Interim Results

Anite Group PLC 12 December 2003 Friday, 12 December 2003 ANITE GROUP plc Interim results for the six months ended 31 October 2003 Anite Group plc ('Anite' or 'the Group'), the worldwide IT solutions and services company, today announces its interim results for the six months ended 31 October 2003: Highlights: • Underlying profit before tax of ongoing businesses, before goodwill amortisation and exceptional items £6.5m (2002: £10.8m) • pre-tax loss (after goodwill and exceptionals items) substantially reduced to £14.2m (2002: loss £43.4m) • adjusted* basic earnings per share of 1.5p (2002: 2.7p); reported basic loss per share 4.4p (2002: loss per share 14.0p) • the Group has been strongly cash generative, ahead of expectations, reflecting our focus on cash management: - £7.9m of cash earnout commitments have been paid out - net debt as at 31 October totalled £10.8m (30 April 2003: £16.3m) • annualised overhead reductions now total around £5.5m with £2.5m expected to be realised in the second half following net headcount reduction of 140 and property rationalisation • Steve Rowley joined as the new Chief Executive on 3 November 2003 • order intake of £95.9m slightly ahead of last year on a like for like basis *ongoing operations excluding amortisation and impairment of goodwill and exceptional items Commenting, Steve Rowley, Anite's Chief Executive, stated: 'Our current priority is to complete our consolidation, integration and cost cutting work with a particular focus on invigorating our sales and marketing activities and reviewing the fit, opportunities and potential for the individual businesses. 'Whilst there is still much work to be done, we have already made considerable progress with these initiatives. Profit performance is expected to be in line with our expectations for the year as a whole but with revenue continuing to be under pressure. In conclusion, the Board believes the Group is now in better shape and is cautiously optimistic about its future prospects.' For further information, please contact: www.anite.com Anite Group plc 01753 804 495 Steve Rowley, Chief Executive David Thorpe, Non-Executive Director Christopher Humphrey, Group Finance Director Weber Shandwick Square Mile 020 7067 0700 Reg Hoare/Sara Musgrave Print resolution images are available for the media to view and download from www.vismedia.co.uk Interim results for the six months ended 31 October 2003 Chairman's Statement Introduction Anite is a worldwide IT solutions and services company. We provide solutions, technology and business consulting, managed services and systems integration. By providing repeatable solutions to the public sector, travel industry, mobile telecoms and finance markets worldwide, we are critical to our customers' operations. We are leaders in several of our markets and operate at the heart of our clients' businesses. The Group employs around 1900 staff primarily based in the UK, France, Germany and the Netherlands, with representation in a total of eleven countries around the world. At the time of the Group's 2002/3 preliminary results in July this year, and then again at the AGM in September, the Board advised shareholders to expect a difficult first half. In view of tough trading conditions, the restructuring programme and other one off costs, together with higher development spending, profitability in the first half was expected to be well down on the same period last year. Today's results broadly reflect those expectations. However, during this relatively short period of time a significant amount of consolidation, integration and cost cutting work has already been undertaken and a number of legacy issues have been successfully dealt with. We intend to continue this work under the leadership of our new Chief Executive, Steve Rowley, in the remainder of the second half and into next year to ensure the invigoration of Anite's position and financial performance. Results Profits before tax (ongoing businesses, before goodwill amortisation and impairment and exceptional items) fell to £6.5m (2002: £10.8m) on sales that were also lower at £95.5m (2002: £106.1m). The total reported pre-tax loss (after goodwill amortisation and impairment and exceptionals) was £14.2m (2002: loss £43.4m). Operating profits for the ongoing businesses (before goodwill and exceptionals) fell to £7.5m (2002: £11.9m) reflecting lower operating margins of 7.8% (2002: 11.2%). The reduction in profits resulted from a combination of the fall in sales and lower margins, the latter principally due to higher development spending, completion of lower profitability legacy contracts and pricing pressure. Adjusted basic earnings per share (ongoing businesses, before goodwill amortisation and exceptional items) were 1.5p (2002: 2.7p), in part reflecting an increase of 7% in the number of shares in issue as £8.0m of share earnout commitments (represented by 9.4m shares) were paid out during the period. A maximum further increase in shares in issue of around 3% is estimated in the current year. Total loss per share after goodwill amortisation and exceptional items was 4.4p (2002: loss per share 14.0p). Although Group turnover fell by around 10% (ongoing businesses) there was a wide variance in performance between the divisions. Travel was down 15% and International down 12%, both reflecting market conditions. Public Sector was down 8%, reflecting management focus on integration and legacy issues and some seasonality, and Telecoms was down 6% due to the transition from 2/2.5G to 3G. There was a similar variance in margin performance: margins rose in Travel and Telecoms, reflecting initial benefits from good cost control. Margins in Public Sector fell due to higher development spending, completion of low profitability contracts and as other contractual and residual issues, relating to past acquisitions, were resolved. International margins, fell sharply due to highly competitive markets, especially at Anite Benelux and losses at Anite Finance (formerly Parsec), resulting in a further goodwill impairment charge of £8.8m for these two businesses. The Group had satisfactory order intake of £95.9m in the first half, with strong order backlog of £97.1m of which £50.6m is deliverable in the second half. Strong cash generation, which is a characteristic of Anite's business, has enabled the Group to pay out £7.9m of cash earnout commitments in the first half whilst reducing net debt to £10.8m (£16.3m at 30 April 2003). Thus, gearing also fell, to 25% as at 31 October 2003 (30 April 2003: 27%). Net debt is anticipated to be at similar levels by the year-end. Remaining earnout commitments total £11.6m in cash and £0.6m in shares, £2m of which is dependent on earnout targets being achieved, and by the year-end we largely expect to have resolved this long running concern. These earnouts resulted from the Group's rapid expansion by acquisition; no further acquisitions have been made since June 2002, and none are anticipated in the immediate future. During the current year, we are reviewing certain peripheral, non-material businesses, and if appropriate will consider disposing of some of these. During the half year, there has been a net headcount reduction of around 140 (ongoing businesses), at a cost of £2.4m. This has resulted in annualised overhead reductions being achieved of around £5.5m with £2.5m expected to be realised in the second half. The Board As previously announced, there have been major board changes during the current year, which are intended to strengthen the Group's management, following the appointment of Christopher Humphrey as our new Group Finance Director in February and the departure of the former Chief Executive John Hawkins in May. Steve Rowley joined as our new Chief Executive on 3 November. Steve had most recently served as a Senior Vice President and General Manager at PeopleSoft Europe and we believe that he has the right skill-set for Anite's future development and can bring to bear his extensive international management experience on the Group's businesses whilst invigorating our sales and marketing activities. We are thankful to David Thorpe for his excellent stewardship during the interim period. We also announced at the AGM that once the new Chief Executive had been appointed, and assuming that continuing progress is made by the Group in 2004, that I will stand down and my successor will be identified in due course. To that end the Board will be further strengthened during the current financial year and succession plans announced in time for the 2004 AGM. Dividend policy The Board continues to believe that rather than pay dividends, its free cash flow should be reinvested in the business to ensure the Group is not exposed to higher gearing whilst still making significant earnout payments and incurring significant restructuring costs. Next year, as these earnout payments reduce and as the Group's performance improves, it will be appropriate to review this policy. Summary Whilst there is still much work to be done, we have already made considerable progress with these consolidation, integration and cost cutting initiatives commenced by David Thorpe and Christopher Humphrey in the summer. Steve Rowley will be continuing these initiatives with a particular focus on invigorating our sales and marketing activities and reviewing the opportunities and potential for the individual businesses. Alec Daly Chairman Chief Executive's Operating & Divisional Review Introduction Having joined as the Group's new Chief Executive on 3 November, I have spent the first few weeks of my tenure familiarising myself with the business and its people and have been encouraged by what I have seen to date. Following this familiarisation phase, the Board has set me three principal tasks: • to continue the consolidation, integration and cost cutting initiatives; • to focus on invigorating our sales and marketing activities; and • to conduct a review of the fit, opportunities and potential of the businesses that constitute the Anite Group. We expect to have made considerable progress on these activities in 2004 and will report on them at the time of the Group's results for the year as a whole in July 2004. Strategy The Group's strategy is to strengthen its positions in each of its chosen market sectors by providing a complete package of services to its customers, from consultancy and software applications to managed services. In the immediate future we will focus on invigorating Anite's position and its financial performance by consolidation and achieving organic growth. We are confident that the actions we are taking will enhance shareholder value. Divisional Review Divisional performance Divisional performance* before Group central costs and interest was as follows: • Public Sector: turnover £33.5m, operating loss (£2.2m), margin (6.6%) • Travel: turnover £13.7m, operating profits £3.0m, margin 21.9% • Telecoms: turnover £18.4m, operating profits £4.5m, margin 24.4% • International: turnover £29.9m, operating profits £3.1m, margin 10.4% *ongoing businesses before goodwill amortisation and impairment and exceptional items. Public Sector Anite is a market leader in applications for key parts of local government - such as local tax collection, benefits payments, housing management and social care solutions - as well as an important supplier into the central government, police and defence markets. The local government business has been a key area of management focus during the half year with progress having been made in terms of restructuring and cost cutting and resolving legacy contract issues. Despite this, Public Sector was loss making during the period with its profitability held back, as expected, by higher development spending and as low profitability contracts were completed and other contractual and residual issues, relating to past acquisitions, have been identified and have mostly been resolved. The underlying business trends have continued; strong order intake and trading performance in the central government area, and in contrast, as previously indicated, a weaker performance in the local government applications solutions area. The latter remains the principal area of management action. Pericles, our revenues and benefits' product, is expected to be completed later this financial year with a significant release having taken place in October. Interest and contract take up in e-local government is growing as we approach the Government's 2005 target and we are also pleased with the progress we are making in the social care area. In the second half, our focus will be on continued integration and cost control, such as completing the relocation of our Bracknell based staff to our Slough offices, controlling development spending, and returning the division to profitability. We expect to benefit from the start up of some new contracts and also from the normal seasonal pick up in this division in March and April. Travel Anite is one of the leading reservation system and e-commerce providers to tour, cruise, ferry, rail and coach operators worldwide, providing mission critical managed services and solutions. The business reported a slightly lower result on reduced turnover during the period under review, but margins rose benefiting from its strong market position and first half cost cutting. However, we believe it will be some time until our customers feel confident to increase their discretionary spending and it is likely that the timing of any pick up will lag an improvement in underlying travel markets. Despite this cautious background, Travel continues to work for the industry market leaders, to win new clients and its major customers continue to meet their obligations to Anite. Telecoms Anite provides specialist systems and software for mobile phone network simulation and handset testing as well as inter-company billing around the globe. The division saw improved results, but on lower turnover, reflecting the tough operating environment and delays to 3G spending previously referred to. Whilst it is too early to suggest that a pick up is imminent, more recently there have been some encouraging orders in both 3G and 2/2.5G from network operators and handset manufacturers alike. During the period some important milestones were achieved with the opening of a sales office in Taiwan and a switch from Racal to Agilent's hardware platform. Despite some short-term disruption from this change, which is expected to continue in the third quarter, orders have been received for the new systems with first deliveries expected in the New Year. We have also established an offshore facility in Bangalore, to provide our 2G solutions maintenance and development services, which is expected to result in service offering and overhead benefits. International International brings together Anite's worldwide consultancy businesses, focusing on IT consultancy and systems integration. As expected sales, orders, margins and profits have fallen against a background of continuing pricing pressure, overcapacity and limited opportunities in European markets, particularly for Anite Benelux. Performance was further impacted by a significant fall in profits at Anite Finance (formerly Parsec), which was loss making thus reducing profits by around £1.5m compared to the same period last year. Following business reviews and the continuing tough market conditions that exist, we have made a further goodwill impairment provision of £8.8m against the values held against these businesses. Although the overall performance of International continues to be creditable in these circumstances, there are no immediate signs of improvement in market conditions. Order Book The Group had satisfactory order intake of £95.9m in the first half, with strong order backlog of £97.1m of which £50.6m is deliverable in the second half, giving a book to bill ratio of 1.0. The book to bill ratio by division in the first half year was as follows: • Public Sector an order intake to revenue ratio of 1.2 • Travel an order intake to revenue ratio of 1.2 • Telecoms an order intake to revenue ratio of 1.0 • International an order intake to revenue ratio of 0.7 Current Trading & Outlook The Group's current performance is in line with our expectations for the year as a whole with second half performance likely to improve compared to the first half. Restructuring and other one off costs such as property rationalisation are currently expected to be below £1m, and the benefits of cost cutting are now coming through strongly. However, revenue is continuing to come under pressure in some areas. In conclusion, whilst there is still much work to be done, we have already made considerable progress with our consolidation and integration initiatives. The Board believes the Group is now in better shape and is cautiously optimistic about its future prospects. Steve Rowley Chief Executive Finance Director's Review Overview Consolidation, integration and cost cutting activity dominated the first half. Group underlying profits before tax (ongoing businesses, before goodwill amortisation and exceptional items) fell during the period reflecting a combination of increased development spending and margin pressure in some businesses, in part due to clearing up legacy issues on poorly performing contracts. Exceptional items, closed businesses and goodwill Total exceptional items, closed businesses and goodwill are analysed below: £m £m Before operating loss Redundancy and restructuring costs 2.4 Severance of former CEO 0.7 Legal costs, NIC re former CEO 0.2 Recruitment cost of new CEO 0.1 Relocation and property rationalisation cost (net) 1.2 Release of acquisition provision no longer required (0.2) Recovery of Dati escrow (0.4) --------- -------- Total exceptional items 4.0 Closed businesses shown before operating loss Operating profit of previously closed business (0.2) Other income shown after operating loss Consideration from previously disposed/closed businesses (0.1) Amounts recovered on own shares and investments (0.1) Profit on sale of fixed asset investment (0.1) (0.3) --------- -------- 3.5 Goodwill shown before operating loss Goodwill amortisation 8.4 Goodwill impairment 8.8 --------- Total goodwill 17.2 -------- Total exceptional items, closed businesses and goodwill before tax 20.7 Tax effect on exceptional items and closed businesses (0.5) -------- Total exceptional items, closed businesses and goodwill after taxation 20.2 ======== Goodwill Goodwill is capitalised based on the best estimate of potential costs of an acquisition, including earnout, and is written off over a maximum of ten years. If earnouts below the amount provided are paid, the difference is credited against goodwill. The goodwill charge for the period was £17.2m, made up as follows: • Goodwill amortisation of £8.4m (2002: £13.5m) • Goodwill impairment of £8.8m (2002: £37.5m) following a further review of the Group's businesses and in light of the continued weakness in some of our international consulting businesses After the above charges, the total net carrying value of goodwill is £82.4m and we expect that the annualised level of goodwill amortisation going forward will be approximately £15.2m. Costs Divisional performances are stated before unallocated Group central costs. These costs include head office staff costs, directors' remuneration, professional and office costs, but exclude costs directly attributable to operations. During the period unallocated Group central costs, before exceptionals of £1.5m, totalled £0.9m (2002: £1.7m). Restructuring of the businesses continues and during the period there has been a net headcount reduction of around 140 staff in total, principally in Public Sector. Whilst we continue to look for cost cutting opportunities that will ensure the Group's cost base is aligned with the market, we are not currently planning any major headcount reductions in the second half. As expected, net un-recovered development spending increased during the period to £6.4m (2002: £4.9m). We anticipate spending around £1m less in the second half, slightly below previous indications, notwithstanding new demand led opportunities. We are also undertaking an in depth review of property rationalisation opportunities across the Group. In the first half we have taken the opportunity to relocate our small head office from Reading to our existing premises in Slough where we have additional space available. We are also relocating our Bracknell based Public Sector operations to Slough and are putting the Bracknell freehold building on the market. Other property opportunities are being reviewed that are likely also to yield cost savings and synergies in the medium term, albeit some short term relocation and other costs will be incurred. Interest cost fell during the period, reflecting the reduction in net debt on the back of strong cash flow, and comprises: £m 2003 2002 Net bank interest 0.5 0.8 Loan notes 0.2 0.2 Other 0.3 0.1 Total 1.0 1.1 Interest cover based on ongoing businesses before goodwill and exceptional items for the period was 7.5 times (2002: 10.6 times). Cash flow There has been strong cash generation and conversion of trading results to cash in the normally seasonally stronger first half. In addition, we have benefited from improved working capital management during the period, lower capital expenditure, and a reduction in aged debts. Cash was also received as a result of the lease surrender of a floor at our premises in Slough. Earnout payments of £7.9m were funded out of cash flow. Taxation The tax rate for the ongoing business for the period was 23% and this level is expected to be maintained for the foreseeable future. Earnings per share The number of shares in issue increased in the period under review from 340,480,869 at 30 April 2003 to 349,896,924 at 31 October 2003 as a result of shares issued as part of earnouts. The weighted average number of shares in issue used to calculate basic earnings per share was 345,771,215 (30 April 2003: 331,614,420; 31 October 2002: 324,569,718). By 30 April 2004 the expected number of shares in issue is expected to increase by around 3.0% to 350.5m as a result of shares being issued as part of earnouts. Balance Sheet The Group is operating comfortably within its banking facilities of £51.6m. Net debt and gearing are as follows: 31 October 2003 30 April 2003 31 October 2002 Net debt £10.8m £16.3m £17.1m Gearing 25% 27% 14% Net debt is anticipated to be at similar levels by the year end. Earnouts The forecast outstanding earnouts are as follows: 2003/4 2004/5 2005/6 Total £m £m £m £m Shares Cash Shares Cash Shares Cash Shares Cash ------- ------ ------- ------ ------- ------ ------- ------ Earnouts paid 8.0 7.9 - - - - 8.0 7.9 Expected to be paid/shares issued 0.6 6.0 - 5.6 - - 0.6 11.6 ------- ------ ------- ------ ------- ------ ------- ------ October 2003 forecast 8.6 13.9 - 5.6 - - 8.6 19.5 ------- ------ ------- ------ ------- ------ ------- ------ April 2003 forecast 8.6 13.9 0.6 4.7 - 6.8 9.2 25.4 Forecast weighted average number of shares (millions) October 2003 forecast 348.4 350.5 April 2003 forecast 348.2 350.8 During the period agreement has been reached with the vendors of Anite Finance (formerly Parsec) to settle their outstanding earnout (maximum total of £6.8m payable in Anite's financial year 2005/6) for £873,000, to be paid in guaranteed loan notes, repayable within one year. This, together with other minor adjustments, has reduced the total cash earnout liability from £25.4m to £19.5m, whilst bringing forward all remaining 2005/6 financial year liabilities, thus ensuring that all outstanding earnouts will have been paid out by the year ended 30 April 2005, subject to performance. The only remaining uncompleted earnout is ITS where the maximum outstanding potential earnout is £2.0m and is subject to achievement of earnout targets. Resulting from these, and other renegotiations of earnouts, over the three year period ended 30 April 2005, the actual number of shares in issue is expected to have increased by around 14% to approximately 350.5m when compared to the number in issue at the year ended 30 April 2002, 306.8m. Christopher Humphrey Group Finance Director Consolidated profit and loss account for the six months ended 31 October 2003 Ongoing Closed businesses businesses, Unaudited Unaudited before goodwill goodwill six months six months Audited Notes amortisation amortisation to 31 to 31 12 months and exceptional and exceptional October October to 30 April items items 2003 2002 2003 £'000 £'000 £'000 £'000 £'000 Turnover -------------------------------------------------------------------------------------------------------- Ongoing businesses 95,461 - 95,461 106,144 209,282 Closed businesses - continuing operations - 162 162 5,397 7,054 Turnover 2 95,461 162 95,623 111,541 216,336 Cost of sales Cost of sales excluding exceptional items (55,309) (13) (55,322) (63,949) (123,493) Redundancy and restructuring costs 3 - (1,124) (1,124) - (779) Contract and purchasing provisions 3 - - - - (3,600) Cost of sales (55,309) (1,137) (56,446) (63,949) (127,872) -------------------------------------------------------------------------------------------------------- Gross profit 40,152 (975) 39,177 47,592 88,464 Net operating costs Goodwill amortisation - (8,437) (8,437) (13,541) (24,295) Goodwill impairment - (8,750) (8,750) (37,495) (74,678) Intangible asset impairment 3 - - - - (2,463) Redundancy and restructuring costs 3 - (3,306) (3,306) (900) (2,015) Recovery/(write off) of abortive acquisition costs 3 - 379 379 - (916) Other operating costs (32,666) 90 (32,576) (37,538) (76,212) Net operating costs (32,666) (20,024) (52,690) (89,474) (180,579) -------------------------------------------------------------------------------------------------------- Operating loss - Ongoing businesses 7,486 (21,238) (13,752) (40,017) (87,737) - Closed businesses - continuing operations - 239 239 (1,865) (4,378) Operating loss 7,486 (20,999) (13,513) (41,882) (92,115) Profit / (loss) on sale/ closure of businesses 3 - 77 77 (398) (17,042) -------------------------------------------------------------------------------------------------------- Loss on ordinary activities before finance charges 7,486 (20,922) (13,436) (42,280) (109,157) Amounts recovered / (written off) on investments and own shares - 134 134 - (964) Profit on sale of fixed asset investment - 57 57 - - Finance charges - net (954) (954) (1,125) (2,359) -------------------------------------------------------------------------------------------------------- Loss on ordinary activities before tax 6,532 (20,731) (14,199) (43,405) (112,480) Tax on loss on ordinary activities 4 (1,653) 556 (1,097) (1,176) (2,292) Release/(increase) of deferred tax 4 140 - 140 (747) (848) Release of prior years tax provisions 4 - - - - 2,342 Tax on loss on ordinary activities (1,513) 556 (957) (1,923) (798) -------------------------------------------------------------------------------------------------------- Loss on ordinary activities after tax 5,019 (20,175) (15,156) (45,328) (113,278) Equity minority interests - - (15) (16) -------------------------------------------------------------------------------------------------------- Loss for the financial period 5,019 (20,175) (15,156) (45,343) (113,294) Dividends paid and proposed - - - - - -------------------------------------------------------------------------------------------------------- Retained loss for the period 5,019 (20,175) (15,156) (45,343) (113,294) -------------------------------------------------------------------------------------------------------- Loss per share - Basic 12 (4.4p) (14.0p) (34.2p) - Diluted 12 (4.4p) (14.0p) (34.2p) Adjusted earnings per share based on ongoing operations excluding goodwill amortisation and - Basic 12 1.5p 2.7p 4.3p exceptional items - Diluted 12 1.4p 2.5p 4.1p -------------------------------------------------------------------------------------------------------- Consolidated statement of total recognised gains and losses for the six months ended 31 October 2003 Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Loss for the financial period (15,156) (45,343) (113,294) Net (loss) / gain on foreign currency translation (291) (489) 3,638 ------------------------------------- -------- -------- -------- Total recognised losses since last annual report and accounts (15,447) (45,832) (109,656) ------------------------------------- -------- -------- -------- Consolidated balance sheet as at 31 October 2003 Notes Unaudited Unaudited Audited 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Fixed assets Goodwill 82,356 157,941 106,507 Other Intangible assets 201 2,950 268 ----------------------------------------------------------------------------------- Intangible assets 82,557 160,891 106,775 Tangible assets 9,597 12,749 12,177 Investments 4 1,091 191 ----------------------------------------------------------------------------------- 92,158 174,731 119,143 Current assets Stocks 8,065 7,561 7,850 Debtors 8 49,696 62,389 69,229 Short term deposits 1,039 2,450 2,048 Cash at bank and in hand 11,662 18,809 11,061 ----------------------------------------------------------------------------------- 70,462 91,209 90,188 ----------------------------------------------------------------------------------- Current liabilities Creditors: Amounts falling due within one year 9 (95,432) (107,546) (110,767) ----------------------------------------------------------------------------------- Net current liabilities (24,970) (16,337) (20,579) ----------------------------------------------------------------------------------- Total assets less current liabilities 67,188 158,394 98,564 Creditors: amounts falling due after one year 10 (1,865) (4,983) (3,546) Provisions for liabilities and charges 11 (21,992) (35,843) (35,634) ----------------------------------------------------------------------------------- (23,857) (40,826) (39,180) ----------------------------------------------------------------------------------- Net assets 43,331 117,568 59,384 ----------------------------------------------------------------------------------- Capital and reserves Called-up share capital 35,040 33,850 34,098 Share premium account 13 22,482 50,308 22,473 Merger reserve 13 22,173 32,388 18,932 Shares to be issued 13 575 20,821 9,182 Profit and loss account 13 (36,939) (19,844) (25,301) ----------------------------------------------------------------------------------- Shareholders' funds 43,331 117,523 59,384 Equity minority interests - 45 - ----------------------------------------------------------------------------------- Capital employed 43,331 117,568 59,384 ----------------------------------------------------------------------------------- Shareholders' funds are analysed as: Equity interests 43,281 117,518 59,334 Non-equity interests 50 50 50 ----------------------------------------------------------------------------------- 43,331 117,568 59,384 ----------------------------------------------------------------------------------- Consolidated cash flow statement for the six months ended 31 October 2003 Note Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 -------------------------------------------------------------------------------------------- Net cash inflow from operating activities 5 11,346 15,074 27,575 -------------------------------------------------------------------------------------------- Returns on investments and servicing of finance Interest received 193 67 372 Interest paid (997) (1,006) (2,059) Interest element of finance lease rental payments (60) (20) (118) -------------------------------------------------------------------------------------------- Net cash outflow from returns on investments and servicing of finance (864) (959) (1,805) -------------------------------------------------------------------------------------------- Taxation UK corporation tax paid - (1,675) (972) Foreign taxation repaid/(paid) 409 (585) (2,169) -------------------------------------------------------------------------------------------- Net cash inflow /(outflow) 409 (2,260) (3,141) -------------------------------------------------------------------------------------------- Capital expenditure and financial investment Purchase of tangible fixed assets (1,190) (2,138) (4,839) Purchase of software licences - (289) (539) Proceeds from sale of own shares 314 - - Sale of tangible fixed assets 17 57 111 -------------------------------------------------------------------------------------------- Net cash outflow from capital expenditure and financial investment (859) (2,370) (5,267) -------------------------------------------------------------------------------------------- Acquisitions and disposals Purchase of subsidiary undertakings - (4,400) (3,001) Net bank balance acquired with subsidiary undertakings - 191 305 Sale of subsidiary undertakings - 266 (492) Net bank balance of businesses sold - - (28) Disposal of fixed asset investment 75 - - Proceeds from previously closed businesses 77 - - Recovery / (payment) in respect of aborted investment 379 (897) (916) Deferred consideration paid for current and previous years acquisitions (375) (4,276) (8,422) -------------------------------------------------------------------------------------------- Net cash inflow/(outflow) from acquisitions and disposals 156 (9,116) (12,554) -------------------------------------------------------------------------------------------- Cash inflow before management of liquid resources and financing 10,188 369 4,808 -------------------------------------------------------------------------------------------- Management of liquid resources Decrease in short term deposits 1,009 13,576 13,978 Financing Issue of ordinary share capital 10 19 17 (Decrease) /increase in bank loans (1,092) 1,241 (7,519) Capital element of finance lease rental payments (495) (529) (977) Redemption of vendor loan note instruments (7,525) (7,957) (13,821) -------------------------------------------------------------------------------------------- Net cash outflow from financing (9,102) (7,226) (22,300) -------------------------------------------------------------------------------------------- Increase/ (decrease) in cash in the period 2,095 6,719 (3,514) -------------------------------------------------------------------------------------------- 1. Introduction This interim report was approved by the board of directors on 11 December 2003 and follows the accounting policies adopted in the 2003 annual report. The financial information contained in this interim report does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and should be read in conjunction with the 2003 annual report. The comparative financial information is based on the interim results for the six months ended 31 October 2002. The figures for the year ended 30 April 2003 are an abridged statement from the group's accounts at that date, which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985. 2. Segmental information Ongoing businesses before goodwill and exceptional items for six months ended 31 October 2003 Public Sector Travel Telecoms International Total 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 ---------------------------------------------------------------------------------------------------------- Turnover 33,541 36,384 13,705 16,130 18,370 19,495 29,845 34,135 95,461 106,144 ---------------------------------------------------------------------------------------------------------- Operating (loss) / profit - ongoing businesses before goodwill and exceptional items and unallocated corporate costs (2,196) 1,367 2,992 3,276 4,479 3,944 3,082 5,020 8,357 13,607 Unallocated corporate costs (871) (1,688) Finance charges (net) (954) (1,125) ---------------------------------------------------------------------------------------------------------- Profit before taxation -ongoing businesses before goodwill and exceptional items 6,532 10,794 ---------------------------------------------------------------------------------------------------------- Group analysis including goodwill and exceptional costs Public Sector Travel Telecoms International Total 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover - Ongoing businesses 33,541 36,384 13,705 16,130 18,370 19,495 29,845 34,135 95,461 106,144 - Closed businesses - 55 - - 162 1,850 - 3,492 162 5,397 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Turnover- continuing operations 33,541 36,439 13,705 16,130 18,532 21,345 29,845 37,627 95,623 111,541 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Segment profit - Ongoing businesses (2,196) 1,367 2,992 3,276 4,479 3,944 3,082 5,020 8,357 13,607 - Unallocated corporate costs (871) (1,688) ------ ------ - Ongoing businesses 7,486 11,919 - Closed businesses - (287) - 239 127 - (1,705) 239 (1,865) Goodwill amortisation (2,260) (3,289) (997) (1,374) - (2,624) (5,180) (6,254) (8,437) (13,541) ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss) / profit before exceptional costs and unallocated corporate costs (4,456) (2,209) 1,995 1,902 4,718 1,447 (2,098) (2,939) ------ ------ Operating loss before exceptional costs (712) (3,487) Exceptional costs : - Goodwill impairment - - - (3,161) - (29,970) (8,750) (4,364) (8,750) (37,495) - Other exceptional costs (note 3) (2,814) - 726 - (119) - (373) - (2,580) - - Corporate costs (note 3) - - - - - - - - (1,471) (900) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Exceptional costs (2,814) - 726 (3,161) (119) (29,970) (9,123) (4,364) (12,801) (38,395) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss)/ profit before unallocated corporate costs (7,270) (2,209) 2,721 (1,259) 4,599 (28,523) (11,221) (7,303) ------ ------ ------ ------ ------ ------ ------ ------ Operating loss (13,513) (41,882) Share of associate loss - - Exceptional items (note 4) 77 (398) Amounts recovered on own shares 134 - Profit on sale of fixed asset investment 57 - Finance charges (net) (954) (1,125) ------ ------ Loss on ordinary activities before tax (14,199) (43,405) ------ ------ Segment net (liabilities) / assets (14,516) 15,051 17,000 12,447 27,486 27,201 24,861 27,178 54,831 81,877 ------ ------ ------ ------ ------ ------ ------ ------ Non operating (liabilities) / assets (11,500) 35,691 ------ ------ Net assets 43,331 117,568 ------ ------ Closed businesses comprise the turnover and operating results of continuing operations which have ceased during the year and which do not meet the definition of discontinued operations under FRS 3. Ongoing businesses comprise the turnover and operating results of continuing operations less the turnover and operating results of closed businesses. 2. Segmental information (continued) Ongoing businesses before goodwill and exceptional items for the year ended 30 April 2003 Public Sector Travel Telecoms International Total 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 --------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Turnover 74,744 54,907 32,014 29,807 37,058 35,453 65,466 70,042 209,282 190,209 --------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss) / profit - ongoing businesses before goodwill and exceptional items and unallocated corporate costs (12) 5,207 6,832 5,812 7,495 11,616 9,562 12,254 23,877 34,889 Unallocated corporate costs (2,868) (3,809) Finance charges (net) (2,359) (1,111) --------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Profit before taxation -ongoing businesses before goodwill and exceptional items (12) 5,207 6,832 5,812 7,495 11,616 9,562 12,254 18,650 29,969 --------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Group analysis including goodwill and exceptional costs Public Sector Travel Telecoms International Total 2003 2002 2003 2002 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Turnover - Ongoing businesses 74,744 54,907 32,014 29,807 37,058 35,453 65,466 70,042 209,282 190,209 - Closed businesses 171 - - - 2,569 1,563 4,314 8,010 7,054 9,573 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Turnover- continuing operations 74,915 54,907 32,014 29,807 39,627 37,016 69,780 78,052 216,336 199,782 - Discontinued - - - - - 268 - 2,460 - 2,728 operations ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ 74,915 54,907 32,014 29,807 39,627 37,284 69,780 80,512 216,336 202,510 ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Segment profit - Ongoing businesses (12) 5,207 6,832 5,812 7,495 11,616 9,562 12,254 23,877 34,889 - Unallocated corporate costs (2,868) (3,809) ------ ------ - Ongoing businesses 21,009 31,080 - Closed businesses (787) - - - (877) (798) (2,714) (819) (4,378) (1,617) - Discontinued - - - - - (1,184) - (59) - (1,243) operations Goodwill amortisation (6,887) (5,404) (2,455) (2,203) (2,624) (5,238) (12,329) (11,420) (24,295) (24,265) ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss) /profit before exceptional costs and unallocated corporate costs (7,686) (197) 4,377 3,609 3,994 4,396 (5,481) (44) Operating (loss) / profit before exceptional costs (7,664) 3,955 - Goodwill impairment (12,953) - (9,060) - (29,723) - (22,942) - (74,678) - - Other exceptional costs (note 3) (5,412) - (763) - (1,100) - (728) - (8,003) - Corporate costs (note 3) - - - - - - - - (1,770) - ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Exceptional costs (18,365) - (9,823) - (30,823) - (23,670) - (84,451) - ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss)/ profit before unallocated corporate costs (26,051) (197) (5,446) 3,609 (26,829) 4,396 (29,151) (44) ------ ------ ------ ------ ------ ------ ------ ------ Operating (loss)/ profit (92,115) 3,955 Share of associate loss - (31) Exceptional items (note 3) (17,042) 2,951 Amounts written off investments and own shares (964) - Finance charges (net) (2,359) (1,111) ------ ------ (Loss) / profit on ordinary activities before tax (112,480) 5,764 ------ ------ Segment net (liabilities) / assets (6,345) 15,173 13,883 9,631 21,790 23,599 25,318 26,175 54,646 74,578 ------ ------ ------ ------ ------ ------ ------ ------ Non operating assets 4,738 106,440 ------ ------ Net assets 59,384 181,018 ------ ------ Closed businesses comprise the turnover and operating results of continuing operations which have ceased during the year and which do not meet the definition of discontinued operations under FRS 3. Ongoing businesses comprise the turnover and operating results of continuing operations less the turnover and operating results of closed businesses. Additional analysis of turnover Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 IT Consultancy 10,421 15,448 24,256 Own product software licences 12,883 16,110 37,307 Bespoke services, systems integration & implementation of software products 35,322 43,331 85,395 Managed services (includes software maintenance and support) 24,060 21,242 46,203 Originating from third party 12,937 15,410 23,175 ----------------------------------------------------------------------------------- 95,623 111,541 216,336 ----------------------------------------------------------------------------------- This information is given to show the main areas from which the group's turnover is derived. Geographic analysis of turnover Origin Destination Unaudited Unaudited Audited Unaudited Unaudited Audited six months to six months to 12 months to six months to six months to 12 months 31 October 31 October 30 April 31 October 31 October to 30 April 2003 2002 2003 2003 2002 2003 £'000 £'000 £'000 £'000 £'000 £'000 ------------------------------------------------------------------------------------------------------------- Europe - United Kingdom 62,972 75,279 136,017 46,340 54,105 112,952 Europe - Other 30,763 36,049 67,972 37,089 44,546 83,610 North America 112 144 8,577 4,907 4,521 8,719 Rest of the World 1,776 69 3,770 7,287 8,369 11,055 ------------------------------------------------------------------------------------------------------------- 95,623 111,541 216,336 95,623 111,541 216,336 ------------------------------------------------------------------------------------------------------------- Geographic analysis of (loss) / profit on ordinary activities before taxation and net assets Unaudited Unaudited Audited six months to six months to 12 months 31 October 31 October to 30 April 2003 2002 2003 £'000 £'000 £'000 Loss Net Loss Net Loss Net before assets before assets before assets taxation taxation taxation £'000 £'000 £'000 £'000 £'000 £'000 ---------------------------------------------------------------------------------------- Europe - United Kingdom 268 21,563 7,363 93,267 (16,981) 37,087 Europe - Other 2,668 21,609 1,904 24,555 4,783 21,462 North America 13 82 42 (178) 439 654 Rest of the World 39 77 (14) (76) 61 181 ---------------------------------------------------------------------------------------- Profit/(loss) on ordinary activities before goodwill 2,988 43,331 9,295 117,568 (11,698) 59,384 Less: goodwill (17,187) - (52,700) - (100,782) - ---------------------------------------------------------------------------------------- Total (14,199) 43,331 (43,405) 117,568 (112,480) 59,384 ---------------------------------------------------------------------------------------- Goodwill is attributed to Europe - United Kingdom £8,730,000 (2002: £41,474,000) and Europe- Other £8,457,000 (2002: £11,226,000). 3. Exceptional items Exceptional items reported before operating loss: --------------------------------------------------------------------------------------- Unaudited Unaudited Audited six months to six months to 12 months 31 October 31 October to 30 April 2003 2002 2003 £'000 £'000 £'000 --------------------------------------------------------------------------------------- Public Sector - Loss making contracts provision - - 2,500 - Redundancy costs (charged to cost of sales £525,000) 1,253 - 939 - Property rationalisation and depreciation alignment costs (charged to cost of sales £123,000) 1,561 - - - Software licence impairment - - 1,973 Travel - Redundancy costs (charged to cost of sales £136,000) 136 - 273 - Software licence impairment - - 490 - Property settlement (862) - - Telecoms - Redundancy costs (charged to cost of sales £340,000) 340 - - - Purchasing commitment provision - - 1,100 - Acquisition provision no longer required (221) - - International - Redundancy / restructuring costs 373 - 728 Corporate costs - Severance costs of former CEO 743 - - - Legal costs and NIC re former CEO 166 - - - Recruitment costs of new CEO 110 - - - Impairment of freehold property 300 - - - Property rationalisation and move costs 256 - Redundancy costs 275 - - - Severance costs of former FD - 750 750 - Recruitment cost of replacement FD - 150 104 -(Recovery) / write off of acquisition costs (Dati) (379) - 916 -------- -------- -------- 4,051 900 9,773 -------- -------- -------- Charged to cost of sales 1,124 - 4,379 Charged to net operating costs 2,927 900 5,394 -------- -------- -------- 4,051 900 9,773 -------- -------- -------- Please refer to note 2 for allocation of exceptional goodwill impairment of £8,750,000(2002: £37,495,000). Exceptional items reported after operating loss: Unaudited Unaudited Audited six months to six months to 12 months 31 October 31 October to 30 April 2003 2002 2003 £'000 £'000 £'000 Closed businesses: Loss on disposal of Anite Consulting GmbH (including £12,690,000 goodwill written back from reserves) - - 15,934 Net loss on disposal/ closure of businesses (including goodwill written off 2002: £1,664,000, April 2003: £1,809,000) - 1,664 3,082 Discontinued businesses from previous years Write back of pension provision no longer required - (1,000) (1,460) Consideration received in respect of previously disposed businesses (77) (266) (514) -------- -------- -------- (Profit)/ loss on sale/closure of businesses (77) 398 17,042 -------- -------- -------- There is no tax effect on the above items. 4. Tax on loss on ordinary activities Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Current tax UK Corporation tax 770 494 1,282 Foreign tax 327 682 1,010 --------------------------------------------------------------------------------- 1,097 1,176 2,292 --------------------------------------------------------------------------------- Adjustments in respect of prior years - UK corporation tax - - (1,832) - Foreign tax - - (510) --------------------------------------------------------------------------------- - - (2,342) --------------------------------------------------------------------------------- Total current tax charge 1,097 1,176 (50) --------------------------------------------------------------------------------- Deferred tax UK (344) 1,985 1,448 Foreign 204 (1,238) (600) --------------------------------------------------------------------------------- Total deferred tax (140) 747 848 --------------------------------------------------------------------------------- Total tax on loss on ordinary activities 957 1,923 798 --------------------------------------------------------------------------------- 5. Reconciliation of operating loss to net cash inflow from operating activities for the six months ended 31 October 2003 Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Operating loss (13,513) (41,882) (92,115) Depreciation 3,576 2,386 4,976 Amortisation of intangible software licences 59 487 947 Impairment of software licences - - 2,239 Goodwill amortisation 8,437 13,541 24,295 Goodwill impairment 8,750 37,495 74,678 ------------------------------------------------------------------------------------ (Increase)/ decrease in stock (215) 2,258 8 Decrease in debtors 19,695 7,713 2,223 (Decrease)/increase in creditors (13,197) (5,844) 3,811 (Decrease) / increase in provisions (2,377) (1,080) 5,390 Loss on disposal/write off of fixed assets 510 - 207 (Recovery)/payment in respect of aborted investment (379) - 916 ------------------------------------------------------------------------------------ Net cash inflow from operating activities 11,346 15,074 27,575 ------------------------------------------------------------------------------------ 6. Reconciliation of net cash flow to movement in net debt Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 ------------------------------------------------------------------------------------ Increase/ (decrease) in cash in period 2,095 6,719 (3,514) Cash outflow/(inflow) from decrease/ (increase) in bank loan and financing 1,587 (712) 8,496 Cash inflow from decrease in liquid resources (1,009) (13,576) (13,978) ------------------------------------------------------------------------------------ Change in net debt resulting from cash flows 2,673 (7,569) (8,996) Increase in finance leases (25) (818) (1,512) Exchange movement (263) - 1,420 Net (debt) / funds at 1 May 2003 (excluding loan notes) (5,226) 3,862 3,862 ------------------------------------------------------------------------------------ Net debt at 31 October excluding loan notes (2,841) (4,525) (5,226) Vendor loan notes (redemption of £7,525,000 in period) (7,959) (12,619) (11,107) ------------------------------------------------------------------------------------ Net debt at 31 October 2003 (10,800) (17,144) (16,333) ------------------------------------------------------------------------------------ 7. Analysis and reconciliation of net debt Audited Non Cash Cash Flow Exchange Unaudited 1 May 2003 items movement 31 Oct 2003 £'000 £'000 £'000 £'000 £'000 Cash at bank and in hand 11,061 - 864 (263) 11,662 Bank overdrafts (1,231) - 1,231 - - -------- 2,095 -------- Bank loans due within one year (13,850) - 1,000 - (12,850) Bank loans due after one year (1,341) - 92 - (1,249) Finance leases (1,913) (25) 495 - (1,443) -------- 1,587 -------- Short - term deposits 2,048 - (1,009) - 1,039 ------------------------------------------------------------------------------------ Net debt excluding loan notes (5,226) (25) 2,673 (263) (2,841) Vendor loan notes due within one year (11,107) (4,377) 7,525 - (7,959) ------------------------------------------------------------------------------------ Net debt (16,333) (4,402) 10,198 (263) (10,800) ------------------------------------------------------------------------------------ 8. Debtors Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Trade debtors 36,335 37,567 50,897 Deferred tax asset 1,890 755 1,750 Other debtors, prepayments and accrued income 11,471 24,067 16,582 -------- -------- -------- 49,696 62,389 69,229 -------- -------- -------- 9. Creditors due within one year Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Bank loans and overdrafts 12,850 21,018 15,081 Finance leases and hire purchase obligations 899 757 957 Vendor loan notes 7,959 12,619 11,107 Trade creditors 10,903 15,314 13,098 Corporation and overseas tax 10,698 9,062 8,839 Other taxes and social security 9,742 13,773 10,869 Other creditors 750 781 1,798 Payments received on account 11,102 6,987 6,331 Accruals and deferred income 30,529 27,235 42,687 --------- -------- -------- 95,432 107,546 110,767 --------- -------- -------- 10. Creditors due after one year Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 Bank loans 1,249 3,099 1,341 Obligations under finance leases and hire purchase contracts 544 910 956 Overseas tax - 755 570 Other creditors 72 219 679 --------- -------- -------- 1,865 4,983 3,546 --------- -------- -------- 11. Provisions for liabilities and charges Deferred Deferred Warranties Surplus Other Group Consideration Tax £'000 Property Provisions Total £'000 £'000 £'000 £'000 £'000 At 1 May 2003 20,684 120 2,212 6,402 6,216 35,634 Reclassification to creditors - (96) - - - (96) Transfer to vendor loan notes payable (4,377) - - - - (4,377) Reclass to stock and work in progress - - - - (1,200) (1,200) Decrease due to re-negotiation of earnouts (5,924) - - - - (5,924) Provision - written back to: - Goodwill (459) - - - - (459) - Profit and loss - - (105) - (175) (280) - Profit and loss- exceptional - - - (127) (221) (348) Established during the period - - - - Profit and loss - - - 20 - 20 - Profit and loss-exceptional - - - 270 462 732 Utilised during the period (494) - (7) (471) (804) (1,776) Foreign exchange adjustment - 1 (1) - (18) (18) Unwinding of discounting of surplus property provision - - - 84 - 84 ------------------------------------------------------------------------------------------ At 31 October 2003 9,430 25 2,099 6,178 4,260 21,992 ------------------------------------------------------------------------------------------ 12. Loss per ordinary share The calculations of (loss) / earnings per share are based on the following (loss) / profit and number of shares: Unaudited Unaudited Audited six months to six months to 12 months to 31 October 31 October 30 April 2003 2002 2003 £'000 £'000 £'000 ------------------------------------------------------------------------------------ Earnings - Loss for the financial period (15,156) (45,343) (113,294) ------------------------------------------------------------------------------------ Reconciliation to adjust earnings: - Goodwill amortisation 8,437 13,541 24,295 Exceptional items - Goodwill impairment 8,750 37,495 74,678 - Other (note 3) 4,051 900 9,773 - Profit on sale of fixed asset investment (57) - - - Amounts (recovered)/ written off on investments and own shares (134) - 964 - (Profit)/ loss on sale/ closure of businesses (77) 398 17,042 - Release of prior year tax provisions and tax credit on exceptional operating items (556) (216) (3,657) (Profit) / loss for closed businesses (239) 1,865 4,378 ------------------------------------------------------------------------------------ Adjusted earnings - Profit for the financial year on ongoing businesses before goodwill amortisation, impairment,closed businesses and exceptional items 5,019 8,640 14,179 ------------------------------------------------------------------------------------ Number of shares ('000) Weighted average number of shares in issue - used to calculate basic earnings per share 345,771 324,570 331,614 ------------------------------------------------------------------------------------ Effect of dilutive ordinary shares - SAYE and share option schemes 102 3,342 2,890 - Contingent consideration 595 12,559 8,480 ------------------------------------------------------------------------------------ Number of shares used to calculate diluted earnings per share 346,468 340,471 342,984 ------------------------------------------------------------------------------------ Earnings per share on ongoing businesses excluding goodwill amortisation, impairment, closed businesses and exceptional items have also been included as the directors consider that this figure is helpful for a better understanding of the underlying business. In calculating adjusted earnings per share after goodwill amortisation, impairment, closed businesses and exceptional items, the dilutive potential ordinary shares of 5,048,000 (2002:2,660,000; April 2003: 3,128,000) were excluded from the calculation of total diluted number of shares in the period ended 31 October 2003, as their inclusion would have been anti-dilutive. 13. Reserves at 31 October 2003 Shares to be Share Premium Merger Profit and loss issued account Reserve account £'000 £'000 £'000 £'000 At 1 May 2003 9,182 22,473 18,932 (25,301) Retained loss for the period - - - (15,156) Premium on shares issued - 9 7,050 - Transfer from merger reserve to cover goodwill amortisation - - (3,809) 3,809 Shares issued against earnouts in the period (7,992) - - - Reduction in consideration and acquisition goodwill (615) - - - Loss of foreign currency translation - - - (291) ------------------------------------------------------------------------------------ At 31 October 2003 575 22,482 22,173 (36,939) ------------------------------------------------------------------------------------ This information is provided by RNS The company news service from the London Stock Exchange

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