RNS Number:2074P
ITNET PLC
01 September 2003







                                   ITNET plc

             Interim Results for the six months ended 30 June 2003

   ITNET delivers another good set of results and a record forward order book



ITNET plc, one of the leading IT, consulting and business process outsourcing
companies, announces interim results for the six months ended 30 June 2003.



Half-year Financial Highlights:



  * Record forward order book standing today at #384m (February 2003: #295m)
  * Turnover up 6.6% to #91.2m (2002: #85.5m)
  * Profit before tax increased to #8.7m (2002: #2.8m)
  * Earnings per share increased to 7.57p (2002: 0.48p)
  * Net cash position increased to #14.9m (2002: #10.1m)
  * Dividend per share up by 10% to 1.33p (2002: 1.21p)



For operating performance comparison purposes, adjusted* turnover and adjusted*
profit before tax** increased by 4.4% to #89.3m (2002: #85.5m) and by 7.2% to
#7.6m (2002: #7.1m) respectively.

Adjusted* earnings per share** increased to 6.9p (2002: 6.8p).

* The adjustment is described in the results section on page three of this
statement, which explains the non-recurring payment received from the London
Borough of Islington

**Before amortisation and impairment of goodwill, exceptional and non-recurring
items



Business Highlights

  * Signing of first major contract win in Central Government, in line with
    stated strategy, the largest single contract win in the Company's history
  * New contract win in transport with National Air Traffic Services plc





Commenting on the results, Bridget Blow, Chief Executive, said:



"I am delighted to report another pleasing performance and the delivery of good
results for the first half of 2003.   Despite contrasting conditions in our
different markets, we have achieved further growth in profits and earnings per
share.  Furthermore, our order book has increased significantly during the
period and today stands at a record level of #384m.



"2003 has been marked by two major events for the Company: firstly, the signing
of the contract with the Cabinet Office - the Company's single largest contract
win to date and, importantly, our first major win in Central Government; and
secondly, a positive outcome was reached in the negotiations with the London
Borough of Islington.



"In addition to the potential growth achievable from the Cabinet Office
contract, its high profile nature will provide us with an excellent platform to
realise further opportunities in Central Government.  We are also pleased to be
announcing today a new contract in transport with National Air Traffic Services,
yet another significant win for the business."



Business Operating Highlights:-

  * We have continued to build on our strong position in the Local Government
    market.   The continuing demand for ITNET's e-government services has
    resulted in 14% adjusted revenue growth in Local Government for the first
    half, well ahead of industry growth rates.
  * Our first major win in Central Government, with a Data Centre Hosting
    contract from the Cabinet Office.  The committed value of the initial
    five-year contract is #83m with options for further services and for a
    further two year extension, making this the single largest contract win in
    the Company's history.
  * Public Sector contract wins in 2003 to date with new and existing
    customers totalled #181m, covering a period of up to ten years.
  * Commercial Sector contract wins in 2003 to date with new and existing
    customers totalled #54m covering a period of up to five years.
  * General market conditions continue to impact our Commercial business.
    However, we continued to grow revenue in transport - up 4.5% on the same
    period last year and 10.5% compared with H2 2002.
  * Continuing strong demand for SAP services in the Public Sector resulted in
    revenue growth of 177% to #6.8m.
  * Another good performance from French Thornton, our consultancy business,
    with revenue growth of 16.5% to #6.8m.







New contracts announced today:-

*  New contract in transport with National Air Traffic Services plc
   (NATS) worth #17.3m over five years, managing IT business systems to provide
   improvements to NATS' infrastructure and service levels in administrative 
   areas.

*  Extension of existing managed services contract with Hertfordshire
   County Council incorporating a fully integrated HR, payroll and pensions 
   system. The amended contract is worth #32.4m and will continue for seven 
   years.

*  Revision of desktop and infrastructure services contract with London
   Underground Limited, increasing contracted revenue by #3.8m over two years.

*  Extension of end-user computing contract with 3663 worth #3.6m over
   3.5 years.

*  Renewal of end-user computing contract with Alstom worth #2m over two
   years.



For further information:


ITNET plc
Bridget Blow, Chief Executive           Tel: 020 7367 5100 (on 1 September 2003)
Robin Taylor, Finance Director          Tel: 0121 459 1155 (thereafter)


Cubitt Consulting
Fergus Wylie                            Tel: 020 7367 5100
Peter Ogden





INTERIM STATEMENT



Results

During the period, following positive negotiations with the London Borough of
Islington, the Group benefited from a non-recurring payment of #1.9m received in
connection with the revised contractual arrangements agreed in February this
year, which has had a favourable impact on both revenues and profits.  In order
to give better comparability with prior periods' results, revenues and profits
have been adjusted in this statement to exclude this non-recurring receipt where
appropriate.



In the six months ended 30 June 2003, adjusted revenue increased by 4.4% to
#89.3m (2002: #85.5m).  Our Public Sector business continued to deliver strong
growth with adjusted revenue up by 10.7% to #50.8m (2002: #45.9m) reflecting
another good performance from our Local Government business, which increased by
14.0% compared with the corresponding period last year.  In the Commercial
Sector, where overall market conditions remain difficult, the Group delivered
another creditable performance with transport and utilities/services increasing
revenue by 4.5% and 37.2% respectively.  Overall, Commercial Sector revenue for
the half-year, was #38.5m (2002: #39.7m), a performance which compares very
favourably with our competitors.



Revenue from infrastructure services increased by 6.2% to #52.5m during the
period (2002: #49.4m).  Applications services and adjusted Business Process
Services revenue were relatively flat year on year at #19.8m and #10.2m
respectively (2002: #19.8m and #10.5m respectively). Our consultancy business,
French Thornton, continued to perform well with a 16.5% increase in revenue to
#6.8m (2002: #5.9m) reflecting the increase in public sector demand.



Operating profit increased to #8.6m (2002: #2.8m).  Adjusted operating profit
(before amortisation and impairment of goodwill, exceptional items and
non-recurring items) improved by 5.6% to #7.5m (2002: #7.1m) with margins
increasing slightly to 8.4% compared with 8.3% for the corresponding period last
year which was in line with management's expectations.  As previously reported,
during 2003 we are increasing our investment in sales and marketing and in the
development of new services both to consolidate our strong position in Local
Government and increase our market share in Central Government and in transport
and utilities/services.  While the increase in employers' National Insurance
from April 2003 is clearly having an impact we continue to manage our cost base
actively and to maintain high levels of utilisation throughout the business.



Profit before tax increased to #8.7m (2002: #2.8m).  In addition to the factors
already referred to, a goodwill write down of #4.4m taken in 2002, relating to
an acquisition made in 1999, was a major factor in this increase.  Earnings per
share increased to 7.57p (2002: 0.48p). Adjusted earnings per share (before
amortisation and impairment of goodwill, exceptional items and non-recurring
items) increased to 6.9p (2002: 6.8p)



The interim dividend has been increased by 10% to 1.33p per share (2002: 1.21p)
and will be paid on 1 October 2003 to shareholders on the register at the close
of business on 12 September 2003.



Net cash inflow from operating activities was #7.5m (2002: #6.1m).  The increase
in cash flows from operating profits has been mitigated by an increase in
accrued income and work in progress.  The increase in accrued income primarily
relates to the consistent application of our revenue recognition policy on
contracts where the customer pays for an outsourcing service evenly over a
number of years following delivery of the business solution.  Cash collection
continues to be well managed with average days sales outstanding improving to 32
(2002: 35).  Free cash flow for the period was #2.4m (2002: #3.9m) reflecting
higher tax payments due to higher taxable profits and a positive benefit related
to tax losses in the corresponding period last year.    Net cash as at 30 June
2003 was #14.9m compared with #14.4m as at 31 December 2002.



In July 2003, ITNET announced that it had been awarded an #83m contract with the
Cabinet Office over five years. This contract has options for further services
and a two-year extension and is the single largest contract win in the Company's
history.  An initial capital and manpower investment of up to #10m will be
required by the Company, which will be booked this year in full and reduce net
cash accordingly.  Income earned will start to impact revenues in 2004.



Review of Operations



Overview

Our Public Sector business performance goes from strength to strength, firmly
reinforcing our position as one of the leading players in the sector.  We
achieved excellent adjusted revenue growth of 10.7% in the Public Sector in the
first half of the year, added #90m to the Public Sector order book since
February 2003 and have a significant pipeline of bid opportunities going
forward.



In the Commercial Sector where overall industry conditions remain difficult, we
are encouraged by the progress we have made in delivering our strategy. As well
as revenue growth in transport in the first half of 2003, we have maintained our
high levels of customer retention and renewals and have extended the breadth of
services provided to customers.



Public Sector

Business wins with new and existing customers have resulted in adjusted revenue
growth of 10.7% to #50.8m in the first half of 2003 (2002: #45.9m).  Whilst
market analysts predict Public Sector IT services to grow at 5.5% during 2003
(Source: Ovum Holway), we have exceeded this forecast demonstrating our leading
position in this market.  Contracts have been signed with new customers to date
in 2003 totalling #127m covering a period of up to 10 years across both Local
and Central Government.



To date in 2003 we have won new business worth #54m for a period of up to 10
years with existing customers which include Birmingham City Council, Braintree
District Council, Colchester Borough Council, Hertfordshire County Council, the
Inland Revenue and the London Boroughs of Enfield, Hounslow and Southwark.



Our Public Sector order book now stands at a record level.  Following the recent
announcement of our largest contract win in the Company's history, the order
book stands today at #292m.  The majority of our Public Sector customers have
contracted for further services with ITNET and our conversion rate remains
outstanding - we continue to win one out of every three contracts we bid for
with new customers.



We continue to believe that there will be significant growth opportunities well
beyond the Government's current 2005 deadline for its Modernising Government
initiative. Government spending is driven by best value and business change
through technology, not solely by e-government.  Ovum Holway further supports
this in a recent UK Public Sector report, which states that the Local Government
online budget will not be spent in the period to 2005, nor does it expect all
local authorities to meet the 2005 deadline.  Therefore, market forecasters
expect to see additional funds available through to 2006 and possibly 2007.

ITNET is firmly established as one of the leading players in Local Government,
and will be able to capitalise on growth opportunities across both Local and
Central Government.



We have maintained our leading position for SAP services in Local Government,
enjoying further success in this market with three new customers announced in
the first half - the London Borough of Richmond Upon Thames, Buckinghamshire
County Council and the City of Sunderland.  Our conversion rate for SAP
contracts is excellent, winning one out of every two contracts we bid for in SAP
services.





As predicted in February, we have broken into the Central Government market with
the largest win so far in the Group's history.  This initial five-year contract
with the Cabinet Office is worth #83m with options for further services and for
a further two-year extension.  We believe that as online Government services
evolve across departments, usage of the service will increase beyond the minimum
contracted value. Furthermore, our track record shows that we are good at
growing business from existing customers and we believe that the Cabinet Office
will be no exception.  We also anticipate that such a high profile account will
give us a good platform to realise further opportunities from Central
Government.   We are currently bidding for a number of Central Government
contracts where decisions are expected to be made in the next six months, in
addition to a smaller number of large deals in the pipeline for the next 12-18
months.







At the preliminary results in February 2003, we identified the Health Service as
a Public Sector opportunity, as a result of the reported level of potential
investment in this area.  We remain interested in the sector and we believe we
are well placed to explore possible opportunities as and when the direction of
the market becomes clearer.



Commercial Sector

Overall Commercial Sector revenue in the first half was #38.5m (2002: #39.7m).
Given the continuing difficult market conditions in the Commercial Sector, this
was another creditable performance which compares very favourably with our
competitors. The main driver for growth has been the need for companies to
operate more cost effectively, in order to remain competitive in their markets.
The strategy we have adopted, together with the investment we continue to make
in our target sectors, has proved successful, despite the general economic
uncertainty.   We have secured new business in transport and utilities/services
with both new and existing customers.  To date, in 2003 we have achieved 100%
success with Commercial customer renewals and nearly all our customers have
given us extra business.

As a result of these new wins, the Commercial Sector order book today stands at
#92m.



Our opportunities in transport are being helped by the Government's strategy for
delivering a modern, safe, reliable transport system as detailed in the 10 year
plan for transport. The plan sets out a #180bn investment programme, covering
all forms of transport and requires transportation organisations to investigate
more effective ways of operating to take advantage of this funding.  In the six
months ended 30 June 2003, revenues in transport increased by 4.5% and, to date
in 2003, a number of new customers have been won including National Air Traffic
Services plc (NATS), as announced today and Go Ahead, which is taking advantage
of our applications management expertise.   There has also been additional
business from our existing customer base at 3663, Alstom, BAA, London
Underground Limited, MAN B&W Diesel, Metronet Rail BCV Limited and Transport for
London.



In utilities, we have secured further work from our existing contracts with
Bristol Water and Powergen.  In the membership services sector we have secured
further work with customers including Dun and Bradstreet, The Law Society, RAC
and Walsall Housing Group.  This high level of activity within the customer base
has contributed to a 37.2% increase in revenues for the sector in the first
half.



High levels of customer satisfaction are reflected in the significant number of
contract renewals, extensions and further business won from existing customers
across our vertical market sectors and general Commercial sectors where we have
worked for some time.  Together these are worth #36m to date covering a period
of up to five years. Those not previously mentioned include Alenia Marconi,
Argos, BAE Systems, Cadbury Schweppes, Equitas, Merck, Merloni Elettrodomestici
UK, Travel Inn and the VA Tech Group.



Consultancy

French Thornton, our change and programme management consultancy, has achieved
strong revenue growth of 16.5% in the first half of 2003, primarily as a result
of its work with Central Government clients.  Further work has been undertaken
with the Inland Revenue and the Office of the e-Envoy during the half year.



A significant project for French Thornton in the first half of 2003 was with the
Royal Mail, helping with the project management of Project WAND, the world's
most technologically advanced mail sorting centre for international mail.   The
aim of Royal Mail WAND is to provide both operational effectiveness and a better
service for UK and international customers.





Outlook

The Public Sector market is still very buoyant.  A special report on the Public
Sector indicated recently that Public Sector organisations intend to spend more
on Information Communications Technology (ICT) in 2003/4 than in 2002, taking
aggregate spending to nearly #12.5bn (source: Kable). Our strength in IT and our
strength in Consultancy means we are well placed for contracts focusing on
transforming operations and processes, as well as technology, and

we are encouraged by the pipeline of new business opportunities available to us
in this area.  Our recent win with the Cabinet Office will position us well to
take advantage of further opportunities in Central Government, particularly as
the service delivery will evolve across a number of Government departments.



In the Commercial Sector, customers continue to focus on cost reductions and
maximising their existing IT investments to ensure they remain competitive in a
challenging economic climate.  We are pleased to see that we are making progress
in transport and utilities/services and taking full advantage of the
opportunities that are emerging.  We expect an increase in commercial revenue in
the second half of the year.



Overall, current trading is in line with the Board's expectations.  The strength
of our order book, which now includes our major contract with the Cabinet
Office, has reached a record level and underpins the sustainable nature of our
business model.  This, together with a strong sales pipeline in the Public
Sector, our contract win rates and an ongoing focus on operating margins, gives
the Board confidence of significant growth in 2004 based on another good
performance in 2003.





                                     -ends-








ITNET plc
Group profit and loss account
for the six months ended 30 June
2003

                                                               6 months to 30 Jun 2003 (unaudited)
                                                                  Before         Goodwill         2003
                                                                goodwill    amortisation,        Total
                                                           amortisation,   impairment and
                                                          impairment and      exceptional
                                                             exceptional            items
                                                                   items
                                                    Notes          #'000            #'000        #'000

Turnover
                                                                  91,215                -       91,215
Cost of sales
                                                                (73,432)                -     (73,432)
Gross profit
                                                                  17,783                -       17,783

Other operating expenses before goodwill
amortisation, impairment 
and exceptional items                                            (8,367)                -      (8,367)
                                                                 
Goodwill amortisation                                                  -            (787)        (787)
                                                                       
Goodwill impairment                                                    -                -            -
                                                                       
Exceptional gain                                        2              -                -            -
                                                                       
Amounts written off investment in own shares            2              -                -            -
                                                                      
Total operating expenses                                         (8,367)            (787)      (9,154)
                                                                 

Operating profit                                                   9,416            (787)        8,629
                                                                   

Interest receivable                                                  164                -          164
                                                                     
Interest payable                                                    (63)                -         (63)
                                                                    

Profit on ordinary activities before taxation                      9,517            (787)        8,730
                                                                   

Tax on profit on ordinary activities                             (3,238)                -      (3,238)
                                                                
Tax on exceptional gain                                                -                -            -
                                                                      
Total taxation                                                   (3,238)                -      (3,238)
                                                                 

Profit on ordinary activities after taxation                       6,279            (787)        5,492
                                                               

Dividends paid and proposed                                        (967)                -        (967)
                                                                  

Retained profit/(loss)                                             5,312            (787)        4,525
                                                                  

Earnings per share (pence)                              3
- Before goodwill amortisation, impairment and
exceptional items                                                   8.66
- Exceptional items                                                  -
- Before goodwill amortisation and impairment                       8.66
- Goodwill amortisation and impairment                                             (1.09)
- Basic                                                                                           7.57
                                                                                                  
- Fully diluted                                                                                   7.53
                                                                                                  
Dividend per share                                                                                1.33
                                                                                                  

ITNET plc
Group profit and loss account
for the six months ended 30 June
2002

                                                              6 months to 30 Jun 2002 (unaudited)
                                                                  Before         Goodwill  As restated
                                                                goodwill    amortisation,   2002
                                                           amortisation,   impairment and
                                                          impairment and      exceptional        Total
                                                             exceptional            items
                                                                   items
                                                    Notes          #'000            #'000        #'000

Turnover                                                          85,547                -       85,547
                                                                  
Cost of sales                                                   (70,292)                -     (70,292)
                                                              
Gross profit                                                      15,255                -       15,255
                                                                

Other operating expenses before goodwill
amortisation, impairment and 
exceptional items                                                (8,136)                -      (8,136)
                                                                 
Goodwill amortisation                                                  -          (1,100)      (1,100)               
                                                                   
Goodwill impairment                                                    -          (4,005)      (4,005)           
                                                                       
Exceptional gain                                        2              -              800          800
                                                                                                
Amounts written off investment in own shares            2              -                -            -
                                                                       
Total operating expenses                                         (8,136)          (4,305)     (12,441)                 
                                                                 

Operating profit                                                   7,119          (4,305)         2,814                
                                                                  

Interest receivable                                                  112                -          112
                                                                    
Interest payable                                                   (126)                -        (126)
                                                                 

Profit on ordinary activities before taxation                      7,105          (4,305)        2,800               
                                                                   

Tax on profit on ordinary activities                             (2,219)                -      (2,219)
                                                                 
Tax on exceptional gain                                                -            (240)        (240)
                                                                     
Total taxation                                                   (2,219)            (240)      (2,459)
                                                                

Profit on ordinary activities after taxation                       4,886          (4,545)          341                 
                                                                 

Dividends paid and proposed                                        (877)                -        (877)
                                                                 

Retained profit/(loss)                                                            
                                                                   4,009          (4,545)        (536)

Earnings per share (pence)                              3
- Before goodwill amortisation, impairment and
exceptional items                                                   6.81
- Exceptional items                                                 0.78
                                                                    
- Before goodwill amortisation and impairment                       7.59
                                                                    
- Goodwill amortisation and
impairment                                                                         (7.11)
- Basic                                                                                           0.48
                                                                                                 
- Fully diluted                                                                                   0.47
                                                                                                  
Dividend per share                                                                                1.21
                                                                                                  

ITNET plc
Group profit and loss account
for the year ended 31 December 2002

                                                                 Year to 31 Dec 2002 (audited)
                                                                  Before         Goodwill  2002
                                                                goodwill    amortisation,
                                                           amortisation,   impairment and        Total
                                                          impairment and      exceptional
                                                             exceptional            items
                                                                   items
                                                    Notes          #'000            #'000        #'000

Turnover                                                         178,992                -      178,992
                                                                                       
Cost of sales                                                  (146,564)                -    (146,564)
                                                                                       
Gross profit                                                      32,428                -       32,428
                                                                  

Other operating expenses before goodwill
amortisation, impairment and 
exceptional items                                               (16,118)                -     (16,118)
                                                               
Goodwill amortisation                                                  -          (2,834)      (2,834)            
                                                                      
Goodwill impairment                                                    -          (6,276)      (6,276)            
                                                                      
Exceptional gain                                        2              -              800          800
                                                                       
Amounts written off investment in own shares            2              -            (705)        (705)
                                                                       
Total operating expenses                                                         
                                                                (16,118)          (9,015)     (25,133)

Operating profit                                                  16,310          (9,015)        7,295                 
                                                                 

Interest receivable                                                  255                -          255
                                                                   
Interest payable                                                   (214)                -        (214)
                                                                 

Profit on ordinary activities before taxation                     16,351          (9,015)        7,336                 
                                                                 

Tax on profit on ordinary activities                             (4,913)                -      (4,913)
                                                                 
Tax on exceptional gain                                                -            (240)        (240)
                                                                   
Total taxation                                                   (4,913)            (240)      (5,153)
                                                               

Profit on ordinary activities after taxation                      11,438          (9,255)        2,183                  
                                                                

Dividends paid and proposed                                      (2,806)                -      (2,806)
                                                               

Retained profit/(loss)                                                            
                                                                   8,632          (9,255)        (623)

Earnings per share (pence)                              3
- Before goodwill amortisation, impairment and
exceptional items                                                  15.86
- Exceptional items                                               (0.20)
                                                                  
- Before goodwill amortisation and impairment                      15.66
                                                                   
- Goodwill amortisation and                                                       
impairment                                                                        (12.63)
- Basic                                                                                           3.03
                                                                                                  
- Fully diluted                                                                                   3.01
                                                                                                  
Dividend per share                                                                                3.87
                                                                                                  

ITNET plc
Group balance sheet
as at 30 June 2003
                                                                   As at            As at        As at
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                    Notes          #'000            #'000        #'000

       Fixed assets
       Intangible assets                                                           
                                                                  13,218           17,160       14,105
       Tangible assets                                                              
                                                                   8,283            7,606        7,704
       Investments                                                                  
                                                                   1,155            1,860        1,155
                                                                                   
                                                                  22,656           26,626       22,964

       Current assets
       Stocks and work in progress                                                  
                                                                   2,430            2,214        1,122
       Debtors                                                                     
                                                     4            33,961           24,250       31,534
       Cash at bank and in hand                                                    
                                                                  16,168           13,711       16,715
                                                                                   
                                                                  52,559           40,175       49,371
       Creditors
       Amounts falling due within                                                
       one year                                      5          (50,121)         (46,003)     (51,989)

       Net current assets/                                                        
       (liabilities)                                               2,438          (5,828)       (2,618)

       Total assets less current                                                   
       liabilities                                                25,094           20,798        20,346

       Creditors
       Amounts falling due after more than one
       year                                          6                 -            (492)        (122)

       Provisions for liabilities
       and charges                                                 (500)            (500)        (500)

       Net assets                                                 24,594           19,806       19,724                  
                                                                 

       Capital and Reserves
       Called-up share capital -                                                    
       equity                                        7             7,329            7,309        7,309
       Share premium account                         8            32,305           31,975       31,980                  
            
                                                    
       Profit and loss account                       8          (15,040)          (19,478)     (19,565)                 
          
                                                     

       Equity shareholders' funds                                 24,594           19,806       19,724                  
     
                                                           

       ITNET plc
       Group cash flow statement
       for the six months ended 30
       June 2003

                                                             6 months to      6 months to      Year to
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                    Notes          #'000            #'000        #'000

       Net cash inflow from                                                    
       operating activities                         10(a)          7,513            6,122       16,353

       Returns on investments and servicing of      
       finance                                      10(b)             42               15           84                  

       Taxation                                                  (3,180)            (763)      (3,198)
                                                                

       Capital expenditure                          10(c)        (1,945)          (1,450)      (4,092)                  
   
                                                                                    
                                                                   2,430           3,924         9,147

       Equity dividends paid                                                      
                                                                 (1,941)          (1,713)      (2,582)


       Cash flow before management of liquid resources                              
       and financing                                                 489            2,211        6,565

       Financing                                    10(d)         (1,036)            (852)      (2,202)
                                                                 

       (Decrease)/increase in cash                                 (547)            1,359         4,363                 
                                                                  

       Reconciliation of net cash flow to movement in
       net cash

       (Decrease)/increase in cash                                                  
       in the period                                               (547)            1,359        4,363

       Decrease in debt and lease
       financing                                                     556              852        2,108

       Loan note redemptions                                         825                -          100
                                                                     

       New loan notes                                              (400)            (500)        (500)
                                                                  


       Change in net cash                                            434           1,711         6,071                  
                                                                  

       Net cash at start of period                                14,442           8,371         8,371                  
                                                                  

       Net cash at end of period                    10(e)         14,876          10,082        14,442                 
                                                                  

       ITNET plc
       Notes to accounts
       for the six months ended 30
       June 2003

       1.Basis of preparation
       This interim financial information has been prepared on the basis of the 
       accounting policies set out in the Group's Annual Report for the year 
       ended 31 December 2002.

       The financial information for the year ended 31 December 2002 is derived 
       from the statutory accounts for that year which have been delivered to 
       the Registrar of Companies.  The auditors reported on those accounts; 
       their report was unqualified and did not contain a statement under 
       section 237(2) or (3) of the Companies Act 1985.

       2.Exceptional items

       The exceptional gain in 2002 arose as a result of the movement in the 
       ITNET share price since January 2000 and the subsequent impact upon the 
       French Thornton employee bonus agreement.  Under the agreement employees 
       were entitled to a bonus payment based upon a fixed number of shares.

       In 2002 the shares held in the QUEST which we previously held at cost 
       were written down to the year-end share price resulting in an exceptional 
       charge of #705,000.

       3.Earnings per share
       The calculation of earnings per share for the 6 months to 30 June 2003 is 
       based on an attributable profit of #5,492,000 (2002: #341,000) divided by 
       72,505,282 shares (2002: 71,732,444). Earnings per share for the year
       to 31 December 2002 is based on an attributable profit of #2,183,000 
       divided by 72,116,270 shares. The number of shares is based on the 
       weighted average number of shares in issue during the year excluding
       those held by employee share ownership trust which are treated as 
       cancelled for earnings per share calculation purposes.

       The fully diluted earnings per share is based on 72,929,174 ordinary 
       shares (2002: 72,006,483) reflecting the full effect of outstanding
       share options.

       4.Debtors
                                                                   As at            As at        As at
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                                   #'000            #'000        #'000

       Trade debtors                                              20,668           17,326       19,407                 
                                                                  
       Deferred tax                                                1,146            1,411        1,582                  
                                                                  
       Prepayments                                                 2,809            1,282        1,901                  
                                                                  
       Accrued income                                              9,338            4,231        8,644                 
                                                                   
                                                                  33,961           24,250       31,534

       5.Creditors - Amounts falling due
       within one year

                                                                   As at            As at        As at
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                                   #'000            #'000        #'000

       Loan notes - issued                                           800            1,325        1,225               
                                                                     
       Loan notes - to be issued                                       -              500          500
                                                                       
       Trade creditors                                             8,688            9,795       10,430                 
                                                                   
       UK corporation tax                                          2,780            2,728        3,158                  
                                                                 
       Other taxation and social                                                    
       security                                                    6,112            5,275        5,850

       Amounts due under finance                                                    
       leases                                                        492            1,812          926

       Accruals                                                   14,125           11,224       13,476                 
                                                                  
       Deferred income                                            16,129           12,435       14,455                  
                                                                 
       Dividend payable                                              995              909        1,969
                                                              
                                                                  50,121           46,003       51,989

       6.Creditors - Amounts falling due after more than
       one year
                                                                   As at            As at        As at
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                                   #'000            #'000        #'000

       Finance leases                                                  -              492          122
                                                                       

       Finance leases falling due:

       Between one and two years                                       -              492          122
                                                                       


       7.Called-up share capital
                                                                   As at            As at        As at
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                                   #'000            #'000        #'000
       Equity:
       Authorised - Ordinary shares                                                
       of 10p each                                                10,584           10,584       10,584
       Allotted - Ordinary shares of                                                
       10p each                                                    7,329            7,309        7,309

       Allotment of shares
       Since 1 January 2003 new ordinary shares of 10p each have been issued as follows:
                                                                                Price per   Valuation/
                                                               Number of            share     proceeds
        Purpose of issue:                                         shares                #        #'000
        Scrip dividend                                           186,539             1.81          339
                                                                                                   
        Sharesave                                                                    
                                                                   1,849             1.48            3
        Sharesave                                                                    
                                                                   1,053             1.34            1
        Sharesave                                                                    
                                                                     946             2.07            2


       8. Reserves
                                                                            Profit & loss        Share
                                                                   Total          account      premium
                                                                   #'000            #'000        #'000

       At 1 January 2003                                          12,415         (19,565)        31,980                 
                                                                
       Premium on issues of new
       share capital                                                 325                -          325
       Profit for the period                                                        
                                                                   4,525            4,525            -
       At 30 June 2003                                                           
                                                                  17,265         (15,040)       32,305

       9. Reconciliation of movements in shareholders' funds for the 6 months ended 30 June 2003

                                                                                                 #'000

       Profit after tax                                                                          5,492
                                                                                                 
       Dividends paid and proposed                                                               (967)
                                                                                                 
                                                                                                 4,525
       Share capital issued and
       subscribed                                                                                   20
       Share premium account                                                                       325
                                                                                                   
       Net addition to shareholders'
       funds                                                                                     4,870
       Opening shareholders' funds                                                              19,724
                                                                                                
       Closing shareholders' funds                                                              24,594
                                                                                               

       10. Cash flow statement

       (a) Net cash inflow from operating
       activities

                                                             6 months to      6 months to      Year to
                                                             30 Jun 2003      30 Jun 2002  31 Dec 2002
                                                             (unaudited)      (unaudited)    (audited)
                                                                   #'000            #'000        #'000

       Operating profit                                            8,629            2,814        7,295                 
                                                                   
       Amounts written off investment in own
       shares                                                          -                -          705

       Exceptional gain                                                -            (800)        (800)
                                                                      
       Depreciation of tangible                                                     
       fixed assets                                                2,215            2,587        5,228

       Amortisation and impairment                                                  
       of goodwill                                                   787            5,105        9,110

       Profit on disposal of
       tangible fixed assets                                         (6)              (1)          (1)

       Increase in debtors                                       (2,863)            (567)      (7,680)
                                                                 

       (Increase)/decrease in stocks                             (1,308)            (895)          197
                                                                 
       Increase/(decrease) in                                                     
       creditors                                                      59          (2,121)         2,299
                                                                                   
                                                                   7,513            6,122        16,353

       (b) Returns on investments and servicing of
       finance


       Interest received                                             141              112          255
                                                                    
       Interest paid                                                (59)                -         (10)
                                                                    
       Interest element of finance lease
       rentals paid                                                 (40)             (97)        (161)

                                                                      42               15           84

       (c) Capital expenditure


       Payments to acquire fixed                                                  
       assets                                                    (1,952)          (1,461)      (4,104)
       Receipts from sale of
       tangible fixed assets                                           7               11           12
                                                                                  
                                                                 (1,945)          (1,450)      (4,092)

       (d) Financing


       Issue of Ordinary share
       capital                                                       345                -            6

       Loan notes repaid                                           (825)                -        (100)
                                                                   
       Capital element of finance lease
       repayments                                                  (556)            (852)      (2,108)

                                                                 (1,036)            (852)      (2,202)

       (e) Analysis of changes in
       net cash
                                         At                         New             Loan            At
                                      1 Jan                         loan             note       30 Jun
                                       2003       Cash             notes      redemptions         2003
                                                 flows
                                      #'000      #'000             #'000            #'000        #'000

       Cash at bank and in hand      16,715       (547)                -                -       16,168
                                     
       Loan notes                    (1,225)          -            (400)              825        (800)
                                     
       Finance leases                (1,048)        556                -                -        (492)
                                     
       Total                         14,442          9             (400)              825       14,876
                                     








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