For Year End 30th September 2000

In 1999 it was clear that post the millennium, when the push by customers to achieve computer solution compliance was completed, there would be limited opportunities in the new business market. In anticipation of a difficult year we ensured the tight control of Group costs. We further anticipated significant difficulties would arise in competitor businesses thus creating the opportunity to acquire such businesses for reasonable cost as compared with the unrealistic prices being asked in the preceding twelve to twenty four months. This indeed was the case and in the second half we were able to acquire Disys Associates Limited and the business and assets of BCT Business Systems Limited.

The acquisition of these two businesses brings a further two hundred and fifteen customers to the Group in the builders merchanting/timber merchanting/distribution sector. Both of these businesses ran into heavy losses as the effect of the post millennium 'nuclear winter' took effect. We are now concentrating our efforts on integrating these businesses into the Group and restoring them to profitability. That work includes bringing substantial quality improvements into the next releases of their software products for the benefit of our new customers.

These loss-making businesses will have a negative impact on the Group's first half results but should begin to show a significant improvement in the second half. Our new customers will benefit from the Group's considerable Research and Development programmes and, in particular, the investment we have made in our fastfreenet.com infrastructure.

I am pleased to report that we won the litigation brought against our subsidiary, BML (Office Computers) Limited, by a former customer. The case against BML was dismissed.

Operational Review

fastfreenet.com has seen a steady increase in utilisation since launch and we are now running at the rate of 12 million call minutes per annum. The development and set-up of these ISP/ASP facilities has been very costly, but necessary, if we are to meet the future data processing demands of our existing and future customers.

Our first customer to select the Application Hosting route went live in November. We are seeing more interest in the use of these facilities as awareness of the enormous complexity of the software technologies involved continues to grow beyond both the economic and technical capabilities of most customers.

It is quite clear that over the next five years we shall see more and more customers returning to the 'computer bureau' operating model for their total computing requirements. Although the market displays some nervousness with regard to adopting electronic trading, customers wish to concentrate their management efforts on core activities at a time when margins are under pressure and the economy generally begins to slow.

Quantum VS is our generic e-business and e-catalogue content management software tool set and has been specifically designed to integrate with any legacy application product. Quantum VS is unique in its architecture and incorporates the underlying software components upon which our future application deliverables are based. It is the 'test bed' for the complex software technologies that permit the accomplishment of our two to five year forward application product strategy whereby we shall bring MERCHANT, CHARISMA and the Disys and BCT products into a single software set.

Shareholders will appreciate that in a fast paced industry where we are seeing fundamental technological change, the Group has a long term product strategy where the ownership of its intellectual property is the life blood of the business.

Customer Services

We have a uniquely skilled support services group who are committed to the provision of high levels of service to our customers. This is also the case with the support groups in both the Disys and BCT businesses where there is similar dedication to ensuring customers achieve the maximum advantage from the implementation of their software solution.

Financial Review

Group pre-tax profits for the year were £1.12 million, including exceptional items, compared with £2.38 million last year. This reduction resulted from a lack of new business, post the millennium, which I have referred to earlier in this statement and the continuing decline in engineering service revenues as 'old' equipment, attracting high maintenance fees, was replaced prior to the year 2000. The losses of £194,000 since acquisition at Disys and BCT have adversely affected the full time results but were in line with our expectations at the time of acquisition. We expect a continuing negative impact on Group profits from Disys and BCT until we have accomplished their complete integration into the Group. This should be achieved during the second half of the current financial year when we expect these acquisitions to begin to contribute to the Group.

These results include £1.8 million, the same as last year, of R & D expenditure which is written off to Profit and Loss Account.

The Balance Sheet continues to be strong with cash balances of some £9.6 million as at 30 September 2000. These may be utilised in the further acquisition of compatible businesses. Since the year end we have acquired the freehold of the property in Warrington, occupied by BCT, for £1.08 million for which the company was previously paying an annual rental of £100,000.

Outlook

The economy has started to slow down but we have been careful to reposition the business in the past two years and implement the infrastructure necessary for us to take advantage of the market opportunities as they present themselves. We do expect to see a higher rate of activity in our customer base as certain businesses move into an electronic trading environment.

Finally, I would thank all members of our staff for their hard work during the year and look forward with them to our future challenges.

RICHARD J. JOWITT

Managing Director
Chief Executive

13th December 2000