COMPANY REGISTRATION NUMBER 3294807 NETWORK SOLUTIONS (NORTHERN) LIMITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st JANUARY 1999 ASHFORD READ Chartered Accountants & Registered Auditors 40 Alexandra Road Freemantle Southampton Hampshire SO15 5DG NETWORK SOLUTIONS (NORTHERN) LIMITED FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999
CONTENTS PAGES Officers and professional advisers 1 The directors' report 2 to 3 Auditors' report to the shareholders 4 Profit and loss account 5 Balance sheet 6 Notes to the financial statements 7 to 10 THE FOLLOWING PAGES DO NOT FORM PART OF THE STATUTORY FINANCIAL STATEMENTS Detailed profit and loss account 12 Notes to the detailed profit and loss account 13
NETWORK SOLUTIONS (NORTHERN) LIMITED OFFICERS AND PROFESSIONAL ADVISERS THE BOARD OF DIRECTORS Mr A.P. Cowler Mr W. Bridgen Mr S. Sutton COMPANY SECRETARY Mr A.P. Cowler REGISTERED OFFICE 12 Acorn Business Centre Northarbour Road Cosham Portsmouth Hampshire PO6 3TH AUDITORS Ashford Read Chartered Accountants & Registered Auditors 40 Alexandra Road Freemantle Southampton Hampshire SO15 5DG BANKERS Barclays Bank Plc Soho Square Business Centre 8-9 Hanover Square London W1A 4ZW SOLICITORS Gurney-Champion & Co 12 Edinburgh Road Portsmouth Hampshire PO1 1DJ
-1- NETWORK SOLUTIONS (NORTHERN) LIMITED THE DIRECTORS' REPORT YEAR ENDED 31st JANUARY 1999 The directors present their report and the financial statements of the company for the year ended 31st January 1999. PRINCIPAL ACTIVITIES The principal activity of the company during the year was computer network installations. THE DIRECTORS AND THEIR INTERESTS IN SHARES OF THE COMPANY The directors who served the company during the year were as follows: Mr A.P. Cowler Mr W. Bridgen Mr S. Sutton Mr J.C. Beckett (Appointed 2 Jun 98) Mr I.C. Cocks (Retired 2 Jun 98) The company is a wholly owned subsidiary and the interests of group directors are disclosed in the accounts of the parent company. Mr J. C. Beckett resigned as a director of Network Solutions Group Limited, Network Solutions Limited and Network Solutions (Northern) Limited on 9th July 1999. YEAR 2000 ISSUES The directors have considered the risks and uncertainties associated with the year 2000 problem. During the year the company has taken steps to ensure that its internal computer systems are millennium compliant. The directors have also assessed the possibility of year 2000 related failures in significant suppliers, all of whom have indicated that they are already dealing with the problem. Whilst it is impossible to guarantee that no year 2000 problems will remain, the directors are confident that the company will be able to deal promptly with any failures that may occur. DIRECTORS' RESPONSIBILITIES Company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company at the end of the year and of the profit or loss for the year then ended. In preparing those financial statements, the directors are required to select suitable accounting policies, as described on page 7, and then apply them on a consistent basis, making judgements and estimates that are prudent and reasonable. The directors must also prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. -2- NETWORK SOLUTIONS (NORTHERN) LIMITED THE DIRECTORS' REPORT (CONTINUED) YEAR ENDED 31st JANUARY 1999 AUDITORS A resolution to re-appoint Ashford Read as auditors for the ensuing year will be proposed at the annual general meeting in accordance with section 385 of the Companies Act 1985. SMALL COMPANY PROVISIONS This report has been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985. Registered office: Signed by order of the directors 12 Acorn Business Centre Northarbour Road Cosham Portsmouth Hampshire /s/ A. P. Cowler PO6 3TH MR A. P. COWLER Company Secretary Approved by the directors on 12 AUG 1999 -3- NETWORK SOLUTIONS (NORTHERN) LIMITED AUDITORS' REPORT TO THE SHAREHOLDERS YEAR ENDED 31st JANUARY 1999 We have audited the financial statements on pages 5 to 10 which have been prepared in accordance with the Financial Reporting Standard for Smaller Entities (effective March 1999), under the historical cost convention and the accounting policies set out on page 7. RESPECTIVE RESPONSIBILITIES OF THE DIRECTORS AND THE AUDITORS As described on page 2, the company's directors are responsible for the preparation of the financial statements. It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you. BASIS OF OPINION We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements give a true and fair view of the company's state of affairs as at 31st January 1999 and of its profit for the year then ended, and have been properly prepared in accordance with the Companies Act 1985. /s/ Ashford Read 40 Alexandra Road Freemantle Chartered Accountants Southampton & Registered Auditors Hampshire SO15 5DG 12 AUG 1999 -4- NETWORK SOLUTIONS (NORTHERN) LIMITED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
Note 1999 1998 L L TURNOVER 681,504 546,049 Cost of sales (551,023) (443,831) --------- --------- GROSS PROFIT 130,481 102,218 Distribution costs (13,006) (21,486) Administrative expenses (104,231) (130,453) Other operating income 344 - --------- --------- OPERATING PROFIT/(LOSS) 3 13,588 (49,721) Interest payable and similar charges (2,600) (115) --------- --------- PROFIT/(LOSS) ON ORDINARY ACTIVITIES 10,998 (49,836) BEFORE TAXATION Tax on profit/(loss) on ordinary activities - - --------- --------- RETAINED PROFIT/(LOSS) FOR THE FINANCIAL YEAR 10,988 (49,836) Balance brought forward (49,836) - --------- --------- Balance carried forward (38,848) (49,836) --------- --------- --------- ---------
The notes on pages 7 to 10 form part of these financial statements. -5- NETWORK SOLUTIONS (NORTHERN) LIMITED BALANCE SHEET 31st JANUARY 1999
Note 1999 1999 L L L L FIXED ASSETS Tangible assets 4 3,711 5,725 CURRENT ASSETS Stocks - 2,364 Debtors 5 100,705 133,666 Cash at bank and in hand 82 - --------- --------- CREDITORS: Amounts falling due within one year 6 (133,346) (181,591) --------- --------- NET CURRENT LIABILITIES (32,559) (45,561) -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES (28,848) (39,836) -------- -------- -------- -------- CAPITAL AND RESERVES Called-up equity share capital 9 10,000 10,000 Profit and loss account (38,848) (49,836) -------- -------- DEFICIENCY (28,848) (39,836) -------- -------- -------- --------
These financial statements have been prepared in accordance with the special provisions for small companies under Part VII of the Companies Act 1985 and with the Financial Reporting Standard for Smaller Entities (effective March 1999). These financial statements were approved by the directors on the 12 AUGUST 1999, and are signed on their behalf by: /s/ A.P. Cowler - ---------------------- MR A.P. COWLER The notes on pages 7 to 10 form part of these financial statements. -6- NETWORK SOLUTIONS (NORTHERN) LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 1. ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements have been prepared under the historical cost convention, and in accordance with the Financial Reporting Standard for Smaller Entities (effective March 1999). TURNOVER The turnover shown in the profit and loss account represents amounts invoiced during the year, exclusive of Value Added Tax. DEPRECIATION Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Fixtures & Fittings - 15% reducing balance basis Equipment - 33% reducing balance basis
STOCKS Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items. OPERATING LEASE AGREEMENTS Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged against profits as incurred. DEFERRED TAXATION Provision is made, under the liability method, to take account of timing differences between the treatment of certain items for accounts purposes and their treatment for tax purposes. Tax deferred or accelerated is accounted for in respect of all material timing differences to the extent that it is considered that a net liability may arise. 2. GOING CONCERN At the balance sheet date the company's liabilities exceeded its assets by L28,848. The day to day operation of the company is dependent upon support from its directors, associated companies, bankers and trade creditors. The support of the directors and associated companies has been confirmed for the foreseeable future. Subsequent to the year end the company has taken significant measures to ensure improved management control and trading performance. These steps, together with the assumed continued support of the company's bankers and trade creditors, provide the directors with the opinion that it is appropriate to prepare the financial statements on the going concern basis. -7- NETWORK SOLUTIONS (NORTHERN) LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 3. OPERATING PROFIT/LOSS Operating profit/(loss) is stated after charging/(crediting):
1999 1998 L L Directors' emoluments - - Depreciation 1,380 1,011 Profit on disposal of fixed assets (344) - Auditors' fees 1,200 1,050 ------- ------- ------- -------
4. TANGIBLE FIXED ASSETS
FIXTURES & EQUIPMENT TOTAL FITTINGS L L L COST At 1st February 1998 1,025 5,711 6,736 Additions 795 3,425 4,220 Disposals - (5,711) (5,711) ------ ------- ------- At 31st January 1999 1,820 3,425 5,245 ------ ------- ------- ------ ------- ------- DEPRECIATION At 1st February 1998 154 857 1,011 Charge for the year 250 1,130 1,380 On disposals - (857) (857) ------ ------- ------- At 31st January 1999 404 1,130 1,534 ------ ------- ------- ------ ------- ------- NET BOOK VALUE At 31st January 1999 1,416 2,295 3,711 ------ ------- ------- ------ ------- ------- At 31st January 1998 871 4,854 5,725 ------ ------- ------- ------ ------- -------
5. DEBTORS
1999 1998 L L Trade debtors 92,238 - 129,911 Other debtors 1,375 1,375 Prepayments and accrued income 7,092 2,380 -------- -------- 100,705 135,666 -------- -------- -------- --------
-8- NETWORK SOLUTIONS (NORTHERN) LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 6. CREDITORS: Amounts falling due within one year
1999 1998 L L L L Bank loans and overdrafts 3,506 8,158 Trade creditors 50,135 110,916 Amounts owed to group undertakings 69,364 38,501 Other creditors including: PAYE and social security 3,696 10,844 VAT 3,390 5,688 -------- ------- 7,086 16,532 Accruals and deferred income 3,255 7,484 -------- ------- 133,346 181,591 -------- -------
7. COMMITMENTS UNDER OPERATING LEASES At 31st January 1999 the company had aggregate annual commitments under non-cancellable operating leases as set out below.
1999 1998 L L Operating leases which expire: Within 1 year 12,116 5,500 Within 2 to 5 years 5,083 10,925 -------- ------- 17,199 16,425 -------- -------
8. RELATED PARTY TRANSACTIONS The company was under the control of the directors (Mr. A. P. Cowler, Mr. W. Bridgen, Mr. S. Sutton and Mr. J. C. Beckett) and Network Solutions Group Limited throughout the year. The four directors are also the sole directors of Network Solutions Group Limited as well as Network Solutions Limited. During the year the company purchased goods and services from Network Solutions Limited amounting to L130,161 (1998 - L1,890). During the year the company also sold goods and services to Network Solutions Limited amounting to L640 (1998 - L291). At the balance sheet date the company owed Network Solutions Limited L69,364 (1998 - L38,509). Mr. A. P. Cowler is a director of and has a controlling interest in The Surrey Design Partnership Limited. During the year the company made sales to The Surrey Design Partnership Limited of LNil (1998 - L530). There were no trading balances outstanding between the companies at the balance sheet date. Mr. I. C. Cocks has a controlling interest in Taylor Cocks (formerly Cocks & Co.). During the year the company acquired services from Taylor Cocks amounting to Lnil (1998 - L10,252). During the year the company also sold goods to Taylor Cocks amounting to Lnil (1998 - L2,423). There were no trading balances outstanding between the companies at the balance sheet date. -9- NETWORK SOLUTIONS (NORTHERN) LIMITED NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31st JANUARY 1999 9. SHARE CAPITAL
AUTHORISED SHARE CAPITAL: 1999 1998 L L 100,000 Ordinary shares of L1 each 100,000 100,000 -------- -------- -------- -------- ALLOTTED, CALLED UP AND FULLY PAID: 1999 1998 L L Ordinary share capital brought 10,000 - forward Issue of ordinary shares - 10,000 -------- ------- 10,000 10,000 -------- ------- -------- --------
10. ULTIMATE PARENT COMPANY The ultimate parent company is Network Solutions Group Limited - a company incorporated within the UK. -10- NETWORK SOLUTIONS (NORTHERN) LIMITED MANAGEMENT INFORMATION YEAR ENDED 31st JANUARY 1999 THE FOLLOWING PAGES DO NOT FORM PART OF THE STATUTORY FINANCIAL STATEMENTS WHICH ARE THE SUBJECT OF THE AUDITORS' REPORT ON PAGE 4. -11- NETWORK SOLUTIONS (NORTHERN) LIMITED DETAILED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
1999 1998 L L L L TURNOVER 681,504 546,049 COST OF SALES Opening WIP 2,364 - Purchases 486,835 396,512 Direct wages 61,824 49,683 -------- -------- 551,023 446,195 Closing WIP - (2,364) -------- -------- 551,023 443,831 -------- -------- GROSS PROFIT 130,481 102,218 OVERHEADS Distribution costs 13,006 21,486 Administrative expenses 104,231 130,453 -------- -------- (117,237) (151,939) -------- -------- 13,244 (49,721) OTHER OPERATING INCOME Profit on disposal of fixed assets 344 - -------- -------- OPERATING PROFIT/(LOSS) 13,588 (49,721) Interest payable and similar charges (2,600) (115) -------- -------- PROFIT/(LOSS) ON ORDINARY ACTIVITIES 10,988 (49,836) -------- -------- -------- --------
-12- NETWORK SOLUTIONS (NORTHERN) LIMITED NOTES TO THE DETAILED PROFIT AND LOSS ACCOUNT YEAR ENDED 31st JANUARY 1999
1999 1998 L L L L DISTRIBUTION COSTS Freight and carriage 307 528 Vehicle hire 12,699 20,958 -------- -------- 13,006 21,486 -------- -------- -------- -------- ADMINISTRATIVE EXPENSES PERSONNEL COSTS: Administrative staff salaries 42,365 84,422 ESTABLISHMENT EXPENSES: Rent and services 5,467 6,591 Rates and water 1,650 2,974 Insurance 526 393 Repairs and maintenance 224 369 ------- ------- 7,867 10,327 GENERAL EXPENSES: Motor expenses 5,574 5,703 Travel and subsistence 629 1,189 Telephone 6,975 10,765 Printing, postage, stationery and 978 1,830 advertising Management services charge 20,000 - Staff recruitment 936 - Sundry expenses 75 596 Entertaining 267 824 Legal and professional fees 125 1,714 Accountancy fees 5,959 10,598 Auditors remuneration 1,200 1,050 Depreciation 1,380 1,011 ------- ------- 44,098 35,280 FINANCIAL COSTS: Bad debts written off 8,256 - Bank charges 1,645 424 ------- ------- 9,901 424 -------- -------- 104,231 130,453 -------- -------- -------- -------- INTEREST PAYABLE AND SIMILAR CHARGES Bank interest payable 175 75 Interest on overdue tax 2,425 40 -------- -------- 2,600 115 -------- -------- -------- --------
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