ALTERIAN PLC ( ALTERIAN OR THE COMPANY ) Preliminary Results for the year ended 31 March 2006

Transcription

1 PRESS RELEASE Embarged fr 07.00hrs 25 May 2006 ALTERIAN PLC ( ALTERIAN OR THE COMPANY ) Preliminary Results fr the year 2006 STRONG REVENUE GROWTH AND OPERATING PROFITABILITY ACHIEVED Alterian plc ( Alterian ), the leading glbal prvider f database marketing and custmer insight slutins, annunces its preliminary results fr the year FINANCIAL HIGHLIGHTS Financial targets fr the year achieved: Revenue up 36% t 10.6m (2005: 7.8m) Operating csts increased, as planned, by 9% t 9.1m (2005: 8.3m) Operating prfit f 0.5m (2005: perating lss f 1.2m) Prfit befre tax f 0.9m (2005 : lss befre tax f 0.6m) Prfit after tax f 1.4m (2005: lss after tax f 0.2m) High level f grss margin maintained at 90% (2005: 91%) Cash and cash equivalents at the year end remained strng at 10.1m (2005: 10.9m) Fully diluted earnings per share f 3.2p (2005: fully diluted lss per share f 0.4p) Strng secnd half: Revenue up 36% t 7.2m (2005: 5.3m) Operating csts increased by 18%, due t lw marketing expenditure in the cmparable perid, t 4.6m (2005: 3.9m) Operating prfit f 1.8m (2005 : 1.0m) Prfit befre tax f 2.0m (2005 : 1.3m) Prfit after tax f 2.4m (2005: 1.4m) OPERATIONAL HIGHLIGHTS Substantial grwth in Alterian s Nrth American business, demnstrating increasing market acceptance and mmentum : Alterian signed partnership agreements with 5 f the tp 10 Marketing Service Prviders ( MSPs ) in Nrth America in the year (as ranked by Frrester Research in The Frrester Wave TM : Database Marketing Service Prviders, Q1 2006). As a result, Alterian nw has active relatinships with 8 f these tp 10 MSPs, demnstrating significant market acceptance and pprtunity t rll ut Alterian s prducts thrugh this expanded channel. Nrth American revenue up 69% fr the year t 4.1m (2005: 2.4m), and 106% in the secnd half t 2.7m (2005: 1.3m). At cnstant exchange rates the grwth is 58% fr the year and 90% fr the secnd half. Cntinuing prgress in UK sales, and ther sales utside f Nrth America : Grwth cntinued as planned in the majrity f UK based business, with the exceptin f ne UK based partner arrangement where the rate f rll ut has been slwer than planned. 1

2 Grwing sales in mainland Eurpe, Australia and Hng Kng Overall revenue utside f Nrth America up by 22% fr the year t 6.5m (2005 : 5.4m), and 13% fr the secnd half t 4.5m (2005 : 4.0m) Research and Develpment activities resulted in the cmpletin f several significant new prjects, and the launch f new prducts : Three new prducts were released in the furth quarter and sales have been made f each f these prducts: Alterian Business Reprting prvisin f enterprise-wide reprt distributin based n infrmatin held in the Alterian marketing database Alterian Mdelling-KXEN integratin f KXEN statistical algrithms with the Alterian Marketing Suite t reduce the cst and increase the speed f cmpletin f statistical mdelling prjects Alterian Selectin Planner campaign management fr high vlume users such as catalgue cmpanies and MSPs carrying ut wrk n behalf f their clients Further versins f Alterian s cre database engine and applicatins with increased functinality have als been released during the year ACQUISITION Acquisitin f Dynamics Direct Inc (DDI) annunced tday, expected t be immediately earnings enhancing in the current financial year and significantly earnings enhancing in the first full year pst acquisitin. Based in Califrnia and recently ranked as ne f the leading marketing sftware prviders by Jupiter Research ( Marketing Buyers Guide, 2005), DDI has a rapidly grwing partner and custmer base. DDI s prducts have already been integrated with the Alterian Marketing Suite resulting in an imprtant enhancement t the Alterian ffering by integrating and ther n-line marketing executin capabilities. This will be distributed thrugh Alterian s glbal partner base f 70 MSPs, and is expected t accelerate penetratin f Partners custmer and prspect bases, increase average sale price, and prvide access t a wider market f ptential Partners OUTLOOK On the basis f the strengthening f the distributin channel in Nrth America, the rate f revenue grwth in that market, at cnstant exchange rates, is expected t cntinue at apprximately the same rate as the last full year. US revenue fr the year t 2006 wuld have been 0.4m lwer at the currently prevailing exchange rate. The acquisitin f DDI will als significantly increase US dllar revenues. In the UK, whilst the majrity f business als cntinues t grw well, the rll ut under ne partner arrangement is subject t increased uncertainty which culd result in a reductin in the verall rate f revenue grwth achieved in this market. The Cmpany is targeting apprximately the same rate f revenue grwth as last year (apprximately 30% at cnstant exchange rates) with each year including the acquisitins which had similar revenues at the pint f acquisitin. With perating csts expected t increase by apprximately 15% in the current financial year, principally due t the additin f the DDI business and grss margin remaining cnstant at 90%, the targeted increase in revenue shuld still prduce a very significant earnings per share grwth. David Eldridge, Alterian Chief Executive, cmmented : Alterian made significant prgress during the year and we are pleased t reprt ver 3 pence per share f fully diluted earnings. 2

3 The perfrmance f ur Nrth American business has been particularly strng, with a 58% revenue increase year-n-year at cnstant exchange rates. As well as strng revenue grwth, ur team has built an extensive channel t market fr the future with 8 f the tp 10 MSPs in Nrth America nw signed up as partners, five f which were added during the year. This demnstrates widespread acceptance f ur technlgy and business mdel in this market and psitins us well fr cntinuing grwth thrugh this expanded channel ging frward. Our acquisitin f Califrnian based Dynamics Direct Inc, annunced tday, will further strengthen ur leadership psitin and prvide revenue pprtunities ging frward, thrugh the integratin f and ther n-line marketing with ur Alterian Marketing Suite and its distributin thrugh ur glbal partner channel. The utlk is psitive, with the Bard targeting a very significant grwth in earnings per share grwth fr the current year. Enquiries: - ends Alterian plc David Eldridge, Chief Executive Officer David Cutler, Finance Directr Financial Dynamics Harriet Keen Cass Helstrip 3

4 OVERVIEW Alterian achieved its bjective f delivering peratinal prfitability fr the year t 2006 tgether with substantial sales grwth. Fr the year, Alterian achieved revenue f 10.6m, up 36% n the prir year (2005: 7.8m). UK and Eurpean revenue increased by 22% t 6.5m (2005: 5.4m) whilst US revenue increased by 69% t 4.1m (2005: 2.4m). At cnstant exchange rates, US revenue increased by 58%. Fr the secnd half, revenues were als up by 36% n the same perid in the prir year t 7.2m (2005: 5.3m). This was made up f UK and Eurpean revenues f 4.5m (2005: 4.0m), an increase f 13%, and US revenues f 2.7m (2005: 1.3m), an increase f 106%. At cnstant exchange rates, US revenue increased by 90%. Alterian secured a 90% revenue renewal rate (2005 : 90%), demnstrating the nging strength f Alterian s relatinships with its partners. At cnstant exchange rates, the value f revenue that will be generated in the year ending 2007, either frm current cntracts r recurring cntracts, represents apprximately 64% f the revenue in the year ending 2006 (2005 : 70%). The slight reductin in this figure year n year was due t a small number f cntracts being written as perpetual rather than annual licences. A high level f grss margin was maintained at 90% fr the year (2005: 91%). Operating csts f 9.1m were 9% higher than the prir year (2005: 8.3m). As explained in ur interim results, this reflects increased investment in Nrth American sales and marketing resurce and Research & Develpment staff, tgether with the csts resulting frm the acquisitin f MarkIT Infrmatin Services Limited in April 2005, ffset by cntinuing lwer csts elsewhere. Secnd half perating csts f 4.6m were 18% higher than the prir year, reflecting a particularly lw marketing spend in that perid. The increase in revenue and cntrlled perating csts has allwed Alterian t deliver n its target f achieving prfitability fr the year, with prfit befre tax f 0.9m (2005: lss f 0.6m). Secnd half prfit befre tax was 2.0m (2005: 1.3m). The Cmpany benefited frm a Research & Develpment tax credit f 0.2m (2005: 0.5m). The Cmpany als benefited frm 0.25m f deferred tax (2005: nil). A psitive earnings per share was achieved fr the year, with fully diluted earnings per share f 3.2p (2005: lss per share f 0.4p). Cash and Cash Equivalents At 2006 the Cmpany had 10.1m f cash and cash equivalents ( 2005: 10.9m). OPERATIONAL REVIEW Alterian and its market Alterian s structural revenue flws are derived principally frm relatinships with Marketing Service Prviders (MSPs), wh incrprate Alterian s technlgy int their ffering fr visualisatin-led database management services, list rental, r marketing analysis prducts and then sell these n t their custmer base. The Cmpany typically receives an annual partner fee frm each MSP partner, tgether with an annual r perpetual fee fr each client fr whm they use r t whm they sub-licence Alterian technlgy. Alterian als derives structural revenues frm business partners that incrprate Alterian sftware int their wn sftware prducts and resell these under their wn brand (OEM partners). Gd prgress was seen in each f Alterian s principal value prpsitins and in each f ur gegraphies, particularly in Nrth America. 4

5 In the year, Alterian signed new partnerships with 13 MSPs wrldwide, including 5 f the tp 10 MSPs in Nrth America as ranked by Frrester Research (The Frrester Wave TM : Database Marketing Service Prviders, Q1 2006). New partners included Merkle, Palm Cast Data, Alliance Data Systems, CMS and Lyalty Wrks GMBH. Alterian s partners signed ver 60 new end users wrldwide, including HBOS, Chelsea Building Sciety, Q8, St Gerges Bank, Renault, Kellggs and Best Western. Substantial grwth was seen in Alterian s Nrth American business, demnstrating increasing market acceptance and mmentum. Fllwing the additin f 5 f the tp 10 MPSs in Nrth America, Alterian nw has active relatinships with 8 f the tp 10 MSPs as ranked by Frrester Research (The Frrester Wave TM : Database Marketing Service Prviders, Q1 2006). This high quality channel underpins Alterian s cntinuing grwth in this imprtant market. These new channel partners will generate ryalties frm sales t their clients as existing partners cntinue t rll ut slutins. Alterian s business utside f Nrth America has als cntinued t grw well, with the exceptin f ne UK based arrangement where the rll-ut has been slwer than planned. In additin t imprtant wins in the UK, sales were made in mainland Eurpe, Australia and Hng Kng thrugh existing partners such as Experian, PacMicr, OneMarketing, 5One and Alterian s master distributr in Spain. Research & Develpment Alterian has cntinued t increase cash investment in Research & Develpment in rder t maintain a market leading psitin. Three new prducts were released in the furth quarter and sales have been made f each f these prducts : Alterian Business Reprting prvisin f enterprise-wide reprt distributin based n infrmatin held in the Alterian marketing database Alterian Mdelling-KXEN integratin f KXEN statistical algrithms with the Alterian Marketing Suite t reduce the cst and increase the speed f cmpletin f statistical mdelling prjects Alterian Selectin Planner campaign management fr high vlume users such as catalgue cmpanies and MSPs carrying ut wrk n behalf f their clients New versins f Alterian s cre database engine and applicatins with increased functinality have als been released during the year and investment is currently fcused n further enhancements t these cre prducts, particularly in the areas f campaign management and reprting. The develpment f the next majr generatin f Alterian s prduct range is als underway, with initial releases planned within the next 12 mnths. Acquisitins Fllwing the successful acquisitin f MarkIT Infrmatin Services a year ag, Alterian has made a further acquisitin annunced separately tday. Alterian has purchased Dynamics Direct Inc (DDI), an marketing sftware specialist based in Califrnia. Recently ranked by Jupiter Research as ne f the leading marketing sftware prviders ( Marketing Buyers Guide, 2005), its flagship prduct, Dynamic Messenger, has already been successfully integrated int the Alterian Marketing Suite and is being made immediately available t all Alterian partners. This is a significant extensin t the Alterian prduct range, and will further strengthen the Cmpany s market leading psitin in Nrth America and internatinally. The acquisitin is expected t be immediately earnings enhancing in the current financial year and significantly earnings enhancing in the first full year pst acquisitin, and t accelerate penetratin f Partners custmer 5

6 and prspect bases, increase average sale price, and prvide access t a wider market f ptential Partners fr Alterian. Infrastructure Alterian had 91 staff at 2006, an increase f 17 frm The increase resulted frm the acquisitin f MarkIT Infrmatin Services, increased Research & Develpment staffing and increased sales and marketing resurce, particularly in Nrth America. The acquisitin f Dynamics Direct Inc will add 8 staff. We anticipate staff numbers will increase in line with Alterian s strategy f bsting its Nrth American capability and Research & Develpment investment. OUTLOOK The results fr the year 2006 demnstrate significant prgress fr Alterian. The utlk is psitive and the cntinuing success f the Alterian business mdel prvides the Bard with the cnfidence that substantial prfitability and cash generatin will cmpund ver future years. On the basis f the strengthening f the distributin channel in Nrth America, the rate f revenue grwth in that market, at cnstant exchange rates, is expected t cntinue at apprximately the same rate as the last full year. US revenues fr the year t 2006 wuld have been 0.4m lwer at the currently prevailing exchange rate. The acquisitin f DDI will als significantly increase US dllar revenues. In the UK, whilst the clear majrity f business als cntinues t grw well, the rll ut under ne partner arrangement is subject t increased uncertainty which culd result in a reductin in the verall rate f revenue grwth achieved in this market. The Cmpany is targeting apprximately the same rate f revenue grwth as last year (apprximately 30% at cnstant exchange rates) with each year including the acquisitins which had similar revenues at the pint f acquisitin. With perating csts expected t increase by apprximately 15% in the current financial year, principally due t the additin f the DDI business and grss margin remaining cnstant at 90%, the targeted increase in revenue shuld prduce a very significant earnings per share grwth. 6

7 ALTERIAN PLC CONSOLIDATED INCOME STATEMENT 6 mnths mnths 2005 restated see nte 2 Year 2006 Year 2005 (restated see nte 2) Nte Unaudited Unaudited Unaudited Audited Revenue 1, 3 7,207 5,295 10,629 7,806 Cst f sales (791) (389) (1,082) (691) Grss prfit 6,416 4,906 9,547 7,115 Net Operating csts (4,643) (3920) (9,096) (8,309) Operating prfit/(lss) 1, (1,194) Investment revenues Retained prfit/(lss) befre tax 1,971 1, (649) Tax Retained prfit/(lss) fr the perid 2,434 1,379 1,369 (162) Attributable t equity hlders f the parent 2,434 1,379 1,369 (162) Basic prfit/( lss) per rdinary share N/A N/A 3.4p (0.4)p Diluted prfit/(lss)per rdinary share 5 N/A N/A 3.2p (0.4)p There is n difference between the perating prfit/(lss) fr the financial perid and their histrical cst equivalents. The results abve derive frm the cntinuing peratins f the Grup and the acquisitin f MarkIT Infrmatin Services Limited (see nte 8). CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE YEAR ENDED 31 MARCH 2006 Year Unaudited Year 2005 (restated see nte 2) 000 Audited Exchange differences n translatin f freign peratins 76 (36) Net incme recgnised in equity 76 (36) Prfit/(lss) fr the perid 1,369 (162) Ttal recgnised incme and expense fr the perid and attributable t equity hlders f the parent 1,445 (198) 7

8 ALTERIAN PLC CONSOLIDATED BALANCE SHEET AT 31 MARCH 2006 At At (restated see nte 2) Nte Unaudited Audited Nn current assets Gdwill 8 1,119 - Other intangible assets Prperty, plant and equipment Available fr sale investments 70 - Deferred tax asset Ttal nn-current assets 2, Current assets Trade and ther receivables 7,229 4,954 Cash and cash equivalents 10,113 10,877 Ttal current assets 17,342 15,831 Ttal assets 19,744 16,425 Current liabilities Trade and ther payables (2,687) (1,639) Tax liabilities (511) (401) (3,198) (2,040) Net current assets 14,144 13,791 Net assets 16,546 14,385 Equity Share Capital 6 10,164 9,805 Capital reserves 6 26,714 26,300 Other reserves Own shares 6 (209) (83) Cumulative currency exchange reserve 6 40 (36) Retained earnings 6 (20,644) (22,013) Ttal equity 16,546 14,385 8

9 ALTERIAN PLC CONSOLIDATED CASH FLOW STATEMENT YEAR ENDED 31 MARCH 2006 Year Year (restated see nte 2) Nte Unaudited Audited Net cash used in perating activities 7 (416) (1,566) Investing activities Interest received Purchases f prperty, plant & equipment (301) (85) Prceeds frm dispsals f prperty, plant & equipment 10 - Expenditure n prduct develpment (405) - Payments t acquire subsidiary 8 (456) - Overdraft acquired 8 (122) - Net cash (used in)/frm investing activities (835) 460 Financing activities Purchase f wn shares (28) (26) Prceeds n issue f shares Net cash frm/(used in) financing activities 514 (22) Net decrease in cash and cash equivalents (737) (1,128) Cash and cash equivalents at beginning f perid 10,877 12,024 Effect f freign exchange rate changes (27) (19) Cash and cash equivalents at end f year 10,113 10,877 9

10 ALTERIAN PLC NOTES TO THE ACCOUNTS The unaudited preliminary results fr the twelve mnths and the unaudited results six mnths 2006 were apprved by the Bard f Directrs n 24 May ACCOUNTING POLICIES AND BASIS OF PREPARATION The financial infrmatin set ut in this annuncement des nt cnstitute the Cmpany s statutry accunts fr the years 2006 r The financial infrmatin fr the year 2005 is derived frm the Alterian plc statutry accunts fr the year 2005, as am fr the adptin f Internatinal Accunting Standards. The statutry accunts fr 2005 have been delivered t the Registrar f Cmpanies. The auditrs reprted n thse accunts; their reprt was unqualified and did nt cntain a statement under s237 (2) r (3) Cmpanies Act The statutry accunts fr the year 2006 will be finalised n the basis f the financial infrmatin presented by the directrs in this preliminary annuncement and will be delivered t the Registrar f Cmpanies fllwing the Cmpany s Annual General Meeting. Whilst the financial infrmatin included in this preliminary annuncement has been cmputed in accrdance with Internatinal Financial Reprting Standards (IFRSs), this annuncement des nt itself cntain sufficient infrmatin t cmply with IFRSs. The Cmpany expects t publish full financial statements that cmply with IFRS fllwing the annual general meeting. Details f the Grup's principal IFRS accunting plicies are set ut belw. Basis f preparatin The cnslidated financial statements f Alterian plc are required t be prepared in accrdance with Internatinal Financial Reprting Standards (IFRS) fr the year ending 2006 nwards. Accrdingly, this reprt has been prepared using accunting plicies cnsistent with IFRS. The Grup had previusly reprted under UK GAAP. Transitin t IFRS The date f transitin t IFRS was 1 April 2004, which is the beginning f the cmparative perid fr the year ending 31 March The Grup has applied IFRS 1 fr first time adptin f IFRS, and has elected t use the fllwing exemptins: - Cumulative translatin differences fr freign peratins have been deemed t be nil at 1 April The prvisins f IFRS 2 Share Based Payments have been applied t equity instruments granted after 7 Nvember 2002 and nt vested. - Cmparative infrmatin has nt been restated fr IAS 32 r IAS 39. The disclsures required by IFRS 1 cncerning the transitin frm UK GAAP t IFRSs are given in nte 2. Fr the year 2006 the Grup is required t prepare cnslidated financial statements under Internatinal Accunting Standards as adpted by the Eurpean Cmmissin. These are thse Internatinal Accunting Standards, Internatinal Financial Reprting Standards and related Interpretatins (SIC-IFRIC interpretatins), subsequent amendments t thse standards and related interpretatins, future standards and related interpretatins issued r adpted by the Internatinal Accunting Standards Bard (IASB) that have been endrsed by the Eurpean Cmmissin. This prcess is nging and the Cmmissin has yet t endrse certain standards issued by the IASB. IFRS 6 t 7 and IFRIC-s interpretatins 4 t 9, which were in issue as at year 2006 but nt yet effective, have nt been applied t these financial statements. The directrs anticipate that the adptin in future perids f these standards and interpretatins will have n material impact n the financial statements f the Grup. Basis f cnslidatin Subsidiaries are fully cnslidated frm the date n which cntrl is transferred t the Grup. Inter-cmpany transactins, balances and unrealised gains n transactins between grup cmpanies are eliminated n cnslidatin. Accunting plicies f subsidiaries are cnsistent with the plicies adpted by the Grup. The financial statements f all subsidiaries are prepared t the same reprting date as the parent cmpany. 10

11 Business cmbinatins The acquisitin f subsidiaries is accunted fr using the purchase methd. The cst f acquisitin is measured at the aggregate f the fair values, at the date f exchange, f assets given, liabilities incurred r assumed, and equity instruments issued by the Grup in exchange fr cntrl f the acquiree, plus any csts attributable t the business cmbinatin. The acquiree s identifiable assets, liabilities and cntingent liabilities that meet the cnditins fr recgnitin under IFRS3 are recgnised at their fair value at the acquisitin date. Gdwill arising n acquisitin is recgnised as an asset and initially measured at cst, being the excess f the cst f the business cmbinatin ver the Grup's interest in the net fair value f the identifiable assets, liabilities and cntingent liabilities recgnised. Gdwill is nt amrtised but is tested annually fr impairment r mre frequently if events r changes in circumstances indicate that the carrying value may be impaired. An impairment charge wuld be immediately recgnised in the incme statement fr any amunt by which the carrying value f gdwill exceeds its fair value. An impairment lss recgnised fr gdwill is nt reversed in a subsequent perid. Revenue recgnitin Revenue represents amunts inviced t custmers (net f value added tax) fr gds and services. Revenue is recgnised as fllws: Licence sales Revenue frm licence sales is recgnised upn delivery t the custmer. Maintenance and supprt cntracts Revenue frm Maintenance and supprt cntracts is recgnised ver the perid f the cntract. Prfessinal Services Revenue frm Prfessinal services such as training and cnsultancy is recgnised when the services are perfrmed. Ryalty incme Ryalty incme is recgnised as it falls due. Where a single arrangement cmprises a number f individual elements which are capable f perating independently f ne anther, the ttal revenues are allcated amngst the individual elements based n an estimate f the fair value f each element. Where the elements are nt capable f perating independently, r reasnable measures f fair value fr each element are nt available, ttal revenues are recgnised n a pr rata basis ver the cntract perid Segment reprting Fr management purpses the Grup is rganised int tw perating divisins - UK and United States. These divisins are the basis n which the Grup reprts its primary segment infrmatin. Revenues are generated in each gegraphic segment by a sales frce dedicated t that regin and these primary csts fllw the regin in which they arise. Research and Develpment csts are lcated and brne in the UK. Prduct transfers between the segments are accunted fr at cmpetitive market prices which take int accunt the allcatin f ther technical and central csts. These transfers are eliminated n cnslidatin. Cst f sales The Directrs cnsider that in rder t apprpriately reflect the perating prfile f the business, nly the directly variable csts f making sales such as ryalties and cmmissins shuld be shwn as deducted frm turnver and that all ther csts f the business are mre apprpriately classified as distributin csts and as administrative expenses. Operating prfit Operating prfit is stated after charging distributin csts and perating expenses but befre investment incme. 11

12 Freign currency translatin Functinal and presentatin currency The cnslidated financial statements are presented in Punds Sterling, which is the Grup s functinal and presentatin currency. Items included in the financial statements f each f the Grup s entities are measured using the currency f the primary ecnmic envirnment in which the entity perates (the functinal currency). Transactins and balances Transactins in freign currencies are recrded at the exchange rate prevailing n the date f the transactin. At each balance sheet date, mnetary assets and liabilities denminated in freign currencies are retranslated at the exchange rate prevailing at the balance sheet date. Translatin differences n mnetary items are taken t the incme statement. Grup cmpanies The results and financial psitin f verseas Grup entities are translated int Sterling as fllws: - Assets and liabilities are translated at the clsing rate at the date f that balance sheet; - Incme and expenses are translated at the average exchange rate fr the perid; - All resulting exchange differences are recgnised as a separate cmpnent f equity. On cnslidatin, exchange differences arising frm the translatin f the net investment in freign entities are taken t equity. Taxatin The tax credit represents the net sum f the tax currently receivable and deferred tax. The tax currently receivable is based n taxable prfit fr the year. Taxable prfit differs frm net prfit as reprted in the incme statement because it excludes items f incme r expense that are taxable r deductible in ther years and it further excludes items that are never taxable r deductible. The Grup s liability fr tax is calculated using tax rates that have been enacted r substantively enacted by the balance sheet date. Deferred tax is the tax expected t be payable r recverable n differences between the carrying amunt f assets and liabilities in the financial statements and the crrespnding tax bases used in the cmputatin f taxable prfit, and is accunted fr using the balance sheet liability methd. Deferred tax liabilities are generally recgnised fr all taxable temprary differences and deferred tax assets are recgnised t the extent that it is prbable that taxable prfits will be available against which deductible temprary differences can be utilised. Such assets and liabilities are nt recgnised if the temprary difference arises frm the initial recgnitin f gdwill r frm the initial recgnitin (ther than in a business cmbinatin) f ther assets and liabilities in a transactin that affects neither the tax prfit nr the accunting prfit. The carrying amunt f deferred tax assets will be reviewed at each balance sheet date and reduced t the extent that it is n lnger prbable that sufficient taxable prfits will be available t allw all r part f the asset t be recvered. Deferred tax is calculated at the tax rates that are expected t apply in the perid when the liability is settled r the asset is realised. Deferred tax is charged r credited in the incme statement, except when it relates t items charged r credited directly t equity, in which case the deferred tax is als dealt with in equity. Deferred tax assets and liabilities are ffset when there is a legally enfrceable right t set ff current tax assets against current tax liabilities and when they relate t incme taxes levied by the same taxatin authrity and the Grup intends t settle its current tax assets and liabilities n a net basis. Prperty, plant and equipment Prperty, plant and equipment are held at cst less accumulated depreciatin and any impairment in value. Depreciatin is charged n a straight line basis as fllws: - Mtr vehicles are depreciated ver 4 years Cmputer & Office Equipment are depreciated ver 2 t 3 years accrding t the estimated life f the asset; Fixtures & Fittings are depreciated ver 4 t 7 years accrding t the estimated life f the asset. 12

13 Other intangible assets Intangible assets acquired as part f an acquisitin f a business are capitalised separately frm gdwill, if thse assets are separable and their fair value can be measured reliably. Intangible assets acquired separately frm the acquisitin f a business are capitalised at cst. Cmputer sftware Cmputer sftware licences and ther intellectual prperty assets acquired are held at cst and are amrtised n a straight line basis ver their estimated useful lives f 2 t 6 years. Csts assciated with develping r maintaining cmputer sftware prgrammes are recgnised as an expense as incurred. Research and develpment csts Research csts are nrmally expensed as incurred. Expenditure arising frm develpment (r frm the develpment phase f an internal prject) is capitalised if it satisfies the specified criteria within IAS 38. These assets are amrtised n a straight line basis ver their useful lives f nt mre than 3 years. Impairment f tangible and intangible assets excluding gdwill Assets that have an indefinite useful life are nt subject t amrtisatin but are tested annually fr impairment. Assets that are subject t amrtisatin are reviewed fr impairment whenever events r changes in circumstances indicate that the carrying amunt may nt be recverable. An impairment lss wuld be recgnised fr the amunt by which the asset s carrying amunt exceeds its recverable amunt. The recverable amunt is the higher f an asset s fair value less csts t sell and value in use. Investments in Subsidiary Undertakings Investments in subsidiary undertakings are shwn at cst less prvisin fr any impairment in value. Investments in Own Shares Investments in the Cmpany s wn shares are included in the Grup balance sheet (deducted frm equity) at cst less any prvisin fr impairment. Financial instruments Shrt-term debtrs and creditrs are treated as financial assets r liabilities. Available fr Sale Investments Available fr sale investments are included in the Grup balance sheet at cst less any prvisin fr impairment. Held t maturity investments Investments that the Grup has the expressed intentin and ability t hld t maturity are measured at amrtised cst using the effective interest rate methd, less any impairment lss recgnised t reflect irrecverable amunts. Cash and cash equivalents Cash and cash equivalents includes cash in hand, depsits held at call with banks and ther shrt-term highly liquid investments with riginal maturities f three mnths r less. Share-based payments The Grup perates a number f equity-settled, share-based cmpensatin plans. The fair value f the emplyee services received under such schemes is recgnised as an expense in the incme statement. Fair value is determined by use f the Black Schles Optin Pricing Mdel. The amunt t be expensed ver the vesting perid is determined by reference t the fair value f share incentives. At each balance sheet date, the Grup revises its estimates f the number f share incentives that are expected t vest. The impact f the revisin f riginal estimates, if any, is recgnised in the incme statement, with a crrespnding adjustment t equity, ver the remaining vesting perid. The Grup s accunts include the Alterian Share Incentive Plan (SIP) which is administered by its trustees. The Trust hlds shares in the Cmpany fr the SIP. The Directrs cnsider that Alterian Technlgy Limited (ne f the Cmpany s subsidiaries) has cntrl f shares held by the Trust and bears their benefits and risks. Where shares in the Cmpany are held by the Trust, they are shwn as Own shares as a deductin in arriving at ttal equity. Finance csts and administrative expenses f the plan are charged t the incme statement as they accrue. 13

14 The Grup als has an Emplyee Benefit Trust. Shares in the Cmpany held by the Trust are als shwn as Own shares and presented in the balance sheet as a deductin frm equity. The Grup has applied the transitinal prvisins f IFRS 2 in respect f equity-settled awards and has applied IFRS 2 t equity-settled awards granted after 7 Nvember 2002 that had nt vested n Leases Operating leases Leases in which the lessr retains substantially all the risks and rewards f wnership are classified as perating leases. Payments made under perating leases are charged t the incme statement n a straight line basis ver the perid f the lease. Finance leases The Grup des nt have any finance leases. Emplyee benefits Pensin bligatins The Cmpany perates a defined cntributin pensin scheme in the UK. The assets f the scheme are held separately frm thse f the Grup in an independently administered fund. The Grup has n legal r cnstructive bligatins t pay further cntributins t the fund. The cst f prviding these benefits, recgnised in the incme statement, cmprises the amunt f cntributins payable t the schemes in respect f the year. In additin t the scheme sme UK emplyees receive an enhancement t salary f between 5% and 10% f grss pay in lieu f cmpany cntributins. The csts f bth schemes are charged t the incme statement as incurred. US emplyees receive an enhancement t their 401k pensin scheme cntributin f 25%. 2. EFFECT OF IFRS ADOPTION Effect f IFRS adptin n the Cnslidated Incme Statement Year t 2005 (the latest perid presented under previus GAAP) Previus UK GAAP Effect f transitin t IFRS IFRS Nte Revenue 7,806-7,806 Cst f sales (691) - (691) Grss prfit 7,115 7,115 Distributin csts (2,706) - (2,706) Administrative expenses a,b (5,386) (217) (5,603) Operating lss (977) (217) (1,194) Investment revenues Lss befre tax (432) (217) (649) Tax Prfit/(lss) fr the perid 55 (217) (162) Earnings per share 0. 1p (0. 5)p (0. 4p) Ntes a Adjustment fr Share ptins under IFRS 2 (2005: 213,000) b Adjustment fr Hliday pay under IAS 19 (2005: 4,000) 14

15 2. EFFECT OF IFRS ADOPTION (cntinued) Recnciliatin f equity Nte Previus UK GAAP As at 1 April 2004 (Date f transitin) IFRS Effect f (pening Transitin Balance t IFRSs sheet) Previus UK GAAP As at 2005 (End f last perid presented under previus GAAP) Effect f Transitin t IFRSs Nn current assets Other intangible assets Prperty, plant and equipment Ttal nn-current assets Current assets Trade & ther receivables 3,699-3,699 4,954-4,954 Cash and cash equivalents 12,024-12,024 10,877-10,877 Ttal current assets 15,723-15,723 15,831-15,831 Ttal assets 16,576-16,576 16,425-16,425 Current liabilities Trade & ther e (2,221) 402 (1,819) (2,013) 374 (1,639) payables Tax liabilities e - (425) (425) - (401) (401) Ttal liabilities (2,221) (23) (2,244) (2,013) (27) (2,040) Ttal assets less ttal liabilities 14,355 (23) 14,332 14,412 (27) 14,385 Equity Share capital 9,803-9,803 9,805-9,805 Capital reserves 26,298-26,298 26,300-26,300 Other reserves c Own shares (117) - (117) (83) - (83) Exchange rate reserve d (36) (36) Retained earnings c,d,e (21,629) (222) (21,851) (21,610) (403) (22,013) Ttal equity 14,355 (23) 14,332 14,412 (27) 14,385 Ntes c Adjustment fr Share ptins under IFRS 2 (2005: 213,000, 2004: 199,000) d e Adjustment fr Cumulative translatin differences under IAS 21 (2005: 36,000, 2004: nil) Adjustment fr Hliday pay under IAS 19 (2005: 4,000, 2004: 23,000) and tax reclassificatin (2005: - 24,000, 2004: 425,000) IFRS Effect f IFRS adptin n the Cnslidated Cash Flw The nly adjustment made t the Cnslidated Cash Flw Statement is presentatinal. 402,000 f tax credit received in 2005 was previusly shwn n the face f the Cash Flw Statement under Investing activities. It is nw included in the ntes t the Cash Flw Statement (see nte 7). 15

16 3. SEGMENTAL INFORMATION All revenue and lss befre tax is attributable t the principal activity f the Grup. 6 mnths mnths 2005 Year 2006 Year 2005 (restated see nte 2) Gegraphical analysis f revenue by rigin United Kingdm 4,490 3,977 6,564 5,398 United States 2,717 1,318 4,065 2,408 7,207 5,295 10,629 7, TAX CREDIT ON LOSS ON ORDINARY ACTIVITIES Analysis f credit in year: Overseas tax current year 7 2 Research and develpment tax credit current year (150) (170) Research and develpment tax credit prir year (87) (319) (230) (487) Deferred tax (250) - Factrs affecting tax charge: (480) (487) The standard rate f tax fr the year, based n the UK standard rate f crpratin tax is 30% (2005: 30%). The actual tax charge fr the current and previus year differs frm the standard rate fr the reasns set ut in the fllwing recnciliatin: Restated (see nte 2) Prfit/(lss) n rdinary activities befre tax 889 (649) Restated Tax n prfit/(lss) n rdinary activities at standard rate 266 (195) Nn deductible expenditure (291) 86 Nn taxable incme (222) (11) Research and develpment credit current year (150) (170) Research and develpment credit prir year (87) (319) Current year lsses surrendered fr research and develpment credit Tax effect f lsses nt previusly recgnised (250) - Tax effect f current year shrt-term timing differences nt recgnised 234 (59) Overseas tax current year 7 2 Current tax credit fr the year (480) (487) 16

17 Factrs affecting future tax charges: Other than tax n UK investment incme, the Grup des nt anticipate that tax will arise n prfits within the immediate future due t the availability f tax lsses f 10m (2005: 10m) in the UK and 7.8m (2005: 6.7m) in the US as at EARNINGS PER SHARE Basic prfit/(lss) per share is calculated by dividing the prfit attributable t rdinary sharehlders fr the year 2006 f 1,369,000 (2005: lss f 162,000) by the weighted average number f rdinary shares in issue during the year f 40,121,938 (2005: 39,213,201) Restated (see nte 2) Basic and diluted prfit/(lss) attributable t equity hlders f the parent 1,369 (162) N. N Weighted average number f rdinary shares Fr the purpses f basic earnings per share 40,122 39,213 Effect f dilutive ptential rdinary shares: Share ptins 2,345 1,779 Weighted average number f rdinary shares Fr the purpses f diluted earnings per share 42,467 40,992 p p Basic prfit/(lss) per share 3.4 (0.4)p Dilute prfit/(lss)per share 3.2p (0.4)p In calculating diluted earnings per share there were 822,890 ptins that have nt been included as they are anti-dilutive and/r the related perfrmance cnditin has nt been achieved fr the perid presented (2005: 1,433,400). 17

18 6. COMBINED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS FUNDS AND STATEMENT OF MOVEMENTS ON RESERVES Prfit Called up share capital Capital reserves Other reserves Own shares and lss accunt At the beginning f the year 9,805 26, (83) (22,013) 14,385 14,332 Issue f new shares Prfit/lss attributable t members f the grup ,369 1,369 (162) Mvement in the perid (126) - (57) 247 Freign exchange translatin differences (36) At the end f the year 10,164 26, (209) (20,644) 16,546 14,385 The figures at the beginning f the year are after restatement fr IFRS (see nte 2). 7. NOTES TO THE CASH FLOW STATEMENT Year Year (restated nte 2) Prfit/(Lss) frm peratins 451 (1,194) Adjustments fr: Depreciatin f prperty, plant and equipment Amrtisatin f intangible assets Prfit n sale f prperty, plant and equipment (1) - Emplyee benefit charges IFRS 2 share based payment charge Operating cash flws befre mvements in wrking capital 989 (594) Increase in receivables (2,195) (1,235) Increase/(Decrease) in payables 540 (139) Cash used by peratins (666) (1,968) Tax credit received Tax paid (7) - Net cash used in perating activities (416) (1,566) 18

19 8. ACQUISITION OF SUBSIDIARY On 6 April 2005 the Grup acquired 100% f the issued share capital f MarkIT Infrmatin Services Limited. The ttal cst f acquisitin is apprximately 1.1m, cmprising cnsideratin fr shares f 586,000 and net liabilities f 533,000. This transactin has been accunted fr by the purchase methd f accunting. As part f the cnsideratin 129,113 shares, with a fair value f 130,404, were issued. In additin 79,604 shares were issued fr cash f 80,400, and 99,010 shares were issued t repay a lan f 100,000. The fair value is calculated as the market value f the shares as at the date f acquisitin. The carrying amunts f each class f MarkIT s assets and liabilities befre the cmbinatin are set ut belw: Descriptin 000 Prperty, plant & equipment 13 Trade & ther receivables 380 Trade & ther payables (excluding bank verdrafts) (464) Cash & cash equivalents (bank verdrafts) (122) Trade & ther payables due after ne year (130) (323) Adjustment t Alterian accunting plicies (210) Net liabilities assumed (533) Gdwill generated and cst f investment 1,119 Cnsideratin 586 Satisfied by Cash 456 Issue f shares 130 Fllwing the acquisitin, the business and net liabilities f MarkIT were integrated int thse f Alterian Technlgy Limited and accrdingly the effective cst f acquisitin, 1.1m, has been reclassified as an additinal investment in Alterian Technlgy Limited in the bks f Alterian plc. The acquisitin expands Alterian s service prtfli t its Partner netwrk. Thrugh the acquisitin, Alterian is delivering a new service called Alterian Cnnect which manages cmputer hardware and Alterian sftware deplyed n this hardware and delivers access t these Alterian slutins via the internet. Alterian Cnnect enables Marketing Services Prviders t prvide access t Alterian sftware fr their clients mre rapidly and is expected t accelerate the assciated sftware licence revenue. Alterian Cnnect will als prvide a new revenue surce frm Alterian Partners fr the ASP services and is expected t prve attractive t prspective Partners wh currently d nt have this resurce. Gdwill amunts t apprximately 1.1m (including net liabilities acquired f 0.5m) a value supprted by the estimated cashflws f the future business. The value attributed t ther intangible assets is nil reflecting the net cashflws f the legacy business. The amunt f the prfit r lss f MarkIT since the acquisitin date has nt been identified as the business has been cmbined within ther Grup activities DISTRIBUTION The annual reprt will be sent t sharehlders in June 2006 and will be available t members f the public frm the Cmpany s registered ffice: Century Place, Newfundland Street, Bristl, BS2 9AG. The Annual General Meeting will be held n 25 July