Results:

• Turnover up 1% to £3.12 million
• Operating losses reduced by £0.23 million to £0.22 million
• Operating cash outflow halved to £0.36 million from £0.76 million
• Cash at year-end up £0.08 million to £0.28 million
• Four new customers secured in 2005
• First transactional pricing contracts with First Data International and Certegy card services
• Global insurance origination solution live at HSBC
• New front-end productivity toolkit, Montage, live at HBOS
• Accredited as a Microsoft gold partner

Outlook

• Two substantial service orders from existing customers, closed in Quarter 1 2006
• First loans origination software solution sold as a service, in partnership with First Data
• Two new partnership contracts concluded in Q1 2006
• New £0.15 million bank facility arranged, to provide working capital headroom

Introduction

The overall financial performance for 2005 fell below our expectations with revenue growth of only 1% and an operating loss of £0.22 million. This was an improvement on 2004, but it was our aim to achieve an operating profit in 2005. The shortfall to our forecast is explained by a number of existing customer projects slipping out of 2005 into 2006 and the decision to change the way we sell licences. Traditionally we have sold one off, up front licences for our products, which generate revenue in the year the contract is signed and delivered. However, to secure future recurring revenues, committing customers to long-term contracts and providing a cost effective point of entry for new customers, we have moved to a transactional pricing model based on end customer volumes. The group attracted four new customers in 2005. Using the old pricing model, this would have substantially increased this years' total sales. However, under the new pricing model these contract wins will spread the revenues over future years.

To fund the new pricing model, our shareholders provided £0.53 million of new equity and this coupled with a positive operating cash inflow in the second half of the year meant that the year-end cash position improved to £0.28 million. Overall the operating cash outflow fell by £0.4 million, due to the reduced operating loss and an increase in deferred revenues. In Q1 2006, the Company has secured a bank facility of £0.15 million to provide working capital, which along with the increased order backlog should meet the Group's cash requirements.

Board and employees

Once again the year proved to be tough for both management and employees, particularly in the first half of the year when one or two major projects were deferred. However, their enthusiasm and resilience is now starting to pay off with new customer wins and an excellent product offering having a beneficial impact on overall morale. I thank them for their continued loyalty and hard work.

During the year, Laurence Shafe, the original founder and more recently a non-executive director, stepped down from the Board. I should like to thank him for his very valuable contribution and wish him and his family well for the future.

Outlook

The new business obtained in late Q4 of last year through our partners First Data and Certegy has dramatically increased our customer consultancy revenue which has enabled your company to be cash positive in Q1.

Since the end of the financial year, your company has signed two new partnerships with TNS and Nomad, both of which have majored on the processing of prepaid cards. This is a new business stream for iE and I am pleased to announce that we have already secured our first customers. We see this development as being a potentially important and rapidly expanding niche area for our proven technology.

Given our expanding blue chip customer base and the impact of our newly introduced transaction based revenue model, your board is optimistic that your company will continue to be cash positive, although the timing of this new licence revenue means that the greater impact to the bottom line is expected to be seen from 2007 onwards.

I look forward to reporting further progress at the half year.

Clive Richards
Chairman

Chief Executive's report

Introduction

Although the financial performance for 2005 was disappointing, the majority of our operational goals were met and the platform for achieving our long-term objectives was secured. The company increased its lead generation activity and the pipeline of potential business is ahead of the same period last year. A number of high profile projects with existing customers were delivered on time, to budget and to the customer's satisfaction, thereby securing our position within that account and providing valuable references for future sales. The development of Montage was completed and successfully deployed at HBOS, which has led to further sales at 2 other clients. The key aim of moving to an indirect selling model through partners took a big leap forward in 2005, with significant sales achieved through both First Data and Certegy. Both these partners have a global customer base in to which the company can sell and in addition they both operate a business model that meets our strategic ambitions. They are selling our software as a service, driven by end customer volumes, which means for iE that as the Internet becomes the primary channel for customer acquisition and self service, our revenues are expected to grow significantly. Given our rich user interface, clients are increasingly using our solutions in their call centres and at the point of sale. Also they enter into long-term relationships with their customers, typically 5 years, and this gives the company increased visibility over future revenues.

Operations

The focus on delivering Internet solutions to retail financial services institutions will continue but our approach will be broader in 2006. Building on existing reference sites at 3 of the top 5 UK banks in the areas of credit cards, loans, savings and investment products, we also intend to market to the smaller and medium-sized financial institutions who have yet to commit to a fully integrated online service. To strengthen our proposition we have partnered with best of breed suppliers in the areas of Internet hosting, web analytics and back-end processing. This gives us a full service offering that will enable customers to maximise their return from the Internet channel without a large upfront investment. 3 customers are now live, demonstrating that we have an attractive start-up offering that includes transactional pricing.

The group will continue to exceed the expectations of its existing customers and drive to both upgrade their existing solutions to our latest .NET architecture whilst cross-selling our other product solutions. This approach has worked especially well with our larger retail banking clients already running several of our solutions. A good example of this is the global insurance solution built for HSBC, already live in Mexico and to be rolled out to other territories over the next 2 years.

Our research and development spending remains significant in relation to our size and this will continue to be a priority in the current year as we continue to invest for future growth. It is vital that we can demonstrate ongoing superior functionality when compared with competitors and internal client IT departments. The majority of our investment will focus on NetFinance Montage, our unique front-end productivity toolkit. The branding and content editing modules are live at HBOS and attention will focus on extending the toolkit to support web analytics, test and learn features and personalising the user experience. These features should position iE as a market leader in improving the Internet user experience and, therefore, the profitability of the channel through higher customer application and retention rates.

The AM to .NET converter product attracted one new customer in 2005, Zurich Insurance, and the Group has continued to make small enhancements that will make it a more compelling proposition for the remaining AM customers.

Conclusion

The focus in 2006 will be on maximising the effectiveness of our partner relationships, capitalising on the new customers signed up to the transactional pricing model and investing in NetFinance Montage, which clearly differentiates the group in our market place and can directly impact our recurring revenue streams. Staff attrition has remained low, underlining the loyalty and commitment of our people and the exciting nature of the work we undertake.

Given the solid customer platform and proven growth potential of the Internet channel, I remain positive about our future.

Phillip Blundell
Chief executive and finance director

Financial Review

Revenue

Group turnover was £3.12 million (2004: £3.07 million), an increase of 1%. A sharp decline in licences of £0.40 million was offset by a corresponding increase in customer consultancy revenue, whilst maintenance revenues were flat to 2004. The decline in licence revenue is as a direct consequence of the

Group's strategy to focus on securing long-term relationships with its customers based on a transactional pricing model, rather than upfront fees. The 24% increase in consultancy revenues is explained by the new customer wins at First Data, Certegy, BBVA and First Rand.

An analysis of revenues shows that licences accounted for 7% (2004: 21%), customer consultancy services represented 64% (2004: 52%) and support and maintenance revenue was 29% (2004: 27%) of total revenues.

Staff costs

Total staff costs, which are by far the most significant cost to the business, have reduced in the year by 8% to £2.19 million. This is reflected in a reduction in the average number of staff from 35 to 31.

Research and development expenditure

Our expenditure on research and development in the year was £0.42 million (2004: £0.55 million). The fall in expenditure was due to the completion of phase1 of Montage and the high level of customer funded consultancy revenue in the second half of 2005, which required additional staff. This amount is written off in the year in which it is incurred and excludes any development work directly funded by customers.

We are looking to provide innovative solutions to our customers that will allow them to maximise profits from their Internet channel through rapid real-time test and learn features. In 2006, we will continue to invest in this area, and in our existing products, by extending their functionality, enhancing flexibility and introducing more intelligent feedback on customer behaviour.

Operating loss

The group operating loss halved to £0.22 million (2004: £0.45 million). This was attributable to the cost savings achieved through lower average staff numbers during the year.

The Company did not apply for an Research and Development tax credit in the year as the innovative element of Montage was claimed in 2004.

Cash flow and net funds

The net cash position of the group improved by £0.08 million in the year to £0.28 million as a result of the 2 fund raising events which in total generated cash of £0.53 million. There was an operating cash outflow of £0.36 million, which was due to an increase in debtors of £0.26 million and the operating loss. The increase in debtors was due to the pick up in business in the final quarter of 2005.

Phillip Blundell
Chief executive and finance director