Final Results

Focus Solutions Group PLC 5 June 2001 5 June 2001 Focus Solutions reports strong performance Preliminary results for the year ended 31 March 2001 Highlights * Revenue up over 300% * 6 new customers in the UK life and pensions industry * First international partnership in place for North America * Strategic partnership increased and extended with Norwich Union Life (CGNU) * Investment in new products accelerated * New server version of goal:technology launched * Strong cash position at £7.7m to support investment plans * Licensing agreement concluded with Spotlight Interactive for South African market, subject of a separate announcement today John Streets, chief executive, said: 'This has been a highly successful year for Focus. We have established a leading position in the life and pensions market and we are well placed to move into other financial services. We have taken our first significant step into the North American market with the signing of a licensing agreement with MPO Group Inc. There is considerable demand for our products and expertise, and so the Board has decided to accelerate investment in product and market development in this financial year to take advantage of these opportunities. The strong revenue growth experienced last year is expected to continue and whilst the increased investment will have an impact on the move to profitability, this will be comfortably funded by existing cash. The Board firmly believes that this allocation of resources is in the best interests of building shareholder value.' Enquiries Focus Solutions Group plc 01926 468 300 John Streets Claire Forrest Citigate Dewe Rogerson 020 7638 9571 Chris Barrie Sara Batchelor Chairman's statement I am pleased to report that the Group has delivered an excellent set of financial results. We have made substantial progress in all areas of our business, including significant product development, and have not experienced any slowdown in demand or opportunity, against a backdrop of one of the most turbulent years for technology markets We have delivered on our promises. Revenue growth has been significant with turnover tripling to £2.3m compared with £0.7m in the year ending March 2000. The loss before tax and after NI on share options was £2.4m (£1.0m 31st March 2000), which reflected on-going product development costs. The cash balance at the year-end was £7.7m, compared with £9.9m in the same period last year. Loss per share increased to 9.7p from 5.6p the previous year. In view of the trading losses the Directors will not be recommending payment of a dividend. As a newly fledged AIM company, we recognise that success lies in building strong relationships with our customers so that we can expand and build upon our business model both in the UK and internationally. To do so means investing the money raised at flotation wisely in the early years to give strong sustainable profit later on. We have seized the opportunity to improve and capitalise on our first mover advantage and develop multi-platform versions of goal: technology. This will facilitate our expansion into other sectors and geographical markets ensuring we are well placed to take full advantage of growing opportunities. The Board has therefore significantly increased the budget for product and market development in this financial year. The strong revenue growth experienced last year is expected to continue and whilst the increased investment will have an impact on the move to profitability, this will be comfortably funded by existing cash. The Board firmly believes that this allocation of resources is in the best interests of building shareholder value. Business development The main focus for the year has been the life and pensions market. In the UK, new customers have been signed from amongst the leading companies in the industry, including both life companies and national independent financial adviser (IFA) organisations. New partnerships have been signed, both with service providers that operate internet portals for IFAs and leading systems integrators. Overseas, the Group put in place its first international licensing agreement to cover North America. MPO Group Inc will be launching a new internet-based product based on goal:technology, our XML-based data capture toolkit. People We continue to develop our management and expertise to ensure we are well equipped to respond to the challenges of such rapid growth. To allow John Streets, Chief Executive, to develop the international strategy, Mark Thelwell has been promoted to Managing Director focusing on expanding the UK business, supported by two additional experienced senior managers in the key roles of operations and marketing. Sue Hele was appointed to the Board as Finance Director on 1st April 2001, taking over from Robert Hull. Robert continues as a non-executive director. I would like to thank him for his significant contribution to the Group during his time as Finance Director. Chief Executive's statement Results In a year when market conditions proved extremely difficult for many organisations, I am particularly pleased to report that Focus has exceeded expectations. Turnover is up 300% following strong demand for our products. Matched with close control of costs, this resulted in a pre-tax loss below expectations in a year when up to 50% of salary costs were invested in product development, laying the foundations for the future. Careful management of cash and debtors contributed to an excellent end of year cash position of £7.7m. Building the community To date, goal: technology has addressed the needs of the UK life and pensions community to cut the cost of capturing transactions from their many routes to market, via their direct sales forces, IFAs, call centres and extranets. Focus has secured customers from all parts of this community and now has the critical mass in place to deliver the cost benefits of e-commerce. Six new life and pensions customers bought goal: technology licences during the year, including Legal and General and Skandia. goal: technology customers now include seven of the top ten life companies (ranked by new business premium income in 2000). The majority of customers have already developed their first electronic applications for insurance bonds, generating a monthly usage revenue. This revenue stream will increase as they add new product categories, such as term assurance and stakeholder pensions. IFAs represent one of the industry's most important distribution channels. There are 36,000 IFAs in the UK, up 29% on last year. Much of the communication with the IFA community is via service providers, or internet portals, that provide on line quotation, research and information services. Partnerships are now in place with three leading service providers. Their members can now complete and validate proposals electronically. Extending the reach of goal: technology With the support of the US life and pensions standards body, ACORD, the Group has signed its first international partnership to cover North America. This is a licensing agreement with MPO Group Inc, a specialist e-business solutions company operating in the life and pensions industry. It will be delivering goal: technology as the primary element of its innovative front office solution, supported by Canadian systems integrator, LOGISIL. An important requirement for the largely IBM based North American market is the development of a server-based version of goal: technology to support IBM MQ Series and integrate with IBM WebSphere. This investment will provide Focus with a scaleable product and platform independence. Throughout the year, we have been developing a new generation point of sale software solution for Norwich Union Life. This will be used by its direct sales force, its tied building societies and its joint venture partners. It incorporates goal: technology as the data capture tool for proposal details and will be fully deployed over the next 18 months, supporting over 2000 users. Agreement has been reached to extend this strategic relationship for another two years in a multi-million pound contract. goal: technology has recently been launched into the mortgage community. Electronic mortgage applications will allow lenders to capture and validate mortgage data from their many sales channels, speeding up this fragmented process and reducing costs. The life insurance market The primary market for Focus during the year was UK life and pensions organisations. This sector is undergoing a period of dramatic change driven by competitive, legislative and technological pressures. A recent survey by SG Equities Research concluded that the life insurance industry could save up to 45% of the management costs of acquiring new business through electronic trading. Six million new policies were sold in the UK in 1999 costing the industry £3.5bn to process with volumes likely to increase as stakeholder pensions are rolled out. Many national IFA chains are emerging which are expanding their service offering to high net worth individuals, supported by their own internet sites, extranet links to the insurance companies and sophisticated back office technology. Focus is working with the key suppliers of back office systems to this market, providing goal: technology as an integral part of their solutions. The mortgage market Increasing competition from new entrants and impending legislative changes have meant that the mortgage industry is now looking for ways of capturing new mortgage transactions more cost effectively. Over one million mortgages are sold each year via a fragmented process involving a number of third parties, complex application forms and frequent product changes. The application of goal: technology to the mortgage process will allow lenders to build flexible, easy to change applications for mortgages that can be used in all their channels: agents, branches, call centres and internet sites. It will also facilitate validation at the point of data collection and will enable accurate data to be transmitted straight into the lenders back office systems, speeding up the transaction cycle and reducing the number of errors. Work has already started on building the community with lenders, partners, and intermediaries evaluating goal: technology. Global potential Focus has worked closely with ACORD, the US insurance standards body and is the first UK software vendor to be certified for implementing ACORD XMLife. This now opens up the potential of the North American life and pensions market (which is over four times larger than the UK) as well as other worldwide markets that adopt ACORD standards such as South Africa and Australia. Product development An intensive product development programme has been in place during the year to deliver a global, scaleable, platform independent product. Focus has joined the IBM partner programme and a new Microsoft server version of goal: technology has been built. This allows the product to be integrated into other distribution channels, such as the Internet and extranets. goal: technology now supports a range of messaging standards, whether industry based, such as Origo (the UK life and pensions industry standards body) and ACORD, or proprietary and unique to a specific company. Focus selected XML as a primary technology at the start of its product development. XML is becoming the accepted mechanism for sending transactions effectively via the Internet and is being widely adopted across many industry sectors on a global basis. After two years of intense experience, Focus has extended its XML expertise with its goal: technology toolkit enabling the development of applications for business users without programming resources. Although resources were focused on goal: technology during the year, the Group intend to continue building a component-based point of sale solution (POS) to support the changing needs of the life and pensions industry where new channels to market are emerging. The IFA channel, for example, accounted for 50% of new business last year. This will incorporate goal: technology to generate and validate the 'fact find' necessary at the beginning of the financial planning cycle, and to capture the proposal data at the end of the sales cycle. Group strategy The Group intends to continue its strategy of building trading communities to facilitate the capture of complex electronic transactions. The insurance industry community is now established and efforts will be concentrated on revenue growth in this market. Priority for 2001/2002 will be to build the mortgage community and penetrate other communities in the financial services industry, both in the UK and internationally. Partnerships are already being developed with systems integrators and software suppliers that are looking to integrate goal: technology within their products. The Group also plans to extend its product range to include complementary software that supports the sale and distribution of other financial products. Markets outside the financial services market offer a significant opportunity longer term. The Group intends to exploit these by establishing licensing agreements for goal: technology with partners who have specific industry expertise and a substantial customer base. Building the team Our success in recruiting people with key skills, particularly in the areas of Java and XML, is particularly pleasing. Staff numbers have risen to 78 at the year-end from 39 last year. This expansion not only includes development staff but also account management, finance, marketing, sales and project management skills. A customer services team has been set up and the quality assurance team has been extended significantly. Prospects With many of the necessary partnerships and customers now in place, the Group is well positioned to take advantage of the strong demand in the insurance industry and to move into new sectors within the financial services market. Although international partnerships are at an early stage, our global strategy is taking shape. Carefully planned investment in the technology aligned with expansion via partners into other markets will deliver additional opportunities in the longer term. The Annual General Meeting will be held on 17th July at 4.30pm at the offices of Focus Solutions Group plc in Leamington Spa. Focus Solutions Group plc Consolidated Profit and Loss Account for the year ended 31 March 2001 31 March 31 March Year ended Year ended 2001 2000 £'000 £'000 Turnover 2,273 721 Staff costs (2,541) (1,140) Depreciation (221) (85) Other external charges (2,454) (555) ________ ________ Operating loss (2,943) (1,059) Investment income 513 32 ________ ________ (2,430) (1,027) Interest payable (7) (12) ________ ________ Loss on ordinary activities Before taxation (2,437) ( 1,039) Taxation - 1 ________ ________ Loss on ordinary activities after Taxation and sustained loss for the year (2,437) ( 1,038) ________ ________ Loss per ordinary share (note 2) (9.7p) (5.6p) ________ ________ Turnover and operating loss are derived from the Group's continuing operations. No separate statement of total recognised gains and losses has been presented as all such gains and losses have been dealt with in the profit and loss account. Focus Solutions Group plc Group Balance Sheet 31 March 2001 2001 2000 £'000 £'000 Fixed assets Tangible assets 519 165 _________ ________ Current assets Debtors 534 312 Cash at bank and in hand 7,670 9,917 ________ ________ 8,204 10,229 ________ ________ Creditors: Amounts falling due within one year 1,120 412 ________ ________ Net current assets 7,084 9,817 ________ ________ Total assets less current liabilities 7,603 9,982 Creditors: Amounts falling due in more than one year 86 28 ________ ________ Net assets 7,517 9,954 ________ ________ Capital and reserves Called up share capital 2,508 2,508 Share premium 9,426 9,426 Profit and loss account (4,417) (1,980) ________ ________ Shareholders' funds - equity interests 7,517 9,954 ________ ________ Focus Solutions Group plc Consolidated Cash Flow Statement for the year ended 31 March 2001 Year ended Year ended 31 March 31 March 2001 2000 £'000 £'000 Net cash outflow from operating activities (note 3) (2,072) (1,022) Returns on investments and servicing of finance 491 20 Taxation - 1 Capital expenditure and financial investment (575) (92) ________ ________ Cash outflow before financing (2,156) (1,093) Management of liquid resources 2,596 (9,679) Financing (91) 10,566 ________ ________ Increase/(decrease) in cash in the year 349 (206) ________ ________ Reconciliation of net cashflow to movement in net funds Year ended Year ended 31 March 31 March 2001 2000 £'000 £'000 Increase/(decrease) in cash in the year 349 (206) Change in net funds resulting from cash flows 25 61 New finance leases - (48) Cash (outflow)/inflow from increase in liquid resources (2,596) 9,679 ________ ________ Movement in net funds in the year (2,222) 9,486 Net funds at start of year 9,865 379 ________ ________ Net funds at end of period 7,643 9,865 ________ ________ Focus Solutions Group plc Notes to the non-statutory financial statements 1. The figures set out above have been reported upon by the auditors. The comparative figures are extracts from the non-statutory audited financial statements of Focus Solutions Group plc for the year ended 31 March 2000, which have been filed with the Registrar of Companies. The report of the auditors for the periods ended 31 March 2001 and the year ended 31 March 2000 contain no qualification or statement under sections 237(2) or (3) of the Companies Act 1985. 10. The financial information contained in this announcement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The 2001 annual report and financial statements will be filed with the Registrar of Companies after the Annual General Meeting. 2. Loss per ordinary share Year Year ended ended 31 March 31 March 2001 2000 £'000 £'000 Earnings attributable to ordinary shareholders Loss for the financial year (2,437) (1,038) Weighted average number of ordinary shares issued during ________ ________ the year (000's) 25,084 18,542 Dilutive effect of share options - - ________ ________ Adjusted weighted average number of ordinary shares in issue during the year (000's) 25,084 18,542 Basic earnings per share (9.7p) (5.6p) ________ ________ Diluted earnings per share (9.7p) (5.6p) ________ ________ Potential share issues arising from the Group's share option schemes are not considered to be dilutive as the basic earnings per share is a loss. This is because potential share issues would not increase the net loss per share reported. 3. Reconciliation of operating loss to net cash outflow from operating activities Year Year Ended ended 31 March 31 March 2001 2000 £'000 £'000 Operating loss (2,943) (1,059) Depreciation 221 85 Increase in debtors (207) (244) Increase in creditors 857 196 ________ ________ Net cash outflow from operating activities (2,072) (1,022) ________ ________

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