Xps Pensions Regulatory News (XPS)

Embargoed: 0700hrs 26 July 2011

EXPANSYS plc

("EXPANSYS" or the "Group")

Preliminary Results for the year ended 30 April 2011

EXPANSYS (AIM: XPS), a leading global online retailer of consumer wireless technology and provider of mobile network and eCommerce services and solutions, announces its preliminary results for the year ended 30 April 2011.

Group Financial Highlights

·; Turnover increased over 60% to £81.8 million (2010: £50.7 million)

o up over 30% on a like for like basis

·; Results significantly enhanced by acquisitions of Data Select Network Solutions Limited (DSNS) and PJ Media Limited (PJ Media) in July 2010

·; Underlying pre-tax profit of £3.4 million (2010: loss £0.2 million) - adjusted for exceptional and other non-cash items

·; Reported loss before tax significantly reduced to £0.7 million (2010: loss £2.7 million)

·; Cash at the year end of £5.1 million (2010: £0.9 million).

Anthony Catterson, CEO of EXPANSYS, commented:

"After a transitional 12 months and challenging trading conditions in our core retail business, EXPANSYS emerges with improved performance and a strong strategic platform for growth and continued success. We have clearly identified our opportunities for growth and remain focussed upon efficiencies in all areas.

In the last year, we have successfully integrated the acquisitions of DSNS and PJ Media, both of which bring distinct and strategy enhancing business models. DSNS has performed well in a more competitive market, and took its first steps towards expanding the model internationally by signing an agreement in the fast growing US mobile market with T-Mobile USA. We believe this represents significant growth potential in the medium term. PJ Media has grown its existing customer base and supported the significant improvements made to the EXPANSYS.com core websites

Despite a challenging consumer environment in Europe and the UK, we have grown our retail sales by over 30% like for like, and we are experiencing higher levels of growth in our Americas and Asian regions, where we have invested to support short to medium term performance.

We have also strengthened the Board and divisional teams, and centralised our UK operations into Marlow for efficiency and an improved management environment. These operational improvements will support an improved performance moving forward."

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About EXPANSYS

EXPANSYS (AIM: XPS) is a global online consumer electronics retailer (www.EXPANSYS.com), operating directly in 50 countries with a vast range of products, and a focused approach to service and value for its customers. In 2010 the Group acquired DSNS, the UK market leading B2B SIM card distributor selling products on behalf of all the UK's major network operators and MVNOs. The Group also acquired PJ Media, an eCommerce and web services business with expertise in the multi-channel telecommunications sector, and a number of large international blue chip clients.

Chairman's Statement

Introduction

This is my first statement as Chairman having joined the board in July 2010 at the time the Company made the substantial acquisitions of Data Select Network Solutions Limited (DSNS) and PJ Media Ltd (PJ Media) and its associated fundraising. While the acquisitions have been successfully integrated and EXPANSYS's core online business much improved operationally under Anthony Catterson's leadership, I was disappointed by the Group's overall performance relative to early expectations. This performance was swiftly reflected in a weak share price. I believe that part of this downward share price pressure was due to some of the shareholders, who joined at the time the Company raised new capital last July, deciding that the Company would take much longer than they had hoped to achieve its goals and did not wish to remain shareholders over this longer time frame. However, EXPANSYS has achieved its highest underlying pre-tax profit to date of £3.4 million (adjusted for exceptional and other non-cash items) and the board is firmly committed to driving shareholder value through improved underlying business performance and international growth opportunities, improving communication with and identifying new shareholders and exploring further potential acquisitions.

Results

Total turnover for the Group including the acquisitions was £81.8 million (2010: £50.7 million). This represents growth in turnover in the year of over 60% (+30% on a like for like basis). The pre-tax profit for the year (adjusted for exceptional and other non-cash items) was £3.4 million compared to a loss in the previous year of £0.2 million.

The reported loss before tax was £0.7 million compared to a loss of £2.7 million in 2010.

The Group's cash balance at year end was £5.1 million (2010: £0.9 million).

Acquisitions

In July 2010, the Group raised £30 million in a share placing. £13.4 million of this cash was used in the acquisitions of DSNS and PJ Media for a total consideration of £38 million. The fund-raising has put the Group on a sound financial footing enabling it to implement its strategy, while the acquisitions have been transformational for Expansys. DSNS, the larger of the two businesses acquired, is the market leader in the UK in the distribution of Pay as You Go SIM Cards and is an extremely efficient company, whilst PJ Media is a highly profitable eCommerce specialist.

People

During the year the Group made the decision to relocate its UK retail business from Manchester to Marlow, Buckinghamshire where it is now housed with the other UK group employees. As a result of this move, the Group has reluctantly lost a number of employees who have been with Expansys for a considerable time and in some cases almost since the Company's inception. I would like to thank all of those people for their contribution over the years.

The Board has been significantly strengthened since the acquisitions. I was appointed as Chairman in July 2010 and was joined, at that time, by Non-Executive Deputy Chairman Peter Jones CBE; Brian Collie was appointed as a Non-Executive Director in November 2010; in May 2011 Chris Ogle was appointed as Chief Financial Officer; and Tim Eltze, previously Chief Operating Officer, was appointed as President, US Operations and has relocated to the US to spearhead our growing business there.

Prospects

Despite progress in many areas of the business, the trading environment in our areas of online retail has been extremely challenging, in the UK and Europe in particular, as demonstrated by our performance along with those of our peers.

Although the Board expects the tough market conditions to continue for some time, we believe that we have a great opportunity to exploit the growing online retail market in the medium term and can establish ourselves as a differentiated choice in our chosen markets. We have demonstrated our ability to grow revenues in these difficult conditions and there is good scope for growth in the US and Asia.

Our SIM Card distribution business, DSNS, enables us to build some strategic partnerships whilst being solidly profitable and cash generative supporting the investment in our online business.

During the coming year, we will continue to concentrate on exploiting the potential of our online business in chosen geographies, seek new strategic relationships with industry partners for DSNS and new marketing opportunities for PJ Media, while continually reviewing the potential for corporate activity.

Chief Executive's Review

Expansys has been through a year of significant change, and despite this, we have accelerated the development of our sales and profitability in the midst of tough trading conditions in our core markets.

We have been pleased with the impact of our acquisitions (DSNS and PJ Media), which have both contributed strongly towards our much improved financial performance and have begun to deliver the strategic benefits we anticipated.

There is no doubt that the Group's retail business (EXPANSYS.com) has had a challenging year, despite the significant improvements we have made to the customer experience through improved operations and proposition. We believe this is largely due to wider economic and consumer trends and their subsequent impact upon our competitive landscape.

Business review - EXPANSYS.com

There has been a marked difference in performance across our four main trading regions (Americas, UK, Europe and Asia) and, despite a disappointing Christmas trading period, I am pleased that our like for like sales across the retail company as a whole grew by over 30% compared to the prior year, driven primarily by demand in Europe and Asia. A number of initiatives contributed to this growth including:

·; Complete Expansys brand redesign in late 2010;

·; Complete overhaul of core websites in 2011;

·; Investment in Customer Relationship Management (CRM) tools and processes over the last six months;

·; Improvements in site functionality and merchandising to improve conversion rate; and

·; Improvement in quality of marketing activities to increase awareness, traffic, conversion and average spend.

UK - this has been, without a doubt, our most challenging retail market over the last year. Despite the success of key product launches such as the HTC Desire, iPhone 4 and iPad/iPad 2, consumer confidence and activity has reduced significantly in the last six months. This has meant it has been more difficult (and expensive) to retain existing customers and attract new ones. In response we have reduced the cost base and consolidated some of the support processes into our European business unit. Nonetheless we strongly believe we can grow the UK business through improved proposition but will focus on faster growth opportunities elsewhere in the short term.

Europe - it has been another successful year for our European team, where we grew revenues by over 30%, and profitability by over 10%. The team began to benefit as they adopted some of the improvements made on the UK website and developed more momentum in their marketplace, partner site and B2B activities. We retain a cautious view on European consumer activity over the next 12 months, but will continue to invest in and grow our European business, which will benefit from improved levels of support and focus from the Group.

Americas - our North American business had a tough first six months, but improved significantly in 2011 as proposition changes and marketing activities drove stronger traffic and sales (+18% for the year). New leadership since May 2011 and an aggressive growth strategy for FY12 give us confidence that we will develop our US model strongly going forward.

Asia - we made significant improvements to our Asian operation throughout the year and this led to strongly improved results, with sales up 154% and the establishment of a profitable business. We made the most progress in the Japanese market where strong partnerships and a focus upon mobile market deregulation have been received well by consumers. We have repositioned our proposition in Greater China and expect to see the benefits of those changes throughout FY12

Business to Business sales (B2B)

The Company has historically traded with SME's (Small to Medium Enterprises) and larger corporates who have been serviced by telesales teams at the regional locations. This sales channel is developing at different rates across the regions, based upon legacy relationships and organisational structure. In the US and Europe, B2B has historically been a larger part of our revenue/margin mix, whilst in the UK and Asia business to consumer sales (b2c) represent the greater share of revenues/margin. While B2B sales are not our core strategic focus, they still represent a valid growth opportunity for each of the regions.

Products and Services

We have seen good sales growth across our major product categories, especially in the tablet computing category where we took advantage of the incremental opportunities presented by product innovation. Margin has remained challenging in the more mature categories, and we are seeking ways to improve this through introduction of additional 'value-add' propositions and services. We have made advances in the reselling of our services and expertise to eCommerce partners, an example being the European launch of the HTC Flyer tablet, where Expansys 'powered' the entire experience (from website to payment and fulfilment) on behalf of HTC, which is a key strategic partner.

People

We have significantly improved the strength of the management team over the last 12 months by recruiting new leaders for our American and Asian regions, as well as the recruitment of key individuals in the critical product and marketing teams. Chris Ogle, our new CFO was also a welcome addition to the executive team in May 2011.

EXPANSYS.com outlook

As widely reported elsewhere, we share the view that consumer spend in the UK and Europe will remain suppressed in the short to medium term. We have taken appropriate actions to minimise the impact of this negative environment upon our business model and are confident of continuing to deliver profitable growth. We are optimistic about the opportunities presented in North America and Asia and are investing into those regions for better returns and faster growth.

Business Review - DSNS

DSNS has only been a part of the Group for nine months of the year under review and has performed well despite increased competition and a more challenging home market. We were delighted to sign our first network distribution agreement in the USA (with T-Mobile USA), which represents our next significant growth opportunity for this successful business model. We believe the Pay as You Go and SIM-only markets in the USA are poised for substantial growth. We will continue to invest in this opportunity as we believe it will reap significant medium-long term rewards.

We continue to evolve the DSNS model in the UK, establishing a stronger market leadership position and developing innovative ways in which we can grow partnerships with our Network/MVNO suppliers and our retail and wholesale customers. We will look to establish a greater share of the network revenues we help create and to differentiate ourselves from our competition with our superior systems/data and intelligence and our innovative routes to market.

DSNS continues to operate efficiently, generate cash and produce strong returns.

Business Review - PJ Media

During its nine months of contribution to the year under review, PJ Media has supported EXPANSYS.com tremendously in terms of its eCommerce successes and its ability to win and develop Partner business. PJ Media and EXPANSYS.com are actively looking to grow the partner business together as a core strategic objective.

In terms of its core model, PJ Media has successfully grown its relationships with key customers by providing extended support on existing projects and innovating successfully in new areas, such as the world's first 'topup by facebook' capability for Vodafone, and Qatar's first 'online auction' site at www.souqit.com .

Group outlook

After a transitional year and challenging trading conditions the Group emerges with improved year on year performance and a strong strategic platform for growth. We have clearly identified our opportunities and remain focussed upon efficiencies in all areas.

I would like to take this opportunity to thank, once again, our dedicated and loyal teams across the globe, all of whom have made tremendous progress in a number of different areas, despite significant change and challenge. We recognise their contribution and appreciate their efforts in the development of the Group.

With an ambitious Board and a strong and motivated executive team we are cautiously optimistic about the prospects for FY2012 and the longer-term growth opportunities.

Financial Review

Results Overview

The results for the year ended 30 April 2011 have been significantly enhanced by the transformational acquisitions of DSNS and PJ Media. However the Group's core retail business made good progress with substantial growth in turnover. The Group has also made a healthy underlying profit for the year.

Turnover for the year ended 30 April 2011 was £81.8 million (2010: £50.7 million.) This represents an increase of 61.1% including the impact of the acquisitions. Excluding the acquisitions, turnover was £66.8 million, so on a like-for-like basis the increase was 31.5%.

The underlying profit before tax for the Group was £3.4 million (2010: loss £0.2 million). A reconciliation of the reported loss for the year of £0.7 million (2010: loss £2.7 million) is set out below. The reconciling items are, in the opinion of the Board, either non-recurring items or are non-cash related and are therefore not indicative of the Group's underlying trading.

The restructuring costs comprise £0.4m of relocation and redundancy costs relating to the move from Manchester to Marlow and a £0.7m provision of costs for the lease of a warehouse in Manchester that the Company has not occupied since 2008. In the past, the prospects of securing a subtenant were encouraging but a full provision has now been taken for the cost of this lease until the first available break and thus assumes that a subtenant will not be found.

The amortisation of acquired intangible assets is on the value of the SIM cards that had been distributed to the market prior to the acquisition of DSNS and on which future revenues would be earned.

Revenue

Overall revenue for the website division (EXPANSYS.com) increased by over 31% compared to the previous year. Revenue from Europe (including the UK) accounted for 74.8% of total revenue (2010: 78.6%) and increased by 24%. Revenue from the Asian operation which is under new leadership increased by over 150% to £7.5 million (2001: £3.0 million) and revenue from the US increased by 17% to £9.2 million (£7.9 million).

Revenue from DSNS and PJ Media was £13.0 million and £2.0 million respectively since the date of their acquisition.

Operating Profit

The retail division made an operating loss of £1.7 million (2010: loss of £1.2 million). However, this includes exceptional items of £1.2 million (2010: £1.2 million) so that the underlying loss for the retail division was £0.5 million (2010: break-even).

The underlying profit for the European retail business was break-even (2010: £0.7 million). The US and Asian divisions made an underlying operating loss of £0.4 million and £0.1 million respectively (2010: £0.3 million loss and £0.4 million loss).

The acquisitions of DSNS and PJ Media contributed significantly to the Group's profits and in the period since the acquisition they made operating profits of £4.0 million and £0.4 million respectively.

Profits were impacted in the year due to investments made in people, re-branding and marketing.

Taxation

The tax charge for the year was £319,000 (2010: £40,000). This is comprised of a current charge of £703,000 (2010: £286,000) and a deferred tax credit of £384,000 (2010: credit of £246,000). The Group pays tax on the profits generated in Europe and tax legislation prevents these profits from being offset these against other Group losses. The Group has tax losses that are available for use against future profits of £4.0 million in the US, £3.9 million in the UK and £2.5 million in Asia.

A deferred tax asset has been recognised in respect of the tax losses that have arisen in the UK but not in Hong Kong and the US.

Results

The full year result is a reported a loss for the year of £1.1 million (2010: loss of £2.7 million). The basic (and diluted) earnings per share for the year were a loss of 0.1p (2010: loss of 1.7p). The adjusted earnings per share were 0.3 p (2010: loss of 0.1p).

Balance Sheet

The Intangible assets on the balance sheet have increased from £4.6 million at the end of April 2010 to £51.1 million. This is comprised of: goodwill £50.1 million (2010: £4.0 million); website development costs £0.3 million (2010: £0.5 million); trademarks of £nil (2010: £0.1 million) and acquired intangible assets of £0.7 million (2010: £nil). Goodwill of £46.3 million arose through the acquisitions of DSNS and PJ Media. The £0.7 million of acquired intangibles relates to the SIM cards that DSNS had distributed prior to the acquisition, which had not yet been activated and therefore on which future profits would be earned. The full value of this intangible asset was £2.3 million at the acquisition and £1.6 million has been amortised as at 30 April 2011.

The goodwill has been tested for impairment at the year end and the Board have concluded that the present value of future cash flows exceeds the carrying value of the goodwill and other attributable assets and no impairment has been made.

Stock at the year end was £4.4 million (2010: £1.9 million). The retail stock at the year end was £4.2 million which represents 24 days' sales (2009: 14 days). The Company fully provides for stock when it ages to 180 days and an additional specific provision has been made for other slow-moving items.

Trade receivables at the year end were £3.0 million (2010: £1.5 million).

Cash Flow

Net cash generated from operating activities was £0.5 million (2010: cash used £0.6 million) representing a turnaround of over £1 million compared to the previous year. Within this there is a detrimental impact of increased stock of £2.3 million and it includes tax paid in the year of £0.9 million (2010 £nil). A successful placing in the year raised £30.0 million; £1.8 million was paid out in fees associated with the share issue and £13.4 million of cash was used in the acquisitions of DSNS and PJ Media; £11.0 million was used to repay borrowings acquired with DSNS. Capital expenditure in the year was £0.1 million (2010: £0.1 million) and £0.4 million (2010: £0.4 million) was used in the development of the company website.

The net increase in cash in the year was £4.1 million (2010: £0.6 million) to £5.1 million (2010: £0.9 million)

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 April 2011

GROUP STATEMENT OF FINANCIAL POSITION

At 30 April 2011

GROUP STATEMENT OF CHANGES IN EQUITY

At 30 April 2011

*Exchange differences relate to the retranslation of net assets of subsidiary undertakings.GROUP CASH FLOW STATEMENT

For the year ended 30 April 2011

NOTES

1. Basis of preparation

The financial information within this report has been prepared in accordance with International Financial Reporting Standards (IFRSs) and International Finance Reporting Interpretation Committee (IFRIC) interpretations as adopted by the European Union as they apply to the financial statements of the Group for the year ended 30 April 2011 and applied in accordance with Companies Act 2006.

The Group financial statements are presented in Sterling (being the Group's functional and measurement currency) and all values are rounded to the nearest thousand pounds (£000) except where indicated otherwise.

The principal accounting policies adopted by the Group are set out in note 2.

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 30 April 2011 or 2010 but is derived from those financial statements. The comparative figures are derived from the financial statements for the year ended 30 April 2010. The auditors have reported on the Group's statutory financial statements and the report was unqualified and did not contain a statement under section 498 (2) or 498 (3) Companies Act 2006. The statutory financial statements for the year ended 30 April 2011 have not yet been delivered to the Registrar of Companies and will be delivered following the Company's Annual General Meeting.

The financial information contained in this preliminary statement does not constitute statutory accounts as defined by Section 240 of the Companies Act.

2. Accounting policies

The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities as at the balance sheet date and the amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates. Estimates and assumptions used in the preparation of the financial statements are continually reviewed and revised as necessary. Whilst every effort is made to ensure that such estimates and assumptions are reasonable, by their nature they are uncertain and, as such, changes in estimates and assumptions may have a material impact in the financial statements.

The key sources of estimation uncertainty that have significant risk of causing material adjustment to carrying amounts of assets and liabilities within the next financial year are the measurement of:

·; indefinite life intangible assets

·; inventory provisions; and

·; trade receivable provisions; and

·; taxation.

The measurement of intangible assets on a business combination involves estimation of future cash flows and the selection of a suitable discount rate. The Group determines whether indefinite life intangible assets are impaired on an annual basis and this requires an estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate. Any estimates of future economic benefits made in relation to these assets may differ from the benefits that ultimately arise and materially affect the recoverable value of the asset.

Calculation of inventory provisions requires judgements to be made which include forecast consumer demand and inventory loss trends.

Provisions for irrecoverable receivables are based on extensive historical evidence and the best available information in relation to specific issues, but are nevertheless inherently uncertain.

The complex nature of tax legislation across the tax jurisdictions in which the Group operates necessitates the use of estimates and assumptions, where the outcome may differ from that assumed. The extent to which tax losses can be utilised depends on the extent to which taxable profits are generated in the relevant jurisdictions in the foreseeable future, and on the tax legislation then in force and, as such, the value of associated deferred tax assets is uncertain.

3. Segment information

The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors, since they are responsible for making strategic decisions.

Operating segments are reported in a manner consistent with the internal reporting provided to the Board which is split in accordance with statutory trading entities in the group, in addition to the parent company.

·; EXPANSYS plc, parent company, incorporated in the United Kingdom

·; EXPANSYS UK Limited, incorporated in the United Kingdom

·; EXPANSYS Nomatica SAS, incorporated in France

·; EXPANSYS Inc (formerly Mobile Planet Inc), incorporated in United States of America

·; EXPANSYS Hong Kong Limited, incorporated in Hong Kong, and its subsidiaries RCK Communications Limited, incorporated in Hong Kong , and EXPANSYS Shenzhen Trading Company, incorporated in China

·; Data Select Network Solutions Limited, incorporated in the United Kingdom

·; PJ Media Limited, incorporated in the United Kingdom

Transfer prices between business segments are set on an arm's length basis in a manner similar to transactions between third parties. Segment revenue, segment expense and segment result includes transfers between business segments. Those transfers are eliminated on consolidation.

No one customer accounts for more than 10% of Group revenue.

The following tables present revenue and (loss) / profit and certain asset and liability information regarding the Group's business segments for the years ended 30 April 2011 and 2010.

4. Exceptional items

All of the exceptional items in the table above, are deemed allowable for corporation tax purposes.

5. Taxation

6. Earnings per ordinary share

Basic earnings per share amounts are calculated by dividing loss for the year attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share for the year amounts are calculated by dividing the loss attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

The amounts for earnings per share from continuing operations after exceptional items are as follows:

Underlying earnings per share

The Group presents as exceptional items and other non-cash items on the face of the Statement of Comprehensive Income, those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to facilitate better assessment of trends in financial performance.

To this end, basic and diluted earnings per share is also presented on this basis and using the weighted average number of ordinary shares for both basic and diluted amounts as per the table above.

the parent is derived as follows:

The amounts for underlying earnings per share before exceptional and other non-cash items are as follows:

7. Impairment review of goodwill

As required by IAS 36 Impairment of Assets, goodwill is subject to annual impairment reviews. These reviews are carried out using the following criteria.

Goodwill acquired through business combinations has been allocated for impairment testing purposes to five cash generating units, which are also reportable segments, as follows:

§ EXPANSYS UK Limited;

§ EXPANSYS Inc;

§ EXPANSYS Nomatica SAS;

§ Data Select Network Solutions Limited; and

§ PJ Media Limited

These represent the lowest level within the Group at which goodwill is monitored for internal management purposes.

The recoverable amount of each CGU is determined based on calculating its value in use, using cash flow projections based on financial budgets approved by the board for the financial period to 30 April 2011. Growth rates that are consider appropriate for each regions have been assumed for the following two years and in the years beyond this a growth rate of 2% has been assumed.

The discount rate applied to cash flow projections is 8.87% (2010: 9.1%) and is deemed as the Group's weighted average cost of capital.

Cash flows in outlaying years are extrapolated using a 2% growth rate (2010: 2%).

The tax rate appropriate for the different regions has been used as follows: UK - 26%; France - 33%; US - 34%; Asia - 17%. In the previous year 28% was used for all regions.

Carrying amount of goodwill allocated to CGUs

Key assumptions used in value in use calculations

The calculation of value in use is most sensitive to the following assumptions:

§ Gross margin in the retail business; the average rate is 18%.

§ Distribution costs; in the budget a rate of between 4.5% and 5% has been used.

§ Discount rates; as above 8.87% has been assumed in these calculations.

§ Growth rate used to extrapolate cash flows beyond the first three years; as noted above a rate of 2% has been assumed.

Gross margins and distribution and administration expenses are based on the rates used in the budget for FY 2012. These are increased to reflect anticipated efficiency improvements due to shortening of the supply chain and in line with expected growth netted against anticipated efficiency improvements respectively.

Discount rates reflect management's estimate of return on capital employed required in each business. This is the benchmark used by management to assess operating performance and to evaluate future capital investment proposals.

Sensitivity to changes in assumptions

A sensitivity analysis has been performed on the base case assumptions used for assessing the goodwill. In particular a higher discount rate of 10.87% was used to sensitise the results.

With regards to the assessment of value in use of the cash-generating units, the Directors believe that key assumptions are reasonable and do not expect these to be incorrect to the extent that it would cause the carrying value of the unit to exceed its recoverable amount.

8. Issued share capital

On 26 July 2010, 978,078,993 new ordinary shares were issued pursuant to a placing of new ordinary shares at 5.6 pence per share. Of the shares issued:

§ 535,714,286 of placing shares with £1,339,286 credited to equity share capital and £28,660,714 credited to equity share premium.

§ 442,364,707 were issued as part consideration for the acquisition of DSNS and PJ Media. £1,105,912 was credited to equity shares and £23,666,512 credited to merger reserve. The group acquired more than 90% of the equity of DSNS and PJ Media and therefore qualify for merger relief under section 612 of the Companies Act.

§ B Collie (non-executive Director) has been awarded 199,915 shares (effective 1 November 2010), as satisfaction of 50% of his salary pursuant to the terms of his service contract. £500 has been credited to equity share capital and £10,000 credited to equity share premium.

9. Share based payments

Share options

.

There were no cash settled share options and no share options were exercised during either year.

The share options issued will all expire on the tenth anniversary of the grant date.

The fair value of equity settled share options granted is estimated as at the date of the grant using the Black-Scholes-Merton model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model:

The expected volatility reflects the assumption that the AIM index is indicative of future trends, which may also not necessarily be the actual outcome.

The expense to the profit and loss account during the year ended 30 April 2011 was £342,000 (2010: £20,000).

The weighted average exercise price is 5.88 pence (2010:10.00 pence) for the 71,819,196 shares (2010: 4,500,000) under option at 30 April 2011.

The weighted average exercise price of shares granted during the year ended 30 April 2011 was 5.60 pence for the 67,319,196 options granted in the year. The weighted average exercise price of shares granted during the year ended 30 April 2010 was 10.00 pence for the 4,500,000 options granted in that year.

Share-based payment of non-executive director

Each month (effective 1 November 2010), B Collie (non-executive Director) is awarded £1,667.67 in shares as satisfaction of 50% of his salary pursuant to the terms of his service contract. The total number of shares awarded to B Collie in the year was 199,515 shares.

10. Related party transactions

Acquisition of Data Select Network Solutions Limited and PJ Media Limited

The Company acquired 100% of the share capital of Data Select Network Solutions Limited (DSNS) and the PJ Media Group of companies (PJ Media) for total consideration of £30 million in cash and shares. This constituted a related party transaction for the purposes of AIM Rule 13, by virtue of Peter Jones being a Director and a shareholder of both DSNS and PJ Media and Stephen Vincent being a Director of both DSNS and PJ Media, a shareholder of PJ Media and having and interest in DSNS. At the time of the acquisition Peter Jones held 133,670,979 Ordinary Shares, representing 75.02 per cent of the total share capital and Stephen Vincent had a beneficial interest of 6,250,000 Ordinary Shares.

Data Select Limited

The Group has a trading relationship with Data Select Limited (Data Select) which is ultimately controlled by Peter Jones. Peter Jones and Stephen Vincent are directors of Data Select. EXPANSYS UK limited has a trade credit facility with Data Select of £2.5 million. The facility is secured by a fixed and floating and is guaranteed by EXPANSYS plc. In the year ended 30 April 2011 purchases by EXPANSYS UK Limited from Data Select amounted to £4.6 million and sales to Data Select amounted to £1.3 million. At 30 April 2011 the EXPANSYS UK Limited had a debtor balance with Data Select of £145,000 and a creditor balance of £1,056,000.

EXPANSYS Nomatica SAS made sales to Data Select in the year totalling £80,000 and purchases from the company of £93,000. At 30 April 2011 there was a debtor balance with the company of £nil and a creditor balance of £61.

DSNS has a trading relationship with Data Select. Since the acquisition of DSNS by EXPANSYS plc sales to Data Select by DSNS have totalled £3.9 million and purchases by DSNS have totalled £1.5 million. DSNS pays rent to Data Select under a license and in the period since the acquisition this has amounted to £90,000. At 30 April DSNS had a debtor balance with Data Select of £3,000 and a creditor balance of £97,000.

PJ Media has undertaken various work for Data Select and during the year sales from PJ Media to Data Select have totalled £821,000. PJ Media pays rent to Data Select under a license and in the period since the acquisition this has amounted to £60,000. Other purchases by PJ Media from Data Select have totalled £167,000. At 30 April 2011 PJ Media had a creditor balance with Data Select of £19,000 and a £nil debtor balance.

Other Related party transactions for PJ Media Limited

PJ Media Limited undertakes various web design and e-commerce related activities for companies in which Peter Jones and Stephen Vincent have interests as follows:

Wireless Logic Limited

Wireless Logic Limited is a company in which Peter Jones and Stephen Vincent are directors. Peter Jones and Stephen Vincent are directors of the holding company and Peter Jones is a director of the ultimate parent company. Peter Jones has a 50% shareholding in the company's ultimate parent company and Stephen Vincent has an interest in share in its immediate parent company. During the period since the acquisition of PJ Media Limited sales to Wireless Logic Limited have totalled £130,000. The debtor balance with the company at 30 April 2011 was £nil.

Wines For Business

Wines For Business Limited is a company in which Peter Jones and Stephen Vincent are directors and have a non-controlling interest in its shares. During the period since the acquisition sales to Wines for Business Limited from PJ Media Limited totalled £66,000. At 30 April 2011 there was a debtor balance with the company of £nil.

National Enterprise Academy

The National Enterprise Academy (NEA) is a charity of which Peter Jones, Stephen Vincent and Bob Wigley, Chairman of EXPANSYS PLC are trustees. In the period since the acquisition of PJ Media sales to the NEA by PM media have totalled £38,000. At 30 April 2011 £5,000 was owed by the NEA to PJ Media.

Peter Jones TV Limited

Peter Jones TV Limited is a company of which Peter Jones and Stephen Vincent are directors and which is controlled by Peter Jones through its parent company. Stephen Vincent has an interest in shares in its parent company. In the period since the acquisition of PJ Media Limited sales to Peter Jones TV Limited have totalled £7,000. At 30 April 2011 the debtor balance was £nil.

PJ Media also undertakes web design and e-commerce related work for EXPANSYS Limited and this was a contributory factor for the acquisition. Work undertaken by PJ Media for EXPANSYS before the acquisition constitutes a related party transaction and in the period from 1 May 2010 up to the date of the acquisition sales from PJ Media to EXPANSYS UK limited totalled £37,000.

SCI CAP70

EXPANSYS Nomatica SAS leases its premises in Montpelier from SCI CAP70, a company owned by Frederic Pont who was a director of EXPANSYS plc until July 2010. The lease commenced on 1 January 2007 and ends on 31 December 2016 with break clauses at 31 December 2009 and 31 December 2012. The rent is 232,000 Euros pa, payable quarterly in advance.

Other Related Party Transactions

Wireless Logic Limited

EXPANSYS UK Limited made sales to Wireless Logic limited, a company in which Peter Jones and Stephen Vincent have an interest as noted above, in the year totalling £37,000. At 30 April 2011 the debtor balance with the company was £745.