RNS Number:8421H
Innovation Group PLC
24 February 2003


                                                           24 February 2003

                    THE INNOVATION GROUP PLC

  QUARTERLY REPORT FOR THE THREE MONTHS ENDED 31 DECEMBER 2002
                        AND TRADING UPDATE

The Innovation Group plc ("TiG" or "the Group"), the provider of innovative
insurance solutions to the global financial services industry,  today
announces  its unaudited results for the three months to 31  December
2002.

Highlights:

Quarterly report

>  Ongoing revenue for three months to 31 December 2002 of
   #15.8m (quarter 4 2002: #14.9m)

>  EBITDA   for  three  months  to  31  December  2002   of   #1.2m
   (quarter 4 2002: adjusted loss of #2.8m)

>  Adjusted PBT for three months ended 31 December 2002 of
   #0.3m (quarter 4 2002: loss of #4.5m)

>  FRS  3  loss  before tax for the three months  to  31  December
   2002  of  #3.8m  after amortisation of #4.1m (quarter  4  2002:  loss
   of #15.8m)

>  Adjusted EPS for three months to 31 December 2002 of 0.1p
   (quarter 4 2002: loss of 2.9p)

>  Cash  satisfactory with #5.7m of  funds  excluding
   guaranteed loan notes as at 31 December 2002

>  Prior restructuring of cost base delivers savings ahead of expectations
   with the annualised cash cost base reduced from #68m to #62m

Trading update

>  Increased volume in the fixed cost element of our BPO division
   provides real evidence of continued improvements in trading

>  Significant value of BPO operations highlighted by sale of French
   BPO operation to Groupama

>  Underwritten Rights Issue to raise approximately #9.2m (net of
   expenses). Proceeds to be used to strengthen Company's balance  sheet
   and  thus  assist in the negotiation of new business currently  under
   discussion



Enquiries:

The Innovation Group plc                                    01489 898300
Paul Smolinski, Group Finance Director

KBC Peel Hunt                                              020 7418 8900
Simon Hayes / Jonathan Marren

Weber Shandwick Square Mile                                020 7067 0700
Sara Musgrave / Katie Hunt


Chairman's Statement
In common with other technology businesses the Group found the second half
of   its   last  financial  year  extremely  demanding.  The  trading
environment  in  the  insurance industry resulted  in  many  insurers
taking  a  cautious  view  on technology infrastructure  and  systems
investments, which in turn meant that new business licence sales  and
the  timing  of  licence deployments relating  to  existing  customer
projects  were  proving  difficult.  Despite a  difficult  IT  market
environment  the  Group  has made a positive  start  to  the  current
financial   year  with  quarter  one  seeing  the  Group  return   to
profitability   before  goodwill  amortisation.    This   significant
milestone  has  been  achieved by focusing  on  revenue  growth  from
continuing  operations and decisive management action to continue  to
optimise costs in line with the Group's revenue expectations.

Financial and Operating Review
Revenue from continuing operations for the three months ended 31 December
2002  was  #15.8m (quarter 4 2002: #14.9m) and EBITDA for  the  three
months  ended  31 December 2002 was #1.2m (quarter 4  2002:  adjusted
loss of #2.8m). Profit before tax and goodwill amortisation was #0.3m
(quarter 4 2002: loss of #4.5m); FRS3 loss before tax was #3.8m after
amortisation of #4.1m (quarter 4 2002: loss of #15.8m).  Adjusted EPS
was 0.09p (quarter 4 2002: loss of 2.93p).  Cash is satisfactory with
#5.7m  of  funds  excluding guaranteed loan notes as at  31  December
2002.

Overall,  quarter one showed a positive trading improvement over  the
previous quarter from continuing operations with the fixed cost  base
being  reduced  significantly. In note 2  to  the  results,  we  have
introduced  segmental  analysis of our business providing  additional
information  on the profitability of our Business Process Outsourcing
(supply   chain/e-procurement)  ("BPO")  and   Technology   Solutions
businesses.  Revenue from our BPO business was #5.7m  and  Technology
Solutions  #10.1m,  comprising  #0.7m  initial  licence  fee,   #3.0m
implementation and #6.4m recurring revenue.

The start of our current financial year has been an encouraging time for
our  BPO  operations.  A significant new client  win  in  our  German
operation  is already having a major effect on its run-rate revenues.
In  the  UK, client developments have resulted in our projected  run-
rates  increasing by 25 per cent. by the conclusion of  quarter  one.
The  effect of these increases should start to manifest itself in the
results for quarter two. These revenue gains within the UK and German
BPO operations are being achieved without any increase in the current
cost base.

In line with our strategy for the long-term sustainability of operations,
the  basis  for forward planning is that management will ensure  that
there  is  no  reliance on cash from any non-contractually  committed
licence  sales  to  generate positive cash  from  operations.   Prior
restructuring  and  cost  base optimisation  has  delivered  benefits
beyond  our previous guidance with the Group's annualised  cash  cost
base  reducing  from  #68m to #62m. Management is still  implementing
further  optimisation  of the ongoing fixed cash  cost  base  with  a
target of #60m driven primarily by rationalisation of facilities  and
other non people based costs.

Trading Update
On  29  January 2003, following an approach from Groupama, the  Group
announced  that  it had entered into an agreement  to  sell  its  BPO
business  in France to the insurer Groupama for a total consideration
of  4 million Euros.  In addition Groupama has paid 0.7 million Euros
for  the licence to continue to use the TiG claims technology  within
the operation.

The Board assessed Groupama's approach from a perspective of creating
shareholder  value  and this was the key driver  for  accepting  this
unsolicited but attractive offer at a multiple of more than 80  times
the  historic earnings of the French BPO business or 25 times the net
asset  value.   The  Board believes that these  terms  highlight  the
significant  value  of  our  BPO  operations.  The  French  operation
represented  less than 1% of total revenue and less than  5%  of  our
total BPO revenues of approximately #20 million during 2002.

The Board has received a number of other approaches regarding various
assets  of the business but believes that it is in the best interests
of our shareholders and other stakeholders for the Group to remain as
a   single  operating  entity.  Therefore,  regardless  of  the  cash
available to the business at this time, the Directors are of the view
that  it is appropriate to raise additional funds via a rights  issue
to strengthen the Company's balance sheet.

Rights Issue
On 14 February 2003 the Group announced a proposed 1 for 1 Rights Issue to
raise  approximately  #9.2m  (net of  expenses).  This  will  provide
further  confidence to clients and potential clients in  the  Group's
ability to fulfil contracts and thus assist in the negotiation of new
business  currently under discussion.  By way of an example of  this,
the Company also announced that it had entered into an agreement with
Zurich   Insurance  Company,  which  has  paid  a  licence   fee   of
approximately  #1.8  million  into an escrow  account  that  will  be
released  to  the  Company upon the passing  of  the  resolutions  in
respect of the Rights Issue.

All of the Directors have irrevocably undertaken to take up their rights
which represent 20.8 per cent. of the issue. In addition, certain  of
the  Directors  have  agreed to sub-underwrite a  proportion  of  the
Rights  Issue.  The Rights Issue has been fully underwritten  by  KBC
Peel Hunt.

Board Changes
Following the announcement of the Rights Issue, Hassan Sadiq was appointed
as  Chief Executive of the Company.  Hassan Sadiq has been the  Chief
Operating  Officer of the Company since December 2001.   In  addition
Robert  Terry, founder and previously Chief Executive of the Company,
has been appointed as Non-Executive Vice Chairman and Chairman Elect.
The  Company  has,  however, secured the ongoing services  of  Robert
Terry  on the terms of a management consultancy agreement on  a  two-
year rolling basis.

John Birkmire, Gordon Crawford and Clive Vlotman resigned from the Board on
3  February  2003.  It is the Board's intention to appoint additional
fully  independent  non-executive  directors  to  the  Board  in  due
course.

Outlook
The Directors consider that the Group has now taken the necessary steps to
put  the business on a sound financial footing for the future  whilst
ensuring that the Group is still recognised as an independent thought
leader in applying technology to the business issues facing insurance
companies across the globe.

The Group continues to provide modern, innovative IT solutions to insurance
companies,  always focusing on systems which give cost and efficiency
gains  in  ongoing  business operations and real measured  return  on
investment  for  customers.  Our  technology  is  fully   proven   in
production  and is used by 25,000 people in 11 countries  across  the
world.   Over  30 million client records are held and  more  than  20
million  policies  with all their associated claims transactions  are
administered daily by our solutions.

In summary, the Board continues to believe, despite previous difficulties,
that  the Group remains a leading solutions provider to the insurance
industry  with  clear opportunities for growth in both  its  BPO  and
Technology  Solutions  businesses once the  market  returns  to  more
positive trading conditions.


Geoff Squire, OBE
Chairman
24 February 2003



The Innovation Group Plc
FINANCIAL HIGHLIGHTS
for the three months ended 31 December 2002


                                        3 months ended                     Year to
                            Note           31 December                30 September
                                       2002          2001                     2002
                                      #'000         #'000                    #'000

Turnover                             15,763        27,509                  100,071

Adjusted profit before tax   1          300         4,101                   10,028

Loss before tax                      (3,838)       (8,029)                (391,114)

Adjusted earnings per share (pence)    0.09          1.26                     2.87

Basic loss per share (pence)          (1.99)        (4.90)                 (202.75)

Dividend per share (pence)                -             -                      0.6


Note:

1.Adjusted profit before tax for the three months ended  31
  December  2002 is FRS 3 loss before tax of #3,838,000  (three
  months ended 31 December 2001: loss of #8,029,000; year ended 30
  September 2002: loss of #391,114,000) after excluding exceptional
  costs of #nil (three months ended 31 December 2001:  #4,539,000;
  year ended 30 September 2002: #374,498,000) and the amortisation
  charge  of  #4,138,000 (three months ended 31 December  2001:
  #7,591,000;  year  ended  30  September  2002:  #26,644,000).
  References to adjusted profit reflect the Directors' view that
  this is an important measure for their own, and shareholders'
  assessment of the Group's underlying performance.




The Innovation Group Plc
UNAUDITED PROFIT AND LOSS ACCOUNT
For the 3 months ended 31 December 2002

                                             Unaudited          Unaudited            Audited
                                           3 months to        3 months to            Year to
                                           31 December        31 December       30 September
                                                  2002               2001               2002
                                     Note        #'000              #'000              #'000



TURNOVER                              2         15,763             27,509            100,071
Cost of sales                                   (3,181)            (4,160)           (14,687)
                                             ----------------------------------------------------
Gross profit                                    12,582             23,349             85,384
Administrative expenses
  - exceptional items                 3              -             (4,539)          (374,498)
  - other                                      (16,352)           (27,209)          (102,411)
                                             ----------------------------------------------------
                                               (16,352)           (31,748)          (476,909)
                                             ----------------------------------------------------
OPERATING LOSS                                  (3,770)            (8,399)          (391,525)
Net interest                                       (68)               370                411

                                             ----------------------------------------------------
LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION                                        (3,838)            (8,029)          (391,114)
                                             ----------------------------------------------------
Adjusted profit before tax                         300              4,101             10,028
Amortisation                                    (4,138)            (7,591)           (26,644)
Exceptional items                                    -             (4,539)          (374,498)
                                             ----------------------------------------------------
Loss before tax                                 (3,838)            (8,029)          (391,114)
                                             ====================================================


Tax on loss on ordinary activities    4            (78)            (1,173)                 -

                                             ----------------------------------------------------

LOSS ON ORDINARY ACTIVITIES AFTER
TAXATION                                        (3,916)            (9,202)          (391,114)
Equity minority interests                          (44)                (9)               (85)

                                             ----------------------------------------------------
LOSS FOR THE PERIOD                             (3,960)            (9,211)          (391,199)
Dividends paid                                       -                  -             (1,255)

                                             ----------------------------------------------------
RETAINED LOSS FOR THE PERIOD                    (3,960)            (9,211)          (392,454)
                                             ====================================================
Adjusted earnings per ordinary
share (pence)                         5           0.09               1.26               2.87
Basic loss per ordinary share
(pence)                               5          (1.99)             (4.90)           (202.75)
Diluted loss per ordinary share
(pence)                               5          (1.99)             (4.90)           (202.75)


The Innovation Group Plc
UNAUDITED BALANCE SHEET
As at 31 December 2002

                                              Unaudited          Unaudited           Audited
                                            31 December        31 December      30 September
                                                   2002               2001              2002
                                     Note         #'000              #'000             #'000

FIXED ASSETS
Intangible assets                                50,096            410,743            53,987
Tangible assets                                  22,194             28,135            22,441
Investments                                       5,992              9,003             5,034
                                             ----------------------------------------------------
                                                 78,282            447,881            81,462
CURRENT ASSETS
Stocks                                              151                202               131
Debtors                                6         13,244             36,110            15,492
Investments                                       6,160             46,185            11,060
Cash at bank and in hand                          4,825             14,587             9,149
                                             ----------------------------------------------------
                                                 24,380             97,084            35,832
CREDITORS: amounts falling
due within one year                             (23,020)           (73,644)          (30,576)
                                             ----------------------------------------------------
NET CURRENT ASSETS                                1,360             23,440             5,256
                                             ----------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES            79,642            471,321            86,718

CREDITORS: amounts falling due after
more than one year
Convertible loan notes                           (2,040)                 -            (2,040)
Other creditors                                 (12,599)           (10,929)          (13,021)

PROVISIONS FOR LIABILITIES AND CHARGES           (3,257)            (1,552)           (3,673)

DEFERRED INCOME                        7         (9,915)           (23,109)          (10,379)

EQUITY MINORITY INTERESTS                          (247)                 -              (206)
                                             ----------------------------------------------------
NET ASSETS                                       51,584            435,731            57,399
                                             ====================================================
CAPITAL AND RESERVES
Called up share capital                           3,974              3,728             3,952
Shares to be issued                               2,302             25,564            14,000
Share premium account                           468,649            439,917           458,973
Profit and loss account                        (423,341)           (33,478)         (419,526)
                                             ----------------------------------------------------
EQUITY SHAREHOLDERS' FUNDS                       51,584            435,731            57,399
                                             ====================================================


The interim results were approved by the Board of Directors on 24 February 2003.



The Innovation Group Plc
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the 3 months ended 31 December 2002

                                              Unaudited           Unaudited          Audited
                                            3 months to         3 months to          Year to
                                            31 December         31 December     30 September
                                                   2002                2001             2002
                                                  #'000               #'000            #'000

Loss for the financial period                    (3,960)             (9,211)        (391,199)
Currency translation differences                    145                 225           (2,580)

                                             ----------------------------------------------------
Total recognised gains and
losses relating to the period                    (3,815)             (8,986)        (393,779)
                                             ====================================================



RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS

                                              Unaudited           Unaudited          Audited
                                            3 months to         3 months to          Year to
                                            31 December         31 December     30 September
                                                   2002                2001             2002
                                                  #'000               #'000            #'000

Loss for the financial period                    (3,960)             (9,211)        (391,199)
Dividends                                             -                   -           (1,255)
                                             ----------------------------------------------------
                                                 (3,960)             (9,211)        (392,454)
Currency translation differences                    145                 225           (2,580)
Issue of shares                                   9,698              25,101           44,381
Shares to be issued                             (11,698)             13,564            2,000
                                             ----------------------------------------------------

Net (reduction)/additions to
shareholders' funds                              (5,815)             29,679         (348,653)

Opening shareholders' funds                      57,399             406,052          406,052

                                             ----------------------------------------------------
Closing shareholders' funds                      51,584             435,731           57,399
                                             ====================================================

The Innovation Group Plc
UNAUDITED CASH FLOW STATEMENT
For the 3 months ended 31 December 2002

                                              Unaudited           Unaudited          Audited
                                            3 months to         3 months to          Year to
                                            31 December         31 December     30 September
                                                   2002                2001             2002
                                                  #'000               #'000            #'000

Net cash outflow from operating activities       (4,235)             (2,230)          (8,086)
Returns on investments and servicing of finance     (36)                608              697
Taxation                                             75              (1,551)          (2,014)
Capital expenditure                                (556)               (880)          (7,328)
Acquisitions                                       (958)            (10,927)         (14,958)
Equity dividends paid                                 -                   -           (5,625)
                                             ----------------------------------------------------

Cash outflow before management of
liquid resources and financing                   (5,710)            (14,980)         (37,314)

Management of liquid resources                    4,900              16,835           51,960
Financing                                        (3,514)             (1,487)         (19,811)
                                             ----------------------------------------------------

(Decrease)/increase in cash
less bank overdraft                              (4,324)                368           (5,165)
                                             ====================================================

RECONCILIATION OF OPERATING LOSS TO NET
CASH OUTFLOW FROM OPERATING ACTIVITIES

Operating loss before
exceptional items                                (3,770)             (3,490)         (17,027)
Depreciation and amortisation charges             5,006               8,824           32,121
Profit on disposal of fixed assets                    -                   -             (131)
(Increase)/decrease in stocks                       (20)                (49)              55
Decrease in debtors                               2,044                 256           15,935
(Decrease) in creditors                          (6,050)             (2,081)         (23,138)

                                             ----------------------------------------------------
                                                 (2,790)              3,460            7,815
Cash outflow arising from
exceptional items                                (1,445)             (4,039)         (13,140)
Acquisition related outflows *                        -              (1,651)          (2,761)

                                             ----------------------------------------------------
Net cash outflow from operating activities       (4,235)             (2,230)          (8,086)
                                             ====================================================


*Acquisition  related  outflows during the three  months  ended  31
December  2001 and year ended 30 September 2002 relate to  payments
made by the Company in respect of liabilities which crystallised as
a  consequence  of  the acquisitions of MTW and Huon  and  creditor
payments associated with the pre-acquisition activities of the Cosy
Group.


RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
(Decrease)/increase in cash in the period        (4,324)                368            (5,165)
Cash outflow from decrease in debt and
lease financing                                   3,514               1,487            19,811
Cash inflow from decrease in liquid resources    (4,900)            (16,835)          (51,960)

                                             ----------------------------------------------------
Change in net funds resulting from cash flows    (5,710)            (14,980)          (37,314)
Loans, loan notes and finance leases
acquired with subsidiaries                            -              (1,546)           (1,508)
Foreign exchange                                      -                (354)             (484)

                                             ----------------------------------------------------
Movement in net funds in the period              (5,710)            (16,880)          (39,306)
Net (debt)/funds at start of period              (1,255)             38,051            38,051

                                             ----------------------------------------------------
Net (debt)/funds at end of period                (6,965)             21,171            (1,255)
                                             ====================================================


The Innovation Group Plc
NOTES TO THE UNAUDITED RESULTS
For the 3 months ended 31 December 2002


1.   BASIS OF PREPARATION

The interim financial information of The Innovation Group Plc  is
for  the  three month period to 31 December 2002,  and  has  been
prepared in accordance with the accounting policies set  out  in,
and  is consistent with, the audited financial statements for the
year  ended 30 September 2002. The results for the year ended  30
September  2002  have been extracted from the  audited  financial
statements  for  that year. The audited financial statements  are
yet to be filed with the Registrar of Companies and the auditors'
report on those accounts was unqualified.

The  unaudited profit and loss account for the three month period
to,  and  the unaudited balance sheet as at 31 December 2002,  do
not amount to full accounts within the meaning of section 240  of
the  Companies  Act  1985  and have not  been  delivered  to  the
Registrar of Companies.


2.   ANALYSIS OF TURNOVER, OPERATING LOSS AND NET ASSETS


Turnover can be analysed into the following categories:

                                        Unaudited      Unaudited        Audited
                                      3 months to    3 months to        Year to
                                      31 December    31 December   30 September
                                             2002           2001           2002
                                            #'000          #'000          #'000

Initial licence fees                          709          6,269         17,520
Implementation                              2,992          8,070         29,408
Recurring                                  12,062         13,170         53,143

                                ----------------------------------------------------
Turnover                                   15,763         27,509        100,071
                                ====================================================

Following the restructuring of the group at the end of 2002,  the
Directors   now  consider  that  the  Group  has  two   principal
activities.  These are technology solutions and business  process
outsourcing.  The results for the quarter ended 31 December  2002
can  be  analysed as follows. In practice it is not  feasible  to
provide  comparative  data with sufficient accuracy  and  so,  as
permitted by SSAP 25 no comparative information is provided.

                                                              Unaudited
                                                    3 months to 31 December 2002
                                            Technology
                                             Solutions         BPO         Total
                                                #'000        #'000         #'000

Turnover                                       10,104        5,659        15,763

                                         ---------------------------------------------
EBITDA before R&D and central costs             2,893          650         3,543
Amortisation and depreciation                  (2,674)      (2,272)       (4,946)

                                        ----------------------------------------------
                                                  219       (1,622)       (1,403)
                                        ===============================
R&D                                                                       (1,562)
Central costs                                                               (805)
                                                                        --------------
Operating loss                                                            (3,770)
                                                                        ==============


* Research and development costs include approximately #60,000 of
depreciation.

BPO  activities include certain territories and activities  where
operations  are still in initial development or are operating  in
markets  where they are yet to achieve critical mass. The  result
above  consequently includes turnover of #180,000 and an adjusted
operating  loss  of approximately #173,000 in relation  to  these
businesses.  Excluding  these, BPO operations  are  achieving  an
adjusted operating margin of 15%.



The geographical analysis by location is as set out below:

                                       Turnover                            Operating loss
                         Unaudited    Unaudited    Audited     Unaudited    Unaudited     Audited
                       3 months to  3 months to    Year to   3 months to  3 months to     Year to
                       31 December  31 December    30 Sept   31 December  31 December     30 Sept
                              2002         2001       2002          2002         2001        2002
                             #'000        #'000      #'000         #'000        #'000       #'000

Europe, Middle
East and Africa              8,719       16,230     59,227         2,122        2,781    (262,381)
Americas                     6,135       10,065     35,143           601        3,506     (66,340)
Asia Pacific                   909        1,214      5,701            12        1,697      (1,412)
Central and R&D                  -            -          -        (2,367)      (4,253)    (10,250)
Exceptional charge               -            -          -             -       (4,539)    (24,498)
Amortisation                     -            -          -        (4,138)      (7,591)    (26,644)

                    --------------------------------------------------------------------------------
                            15,763       27,509    100,071        (3,770)      (8,399)   (391,525)
                    ================================================================================

Due  to  the geographical spread of certain acquisitions and  the
centralisation  of  certain functions,  it  is  not  possible  to
allocate  the  related central costs over the geographical  areas
for the above periods.
                                                           Net assets
                                             Unaudited      Unaudited         Audited
                                           31 December    31 December    30 September
                                                  2002           2001            2002
                                                 #'000          #'000           #'000

Europe, Middle East and Africa                  26,268        (10,736)         18,156
Americas                                       (20,168)        (1,889)        (21,191)
Asia Pacific                                    (7,975)        (6,466)         (7,792)
Central                                         53,459        454,822          68,226
                                       -----------------------------------------------------
                                                51,584        435,731          57,399
                                       =====================================================

Central net assets include goodwill, other investments and net funds.


3.EXCEPTIONAL ADMINISTRATIVE EXPENSES
                                             Unaudited      Unaudited         Audited
                                           3 months to    3 months to         Year to
                                           31 December    31 December    30 September
                                                  2002           2001            2002
                                                 #'000          #'000           #'000

Fixed asset impairment                               -              -           4,616
Goodwill impairment                                  -              -         350,000
Office closure costs                                 -            500           3,050
Termination payments                                 -            744           5,804
Redundancy period costs                              -          3,295           9,255
Contractual settlements                              -              -           1,773
                                       -----------------------------------------------------
                                                     -          4,539         374,498
                                       =====================================================


4.TAXATION
The  effective tax rate for the group based on projected  results
for  the year ended 30 September 2003 before amortisation is 26%.
The  tax  charge  for  the  period is based  upon  the  estimated
effective tax rate on FRS3 reported profits for the year  of  26%
after excluding the impact of goodwill amortisation which is  not
allowable for tax (December 2001: 34%; September 2002: nil).

5.EARNINGS PER SHARE
                                             Unaudited      Unaudited         Audited
                                           3 months to    3 months to         Year to
                                           31 December    31 December    30 September
                                                  2002           2001            2002
                                                 #'000          #'000           #'000
                                                 pence          pence           pence

Diluted loss per share                           (1.99)         (4.90)        (202.75)
Adjustments for share options and
shares to be issued                                  -              -               -
                                       ----------------------------------------------------
Basic loss per share                             (1.99)         (4.90)        (202.75)
Adjustments for exceptional
items and amortisation                            2.08           6.16          205.62
                                       -----------------------------------------------------
Adjusted earnings per share                       0.09           1.26            2.87
                                       =====================================================

Earnings per share is calculated as follows:

Basic earnings per share
Average number of shares                    198,904,011    188,087,967    192,946,800
Loss for the financial period (#'s)          (3,960,000)    (9,211,000)  (391,199,000)
                                       =======================================================
Diluted earnings per share
Average number of shares                    198,904,011    188,087,967    192,946,800
Loss for the financial period (#'s)          (3,960,000)    (9,211,000)  (391,199,000)
                                       =======================================================

Adjusted earnings per share
Average number of shares                    198,904,011    188,087,967    192,946,800


Loss for the financial period (#'s)          (3,960,000)    (9,211,000)  (391,199,000)
Add amortisation (#'s)                        4,138,000      7,591,000     26,644,000
Add exceptional items (#'s)                           -      4,539,000    374,498,000
Less tax credit arising on exceptional items (#'s)    -       (547,000)    (4,400,000)

                                        -----------------------------------------------------
Adjusted earnings (#'s)                         178,000      2,372,000      5,543,000
                                        =====================================================


FRS  14 requires presentation of diluted EPS when a company could
be  called upon to issue shares that would decrease net profit or
increase  net  loss  per share.  For a loss making  company  with
outstanding  share  options, net loss per  share  would  only  be
increased by the exercise of out-of-the-money options.  Since  it
seems  inappropriate  to  assume that option  holders  would  act
irrationally, no adjustment has been made to diluted EPS for out-
of-the-money share options.


6.WORKING CAPITAL
Debtors  as at 31 December 2002 comprise trade debtors of  #10.0m
(30   September   2002:   #11.8m),  accrued   income   of   #0.4m
(30  September  2002:  #0.3m), prepayments,  deposits  and  other
debtors of #2.8m (30 September 2002: #3.4m).


7.DEFERRED INCOME
The Company's Act format of accounts allows for the inclusion  of
deferred income as a separate balance sheet category. In view  of
the  significance  of  this balance to the Group,  the  Directors
believe  that showing this balance separately provides  a  fairer
presentation.  Comparatives have been adjusted as appropriate.


8.ADDITIONAL COPIES OF THIS STATEMENT
Copies of this statement are available from The Innovation  Group
plc, Yarmouth House, 1300 Parkway, Solent Business Park, Whiteley
PO15 7AE.

INDEPENDENT REVIEW REPORT TO THE INNOVATION GROUP PLC

Introduction

We  have  been  instructed  by the  company  to  review  the
financial information for the three months ended 31 December
2002  which  comprises  the profit  and  loss  account,  the
balance  sheet, the cash flow statement and related notes  1
to  8.  We have read the other information contained in  the
interim  report  and  considered  whether  it  contains  any
apparent misstatements or material inconsistencies with  the
financial information.

This report is made solely to the company in accordance with
Bulletin 1999/4 issued by the Auditing Practices Board.  Our
work  has  been  undertaken so that we might  state  to  the
company those matters we are required to state to them in an
independent review report and for no other purpose.  To  the
fullest extent permitted by law, we do not accept or  assume
responsibility  to anyone other than the  company,  for  our
review work, for this report, or for the conclusions we have
formed.

Directors' responsibilities

The  interim  report,  including the  financial  information
contained  therein, is the responsibility of, and  has  been
approved  by,  the directors. The directors are  responsible
for  preparing  the  interim report in accordance  with  the
Listing  Rules  of  the Financial Services  Authority  which
require that the accounting polices and presentation applied
to  the interim figures are consistent with those applied in
preparing  the  preceding annual accounts except  where  any
changes, and the reasons for them, are disclosed.

Review work performed

We  conducted  our  review in accordance with  the  guidance
contained   in  Bulletin  1999/4  issued  by  the   Auditing
Practices  Board  for use in the United Kingdom.   A  review
consists principally of making enquiries of group management
and   applying   analytical  procedures  to  the   financial
information  and  underlying  financial  data   and,   based
thereon,  assessing  whether  the  accounting  policies  and
presentation have been consistently applied unless otherwise
disclosed.  A review excludes audit procedures such as tests
of  controls  and  verification of assets,  liabilities  and
transactions.   It is substantially less in  scope  than  an
audit  performed in accordance with United Kingdom  auditing
standards  and therefore provides a lower level of assurance
than  an  audit.   Accordingly, we do not express  an  audit
opinion on the financial information.

Review conclusion

On  the basis of our review we are not aware of any material
modifications   that  should  be  made  to   the   financial
information  as  presented for the  three  months  ended  31
December 2002.

Deloitte and Touche
Chartered Accountants
London

24 February 2003




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