Final Results

RNS Number:3476T
Raft International PLC
17 December 2003

        Raft International PLC ("Raft" or the "Company" or the "Group")

    Raft International PLC is a leading supplier of component-based software
           solutions for the financial services and energy industries

            Preliminary Results for the Year Ended 31st October 2003

                                   Key Points

   *Results in line with expectations despite challenging market conditions

   *Turnover up 28% to #8.6 million (2002: #6.7 million)

   *Loss before taxation reduced by 53% to #1.0 million (2002: #2.1 million).

   *Gross profit margins up from 31% to 41%

   *Strong cash position of #2.2m at year end

   *Business strategy of focusing on Operational and Credit Risk progressing
    well

   *Seven significant contract wins during the period with blue chip clients
    including American Electric Power, Reliant Resources and Abbey National

   *Ongoing stringent cost controls remain in place

   *Rapid build up of research and development centre in India

   *Markets remain demanding but prospects remain positive


David Priestley, Chairman commented:-

" I am pleased to report that Raft has delivered on all of its key objectives as
announced this time last year. Our business turnaround strategy has focused the
group on key operational and credit risk markets and has been very successful
with significant contract wins achieved during the period with the likes of
American Electric Power and Reliant Resources. Losses have been reduced by 53%
as planned with turnover and margins delivering double-digit growth.

Market conditions do remain challenging, but the Directors remain confident that
Raft is well positioned to fully capitalise on the tremendous growth potential
of the operational and credit risk markets by providing proven solutions"

Press Enquiries:

Sandra Kelly, CFO    Raft International PLC    + 44 (0)20 7816 7151
Shane Dolan          Biddicks                  + 44 (0)20 7448 1000



CHAIRMAN'S STATEMENT

I am pleased to report that despite challenging trading conditions, the Group
delivered full year results largely in line with market expectations. Our
turnover was up by 28% with losses reduced by 53% on the previous year. In
addition, higher margin licence fee revenue more than doubled to 24% with gross
margins also strengthening and moving up from 31% to 41%.

The introduction of a new management structure has been very successful and has
played a key role in driving forward a business turnaround strategy that has
focused the Group on the key growth markets of operational and credit risk
management for the financial services and energy sectors. Testimony to the
success of this strategy is that during the period under review, significant
contract wins have been announced with blue chip clients such as American
Electric Power, Reliant Resources, and Abbey National. Provided market
conditions do not deteriorate, I am confident that the Group has the foundations
in place to deliver increased shareholder value in the short term.

As you are aware, on 31 July 2003, the Board announced that the Group was in bid
talks with third parties. As a result, indicative offers were received for the
entire share capital of the business. These offers were declined as the Board
was and remains firmly of the view that these offers did not reflect the full
potential of the Group and talks ended on 24 October.

Raft remains well capitalised and offers a functionally rich product range,
which enables corporate clients to manage risk and adhere to important corporate
governance guidelines which are increasingly driven by legislation. We have
significantly strengthened our routes to market via strategic distribution
agreements with SunGard and as a result, we are well positioned to grow our
revenue streams in the coming year.

Overall the trading environment remains challenging, with continuing delays to
both client IT spend and sales cycles. However, Raft is well positioned to
benefit from the Basel II Accord legislation, which demands that firms within
the financial services sector should have effective risk management processes in
place. Following high profile corporate failures this is also supported by the
increasing recognition within the energy industry of the tangible benefits of
improved credit processes. We have no doubt that both of these markets will
generate a significant deal flow for our product range during the next two or
three years.

Derek Hall joined the Board to assist in the overall management of the Group
whilst we developed our sales profile and overall strategy. This has now been
completed and the Group has been restructured such that we have an increased
overseas presence managed by other executive directors. Derek will therefore be
retiring from his role as CEO at the end of 2003 and David Priestley will assume
CEO and Executive Chairman responsibilities. The Board would like to express its
appreciation to Derek for his significant contribution to the Group and would
like to wish him the very best in his retirement. Following this change in Board
membership and Higgs' recommendations, we are actively looking for a second
independent non executive director and anticipate making an announcement in
early 2004

The Board would also like to thank all members of staff for their loyalty and
dedication, which has enabled Raft to build a reputation for delivering quality
products and services to a growing blue chip client base.

Raft is now a streamlined business with costs carefully managed and controlled.
Recent management changes have strengthened the Group and have driven a focused
business strategy that is delivering significant results. We are capitalising on
our reputation within the risk management market as a supplier of proven risk
solutions and are well positioned to take maximum advantage of a growing market
fuelled by increased emphasis on corporate governance.

Our routes to market have been strengthened by distribution deals and although
we plan to remain predominately in the risk management sector, we will
progressively enhance the scope of the products and widen the industry sectors
in which they are used.

We look forward to building on our achievements to date in the year ahead.

David Priestley
Chairman
16 December 2003



OPERATING REVIEW

During the year the Group has pursued its strategy of principally focussing on
its two risk management software products - operational risk for the banking
sector and credit risk for the energy sector - and on maintaining a strong
revenue flow from its traditional investment banking sector. The Group continues
to operate from London, Mumbai, Copenhagen, Stockholm and its recently-opened
office in Houston. No additional offices were opened during the year.

The Group delivered a 28% increase in revenue as well as making significant
progress in diversifying and balancing this revenue resulting in, for the first
time, more than 50% being generated by the strategically important component and
risk management sectors. The proportion of higher margin licence fee revenue
more than doubled to 24% and drove the overall gross margin up to 41%. The
continuation of the material revenue flow from our traditional investment
banking market (#4.3m) was due largely to our abilities to sell professional
services into that sector.

Although there was a noticeable upturn in the first half of the year, market
conditions have generally remained difficult. We continue to respond on the
expense side by maintaining our pressure on cost and on improving our
efficiency. Our administrative expenses dropped from 65% to 53% of turnover and
are only 4% up on last year despite the 28% increase in turnover and a full
year's operation of the new office in Houston. The average permanent headcount
during the year remained constant at 69.

We commented in our 2002 report that we expected early benefits from the Houston
office and 2003 was easily our best year for product sales as we signed up a
total of seven substantial deals - four for US customers and three for European
customers. Four were in the energy credit sector, two in operational risk and
one was a component technology sale. We also had an encouraging flow of
follow-on business from existing clients and benefited from their participation
in the further development of the products.

Our R&D investment in 2003 was #0.5m (2002 #0.4m). Most of this investment was
spent on increasing the functionality of our products, improving their
scalability and upgrading them to exploit technology advances from Microsoft and
others. We will continue investing in R&D to maintain the attractiveness of our
products and to raise the entry-level requirements for the competition.
Increases in functionality are almost always client-driven. An increasing
proportion of the R&D is performed in Mumbai and we expect this to rise to
virtually 100% from March 2004 as we accelerate the programme to move our
development resources there. We have kept the administrative centre, which
provides services to the international group, in London and we plan to continue
with this policy.

The two distribution agreements signed this year with SunGard are of significant
importance to the Group. The Group believes that its risk management products,
which are aimed at the largest financial institutions and energy companies, now
have the additional opportunity to be leveraged by a major player in the
software supply sector. SunGard is one of the world's major suppliers of
software solutions and has huge marketing, sales and implementation
capabilities.


Product review

We supply two types of product: pre-assembled products for improving risk
management based on component technology and targeted at specific sectors and
secondly, the component technology tools themselves. This two-track approach
enables us to offer a wider choice to the market place and to rapidly create new
pre-packaged products for specific market sectors. In addition to the SunGard
distribution agreements we have an active partnership programme with both large
and small suppliers.

Credit risk

We made 4 sales of the energy credit risk management product to the energy
sector - three in the US and one in Europe. We added new reporting engines, more
limit and loss calculations, new credit mitigation tools to the scope, as well
as retail functionality which significantly widens the market potential for this
product. We are now a well recognized brand in the energy market.

Operational risk

Following radar's two successful implementations in the UK we achieved two
further sales during the year - one in the US and one in the UK. Our target
market is the top tiers of the banking sector and the UK win was our first in
retail banking.

Component product

The component architecture underpinning these products is a product in its own
right. Raft International's approach is to satisfy a customer's specific
requirements by selecting and assembling components from the constantly growing
inventory of components. We are among the world's front runners in this field
and have just signed a substantial follow-on contract with the Danish Stock
Exchange.

Professional services

We continue to provide consultancy services independent of product-related work
to specific clients - particularly in the UK and Scandinavia. This continues to
be an important source of revenue for the Group.

Technology

Our products are based on technology infrastructures that are most appropriate
for the individual markets - Microsoft's .NET for credit and Java for radar. We
plan to continue offering both these technical platforms for the foreseeable
future.

Outlook

Our strong products, efficient organisational structure and committed staff mean
that we are well positioned for fiscal 2004.

Derek Hall
Chief Executive Officer
16 December 2003



FINANCIAL REVIEW

Operating results

The Group's turnover increased by #1.9 million to #8.6 million (2002: #6.7
million) and the loss before taxation reduced by #1.1 million to #1.0 million
(2002: #2.1 million).


Turnover
                                                            
                                                  Share of turnover
                                                    2003      2002
Investment banking                                    49%       68%
Energy                                                26%       12%
Operational risk                                      16%        9%
Other products                                         9%       11%

The increase in turnover has come from new contracts signed in the operational
risk and energy credit risk sectors. Turnover in the first half of the year was
28% higher than the previous half year and has risen by a further 5% in the
second half of 2003.

As mentioned in last year's financial review, we continue to reduce our
dependency on the investment banking sector by developing sales in our other
markets.

We have seen strong demand for our products in the USA with more than 75% of the
increase in our turnover being generated there.

Outright licences accounted for 22% of our turnover (2002: 5%) with the
proportion of recurring licence fees and maintenance reducing slightly to 2%
(2002: 4%). With the increase in live client sites we anticipate recurring
revenue to rise further in future years.

Share of gross profit

                                           2003               2002
Investment banking                          43%                62%
Energy                                      38%                20%
Operational risk                             7%                 2%
Other products                              12%                16%

Whilst there continues to be downward pressure on prices it is encouraging to
note that the increase in the proportion of turnover relating to licence fees
has had a significant positive effect on the gross margin resulting in this
rising to 41% (2002: 31%).

The proportion of licence fees as a percentage of total fees generated by the
energy division is greater than that generated by the operational risk division,
resulting in a lower gross margin for the operational risk division. Operational
risk is a new and developing market with requirements evolving such that
customers will take a base product and seek to have that tailored for their own
requirements. As the market matures, we anticipate that the development
requirement of customers will reduce resulting in a rise in the gross margin for
that product.

Administrative expenses

The Group's administrative expenses have risen by #0.1 million to #4.5 million 
(2002: reduction of #0.5 million to #4.4 million) due to additional spend on 
research and development and a full year's cost of the office in Houston

Taxation

The Group has used some of the tax losses generated by its UK subsidiary to
recover the eligible proportion of research and development expenditure. The
amount claimed for 2003 is #49,000 (2002: #10,000).


Going concern

After making enquiries, the directors have formed a judgment, at the time of
approving the financial statements, that there is reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future. The directors, therefore, continue to adopt the going
concern basis in preparing the financial statements.


Financial position

The Group's balance sheet remains strong and cash balances at the end of the
financial year were #2.2 million (2002: #3.7 million). As the Group is not yet
cash generative it has continued to fund its operations from monies raised at
the time of flotation in 2000.

Debtors have risen in line with the increase in turnover and we remain focused
on the timely conversion of debtors into cash.

Sandra Kelly
Chief Financial Officer
16 December 2003



Raft International plc
Consolidated profit and loss account
For the year ended 31 October 2003
                                                        2003      2002
                                             Note      #'000     #'000
----------------------------------           ------ ---------- ---------

Turnover                                        2      8,562     6,666

Cost of sales                                         (5,094)   (4,579)
----------------------------------           ------ ---------- ---------

Gross profit                                           3,468     2,087

Administrative expenses                               (4,543)   (4,355)
----------------------------------           ------ ---------- ---------

Operating loss                                        (1,075)   (2,268)

Interest receivable and other income                      80       155

Interest payable and similar charges                      (4)        -
----------------------------------           ------ ---------- ---------

Loss on ordinary activities before taxation             (999)   (2,113)

Tax on loss on ordinary activities              3         35        75
----------------------------------           ------ ---------- ---------

Loss after taxation retained for the year               (964)   (2,038)
----------------------------------           ------ ---------- ---------

Loss per share (pence)                          4      (1.47)    (3.10)
----------------------------------           ------ ---------- ---------

Fully diluted loss per share (pence)            4      (1.47)    (3.10)
----------------------------------           ------ ---------- ---------

All operations are classed as continuing



Statement of total recognised gains and losses
For the year ended 31 October 2003
                                                        2003      2002
                                                       #'000     #'000
----------------------------------           ------ ---------- ---------

Loss for the year                                       (964)   (2,038)

Currency translation difference on foreign
currency net investments                                 (17)        8
                                  
----------------------------------           ------ ---------- ---------

Total losses recognised for the year                    (981)   (2,030)
----------------------------------           ------ ---------- ---------




Raft International plc
Balance sheets
For the year ended 31 October 2003

                                         Group                Company
                                      2003     2002         2003     2002
                                     #'000    #'000        #'000    #'000
----------------------------- -----  -------  ------- ---  -------  -------

Tangible fixed assets                  286      322            -        -
Investments                              -        -        2,788    2,788
----------------------------- -----  -------  ------- ---  -------  -------
                                       286      322        2,788    2,788
Current Assets

Debtors                              2,106    1,562        2,644    2,453

Cash at bank and in hand             2,250    3,709          951    2,056
----------------------------- -----  -------  ------- ---  -------  -------

                                     4,356    5,271        3,595    4,509

Creditors: amounts falling
due within one year                 (1,371)  (1,355)        (146)     (99)
               
----------------------------- -----  -------  ------- ---  -------  -------

Net current assets                   2,985    3,916        3,449    4,410
----------------------------- -----  -------  ------- ---  -------  -------

Total assets less current
liabilities                          3,271    4,238        6,237    7,198

Provisions for liabilities
and charges                           (12)       -            -        -
                       
----------------------------- -----  -------  ------- ---  -------  -------

                                     3,259    4,238        6,237    7,198
----------------------------- -----  -------  ------- ---  -------  -------

Capital and reserves

Called up share capital              3,288    3,286        3,288    3,286

Share premium account                5,765    5,765        5,765    5,765

Profit and loss account             (5,794)  (4,813)      (2,816)  (1,853)
----------------------------- -----  -------  ------- ---  -------  -------

Equity shareholders' funds           3,259    4,238        6,237    7,198
----------------------------- -----  -------  ------- ---  -------  -------

The financial statements were approved by the Board on 16 December 2003

S Kelly - Director



D Hall - Director



Raft International plc
Consolidated cash flow statement
For the year ended 31 October 2003

                                                        2003      2002
                                              Note     #'000     #'000
------------------------------------        ------ --------- ---------

Net cash outflow from operating activities     a      (1,376)   (1,642)

Return on investments and servicing of
financing

Interest received                                         80       155

Interest paid                                             (4)        -
------------------------------------          ------ --------- ---------

                                                          76       155
------------------------------------          ------ --------- ---------

Taxation                                                  64       (67)

Capital expenditure



Purchase of tangible fixed assets                       (220)      (31)
------------------------------------          ------ --------- ---------

Net cash outflow before financing                     (1,456)   (1,585)

Financing

Capital element of hire purchase contract                (12)      (16)
payments

Repayment of loans                                         -        (7)

Issue of equity shares                                     2         -
------------------------------------          ------ --------- ---------

Decrease in cash in the year                          (1,466)   (1,608)
------------------------------------          ------ --------- ---------




Raft International plc
Notes to consolidated cash flow statement
For the year ended 31 October 2003

a) Reconciliation of operating result to net cash flow from operations

                                                                         2003      2002
                                                                        #'000     #'000
------------------------------        ---------      --------         ---------  --------

Operating loss                                                         (1,075)   (2,268)
Depreciation                                                              257       287
Loss on disposal of asset                                                   1         -
Decrease in provisions                                                      -        (2)
(Increase)/decrease in debtors                                           (530)      124
(Decrease)/increase in creditors                                          (29)      217
                                                                 
------------------------------        ---------      --------         ---------  --------

                                                                       (1,376)   (1,642)
------------------------------        ---------      --------         ---------  --------

b) Reconciliation of net cash flow to movement in net funds

                                                       2003                        2002
                                        #'000         #'000       #'000           #'000
------------------------------        ---------      --------    --------       ---------

Decrease in cash in the year           (1,466)                   (1,608)
Translation difference                      7                        22
Cash outflow from hire purchase            12                        16
Cash outflow from loans                     -                         7
------------------------------        ---------      --------    --------       ---------

Change in net funds arising
from cash flow                                       (1,447)                     (1,563)
------------------------------        ---------      --------    --------       ---------

Movement in funds in the year                        (1,447)                     (1,563)

Net funds at the start of
the year                                              3,697                       5,260
------------------------------        ---------      --------    --------       ---------

Net funds at the end of the
year                                                  2,250                       3,697
------------------------------        ---------      --------    --------       ---------

c) Analysis of net funds
                              1 November 2002      Exchange   Cash flow 31 October 2003
                                                differences
                                        #'000         #'000       #'000           #'000
------------------------------        ---------      --------    --------       ---------

Cash at bank                            3,709             7      (1,466)          2,250
Hire purchase contracts                   (12)            -          12               -
------------------------------        ---------      --------    --------       ---------
                                        3,697             7      (1,454)          2,250
------------------------------        ---------      --------    --------       ---------


NOTES TO THE FINANCIAL STATEMENTS

Note 1 Accounting policies

Accounting convention

The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards and
the accounting policies set out below.

Basis of consolidation

The consolidated financial statements include the accounts of the
Company and its subsidiary undertakings and have been prepared using
merger accounting principles.

The Company has not presented its own profit and loss account as
permitted by Section 230 (3) of the Companies Act 1985.

Revenue recognition

Turnover represents amounts invoiced to customers, excluding value added
tax, adjusted for opening and closing accrued income.

The Group has three types of revenue stream:

(a) Licence fees, implementation and development income is recognised
over the period from delivery of the system to the point at which there
are no significant vendor obligations remaining and the collection of
the resulting receivable is considered probable. This recognition is
based on the actual costs incurred and estimated likely future costs to
the point at which there are no significant vendor obligations
remaining.

(b) Maintenance fees and recurring licence fees are recognised rateably
over the period of the contract.

(c) Professional services fees are recognised as the services are
performed.

Tangible fixed assets

Depreciation is provided on a straight-line basis over the following
periods in order to write off each asset over its estimated useful life
or, if held under a finance lease, over the lease term, whichever is the
shorter.

Leasehold property                        - Over the period of the
                                          lease

Improvements to property                  - Over the period of the
                                          lease

Fixtures, fittings and computer           - Four years
equipment

Computer software                         - Two years

Investments

Investments held as fixed assets are stated at cost, less any provision
for impairment in value.


Deferred taxation

Deferred tax is recognised in respect of all timing differences that
have originated but not reversed at the balance sheet date where
transactions or events that result in an obligation to pay more tax in
the future or a right to pay less tax in the future have occurred at the
balance sheet date. Deferred tax assets are only recognised where
recovery is more likely than not. Timing differences are differences
between the Group's taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses
in tax assessments in periods different from those in which they are
recognised in the financial statements.

Deferred tax is measured at the average tax rates that are expected to
apply in the periods in which timing differences are expected to
reverse, based on tax rates and laws that have been enacted or
substantially enacted by the balance sheet date. Deferred tax is
measured on a non-discounted basis.


Research and development

Research and development is charged to the profit and loss account in
the year in which it is incurred.


Foreign currencies

Differences on exchange arising from the retranslation at closing rates
of the opening net investment in overseas subsidiary companies, and from
the translation of the results of those companies, are taken to reserves
and are reported in the statement of total recognised gains and losses.
All other exchange differences are taken into account in arising at the
operating result.


Hire purchase and leasing commitments

Assets obtained under hire purchase contracts or finance leases are
capitalised in the balance sheet. Those held under hire purchase
contracts are depreciated over their estimated useful lives. Those held
under finance leases are depreciated over their estimated useful lives
or the lease term, whichever is the shorter.

The interest element of these obligations is charged to the profit and
loss account over the relevant period. The capital element of the future
payments is treated as a liability.

Rentals paid under operating leases are charged to the profit and loss
account as incurred.



Note 2 Turnover and geographical segmental analysis
Turnover is analysed by sales into the following geographical markets

By Destination         Turnover        (Loss) / profit before tax          Net assets /
                                                                         (liabilities)
                     2003      2002               2003       2002         2003         2002
                    #'000     #'000              #'000      #'000        #'000        #'000
 ------------------ -------   -------          ---------   --------    ---------     --------
United Kingdom      3,502     3,073               (575)    (2,046)       3,424        4,560
Europe              2,828     2,821                 97       (242)         (47)        (166)
United States
of America          2,232       772               (209)       387          (90)        (128)
Rest of World           -         -               (312)      (212)         (28)         (28)
------------------  -------   -------          ---------   --------    ---------     --------
                    8,562     6,666               (999)    (2,113)       3,259        4,238
==================  =======   =======          =========   ========    =========     ========

By Origin              Turnover         (Loss) / profit before tax          Net assets /
                                                                           (liabilities)
                     2003      2002               2003       2002         2003         2002
                    #'000     #'000              #'000      #'000        #'000        #'000
------------------ -------   -------          ---------   --------    ---------     --------
United Kingdom      6,209     3,845               (304)    (1,617)       3,670        4,505
Europe              2,353     2,821                 49       (242)        (105)        (166)
United States
of America              -         -               (432)       (42)        (278)         (73)
Rest of World           -         -               (312)      (212)         (28)         (28)
------------------  -------   -------          ---------   --------    ---------     --------
                    8,562     6,666               (999)    (2,113)       3,259        4,238
==================  =======   =======          =========   ========    =========     ========

Note 3 Taxation
Tax on the loss on ordinary activities for the year was
as follows:                                                               2003         2002
                                                                         #'000        #'000
-----------------------------------------                              ---------     --------

UK corporation tax                                                         (49)         (10)
Overseas taxation                                                            2            1
Overprovision in prior years                                                 -          (64)
------------------------------------------                             ---------     --------

Current tax credit for the year                                            (47)         (73)
Deferred taxation                                                           12           (2)
------------------------------------------                             ---------     --------
                                                                           (35)         (75)
==========================================                             =========     ========


Note 4 Loss per share
The tax charge on the loss on ordinary activities for the year was
as follows:                                                               2003         2002
                                                                         #'000        #'000
------------------------------------------                             ---------     --------

Basic and diluted loss attributable to ordinary
shareholders                                                              (964)      (2,038)
------------------------------------------                             ---------     --------

Weighted average number of ordinary shares                          65,727,124   65,720,874
Diluted share options                                                        -            -
------------------------------------------                             ---------     --------

Adjusted weighted average number of ordinary shares                 65,727,124   65,720,874
==========================================                             =========     ========

Loss per share (pence)                                                   (1.47)       (3.10)
==========================================                             =========     ========

Diluted loss per share (pence)                                           (1.47)       (3.10)
==========================================                             =========     ========


Note 5 Dividend

The directors do not recommend the payment of a dividend on the ordinary shares.

Note 6 Preliminary announcement

The figures for the year ended 31 October 2003 do not constitute full accounts
within the meaning of Section 240 of the Companies Act 1985. The figures for the
year ended 31 October 2002 have been extracted from the accounts for 2002, which
have been delivered to the Registrar of Companies. The auditors have reported on
those accounts; their report was unqualified and did not contain statements
under Section 237 (2) of (3) of the Companies Act 1985.

Note 7 Availability of report and accounts

Copies of the Group's report and accounts will be dispatched to shareholders as
soon as is practicable. Copies will also be available on request from the
Group's head office at Gallery Four, 12 Leadenhall Street, London, EC3V 1LP and
the Group's Nominated Advisor, Seymour Pierce Limited, Bucklersbury House, 3
Queen Victoria Street, London EC4N 8EL

Note 8 Annual General Meeting

The annual general meeting is to be held on 23 February 2004 at 2 pm. Notice of
the AGM will be dispatched to shareholders with the Group's report and accounts.



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

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