total        78,729       75,957   156,899        78,729      75,957    156,899           (3,405)    (4,636)   (6,567)
                                                                                                                      

The Allasso group of companies (included in the above table) contributed the
following in the 2 month period following completion of the acquisition on 31
July 2003:


                                Turnover by             Turnover by             Operating profit by
                                destination                  source                          source
                                   6 months                6 months                        6 months
                                      ended                   ended                           ended
                               30 September            30 September                    30 September
                                       2003                    2003                            2003
                                (Unaudited)             (Unaudited)                       (Audited)
                                      #'000                   #'000                           #'000

Geographical analysis
United Kingdom                        6,417                   6,417                             179
Continental Europe                    8,665                   8,665                              72
Total                                15,082                  15,082                             251





                                                                       Operating profit/(loss)
                                                  Before goodwill amortisation        After goodwill amortisation
                        Turnover                     and exceptional items              and exceptional items

                6 months    6 months      Year      6 months    6 months       Year      6 months    6 months      Year
                   ended       ended     ended         ended       ended      ended         ended       ended     ended
                      30          30  31 March            30          30   31 March            30          30  31 March
               September   September               September   September                September   September
                    2003        2002      2003          2003        2002       2003          2003        2002      2003
             (Unaudited) (Unaudited) (Audited)   (Unaudited) (Unaudited)  (Audited)   (Unaudited) (Unaudited) (Audited)
                   #'000       #'000     #'000         #'000       #'000      #'000         #'000       #'000     #'000

Business
analysis

Distribution      72,807      72,295   148,681         2,990       3,572      8,148         2,012       2,720     6,449
Managed            5,922       3,662     8,218       (4,277)     (4,567)    (9,090)       (5,417)     (7,356)  (13,016)
 Services          
Total             78,729      75,957   156,899       (1,287)       (995)      (942)       (3,405)     (4,636)   (6,567)


The Allasso group of companies contributed #15,082,000 of turnover and #251,000
of operating profit to the Distribution division in the 2 month period following
completion of the acquisition on 31 July 2003.


3. Tax on loss on ordinary activities

The corporation tax credit for the 6 months to 30 September 2003 is #111,000 (30
September 2002: #nil, 31 March 2003: #367,000 charge).  Taxation has been
calculated by applying the Directors' best estimate of the effective tax rate
for the period, which is 30% in the UK and approximately 42% in respect of
European operations (30 September 2002 and 31 March 2003: 30%, UK only), to the
profit or loss, before goodwill amortisation, for the period.


4. Loss per share

Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders of #3,541,000 (30 September 2002: #4,683,000, 31 March 2003:
#7,042,000) by the weighted average number of ordinary shares in issue during
the period of 138,113,346 (30 September 2002: 138,101,518, 31 March 2003:
138,101,518).

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


                                              6 months ended                6 months ended              Year ended
                                             30 September 2003            30 September 2002            31 March 2003

                                                      (Unaudited)                  (Unaudited)               (Audited)
                                            (Loss)/       (Loss)/          (Loss)/     (Loss)/      (Loss)/    (Loss)/
                                           earnings      earnings         earnings    earnings     earnings   earnings
                                                        per share                    per share               per share

                                              #'000         pence            #'000       pence        #'000      pence
Loss attributable to ordinary               (3,541)        (2.56)          (4,683)      (3.39)      (7,042)     (5.10)
shareholders
Amortisation of goodwill                      2,118          1.53            1,996        1.45        3,980       2.88
Exceptional costs of German subsidiary          -             -              1,645        1.19        1,645       1.19

Adjusted basic loss per share               (1,423)        (1.03)          (1,042)      (0.75)      (1,417)     (1.03)



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 all potentially dilutive shares are considered to be
anti-dilutive under the terms of FRS14 "Earnings per share" as the Company has
incurred a loss for the period.


5. Acquisitions

On 31 July 2003 the Group acquired all of the issued share capital of Allasso UK
Limited and Allasso France SAS from Articon-Integralis AG for cash consideration
(including costs) of #18,748,000 and contingent consideration to a maximum of
Euro3,770,000 (#2,655,000 assuming an exchange rate of #1 to Euro1.42).  The
contingent consideration is dependent upon the level of revenue earned from
Articon-Integralis AG in the 24 month period following completion.  The full
contingent consideration of Euro3,770,000 is payable if cumulative sales to
Articon-Integralis AG reach Euro61,500,000 by 31 July 2005.  The contingent
consideration has not been accrued as the level of revenue expected to be earned
from Articon-Integralis AG is uncertain.

The amounts in the following table represent the provisional book and fair
values of the assets and liabilities acquired and the consideration paid.
Completion accounts have been prepared in respect of the acquisition and are in
the process of being agreed with Articon-Integralis AG.  Any adjustments to the
book and provisional fair values shown above which result from this process will
be reflected in the Group's full year accounts.


                                                    Provisional book &
                                               fair value to the Group
                                                                 #'000

Tangible fixed assets                                            1,033
Stock                                                            1,465
Debtors                                                         17,418
Deferred cost of goods sold                                     13,311
Cash                                                             2,731
Obligations under finance leases                                  (48)
Creditors - amounts falling due within one                    (11,648)
year
Creditors - amounts falling due after more                        (59)
than one year
Deferred revenue                                              (16,971)
Net assets                                                       7,232
Goodwill arising on acquisition                                 11,516
                                                                18,748

Discharged by:
Cash consideration                                              17,480
Costs associated with the acquisition                            1,268
                                                                18,748


The unaudited results of Allasso for the period 1 January 2003 to 31 July 2003
together with the unaudited pro-forma results extracted from Articon-Integralis
AG detailed transactions for the year ended 31 December 2002 were as follows:


                                               7 months ended                   Year ended
                                                 31 July 2003             31 December 2002
                                                  (Unaudited)        (Unaudited pro-forma)
                                                        #'000                        #'000

Turnover                                               52,529                      104,805
Cost of sales                                        (40,937)                     (80,159)

Gross profit                                           11,592                       24,646

Net operating expenses before depreciation
and amortisation of goodwill                          (9,493)                     (17,477)
Depreciation                                            (355)                      (1,054)
Amortisation of goodwill                                 (42)                        (425)

Net operating expenses                                (9,890)                     (18,956)

Operating profit                                        1,702                        5,690

Net interest payable                                     (14)                        (217)


Profit on ordinary activities before                    1,688                        5,473
taxation

Tax on loss on ordinary activities                      (238)                      (1,020)

Profit for the period                                   1,450                        4,453

EBITDA                                                  2,099                        7,169





6. Consolidated statement of total recognised gains and losses


                                                            6 months ended         6 months ended            Year ended
                                                              30 September      30 September 2002         31 March 2003
                                                                      2003
                                                               (Unaudited)            (Unaudited)             (Audited)

                                                                     #'000                  #'000                 #'000

Loss sustained for the period                                      (3,541)                (4,683)               (7,042)
Exchange adjustments offset in reserves                                -                        2                   -

Total recognised losses since last annual report                   (3,541)                (4,681)               (7,042)



7. Reconciliation of movements in Group shareholders' funds


                                                    6 months ended        6 months ended           Year ended
                                                      30 September     30 September 2002        31 March 2003
                                                              2003
                                                       (Unaudited)           (Unaudited)            (Audited)

                                                             #'000                 #'000                #'000

Loss sustained for the period                              (3,541)               (4,683)              (7,042)
Proceeds of ordinary share capital issued                        1                   -                    -
Premium on ordinary share capital issued                         1                   -                    -
Exchange gain on translation of subsidiary                       8                     2                  -
Exchange loss on translation of loan                           (8)                   -                    -

Net change in shareholders' funds                          (3,539)               (4,681)              (7,042)

Opening shareholders' funds                                 97,447               104,489              104,489

Closing shareholders' funds                                 93,908                99,808               97,447



On 20 August 2003 the Company issued 138,679 ordinary shares in respect of
employee share options.



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


                                                   6 months 6 months ended  6 months ended 6 months ended    Year ended
                                                      ended
                                               30 September   30 September    30 September   30 September      31 March
                                                       2003           2002            2003           2002          2003
                                                (Unaudited)    (Unaudited)     (Unaudited)    (Unaudited)     (Audited)
                                                 Continuing    Acquisition           Total
                                                      #'000          #'000           #'000          #'000         #'000

Operating (loss)/profit                             (3,656)            251         (3,405)        (4,636)       (6,567)
Depreciation of tangible fixed assets                 2,531            117           2,648          2,330         4,885
Depreciation of tangible fixed assets -
exceptional
costs of German subsidiary                              -              -               -               89            89
Goodwill amortisation                                 1,990            128           2,118          1,996         3,980
Loss/(profit) on sale of tangible fixed                   2            -                 2             24          (41)
assets
(Increase)/decrease in stocks                       (2,771)          (145)         (2,916)        (1,573)         2,223
Decrease/(increase) in debtors                        3,370        (2,089)           1,281        (3,105)         5,183
(Decrease)/increase in creditors and                (4,974)          1,615         (3,359)            523       (7,396)
provisions
Net cash (outflow)/inflow from operating            (3,508)          (123)         (3,631)        (4,352)         2,356
activities





9. Reconciliation of movement in net funds


                                                               6 months  6 months ended    Year ended
                                                                  ended
                                                           30 September    30 September      31 March
                                                                   2003            2002          2003
                                                            (Unaudited)     (Unaudited)     (Audited)
                                                                  #'000           #'000         #'000

(Decrease)/increase in cash in the period                       (3,820)         (1,886)         4,836
Net cash (inflow)/outflow from (increase)/decrease in              (95)             232           813
finance leases
Decrease in short term deposits                                     -           (5,000)      (10,000)
Cash (inflow)/outflow from (advance)/repayment of debt         (19,295)             794         2,199

Change in net funds resulting from cash flows                  (23,210)         (5,860)       (2,152)

Non-cash changes:
Inception of new finance leases                                     -           (1,428)       (1,577)
Finance leases acquired on purchase of subsidiary undertakings     (48)             -             -


Movement in net funds in the period                            (23,258)         (7,288)       (3,729)
Net funds at start of period                                      9,961          13,690        13,690

Net (debt)/funds at end of period                              (13,297)           6,402         9,961



10. Shareholder information


The interim announcement will be posted to shareholders on 20 November 2003.
Further copies are available on request from the registered office of the
Company at Nidderdale House, Beckwith Knowle, Harrogate, HG3 1SA.


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

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