Interim Results

Anite Group PLC 11 December 2002 Wednesday, 11 December 2002 ANITE GROUP PLC ('ANITE') Interim results for the six months ended 31 October 2002 Anite Group plc, the worldwide IT solutions and services company, today announces its interim results for the six months ended 31 October 2002. The highlights are: Highlights: > Profit before tax* Â£8.9m (2001: Â£14.3m), after impact of increased R&D and restructuring costs > Adjusted basic earnings per share* 2.1p (2001: 3.9p), in part reflecting 14.7% increase in shares in issue > Impairment review resulted in Â£39.1m write off of goodwill, leading to a net retained loss of Â£45.3m and basic and diluted losses per share of 14.0p > Turnover of continuing businesses up 20% to Â£111.5m > Strong cash generation and interest cover of 8.9 times - the Group is operating comfortably within its banking facilities > Divisional performance before Group central costs (divisional performance is now stated before central costs of Â£1.8m) and interest (Â£1.1m) was as follows: Public Sector turnover Â£36.4m, operating profits Â£1.2m, margin 3.3% Travel turnover Â£16.2m, operating profits Â£3.3m, margin 20.3% Telecoms turnover Â£21.3m, operating profits Â£4.1m, margin 19.2% Consultancy turnover Â£37.6m, operating profits Â£3.2m, margin 8.5% > All acquisitions have been successfully integrated, with only one acquisition completed in the current financial year (CME in June); none are currently expected in second half > 78% of earnout obligations renegotiated; negotiations are close to completion for the balance > Strong Group order intake of Â£114m with Public Sector up 47%; order intake to revenue ratio of 1.2 in Public Sector, 0.8 in Travel, 0.9 in Telecoms and 1.0 in Consultancy, respectively *Continuing businesses before goodwill amortisation and exceptional items, but after finance charges Commenting on the results John Hawkins, Chief Executive, said: 'Overall, we are confident that, for the year as a whole, Anite will perform in line with expectations, continuing to benefit from its strong order book and its business and geographical diversification against a background of tough trading conditions. 'Our strategy to focus on building strong market positions in our chosen sectors means that the Group, following the actions taken to renegotiate the earnout obligations, reduce costs and drive synergy benefits from the integration of its recent acquisitions, will be well placed to recover strongly in 2003/4.' For further information please contact: Anite Group plc www.anite.com John Hawkins, Chief Executive On the day: 020 7950 2800 Neil Bass, Group Financial Controller Thereafter: 0118 945 0129 Weber Shandwick Square Mile Reg Hoare/Laurence Read 020 7950 2800 Interim results for the six months ended 31st October 2002 Chairman's Statement Introduction Anite is a worldwide IT solutions and services company. We focus on providing mission critical, repeatable applications to the public sector, travel, wireless telecoms and finance markets worldwide. The Group employs around 2,400 staff primarily based in the UK, France, Germany and the Netherlands, with representation in nine other countries around the world. For the six months ended 31 October 2002, I am pleased to report a solid underlying first half performance against a background of challenging market conditions and the impact of a number of one off issues and items during the period. The Group's focus for the period has been on managing its assets and good housekeeping, as evidenced by strong cash generation, driving the synergies of the businesses, successfully renegotiating the earnouts and reducing costs. Our strategy to grow Anite by organic investment and acquisitions has positioned the Group with a business mix and geographical diversification that should help to deliver above average margins and growth when market conditions improve whilst ensuring that it is capable of making good underlying progress even in difficult times. Against the background of continued weak equity markets, particularly for technology companies, we remain committed to our strategy which we believe will deliver value to shareholders. Results Headline profits before tax on continuing businesses, before goodwill amortisation and exceptional items but after finance charges, held up well at Â£8.9m (2001: Â£14.3m). These profits included the impact of a Â£2m increase in first half research and development expenditure and Â£1.5m trading losses at Anite Consulting Germany (formerly known as GMO - our SAP/ERP business), as well as higher interest charges as a result of the payment of earnouts. A reduced operating margin of 8.9% is based on operating profits (before goodwill) of Â£10.0m (2001: Â£14.8m) and also reflected the impact of the one off items referred to above. The reported post-tax loss after amortisation and exceptional items of Â£45.3m (2001: Â£1.4m loss) reflects the review of goodwill relating to past acquisitions that was undertaken in the first half and which has resulted in an impairment charge of Â£39.1m being included in these results. We also incurred the severance payment of Â£0.75m and recruitment fees of Â£0.15m in respect of the finance director. Adjusted basic earnings per share (before goodwill amortisation and exceptional items) were 2.1p (2001: 3.9p), in part reflecting an increase of 14.7% in the number of shares in issue. Turnover growth of 20% has been achieved in the first half, driven by strong order intake and by contributions from acquisitions made last year. Public Sector, Telecoms and Travel all grew their revenues, whilst Consultancy fell slightly. The Group's order intake totalled Â£114m in the first half, which should result in our projected annualised recurring revenues increasing from 29% to 31% of total revenues, with an order intake to revenue ratio of 1.2 in Public Sector, 0.8 in Travel, 0.9 in Telecoms and 1.0 in Consultancy, respectively. The highlight in the first half was the recently announced Â£11m State of Victoria contract won by Anite Public Sector which utilises the skills of five of the Group's companies. During the period, the Group completed just one small acquisition, that of CME, which provides software solutions for the police force, at a total cost including earnout of up to Â£0.9m. All the acquisitions made in the last two years have been successfully integrated, and no further acquisitions are currently expected to be made in the second half. The earnout obligations for Calculus, Carus, Didgicom, MSPS, Parsec (partially), and Rox, representing 78% of the Group's total potential earnout liabilities, have been successfully renegotiated during the period; negotiations to crystallise the remaining smaller earnouts are close to completion. Strong first half cash generation has enabled the Group to keep well within its banking facilities whilst paying out acquisition and earnout commitments of Â£17.5m, with half year debt increasing from Â£11.5m at 30 April 2002 to Â£17.1m at the half year, representing gearing of 14.5% (30 April 2001: 6.4%). A similar level of net debt is anticipated at the year-end after making further estimated earnout payments of Â£11m. Interest cover was a healthy 8.9 times. During the first half there has been a headcount reduction of 30, principally in Anite Consulting Germany (GMO) and the Travel division, giving annualised savings of approximately Â£1m. In the second half we have made a further headcount reduction of 70, principally within Public Sector, which is expected to give annualised savings of approximately Â£3m at a cost of Â£1.5m-Â£2.0m The Board The recruitment of a new finance director is progressing well with a shortlist drawn up and interviewed and we expect to be in a position to announce an appointment early in the New Year. In the period under review, the finance director's role has been ably handled by other members of our finance team, both at head office and in the divisions. On behalf of the board, shareholders and staff, I would like to thank Simon Hunt, who resigned in the period under review, for his significant contribution and dedication to the Group's transformation and success since his appointment in 1996. Shareholders may be aware that it is the Group's policy that one third of the board should be re-appointed every year and in any event each director must retire at the third AGM following their appointment or re-appointment. Dividend policy The Board has consistently stated that rather than pay dividends, its free cash flow should be reinvested in the business to deliver the Group's core strategy, and in the short term this is ensuring the Group is not exposed to higher gearing whilst it makes significant earnout payments. In the longer term, and given the likelihood of strong free cash flows in coming years, it may be appropriate to review this policy. Chief Executive's operating review Strategy Our strategic objective is to establish a worldwide IT solutions and services group which is centred on the telecoms, finance, public sector and travel markets and to establish global repeatable software solutions in three of these areas: public sector, telecoms and travel. We will achieve this by a combination of organic investment in our people and products and selective acquisitions of businesses that broaden our product portfolio, client and geographical reach. The estimated investment in our core applications amounts to between Â£150m- Â£200m. This strategy helps to create a balance between long-term recurring revenues from managed services' and maintenance of solutions' contracts and shorter-term revenues from an order book generated by our consultancy activities. Unlike a pure consultancy business, this strategy should enable us to increase our revenues and profits without necessarily increasing the number of people we engage. Our management philosophy is to encourage strong decentralised management that focuses on achieving enterprise value growth and profit growth in their respective businesses whilst creating businesses that are dedicated to their target markets. Anite Public Sector Anite Public Sector (APS) continued to grow strongly with revenue up 54% at Â£36.4m, and order intake at Â£43.5m, up 47% on the first half of last year. Operating profits at Â£1.2m (2001: Â£2.8m) were, as expected, impacted by increased spending on R&D and pre- sales costs incurred on the State of Victoria contract. Order intake to revenue ratio improved to 1.2 compared to 1.1 last year. Public Sector is now our largest business, currently with around 800 staff in the UK, built up through organic investment and acquisition. All the acquisitions have now been integrated into one organisational structure with three divisions focused on local and regional government; central government; and Scotland. The integration has given us the opportunity to remove duplicated activities without impacting the division's capacity to exploit growth, and we have therefore instigated a further headcount reduction of 70 employees in the second half, equating to approximately 9% of APS's workforce, providing annualised savings of approximately Â£3m. As part of this reorganisation, we have strengthened the division's management. John Gibson, who joined us from Bull Information Systems Limited where he was chief executive, has been appointed managing director of APS. Management's focus is on driving the benefits from our recent acquisitions - and particularly to sell more of those acquisitions' capabilities into our existing customers - and to work with other Anite divisions to develop new offers - notably in managed services. In the first half APS has had many notable successes in its main areas of operations: Revenues and Benefits - first half contracts include Sefton M.B.C. and West Lindsey D.C. with over 25 authorities having now selected Pericles, which has been the main focus of much of our recent R&D. We are well placed for several other procurements in the second half, having already been awarded preferred supplier status. Social Care - our offerings continued to perform strongly, with Tameside Borough Council, London Borough of Barking and Dagenham and Knowsley M.B.C. amongst those committing to our SWIFT system and services. Document Management - at the corporate level our system is proving an increasingly attractive proposition for public authorities. APS with its Anite@Work product and DOCS@on-line offer has secured contract wins including Gloucester City Council, South Cambridgeshire and Manchester City. Housing - the successful signing of the State of Victoria contract concluded an encouraging half-year for APS in the housing arena, endorsing our R&D investments in these software products. Windsor and Maidenhead Royal Borough Council joined our expanding list of housing system customers and we were appointed preferred housing system supplier in a number of other procurements during the half. An excellent order for the future was that received from South Somerset - our first significant Housing Association win. Central government, police and defence - driven in many cases by the e.government targets - these markets present good opportunities for APS domain knowledge, products and skills. APS secured recommendations, preferred supplier status and contracts for a number of projects including choice-based lettings; developing a multi-agency intranet for emergency and disaster response; extending e.services to older people; and the development of an extranet for a consortium of 4 London boroughs. This latter project, which will contract shortly, represents a Â£2.7m 3-year contract and will produce a single point of access for public services and community information. Travel Anite Travel's strategic focus is to provide managed services and solutions to the European tour operating, ferry and cruise marketplace. The division has continued to make good progress following the acquisition and integration of FSS (previously a competitor, which was acquired in December 2001), despite tough market conditions. Half year operating profits were 50% up at Â£3.3m (2001: Â£2.2m) on sales 37.3% higher at Â£16.2m (2001: Â£11.8m). In order to capitalise on Travel's strong market position and the Group's strong Consultancy capabilities within Germany, Anite Travel Systems Germany has been created thus directly increasing the range and reach of the Travel division by offering its products and services to the German tour operating market. Our long-term managed services contract with MyTravel continues to be implemented successfully and without interruption and the customer in return continues to meet all its obligations to us. The annualised value of this contract represents around 5% of the revenues of the Travel division and the contract period is for 10 years from August 2001 with a 3 year break clause. The high percentage of revenues derived from managed services, applications management and support contracts provides good forward visibility and a predictable revenue stream from Travel's key customers. Its strong market position, and the cost savings made in the first half, indicates that the division's prospects remain good. However, discretionary spend from travel market customers is proving less predictable because of the current economic climate. Telecoms The Telecoms business has continued to grow its revenues in a tough market. Sales were 18.3% up at Â£21.3m (2001: Â£18.0m) with operating profits of Â£4.1m (2001: Â£5.8m). Although the core wireless testing business grew its sales and profits, overall divisional profitability was impacted by Anite Calculus which made no contribution during the period compared to Â£1.9m (before Group central costs) in the first half last year. The core wireless testing business, which represents approximately 93% of the Telecoms division's turnover, continues to perform well in a difficult market. Its revenue and profits increased by 32% and 6%, respectively, compared to the first half of last year, reflecting higher 3G hardware costs, competition and the weakening of the US dollar. Its order intake has increased by 16% driven by a healthy prospect list for both 2/2.5G and 3G solutions, with a 55/45 split between the two technologies. Performance in Europe, USA, Taiwan and Korea was strong driven by continuing demand for its 2G solutions, particularly for the new 850Mhz and EDGE variants, although Japan is weak. The overall divisional outlook is reasonable with a good prospect list and the majority of profits expected to be derived from our strong core wireless testing business. Consultancy The market for consultancy services remains challenging across Europe with an over-supply of services and shortening contract cycles, with particular pricing pressure in markets such as the Netherlands and Germany, and as a result, we have rationalised our German businesses by means of the closure of offices and a reduction in staff. The Group's consultancy activities remained profitable but operating profits fell to Â£3.2m (2001: Â£6.7m) and we do not expect market conditions to change for the remainder of this financial year. This result includes losses of Â£1.5m from Anite Consulting Germany (GMO), which specialises in SAP/ERP consultancy and which is no longer a core business, as a result of which the board is considering its options for this activity. The core of Anite's Consultancy division in the region, including Anite Systems, Anite Deutschland, GMO-MC and Anite Austria, together represent some 80% of the total reported turnover in Austria and Germany and continue to perform satisfactorily. Ian Tait has been appointed to the new role of head of European and International Operations and is accelerating our plans to focus our international consultancy based businesses in line with our chosen business sectors, public sector, travel, telecoms and finance, and to leverage opportunities provided by our strong offering of applications developed by our core UK businesses. The division continues to focus on utilisation levels, keeping overheads low and diversifying the business as far as possible in applications management and support contracts, whilst continuing to benefit from: > Applications and management support contracts in Germany > An increase in public sector contracts won through the German armed forces > Over 100 of our consultants being linked to long-term contracts with customers - resulting in a variable cost structure > Strong margins and utilisation in our French and UK consultancy base. Examples of international consultancy work in our chosen industry sectors include, in public sector, the successful signing of the Â£11m State of Victoria contract, and our business with the European Space Agency in Germany, which has performed well with sales up 10% compared with the first half of 2001, and orders up by 60%. Both finance and telecoms have also won new work in Austria, whilst Parsec Systems has been particularly successful growing its international and finance sector work. Research and development and offshore development Total research and development expenditure in the first half was Â£5m (2001: Â£3m), largely focused on Public Sector and Telecoms. A similar level of R&D is expected in the second half. Dati, a Latvian based software development group which develops software and provides services and for which we have an option to acquire, has as expected been used on a number of projects in Public Sector and other divisions. The benefits of this low cost offshore development resource are that it enables us to continue to invest in product development at a considerable saving and to take advantage of new business opportunities. Outlook The divisional outlook for the remainder of the current financial year can be summarised as follows: > Public Sector - the outlook is excellent with orders up 47% in the first half, an order intake to revenue ratio of 1.2 and beneficial seasonal bias > Telecoms - the outlook is reasonable with an order intake to revenue ratio of 0.9, with performance expected to be driven by its strong core wireless testing business > Travel - the outlook is reasonable with an order intake to revenue ratio of 0.8, continuing benefits from the FSS acquisition, and a good proportion of managed services > Consultancy - the outlook is uncertain with an order intake to revenue ratio of 1.0, but following cost reductions, the business is expected to maintain its current performance in the absence of further market deterioration. Overall, we are confident that, for the year as a whole, Anite will perform in line with expectations, continuing to benefit from its strong order book and its business and geographical diversification against a background of tough trading conditions. Our strategy to focus on building strong market positions in our chosen sectors means that the Group, following the actions taken to renegotiate the earnout obligations, reduce costs and drive synergy benefits from the integration of its recent acquisitions, will be well placed to recover strongly in 2003/4. Finance Review Cash flow and balance sheet There has been strong cash generation and control of working capital in the first half and the Group is operating comfortably within its banking facilities. Net debt (including outstanding loan notes) at the half-year end stood at Â£17.1m (30 April 2002: Â£11.5m), after making Â£17.5m of acquisition and earnout payments. A similar level of net debt is anticipated at the year-end after paying a further estimated Â£11m in earnout payments. Gearing at the half year end was 14.5% (30 April 2002: 6.4%). Net debt included net bank borrowings of Â£2.8m, finance leases of Â£1.7m and loan note obligations of Â£12.6m relating to earnouts. During the first half, our average net borrowings were Â£10.4m after deducting overseas cash balances and we expect strong second half cash generation to reduce borrowings by the financial year-end. Group central costs In order to provide a better analysis of divisional performance, we are now stating divisional operating profits before Group central costs. These costs include head office staff costs, directors' remuneration, professional and office costs, but exclude costs directly attributable to operations. Earnouts The earnout obligations for Calculus, Carus, Didgicom, MSPS, Parsec (partially) and Rox together representing 78% of the Group's total potential earnout liabilities, have been successfully renegotiated; negotiations to crystallise the remaining smaller earnouts are close to completion and the forecast outstanding earnouts are as follows: Â£m 2002/3 2003/4 2004/5 2005/6 Total Shares Cash Shares Cash Shares Cash Shares Cash Shares Cash -------------------------------------------------------------------------------------------------- Already paid/shares issued - existing agreements 21.2 17.5 - - - - - - 21.2 17.5 Future earnout payments - existing agreements 6.7 5.4 0.9 1.2 2.6 3.3 - - 10.2 9.9 - agreements being renegotiated* (Parsec, Anite.Net,ITS & CME) 0.6 5.6 - 7.5 - 2.8 - 4.4 0.6 20.3 -------------------------------------------------------------------------------------------------- Total forecast earnouts 28.5 28.5 0.9 8.7 2.6 6.1 - 4.4 32.0 47.7 -------------------------------------------------------------------------------------------------- Forecast weighted average number of shares in issue 334.6m 347.5m 351.7m *current estimate of likely variation Interest Interest cost comprises: Â£m 2002/3 2001/2 Net bank interest 0.8 0.2 Loan notes 0.2 - Property interest 0.1 0.3 ------------------------ 1.1 0.5 ------------------------ A broadly similar level of interest payable is expected in the second half. Interest cover in the first half was 8.9 times. Taxation The Group tax rate in the first half was 24% (2001: 24.6%) and we expect to be able to maintain this rate for the foreseeable future. Earnings per share The number of shares in issue increased from 306,810,769 at the year-end 30 April 2002 to 338,012,514 in this period. The average number of shares in issue used to calculate earnings per share was 324,569,718 (2001: 282,904,502), an increase of 14.7%. Goodwill Goodwill is capitalised based on the maximum potential cost of an acquisition including earnout and is written off over a maximum of 10 years. If earnouts below the maximum provided in the relevant acquisition agreement are paid, the difference is credited against goodwill. In line with our practice of reviewing goodwill acquired with all our past acquisitions every 6 months, we have included an impairment charge of Â£39.1m in these interim results, principally in respect of Anite Calculus (100% of investment impaired - Â£29.6m), a supplier of billing solutions to the telecoms' market, which we acquired in December 2000. Since acquisition, the billing market has not performed as expected, and we have decided, therefore, to impair the carrying value of the goodwill acquired with this business. As a result, the total goodwill carried on the balance sheet is now Â£158.0m and we expect that the annualised goodwill amortisation going forward will be approximately Â£21m. Exceptional items As previously indicated, these results include an exceptional Â£0.75m cost relating to the departure of the outgoing finance director together with Â£0.15m in respect of recruitment fees for the new finance director. 11 December 2002 ANITE GROUP PLC Consolidated profit and loss account for the six months ended 31 October 2002 Before goodwill Goodwill Unaudited Unaudited Audited amortisation amortisation 6 months to 6 months to 12 months to and exceptional and exceptional 31 October 31 October 30 April items items 2002 2001 2002 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Turnover Existing operations 111,292 - 111,292 92,638 199,782 Acquisitions 249 - 249 - - -------------------------------------------------------------------------------------------------- Continuing operations 111,541 - 111,541 92,638 199,782 Discontinued - - - 2,582 2,728 Total Turnover 111,541 - 111,541 95,220 202,510 -------------------------------------------------------------------------------------------------- Net operating costs - Operating costs (101,487) - (101,487) (81,491) (174,290) - Goodwill amortisation - (13,541) (13,541) (11,080) (24,265) - Goodwill impairment - (39,159) (39,159) - - - Severance costs - (900) (900) - - (101,487) (53,600) (155,087) (92,571) (198,555) Operating profit/(loss) - Existing operations 10,049 (53,559) (43,510) 3,784 5,198 - Acquisitions 5 (41) (36) - - -------------------------------------------------------------------------------------------------- Continuing operations 10,054 (53,600) (43,546) 3,784 5,198 Discontinued operations - - - (1,135) (1,243) 10,054 (53,600) (43,546) 2,649 3,955 Share of associate's operating loss - - - (77) (31) Profit/(loss) on sale/closure of discontinued operations (note 2) - 1,266 1,266 (83) 2,955 Loss on sale of tangible fixed assets - - - - (4) ================================================================================================== Profit/(loss) on ordinary activities before finance charges 10,054 (52,334) (42,280) 2,489 6,875 Finance charges - net (1,125) - (1,125) (525) (1,111) ================================================================================================== Profit/(loss) on ordinary activities before tax 8,929 (52,334) (43,405) 1,964 5,764 Tax on profit/(loss) on ordinary activities (note 3) (2,139) 216 (1,923) (3,224) (7,344) ================================================================================================== Profit/(loss) on ordinary activities after tax 6,790 (52,118) (45,328) (1,260) (1,580) Minority interests (15) - (15) (113) (82) ================================================================================================== Profit/(loss) for the financial period 6,775 (52,118) (45,343) (1,373) (1,662) Dividends proposed (note 4) - - - - - ================================================================================================== Retained profit/(loss) for the period 6,775 (52,118) (45,343) (1,373) (1,662) ================================================================================================== Loss per share (note 8) Basic (14.0p) (0.5p) (0.6p) Diluted (14.0p) (0.5p) (0.6p) Adjusted earnings per share before goodwill amortisation and exceptional items -continuing operations (note 8) Basic 2.1p 3.9p 7.2p Diluted 2.0p 3.7p 6.8p Consolidated statement of total recognised gains and losses for the six months ended 31 October 2002 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 October 31 October 30 April 2002 2001 2002 Â£'000 Â£'000 Â£'000 Loss for the financial period - Group (45,343) (1,296) (1,631) - Associate - (77) (31) ------------------------------------------------------------------------------------------------ (45,343) (1,373) (1,662) (Loss)/gain on foreign currency translation (489) 2,017 1,615 ------------------------------------------------------------------------------------------------ Total recognised (losses)/gains since last annual report and accounts (45,832) 644 (47) ================================================================================================ ANITE GROUP PLC Consolidated balance sheet as at 31 October 2002 Unaudited Unaudited Audited 31 October 31 October 30 April 2002 2001 2002 Â£'000 Â£'000 Â£'000 Fixed assets Intangible 160,891 207,512 228,460 Tangible 12,749 9,139 12,232 Associates - 1,667 - Investments 1,091 850 1,145 -------------------------------------------------------------------------------------------------- 174,731 219,168 241,837 Current assets Stock and WIP 7,561 6,966 9,819 Debtors 62,389 54,416 69,464 Investments - 49 - Short term deposits 2,450 7,930 16,026 Cash at bank 18,809 11,352 12,690 -------------------------------------------------------------------------------------------------- 91,209 80,713 107,999 -------------------------------------------------------------------------------------------------- Current liabilities Bank borrowings (21,018) (7,057) (18,618) Hire purchase (757) (240) (652) Amounts falling due within one year (85,771) (79,757) (100,004) -------------------------------------------------------------------------------------------------- (107,546) (87,054) (119,274) -------------------------------------------------------------------------------------------------- Net current liabilities (16,337) (6,341) (11,275) Creditors: amounts falling due after one year Hire purchase (910) (169) (726) Bank loan (3,099) (3,334) (4,858) Other creditors (974) (242) (757) Provisions for liabilities and charges (35,843) (43,086) (43,203) -------------------------------------------------------------------------------------------------- (40,826) (46,831) (49,544) -------------------------------------------------------------------------------------------------- Net assets 117,568 165,996 181,018 ================================================================================================== Called-up share capital 33,850 28,816 30,731 Share premium account 92,814 54,814 74,595 Shares to be issued 20,821 67,177 59,350 Reserves (29,962) 14,729 16,140 Minority interest 45 460 202 -------------------------------------------------------------------------------------------------- Capital employed 117,568 165,996 181,018 ================================================================================================== ANITE GROUP PLC Consolidated cash flow statement for the six months ended 31 October 2002 Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 October 31 October 30 April 2002 2001 2002 Â£'000 Â£'000 Â£'000 Net cash inflow from operating activities (note 5) 15,074 7,235 26,634 Returns on investments and servicing of finance (959) (331) (786) Taxation (2,260) (3,770) (7,969) Capital expenditure and financial investments (2,370) (2,854) (6,221) Acquisitions and disposals (9,116) (5,823) (21,013) ===================================================================================================== Cash inflow/(outflow) before management of liquid resources and financing 369 (5,543) (9,355) Management of liquid funds 13,576 1,791 (5,991) Financing (7,226) (5,039) 11,121 ----------------------------------------------------------------------------------------------------- Increase/(decrease) in cash in the period 6,719 (8,791) (4,225) ===================================================================================================== Notes to the interim accounts for the six months to 31 October 2002 1. The financial information contained in this document does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The accounts have been prepared using accounting policies consistent with those set out in the most recent audited financial statements. Statutory accounts for the year to 30 April 2002 have been filed with the registrar of companies. The auditors have reported on those accounts; their report is unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 2. Profit/(loss) on sale/closure of discontinued operations Unaudited 6 months to 31 October 2002 Â£'000 Deferred consideration received in respect of Anite IT Personnel disposal 266 Release of pension underfunding provision in previously disposed of businesses 1,000 -------------- 1,266 ============== 3. Taxation Unaudited 6 months to 31 October 2002 Â£'000 On the profit on ordinary activities for the period UK corporation tax 494 Overseas taxation 682 Originating and reversal of timing differences - UK 1,985 Originating and reversal of timing differences - Overseas (1,238) ----------------- 1,923 ================= 4. Dividends Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 October 31 October 30 April 2002 2001 2002 Â£'000 Â£'000 Â£'000 Proposed - - - ================================================== 5. Reconciliation of operating (loss)/profit to net cash inflow from operating activities Unaudited Unaudited Audited 6 months to 6 months to 12 months to 31 October 31 October 30 April 2002 2001 2002 Â£'000 Â£'000 Â£'000 Operating (loss)/profit (43,546) 2,649 3,955 Depreciation 2,386 1,886 3,898 Intangible software licence 487 299 725 Goodwill amortisation 13,541 11,080 24,265 Goodwill impairment 39,159 - - Decrease/(increase) in stock 2,258 (1,638) (3,351) Decrease/(increase) in debtors 7,713 (1,164) (17,168) (Decrease)/increase in creditors (6,924) (5,877) 14,344 Profit on disposal of fixed assets - - (34) ---------------------------------------------------------------------------- Net cash inflow from operating activities 15,074 7,235 26,634 ============================================================================ 6. Reconciliation of net cash flow to movement in net debt Â£'000 Increase in cash in period 6,719 Cash outflow from decrease in bank loan and financing (including redemption of loan notes Â£7,957) 7,245 Cash inflow from increase in liquid resources (13,576) ---------------------------------------------------------------------------- Change in net debt resulting from cash flows 388 Increase in finance leases (818) Increase in loan notes (5,217) Net debt at 1 May 2002 (11,497) ---------------------------------------------------------------------------- Net debt at 31 October 2002 (17,144) ============================================================================ 7. Analysis of net debt 1 May 2002 Non Cash Cash Flow 31 Oct 2002 Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank and in hand 12,690 - 6,119 18,809 Bank overdrafts (766) - 600 (166) ----------- 6,719 Bank loans due within one year (17,852) - (3,000) (20,852) Bank loans due after one year (4,858) - 1,759 (3,099) Finance leases (1,378) (818) 529 (1,667) ----------- (712) Short - term deposits 16,026 - (13,576) 2,450 ------------------------------------------------------------------------------- Net (debt)/funds excluding loan notes 3,862 (818) (7,569) (4,525) Loan notes due within one year (15,359) (5,217) 7,957 (12,619) ------------------------------------------------------------------------------- Net debt (11,497) (6,035) 388 (17,144) =============================================================================== 8. (Loss)/earnings per share The loss per share has been calculated on the net loss of Â£45,343,000 (2001: loss Â£1,373,000) and the average number of shares in issue of 324,569,718 (2001: 282,904,502) and the weighted average number of shares (adjusted for dilution) of 339,998,484 (2001: 292,648,520) FRS 14 requires presentation of diluted EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that option holders would act irrationally, no adjustment has been made to diluted EPS for out- of-the-money share options. The adjusted earnings per share has been based on the adjusted profit for the financial period on continuing operations (excluding goodwill amortisation, exceptional items and profit/(loss) on sale/closure of discontinued operations of Â£6,775,000 (2001: Â£10,925,000). 9. Reserves at 31 October 2002 Share Premium Profit & loss Shares to be issued account Other Reserves account At 1 May 2002 59,350 74,595 270 15,870 Retained loss for the period - - - (45,343) Premium on shares issued - 18,219 - - Shares to be issued 420 - - - Shares issued against earnouts in the year (21,194) - - - Provisions no longer required- written back against goodwill (17,623) - - - Reclass of provisions (132) - - - Loss of foreign currency translation - - - (489) Utilised during the year - - (270) - -------------------------------------------------------------------------------------------- At 31 October 2002 20,821 92,814 - (29,962) ============================================================================================ 10.Divisional results (before goodwill amortisation and exceptional items) Unaudited 6 months to Unaudited 6 months to 31 October 2002 31 October 2001 Â£m Sales Profit Margin % Sales Profit Margin % --------------------------------------------------------------------------------------------- Public Sector 36.4 1.2 3.3 23.7 2.8 11.8 Travel 16.2 3.3 20.3 11.8 2.2 18.6 Telecoms 21.3 4.1 19.2 18.0 5.8 32.2 Consultancy 37.6 3.2 8.5 39.1 6.7 17.1 --------------------------------------------------------------------------------------------- 111.5 11.8 10.6 92.6 17.5 18.9 Head Office costs - (1.8) - - (2.7) - --------------------------------------------------------------------------------------------- 111.5 10.0 8.9 92.6 14.8 16.0 Finance charges - (1.1) - - (0.5) - --------------------------------------------------------------------------------------------- Continuing operations 111.5 8.9 8.0 92.6 14.3 15.4 Discontinued operations - - - 2.6 (1.1) - --------------------------------------------------------------------------------------------- Profit before tax, goodwill amortisation and exceptional items 111.5 8.9 8.0 95.2 13.2 13.9 ============================================================================================= INDEPENDENT REVIEW REPORT TO ANITE GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 31 October 2002 which comprises the Consolidated profit and loss account, the Consolidated balance sheet, the Consolidated statement of total recognised gains and losses, the Consolidated cash flow statement, and related notes 1 to 10. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 October 2002. Deloitte & Touche Chartered Accountants London 11 December 2002 Notes: A review does not provide assurance on the maintenance and integrity of the website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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