Final Results

Anite Group PLC 11 July 2006 For immediate release Tuesday, 11 July 2006 ANITE GROUP PLC Preliminary results for the year ended 30 April 2006 Anite Group plc ('Anite' or 'the Group'), the worldwide IT solutions and services company, today announces its preliminary results for the year ended 30 April 2006. Underlying results*: • Profit before tax up 8.8% to £24.7m (2005: £22.7m) • Revenues up 8.0% to £168.0m (2005: £155.5m), all organic growth • Basic earnings per share 5.1p (2005: 5.0p) • Operating margin of 14.3% (2005: 15.0%) • Underlying results are slightly ahead of expectations, following another strong performance by Telecoms Statutory results: • Group profit before tax from continuing operations £10.4m (2005: £7.1m) • Group revenue from continuing operations £164.7m (2005: £160.2m) • Group profit after tax from discontinued operations £5.3m (2005: £4.6m) • Group profit after tax for the year £8.9m (2005: £6.7m) • Basic and diluted earnings per share 2.5p (2005: 1.9p) Highlights • Full and final settlement of SoV contract on 10 July 2006, but included in these results • Underlying profit before tax of £10.4m (2005: £22.7m), including SoV results, settlement costs and Australia onerous contract wind-down costs of £14.3m • Net cash of £36.3m (2005: £37.4m) before payment of approximately £10m to settle the SoV contract • Share buybacks to be continued in the current year following 7.7m shares bought back at a cost of £5.0m during the year • Recommended dividend of 0.5 pence per share - Anite's first dividend since 2001 *underlying results are for ongoing businesses (stated prior to the results and settlement of the State of Victoria ('SoV') contract, before impairment of goodwill, disposed and discontinued operations, and post utilisation of Pericles contract provisions). See attached Income Statement and Notes for details. These results are issued under IFRS; all numbers including comparatives are stated accordingly. Commenting on today's results, Steve Rowley, Anite's Chief Executive, stated: 'We will continue to invest in growth opportunities during the current financial year, supported by much improved quality of earnings and a strong balance sheet. 'The successful settlement of the troubled SoV contract will enable management to focus wholly on Anite's core business and growth strategy in the current financial year. 'Overall, we have had a satisfactory start to the current financial year and anticipate making further progress.' For further information, please contact: www.anite.com Anite Group plc 01753 804000 Steve Rowley, Chief Executive Christopher Humphrey, Group Finance Director Smithfield 020 7360 4900 Reg Hoare/Sara Musgrave An analysts' meeting will be held at 11.15 for 11.30 a.m. at the offices of Smithfield, 10 Aldersgate, EC1 Print resolution images are available for the media to view and download from www.vismedia.co.uk Notes to editors Anite is an international IT company whose primary business is the provision of business critical solutions based on its deep sector knowledge of the telecoms, public sector, and travel markets. These solutions almost always include at their core the supply of Anite-owned software products. The Group offers a comprehensive service to its customers, including implementation, systems integration, maintenance and managed services, enabling it to maximise customer satisfaction and financial returns. Headquartered in the UK, the Group now employs around 1300 staff in 10 countries across Europe, America, and Asia Pacific. Anite solutions are recognised as market leaders in their fields: • all the leading global mobile phone manufacturers use Anite software • 3 out of 4 UK Local Authorities use Anite applications • around 40% of UK package holiday bookings were made using Anite systems last year. Telecoms Anite provides specialist systems and software for mobile phone network simulation and handset testing around the globe for all of the world's leading mobile phone manufacturers and many operators, component manufacturers and test houses. Public Sector Anite is a market leader in software and solutions to key parts of local government, such as local tax collection, benefits payments, housing management and social care solutions - as well as an important supplier of secure information solutions to the law enforcement markets. Travel Anite is one of the leading travel and transportation technology solution providers for tour operators, air fare consolidators, and cruise, ferry, motor and rail inclusive operators. International International brings together Anite's German consultancy businesses, focusing on IT consultancy and systems integration in a range of vertical markets including finance, telecoms and public sector. Chairman's Statement Introduction I am delighted to bring you this, my first annual statement, as Chairman of Anite Group plc. I am pleased to report continued good progress in the financial year ended 30 April 2006. After experiencing a slow start, the Group performed well for the year as a whole with a particularly strong performance by Telecoms, which represents in excess of 50% of operating profits. When I took over the chairmanship after the Annual General Meeting ('AGM') in October 2005, the management was getting to grips with the last remaining major legacy issues of SoV and Pericles. I am delighted that the team has now resolved the issues relating to SoV. The settlement provides our shareholders with complete certainty and removes all ongoing losses, cash outflows and risk associated with this troubled contract. Furthermore, the Group's robust financial position has enabled it to withstand the costs relating to Pericles and SoV whilst still investing in growth opportunities. Anite has a clear view of its future. The key driver in all our businesses is to be or become our clients' supplier of first choice. We can achieve this by working hard and smart to understand and meet their requirements, by delivering systems and software in the most cost effective and efficient way and by working closely together to manage expectations. Divisional overview This year has seen good progress in all our businesses. A full account of the Group's activities comes later in this report, but I would like to highlight some significant aspects of our business. Our Telecoms business holds a global position in its chosen field. Order intake picked up well in the second half and the year ended on a high note. Our commitment to development expenditure is critical to the future of our Telecoms activities. We must invest to help our clients, and also to maintain our top tier position. Our Travel business is again a market leader. The travel sector is undergoing major transformation as package holiday operators are facing severe competition from major internet providers. Anite is at the forefront of helping its customers meet these challenges. Our Public Sector business continues to focus on Local Government and security and criminal justice markets where its position is strongest. Critical mass is an important measure and our main objective is to maintain leadership positions in our key markets. Results This is our first set of annual results reported under the new IFRS accounting standards. The principal changes relate to goodwill, share based payments and the capitalisation of certain developments costs and have had minimal effect on the underlying operating performance of the Group in the year. Underlying profit before tax*, rose 8.8% to £24.7m (2005: £22.7m). The Board believes this is the most appropriate way to report our results. Basic earnings per share* were 5.1p (2005: 5.0p). *of ongoing businesses (stated prior to the results and settlement of the State of Victoria contract('SoV') before impairment of goodwill, disposed and discontinued operations, and post utilisation of Pericles contract provisions) Statutory Group profit after tax for the year was £8.9m (2005: £6.7m) and basic earnings per share for continuing and discontinued operations were 2.5p (2005: 1.9p). For continuing operations, Group turnover for the period was £164.7m (2005: £160.2m), profit after tax was £3.6m (2005: £2.0m), and basic earnings per share were 1.0p (2005: 0.5p). There has been no increase in the contract provisions relating to Pericles during the year. However, on 3 July 2006, we announced that we had agreed a full and final settlement to release the Group from its liabilities and obligations relating to the State of Victoria contract, in return for a payment of approximately £10 million. In addition, costs have been provided for the onerous contract wind down of our Australian activities.. Share buyback and dividend policies The Board has recently reviewed its share buyback and dividend policies. Reflecting the strong underlying financial and operating performance of the core businesses, the SoV settlement and Pericles de-risking, and the Board's greater confidence in the Group's outlook, it has resolved to : • recommend the payment of a dividend in respect of the year ended 30 April 2006 of 0.5 pence per share; and • continue the share buy back programme commenced last year The dividend will be payable on 17 November 2006 to shareholders on the register 20 October 2006. This is the first dividend Anite has declared since 2001. It is the intention of the Board to adopt a progressive dividend policy going forward with a split of approximately one third at the half year and two thirds at the full year. A resolution to renew the authority to buy back shares will be proposed at the Group's forthcoming AGM to be held on 3 October 2006. This authority will only be utilised if shares can be acquired at levels that the Board believes will enhance shareholder value. During the year 7.7 million shares were bought back and cancelled at a total cost of £5m and at an average price of 65.1p per share. We were, however, often constrained from making further share buy backs due to corporate activity. Balance sheet and cash Year end net cash stood at £36.3m (30 April 2005: £37.4m; 31 October 2005: £25.6m). This includes the £5m cost of the share buy back programme and the net proceeds of the disposal of Anite Austria of £1.4m. Of this balance, approximately £10m was paid to the SoV on 10 July 2006. The Board At the AGM in October 2005, we completed our Board transformation following the appointment of three new non-executive directors over the last two years. Following the conclusion of the AGM, Alec Daly retired and I joined as Chairman, the final part of our succession planning. Alec Daly served as Chairman for ten years and on behalf of the Board I would like to recognise and thank him for his commitment and contribution over that long period. People On behalf of the Board, I would like to thank all employees for their contribution, hard work and support during the period. Summary My first report as Chairman concludes a year in which Anite has continued to make good progress against its objectives, invested in growth opportunities as planned and continued to strengthen its financial and market positions. In the current year we will build on the transformational work already undertaken by the management team, and we intend to continue investing in growth opportunities whilst making further financial progress. The Board remains optimistic about Anite's future prospects. Clay Brendish Chairman Chief Executive's Operating Review Introduction Last year we indicated that 2005/6 would be a year of investing in growth opportunities. I am pleased to report that the continued investment in keeping Telecoms at the leading edge of its market and technologies has paid off with this business leading the growth of the Group. Since 2003, Telecoms has more than doubled its profits and now represents over 50% of the Group's operating profit. Overall, we have grown underlying Group revenues and profits despite the increasing investment in development of our products and a mixed performance by Public Sector. We expect that the current year will be a similar year of investment in growth opportunities where attractive potential returns can be earned. We are thus continuing investment in development of new products with a further substantial increase in development spending planned, of which the majority will be focused on Telecoms. Compared to three years ago, the Group now boasts high quality earnings and margins, based on strong and growing recurring revenues and software licence and service revenues. Our balance sheet has been strengthened considerably following disposals, good cash generation and the resolution of a number of long standing legacy issues relating to earn out settlements, poorly bid contracts, and property and taxation issues. Continuing this transformation, following the year end we successfully resolved the long standing, troubled SoV contract, whilst making further progress with Pericles throughout the year. The resolution of the SoV issues will enable management to focus on the core business and growth strategy this year. Progress on Strategy Anite's primary business is the provision of business critical solutions based on its deep sector knowledge of the telecoms, public sector, and travel markets. These solutions almost always include at their core the supply of Anite-owned software products. Our strategy is to be number one or two in each of these markets as we believe that businesses with strong market positions have demonstrably superior returns. Since our strategic review in 2004 we have placed Telecoms at the heart of our business. It is our belief that we can achieve global market leadership in the handset testing market through internal investment and organic growth. These results are evidence that this approach is working. We continue to look at entering adjacent markets through either internal investment or acquisition. Our Travel business is the market leader in the UK. To drive growth we have invested in a new internet-based software suite which we are selling to existing customers and are using as a platform for entering international markets. At the end of last year we secured a significant contract with TUI (UK) for our new technology and subsequently we have signed contracts with Finnair and Condor Ferries. Against a backdrop of changing purchasing behaviour and supplier consolidation we are focusing our Public Sector business needs on its market leading positions. The legacy issues of Pericles and SoV have proven to be impediments to a corporate transaction. Now that SoV is resolved and Pericles continues to make progress, management can focus on the consolidation opportunities. Divisional performance Divisional operating performance* was as follows: --------- -------- ------- -------- ------- ----------- ------- £m Revenue Profit Share Profit Utilisation Profit Pre based of SBP payments provisions --------- -------- ------- -------- ------- ----------- ------- Telecoms 57.0 16.2 (0.2) 16.0 - 16.0 --------- -------- ------- -------- ------- ----------- ------- Public Sector 67.1 8.6 (0.2) 8.4 - 8.4 Pericles 3.7 (5.4) - (5.4) 0.5 (4.9) --------- -------- ------- -------- ------- ----------- ------- Total Public 70.8 3.2 (0.2) 3.0 0.5 3.5 Sector Travel 28.1 6.2 (0.3) 5.9 - 5.9 International 12.1 1.0 (0.1) 0.9 - 0.9 --------- -------- ------- -------- ------- ----------- ------- 168.0 26.6 (0.8) 25.8 0.5 26.3 --------- -------- ------- -------- ------- ----------- ------- * underlying results are for ongoing businesses (stated prior to the results and settlement of the State of Victoria ('SoV') contract, before impairment of goodwill, disposed and discontinued operations, and post utilisation of Pericles contract provisions) The above does not include unallocated central costs of £2.2m (including unallocated share based payments and property provision). Telecoms Anite provides specialist systems and software for mobile phone network simulation and handset testing around the globe for all of the world's leading mobile phone manufacturers and many operators, component manufacturers and test houses. Telecoms had another very successful year substantially increasing both its revenues and operating profits by over 20% in a good market, building on the strong results of recent years. This performance reflected a key feature of Telecoms' success, namely the good returns earned from the continuing high level of investment in new product development designed to satisfy the demanding requirements of the leading players in the market. During the year under review this included the successful introduction of the Anite Baseband Processor an essential component of our 3G and future solutions. This platform has been well accepted by the market and has helped to improve customer satisfaction. These investments continue to deliver improved product capability and quality enabling Anite's market and technology leadership. Investment in overseas expansion is also paying off, as evidenced by a strong performance in North America and Korea, and with our first sales into South America. We also established a new sales presence in India. We continue to build our strategic relationships with influential global Tier 1 customers and as a result all of the world's leading mobile phone manufacturers now use Anite software. A number of new name customers were also won, including start ups and new entrants into the mobile phone development space. During the year Telecoms completed its move into its new modern freehold property in Fleet, Hampshire, which has enabled it to consolidate all its UK activities into one building and to undertake increased development more effectively. The move has significantly improved communications within the business, whilst providing long-term property cost savings and efficiencies and scope for future expansion. In the current year, the decline of older 2G technologies is expected to continue. However, there are significant new growth opportunities on the back of the continued strong global growth in mobile handset sales, the adoption of 3G and the proliferation of new wireless devices. These will require substantial investment but are expected to deliver good long term returns. Public Sector Anite is a market leader in software and solutions to key parts of local government, such as local tax collection, benefits payments, housing management and social care solutions - as well as an important supplier of secure information solutions to the law enforcement markets. Although Public Sector (excluding Pericles) grew its core revenues by 4.8% and made progress against our objectives, underlying profits fell during the year, albeit we maintained double digit margins. The fall in profits was due to a number of different factors, including the expected reduction of income from our legacy Council Tax and Benefits product (VME), an increase in low margin hardware sales, a change in business mix and an increase in sales and marketing spending. Finally, whilst orders for the new Integrated Children's System (ICS) have been strong, the benefit will principally be seen in the current financial year. On orders, there was an absense of the expected seasonal upswing in the fourth quarter and softer demand for Anite products in the local government market. It is too early to establish whether this will continue in the current financial year. Pericles We continued to progressively de-risk Pericles in line with our expectations. This was achieved through a combination of successful implementations, with the number of benefits customers implemented rising from 9 to 21 (out of 25) since this time last year, financial settlements in a small number of cases, and increased functionality following successful software releases. There are two further, important software releases planned by the calendar year end. The remaining implementations are expected to be concluded during the current financial year, either by finalising implementation or by agreement not to proceed. The provision carried forward continues to be adequate but is under continual review. State of Victoria On 7 April 2006, the Board of Anite announced that it was in detailed negotiations regarding options to finish the final stages of the SoV project. At the same time and following detailed analysis, the Board determined that the best option would be to exit the contract if it could be achieved at an acceptable cost. Subsequently on 3 July 2006 the Group signed a deed of settlement and release in relation to its contract that removed any further liabilities in return for a one off payment of approximately £10m. Following the agreement, Anite has set in motion the wind-down of its Australian business. This settlement provides complete certainty, by removal of all risks and ongoing costs and losses relating to this historic troubled contract. Travel Anite is one of the leading travel and transportation technology solution providers for tour operators, air fare consolidators, and cruise, ferry, motor and rail inclusive operators. Travel reported a steady performance, and continues to be very profitable. Following a slow first half, which stalled investment in @com, our new reservation system, significant new orders were received in the second half and since the year end. These orders, when paired with our own investment, will help fund the remaining development work on, and ensure completion of, @com in the current financial year. Travel again reported strong recurring and services revenues from its installed base during the year, a key element of its business model. During the year, our new generation ferry reservation system, FerryRes, went live at Irish Ferries. This has led to enhanced sales opportunities for this product in the current year. Renewed order momentum came with existing and new name customers in the UK. These have included additional orders for @com software modules and services. Significant progress has also been made with leading new name European customers, which has resulted in a major new order for the @com suite in the UK. In addition, and since the year end, we have signed multi-million pound long term contracts with Condor Ferries in the UK and Finnair's domestic holiday business. International International now solely comprises Anite's German consultancy businesses, focusing on IT consultancy and systems integration in a range of vertical markets including telecoms, finance and public sector. International continued to be profitable, although margins were flattered by a provision release. With satisfactory order intake, the outlook for this business is much more stable although it remains overly reliant on one major contract. Outlook We will continue our investment in growth opportunities during the current financial year driven by market demand. Our planned increase in development investment in Telecoms will have the effect of tempering profit growth on rising revenues. The full benefit of this investment will be seen in future years. The development investment in Travel's @com development will now accelerate, supported by recent contract wins, which will have the effect of depressing profits this year. Although further contract wins are anticipated, the current year benefit of these multi-year arrangements will not be significant. Margins in Public Sector are expected to improve slightly although our outlook is cautious in the light of recent softening of demand. The successful settlement of the SoV contract will enable management to focus wholly on Anite's core business and growth strategy in the current financial year. Overall, we have had a satisfactory start to the current financial year and anticipate making further progress. Steve Rowley Chief Executive Financial Review Overview The Group's financial performance continued the improvement of recent years. Anite is now a business with a strong balance sheet and three core businesses with high underlying margins. Furthermore, the Group's strong financial position has enabled it to withstand the costs relating to Pericles and SoV whilst still investing in growth opportunities. Accounting standards - IFRS The first accounting period for adoption by the Group of International Financial Reporting Standards ('IFRS') was the financial year ended 30 April 2006,reported on herein. The main impacts on the Group were in the areas of accounting for remuneration, in particular share based payments, research and development, goodwill and deferred tax. There were no implications in relation to pensions as all Anite pension schemes are money purchase schemes and the Group does not operate any defined benefit pension schemes. It should be emphasised that although the introduction of IFRS has some impact on the presentation of the primary financial statements and the results of the Group, including restatement of some of the results, it does not change the economics, risk profile or cash flow of the business itself. The main factors that have affected the group operating profit excluding goodwill are as follows: 2006 2005 £m £m --------------------------------- -------- -------- Capitalised development costs 2.1 1.1 Share based payments (1.2) (0.9) --------------------------------- -------- -------- Net increase in profit under IFRS 0.9 0.2 --------------------------------- -------- -------- Financial objectives Looking forward the Group will continue to focus on revenue and earnings growth, maintaining margins, investing in new products and maintaining strong cash flow. Group Trading Summary 2006 2005 ------------------------ ------------------------- ------------------------ Underlying results* £m £m £m £m £m £m Ongoing* SoV+ Total Ongoing* SoV+ Total ------------------------ -------- ------- ------- -------- ------ ------ Revenue 168.0 (3.3) 164.7 155.5 2.5 158.0 ------------------------ -------- ------- ------- -------- ------ ------ Operating profit/(loss) 23.6 (19.3) 4.3 21.2 (3.5) 17.7 Net finance income/(expense) 0.6 - 0.6 (0.6) - (0.6) ------------------------ -------- ------- ------- -------- ------ ------ Profit/(loss) before tax (1) 24.2 (19.3) 4.9 20.6 (3.5) 17.1 ------------------------ -------- ------- ------- -------- ------ ------ Utilisation of contract 0.5 5.0 5.5 2.1 3.5 5.6 Provisions ------------------------ -------- ------- ------- -------- ------ ------ Profit/(loss) before tax (2) 24.7 (14.3) 10.4 22.7 - 22.7 ------------------------ -------- ------- ------- -------- ------ ------ Underlying earnings per share (1) 5.0p (5.5p) (0.5p) 4.6p (1.0p) 3.6p Underlying earnings per share (2) 5.1p (4.1p) 1.0p 5.0p - 5.0p * underlying results are for ongoing businesses (stated prior to the results and settlement of the State of Victoria ('SoV') contract, before impairment of goodwill, disposed and discontinued operations, and post utilisation of Pericles contract provisions) + SoV represents the results, settlement and wind down costs relating to the State of Victoria contract (1) before utilisation of contract provisions; (2) t after utilisation of contract provisions Revenue Revenue for ongoing businesses increased by 8% to £168.0m, and is analysed by type below: By type 2006 % 2005 % ------------------ -------- -------- -------- -------- IT Consultancy 7.4 4% 7.7 5% Bespoke & SI 32.2 19% 35.3 23% Own Product licences 36.4 22% 31.8 20% Managed services/maintenance 52.5 31% 48.6 31% Other third party 39.5 24% 32.1 21% ------------------ -------- -------- -------- -------- Total 168.0 100% 155.5 100% ------------------ -------- -------- -------- -------- Profit Divisional performances are stated before unallocated Group corporate costs. These costs include head office staff costs, directors' remuneration, professional and office costs, and non-operational costs, but exclude costs allocated to operations. During the period unallocated Group corporate costs totalled £1.3m (2005: £1.4m). Unallocated share based payments totalled £0.4m (2005: £0.3m) There was also a small net increase of £0.5m (2005: £0.8m) in our non-operational property provision, principally arising from the settlement of an onerous long term lease. We continue to manage an orderly and low risk run down of this portfolio which comprises legacy properties previously occupied by Group businesses. The contract provisions utilised during the year were £5.0m in respect of SoV and £0.5m in respect of Pericles making a total of £5.5m (2005: £5.6m); provisions carried forward into the current financial year total £14.2m, which includes £12.0m for the SoV settlement and £2.2m for Pericles. Net operating costs for the Group, excluding goodwill impairment continue to be tightly controlled and are summarised below: Continuing operations 2006 2005 £m £m ---------------------- -------- -------- Distribution costs 10.9 10.6 Administrative expenses 42.1 40.3 ---------------------- -------- -------- Total overhead costs 53.0 50.9 Less: Share based payment (1.2) (0.9) Development costs (12.4) (9.4) ---------------------- -------- -------- Net overhead costs 39.4 40.6 ---------------------- -------- -------- % Continuing revenue 24% 25% ---------------------- -------- -------- Development spending, including amortisation of £1.6m (2005: £0.9m), increased to £12.4m (2005: £9.4m), once again largely focused on Telecoms and Public Sector. The level of development spending is expected to increase by approximately one third again in the current year, with a first half to second half split of roughly 50:50 and over 60% of the spending continuing to be focused on Telecoms. Development spending by division during the year was as follows: £m 2005/6 2004/5 ----------------------------- --------------------- P&L Capitalised P&L Capitalised (net) (net) ---------- ------ --------- ------ --------- Telecoms 7.9 0.4 5.1 1.1 Public Sector 4.4 1.7 4.3 - Travel 0.1 - - - ---------- ------ --------- ------ --------- Total 12.4 2.1 9.4 1.1 ---------- ------ --------- ------ --------- Travel's intended development spend in the year was deferred due to the low level of new @com orders in the first half year and our requirement to develop @com against the disciplines of a customer specification. Group finance costs As expected, with the Group now in a net cash position, net interest of £0.6m was earned compared to the £0.5m net interest expense last year. Orders Orders for ongoing businesses excluding SoV are analysed by division below: Order intake Revenue Order intake as £m £m a % of revenue ---------------- ----------- ----------- ----------- Telecoms 55.6 57.0 97% Public Sector 75.1 70.8 106% Travel 32.1 28.1 114% International 12.5 12.1 103% ---------------- ----------- ----------- ----------- Total operating companies 175.3 168.0 104% ---------------- ----------- ----------- ----------- Taxation The tax rate for the ongoing business, after utilisation of provisions, for the year was 27.8% (2005: 22.2%). The tax rate as expected increased due to the increase in profits from countries where tax rates are higher than the UK, principally in Anite Telecoms US operation. As Telecoms continues to widen its geographical spread of profits in higher tax regimes, the Group tax rate is expected to continue to rise modestly. Further progress was made during the year with respect of de-risking the Groups' tax provision and this has led to a £3m exceptional tax credit relating to prior years in the financing structure of our discontinued European businesses Shareholder returns and dividends • Underlying basic earnings* per share increased to 5.1p • Board has proposed a dividend of 0.5p per share (2005:nil) - covered 10 times by underlying earnings • Retained earnings for the year to equity holders increased to £8.9m The number of shares in issue decreased in the period under review to 351.36 million at 30 April 2006 from 353.95m at 30 April 2005, following the share buy backs undertaken in the year. In total 7,733,332 shares were bought back and cancelled at an average price of 65.1 pence per share. 5,137,368 new shares were issued to settle SAYE and option maturities. The weighted average number of shares in issue used to calculate basic earnings per share was thus 349.48m (30 April 2005: 353.05m). This does not include the dilutive effect of share option and SAYE schemes. There was no dilution effect on the basic earnings per share of these schemes in the year. Disposal The disposal of Anite Austria (part of the International division) for a gross consideration of £2.6m (including cash balances) was completed early in the financial year. Cash management As expected the conversion of operating profits to cash during the year was worse than the previous year due to a number of anticipated factors including: • Continued losses in SoV and Pericles contracts: and • Diminishing returns from VME maintenance renewals in Public Sector In addition the exceptionally strong performance by Telecoms in the last two months of the year increased debtors, which meant that cash could not be collected until the first quarter of the current year. In addition stock was purchased and paid for prior to the year end to support this revenue. Strong management of working capital continued and the net proceeds of the disposal of Anite Austria of £1.4m were received in July 2005, whilst £5.0m was spent buying back shares. Capital expenditure totalled £6.3m (2005: £9.3m) and fell due to the non-recurrence of significant expenditures incurred last year on Telecoms' new UK headquarters and IT spending. Cash The Group's balance sheet remains strong, with net cash of £36.3m (2005:£37.4m), prior to the settlement of approximately £10m to SoV. The Group's syndicated banking facilities provide a facility of £20m was recently renewed and is next due for review in August 2007. In addition, the Group retains a £10m overdraft facility, renewable annually. We believe these facilities are appropriate for the Group's expected future requirements. However, the Board believes it has access to additional facilities if required to fund appropriate acquisitions. Net cash can be analysed as follows: Analysis of net cash £m 2006 2005 ---------------------- -------- -------- Net cash 36.3 37.4 Finance leases - (0.1) Loan notes (0.5) (0.1) ---------------------- -------- -------- Net funds 35.8 37.2 ---------------------- -------- -------- Earnouts Subsequent to the year end we finally completed the process begun four years ago to unwind this legacy issue and settle all outstanding earnout commitments. Having settled £0.5m during the year under review (2005: £6.8m), the remaining payment of £0.5m in respect of loan notes was settled following the year end in May 2006. No other outstanding earnout commitments remain. Foreign exchange The Group has not been materially affected by currency movements. The increase in Telecoms' US dollar-denominated sales in recent years has raised the Group's exposure to the US dollar, although it should be noted that much of its hardware costs are also expressed in US dollars, and so there is in part a natural hedge. Post balance sheet events The SoV settlement cost approximately £10m, which was paid on 10 July 2006. The onerous contract wind down in the Australia business following the SoV settlement, has led to additional costs of £2.5m, including various non-cash write-downs. No accrued income for this contract is held in the Balance Sheet as at 30 April 2006. The provision carried forward in the accounts to 30 April 2006 to cover the settlement and closure costs amounted to £12m. Following the year end, we settled our liabilities in respect of a major portion of the non-operating property provision at a cost of £2.1m (completed on 6 July 2006). This represented 39% of the outstanding surplus property provision as at 30 April 2006. As a result, the ongoing net rental deficit on non-operating properties will have been reduced from over £0.5m to less than £0.06m over the last three financial years. Christopher Humphrey Group Finance Director Consolidated income statement for the year ended 30 April 2006 2006 2005 Notes £000 £000 ------------------------ ------- -------- -------- Continuing operations Revenue 2.1 164,667 160,169 Cost of sales 2.1 (101,704) (85,820) ------------------------ ------- -------- -------- Gross profit 62,963 74,349 Distribution costs (10,956) (10,558) ------------------------ ------- -------- -------- Goodwill impairment 2.2 - (17,347) Other administrative expenses (42,142) (40,343) ------------------------ ------- -------- -------- Administrative expenses (42,142) (57,690) ------------------------ ------- -------- -------- Net operating costs (53,098) (68,248) Profit on disposal of businesses 3(a) - 1,565 ------------------------ ------- -------- -------- Operating profit from continuing operations 9,865 7,666 Finance income 4 939 41 Finance charges 4 (355) (609) ------------------------ ------- -------- -------- Profit from continuing operations before tax 10,449 7,098 Tax expense 5 (6,879) (5,087) ------------------------ ------- -------- -------- Profit from continuing operations 3,570 2,011 Profit from discontinued operations 3(b) 5,299 4,646 ------------------------ ------- -------- -------- Profit for the year 8,869 6,657 ------------------------ ------- -------- -------- Profit attributable to equity holders of the parent 8,869 6,657 ------------------------ ------- -------- -------- Continuing and discontinued operations Earning per share - basic 6 2.5p 1.9p - diluted 2.5p 1.9p Continuing operations Earning per share from continuing operations - basic 6 1.0p 0.5p - diluted 1.0p 0.5p ------------------------ ------- -------- -------- Consolidated balance sheet as at 30 April 2006 --------------------------------------- ------ -------- -------- Notes 2006 2005 £000 £000 --------------------------------------- ------ -------- -------- Non-current assets Goodwill 34,119 34,619 Other intangible assets 4,751 2,650 Property, plant and equipment 12,936 12,027 Deferred tax assets 2,438 2,896 --------------------------------------- ------ -------- -------- 54,244 52,192 --------------------------------------- ------ -------- -------- Current assets Inventories 7 2,920 4,279 Trade and other receivables 8 55,376 49,577 Current tax assets 334 331 Cash and cash equivalents 9 36,263 37,443 --------------------------------------- ------ -------- -------- 94,893 91,630 Assets classified as held for sale 3(c) 473 1,415 --------------------------------------- ------ -------- -------- 95,366 93,045 --------------------------------------- ------ -------- -------- Total assets 149,610 145,237 --------------------------------------- ------ -------- -------- Current liabilities 10 (66,623) (69,564) Trade and other payables Current tax payable (12,974) (14,728) Obligations under finance leases - (151) Provisions 11 (14,649) (8,247) --------------------------------------- ------ -------- -------- (94,246) (92,690) Liabilities directly associated with assets classified as held for sale 3(c) (519) (1,464) --------------------------------------- ------ -------- -------- (94,765) (94,154) --------------------------------------- ------ -------- -------- Non-current liabilities (150) (268) Other payables Provisions 11 (10,730) (12,694) --------------------------------------- ------ -------- -------- (10,880) (12,962) --------------------------------------- ------ -------- -------- Total liabilities (105,645) (107,116) --------------------------------------- ------ -------- -------- Net assets 43,965 38,121 --------------------------------------- ------ -------- -------- Equity Share capital - issued 35,186 35,446 Share premium account 24,303 23,390 Own shares (715) - Merger reserve 6,538 6,538 Capital redemption reserve 773 - Retained earnings (22,120) (27,253) --------------------------------------- ------ -------- -------- Total equity 43,965 38,121 --------------------------------------- ------ -------- -------- Consolidated statement of changes in equity for the year ended 30 April 2006 Share Shares Share Own Merger Capital Retained Total capital to be premium shares reserve redemption earnings issued issued account reserve £000 £000 £000 £000 £000 £000 £000 £000 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Balance at 1 May 2004 Changes in equity for the year to 30 April 2005 35,239 800 22,856 - 14,227 - (43,081) 30,041 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Exchange differences arising on translation of foreign operations - - - - - - 37 37 Amount recovered from own shares - - - - - - 82 82 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Net income recognised directly in equity - - - - - - 119 119 Profit for the year - - - - - - 6,657 6,657 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Total recognised income and expense for the year - - - - - - 6,776 6,776 Issue of share capital 207 - - - - - - 207 Premium on shares issued - - 534 - 341 - - 875 Transfer goodwill impairment to merger reserve - - - - (8,030) - 8,030 - Shares issued against earnout in the year - (800) - - - - - (800) Deferred tax related to share-based payments - - - - - - 150 150 Recognition of share-based payments (before tax) - - - - - - 872 872 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Balance at 30 April 2005 35,446 - 23,390 - 6,538 - (27,253) 38,121 Changes in equity for the year to 30 April 2006 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Exchange differences arising on translation of foreign operations - - - - - - 92 92 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Net income recognised directly in equity - - - - - - 92 92 Profit for the year - - - - - - 8,869 8,869 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Total recognised income and expense for the year - - - - - - 8,961 8,961 Issue of share capital 513 - - - - - - 513 Premium on shares issued - - 913 - - - - 913 Purchase of own shares - - - (715) - - - (715) Dividend not collected by shareholders - - - - - - 12 12 Share buy back (773) - - - - 773 (5,037) (5,037) Deferred tax related to share-based payments - - - - - - (11) (11) Recognition of share-based payments (before tax) - - - - - - 1,208 1,208 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Balance at 30 April 2006 35,186 - 24,303 (715) 6,538 773 (22,120) 43,965 --------------------- ------ ------ ------- ----- ----- ------ ------ ------ Consolidated cash flow statement for the year ended 30 April 2006 --------------------------------------- ------ -------- -------- Notes 2006 2005 Total Total £000 £000 --------------------------------------- ------ -------- -------- Profit for the year: - continuing 3,570 2,011 - discontinued 5,299 4,646 --------------------------------------- ------ -------- -------- 8,869 6,657 Adjustments for: Income tax expense 3,628 5,220 Profit on disposal of discontinued operations (2,383) (5,540) Profit on disposal of disposed businesses - (1,565) Finance (income)/charges (604) 517 Depreciation of property, plant and equipment 5,212 4,062 Amortisation of intangible assets 556 337 Amortisation of internally generated assets 1,568 875 Goodwill impairment 500 20,658 Loss on disposal of property, plant and equipment 112 28 Share-based payments 1,208 872 Increase/(decrease) in provisions 5,587 (2,687) --------------------------------------- ------ -------- -------- Operating cash flows before movements in working capital 24,253 29,434 Decrease/(increase) in inventories 959 (878) Increase in receivables (6,253) (3,179) (Decrease)/increase in payables (3,235) 331 --------------------------------------- ------ -------- -------- Cash generated from operations 15,724 25,708 Interest received 781 51 Interest paid - (443) Interest element of finance lease rental payments (8) (66) Income taxes paid (4,916) (185) --------------------------------------- ------ -------- -------- Net cash from operating activities 11,581 25,065 --------------------------------------- ------ -------- -------- Cash flow from investing activities Proceeds from disposal of subsidiary undertakings (net of cash disposed) 1,368 19,372 Disposal of fixed asset investment - 170 Proceeds from previously closed businesses 430 216 Deferred consideration paid for prior years' acquisitions - (1,061) Purchase of property, plant and equipment (5,667) (9,219) Proceeds on disposal of property, plant and equipment (17) 31 Purchase of software licences (600) (162) Expenditure on capitalised product development (3,621) (1,943) --------------------------------------- ------ -------- -------- Net cash (used in)/generated from investing activities (8,107) 7,404 --------------------------------------- ------ -------- -------- Cash flow from financing activities Decrease in short-term deposits - 1,095 Issue of ordinary share capital 1,426 238 Share buy back (5,018) - Purchase of own shares into treasury (715) - Capital element of finance lease rental payments (155) (783) Redemption of vendor loan note instruments (482) (6,838) --------------------------------------- ------ -------- -------- Net cash used in financing activities (4,944) (6,288) --------------------------------------- ------ -------- -------- Net (decrease)/increase in cash and cash equivalents (1,470) 26,181 --------------------------------------- ------ -------- -------- Effect of exchange rate changes 290 (91) --------------------------------------- ------ -------- -------- Cash and cash equivalents at 1 May 37,443 11,353 --------------------------------------- ------ -------- -------- Cash and cash equivalents at 30 April 9 36,263 37,443 --------------------------------------- ------ -------- -------- Discontinued operations include GMO Management Consulting (held for sale at 30 April 2006) which generated net operating cash outflows of £329,000, paid £345,000 in respect of net returns on investment and servicing of financing and paid £10,000 for capital expenditure. Notes to the accounts 1. Basis of preparation The preliminary results have been prepared under the historical cost convention and in accordance with current International Financial Reporting Standards (IFRS), and are covered by IFRS 1, 'First-time Adoption of International Financial Reporting Standards', because they are the Group's first consolidated IFRS financial statements. The transition date for the application of IFRS for the Group was 1 May 2004. The statutory accounts for 2006 have been prepared following accounting standards consistent with those for the year ended 30 April 2005. The financial information for the year ended 30 April 2005, presented as comparative figures in this report, have been restated from UK GAAP in accordance with IFRS with the exception of the adoption of IAS 32 and 39. The restatement of these comparative figures can be found in the Group's statutory accounts for the year ended 30 April 2006 and on the Group's website www.anite.com. Whilst the financial information included in the preliminary announcement has been prepared in accordance with IFRS as endorsed by the European Union, this announcement does not contain sufficient information to comply with all the disclosure requirements of IFRS. The financial information set out above does not constitute the company's statutory accounts for the year ended 30 April 2006, but is derived from those accounts. Statutory accounts for 2006 will be delivered following the company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s237 (2) or (3) Companies Act 1985. The preliminary announcement for the year ended 30 April 2006 was approved by the Board of Directors on 10 July 2006. 2. Segmental information 2.1 Settlement of State Of Victoria contract 2006 2005 ---------------------------------- ---------------------------------- Continuing State of Continuing Continuing State of Continuing operations Victoria operations operations Victoria operations (excluding ('SOV') (excluding ('SOV') SOV SOV contract) contract) £000 £000 £000 £000 £000 £000 ----------------- -------- ------- -------- -------- ------- -------- Revenue 168,010 (3,343) 164,667 157,697 2,472 160,169 Cost of sales (90,769) (10,935) (101,704) (83,348) (2,472) (85,820) ----------------- -------- ------- -------- -------- ------- -------- Gross profit 77,241 (14,278) 62,963 74,349 - 74,349 ----------------- -------- ------- -------- -------- ------- -------- On 30 June 2006, the Group signed a settlement and release agreement in respect of the contract for the State of Victoria. This settlement concluded negotiations regarding the Group's obligations under this contract which were commenced prior to 30 April 2006. A one-time payment of approximately £10m has been made in full and final settlement of all the Group's obligations under the contract to the Department of Human Services of the State of Victoria ('SOV''). The terms of the settlement and other onerous contract costs arising from the settlement and restructuring of the Australian business including the write-down of assets have been reflected in these financial statements. This results in a net loss for the year of £14.3m in relation to this contract after utilisation of £5.0m contract provisions brought forward and includes a £ 12.0m provision for the settlement and onerous contract exit costs (note 11). 2.2 Business segments - primary basis Telecoms Public Sector Travel International Total Consultancy ------------ ------------------------------------------------------------------------------------------ 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Revenue - ongoing businesses* 57,008 45,778 67,641 69,721 28,872 31,636 12,114 12,491 165,635 159,626 - inter-segment revenue1 - - (227) - (741) (1,648) - (1) (968) (1,649) ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ 57,008 45,778 67,414 69,721 28,131 29,988 12,114 12,490 164,667 157,977 - disposed businesses - 1,234 - 958 - - - - - 2,192 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Revenue - continuing operations 57,008 47,012 67,414 70,679 28,131 29,988 12,114 12,490 164,667 160,169 - discontinued operations - - - - - - 2,204 29,234 2,204 29,234 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Total revenue 57,008 47,012 67,414 70,679 28,131 29,988 14,318 41,724 166,871 189,403 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Continuing operations 15,989 12,515 (10,742) 6,259 5,891 6,162 911 617 12,049 25,553 Segment profit - ongoing businesses* - disposed businesses - 67 - 76 - - - - - 143 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ - continuing operations 15,989 12,582 (10,742) 6,335 5,891 6,162 911 617 12,049 25,696 ------ ------ Unallocated corporate costs (2,184) (2,248) (after recharges) ------ ------ Operating profit for continuing operations before goodwill and profit on disposals 9,865 23,448 - goodwill impairment - - - (5,000) - (1,119) - (11,228) - (17,347) Profit on disposal of businesses - 1,565 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Segment operating profit/(loss) 15,989 12,582 (10,742) 1,335 5,891 5,043 911 (10,611) - continuing operations ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Operating profit from continuing operations 9,865 7,666 Finance income/ (charges) (note 4) 584 (568) ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Profit before tax 10,449 7,098 Tax expense (6,879) (5,087) ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Profit from continuing operations 3,570 2,011 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Discontinued operations Operating loss from discontinued operations (note 3) (355) (812) (355) (812) Profit on disposal of businesses 2,383 5,540 2,383 5,540 Finance income (note 4) 20 51 20 51 Tax credit/ (expense) 3,251 (133) 3,251 (133) ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Profit from discontinued operations 5,299 4,646 5,299 4,646 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ Profit for the year 8,869 6,657 ------------ ------ ----- ------ ------ ------- ------- ------ ------ ------ ------ 1 Inter-segment revenues are charged at prevailing market rates. * Ongoing businesses (including SoV) comprise operating results of continuing operations less the operating results of disposed businesses. Disposed businesses comprise the operating results of continuing operations which have ceased during the year and which do not meet the definition of discontinued operations under IFRS 5. Ongoing businesses comprise the operating results of continuing operations less the operating results of disposed businesses. Discontinued operations are all within the International Consultancy business segment. 2.3 Geographical segment - secondary basis The four business segments operate in four principal geographical areas, as set out below. The following analysis of the Group's revenue is based on the geographical location of the customers, irrespective of the origin of the goods or services. The corresponding segment assets are based on the geographical location of the assets. ------------------ ----------------- ----------------- Revenue Revenue Revenue Continuing Discontinued Total operations operations -------------------- -------- -------- -------- ------- ------- ------ 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 -------------------- -------- -------- -------- ------- ------- ------ Europe - United Kingdom 91,254 92,144 381 2,665 91,635 94,809 Europe - other 20,083 33,508 1,823 26,566 21,906 60,074 North America 19,859 10,936 - 3 19,859 10,939 Rest of the world 33,471 23,581 - - 33,471 23,581 -------------------- -------- -------- -------- ------- ------- ------ 164,667 160,169 2,204 29,234 166,871 189,403 -------------------- -------- -------- -------- ------- ------- ------ 2.4 Ongoing businesses excluding SoV, before goodwill impairment Telecoms Public Sector Travel International Total Consultancy --------------- --------------- --------------- --------------- --------------- ---------------- 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ Revenue - ongoing (excluding SoV) 57,008 45,778 70,757 67,249 28,131 29,988 12,114 12,490 168,010 155,505 - SoV - - (3,343) 2,472 - - - - (3,343) 2,472 --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ - ongoing businesses* (note 2.2) 57,008 45,778 67,414 69,721 28,131 29,988 12,114 12,490 164,667 157,977 --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ Operating profit (excluding SoV)1 before share-based payments 16,246 12,686 3,259 4,334 6,154 6,337 959 674 26,618 24,031 Share-based payments (257) (171) (216) (218) (263) (175) (48) (57) (784) (621) --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ Operating profit (excluding SoV)1 15,989 12,515 3,043 4,116 5,891 6,162 911 617 25,834 23,410 Unallocated corporate costs (1,760) (1,997) Share-based payments (424) (251) ------ ------ Operating profit 1 23,650 21,162 Utilisation of Pericles provision 2 - - 493 2,143 - - - - 493 2,143 --------------- ------ ----- ------ ------ ----- ------- ------ ----- Segment operating profit (excluding SoV)3 15,989 12,515 3,536 6,259 5,891 6,162 911 617 ------ ------ Operating profit 3 24,143 23,305 Net finance income/(charges) 584 (568) ------ ------ Profit before tax (excluding SoV) 24,727 22,737 Operating loss - SoV - - (14,278) - - - - - (14,278) - --------------- ------ ----- ------ ------ ----- ------- ------ ----- Segment operating profit/(loss) (including SoV) 3 (note 2.2) 15,989 12,515 (10,742) 6,259 5,891 6,162 911 617 --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ Profit before tax (including SoV) 10,449 22,737 --------------- ------ ----- ------ ------ ----- ------- ------ ----- ------ ------ This additional information has been disclosed to give a clearer understanding of the results of the core ongoing businesses. * Ongoing businesses comprise the operating results of continuing operations less the operating results of disposed businesses. 1 Before goodwill impairment and utilisation of provisions. 2 Contract provisions relate to the utilisation of the contract provisions made for the Pericles development. 3 Before goodwill impairment but after utilisation of provisions. 2.5 Additional analysis of Public Sector ongoing businesses Public Sector Pericles Subtotal Public State of Total (excluding Sector Pericles and SoV) development (excluding SoV) Victoria ('SoV') --------------- --------------- --------------- ---------------- --------------- 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 ---------------- ------ ------ ------ ------ ------ ------ ------- ----- ------ ------ Revenue on ongoing businesses* 67,012 64,065 3,745 3,184 70,757 67,249 (3,343) 2,472 67,414 69,721 ---------------- ------ ------ ------ ------ ------ ------ ------- ----- ------ ------ Operating profit/(loss)1 - before share-based payments 8,656 12,243 (5,397) (7,909) 3,259 4,334 (19,299) (3,491) (16,040) 843 Share-based payments (216) (218) - - (216) (218) - - (216) (218) Utilisation of contract provisions2 - - 493 2,143 493 2,143 5,021 3,491 5,514 5,634 ---------------- ------ ------ ------ ------ ------ ------ ------- ----- ------ ------ Operating profit/(loss)3 (note 2.2) 8,440 12,025 (4,904) (5,766) 3,536 6,259 (14,278) - (10,742) 6,259 ---------------- ------ ------ ------ ------ ------ ------ ------- ----- ------ ------ This additional information has been disclosed to give a clearer understanding of the results of the core ongoing businesses. * Ongoing businesses comprise the operating results of continuing operations less the operating results of disposed businesses. 1 Before goodwill impairment and utilisation of provisions. 2 Contract provisions relate to the utilisation of the contract provisions made for the Pericles development and SoV contract. 3 Before goodwill impairment but after utilisation of provisions. 3 Disposed businesses/discontinued operations ------------------------------------------ ------- ------- a) Disposed businesses: 2006 2005 £000 £'000 ------------------------------------------ ------- ------- Profit on sale of business and assets of: - 742 Telecoms Billing business (Anite Calculus Limited) - Transport division (Anite Public Sector Limited) - - 823 ------------------------------------------ ------- ------- - 1,565 ------------------------------------------ ------- ------- In the opinion of the Directors, the disposed businesses did not meet the criteria to be classified as discontinued operations under IFRS 5, Non-current assets held for sale and discontinued operations, as they did not represent a separate major line of business within the Group. b) Discontinued operations On 29 June 2004, the Directors resolved to dispose of some of the non-core businesses within the International Consultancy division. The results of these businesses are included in the International Consultancy division as discontinued operations for segment reporting purposes (see note 2). ---------------------------------------- -------- -------- 2006 2005 £000 £000 ---------------------------------------- -------- -------- Profit after tax for the year from discontinued operations Revenue 2,204 29,234 Cost of sales (1,385) (21,282) ---------------------------------------- -------- -------- Gross profit 819 7,952 Goodwill impairment (500) (3,311) Operating expenses (674) (5,453) ---------------------------------------- -------- -------- Operating loss before finance income (355) (812) Finance income 20 51 ---------------------------------------- -------- -------- Loss before tax (335) (761) Tax credit/(expense) 41 (133) ---------------------------------------- -------- -------- Loss after tax (294) (894) ---------------------------------------- -------- -------- Profit on sale of discontinued operations 907 - Profit on disposal of previously disposed businesses Profit on disposal of Anite Consulting GmbH (Austria) 1,409 - Profit on disposal of Anite Systems GmbH - 6,187 Profit/(loss) on disposal of Datavance Informatique SAS 67 (479) Loss on disposal of French Space Business (Delta Partners SAS) - (168) ---------------------------------------- -------- -------- Net profit before tax on sale of discontinued operations 2,383 5,540 Current year tax credit relating to discontinued activities - - Tax credit relating to activities discontinued in prior years 3,210 - ---------------------------------------- -------- -------- Net profit after tax on sale of discontinued operations 5,593 5,540 ---------------------------------------- -------- -------- Total 5,299 4,646 ---------------------------------------- -------- -------- On 30 June 2005 the Group sold its 100% interest in the ordinary share capital of Anite Consulting GmbH (Austria). c) Assets held for sale The assets and liabilities of GMO Management Consulting GmbH, which is expected to be sold within 12 months, have been classified as held for sale and are presented separately in the balance sheet at 30 April 2006. Anite Consulting GmbH (Austria) was held for sale at 30 April 2005 and subsequently sold on 30 June 2005. The results of these businesses are included in the International Consultancy division as discontinued operations for segment reporting purposes (see note 2). The major classes of assets and liabilities of these discontinued businesses classified as held for sale are as follows: 2006 2005 £000 £000 ---------------------------------------- -------- ------- Goodwill - 557 Property, plant and equipment 26 105 Trade and other receivables 447 753 ---------------------------------------- -------- ------- Total assets classified as held for sale 473 1,415 Trade and other payables, and total for liabilities associated with assets classified held for sale (519) (1,464) ---------------------------------------- -------- ------- Net liabilities (46) (49) ---------------------------------------- -------- ------- 4 Net finance income Continuing Discontinued Total operations operations ----------------- ------------------ --------------- 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 -------------------- -------- -------- -------- -------- ------- ------- Finance income Interest receivable and similar income 939 41 20 51 959 92 -------------------- -------- -------- -------- -------- ------- ------- 939 41 20 51 959 92 -------------------- -------- -------- -------- -------- ------- ------- Finance charges Bank loans and overdrafts - (91) - - - (91) Vendor loan notes (30) (153) - - (30) (153) Finance leases and hire purchase contracts (8) (58) - - (8) (58) Other loans (78) (65) - - (78) (65) Unwinding of discount on provisions (239) (234) - - (239) (234) -------------------- -------- -------- -------- -------- ------- ------- Exchange loss on foreign currency borrowings less deposits (net) - (8) - - - (8) -------------------- -------- -------- -------- -------- ------- ------- (355) (609) - - (355) (609) -------------------- -------- -------- -------- -------- ------- ------- Net finance income/(charges) 584 (568) 20 51 604 (517) -------------------- -------- -------- -------- -------- ------- ------- 5 Income tax expense Continuing Discontinued Total operations operations ----------------- ------------------ -------------- Current tax 2006 2005 2006 2005 2006 2005 £000 £000 £000 £000 £000 £000 --------------------- ------- ------- -------- ------- ------ ------- UK corporation tax 5,120 4,073 (41) - 5,079 4,073 Foreign tax 1,453 688 - 133 1,453 821 --------------------- ------- ------- -------- ------- ------ ------- 6,573 4,761 (41) 133 6,532 4,894 --------------------- ------- ------- -------- ------- ------ ------- Adjustments in respect of prior years - UK corporation tax (301) (228) (3,210) - (3,511) (228) - foreign tax 68 24 - - 68 24 --------------------- ------- ------- -------- ------- ------ ------- (233) (204) (3,210) - (3,443) (204) --------------------- ------- ------- -------- ------- ------ ------- Total current tax expense 6,340 4,557 (3,251) 133 3,089 4,690 --------------------- ------- ------- -------- ------- ------ ------- Deferred tax 455 (79) - - 455 (79) UK 84 609 - - 84 609 Foreign --------------------- ------- ------- -------- ------- ------ ------- Total deferred tax expense 539 530 - - 539 530 --------------------- ------- ------- -------- ------- ------ ------- --------------------- ------- ------- -------- ------- ------ ------- Total income tax expense 6,879 5,087 (3,251) 133 3,628 5,220 --------------------- ------- ------- -------- ------- ------ ------- No tax arose on the profit on sale of discontinued operations recognised during the year. (2005: nil). Corporation tax is calculated at 30% (2005: 30%) of the estimated assessable profit for the year. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. 2006 2005 Charged/(credited) to equity £000 £000 ---------------------------------------- -------- ------- Deferred tax relating to share-based payments 11 (150) ---------------------------------------- -------- ------- 6 Earnings per share The calculations of earnings per share are based on the Group profit for the year, profit on ongoing businesses (excluding SoV) and weighted average number of shares in issue. EPS summary 2006 2005 ---------------------------------------- -------- -------- Profit for the year - basic and diluted 2.5p 1 .9p Profit for the year on continuing operations - basic and diluted 1.0p 0.5p Profit on ongoing businesses (excluding SoV)* before utilisation of Pericles development provision 5.0p 4.6p Profit on ongoing businesses (excluding SoV)* after utilisation of Pericles development provision 5.1p 5.0p ---------------------------------------- -------- -------- ------------------------------------------------------------------------------- 2006 2005 2006 2005 Pence Pence per per share share £000 £000 -------- ------- -------- ------- Profit for the year - basic and diluted 2.5 1.9 8,869 6,657 ------------------------------ -------- ------- -------- ------- Profit from discontinued operations (1.5) (1.4) (5,299) (4,646) ------------------------------ -------- ------- -------- ------- Profit for the year on continuing operations - basic and diluted 1.0 0.5 3,570 2,011 ------------------------------ -------- ------- -------- ------- Reconciliation to profit on ongoing businesses (excluding SoV): Operating profit from disposed businesses - - - (143) Profit on disposal of businesses - (0.4) - (1,565) Charge of prior year tax provisions and tax credit on profit on disposal of disposed busineses - - - 49 Goodwill Impairment - 4.9 - 17,347 Utilisation of contract provisions (net of tax) - Pericles development (0.1) (0.4) (345) (1,500) - SoV contract (1.4) (1.0) (5,021) (3,491) Loss on SoV contract (before utilisation of provision) 5.5 1.0 19,299 3,491 ------------------------------ -------- ------- -------- ------- Profit on ongoing businesses (excluding SOV)* before utilisation of Pericles development provision 5.0 4.6 17,503 16,199 ------------------------------ -------- ------- -------- ------- Utilisation of Pericles development provision (net of tax) 0.1 0.4 345 1,500 ------------------------------ -------- ------- -------- ------- Profit on ongoing businesses (excluding SOV)* after utilisation of Pericles development provision 5.1 5.0 17,848 17,699 ------------------------------ -------- ------- -------- ------- Basic and diluted EPS for discontinued operations are 1.5p per share (2005: 1.4p per share) and 1.5p per share (2005: 1.4p per share), respectively. ----------------------------------------- ------- ------- Number of shares ('000) Weighted average number of shares in issue - used to 349,478 353,046 calculate basic earnings per share ------- ------- ----------------------------------------- Effect of dilutive ordinary shares - SAYE and share option schemes 4,435 5,122 ----------------------------------------- ------- ------- Weighted average number of shares used to calculate diluted earnings per share 353,913 358,168 ----------------------------------------- ------- ------- Earnings per share on ongoing businesses (excluding SoV contract) before goodwill impairment have also been included as the Directors consider that this figure provides an additional measure of the ongoing businesses. * Ongoing businesses (excluding SoV) comprise the operating results of continuing operations less the operating results of disposed businesses. 7 Inventories 2006 2005 £000 £000 ---------------------------------------- ------- ------- Inventories - components 2,674 3,173 Work in progress 127 1,017 Finished goods 119 89 ---------------------------------------- ------- ------- 2,920 4,279 ---------------------------------------- ------- ------- Inventories are stated at fair value less costs to sell. 8 Trade and other receivables 2006 2005 £000 £000 ---------------------------------------- ------- ------- Amounts falling due within one year: Trade debtors 43,582 34,540 Less: provision for doubtful trade receivables (1,060) (840) ---------------------------------------- ------- ------- Trade debtors net of provision 42,522 33,700 Other receivables 1,146 1,784 Prepayments 5,206 6,050 Amount due from construction customers 383 1,121 Accrued income 6,119 6,922 ---------------------------------------- ------- ------- 55,376 49,577 ---------------------------------------- ------- ------- 9 Cash and cash equivalents 2006 2005 £000 £000 ----------------------------------------- ------- ------- Cash at bank and in hand 36,263 37,443 ----------------------------------------- ------- ------- 10 Trade and other payables 2006 2005 £000 £000 ----------------------------------------- ------- ------- Vendor loan notes 478 77 Trade creditors 8,714 12,203 Other taxes and social security 6,540 5,919 Other creditors 2,760 3,426 Amount due to contract customers 81 - Payments received on account 7,122 6,304 Deferred income 24,509 22,700 Accruals 16,419 18,935 ----------------------------------------- ------- ------- 66,623 69,564 ----------------------------------------- ------- ------- 11 Provisions Deferred Warranties Surplus Onerous Other Group consideration property contract provisions total provisions £000 £000 £000 £000 £000 £000 -------------------- ------- ------- ------- ------- ------- ------- At 1 May 2005 1,024 5,675 5,224 7,592 1,426 20,941 Reclassification (to)/from trade and other payables (141) - 50 - - (91) Crystallisation of earnout and transferred to vendor loan notes (883) - - - - (883) Release of provision credited to income statement - (674) (743) - (392) (1,809) Established during the year - - 1,218 12,000 50 13,268 Utilised during the year - - (538) (5,514) (478) (6,530) Unwinding of discounting - - 239 - - 239 Foreign exchange adjustment - 61 2 158 23 244 -------------------- ------- ------- ------- ------- ------- ------- At 30 April 2006 - 5,062 5,452 14,236 629 25,379 -------------------- ------- ------- ------- ------- ------- ------- 2006 2005 £000 £000 -------------------- ------- ------- ------- ------- ------- ------- Analysed as: Current liabilities 14,649 8,247 Non-current liabilities 10,730 12,694 -------------------- ------- ------- ------- ------- ------- ------- 25,379 20,941 -------------------- ------- ------- ------- ------- ------- ------- The warranty provision has been made to cover any potential claims made by disposed businesses under the contractual warranty period and is expected to be utilised in one to three years. The surplus property provision is in respect of all properties surplus to business requirements. The provision is calculated in accordance with IAS 37 as disclosed in note 1 to the accounts and is expected to be utilised in one to thirteen years. The onerous contract provisions were provided in 2004 and 2005 in respect of the Pericles and State of Victoria contractual commitments. In the year, £0.5m (2005: £2.1m) and £5.0m (2005: £3.5m) was utilised in respect of the contracts respectively. Following the settlement with State of Victoria a provision has been made of £12.0m for the costs of settlement and restructuring costs. These provisions are expected to be utilised in one to two years. This information is provided by RNS The company news service from the London Stock Exchange MUPQGBU

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