Interim Results

Inspace Plc
26 September 2006


Press Release                                                  26 September 2006


                                  Inspace plc

                          ('Inspace' or 'the Company')


             Interim Results for the six months ended 30 June 2006


Inspace plc (AIM:INSP), one of the UK's leading specialist service providers to
the social housing market, announces its Interim Results for the six months
ended 30 June 2006.


Highlights

•   Turnover in line at £62.6 million*
•   Operating profit in line at £3.6 million*
•   Adjusted diluted earnings per share at 3.74 pence**
•   Interim dividend of 1.07 pence (2005 pro forma: 0.966 pence)***
•   Order book and frameworks of £1.35 billion (2005: £0.45 billion)
•   80% of social housing turnover for 2007 secured*
•   64% of social housing turnover for 2008 secured*
•   Cash of £6.7 million (2005: £3.6 million)
•   Operating cash conversion of 80% (2005: 61%)****
•   Shareholders' funds of £17.8 million (2005: £13.6 million)


*    Based on market forecasts
**   Year-on-year movement distorted by shares issued on flotation
***  Time apportioned dividend to post flotation shareholders
**** Proportion of operating profit converted into cash from operating 
     activities


Commenting on the Results, Colin Enticknap, Executive Chairman of Inspace plc,
said:  'We are pleased to report continued progress on a number of fronts.
First half results are in line with market forecasts; the recently secured
social housing maintenance contract for the borough of Hinckley & Bosworth is
expected to contribute sales of some £15 million over 7 years; and with the
successful Widacre acquisition, our size has almost doubled and our workload
visibility trebled.'

'We now have a broader portfolio of businesses, better cash generation and a
stronger board.  Perhaps most importantly, we are now firmly positioned as one
of the UK's largest specialist service providers to the robust social housing
market, with a unique ability to provide a comprehensive, integrated solution
covering maintenance, 'Decent Homes' stock reinvestment, regeneration and new
build needs.  We look forward to the future with renewed enthusiasm.'

                                    - Ends -


For further information:
 Inspace plc
 Colin Enticknap, Executive Chairman                   Tel: [phone]
 [e-mail]
 Andrew Telfer, Chief Financial Officer                
 [e-mail]                                   www.inspace.co.uk

 Seymour Pierce
 Mark Percy, Corporate Finance                         Tel: [phone]
 [e-mail]                               www.seymourpierce.com

Media enquiries:
 Abchurch
 Henry Harrison-Topham                                 Tel: [phone]
 [e-mail]                              www.abchurch-group.com



Executive Chairman's statement


Overview

The last six months has been an intensely busy, sometimes challenging, but
ultimately successful period for the group.

Financially, we have delivered first half results in line with market
expectations.  Operationally, we have moved forward the transformation programme
affecting our non-housing interests and strengthened relationships with key
customers across all parts of our business.  Despite a series of tendering
frustrations, we have not allowed pricing levels to be compromised by the demand
for short term news flow, and have now been rewarded by a significant increase
in the number of tender opportunities flowing through the sales pipeline.
Strategically, we successfully completed the acquisition of Widacre Limited on
31 August 2006, a business that will significantly strengthen our social housing
capability, the visibility of our forward order book, and ultimately the quality
of our future earnings.


The acquisition

Shareholders will recognise that the board is pursuing a growth strategy, and
that we expect social housing to be the main driver of that growth.

Until now, our social housing activity has centred around local authority
maintenance contracts, particularly those that have offered spin-off 'Decent
Homes' stock reinvestment work.  Future growth targets demand that we accelerate
the expansion of this maintenance customer base, and that we now also expand
into stand-alone 'Decent Homes' contracts - those tendered in their own right.

In maintenance terms, our challenge will be to find an increasing population of
new customers as the market matures and competition increases.  We see
Registered Social Landlords - commonly referred to as RSLs - as important
targets in this respect.  They are already becoming much more active in the
maintenance market, induced by new measures recently introduced by Government
under its audit and inspection regime which mean that RSLs who fail to properly
maintain their stock risk losing grant funding.

We face a different challenge in expanding into stand-alone 'Decent Homes'
contracts.  Experience has taught us that our core skills, managing a directly
employed 'blue collar' workforce, are insufficient in this market.  They need
supplementing with contracting skills, the ability to procure, manage and
control a subcontract workforce.  It is no coincidence that many of these
contracts have been won by contractors rather than maintenance specialists.

The acquisition significantly addresses both these issues.  Firstly, Widacre's
social housing business has strong relationships with many of the UK's largest
and highest spending RSLs; its RSL customer base accounts for more than half of
the UK's RSL managed housing supply. Secondly, it naturally has very strong
contracting and supply chain management skills that are directly transferable to
the 'Decent Homes' market.

Furthermore, as we first mentioned in our AGM statement back in May, Government
policy is changing in relation to 'Decent Homes' expenditure.  As has now been
made clear from the recent discussion paper entitled From Decent Homes to
Sustainable Communities, future 'Decent Homes' funding will be allocated to
schemes capable of delivering mixed sustainable communities through major
transformation of estates.  Transformation, in this context, will be
characterised by housing for rent alongside housing for sale and the building of
new homes alongside the refurbishment of existing.  Widacre's social and
affordable housing businesses are ideally positioned to support us in this
unfolding market, and Inspace will now be uniquely positioned to provide a
comprehensive, integrated service to all types of social housing landlord.

An additional strategic benefit is, of course, the strong order book and
significant earnings visibility gained from Widacre's secured social housing
orders and frameworks, which total over £900 million.  This reflects specialist
new build social housing work to be undertaken under long term open-book
partnering frameworks, similar in concept to 'Decent Homes' contracts.

Widacre brings with it an excellent, well motivated workforce, a culture closely
aligned and easily integrated with ours through its shared Willmott Dixon
heritage, and strong leadership from Chris Durkin, who now joins our main board
as chief operating officer of our wider social and affordable housing interests.

The board believes that the acquisition undoubtedly broadens and strengthens our
underlying business, and will enable us to build upon the results already
achieved during the first half year.


Financial highlights

Turnover was in line with expectation at £62.6 million (2005:£70.8m), reflecting
the reduction in Inspace Maintain during its carefully planned transformation
programme, the winding down of Inspace Complete's Job Centre Plus refurbishment
contract, and our increased sensitivity to seasonality in public sector spending
patterns as we continue to grow Inspace Partnerships.

An improved operating margin of 5.7% (2005:5.0%) meant that operating profit
remained at £3.6 million despite the reduced turnover.  With no bank borrowings,
and interest on deposit of £0.1 million, pre-tax profit grew by 6.8% to reach
£3.7 million (2005:£3.4m).  Tax relief on options exercised led to a greater
increase in post-tax profit, which improved by 20.0% to £2.8 million.  Diluted
earnings per share were 3.74 pence on an adjusted basis (2005:3.94p), reflecting
the shares issued on flotation.

Our balance sheet continued to strengthen, with net current assets of £16.7
million (2005:£12.7m) and shareholders' funds of £17.8 million (2005:£13.6m).
Cash conversion also improved to 80% (2005:61%), with a half year cash balance
of £6.7 million (2005:£3.6m).

Importantly, the most significant improvement relates to the quality and scale
of our forward order book.  With the Widacre acquisition now complete and the
integration process under way, secured orders and frameworks have increased
three-fold from £450 million to £1.35 billion.


Dividend

An interim dividend of 1.07p per share will be paid on 2 November 2006 to those
shareholders on the register on 6 October 2006. The pro forma 2005 interim
dividend, paid to post flotation shareholders, stood at 0.966p on a time
apportioned basis.


Operational Performance

With operating activity about to increase significantly, our portfolio of
business streams has been aligned into three divisions - Social Housing,
Affordable Housing and Corporate Assets.

Social Housing accounted for 48% (2005:42%) of group turnover in the first half
year, continuing the growth pattern established over recent years.  This was
despite a significant reduction against forecast spend by one customer, a factor
expected to also impact upon the second half year.  The recently secured repair
and maintenance contract for the borough of Hinckley and Bosworth, expected to
contribute sales of more than £15 million over seven years, was a welcome
success for the sales team, coming at the end of an unusually quiet tendering
period.  Post incentive operating margins improved to 8.0% (2005:6.4%),
influenced by the timing of performance based incentive payments and the
expected migration of 'schedule of rates' contracts towards full partnering
arrangements.  With Widacre's Social Housing interests now expanding this
division, its proportional weighting will undoubtedly continue to grow, probably
approaching 60% in full year terms.

Affordable Housing, which comes entirely with the Widacre acquisition, will only
feature in full year figures.

Corporate Assets, which brings together our non-housing maintenance and
interiors activities, accounted for the remaining 52% (2005:58%) of group
turnover.  This part of our business has been going through the early stages of
a comprehensive change programme, aimed at realigning its customer base around
those offering greater visibility and resilience, and upon improving efficiency
levels.  Whilst this undoubtedly affected turnover in the short term, operating
margins held up reasonably well at 3.6% (2005:4.1%).


Future Priorities

With the acquisition just behind us, our attention has already turned towards
integration and the embedding of our new structure, a process expected to
culminate with the new businesses adopting the Inspace brand early in 2007.  In
the meantime, we cannot afford to be distracted from the need to secure a
healthy stream of new orders - the lifeblood of a growth business such as ours.

In Social Housing terms, secured orders and frameworks accounted for 94% of
2006, 80% of 2007 and 64% of 2008 consensus forecasts.  With organic growth from
existing accounts expected to fuel the outstanding balance for this year, our
main priority will be to secure the shortfall for next year and build a more
robust platform for future years.  We will look first to our excellent pipeline
of core repair and maintenance contracts, where tender throughput is once again
at a very healthy level.  Alongside this, the inherited pipeline of '
regeneration and new build' partnering frameworks is equally strong and tender
activity equally intense.  Having been appointed on fourteen of the sixteen
frameworks previously tendered, our optimism for future success in this area is
high.

With Affordable Housing, the longer 'incubation period' for new projects demands
that we plan even further ahead.  Activity levels for 2006 have been secure for
some time, and 2007 activity will predominantly revolve around the Eastside
joint venture developments in East London where the relationship with Circle
Anglia, one of the UK's largest RSLs, is proving particularly successful.  Focus
has therefore moved to 2008, with the priority being to bring the London Wide
Initiative developments, which offer enormous potential, to early fruition, and
to nurture the next generation of joint venture relationships with new RSL
partners.

By contrast, Corporate Assets inherently offers less workload visibility.
Maintenance contracts are usually shorter in duration than in social housing and
there is a greater dependence upon discretionary 'project' expenditure to
supplement the core maintenance budgets.  Interiors work demands a constant
throughput of intense, short term projects, although these do invariably
generate higher margins and surplus working capital.  Our challenge here will be
to secure the remaining 19% of workload required for 2006, and to continue to
improve visibility for future years through an increased proportion of more
substantial, longer term contracts.  Encouraging progress has already been made
in shifting the sales pipeline towards the substantial £7 billion per annum
public non-housing maintenance market; the next and most important stage will be
to convert that pipeline into live contracts.

With social housing revenues now increasing towards our 70% target, our
dependence upon Corporate Assets is expected to be sustained at around 30% as we
move into 2007.


Summary

Our people have continued to invest enormous energy and commitment into this
business over the last six months, often more so than could reasonably be
expected.  I thank them all for their considerable efforts, and for their
important achievements.

It may not be immediately apparent from the headline results, but this period
will mark an important stage in the group's unfolding success story.  With the
acquisition, our size has almost doubled and workload visibility has trebled.
We have a broader portfolio of businesses, better cash generation and a stronger
board.  Perhaps most importantly, we are now firmly positioned as one of the
UK's largest specialist service providers to the robust social housing market,
with a unique ability to provide a comprehensive, integrated solution covering
maintenance, 'Decent Homes' stock reinvestment, regeneration and new build
needs.


Colin Enticknap
Executive Chairman
26 September 2006


Group Profit and Loss Account

                                                          Unaudited         Unaudited           Audited
                                                          half year         half year        year ended
                                                        30 Jun 2006       30 Jun 2005       31 Dec 2005
                                            Notes             £'000             £'000             £'000

Turnover                                        2            62,642            70,815           147,527
Cost of sales                                              (45,430)          (54,341)         (113,802)

Gross profit                                                 17,212            16,474            33,725
Administrative expenses
  Excluding exceptional items                              (13,625)          (12,903)          (25,865)

  Exceptional items                                               -                 -             (418)
                                                           (13,625)          (12,903)          (26,283)

Operating profit                                2
  Excluding exceptional items                                 3,587             3,571             7,860
  Exceptional items                                               -                 -             (418)

                                                              3,587             3,571             7,442
Interest receivable                                              91                92               223
Interest payable and similar charges                              -             (218)             (218)

Profit on ordinary activities before                          3,678             3,445             7,447
taxation

Tax on profit on ordinary activities            3             (842)           (1,082)           (2,310)

Profit for the financial period                               2,836             2,363             5,137

Unadjusted earnings per ordinary share:
(pence)
Basic                                           5              4.19              4.04              8.17
Diluted                                         5              4.18              3.94              8.03

Adjusted earnings per ordinary share:
(pence)
Basic                                           5              3.75              4.04              8.64
Diluted                                         5              3.74              3.94              8.49


All activities are continuing



Group Balance Sheet

                                                          Unaudited         Unaudited           Audited
                                                          half year         half year        year ended
                                                        30 Jun 2006       30 Jun 2005       31 Dec 2005
                                                                          (Re-stated)
                                            Notes             £'000             £'000             £'000

Fixed assets
Tangible assets                                               1,150               899             1,058

Current assets
Stocks                                          6               464               277               335
Debtors                                         7            32,040            33,230            30,350
Cash at bank and in hand                                      6,728             3,648             6,084

                                                             39,232            37,155            36,769

Creditors: amounts falling due within
one year                                        8          (22,553)          (24,469)          (21,873)

Net current assets                                           16,679            12,686            14,896

                                                             17,829            13,585            15,954

Capital and reserves
Called up share capital                                       1,356             1,343             1,343
Share premium                                                10,387             9,864            10,107
Capital redemption reserve                                        3                 3                 3
Profit and loss account                                       6,083             2,375             4,501

                                                9            17,829            13,585            15,954



Group Cash Flow Statement
                                                          Unaudited         Unaudited           Audited
                                                          half year         half year        year ended
                                                        30 Jun 2006       30 Jun 2005       31 Dec 2005
                                            Notes             £'000             £'000             £'000

Cash flow from operating activities            10             2,870             2,168             6,707

Returns on investments and servicing of
finance                                                          90             (126)                 5

Taxation paid                                               (1,059)             (484)           (1,706)

Capital expenditure and financial
investment                                                    (287)             (498)             (861)

Equity dividends paid                           4           (1,254)           (4,274)           (4,923)

Cash flow before use of liquid
resources and financing                                         360           (3,214)             (778)
Financing                                                       284             6,825             6,825

Increase in cash                                                644             3,611             6,047

Reconciliation of net cash flow to
movement in net funds

Increase in cash                                                644             3,611             6,047

Opening net funds                                             6,084                37                37

Closing net funds                                             6,728             3,648             6,084



Notes to the Interim Results


1. Basis of preparation

The interim financial information for the six months to 30 June 2006 has been
prepared on the basis of the accounting policies applied in the Group's
statutory accounts for the year to 31 December 2005 with the exception of the
application of FRS 20 (share based payments) in replacement of UITF 17.  The
adoption of FRS 20 has not required any adjustment in respect of prior periods.

As a result of the adoption of FRS 21 and UITF 40 in the statutory accounts for
the year to 31 December 2005 the balance sheet and the cash flow statement for
the half year ended 30 June 2005 have been re-stated.

The audit report on the 2005 annual report and accounts was unqualified and did
not contain statements under section 237(2) or (3) of the Companies Act 1985.
The accounts have been filed at Companies House.

The Directors expect current accounting policies to apply to the accounts for
the year to 31 December 2006.  The half year information has not been audited
and does not represent statutory accounts.


2. Segmental analysis
                                                           Unaudited         Unaudited           Audited
                                                           half year         half year        year ended
                                                         30 Jun 2006       30 Jun 2005       31 Dec 2005
                                                               £'000             £'000             £'000

Turnover
Social Housing                                                30,171            29,482            61,201
Affordable Housing                                                 -                 -                 -
Corporate Assets
  Maintenance                                                 25,462            31,105            60,821
  Interiors                                                    7,009            10,228            25,505

                                                              62,642            70,815           147,527

Operating profit
Social Housing                                                 2,416             1,873             4,529
Affordable Housing                                                 -                 -                 -
Corporate Assets
  Maintenance                                                    961             1,334             2,167
  Interiors                                                      210               364             1,164

                                                               3,587             3,571             7,860


3. Taxation

The taxation charge for the period has been applied at the current rate of
corporation tax and includes appropriate allowance for items not deductable for
corporation tax purposes and deferred taxation.  Taxation relief of £0.30
million has also been accrued for in respect of shares issued under employee
incentive schemes.


4. Dividends

A final dividend of 1.85p per ordinary share was paid in respect of 2005
earnings on 24 May 2006 totalling £1.25 million.  An interim dividend of 1.07p
per ordinary share is proposed for payment on 2 November 2006 totalling £0.73
million.


5. Earnings per share

Earnings per share are based upon the average number of ordinary shares in issue
during the period of 67,737,067 (June 2005: 58,532,666; December 2005:
62,872,928). The diluted earnings per share are based upon the weighted average
number of 67,848,547 (June 2005: 59,952,559; December 2005: 63,975,884) ordinary
shares having taken into account the dilutive effect of shares which have been
made available to employees under existing incentive schemes.

The unadjusted earnings per share for the period are based upon the profit after
tax of £2.84 million (June 2005: £2.36 million; December 2005: £5.14 million).
The adjusted earnings per share highlight the impact of the exceptional items
during 2005 of £0.42 million and the impact of tax relief in respect of shares
issued under share incentive schemes of £0.30 million (June 2005: nil; December
2005: £0.13 million).

                                                             Unaudited        Unaudited          Audited
                                                             half year        half year       year ended
                                                           30 Jun 2006      30 Jun 2005      31 Dec 2005
                                                                            (Re-stated)
                                                                 £'000            £'000            £'000

6. Stocks
Stock of raw materials                                             464              277              335

7. Debtors
Trade debtors                                                   11,095           16,849           13,445
Prepayments                                                      2,360            1,568              925
Deferred tax                                                         -               13                -
Amounts recoverable on contracts                                18,585           14,800           15,980

                                                                32,040           33,230           30,350

8. Creditors amounts falling due within one year
Trade creditors                                                 12,383           12,292           11,522
Payments on account                                              2,579            1,727            1,656
Corporation tax                                                    850            1,082            1,064
Other taxes and social security                                  3,389            4,127            1,908
Accruals                                                         3,341            5,241            5,712
Deferred tax                                                        11                -               11

                                                                22,553           24,469           21,873



9. Reconciliation of movements in equity                  Unaudited          Unaudited            Audited
shareholders' funds                                       half year          half year         year ended
                                                        30 Jun 2006        30 Jun 2005        31 Dec 2005
                                                                           (Re-stated)
                                                              £'000              £'000              £'000

Profit for the financial period                               2,836              2,363              5,137
Dividends                                                   (1,254)            (4,274)            (4,923)

                                                              1,582            (1,911)                214
Call on share capital                                             -                530                530
Purchase of own shares                                            -                (3)                (3)
Issue of shares under option                                    293                  -                244
Issue of shares                                                   -             10,054             10,054
Costs associated with issue of shares                             -              (613)              (613)

Net proceeds from issue of shares                               293              9,968             10,212

Movement in equity shareholders' funds                        1,875              8,057             10,426
Opening shareholders' funds                                  15,954              5,528              5,528

Closing shareholders' funds                                  17,829             13,585             15,954


During the period options in respect of 664,327 shares were exercised under
Director and employee incentive schemes.  An additional 779,502 share options in
place at 30 June 2006 are yet to be exercised.


10. Cash flows                                               Unaudited        Unaudited          Audited
                                                             half year        half year       year ended
                                                           30 Jun 2006      30 Jun 2005      31 Dec 2005
                                                                            (Re-stated)
                                                                 £'000            £'000            £'000

Reconciliation of operating profit to net cash inflow
from operating activities
Operating profit on ordinary activities                          3,587            3,571            7,442
Depreciation                                                       197              180              383
Increase in stock and amounts recoverable on                   (2,734)            (436)          (1,674)
contracts
Decrease/(increase) in debtors                                     917          (8,033)          (3,988)
Increase in payments on account                                    923              394              323
(Decrease)/increase in trade and other creditors                  (29)            6,492            3,977
Non-cash cost of share based payments                                9                -              244

Net cash inflow from operating activities                        2,870            2,168            6,707

Analysis of change in net funds in year
Opening cash at bank and in hand                                 6,084               37               37
Increase in cash in year                                           644            3,611            6,047

Closing net funds                                                6,728            3,648            6,084


11. Interim Report

Further copies of the interim report are available from the registered office of
Inspace plc or www.inspace.co.uk


                                    - Ends -



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