CTP.L Regulatory News (CTP)

28 November 2011

Redstone plc

 ("Redstone", "the Company" or "the Group")

Interim Results to the Six Months Ended 30 September 2011

Redstone plc (AIM:RED), the integrated ICT and Communications Solutions provider, today announces its interims results for the six months ended 30 September 2011.

Highlights

§ Total Revenue increased by £4.6 million or 14.3% to £36.5 million (H1 10/11 £32.0 million)

§ Project revenues increase by 29.5% to £18.0 million (H1 10/11 £13.9 million) and Annuity revenues by 2.7% to 18.6 million (H1 10/11 £18.1million)

§ Significant contract wins announced with cumulative revenues in excess of £40 million over the next five years

§ Operating Expenses (comprising selling & distribution costs and administrative expenses),excluding integration and strategy costs, decreased by £3.1 million or 16.4% to £15.6 million (H1 10/11 £18.7 million)

§ Adjusted EBITDA* before central costs increased by £1.7 million to £2.7 million (H1 10/11 £1.0 million). Annuity business now contributes 65.6% of adjusted EBITDA* before central costs

§ Adjusted EBITDA* increased by £1.8 million or 1,420% to £1.9 million (H1 10/11 £0.1 million)

§ Operating losses reduced by 51.1% to £0.5 million (H1 10/11 loss £0.9 million) after exceptional costs of £0.6 million (H1 10/11 £0.7 million credit)

§ Fujin exceeds earn out target triggering payment of deferred consideration of £2.5 million to be satisfied by the issue of 224,719,100 new ordinary shares at an issue price of 0.89p per share, and £0.5 million in cash

§ Oversubscribed new equity fund raising via the issue of 212 million new Ordinary shares at 1.25p per share, raising £2.4 million net of expenses

§ Portsmouth Metropolitan Area Network now lit and fully operational with Portsmouth City Council being the first customer to be connected

___________________________________________

* Before net finance costs, tax, depreciation, amortisation, integration & strategy costs and share based payments

Tony Weaver, Chief Executive of Redstone commented:

 "I am pleased to report encouraging interim results that show that in a difficult market; the restructuring undertaken in the previous financial year has enabled the businesses to trade profitably, and also achieve significant contract wins.

The Company is successfully building an attractive and resilient recurring revenue base while improving its competitive offering in winning material project work. We have now successfully lit the Portsmouth MAN as outlined at the time of our fundraising, and have our first customer connected, Portsmouth City Council. While the general economic outlook and consequently the marketplace for ICT spending remains uncertain the Board is encouraged by the growing market traction achieved in the period. Redstone is now successfully re-established as a leading ICT provider."

Enquiries:

Redstone PLC

Half Year Report 2011

Chairman's Statement

Dear Shareholder

I am reporting to you for the first time as Chairman following my appointment at the General Meeting on 29 September 2011. I would like to thank Ian Smith, my predecessor, for his contribution as Executive Chairman from his appointment on 8 September 2010.

Ian had indicated in his Chairman's Statement dated 7 September 2011 that he would remain an executive director. However, as will be seen in the accompanying interim results for the six months to 30 September 2011, the business has made great progress during Ian's tenure, and on reflection Ian felt, with the Board's support, that continuing as a non-executive director was a more appropriate and cost-effective position for the Company.

There were no further Board changes during the six months to 30 September 2011.

The results for the six months ending 30 September 2011 are beginning to reflect the positive impact of the significant financial, management and component re-structuring of the group under taken in the previous financial year, which have been covered in detail in previous reports to shareholders.

Group revenue increased by £4.6 million or 14.3% to £36.5 million (H1 10/11 £32.0 million). The underlying increase excluding a first time contribution of Fujin revenues of £1.5 million was £3.1 million or 9.5%.

Adjusted EBITDA* for the period was £1.9 million (2010 £0.1 million) a very substantial increase. Operating adjusted EBITDA* (before central costs) was £2.7 million (2010 £1.0 million) an increase of 181%.

It is important to note that whilst the major operational restructuring was completed by 31 March 2011, the Group was still assimilating the impact of the structural changes in the current financial year. Therefore, although the results for the six months to 30 September 2011 show a vast improvement on 2010, there is scope for further improvement. A continuing competitive cost base remains a priority and we keep our costs under regular review.

Equity Financing

The Group undertook a modest equity placing in August, issuing 212 million new ordinary shares at a price of 1.25p, which raised approximately £2.4 million (net of expenses). The fundraising was significantly over subscribed and was conducted to provide funding to develop the Metropolitan Area Network ("MAN") in Portsmouth and to provide additional working capital.

I am delighted to report that the Portsmouth MAN is now fully lit and operational. More details on this important development are contained in the Chief Executive's Review below.

Fujin Systems Limited ("Fujin")

Fujin was acquired by the Group on 8 November 2010, for a total consideration of up to £2.9 million, dependent on the achievement of a minimum profit before tax of £560,000 in the year to 31 October 2011.

I am pleased to report that Fujin has exceeded the earn-out target, and has delivered a profit before tax of £596,000 in the year to 31 October 2011, £430,000 of which has been incorporated into the group results for the six months ending 30 September 2011 (H1 10/11 £Nil).

As a result, the maximum consideration of £2.9 million will be paid to the former shareholders of Fujin, and satisfied as follows:-

·; £0.4 million paid in cash on completion in November 2010

·; £2.0 million by the issue of 224,719,100 new ordinary shares at an issue price of 0.89p in December 2011

·; £0.5 million to be paid in cash in December 2011

Outlook

The economic outlook remains gloomy on a macro level, with enormous uncertainty as to how significantly the global debt crisis will ultimately impact UK business.

However, despite the difficult market conditions, we continue to re-build business revenue. Our sales team is at full complement for the first time in almost two years and are enthusiastically pursuing and winning exciting opportunities to consolidate and grow the business. We have also invested in the Portsmouth MAN, which is now fully operational and will provide opportunities for growth, and we continue to expand the capabilities of our core network to ensure we are at the forefront of the expected growth in cloud based shared services.

Redstone is therefore well able to compete in the current market and continue the progress made to date in the current financial year.

Richard Ramsay

Non-Executive Chairman

28 November 2011

Redstone PLC

Half Year Report 2011

Chief Executive's Review

Business Development

The business continues to establish and develop its position as the largest mid-market provider of network based end-to-end managed services, technology and infrastructure solutions, by delivering customer applications over leading edge technologies across Redstone's own high speed resilient network.

During the six months to 30 September 2011, targeted and selective recruitment has increased the sales team to a full complement of 26 Full Time Employees by 31 August 2011, a team we regard as "best in class" in our areas of expertise. The establishment of this hand-picked team, a process which commenced on my appointment in September 2010, is already delivering in terms of increasing revenues in targeted markets.

The sales team present Redstone as a single brand and marketed entity, showcase all the capabilities of the Group to the customer, and are no longer restricted to divisional denominated product sets. The majority of the sales team has relocated to new, designed for purpose, office premises in the City of London, which also provides first class demonstration facilities for existing and new clients.

The progress made in re-establishing a vibrant and cohesive sales presence is evidenced by the following contract wins during the current financial year:

·; 23 June 2011, £1.5 million new contract to deliver structured cabling to a major international bank

·; 27 June 2011, £10 million 4 year contract extension with a major customer in the financial sector to provide managed services, including the use of Redstone's proprietary software for the customer's critical IT Infrastructure

·; 29 September 2011, £21.9 million contract with a leading UK Bank for the design, and delivery of a new mission critical Data Centre over a period of 12 months to November 2012

·; 13 October 2011, preferred bidder on £10.2 million contract to deliver a Managed Wide Area Network over 5 years to a new customer over 1,900 sites across the UK and Ireland. Full roll out is expected to commence in early 2012 on completion of the pilot programme currently in progress

In addition, I am delighted to announce today

·; we have been appointed by an international media and entertainment group to provide structured cabling for its new London office. The project set for completion in January 2012 and is valued at £1million

·; the award of a three year contract to provide fully managed connectivity across the UK to a leading outdoor advertising agency. Redstone as sole supplier, will deliver cost efficiencies through faster connectivity speed

The above contract wins not only evidence the momentum that the sales team are building within the business but also prove that Redstone remains a trusted partner of sophisticated global institutions and retains the high degree of expertise required to design, deliver and manage complex and sensitive IT infrastructure installations in a competitive market.

Operational Capability

Redstone has continued to invest in its core network and also to selectively develop new capability which enhances or complements the existing product set.

On 22 July, we advised shareholders that we had plans to bring our MAN in Portsmouth into service, and wished to fund the investment required as part of a new equity raise of £2.4 million (net of expenses), which concluded in August 2011, to provide funds in order to develop the Metropolitan Area Network ("MAN") in Portsmouth and to provide working capital to support the company's growth.

I am delighted to report that we have now completed the work required to bring the Portsmouth MAN into service and it is now fully operational. The Portsmouth MAN comprises approximately 44.5 km of fibred ducting in the Portsmouth and Fareham area, comprising 17 carriageway and 241 footway boxes. The historic cost investment in this MAN was £4.9 million, with a current Net Book Value of £0.1 million. The asset had been written down to reflect its' non-operational status, and also includes a further 10.0 km of fibred ducting in Southampton (which remains unlit).

I can further report that Portsmouth City Council is our first customer connected to the MAN in Portsmouth. Redstone are providing all schools across Portsmouth with super-fast internet connectivity, critical to effective learning at half the previous cost to the Council. The company also has significant fibre assets in Southampton and we are now investigating the feasibility of lighting this fibre to provide bandwidth and geographic reach to our south coast MAN.

Enhancement of our Cambridge MAN continues as we make additional new generation services such as IaaS (Infrastructure as a Service), SaaS (Software as a Service) and DdoS (Distributed Denial of Service) protection live and available. The roadmap of services to be added to the platform is in continuous development.

In addition to, and complementary to the enhanced MAN's and development of the core network we have recently completed a fourth data centre in Hertfordshire, leased within an existing tier III data centre. This new data centre provides both the capacity to support the expansion of our "cloud" services offering, and greater resilience for mission critical services provided to existing customers.

The new data centre is a showcase for Redstone's data centre expertise. We regularly build world class data centres for some of the world's largest financial institutions and to date have not had a showcase to demonstrate what we can do in conjunction with our technology partners, for present and future customers.

The new data centre is PCI (Payment Card Industry) and FSA compliant, is energy efficient and protected with the latest biometric security. This facility joins our three existing data centres in Cambridge, London and the Netherlands.

Profitability

Whilst the financial highlights are covered in detail in the CFO's Financial Review, I am particularly pleased to report significant growth in both revenue and adjusted EBITDA* evidencing the continuing recovery across both the project and annuity businesses.

Group revenue increased by £4.6 million or 14.3% to £36.5 million (H1 10/11 £32.0 million), with increases of 29.5% and 2.7% in project and annuity revenues respectively. The project/annuity revenue split for the half year is 49.2%:50.8% (H1 10/11 43.5%:56.5%).

Adjusted EBITDA* for the period was £1.9 million (H1 10/11 £0.1 million) an increase of 1,420%. Operating adjusted EBITDA* (before central costs) was £2.7 million (H1 10/11 £1.0 million) an increase of £1.7 million or 182%. Adjusted EBITDA* attributable to project and annuity business again both increased by 1,808% and 94.7% respectively.

The Project/Annuity adjusted EBITDA* split for the half year is 34.4%:65.6% (H1 10/11 5.1%:94.9%)

The resilience of the restructured business is particularly demonstrated by the adjusted EBITDA* contributed by the core annuity business (comprising Connectivity, Campus and Hardware Maintenance), which achieved adjusted EBITDA * of £1.8 million (H1 10/11 £0.9m) an increase of £0.9m or 94.7%, and representing 65.6% of total adjusted EBITDA before central costs.

These are recurring earnings, and evidence the solid base on which the Group's growth strategy will continue to be focussed.

Outlook

I am pleased to report encouraging interim results that show that in a difficult market; the restructuring completed in the previous financial year has enabled the businesses to trade profitably and also achieve significant contract wins

The Company is successfully building an attractive and resilient recurring revenue base while improving its competitive offering in winning material project work. We have now successfully lit the Portsmouth MAN as outlined at the time of our fundraising, and have our first customer connected, Portsmouth City Council. While the general economic outlook and consequently the marketplace for ICT spending remains uncertain the Board is encouraged by the growing market traction achieved in the period. Redstone is now successfully re-established as a leading ICT provider

Tony Weaver

Chief Executive

28 November 2011

Redstone PLC

Half Year Report 2011

Financial Review

Segment Reporting

The operating segments have been re-defined in these financial statements, as announced in the CEO's report to shareholders dated 7 September 2011 and which accompanied the accounts for the year ended 31 March 2011.

The Group now segments the business performance between recurring "Annuity" business (comprising campus based managed services, connectivity and hardware maintenance), non-recurring "Project" business (comprising cabling, ICT projects, equipment sales and professional services) and "Central Costs".

As a result of this change the comparatives for 10/11 have been reclassified.

Revenue

Group revenue increased by £4.6 million or 14.3% to £36.5 million (H1 10/11 £32.0 million).

Increases of 29.4% and 2.7% were achieved in project and annuity business respectively, with reported revenues of £18.0 million (H1 10/11 £13.9 million) and £18.6 million (H1 10/11 £18.1 million) respectively.

Revenue growth of £4.1 million in the projects business was driven by two large structured cabling projects for a major international banking client, together with a first time H1 contribution from Fujin of £1.2 million (H1 10/11 £nil), which offset contraction in the ICT projects business due to the absence of an effective sales team throughout the latter part of 2010/11.

Annuity revenue growth of £0.5 million was driven by £1.1 million (14.8%) growth in connectivity and hardware maintenance, and a first time H1 contribution of £0.3 million (H1 10/11 £nil) from Fujin. This offset a £0.9 million (8.2%) reduction in campus managed service revenues due to a lower level of general discretionary expenditure by clients.

The project/annuity revenue split for the half year is therefore 49.2%:50.8% (H1 10/11 43.5%:56.5%).

Gross Profit

Gross profit decreased by 7.3% or £1.2 million to £15.8 million (H1 10/11 £17.0 million), with gross margin declining to 43.2% (H1 10/11 53.2%, H2 10/11 41.2%). The decrease in gross margin is mainly attributable to two large cabling contracts, though also reflects a general tightening of margins across most business activities, with increased competitive bidding in a flat market, and intensive pricing pressure from customers.

However, whilst the market outlook is currently challenging we consider the market to have stabilised, evidenced by a 2.0% increase in gross margin on H2 10/11. Throughout this period of market retrenchment and caution we have nevertheless continued to win significant new contracts. The continual realignment of our operating cost base underpins our ability to compete in a lower margin environment.

Annuity gross profit of £11.0 million (H1 10/11 £11.7 million) fell by £0.6 million or 5.2%. This masked a £0.5 million increase in connectivity gross profit, and a campus gross profit reduction of £1.2 million. Overall annuity gross margins decreased to 59.5% (H1 10/11 64.5%), with the campus business bearing the brunt of the decrease. However, connectivity gross margin increased during the period.

Project gross profit decreased by £0.6 million or 11.7% to £4.7 million, largely due to a £0.8 million decrease in gross profit arising from ICT projects, as a result of the lack of sufficient pipeline carried forward from last year and aggressive price competition impacting achievable gross margin.

Overall project gross margins decreased to 26.3% (H1 10/11 38.8%). Cabling activities had the greatest impact on gross margin, where although gross profit increased by £0.2 million revenues increased by £5.6 million and diluted the overall project margin.

The increase in cabling revenue was largely attributable to two large contracts with a major international bank, and as noted above, the overall decrease in gross margin was largely attributable to these contracts.

Overall margin mix has improved slightly, with higher gross margin annuity business accounting for 70.0% of total gross profit (H1 10/11 68.4%).

Operating Expenses

Operating expenses (comprising selling and distribution costs and administrative expenses) including integration and strategy costs, decreased by 9.6% or £1.7million to £16.2 million (H1 10/11 £18.0 million).

The £1.7 million decrease in operating expenses is net of a £1.3 million increase in integration and strategic costs to £0.6 million (H1 10/11 £0.7 million credit) with negligible increases in aggregate depreciation & amortisation of intangibles, and share based payments.

Therefore the underlying decrease in operating expenses excluding integration and strategy costs is £3.1 million reflecting the realisation of cost savings arising from last year's restructuring, together with further annualised savings identified in the current year relating to the final stages of integration of the residual businesses.

Adjusted EBITDA* and Profitability

Adjusted EBITDA* for the period was £1.9 million (2010 £0.1 million) an increase of £1.8 million or 1,420%.

Operating adjusted EBITDA* (before central costs) was £2.7 million (2010 £1.0 million) an increase of £1.7 million or 182%. Adjusted EBITDA* attributable to the project and annuity businesses was £0.9 million and £1.8 million (H1 10/11 £nil and £0.9 million) respectively, representing increases of 1,808% and 94.7% respectively.

The Project/Annuity adjusted EBITDA* split for the half year is 34.4%:65.6% (H1 10/11 5.1%:94.9%). The 10/11 split was adversely affected by historically low levels of project business.

Central costs remain unchanged at £0.8 million (H1 10/11 £0.8 million) and represent the current run rate of the business.

Integration and strategic costs amounted to £0.6 million (H1 10/11 £0.7 million credit), and mainly comprise redundancy and employment related costs of staff made redundant as a consequence of integration.

The 10/11 exceptional credit of £0.7 million mainly comprised a credit of £1.2 million in relation to the settlement of the loan from Eckoh plc, where the original loan of £2.7 million was settled by a cash payment of £0.5 million and the issue of new Ordinary shares at a value of £1.0 million. In addition, there were exceptional costs relating to redundancies and professional fees arising from restructuring amounting to £0.5million.

The resulting operating losses of £0.5 million (H1 10/11 loss £0.9 million) have been reduced by 51.1%.

Net finance costs amounted to £1.0 million (H1 10/11 £1.0 million). The charge for the period includes £0.4 million of interest on bank borrowings (H1 10/11 £0.5 million), a £0.4 million fair value write down on the interest rate swap (H1 10/11 £0.3 million) and amortisation of finance charges incurred on refinancing of £0.2 million (H1 10/11 £0.8 million). Net finance costs attributable to loan notes were £nil (H1 10/11 £0.6 million credit).

The resulting loss before taxation is £1.5 million (H1 10/11 loss £2.0 million), a reduction of £0.5 million or 24.1%. The tax credit for the period of £0.2 million (H1 10/11 £0.2 million) arises from the reduction in deferred taxation liabilities in line with amortisation of intangible assets recognised on acquisition.

The resulting loss for the period from continuing operations (attributable to the shareholders of the parent company) is therefore £1.3 million (H1 10/11 £1.8 million).

Discontinued Operations

The loss for the period from discontinued operations amounted to £0.4 million (H1 10/11 loss £1.8 million). The loss predominately arises from the write off of loan notes outstanding from the disposal of the security business of Redstone Managed Security Limited in December last year.

The security business incurred significant losses following disposal by Redstone last year and has subsequently been acquired by a third party in the current financial year. It is prudent therefore to provide against the remaining loan notes, which represent operating costs incurred by Redstone on behalf of the purchaser in the period between exchange and completion last year.

Overall Result for the Period

The net loss for the period from continuing and discontinued operations is £1.7 million (H1 10/11 £3.5 million), a decrease of 51.7%.

Adjusted basic loss* per share has decreased by 0.34p or 87.2% to a loss per share of 0.05p (H1 10/11 loss of 0.39p)

Cash Flow

The net cash inflow from continuing operating activities, before strategic and integration costs was largely unchanged at £0.1 million (H1 10/11 £0.0 million). This was made up of cash inflow from trading activity of £2.2 million (H1 10/11 inflow £1.5 million) offset by an increase in working capital of £2.1 million (H1 10/11 £1.5 million).

Integration and strategic costs absorbed £0.9 million of cash (H1 10/11 £0.6 million), and comprise £0.6 million of redundancy and related employment costs of employees made redundant as part of the reorganisation executed in in the last quarter of 10/11, and £0.3 million in respect of the final wave of redundancies arising from integration of the businesses in the current financial year.

£0.4 million of cash was consumed by net finance charges, a reduction of £0.3million or 40.2% on H1 10/11. The reduction reflects the reduction in average borrowings during the period compared to 10/11.

Discontinued operations were cash neutral in the period (H1 10/11 outflow £1.5 million).

The purchase of tangible and intangible assets resulted in a cash outflow of £0.3 million (H1 10/11 £0.5 million).

Net proceeds of issue of shares pursuant to the refinancing detailed earlier in this report amounted to £2.4million (H1 10/11 £12.0 million). Repayment of borrowings amounted to £0.3 million (H1 10/11 £8.8 million). Net proceeds from financing activities therefore amounted to £2.2 million (H1 10/11 £4.8 million).

The resulting net increase in cash and cash equivalents amounted to £0.6 million (H1 10/11 £1.5 million).

Borrowings and Bank Facilities

Total borrowings (net of cash and cash equivalents) amounted to £11.3 million (31 March 2011 £12.1 million) a decrease of 6.9% or £0.8 million.

Resultant gearing based on enterprise value (the aggregate of total equity and total borrowings) is 47.2% (31 March 2010 51.0%) arising from reduced borrowings and increase in the total equity to £12.6million (31 March 2011 £11.6 million).

Overdraft and term loan facilities totalling £13.6 million remain in place with Barclays Bank and are currently committed until December 2013. In addition the Group has the ability to raise capital lease or hire purchase finance in the ordinary course of business to a maximum of £3.0 million.

Equity

Total equity has increased by £1.0 million to £12.6 million (31 March 2011 £11.6 million). The increase comprises an equity placing of £2.4 million (net of expenses) and equity based payments of £0.2 million, offset by the net loss for the period of £1.7 million.

The equity placing was made in August 2011, when 212 million new ordinary shares were issued at a price of 1.25p per share, raising approximately £2.65 million. The fundraising was significantly over subscribed and was conducted to provide funding to develop the Metropolitan Area Network ("MAN") in Portsmouth and to provide additional working capital.

Peter J Hallett

Chief Financial Officer

28 November 2011

Consolidated Income Statement

*earnings from continuing operations before interest, tax, depreciation, amortisation, integration and strategic costs and share-based payments.

The above consolidated income statement should be read in conjunction with the accompanying notes.

Consolidated statement of comprehensive income

Consolidated Statement of Changes in Equity

(a) Merger reserve

The merger reserve resulted from the acquisition of Redstone Communications Limited (formerly Redstone Network Services Limited) and represents the difference between the value of the shares acquired (nominal value plus related share premium) and the nominal value of the shares issued.

(b) Capital redemption reserve

The capital redemption reserve arose on the elimination of deferred shares and represents the nominal value of the deferred shares.

(c) Translation reserve

The translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

(d) Repurchase of own shares

Shares in Redstone plc purchased by and held in the Employee Benefit Trust have been recognised in retained earnings, in accordance with SIC 12 and IAS 32.

(e) Revaluation reserve

(i) The Directors have revalued the metropolitan area network assets (MAN) residing in the property plant and equipment. This is permitted under IAS 16 where the value attributed to an asset is less than its fair value.

(ii) Fair value of the MAN has been established by the discounting of the cash flow of future income arising from the asset. The current operational MAN owned by the group are the network in Cambridge and Portsmouth. The Portsmouth MAN became operational in the 6 month period ended 30 September 2011 and has not yet been revalued.

(iii) The effective date of the revaluation was 31 March 2011 and the group engaged Oakley Capital Limited, to act as independent valuers in this regard. The principal assumptions used in the valuation model were as follows:

Annualised value of the current contract base £1.4 million per annum

Annual revenue growth - years 1 - 2, 20%; years 3 - 4, 5% thereafter 2.5%

Discount rate applied to cash flows - 15%

The future pricing of contracts is based on the average value of current contracts in the base

(iv) The fair value of the revalued assets was established at £5.5 million, resulting in a non distributable revaluation surplus of £4.7 million as at 31 March 2011

(v) The carrying amount that would have been recognised had the asset continued to be carried under the cost model was £0.8 million at 31 March 2011

Consolidated Balance Sheet

Consolidated Cash Flow Statement

Notes to the half-yearly financial information

1 Basis of preparation and general information

The interim financial information is unaudited.

The Company is a limited liability company incorporated and domiciled in England. The address of its registered office is Redstone plc, Kirtlington Business Centre, Slade Farm, Kirtlington, OX5 3JA. The Company is listed on the London Stock Exchange AIM. This condensed consolidated interim financial information was approved for issue on 28 November 2011.

This condensed, consolidated half-yearly financial information for the half-year ended 30 September 2010 has been prepared in accordance with IAS 34, 'Interim financial reporting' as adopted by the European Union. The consolidated half-yearly financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2011 were approved by the Board of directors on 07 September 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under sections 498 (2) or (3) of the Companies Act 2006.

The interim report was approved by the Board on 28 November 2011.

Accounting policies

The accounting policies adopted are consistent with those of the previous financial year,except as described below.Exceptional items are disclosed and described separately in the financial statementswhere it is necessary to do so to provide further understanding of the financialperformance of the Group. They are material items of income or expense that have beenshown separately due to the significance of their nature or amount.Taxes on income in the interim periods are accrued using the tax rate that would beapplicable to expected total annual earnings.IFRS 9, 'Financial instruments', addresses the classification, measurement andde recognition of financial assets and financial liabilities. The standard is not applicableuntil 1 January 2013 but is available for early adoption. However, the standard has notyet been endorsed by the EU. When adopted, the standard will affect in particular thegroup's accounting for its available-for-sale financial assets, as IFRS 9 only permits therecognition of fair value gains and losses in other comprehensive income if they relate toequity investments that are not held for trading. Fair value gains and losses on available for-sale debt investments, for example, will therefore have to be recognised directly inprofit or loss. In the current reporting period, the group recognised C15 of such gains inother comprehensive income.There will be no impact on the Group's accounting for financial liabilities, as the newrequirements only affect the accounting for financial liabilities that are designated at fairvalue through profit or loss, and the Group does not have any such liabilities. The de recognition rules have been transferred from IAS 39, 'Financial instruments:Recognition and measurement', and have not been changed. The Group has not yetdecided when to adopt IFRS 9.

Reclassification of results in the period to 30 September 2010

During the year ended 31 March 2011 the Group undertook an extensive data validation exercise and as a result of this the revenue recognition of certain annuity contracts was amended. This has resulted in revenue to the value of £0.4 million that was originally recognised in the 6 months ending 30 September 2010, being recognised in the 6 months ending 31 March 2011.

The comparatives for the 6 months ended 30 September 2010 have been amended to reflect this change.

Going Concern

The consolidated half-yearly financial information of Redstone plc has been prepared on the going concern basis and in accordance with EU adopted International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated half-yearly financial information has been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.

The Directors are required to be satisfied that the Group has adequate resources to continue in business for the foreseeable future. The validity of this assumption depends on the ability of the Group to meet its cash flow forecasts and the continuing support of its bankers by providing adequate overdraft facilities and of its debt holders and shareholders. In August 2011 the Group has raised further equity finance and it has facilities with Barclays Bank through to 31 December 2013.The bank has agreed to a variation to the financial covenants in terms of which it can elect to have a one-off right not to test the financial covenants during a limited period. The nature of the group's business is such that there can be considerable variation in cash inflows, and the timing thereof. Whilst this adds risk to the group's ability to forecast cash and in the current economic environment there can be no absolute certainty that the Group will achieve its EBITDA forecasts, the present cash flow forecasts indicate that the Group will be able to operate within the present overdraft facilities for at least 12 months from the date of approval of these financial statements. For these reasons the Directors believe the going concern basis to be appropriate.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

2 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been identified as the Group Chief Executive and the Chief Financial Officer. The Group Chief Executive and the Chief Financial Officer are jointly responsible for resources allocation and assessing the performance of the operating segments. The operating segments are defined by distinctly separate product offerings or markets. The directors have changed the way they view the segments of the group from divisional entities to project and annuity activities and central costs. As a result of this change the comparatives have been reclassified.

 (a) Unaudited for the six months ended 30 September 2011

* earnings from continuing operations before interest, tax, depreciation, amortisation, integration and strategic costs and share-based payments.

(b) Unaudited for the six months ended 30 September 2010

* earnings from continuing operations before interest, tax, depreciation, amortisation, integration and strategic costs and share-based payments.

c) Unaudited for the year ended 31 March 2011

* earnings from continuing operations before interest, tax, depreciation, amortisation, integration and strategic costs and share-based payments.

3 Integration and strategic costs

In accordance with the Group's policy of integration and strategic costs the following charges/ (credits) were incurred:

In the year ended 31 March 2011 the Group agreed a settlement in relation to the Eckoh loan of £2.7million. Eckoh was paid £0.5 million in cash and received 200,000,000 ordinary shares in consideration for waiving all sums due under the loan. This resulted in a surplus of £1.2 million disclosed as a credit in integration and strategy costs.

4 Loss per share

Basic loss per share of (0.05p) per share (31 March 2011: loss per share (0.38p) and 30 September 2010 loss per share (0.39p)) is calculated using a loss from continuing operations of £1,293,000 (31 March 2011: loss £5,907,000 and 30 September 2010: loss £1,769,000) and a weighted average number of shares of 2,689,033,084 (31 March 2011:1,551,304,865 and 30 September 2010: 448,098,493).

There was no dilutive effect of share options at 30 September 2011 nor at 31 March 2011 and 30 September 2010.

In addition, adjusted EBITDA* per share has been shown on the grounds that it is a common metric used by the market in monitoring similar businesses. This measure is derived as follows:

Basic and adjusted EBITDA* per share 0.07p 0.03p 0.07p

*earnings from continuing operations before interest, tax, depreciation, amortisation, integration and strategy costs and share based payments.

5 Goodwill

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Goodwill was allocated for impairment testing purposes to cash generating units (CGUs) Converged Solutions; Fujin and Managed Solutions.

The recoverable amount of the continuing CGUs was based on a value in use calculation using forecast cash flow projections extrapolated for a further 4 years by growth rates applicable to each unit. An appropriate terminal value based on a perpetuity calculation using 2% real growth was then added. Discount rates were then applied to these projections ranging from 12% to 15% reflecting management's expected risk profile for each CGU.

In addition to revenue growth, the key assumptions used in the impairment testing were as follows:

Gross margin percentage;

Discount rate; and

Rates of growth in cash generating units beyond the budget period, and in determining the terminal value.

Gross margins have been based on flat or declining margins starting at current levels. Where declining margins have been assumed at 0.5% per year in certain CGU's, this allows for cost increases from network providers, suppliers and competitive market influences. This has been assumed in respect of part of Redstone Converged Solutions. The assumption of margins remaining flat assumes a mix of cost savings in service delivery offset by competitive market influences. This has been applied in respect of Fujin, Redstone Managed Solutions and part of Redstone Converged Solutions.

A discount rate of 15% was applied to the Converged Solutions and Fujin CGU because they are dependent on strong relationships with certain key suppliers and the projects it delivers are complex in nature. A discount rate of 12% was applied to the Managed Solutions which reflects management's estimate of ROCE required. The Managed Solutions CGU have an element of recurring revenue through maintenance contracts and this reduces the risk inherent in the businesses.

After the initial period covered by the latest budget, revenues are projected to grow at between 3% and 5% for the following 4 years. Cost growth after the budget period was projected at between 1% and 3%. Cost growth assumptions were linked to the revenue growth assumptions with an allowance for the decline in gross margins as set out above. Capital expenditure growth after the budget forecast period is projected at 2% across all divisions where there is significant capital spend.

6 Net Cash flows from continuing operating activities

7 Discontinued operations

Subsequent to the 30 September 2011 the security business sold in the year ended 31 March 2011 was resold to a third party. As a result outstanding loan notes from Redstone Managed Security Limited of £0.4 million that arose on the disposal of this business have been provided against and this has been reflected as a loss on discontinued operations.

8 Funding

Share Placing

In August 2011 the group issued 212,000,000 new Ordinary shares at a price of 1.25p per share. This raised approximately £2.4 million, net of fees of £0.2 million.

9 Subsequent events

Subsequent to the 30 September the security business sold during the year ended 31 March 2011 was resold to a third party. As a result of this subsequent sale of Redstone Managed Security Limited, the Group has provided against the receipt of outstanding loan notes of £0.4 million that arose on the disposal of the security business. This has been reflected as a cost under discontinued operations.

10 Contingent liabilities

The Group's subsidiaries and the Company are currently, and may be from time to time, involved in a number of legal proceedings. Whilst the outcome of current outstanding actions and claims remains uncertain, it is expected that they will be resolved without a material impact on the Group's financial position.

The banking facilities in place are secured through fixed and floating charges over all property and assets of the Redstone plc group.

Statement of Directors' Responsibilities

The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union.

The Directors of Redstone plc are listed in the Redstone plc Annual Report and Accounts for 31 March 2011.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. A copy of the interim results can be found on the Company's website www.redstone.com.

By order of the Board

Advisers

Financial Adviser and Broker

FinnCap, 60 New Broad Street London, EC2M 1JJ

Auditors

PricewaterhouseCoopers LLP, 1 Harefield Road, Uxbridge, UB8 1EX

Solicitors

Beechcroft LLP, 100 Fetter Lane, London, EC4A 1BN

Registrars

Capita IRG Plc, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU

Principal Bankers

Barclays Bank plc, 54 Lombard Street, London, EC3V 9EX

Company Number

3336134

Further details can be found on the Redstone website at the following address: www.redstone.com