RNS Number:2387I
Marlborough Stirling PLC
04 March 2003


                                                                                                4th March 2003



Marlborough Stirling plc



Preliminary results announcement for year ended 31st December 2002



Marlborough Stirling, a leading provider of software and services to the
mortgage, life, pensions and investment market sectors, announces its results
for the year ended 31st December 2002.



Key features



Financial

Turnover (including joint ventures) up 65% to #121.0m (2001: #73.4m)

Organic turnover growth of 38%(1)

Adjusted pre-tax profit of #11.3m (2001: #15.0m)(2)

Reported pre-tax loss of #34.5m (2001: profit of #9.3m), reflecting #32.7m of
one-off non-cash items

Net cash at 31st December 2002 of #9.1m (2001: #7.5m)

Adjusted diluted earnings per share of 3.5p (2001: 5.9p)(2)

Reported basic loss per share of 20.0p (2001: earnings of 3.6p)



Operational

Significantly increased scale in life and pensions outsourcing

Largest ever contract for group with Sun Life Financial of Canada

Further major outsourcing contract with GE Pensions

Strengthened position in distribution market

Strategic alliances with two major IFA groups, Bankhall and The Tenet Group

Successful launch of Officeweb and initial contract wins

Important software implementations for AXA Sun Life, MCAP Mortgage Corporation
and Birmingham Midshires

Headcount of just under 1,900 at year end down by over 500 from peak levels with
further reorganisation announced since

2003 revenue visibility currently #90m



Organic turnover growth is based on (i) including turnover related to the SLFoC
outsourcing contract that is disclosed under acquisitions in the accounts as a
result of the contract having been effected through an acquisition and (ii)
excluding turnover relating to the Exchange FS businesses acquired in November
2001

Figures include the group's share of the results of joint ventures and are
before charges for goodwill amortisation and impairment, employee share options,
reorganisation costs and amounts written off investments



Commenting on the results, Graham Coxell, Chief Executive said:



"During a year of unprecedented upheaval and uncertainty for our customers the
strong growth in outsourcing helped to offset weakness in software sales. In the
circumstances our financial performance is reasonable.  Although we see some
early, encouraging signs of renewed interest in software in the early part of
this year we have taken firm steps to reduce costs in order to maintain
profitability in a year in which we are assuming sales will be slightly lower
than in 2002.



2002 was a year of transformation for Marlborough Stirling. In our first full
year as a public company we have built upon our established strength in life and
pensions and mortgage point of sale and administration systems by demonstrating
large scale outsourcing expertise and integrating the UK's leading intermediary
trading platform into our operations and strategy. Not only has this given us
greater visibility over future revenues and resilience to withstand the impact
of a downturn in software sales but it ensures we are uniquely well placed to
play a leading role in the transformation of the UK financial services market.



Marlborough Stirling now has a complete range of point of sale (front office)
and administration (back office) solutions, integrated to provide seamless
end-to-end capability at lowest cost. Our customers' needs are changing rapidly
and our solutions give them the flexibility they need to emerge as winners in
the new, consumer led financial services market."



An analyst briefing will be held at Citigate Dewe Rogerson's offices at 26
Finsbury Square at 9:30 am today.



For further information


Marlborough Stirling                                    01242-547000
Graham Coxell, Chief Executive
Bob Beveridge, Finance Director

Citigate Dewe Rogerson                                  020-7638-9571
Toby Mountford/Alex Brown









Chairman's statement



Introduction



The markets in which Marlborough Stirling operates are undergoing a period of
massive change.  This change will transform totally the way in which the
financial services industry operates within the next few years.  This upheaval
will undoubtedly present significant opportunities to the group as well as
challenges such as those we faced in 2002.



Marlborough Stirling itself has undergone a significant transformation over the
last twelve months.  In our first full year as a public company, two key
strategic initiatives were successfully completed:



The integration of Exchange FS into our portfolio of services and strategy

Securing the Sun Life Financial of Canada (SLFoC) outsourcing contract



These two developments build on Marlborough Stirling's established strength in
life and pensions and mortgage point of sale and back office administration
systems.  The group now possesses the UK's leading intermediary trading platform
in the financial services market and is able to demonstrate large scale
outsourcing expertise.  Together they will play a key role in supporting our
mission to be a key enabler of the transformation of financial services to a
competitive, highly efficient, consumer led industry.



Marlborough Stirling now has a complete range of point of sale (front office)
and administration (back office) solutions, together with straight through
processing capabilities for life insurance, pension and mortgage customers.  Our
transformed presence in distribution through the Exchange portal (Exweb) leaves
us well placed to extend our capabilities into other financial services vertical
markets.



The significant changes being implemented within our own business in 2002
coincided with a marked deterioration in market conditions in certain of the
markets we serve. This was particularly the case for the UK life and pensions
industry which was materially affected by falls in equity markets of over 30%
during the year, ultimately to the lowest levels experienced in over six years.
In the medium term, we believe these difficulties will bring positive momentum
to our own business.  However, in 2002, the unprecedented uncertainty for our
customers led to deferrals and cancellations of commitments to suppliers, from
which we were not immune.  This in turn contributed to our financial performance
for the year falling well below our initial expectations and the consequent need
to reduce our cost base.



With great regret, we were forced to seek compulsory redundancies during the
year beyond those implemented either as part of the SLFoC outsourcing contract
or the integration of Exchange FS Group plc.  Overall group headcount (including
that within our mortgage outsourcing joint venture) reduced from approximately
2,400 at its peak when we commenced the SLFoC contract in March 2002 to just
under 1,900 at 31st December 2002.



For a company particularly dependent on its people this has been a difficult
period and the board is acutely conscious of the efforts and contribution of all
members of staff.  However, we believe that as a result of this process we will
emerge with a more focused business, better positioned to operate profitably in
the ongoing demanding market conditions and to deliver growth in new areas and
geographies as opportunities arise.



Dividend



The Board continues to support a progressive dividend policy, consistent with
the cash generative nature of the business.  However, the recent fall in the
company's share price has led to a significant impairment in the carrying value
of the company's shares held in employee related share trusts.  Unfortunately,
this has the effect of reducing distributable reserves to the extent that it
would be imprudent for the Board to declare a dividend for 2002 despite the
company's significant cash resources.  During the year the group's net cash
position strengthened to #9.1m (2001: #7.5m).



Outlook



In recent months, certain areas of the business, particularly life and pensions
and mortgage outsourcing, Officeweb and mortgage software in both the UK and
Canada, have been experiencing encouraging levels of interest.  However, our UK
life and pensions software business continues to show weakness.  Our visibility
for 2003, in terms of contracted and recurring turnover, is currently
approximately #90m, a satisfactory position at this stage in the year.



Marlborough Stirling's sales activities have always been characterised by long
lead times.  Further, some of the initiatives we are pursuing have significant
strategic value but will only enhance our financial performance in the medium
term.  We expect to make good operational progress in 2003 whilst building the
foundations for improving our future financial performance.  This includes
continuing to review our cost base to enable the group to operate in 2003 with
similar margins at lower turnover levels than achieved in 2002.  In order to
maximise synergies and efficiencies, we recently announced the proposed
relocation of employees based in our Halesowen office.  In addition, as a final
stage in our recent reorganisation programme, we have restructured the group
into four business units, to facilitate greater focus and accountability.  We
expect these developments to result in additional employees leaving the group
during the first half of the year.



Marlborough Stirling retains a strong position in its markets. Our solutions
deliver demonstrable business benefits and return on investment at a time when
our customers need our solutions more than ever.  Our infrastructure is at the
core of our customers' operations and we have a broad range of strong reference
clients.  We have an unparalleled depth of understanding of our markets and are
committed to being a key enabler of transformation in financial services.  With
our highly skilled employees, I am certain that the foundations are in place for
us to exploit the substantial opportunities ahead.



Operating review



Marlborough Stirling plays a leading role in the transformation of financial
services to a consumer-led, competitive and efficient marketplace, by providing
comprehensive software and service solutions for:



Point of sale

Back office administration of policies and mortgages at lowest cost

Straight through processing which enables full integration of point of sale and
back office administration systems



We achieve this by working with our customers who are both distributors and
providers of financial products who choose to partner with us because of our:-



In depth knowledge of the market and the needs of both existing and prospective
customers

Vision and insight into the future consumer-led market and the transformation
process necessary to get there

Experience in delivery of large successful solutions to over 80 clients

Commitment to play a leading role in the creation of a truly competitive and
efficient financial services market



Uniquely in this marketplace our range of solutions now covers direct and
indirect sales support, back office administration and the ability to join front
and back office with seamless straight through processing. In addition to
developing and implementing process and system solutions directly for our
customers we offer either a partial or full outsourced service.



The current key areas of focus within our strategy are closely related to the
key growth trends in the UK retail financial services industry, namely
distribution, life and pensions (particularly via an outsourcing arrangement),
and mortgages.



Business review



Distribution



In 2002, Marlborough Stirling's distribution business accounts for 26% of total
turnover (2001: 8%).



The intermediary part of our distribution business enjoyed good levels of
activity across both portal services and software in the year, but activity in
the distribution software business targeting product providers was below our
expectations.



The Exchange portal (Exweb) continued to perform well, increasing subscriber
numbers by 6% in the year to 18,270 at 31st December 2002 (2001: 17,254).
Despite some slowdown in growth in the second half of the year, this increase is
particularly encouraging given Exweb's already strong market position.  The
volume of quotations and illustrations generated through Exweb grew from 89
million in 2001 to 99 million in 2002.



A number of key initiatives commenced to enhance further the market position of
Exweb and its value to intermediaries, product providers and Marlborough
Stirling. These included:



A strategic alliance with Bankhall that will bring additional subscribers to and
usage of Exweb as well as new services to the portal's subscribers

A contract with The Tenet Group that involves Officeweb being integrated with
the portal's quotation and new business functionality



The agreements with Bankhall and Tenet are particularly important as both
organisations are amongst the largest providers of support and distribution
services to the IFA market and they will align the IT strategy for their
businesses with use of our infrastructure for the intermediary market.



However, our core strategic objective for Exweb is to make it a key enabler of
electronic trading and straight through processing in financial services
distribution.  This has the potential to deliver substantial efficiencies, cost
savings and competitive advantage to product providers, intermediaries and other
distributors.  It will also allow Exweb to participate actively in the complex
distribution relationships likely to arise as a consequence of regulatory
change. These include new environments such as multi-tied partnerships, whether
developed by parties that are currently life and pensions companies, retail
banks, mortgage lenders, IFAs or other current or potential distributors.  Our
relationship with parties such as Bankhall and Tenet are early examples of these
types of arrangements.  Exweb's substantial existing subscriber base and its
extensive connectivity across financial services position the group well to
benefit from the expected significant increase in electronic trading revenues in
financial services as these developments unfold.



We commenced implementation of this strategy during the period in conjunction
with a number of major product providers.  Exweb's electronic trading
capabilities will be extended from the current focus on the provision of
quotation and other product information. Initially this will involve developing
infrastructure to support the provision of services such as electronic new
business processing and online product valuations.  Ultimately, it is expected
to embrace more complex services such as customer data aggregation.  It is
expected that the first phase of these services will become operational in late
2003 and increasingly significant new transactional revenues will result from
2004 onwards.



Turning to the software element of our distribution business, in March 2002 we
launched Officeweb, which manages all aspects of an intermediary's business
administration and can be integrated seamlessly with Exweb. Increasing our
involvement in infrastructure provision for the intermediary market is central
to our strategy of maximising our presence in the distribution market. Officeweb
is expected to play a key role in achieving this goal. Since Officeweb's
development commenced, a number of contracts have been secured with clients such
as Chase de Vere, The Tenet Group and Thomson's Group and we aim to further
increase its market penetration.



New business activity in our distribution software business targeting product
providers was disappointing, reflecting the difficult market conditions.
However, we continued work on a number of implementations for clients such as
Wesleyan, Royal London and Friends Provident.  We are currently undertaking the
first implementation of Omiga with full point of sale functionality for the life
and pensions market, representing a strategic extension from its previous role
in the mortgage market.



Life, pensions and investment



In 2002, Marlborough Stirling's life, pensions and investment business accounted
for 62% of total turnover (2001: 75%).



The challenging market conditions had a marked impact on the life, pensions and
investment business with substantial increases in activity relating to
outsourcing helping to offset weakness in software sales.



Significant developments during the year included the major outsourcing
contracts for Sun Life Financial of Canada (SLFoC) and GE Pensions and
continuation of the Lamda software implementation for AXA Sun Life.



Substantial progress was made in increasing our presence in the outsourcing
market, a key part of the group's strategy.  In particular, the scale of our
life and pensions outsourcing activities was completely transformed by securing
an outsourcing contract with SLFoC involving the administration of around
800,000 policies. Despite delays in completing the migration of SLFoC's policies
from its legacy mainframe systems onto Lamda, 600,000 policies had been migrated
by the end of 2002 and the overall programme is expected to be completed by the
third quarter of 2002.  The penultimate portfolio migration of around 50,000
policies should occur by the end of March 2003.



We have begun to realise efficiencies under the SLFoC contract enabling us to
implement planned reductions in headcount.  Permanent headcount reduced by
approximately 100 between commencement of the contract and 31st December 2002.
In addition, SLFoC endorsed the strength of our performance late in the year by
extending the outsourcing contract from 5 years to 7 years, giving it an
expected value of over #125 million in turnover over its life.  Significant cost
transformation has been achieved for SLFoC's operations and it is already acting
as a strong reference site for potential clients to the group.  We have
developed the operation into a showcase for the industry in terms of achieving
high customer service at significantly reduced cost.



During the year the group secured a further major outsourcing contract with GE
Pensions with a value of #11 million over 5 years.  Part of this contract is
being administered out of the same offices in Basingstoke as the SLFoC contract.



The most significant project for the life, pensions and investment software
business in 2002 was our Lamda implementation for AXA Sun Life, on which
substantial progress was made. In May, the first phase of the implementation
went live enabling the launch of investment bonds.  The second phase then went
live in October, enabling AXA Sun Life to launch a number of products into the
group pensions market.  We are in the early stages of managing the migration of
policies from AXA Sun Life's Tandem and IBM legacy systems onto Lamda which is
expected to continue throughout 2003.



Elsewhere, Marlborough Stirling WebTech, based on the Isle of Man, has continued
the good progress apparent since its acquisition in August 2000. It has either
completed or is in the process of implementing projects to install Genesis Life,
the group's solution for offshore portfolio bond management, for Prudential
Europe Management Services, Isle of Man Assurance and a new entrant to the
offshore market based in the Isle of Man and Ireland.



Life Strategies, our actuarial and management consultancy based in Ireland,
performed satisfactorily in the period and, through the contacts it has
developed in recent years assisting life companies setting up cross-border
operations in Dublin, it has played a key role in developing interest in Lamda
and life and pensions outsourcing in other European markets.



Mortgages



In 2002, Marlborough Stirling's mortgage business accounted for 12% of total
turnover (2001: 17%).



Activity in the UK mortgage software business remained at a satisfactory level
with work on a number of implementations of Omiga for clients such as Northern
Rock and Birmingham Midshires, part of HBOS plc. The scope of our ongoing
support for Northern Rock was significantly extended in terms of both scope of
services provided and contracted duration of work.  We also completed
implementation of the latest version of our Omiga mortgage new business
processing solution for Birmingham Midshires.



The group's Canadian operation made strong progress in the year, with work
concluding successfully on the first Canadian implementation of Omiga for MCAP
Mortgage Corporation.  There was also ongoing work for a number of established
clients of the Optimus mortgage administration software. Furthermore, a new
server gateway application developed for Optimus, to enable straight through
processing with Omiga, was well received in the market.



Interest in Omiga has continued to strengthen in Canada reflecting the
imperative for many mortgage lenders in this market to upgrade technology in
both front and back office given the rapid rise in mortgage volumes that have
occurred in recent years.  Omiga's strong new business application processing
functionality and scalability is well suited to many lenders' requirements in
this environment.  The success of the MCAP Mortgage Corporation implementation
has provided additional credibility to both Omiga and our delivery capabilities
in Canada.



The group's mortgage outsourcing joint venture with Egg, Marlborough Stirling
Mortgage Services (MSMS), continued to make steady progress following its
establishment in 2001.  Whilst new business activity was subdued during most of
the year, the quality of services MSMS provides to its clients was endorsed by
existing clients significantly extending the short term contracts initially
entered into with MSMS when it commenced operations.



Its contract with London Mortgage Company expanded from being worth around #1m
in turnover over three years to being worth in excess of #5m over 5 years.  Its
contract with Standard Life Bank was extended from a 1 year duration to a 5 year
maturity.  MSMS is now in a strong position with a number of medium term
contracts in place. Sales activity was at a good level as the period ended and
progress in securing both new clients and additional services from existing
clients is envisaged during 2003.



The advent of mortgage regulation, the proliferation of new mortgage products
(such as buy-to-let, equity release and sub-prime) and increasing competition
and transparency provides an ideal environment for the group to capitalise on
the increased scope of its solutions for the mortgage industry.



Financial review



The statutory accounts for the year disclose the turnover and operating results
relating to the outsourcing contract with Sun Life Financial of Canada (SLFoC)
as arising from an acquisition as the contract was effected through the
acquisition of an existing services company previously owned by SLFoC.  From a
management perspective, this contract is viewed as organic growth and treated as
such in the commentary below.



Turnover



Total turnover, including Marlborough Stirling's share of turnover from joint
ventures, for the year ended 31st December 2002 increased by 65% to #121.0m
(2001: #73.4m). Organic turnover growth (A) was 38% relative to 2001.



In the period, Marlborough Stirling's revenue mix changed substantially as a
result of the acquisition of Exchange FS and the SLFoC outsourcing contract.
Total turnover in the period comprised 48% from software and consultancy, 39%
from outsourcing and 13% from portal services.  In 2001, software and
consultancy accounted for 77% of total turnover.



Software and consultancy turnover increased by 2% to #57.8m (2001: #56.6m)
although, excluding turnover attributable to the acquisition of Exchange FS, it
declined by 14%.  This performance is due to a number of factors including the
difficult environment for technology investment and current demand for life and
pensions back office solutions being focused more towards outsourcing.  However,
there were some notable positive performances within the software and
consultancy business from the mortgage software business and our operations
based in the Isle of Man, Ireland and Canada.



Outsourcing turnover increased to #47.4m (2001: #13.8m). This strong growth was
due to the commencement of the major outsourcing contract with SLFoC.





Organic turnover growth is based on (i) including turnover related to the SLFoC
outsourcing contract that is disclosed under acquisitions in the accounts as a
result of the contract having been effected through an acquisition and (ii)
excluding turnover relating to the Exchange FS businesses acquired in November
2001



Our portal services business (excluding the portal services joint venture in
Germany that was disposed of in the period) generated turnover of #15.7m (2001:
#2.7m) reflecting a full year contribution from the Exchange portal (Exweb)
acquired in November 2001. Turnover in the latter part of the year was impacted
by a reduction in income from quotations, primarily relating to pension and
other investment products, reflecting particularly difficult equity market
conditions.



In 2002, the group's distribution activities accounted for 26% of total
turnover, up from 8% in 2001 primarily due to a full year contribution from the
acquisition of Exchange FS Group plc.  This sector is expected to become
increasingly important in the next few years.  The life, pensions and investment
market remained the most important to the group, contributing #75.5m or 62% of
total turnover.  The mortgage sector contributed 12% to total turnover.



The geographic breakdown of turnover in the period shows 93% of total turnover
(2001: 87%) coming from the UK market.  This reflects the greater UK revenue
concentration of Exchange FS, the SLFoC outsourcing contract and reduced
turnover from our activities in South Africa.  Turnover from the remainder of
our international operations increased by 34% in 2002 relative to 2001
reflecting encouraging progress for our activities in Canada and Ireland.



Cost of sales



Cost of sales increased by 93% to #57.9m (2001: #29.9m), resulting in a gross
margin of 50.4% (2001: 57.1%) on turnover in the period (excluding joint
ventures) of #116.7m (2001: #69.7m).  The reduced gross margin relative to 2001
was due to a number of factors such as the increased contribution of
outsourcing, which tends to have lower gross margins, reduced margins resulting
from the extended migration period under our project for SLFoC, utilisation
within the software business being affected by reduced turnover on a
like-for-like basis relative to 2001 and low margins on a number of software
contracts inherited from Crisp Computing, a subsidiary of Exchange FS Group plc.



Operating costs



Operating costs (excluding charges for depreciation, goodwill amortisation and
impairment, employee share options and reorganisation costs) increased by 94% to
#42.7m (2001: #22.0m). Such operating costs as a proportion of turnover
(excluding joint ventures) were 36.6% (2001: 31.5%) reflecting particularly the
operating costs within the SLFoC outsourcing contract and the costs of
establishing our new operations in Italy and Spain.



Research and development expenditure was around #5m, in line with last year, and
the deliverables included the development of a new end-to-end solution for life
and protection products (which is already attracting significant interest), the
extension of Omiga to include further sales automation capability across
multiple financial products and delivery channels, completion of Officeweb and
message enabling our back office solutions.  In 2003 we will incur research and
development expenditure particularly in completing the full electronic trading
capability of Exweb.



Goodwill



The group has undertaken a review of the value of goodwill being carried in
relation to previous acquisitions. The review was undertaken in accordance with
FRS 11 "Impairment of fixed assets and goodwill".  It concluded that, given the
current performance of the former Crisp Computing business (that formed part of
the acquisition of Exchange FS Group plc) and changes in valuations of similar
businesses since the acquisition of Exchange FS in November 2001, a non-cash
goodwill impairment charge of #23.6m should be included in the 2002 results
relating to this business.



The review also confirmed the value of goodwill being carried in relation to the
Exweb portal element of this acquisition which amounted to #46.4m at 31st
December 2002.  Exweb has brought significant strategic benefits and it is
expected to play a key role in the transformation of financial services
distribution in the UK.  We expect to build further on the tangible successes
achieved by Exweb since its acquisition and that it will have a significant
influence on the group's future development.



As a result, total intangible assets carried on the balance sheet at 31st
December 2002 were #51.3m and it is expected that annualised amortisation from
2003 to 2005 will be in excess of #7m.



Reorganisation costs



During 2002, substantial work was undertaken to complete the integration of the
operations of Exchange FS Group with the remainder of the group. This
integration programme included reduction in headcount particularly in central
and administrative functions.  The integration also involved rationalising
investments previously made by Exchange FS, including the disposal of a 25.5%
interest in Financial Express Prestel Limited and a 50% interest in the joint
venture, eXtrahyp.de, in Germany.  The disposal programme resulted in a modest
net gain which led to an adjustment to the goodwill arising on the acquisition
of Exchange FS.



In the latter part of 2002, the group embarked on a reorganisation programme
necessitated by the difficult trading conditions experienced by the UK software
business.  This resulted in significant reductions in headcount.  The
integration of Exchange FS, combined with the reorganisation programme, resulted
in total reorganisation charges, principally relating to severance costs
associated with headcount reductions and property rationalisation costs, of
#4.1m in the period.



The integration of Exchange FS and the reorganisation programme have realised
ongoing annualised savings of around #4m and #6m respectively, consistent with
previous announcements.  It should be noted that these cost reductions will be
partially offset by higher business taxes in the UK, modest increases in
employee costs and other minor increases in non-people based costs.



Since the end of 2002, we have announced the proposed relocation of employees
based in our Halesowen office.  In addition, as a final stage in our recent
reorganisation programme, we have restructured the group into four business
units, each with greater focus and accountability.  These units are the three UK
markets we serve - distribution, life, pension and investments and mortgages -
and our international activities.  We expect these developments will result in a
total of up to 100 employees leaving the group during the first half of 2003.
This is  expected to result in a restructuring charge to be incurred in the
first half of 2003 of around #2m and annualised savings of over #3m from the
middle of 2003.



Results



The reported pre-tax loss for the year of #34.5m (2001: profit of #9.3m)
reflects goodwill amortisation and impairment charges of  #33.4m, amounts
written off investments, taken against the carrying value of the company's
shares held in employee related share trusts, of #9.1m and employee share option
charges and reorganisation costs of #3.3m.



Underlying profit, namely operating profit, including the results of joint
ventures and before charges for goodwill amortisation and impairment, employee
share options and reorganisation costs, amounted to #11.5m (2001: #14.8m). On
this basis, in 2002 the operating margin was 9.5% (2001: 20.1%).  The reasons
for the reduced margin in 2002 relative to 2001 are set out above in the
sections entitled "Cost of sales" and "Operating costs".



Taxation



The underlying taxation rate, based on pre-tax profit, including the results of
joint ventures but after adding back goodwill amortisation and impairment and
amounts written off investments, was 38.0% (2001: 32.3%). The principal factors
causing the rate of tax to exceed the UK statutory rate of 30% were overseas
losses for which no benefit can currently be assumed and non-deductible
expenses.



Earnings per share



The basic loss per share for the year ended 31st December 2002 was 20.0 pence
(2001: earnings of 3.6 pence). Basic and diluted earnings per share (before
charges for goodwill amortisation and impairment, employee share options,
reorganisation costs and amounts written off investments) for the period were
3.8 pence and 3.5 pence respectively (2001: 7.3 pence and 5.9 pence
respectively).



Dividend



The Board continues to support a progressive dividend policy, consistent with
the cash generative nature of the business.  However, the recent fall in the
company's share price has led to a significant impairment in the carrying value
of the company's shares held in employee related share trusts.  Unfortunately,
this has the effect of reducing distributable reserves to the extent that it
would be imprudent for the Board to declare a dividend for 2002 despite the
company's significant cash resources.



Cash flow and borrowings



Operating cash flow was #11.5m (2001 : #13.5m), representing 100% of group
operating profit before charges for goodwill amortisation and impairment,
employee share options and reorganisation costs.



Operating cash flow relative to underlying operating profit was strong in the
year given that there were some specific adverse non-recurring movements
relating to the acquisition of Exchange FS Group plc, the reorganisation
programme undertaken by the group and the SLFoC outsourcing contract. This
strong performance is attributable particularly to good cash inflows during the
second half of the year when the level of trade and other debtors was reduced
substantially.



This positive influence was offset by cash outflows in the period of #4.2m
related to reorganisation costs charged in both 2001 and 2002 as well as cash
movements linked to fair value provisions established since the acquisition of
Exchange FS Group plc.  The reorganisation costs relate to the integration of
Exchange FS as well as the reorganisation programme undertaken by the group in
the second half of the year.



The adverse operating cash flow movements relating to the SLFoC outsourcing
contract were linked to redundancy costs.  These costs were not charged in the
period as provisions had been established at the time that we acquired Sun Life
of Canada (U.K.) Group Services Limited (SLOCGSL) as part of the contract
arrangements. However, this adverse movement was offset in large part by the
receipt of a substantial receivable from the SLFoC group towards the end of the
year, which contributed to the strong cash collection referred to above.



During 2002, non-operating cash movements included payments of #4.9m of
acquisition costs and related professional fees in connection with the
acquisition of Exchange FS and the consideration for the acquisition of SLOCGSL
(offset by #3.5m held on SLOCGSL's balance sheet) and #10.3m relating to capital
expenditure, dividends and tax. These payments were offset by the receipt of
#1.3m on the exercise of share options and #0.3m on disposal of the Group's
shareholding in Financial Express Prestel Limited.



Overall, reflecting principally the above factors, during 2002 Marlborough
Stirling moved from an opening net cash position of #7.5m to a closing net cash
position of #9.1m.  The group also maintains significant available bank
facilities amounting to #20m which were all undrawn at 31st December 2002.



Consolidated profit and loss account
For the year ended 31st December 2002
                                                  Notes                          2002                     2001
                                                                                 #000                     #000

Turnover (including share of joint ventures)          2                       121,008                   73,369
Less share of turnover of joint ventures                                      (4,353)                  (3,622)

Group turnover                      - continuing                               81,879                   69,747
                                    - acquisition                              34,776                        -
Group turnover                                                                116,655                   69,747


Cost of sales                                         3                      (57,862)                 (29,913)

Gross profit                                                                   58,793                   39,834

Operating expenses                                    3                      (83,649)                 (30,551)


Group operating (loss)/profit     - continuing                               (26,514)                    9,283
                                  - acquisition                                 1,658                        -




Group operating (loss)/profit                                                (24,856)                    9,283


Share of operating (loss) of joint ventures and
associates                                                                      (352)                    (249)
Total operating profit before charges for
goodwill amortisation and impairment, employee
share options and reorganisation costs

                              - continuing           3                         8,968                   14,780
                              - acquisition                                    2,502                        -



                                                                               11,470                   14,780

Goodwill amortisation         - subsidiaries         3                        (9,496)                  (2,851)
                              - joint ventures       3                          (250)                    (250)

Goodwill impairment charge                                                   (23,622)                        -
Employee share option credit/(charge)                3                            778                  (1,474)
Reorganisation costs                                 3                        (4,088)                  (1,171)

Total operating (loss)/profit including share of
joint ventures and associates                                                (25,208)                    9,034
Interest receivable                     - group                                   900                      969
                                        - joint venture                            49                       46
  

Amounts written off investments                     4                         (9,052)                        -


Interest payable                                                              (1,167)                    (772)

(Loss)/profit for financial year                                             (34,478)                    9,277


Tax on (loss)/profit on ordinary activities           5                       (3,016)                  (3,999)

(Loss)/profit after non-equity appropriation                                 (37,494)                    5,278

Non-equity dividends and preference
share appropriation                                                                 -                    (496)

Total non-equity appropriation                                                      -                    (496)
(Loss)/profit for financial year                                             (37,494)                    4,782


Equity dividends                                                                    -                  (1,718)

Retained (loss)/profit for the financial year        12                      (37,494)                    3,064

(Loss)/earnings per share                             6                       (20.0)p                     3.6p

Diluted (loss)/earnings per share                     6                       (20.0)p                     2.9p

Adjusted (loss)/earnings per share                    6                          3.8p                     7.3p
Adjusted diluted (loss)/earnings per share            6                          3.5p                     5.9p

Adjusted earnings per share and adjusted diluted earnings per share are
calculated before charges for goodwill amortisation and impairment, employee
share options,

reorganisation costs and amounts written off investments.



There is no material difference between the (losses)/profits reported above and
the historic cost (losses)/profits.



Consolidated statement of total recognised gains and losses
For the year ended 31st December 2002
                                            Note                          2002                      2001
                                                                          #000                      #000

(Loss)/profit on ordinary activities
after taxation                                                        (37,494)                     5,278

Exchange adjustments offset in reserves             12                     195                      (97)

Total gains and losses recognised in the                              (37,299)                     5,181
year




Consolidated balance sheet
At 31st December 2002

                                                               31st                     31st December
                                         December 2002                      2001


                                        Notes         #000         #000              #000        #000

Fixed assets

Goodwill                                                         50,746                        84,094
Intangible assets                                                   537                             -
Tangible assets                                                  16,566                        13,011
Investments - interests in own              4                    10,477                        20,877
shares
Investment s in joint ventures:
share of gross assets                                2,430                          3,820
share of gross liabilities                         (1,467)                        (2,133)
goodwill arising on
acquisition                                            500                            750
                                                                  1,463                         2,437
Total fixed assets                                               79,789                       120,419

Current assets

Debtors                                     7       32,831                         25,201
Current asset investments                              529                              -
Cash at bank                                        21,486                         23,022
                                                    54,846                         48,223

Creditors

Amounts falling due within one year         8     (38,329)                       (36,620)


Net current assets                                               16,517                        11,603

Total assets less
current liabilities                                              96,306                       132,022

Creditors

Amounts falling due after more
 than one year                              9                   (7,007)                       (7,938)

Provisions for liabilities and             10                   (7,535)                       (3,897)
charges

Net assets                                                       81,764                       120,187

Capital and reserves

Called up share capital                    11                     2,257                         2,254
Share premium account                      12                    43,879                        43,965
Capital redemption reserve                 12                         6                             6
Merger reserve                             12                    44,646                        68,268
Shares to be issued                        11                        21                         1,161
Profit and loss account                    12                   (9,045)                         4,533

Equity shareholders' funds                                       81,764                       120,187






Consolidated cash flow statement
For the year ended 31st December 2002

                                                  Notes          31st December 2002     31st December 2001
                                                                               #000                   #000

Net cash inflow from operating activities         13                         11,549                 13,453

Return on investments and servicing
 of finance

Interest paid                                                                 (929)                  (519)
Interest received                                                               900                    972
Non-equity dividends paid to shareholders                                         -                (1,394)
Interest element of finance lease rentals                                     (212)                  (278)

Net cash (outflow) from returns on investments
and servicing of finance                                                      (241)                (1,219)

Taxation paid                                                               (3,242)                (1,909)
Capital expenditure and financial investment

Purchase of tangible fixed assets                                           (5,844)                (5,054)
Purchase of own shares                                                            -               (17,356)
Proceeds from exercise of share options                                       1,348                    161
Sale of tangible fixed assets                                                   102                     39

Net cash (outflow) for capital expenditure
 and financial investment                                                   (4,394)               (22,210)

Acquisitions and disposals

Purchase of subsidiary undertakings                                         (4,866)               (26,286)
Investment in joint ventures                                                   (72)                      -
Sale of associate undertakings                                                  334                      -
Cash acquired with subsidiary undertakings                                    3,486                 16,054

Net cash (outflow) for acquisitions
 and disposals                                                              (1,118)               (10,232)

Equity dividends                                                            (1,244)                  (474)
Net cash inflow / (outflow) before management
of liquid resources and financing                                             1,310               (22,591)
Management of liquid resources

Increase in short-term deposits with banks                                    (529)                      -

Net cash inflow from management of liquid                                     (529)                      -
resources
Financing
Capital element of finance lease rentals and
increase/(decrease) in advances from finance                                    400                    128
houses

Issue of ordinary share capital                                                 227                 42,995
Repurchase of preference shares                                                   -                (3,000)
(Decrease) in borrowings                                                      (158)                (6,249)
Repayment of loan and promissory note                                       (3,206)                      -

Net cash (outflow)/inflow from financing                                    (2,737)                 33,874

(Decrease)/increase in net cash in the year       14                        (1,956)                 11,283



Notes to the financial statements



1.        Basis of preparation



The financial information for the years ended 31st December 2002 and 31st
December 2001 does not constitute

full financial statements within the meaning of Section 240 of the Companies Act
1985.

The statutory accounts for the year ended 31st December 2001 have been delivered
to the Registrar of Companies,

 whereas those for the year ended 31st December 2002 will be delivered following
the annual general meeting.

 The auditors have given unqualified reports on both sets of accounts which did
not contain a statement under

 Sections 237(2) or (3) of the Companies Act 1985.



The financial information has been prepared in accordance with the accounting
policies adopted for the

 year ended 31st December 2002, which are consistent with those adopted for the
year ended 31st December 2001.



The preliminary statement was approved by the directors on 3rd March 2003.



2.     Segmental information



In the following analyses, those by business are based on the Group's management
structure.



Geographical analysis
                                                                 By origin


                                                                 (Loss)/profit  Net assets      Turnover by
                                                     Turnover  before taxation                  destination
                                                         #000             #000        #000             #000

Year ended/at 31st December
2002

United Kingdom                           - group      109,261         (23,271)      57,294          108,568

                                 - joint venture        4,226            (157)       1,463            4,226



Rest of the world                        - group        7,394          (1,585)       5,144            8,087

                                 - joint venture          127            (195)           -              127
                                                      121,008         (25,208)      63,901          121,008

Other                                                       -          (9,270)      17,863                -
                                                      121,008         (34,478)      81,764          121,008



Current year turnover attributable to Exchange FS, acquired in November 2001,
was #26,214,000 (2001: #4,539,000).


Year ended/at 31st December 2001



United Kingdom                           - group       64,656            9,895      86,809           60,515

                                 - joint venture        3,407            (189)       1,873            3,407

Rest of the world                        - group        5,091            (612)         168            9,232

                                 - joint venture          215             (60)         564              215
                                                       73,369            9,034      89,414           73,369

Other                                                       -              243      30,773                -
                                                       73,369            9,277     120,187           73,369



Other unallocated net assets comprise assets and liabilities which cannot be
attributed to a geographical or business segment and

principally comprise cash and bank borrowings, interest in own shares, dividends
payable and certain other corporate assets and liabilities.



Business analysis
                                                          Turnover



                                                        Acquisitions in                   Profit
                                             Continuing        the year       Total       before   Net assets
                                                                                        taxation
                                                   #000            #000        #000         #000         #000

Year ended/at 31st December
2002

Software and consultancy           - group       57,837               -      57,837     (27,833)       14,473

Services

Outsourcing                        - group        8,371          34,776      43,147        3,735        3,104

                                   - joint        4,226               -       4,226        (157)        1,963
                                   venture

Portal services                    - group       15,671               -      15,671        (758)       44,361

                                   - joint          127               -         127        (195)            -
                                   venture
                                                 86,232          34,776     121,008     (25,208)       63,901

Other                                                 -               -           -      (9,270)       17,863
                                                 86,232          34,776     121,008     (34,478)       81,764

Year ended/at 31st December
2001

Software and consultancy           - group       56,648               -      56,648        9,240       33,402

Services

Outsourcing                        - group       10,384               -      10,384        1,482        2,435

                                   - joint        3,407               -       3,407        (189)        1,873
                                   venture

Portal services                    - group        2,715               -       2,715      (1,439)       51,140

                                   - joint          215               -         215         (60)          564
                                   venture
                                                 73,369               -      73,369        9,034       89,414

Other                                                 -               -           -          243       30,773
                                                 73,369               -      73,369        9,277      120,187



Software and consultancy



The group's software and consultancy activities comprise the sale and delivery
of software licences together with related specialist services such as
implementation, customisation, consultancy and support and maintenance



Software and consultancy turnover includes licence fees of #5,712,000 (2001:
#7,747,000).



Outsourcing services



The group's outsourcing activities relate to the delivery of a range of services
on behalf of financial

services companies to transform their administration operations.  These services
include business process re-engineering, change management, new business processing,
customer service, finance and actuarial.



Portal services



The group portal services activities are involved in the maintenance of
connectivity between product providers and intermediaries in the financial 
services industry to enable key processes in the sale and distribution

of financial services products together with a range of related services.



In addition to the above analysis of the Group's results, turnover can be
analysed according to the market served as follows:
                                                          Continuing     Acquisitions in the              Total
                                                                                        year
                                                                #000                    #000               #000
Year ended 31st December 2002

Life, pensions and investment
Software and consultancy                    - group           32,316                       -             32,316

Outsourcing                                 - group            8,371                  34,776             43,147
                                                              40,687                  34,776             75,463
Mortgage
Software and consultancy                    - group            9,971                       -              9,971

Outsourcing                         - joint venture            4,226                       -              4,226
                                                              14,197                       -             14,197
Distribution
Software and consultancy                    - group           15,550                       -             15,550

Portal services                             - group           15,671                       -             15,671
                                    - joint venture              127                       -                127
                                                              31,348                       -             31,348
                                                              86,232                  34,776            121,008

Year ended 31st December 2001

Life, pensions and investment
Software and consultancy                    - group           44,916                       -             44,916

Outsourcing                                 - group           10,353                       -             10,353
                                                              55,269                       -             55,269
Mortgage
Software and consultancy                    - group            8,890                       -              8,890

Outsourcing                                 - group               31                       -                 31
                                    - joint venture            3,407                       -              3,407
                                                              12,328                       -             12,328
Distribution
Software and consultancy                    - group            2,842                       -              2,842

Portal services                             - group            2,715                       -              2,715
                                    - joint venture              215                       -                215
                                                               5,772                       -              5,772
                                                              73,369                       -             73,369



3.     Cost of sales, gross profit and operating profit

                                                          2002


                                                                           Acquisitions               2001 Total
                                                              Continuing    in the year       Total
                                                                    #000           #000        #000         #000
Year ended 31st December 2002

Total Group turnover (excluding joint ventures)                   81,879         34,776     116,655       69,747

Cost of sales                                                   (40,878)       (16,984)    (57,862)     (29,913)
Gross profit                                                      41,001         17,792      58,793       39,834

Operating expenses

Goodwill amortisation                                              9,472             24       9,496        2,851

Intangible amortisation                                                -             72          72            -

Goodwill impairment charge                                        23,622              -      23,622            -

Depreciation                                                       4,105            399       4,504        3,074

Research and development costs                                     5,133              -       5,133        4,938

Reorganisation costs (a)                                           3,268            820       4,088        1,171

Employee share option (credit)/charge (b)                          (778)              -       (778)        1,474

Other administrative costs                                        22,693         14,819      37,512       17,043

Total administrative costs                                        67,515         16,134      83,649       30,551
Group operating (loss)/profit                                   (26,514)          1,658    (24,856)        9,283

Share of operating loss of joint ventures and associates           (352)              -       (352)        (249)
Total operating profit/(loss) including share of joint          (26,866)          1,658    (25,208)        9,034
ventures and associates
Total operating profit before charges for goodwill                 8,968          2,502      11,470       14,780
amortisation and impairment, employee share options and
reorganisation costs (including joint ventures and
associates)

Goodwill amortisation                                            (9,722)           (24)     (9,746)      (3,101)

Impairment charge                                               (23,622)              -    (23,622)            -

Reorganisation costs (a)                                         (3,268)          (820)     (4,088)      (1,171)

Employee share option credit/(charges) (b)                           778              -         778      (1,474)

Total operating profit including share of joint ventures        (26,866)          1,658    (25,208)        9,034



a)                   In the early part of 2002, the group completed the
integration programme relating to the acquisition of Exchange FS Group plc which
resulted in reorganisation costs being incurred. Following the acquisition of
Marlborough Stirling Life and Pensions Services Limited (MSLPS) on 1st March 2002, 
the Group incurred reorganisation costs in connection with bringing MSLPS under
the Group's management which are disclosed separately above. In addition, during the second half of
2002 the group initiated a cost reduction programme across the  group.  As a 
result of these activities, the group incurred during the year a total of
#4.1 million of reorganisation costs which comprise principally redundancy and
other personnel costs together with charges in respect of vacant property.

b)                   The employee share option credit reflects an adjustment in
respect of a provision for National Insurance payable on the grant of employee
share options.



4.     Interests in own shares and investments
                                                                                                          Total
                                                                                                           #000

At 1st January 2002                                                                                      20,877
Amounts written off investments                                                                         (9,052)
Shares transferred on exercise of employee                                                              (1,348)
options

At 31st December 2002                                                                                    10,477



The value of the interest in own shares held in employee related share trusts
has been assessed and marked to market at the balance sheet date.

Based on the share price of #0.355 at 31st December 2002 and the 36,827,246
shares held by these trusts at that date, an amount of #9,052,000

has been provided against the carrying value of the interest in own shares.
Based on the latest available share price of #0.28 on 3rd March 2003,

a further provision of #1,646,000 would be required.



5.     Tax charge on profit on ordinary activities
                                                                       31st December 2002  31st December 2001
                                                                                     #000                #000

(a) Analysis of charge in the period

Current tax

UK corporation tax at 30% (2001: 30%) on profits for the year                       (197)               4,017
Share of joint ventures                                                                 -                  11
Adjustment in respect of previous periods                                           (191)                (16)
                                                                                    (388)               4,012
Overseas tax                                                                          246                 119

Total current tax                                                                   (142)               4,131

Deferred tax origination and reversal of timing differences

                - current year charge/(credit)                                      2,813               (189)

                - prior year charge                                                   276                  57

                                                                                    3,089               (132)
Share of joint venture                                                                 69                   -

Tax charge on (loss)/profit on ordinary activities                                  3,016               3,999

(b) Factors affecting the current tax charge for the period

The tax assessed in each year varies from the standard rate of corporation tax
in the UK in the relevant years.  The differences are explained below:
(Loss)/profit on ordinary activities before taxation                             (34,478)               9,277

(Loss)/profit on ordinary activities before taxation multiplied by               (10,343)
standard rate of UK corporation tax of 30% (2001: 30%)                                                  2,783
Goodwill amortisation                                                               2,923                 930

Goodwill impairment charge                                                          7,087                   -
Amount written off investments                                                      2,715                   -
Overseas losses not recognised                                                        321                 369

Fair value adjustments                                                            (1,141)                   -
Rate differences on overseas entities                                               (115)               (140)

Losses brought forward                                                              (999)                   -

Adjustments to tax in previous periods                                              (191)                (16)

Depreciation charges in excess of capital allowances and other
timing differences                                                                                        189
                                                                                    (631)
Permanent differences and other                                                       232                  16

Current tax (credit)/charge for period                                              (142)               4,131





6.     Earnings per share



Basic earnings per share (EPS) is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of ordinary 
shares in issue during the period, excluding those held by the Employee Share 
Ownership Trusts which are treated as cancelled.

For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all potentially dilutive ordinary
shares.  This includes share options in issue where the exercise price is less than the
average market price together with other convertible and contingently issuable shares.


                                                                               Year ended            Year ended
                                                                       31st December 2002    31st December 2001
                                                                                     #000                  #000

Earnings

(Loss)/profit attributable to ordinary shareholders                              (37,494)                 4,782

Goodwill amortisation                                                               9,746                 3,101

Employees share option (credit)/charges                                             (563)                 1,086

Reorganisation costs                                                                2,862                   820

Goodwill impairment charge                                                         23,622                     -

Amounts written off investments                                                     9,052                     -

Profit before goodwill amortisation and impairment, employee                        7,225                 9,789
share option charges, reorganisation costs and amounts written
off investments                                                                                           

Weighted average number of shares

Basic                                                                         187,707,473           134,007,265

Dilution                                                                       21,257,102            30,860,668

Diluted number of shares                                                      208,964,575           164,867,933

(Loss)/earnings per share (pence)

Basic                                                                             (20.0)p                  3.6p

Adjusted basic (i)                                                                   3.8p                  7.3p

Diluted (ii)                                                                      (20.0)p                  2.9p

Adjusted diluted (i)                                                                 3.5p                  5.9p


(i)                   Adjusted earnings per share and adjusted diluted earnings per share are calculated before charges
for goodwill amortisation and impairment, employee share options, reorganisation costs and amounts written off
investments. This supplementary EPS information has been provided as the directors consider it gives a clearer
indication of the underlying trading performance of the group.

(ii)                  In the year ended 31st December 2002, the Group made a loss, consequently the effect of share
options is anti-dilutive.  Therefore there is no difference between the weighted average number of shares for the basic
and diluted loss per share. The dilutive effect on the adjusted basic earnings per share is shown.





 7.    Debtors
                                                                      31st December 2002     31st December 2001
                                                                                    #000                   #000

Trade debtors                                                                     18,958                 17,897
Corporation tax recoverable                                                          555                    153
Deferred taxation                                                                  2,798                    732
Accrued income                                                                     6,270                  3,991
Prepayments and other debtors                                                      4,250                  2,428
                                                                                  32,831                 25,201



Included in deferred taxation above is an estimated asset of #1,048,000
recoverable in excess of one year.



8.   Creditors: amounts falling due within one year
                                                                      31st December 2002     31st December 2001
                                                                                    #000                   #000
Bank and other borrowings                                                          7,515                  7,745
Trade creditors                                                                    3,268                  2,365
Corporation tax                                                                      309                  2,400
Overseas tax                                                                         328                    141
Other tax and social security                                                      3,684                  3,646
Other creditors                                                                      636                      -
Accruals                                                                           9,052                 10,491
Payments on account and deferred income                                           12,865                  8,430
Deferred consideration on acquisitions                                               672                    158
Dividend proposed                                                                      -                  1,244
                                                                                  38,329                 36,620



9.     Creditors: amounts falling due after more than one year
                                                                      31st December 2002     31st December 2001
                                                                                    #000                   #000
Bank and other borrowings                                                          5,389                  7,766
Deferred consideration on acquisitions                                             1,048                      -
Other                                                                                570                    172
                                                                                   7,007                  7,938





10.   Provisions for liabilities and charges



The movement in provisions for the year ended 31st December 2002 is detailed
below.




                          Provision at                               Established/              Provision at
                           1st January              Established to       released             31st December
                                  2002     Acquired     fair value                  Utilised           2002
                                  #000         #000           #000           #000       #000           #000
Employee related

reorganisation provisions (i)    1,083        6,473              -          3,012    (7,024)          3,544

Property related

reorganisation provisions (ii)   1,730            -          2,533            847    (1,287)          3,823

Other provisions (iii)           1,084            -           (93)          (802)       (21)            168
                                 3,897        6,473          2,440          3,057    (8,332)          7,535



(i)              Employee related reorganisation provisions relate principally
to redundancy provisions, which are expected to be utilised within the next 12
months.

(ii)             Property provisions relate to onerous leasehold properties and
are expected to be utilised within the next three years, representing the
Directors'estimate of the net unrecovered costs of the remaining period of the leases.

(iii)            Other provisions will be utilised over the next six months.





11.   Called up share capital


                                                                   31st December 2002      31st December 2001
                                                                                 #000                    #000
Allotted, called up and fully paid

225,716,013 ordinary shares of 1p each (2001: 225,472,528)                      2,257                   2,254

Shares to be issued                                                                21                   1,161



During the year 243,485 new shares were issued for a consideration of #227,000
as a result of employees exercising their options



12.   Reserves
                                                            Capital          Share                Profit and
                                                         redemption        premium       Merger         loss
                                                            reserve        account      reserve      account
                                                               #000           #000         #000         #000
At 1st January 2002                                               6         43,965       68,268        4,533
Premium on issue of ordinary shares                               -            373            -            -
Costs of share issues                                             -          (459)            -            -
Impairment charge transferred to merger reserve                   -              -     (23,622)       23,622
Share option adjustment                                           -              -            -           99
Retained loss for the year                                        -              -            -     (37,494)
Exchange adjustments                                              -              -            -          195
At 31st December 2002                                             6         43,879       44,646      (9,045)





Cumulative goodwill relating to acquisitions made prior to 1999 which has been
eliminated against the merger reserve, amounts to #2,861,000 (2001: #2,861,000).

 The current year impairment charge of #23.6 million has been eliminated against
the merger reserve established on the issue of shares i

n connection with the acquisition of the issued share capital of Exchange FS
Group plc in November 2001.



13.           Reconciliation of operating profit to operating cash flow
                                                               31st December 2002          31st December 2001
                                                                             #000                        #000
Group operating (loss)/profit                                            (24,856)                       9,283
Depreciation charge                                                         4,504                       3,074
Goodwill amortisation and intangible impairment                            33,190                       2,851
(Profit)/loss on sale of tangible fixed assets                               (32)                           9
Adjustment for unrealised profit on sales to joint venture                    169                           -
Decrease/(increase) in debtors                                              2,641                     (1,014)
Increase/(decrease) in creditors                                            1,033                     (4,345)
(Decrease)/increase in provisions                                         (5,100)                       3,595
Net cash inflow from operating activities                                  11,549                      13,453



14.   Reconciliation of net cash flow to movement in net debt


                                                               31st December 2002         31st December 2001
                                                                             #000                       #000
(Decrease)/increase in cash                                               (1,956)                     11,283
Borrowings net of short-term deposits acquired with                             -                    (1,080)
subsidiaries
New short term deposits                                                       529                          -
Movement in borrowings                                                      2,964                      4,049
Inception of new finance leases                                             (196)                      (158)
Currency translation differences                                              259                       (90)
Movement in net debt                                                        1,600                     14,004
Net debt at 1st January                                                     7,511                    (6,493)
Net debt at 31st December                                                   9,111                      7,511





15.   Analysis of movement in net cash


                                     At 1st                                 Exchange   Finance         At 31st
                               January 2002   Cash flow   Acquisitions   differences    leases   December 2002
                                       #000        #000           #000          #000      #000            #000
Cash at bank and in hand             23,022     (5,251)          3,486           229         -          21,486
Overdrafts                          (4,860)       (191)              -             3         -         (5,048)
                                     18,162     (5,442)          3,486           232         -          16,438
Current asset investments                 -         529              -             -         -             529
Bank and term loans                 (3,483)         158              -             -         -         (3,325)
Other loans                         (3,382)       3,206              -            28         -           (148)
Finance leases and advances
from finance houses                 (3,786)       (400)              -           (1)     (196)         (4,383)
                                      7,511     (1,949)          3,486           259     (196)           9,111




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