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2 ergo Group plc (MXCP)

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Wednesday 11 May, 2005

2 ergo Group plc

Interim Results

2 ergo Group plc
11 May 2005

Embargoed until 7am                                                  11 May 2005

                                2ergo Group plc
                            ('2ergo' or the 'Group')

           Interim Results for the six months ending 28 February 2005

2ergo Group plc, which facilitates communication and interaction between
companies and their customers or staff using Mobile Internet, SMS, MMS, Web and
Voice applications, is pleased to announce interim results for the six months
ended 28 February 2005.

                                        Interim 2005   Interim 2004   % change
                                               £'000          £'000
Turnover                                       8,893          4,452       +100
Operating profit                                 518            219       +137
Pre-tax profit                                   540            212       +155
Adjusted pre-tax profit (1)                      737            401        +84
Basic earnings per share                        1.53p           0.6p      +155
Adjusted earnings per share (1)                 2.08p          1.21p       +72
(1) - figures stated pre amortisation

 • Significantly exceeded market expectations for adjusted pre-tax profit 
   of £737,000

 • Turnover increased 100% to £8.9m

 • 5th consecutive year of triple-digit growth

 • Successful validation of US operations

 • Transactional activity across the Multiserve Platform increased by 82%

Barry Sharples, Joint Managing Director of 2ergo, commented: 'We are delighted
to report on 2ergo's progress over the last six months and to demonstrate to the
market how the results of the hard work and investment since flotation over 12
months ago are now benefiting the growth of the business going forward.

'In particular, the benefits of operational gearing are starting to show
through; the final stages of the implementation of 2ergo's infrastructure to
serve the global market is very close to being completed. This will enable us to
support the continued growth in demand for converged communication services
around the world and in such a fast moving market we are delighted the Group has
achieved stability, whilst looking forward to delivering significant results
over the years to come.

'We believe we can continue our aggressive organic growth and we are now ready
to consider strategic acquisitions that will benefit from 2ergo's core services
and which will generically grow the diverse usage of the Multiserve Platform at
the same time as increasing the Group's global footprint.'


For further information, please contact:

2ergo Group plc                                     +44 (0)1706 221777
Neale Graham, Joint Managing Director
Barry Sharples, Joint Managing Director
Jill Collighan, Finance Director

Tavistock Communications                            +44(0)20 7920 3150
Christian Taylor-Wilkinson or Paul Dulieu

Embargoed until 7am                                                11 May 2005

                                2ergo Group plc
                            ('2ergo' or the 'Group')

           Interim Results for the six months ending 28 February 2005

2ergo is pleased to report another period of strong operational and financial
growth, seeing a significant increase in transactions across its proprietary
Multiserve Platform, which lies at the heart of the Group's infrastructure and
multidisciplinary services. Yet again, both top and bottom line triple digit
growth has been achieved.

Financial Review

Since commencing trading in 1999, the Group has achieved turnover growth of at
least 100% per annum. This trend has continued into 2005, with turnover for the
six months to 28 February 2005 of £8.9 million being double that achieved in the
same period in 2004 (£4.45 million). This growth in revenues comes as a result
of an 82% increase in transactions across the Multiserve Platform from both new
and existing clients, as more companies embrace communication technology as a
way of interacting with, and supplying services to, their staff and customers.

The Board is pleased to announce that the first revenues from the Group's US
operations have been generated in the period, validating all aspects of the
Group's US product and service portfolio. The Group believes it is now in a
position to move from its validation phase into full-scale operation in the US
over the next twelve months, and is pleased that the controlled, cautious
approach into the US market has proven to be a successful strategy.

Gross profit in the period has grown to over £2.0 million (2004: £1.2 million),
with the margin achieved for the six months being 22.9%. This margin is in line
with the 22.5% achieved in second half of the 2004 financial year as the Group
has maintained the mix of its products and services during the period.

Operating expenses in 2005 have risen by £0.56 million. Of this increase, staff
costs account for £0.33 million. Average headcount in the six months to 29
February 2004 was 24, by 2005 this had risen to 40. This investment in staff
costs has been made to facilitate growth in the Group; the increase in revenues
and profitability achieved in the period support this investment decision. Since
31 August 2004, headcount has increased by only four, demonstrating that the
Group now has sufficient staff to support the levels of activity achieved in the
period without the need to grow headcount at the rate seen in the past. From an
operational gearing perspective, future revenues should contribute more to the
bottom line as staff costs as a percentage of turnover should now begin to fall
in the UK.

Pre-tax profit for the six months was £0.54 million, an increase of 155% over
the £0.21 million achieved in 2004. Adjusted (pre-amortisation) pre-tax profit
has grown to £0.74 million, significantly exceeding market expectations. Basic
earnings per share increased by 155% to 1.53p (2004: 0.6p).

The Group continues to be cash generative, having a strong balance sheet, with
shareholders' funds at 28 February 2005 standing at £4.3 million.

Operational Review

The Group's core operations have continued to perform in line with management 
expectations, with several new client applications being launched during the 
period. Client loyalty has continued to be strong with over 96% of 2ergo's 
clients renewing their contracts during the period with many also expanding 
their current usage. In addition, a significant number of new clients have 
taken up the Group's services in the six months.

During the period the Group has remained extremely profitable. As predicted, it
is starting to see the real benefit of operational gearing from the extensive
development work undertaken in recent years as transaction volumes build without
the requirement to re-engineer or expand technical resource to accommodate the
continued upturn in transaction volumes.

Development has continued on Version 4 of the Multiserve Platform, which is
scheduled to be released this month. As no further work is needed within the
foreseeable future to satisfy anticipated future capacity requirements, Version
4 has concentrated on utilising best practice engineering methods to design and
deploy an Oracle database architecture providing increased performance,
scalability and integrity. These increased complexities of the Multiserve
Platform provide a further key differentiator and barrier to entry in the
marketplace. The Group is also currently in the process of assessing the
commerciality of licensing the Platform to third parties around the world.

Following the recent AGM on 7 April 2005, the Group announced that it had
conducted a share buy-back of 718,182 ordinary shares, of 1p each, from Michael
Kilgannon, which are to be held in treasury. The shares were purchased at a
price of 110p per share, which the Board believes represents excellent value for
shareholders. Placing these shares into treasury means they can be used to
facilitate future transactions without diluting existing shareholdings. The
Board also expects the buy-back to improve future earnings per share. The Group
holds a further option on the remaining 1,781,818 shares Mr Kilgannon still owns
at a price of 110p per share.

US Operations

M-invent, the Group's US trading company, has achieved successful validation of
its products and services. Building relationships with organisations such as
Hearst Communications, Clear Channel and the New York Post, the company now has
numerous retail partnerships as well as technical integration into the US

Over this period M-invent has also continued to attract a significant number of
registered consumer members to its mobile content lifestyle service 'Zobmob',
which is proving to be a real hit with American teenagers. The Group plans to
continue its controlled roll out in the US over the next twelve months, leading
to a significant contribution to the Group's revenue in 2006/7.

The Board is extremely encouraged by the speed in which the American market has
matured over the past 6 months, even though US operators are still adopting a
'walled garden' approach to their user base. However, this is relaxing over time
and reflects the progression of the European market. In addition, the level of
acceptance the American public are showing towards the mobile content and
services sector is pleasing. The US will remain a key focus area for the Group
and 2ergo has already started to receive interest from the US in its UK
application services and solutions.

Market Overview

Communications convergence across the fixed-line and mobile telecommunications
and IT landscapes is having a major impact on both business and consumer life.
It is changing the way people interact and communicate. This change is
convincing many organisations to define and deploy new ways to conduct business
- to optimise business processes, improve customer or consumer experience,
leverage market differentiation and above all, drive performance improvement.

As a result, the communications convergence market and, in particular, the
mobile sector will continue to experience dramatic growth around the world, with
industry forecasts predicting healthy increases in transaction volumes.

The mobile entertainment market is continuing to broaden. Several new sector 
opportunities emerged during the period, the most significant being Mobile 
Gaming. The Group considers this to present significant revenue opportunities 
and will increasingly focus on this sector as it emerges, working closely with
both key gaming industry partners and clients to develop specialist services.

Following the early success of mobile applications to support B2C
communications, organisations are increasingly adopting mobile solutions to
support both internal and B2B processes. Increasingly, businesses are seeking
new ways to utilise technology to deliver mass communications and provide a
simplified approach to data capture.

The recent relaxation in European legislation regarding m-commerce also presents
new market opportunities for 2ergo. The customer is no longer restricted to only
purchasing content and services to reside on the mobile device. We are entering
a new phase in mobile commerce, creating new channels to market for many
businesses. Now, the mobile device can be used by business people and consumers
alike to purchase many different types of products and services.


The Group remains confident of its positioning as it takes advantage of a
converging market, and in particular, the mobile communication sector's dramatic
evolution. It looks forward to benefiting from the increasing rewards that are
expected, and have been predicted. The Board feels this view is supported by the
current dynamic levels of growth enjoyed by the Group.

The Group's success to date is based on differentiating its services through its
holistic approach and continued desire and ability to innovate. A key factor of
this approach has been the sharing of knowledge across telecommunications, IT
and business facets - to drive value from the appropriate use of technologies.
This has recently evolved into the formation of a consulting practice, aimed at
guiding clients through the myriad of choices they have to make, to ensure they
deploy the right solution to maximise achievement of business goals.

In addition to maintaining the Group's traditional organic growth, a number of
select acquisitions have been identified both in Europe and the US, and the
Group expects to make announcements during the year regarding these

New business pipeline remains healthy and the Group fosters and benefits from
strong client loyalty. Once again, 2ergo has enjoyed strong growth to date, and
expects this trend to continue throughout the remainder of this year.


2ergo Group plc

Consolidated Profit and Loss Account
For the six months ended 28 February 2005

                                Notes     Unaudited     Unaudited     Audited
                                        6 months to   6 months to     Year to
                                        28 February   29 February   31 August
                                               2005          2004        2004
                                              £'000         £'000       £'000

Turnover                                      8,893         4,452      11,171

Cost of sales                                (6,859)       (3,280)     (8,489)
Gross profit                                  2,034         1,172       2,682

Operating expenses                           (1,516)         (953)     (2,285)

Profit on sale of database                        -             -         222

Operating profit                                518           219         619

Finance charges (net)                            22            (7)         26

Profit on ordinary activities
  before taxation                               540           212         645

Tax on profit on ordinary 
  activities                        2          (119)          (51)        (40)

Retained profit for the period                  421           161         605


Earnings per ordinary share:

Basic                               3          1.53p          0.6p       2.22p

Diluted                             3          1.46p          0.6p       2.19p

2ergo Group plc

Consolidated Balance Sheet
As at 28 February 2005

                                          Unaudited     Unaudited     Audited
                                        28 February   29 February   31 August
                                               2005          2004        2004
                                              £'000         £'000       £'000

Fixed assets

Intangible assets                             1,010           949       1,208
Tangible assets                                 181            61         129
                                              1,191         1,010       1,337

Current assets

Stock                                            54             -         298
Debtors                                       3,380         1,696       2,399
Cash at bank and in hand                      2,249           468       1,992
                                              5,683         2,164       4,689

Creditors: amounts falling due within
  one year                                   (2,540)       (2,113)     (2,111)
Net current assets                            3,143            51       2,578

Total assets less current liabilities         4,334         1,061       3,915

Provisions for liabilities and charges          (17)          (13)        (18)
Net assets                                    4,317         1,048       3,897

Capital and reserves
Called up share capital                         290           265         290
Share premium account                         2,380             -       2,380
Merger reserve                                1,512         1,512       1,512
Other reserve                                  (657)         (657)       (657)
Profit and loss account                         792           (72)        372
Equity shareholders' funds                    4,317         1,048       3,897

2ergo Group plc

Consolidated Cash Flow Statement
For the six months ended 28 February 2005

                                          Unaudited     Unaudited     Audited
                                        6 months to   6 months to     Year to
                                        28 February   29 February   31 August
                                               2005          2004        2004
                                              £'000         £'000       £'000

Net cash inflow/(outflow) from
operating activities                            296           473         (26)

Returns on investments and servicing of 
Interest received/(paid) (net)                   22            (7)         22
Taxation                                          -           166         166

Capital expenditure and financial investment
Payments to acquire tangible fixed assets       (20)           (9)        (49)
Payments to acquire intangible fixed assets       -          (490)       (965)
                                                (20)         (499)     (1,014)
Net cash inflow/(outflow) before financing      298           133        (852)


Repayment of loans                                -             -        (250)
Proceeds from share issue                         -             -       3,000
Exercise of share options                         -             -         375
Expenses of share issue                           -             -        (595)
Capital element of finance lease payments       (41)            -         (21)
                                                (41)            -       2,509

Increase in cash                                257           133       1,657

2ergo Group plc

Notes to the Interim Statement

1. Basis of Preparation

The interim financial statements have been prepared on the basis of the
accounting policies set out in the financial statements of 2ergo Group plc for
the year ended 31 August 2004.

The financial information contained in these statements does not constitute
statutory accounts as defined in Section 240 of the Companies Act 1985. The
accounts for the year ended 31 August 2004 received an unqualified audit report
and have been filed with the Registrar of Companies.

2. Taxation
The tax charge accrued in these interim financial statements reflects an
estimated tax rate of 22% for the period to 28 February 2005, which is the
anticipated effective composite rate for the current financial year.

3. Earnings per share
Basic earnings per share have been calculated by dividing the profit after
taxation in the period by 27,600,100 shares (2004:25,171,379 shares), being the
weighted average number of shares in issue. The diluted earnings per share have
been calculated on a weighted average number of shares of 28,831,332 (2004:

4. Reconciliation of operating profit to net cash inflow from operating

                                          Unaudited     Unaudited     Audited
                                        6 months to   6 months to     Year to
                                        28 February   29 February   31 August
                                               2005          2004        2004
                                              £'000         £'000       £'000

Operating profit                                518           219         619
Depreciation charge                              28            11          28
Amortisation charge                             197           189         325
Decrease in stock                               243             -           -
Increase in debtors                            (981)         (681)     (1,758)
Increase in creditors                           291           735         982
Profit on sale of database                        -             -        (222)
Net cash inflow from operating activities       296           473         (26)

5. Analysis and reconciliation of net funds

                              1 September     Cash         Other  28 February
                                     2004     Flow     movements         2005
                                    £'000    £'000         £'000        £'000

Cash at bank and in hand            1,992      257             -        2,249
Hire purchase: due within 1 year      (10)      41           (59)         (28)
                                    1,982      298           (59)       2,221

                      This information is provided by RNS
            The company news service from the London Stock Exchange

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