Northgate Information Solutions - Pre-close period statement

Northgate Information Solutions plc (www.northgate-is.com), the UK's leading supplier of specialist software and IT services for the Human Resources and Public Service markets, today issues a trading update for the 12 months to April 30th 2007, ahead of e

During the year, the group made good progress. Revenue growth in the second half of the year was driven by the continued strong performance of the Human Resources division and a rising workload in the Managed Services and Public Services divisions. Accelerating revenue growth is a clear vindication of the group's sustained investment in sales and marketing spend throughout 2007 which is now benefiting the group despite the ongoing challenging conditions in the criminal justice market. Whilst this has had a temporary impact on margins it is pleasing to see this investment in the business delivering top line growth.

The Human Resources division has built on its excellent performance in the first half of the year and won a number of significant new contracts in the second half. Notable contract wins in this division included:

• A five-year pensions administration contract with Alliance Boots plc, expanding the existing HR and payroll services provided by Northgate;
• Providing an outsourced shared service for Payroll & HR to Thistle Hotels for its 5,000 employees throughout the UK; and
• A five-year contract with the University of Southampton to provide a payroll and pensions solution to more than 5,000 staff.

The Managed Services division has also seen good progress. The highlight of the second half was that work commenced on two significant contracts to provide Information and Communication Technology (ICT) services and support to the education sector, in Bristol and Northern Ireland. The Bristol contract was the first of its kind to be signed in the Government’s Building Schools for the Future (BSF) programme, while the Lot 6 contract in Northern Ireland will ultimately provide ICT support to 150,000 schoolchildren throughout the Province. Northgate’s Managed Services division remains a leader in the BSF bidding process and to support this position has recently achieved ISO 20000 accreditation for Service Delivery in its Education business operations. Northgate is currently shortlisted on a further 9 BSF opportunities. Other notable new contract wins in this division were:

• A major email systems project for North Tyneside and Newcastle City Councils;
• A five-year IT outsource with Sandwell Metropolitan Borough Council;
• The launch of an internet booking service and a further 2 year extension to the existing managed services contract with DVTA in Northern Ireland;
• An IT support contract with Solihull Metropolitan Borough Council; and
• New infrastructure support contracts with Waterways Ireland, Scottish Criminal Records, Strathclyde Police, and Seagate Technologies.

Revenue in the Public Services division returned to growth in the second half of the year, although the criminal justice market remains challenging with projects being deferred and cancelled as the Home Office focuses on other priorities. Notable contract wins in this division in the second half that led to this resumption of growth included:

• A 5 year partnership with the London Borough of Croydon to deliver a multi application managed service solution, building upon Northgate’s successful implementation of revenues and benefits;
• London Borough of Brent where work has commenced on the Identity Hub project to automate the recording of changes across multiple systems, improving services and compliance;
• The delivery of a customer relationship management system for Warrington Borough Council in support of its customer contact strategy;
• 78 new systems for clients to eliminate fraud in Postal Voting; and
• A management information solution for the Office for Criminal Justice Reform in partnership with LogicaCMG.

Northgate further announces the acquisition of Kendric Ash, a public sector change management consultancy, which works closely with its clients in Local Government to improve their processes and performance, and has delivered more than £100 million in financial benefits to clients to date. The acquisition from the founding shareholder and CEO of Kendric Ash, Kenneth Mander, and a number of other employees will help Northgate widen its service proposition in this fast growing part of the market. The consideration is payable in the form of cash and/or loan notes and comprises an initial net payment of £9.2m, a deferred payment of £0.5m, and a further payment of up to £4.5m subject to various performance conditions being satisfied over a 2 year period.

As a result of a number of bolt-on acquisitions and other internal reorganisation measures, Northgate’s results for the full year will include a restructuring charge of approximately £6 million. This exceptional charge will be largely offset by one off property gains recognised in the year. The reorganisation is anticipated to deliver significant cost savings in future years and is expected to return operating margins to the previous levels expected by management.

Due to the impact of the challenging market conditions in criminal justice and the group’s on-going investment in sales and marketing, the Board expects to announce full year Earnings Before Interest, Tax and Amortisation towards the lower end of management’s expectations albeit strong cash generation and tight financial management and planning are expected to ensure that Earnings Per Share will be at the upper end of expectations.

Northgate remains well positioned to drive the business further forward in 2007/08 and management is comfortable with its trading expectations.


Enquiries:

Northgate Information Solutions plc
Chris Stone / John Stier 01442 232424

Maitland
Neil Bennett/Amanda Martyr 020 7379 5151

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