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FI Group PLC (XAN)

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Wednesday 10 January, 2001

FI Group PLC

Interim Results

FI Group PLC
10 January 2001



Wednesday 10 January 2001


Hilary Cropper, Executive Chairman
Jo Connell, Group Managing Director
Geoff Dunn, Group Finance Director                         Today: 020 7831 3113
F.I.Group PLC                                          Thereafter: 01442 233339

Giles Sanderson
Ben Atwell
Financial Dynamics                                                020 7831 3113



                                F.I.GROUP PLC

                         INTERIM RESULTS ANNOUNCEMENT

                   FOR THE SIX MONTHS ENDED 30 OCTOBER 2000




F.I.GROUP PLC ('FI' or 'the Group') is a leading supplier of business
technology services for major organisations worldwide. The Group's global
operations cover UK, USA, Continental Europe, India and Asia Pacific.

FI's portfolio includes First Banking Systems (a joint venture with Bank of
Scotland), IIS Infotech, its Indian organisation which provides an offshore
delivery capability, and change management and IT consultancy firms OSI and
Druid. These are supported by FI's further capabilities in skills transfer and
resourcing.



                                 KEY FEATURES


- Turnover up 40% to £204.0m (H1 2000: £145.4m)

- Operating profit* up 37% to £16.4m (H1 2000: £12.0m)

- Profit before tax* up 32% to £15.0m (H1 2000: £11.4m)

- Operating margin* excluding Druid up 23% to 10.2% (H1 2000: 8.3%)

- Diluted earnings per share* down 7% to 3.20p (H1 2000: 3.5p) due mainly to
increased number of shares in issue and the fact that Druid is in recovery
period

- Interim dividend per share up 20% to 1.08p (H1 2000: 0.9p)


    * All figures above are quoted before goodwill amortisation arising from
    the acquisitions of OSI and Druid.

- Marked improvement in Druid performance with return to profitability in last
four calender months

- Very strong performance at OSI with revenues doubling to £44m (H1 2000: 4.5
months) and margins up to 16.6%

- Order bank up 37% to £416m (H1 2000: £304m)

- Three large deals: Barclays £38m, Centrica £26m, Her Majesty's Customs &
Excise potential for £25m

- International revenues grew 40%, US turnover nearly doubled

- FI Recruitment external business up 44% to £16.3m (H1 2000: £11.6m)

- Rebranding on schedule for start of new financial year on 1 May 2001



Commenting on the results, Hilary Cropper CBE, Executive Chairman, said:

'I am delighted to announce another strong set of results in more difficult
market conditions. We are particularly pleased with Druids' performance and
with the very strong set of results from OSI.

Following the acquisition of these businesses, the composition of the Group is
now an excellent fit with the capabilities which customers are seeking from
their IT service providers. Although we are living through a turbulent period
for technology stocks our own confidence in the future growth of the Company
remains high.

The second half year is progressing according to our expectations and the
marked improvement in Druid's performance has continued. The Board remains
confident that management expectations will continue to be met with consequent
increases in shareholder value for the long term.'



Chairman's Statement

I am delighted to announce another strong set of results in a half year which
has seen the strategic positioning of the Group significantly enhanced by the
two major acquisitions of OSI and Druid, both made in the previous financial
year, and the international bridgeheads which have been established ,
particularly in the United States of America.

Our primary concentration during the period has been on the continuing
successful integration of the new companies into the Group and on realising
the synergies which they will bring. The three large contracts concluded in
the half year were all dependent on the combination of capabilities from FI,
OSI, Druid and our Indian subsidiary, IIS Infotech.

These results have been achieved against the background of a market which is
still slower than we have traditionally experienced, partly as a consequence
of the Y2K freeze and partly due to a reassessment by large corporates of the
opportunities opening up to them through e-commerce and customer and knowledge
management systems.

Druid, which of all parts of the Group was most affected by the Y2K slowdown
in the Enterprise Resource Planning (ERP) market, returned to profitability in
the last two months of the period although reporting a loss of £2.4m for the
period as a whole. I am very pleased to report that this upward trend has
continued into the second half year. Meanwhile, OSI has delivered an excellent
set of results doubling the revenues reported in the same period last year
(4.5 months) and producing an operating margin of 16.6% which exceeded our
expectations.

Financial Results

- Turnover increased by 40% to £204.0m (H1 2000: £145.4m)

- Operating profit (pre-goodwill amortisation of £20.8m) grew 37% to £16.4m
(H1 2000: £12.0m)

- Profit before tax (pre-goodwill amortisation) rose by 32% to £15.0m (H1
2000: £11.4m)

- Profit after tax (pre-goodwill amortisation) rose by 34% to £10.6m (H1 2000:
£7.9m)

- Diluted earnings per share (pre-goodwill amortisation) fell by 7% to 3.2p
(H1 2000: 3.5p)

The figures above are quoted before goodwill amortisation of £20.8 million for
the period arising principally from the acquisitions of OSI and Druid.

Margins at the operating profit level before interest and the amortisation of
goodwill decreased to 8.0% from 8.3%, due to the impact of Druid losses but
increased to 10.2% for the Group excluding Druid.



Earnings per share fell by 7% due to additional shares in issue and the fact
that Druid was in its recovery period.

In the half year there was a cash outflow of £17.4m. The main reason for this
was an increase of £26.1m in working capital, itself largely the result of the
changing mix of our business towards consultancy where billing practices
differ from those in our traditional businesses. As a result borrowings rose
to £47.6 million, still a low level in relation to shareholders' funds.

Business Performance

Orders taken in the period totalled £201m producing an order bank of £416m
which was a 37% increase on the same period last year and broadly flat
compared with the order bank at year end. Two large deals included in this
order bank were signed with Barclays for £38m spread over three years and with
Centrica for £26m also over three years. Additionally, FI has been selected as
one of two preferred suppliers by HM Customs & Excise for a three year period
in a contract which could potentially deliver business worth £25m. Other
orders in excess of £4m include Bank of Scotland, DfEE, Singapore
International Airlines, Electricity Pool, BT, Dixons, Kingfisher, Scottish and
Southern Energy, and a major Asian airline.

The total Outsourcing business which includes IIS Infotech and 49% of First
Banking Systems, our joint venture with the Bank of Scotland, increased
turnover by 16%. FI Recruitment, which is a leading indicator of IT resource
demand, saw its external business grow by 44% under the leadership of new
Managing Director, Kate Curtis, and has won three preferred supplierships as
well as launching a new managed resourcing service.

Revenues earned outside the UK by source grew at 40% to £27.9m which included
a doubling of our business in North America. An excellent North American
client base is being developed with repeat orders from TXU, Kansas City P&L
and Pfizer plus new client wins at VISA (Canada), and a major US Insurance
Company.

The mix of the business has changed slightly compared with the last full year
picture following the inclusion of Druid and a full period of OSI.
Applications Management remains the core service at 51% followed by a good
spread across Business Consultancy, ERP Implementation, e-Business and
Recruitment.

Applications Management            51%    (Last full year 53%)
Business Consultancy               22%    (Last full year 27%)
ERP                                10%    (Last full year 3%)
e-Business                         9%     (Last full year 9%)
Recruitment                        8%     (Last full year 8%)

A strategic review of the key industry sectors which we service has been
undertaken to ensure that we are exploiting all the opportunities created by
the combined Group. We shall extend our worldwide coverage to Pharmaceuticals,
Supply Chain and Consumer Goods, Aerospace and Defence sectors as well as to
FI's traditional sectors of Financial Services, Utilities, Telecommunications,
Retail. In addition we will continue to service UK Government Departments.

The sector mix during the period was as follows:

Banking & Insurance                                   44% (Last full year 44%)
Utilities & Telecoms                                  30% (Last full year 29%)
Retail, Supply Chain and Consumer Goods               17% (Last full year 21%)
Aerospace & Defence, Pharmaceuticals, UK Government   9%  (Last full year 6%)

Worldwide workforce numbers, expressed as half yearly average full-time
equivalents and including our 49% share of First Banking Systems' resources,
have increased by 18% year on year to 5,263, largely as a result of the Druid
acquisition and the enlargement of FBS. Freelance contractors continue to
amount to 23% of total headcount.


Board Changes

It gives me a great deal of pleasure to announce the appointment of Steve
Weston, Managing Director of our Outsourcing business, to the Group Board.
Steve joined FI from Barclaycard in January 1998, initially as Director of
Technology, and has played an important role in developing the new technology
aspects of our Applications Management and Systems Integration capabilities.
Representing the largest people employer and profit generator within the
Group, I am confident that Steve's experience and personal qualities will make
a major contribution to the Board's debate.

I am also very pleased to welcome Philip Cook, previously Company Secretary at
British American Tobacco Plc, who joined the Company on 1 January as our Group
General Counsel and Company Secretary. Philip's earlier career included
spending eight years at Herbert Smith.

However, I am sad to inform you that Tricia Gardom, Group Communications
Director, has indicated her intention to leave the Company on 1 May 2001 to
take up a role outside FI. Tricia, who has been with FI Group for 19 years and
served as a Board member since 1993, has played a vital part in the successful
growth of FI and has given me invaluable personal support through our initial
flotation and subsequent corporate activities. She will be greatly missed and
goes with our thanks and warmest wishes for the future.

Dividends

Having considered the performance of the business the Board has decided to
declare an interim dividend of 1.08p per share (1999: 0.9p) which is 20% up on
the interim dividend last year. The dividend will be paid on 6 April 2001 to
shareholders on the register at 26 January 2001. Dividends charged to the
profit and loss account were £3.5m compared with £2.4m in the first half of
1999/2000.

Workforce Share Ownership

The Board has continued its commitment to workforce share ownership worldwide
and during the period has established a Share Scheme Steering Board, which I
chair and which comprises representatives from the Group Executive, its
operating businesses and external advisors.

The steering board meets monthly and has already considered the detailed
design of the new AESOP, for which shareholder approval was attained at the
AGM in September and which it is anticipated will replace the existing
Approved Profit Sharing Scheme when the existing arrangements are withdrawn by
the Government. Particularly important is the review of emerging practice, in
terms of structure and value, in share based incentive schemes in competitive
overseas recruitment markets that are of increasing importance to us. We are
also continuing to evaluate our options for dealing with the employers
National Insurance Contribution liability on unapproved options granted
between 6 April 1999 and 19 May 2000 in the light of measures recently
announced by the Chancellor and hope to have this situation clarified by year
end.

At the end of the period, the workforce and related trusts held 30% compared
to 32% of the Group's issued share capital at the full year. In June we
granted share options equal to 10% of base salary as at 1 May 2000 to all UK
employees, and extended this benefit to all our international employees as far
as was practical in the context of local restrictions and regulations.

Since the end of the Interim period, we have been commended by Proshare for
'Extending Employee Share Schemes Beyond the UK' in recognition of our
achievement in implementing FI's Employee Share Schemes across the Group into
India, Malaysia, Singapore, Belgium, Holland and the USA.

Rebranding

To maximise the impact of the enlarged Group and increase customer perception
of the totality of the Company's capability it is clearly vital that the nine
separate identities we have inherited over the last few years are replaced by
the concept of One Company, One Brand and to bring together our combined
attributes, specialisms and values. After seeking input from both customers
and employees, a decision was taken to adopt a new name for the Company as
well a new identity.

Progress on the research and design of the brand is well advanced and a new
positioning statement, name and house-style have all been prepared. Approval
of the new name will be put to shareholders at an Extraordinary General
Meeting to be held in the Conference Suite at the Financial Times Building, 1
Southwark Bridge, London SE1 9HL on Friday 27 April 2001. Subject to
shareholder approval, we are on schedule to launch the new brand at the start
of our new financial year on 1 May 2001.

Outlook

The composition of the Group is an excellent fit with the capabilities which
customers are seeking from their IT service providers. Although we are living
through a turbulent period for technology stocks our own confidence in the
future growth of the Company remains high.

The aftermath of the Y2K freeze plus the reassessment of technology needs have
made our markets more difficult during the last twelve months and are still
affecting the pace of decision making. Nevertheless, the pent up demand for
transformational business change and for better return on IT investment is
bound to continue the outsourcing trend. We are already seeing this trend in
our discussions with customers, in the large new developments which they are
considering, in their concentration on Customer Relationship Management and
Supply Chain Management, and in the pick up of the ERP implementation market
worldwide.

The second half year is progressing according to our expectations and the
marked improvement in Druid's performance has continued. The Board remains
confident that management expectations will continue to be met with consequent
increases in shareholder value for the long term.

I should like to say a special thank you to all our workforce around the world
for their commitment during the last tough year and wish them a share of the
success and excitement which our soon to be rebranded company will deliver in
the years ahead.



Consolidated profit and loss account
                                                   6 months  6 months   Year to
                                                         to        to
                                                     31 Oct    31 Oct  30 April
                                                      2000      1999      2000
                                                 (reviewed) (reviewed)(reviewed)
                                            Notes     £'000     £'000     £'000
Turnover:
Ongoing group including share of joint        2     204,018   145,379   307,696
venture's turnover
Less: share of joint venture's turnover             (21,806)  (11,813)  (29,441)
Group turnover                                      182,212   133,566   278,255
Operating (loss) profit:
Operating profit pre goodwill amortisation           12,598     9,655    23,224
Goodwill amortisation                               (20,780)   (1,872)   (9,624)
Operating (loss) profit                              (8,182)    7,783    13,600
Share of operating profit in Joint venture            3,818     2,341     5,390
Total operating (loss) profit                        (4,364)   10,124    18,990
Net interest payable                                 (1,382)     (585)   (1,599)
(Loss) profit on ordinary activities before          (5,746)    9,539    17,391
taxation
(Loss) profit on ordinary activities before
tax analysed between:
Profit on ordinary activities before
taxation and
amortisation of goodwill                            15,034    11,411    27,015
Amortisation of goodwill                           (20,780)   (1,872)   (9,624)
                                                    (5,746)    9,539    17,391
Taxation                                      3     (4,480)   (3,537)   (7,668)
(Loss) profit attributable to shareholders         (10,226)    6,002     9,723
Dividends                                     4     (3,462)   (2,378)   (8,134)
Retained (loss) profit for the period              (13,688)    3,624     1,589
Earnings per share - pre goodwill
amortisation
- basic                                               3.31p     3.55p     8.12p
- diluted                                             3.20p     3.45p     7.78p
(Loss) earnings per share
- basic                                             (3.21)p     2.71p     4.08p
- diluted                                           (3.21)p     2.63p     3.91p
Statement of total recognised gains and
losses
(Loss) profit attributable to shareholders         (10,226)    6,002     9,723
Exchange differences on retranslation of
net assets of
subsidiary undertakings                               (137)      (74)        8
Total recognised (losses) gains                    (10,363)    5,928     9,731



Consolidated balance sheet
                                      Note 31 Oct 2000 31 Oct 1999     30 April
                                                                           2000
                                            (reviewed)  (reviewed)    (audited)
                                                 £'000       £'000        £'000
Fixed assets
Intangible assets                              800,817     108,285      822,213
Tangible assets                                 21,061      17,932       22,956
Investments
Investments in joint venture:
Share of gross assets                           10,750       5,626       12,671
Share of gross liabilities                      (9,777)     (5,059)     (11,798)
                                                   973         567          873
Other investments                                2,724           -        2,762
                                               825,575     126,784      848,804
Current Assets                         5        95,291      72,317       84,330
Creditors due within one year
Creditors                                      (67,277)    (56,780)     (80,061)
Short term borrowings                          (28,603)     (4,698)     (14,517)
                                               (95,880)    (61,478)     (94,578)
Net current (liabilities) assets                  (589)     10,839     (10,248)
Total assets less current liabilities          824,986     137,623      838,556
Long term borrowings                           (26,549)    (39,856)     (30,213)
Provisions for liabilities and                  (2,576)     (3,018)      (2,339)
charges
Net assets                                     795,861      94,749      806,004
Share capital                                   16,080      11,459       15,974
Reserves                                       779,781      83,290      790,030
Total equity shareholders' funds               795,861      94,749      806,004



Consolidated cash flow statement
                    Note  6 months to 31 Oct  6 months to 31 Oct    Year to 30
                           2000 (reviewed)    1999 (reviewed)      April 2000
                                     £'000              £'000      (audited) 
                                                                         £'000
Cash (outflow)       6                (9,570)              (890)        15,544
inflow from
operating
activities
Dividends from                         2,729               1,632         3,540
joint venture
Returns on                            (1,508)               (647)         (876)
investments and
servicing of
finance
Taxation                              (1,821)               (162)       (6,961)
Capital expenditure                   (3,217)             (2,982)       (4,156)
and financial
investment
Acquisitions                          (1,938)            (51,012)      (58,022)
Equity dividends                      (3,398)             (2,899)       (4,966)
paid
Cash outflow before                  (18,723)            (56,960)      (55,897)
use of liquid
resources and
financing
Management of        7                    99               9,964        19,044
liquid resources
Financing                             11,740              51,772        47,543
(Decrease) increase  8                (6,884)              4,776        10,690
in cash at bank and
in hand





Notes to the Accounts




    1 The accounting policies set out in the Accounts for the year to 30 April
    2000 have been applied for the purposes of this statement.

2 Geographic analysis
                                  6 months ended 31 October 2000 (reviewed)
                                 Turnover by Turnover by     Operating      Net
                                 destination      source     profit by   assets
                                                               source* employed
                                                                             by
                                                                         source
                                       £'000       £'000         £'000    £'000
United Kingdom - Group               158,696     154,285        10,258  786,998
India                                  1,607       9,276         1,012    6,144
United States of America              14,274      13,939         1,251     (625)
Rest of World                          7,635       4,712            77    2,371
                                     182,212     182,212        12,598  794,888
United Kingdom - joint venture        21,806      21,806         3,818      973
                                     204,018     204,018        16,416  795,861

                                  6 months ended 31 October 1999 (reviewed)
                                       £'000       £'000         £'000    £'000
United Kingdom - Group               120,201     113,651         8,155   87,453
India                                    874      10,199         1,162    5,679
United States of America               7,473       6,969           160    1,050
Rest of World                          5,018       2,747           178        -
                                     133,566     133,566         9,655   94,182
United Kingdom - joint venture        11,813      11,813         2,341      567
                                     145,379     145,379        11,996   94,749

                                     Year ended 30th April 2000 (audited)
                                       £'000       £'000         £'000    £'000
United Kingdom - Group               242,746     237,813        21,151  794,822
India                                  2,499      17,760         2,419    3,112
United States of America              18,358      17,238         (491)    4,779
Rest of World                         14,652       5,444           145    2,418
                                     278,255     278,255        23,224  805,131
United Kingdom - joint venture        29,441      29,441         5,390      873
                                     307,696     307,696        28,614  806,004

*Before goodwill amortisation

In accordance with FRS 9, the Group's turnover includes £16,738,000 (6 months
ended 31 October 1999 £4,643,000, year ended 30 April 2000 £17,153,000) billed
to the joint venture for the supply of services.



3 Taxation
                                                                       Year to
                                            6 Months to 31 Oct 1999
                    6 Months to 31 Oct 2000        (reviewed) £'000   30 April
                           (reviewed) £'000                               2000
                                                                     (audited)
                                                                         £'000
UK Corporation tax                   2,783                   2,780       6,515
Overseas taxes                         329                      43         152
Corporation tax                        156                       -     (1,137)
under (over)
provided in
previous years
Deferred taxes                           -                       -         466
Share of joint                       1,212                     714       1,672
venture taxation
                                     4,480                   3,537       7,668



4 Dividends

The interim dividend of 1.08p (1999: 0.9p) per share will be paid on 6 April
2001 to members registered at the close of business on 26 January 2001.



5 The analysis of current assets is as follows:
                         31 October 2000         31 October 1999  30 April 2000
                        (reviewed) £'000        (reviewed) £'000    (audited) 
                                                                           £'000
Trade debtors                     52,113                  42,773         46,841
Amounts due from                   2,922                   2,689          3,077
joint venture
Amounts to be                     19,886                   2,684          7,499
billed on
contracts
Other debtors                     12,789                   6,595         12,503
Cash on deposit                    7,581                  17,576         14,410
and at bank
                                  95,291                  72,317         84,330



6 Reconciliation of operating profit to net cash (outflow) inflow from
operating activities
                           31 October 2000       31 October 1999  30 April 2000
                          (reviewed) £'000      (reviewed) £'000    (audited) 
                                                                           £'000
Operating (loss)                   (4,364)                10,124         18,990
profit
Share of operating                 (3,818)                (2,341)        (5,390)
profit in joint
venture
                                   (8,182)                 7,783         13,600
Depreciation charge                 3,907                  2,642          6,307
Loss (profit) on                       30                    (63)          (100)
sale of tangible
assets
Amortisation of                     20,780                 1,872          9,624
goodwill
Profit on sale of                       (4)                    -              -
own shares
Exchange differences                     -                  (74)             39
Increase in debtors                (17,294)              (2,201)         (6,365)
Decrease in                         (8,807)             (10,849)         (7,561)
creditors and
provisions
                                    (9,570)                (890)         15,544





7 Analysis of changes in net debt
           At 1 May 2000    Cash flow      Other non-cash Exchange movement   At
                   £'000        £'000       changes £'000          £'000      31
                                                                            Oct
                                                                           2000
                                                                          £'000
Cash at           14,254     (6,884)                   -           154    7,524
bank and
in hand
Debt due         (14,244)   (10,660)              (3,427)           (8) (28,339)
within 1
year
Debt due         (29,195)         -                3,427            (4) (25,772)
after 1
year
Finance           (1,291)       250                    -             -   (1,041)
leases
                            (10,410)
Cash                 156        (99)                   -             -       57
deposits
maturing
in one
year
                 (30,320)   (17,393)                   -            142 (47,571)



8 Reconciliation of net cash flow to movement in net debt
                              6 Months to 31    6 Months to 31 Year to 30 April
                                    Oct 2000          Oct 1999 2000 (audited) 
                            (reviewed) £'000  (reviewed) £'000            £'000
(Decrease) increase in               (6,884)             4,776           10,690
cash in period
Cash inflow from increase           (10,410)          (30,660)         (29,639)
in debt and lease
financing
Cash inflow from decrease               (99)           (9,964)         (19,044)
in liquid resources
Change in net debt                  (17,393)          (35,848)         (37,993)
resulting from cash flows
Translation difference                  142                 -                -
Loans and finance leases                   -           (4,416)         (13,551)
acquired with subsidiary
undertaking
Movement in net debt in             (17,251)          (40,264)         (51,544)
the period
Net funds at period start           (30,320)            21,224           21,224
Net funds at period end             (47,571)          (19,040)         (30,320)



9 General

The interim financial statements for the period to 31 October 2000 were
approved by the Board on 9 January 2001. They are unaudited but have been
reviewed by the Auditors. The comparative figures for the year to 30 April
2000 have been abridged from the Group's statutory accounts which have been
delivered to the Registrar of Companies. The auditors' report on the statutory
accounts was unqualified and did not include a statement under Section 237 (2)
or (3) of the Companies Act 1985.