ANNUAL REPORT AND
FINANCIAL STATEMENTS 
2005
UNITED KINGDOM
AUSTRALIA
CANADA
GERMANY
JAPAN
SOUTH AFRICA
UNITED STATES
R&A AW Cover_2005  17/1/06  7:22 pm  Page 2 R&A AW Front16_2005 5  17/1/06  7:04 pm  Page 2 At The Innovation Group, we are aiming to
raise the insurance bar, globally, through the
development and delivery of leading-edge
policy and claims insights and solutions.
The innovations on offer are relevant to our
clients’ needs today – flexibility, cost-efficiency,
speed-to-market and improved customer
service – and are subject to a persistent quest
for advancement to anticipate the future and
leverage evolving market opportunities. 
As a result, our work yields higher returns on
investment for all involved – our clients, their
customers, our shareholders and employees
– both in the immediate and in the long-term. 
We are pleased by this opportunity 
to continue our relationship with 
The Innovation Group. We look forward
to the positive impact their ongoing
technical support will have on our 
ability to provide more effective, 
efficient service to our customers.
Charles H. Podowski, President and CEO 
The Auto Club Group (ACIA’s affiliate company),
USA
“
”
RELENTLESS
PURSUIT OF
PROGRESS
R&A AW Front16_2005 5  17/1/06  7:04 pm  Page 1 Highlights 3
Chairman’s Statement 5
Chief Executive’s Review 8
Finance Director’s Review 11
Financial Highlights 13
Directors’ Biographies 15
Executives’ Biographies 16
Directors’ Report 17
Corporate Governance 18
Statement of Directors’ Responsibilities 22
Directors’ Remuneration Report 23
Independent Auditors’ Report to the Members 
of The Innovation Group plc 27
Consolidated Profit and Loss Account 28
Consolidated Statement of Total Recognised 
Gains and Losses 29
Reconciliation of Movement in Consolidated
Shareholders’ Funds 29
Consolidated Balance Sheet 30
Company Balance Sheet 31
Consolidated Cash Flow Statement 32
Notes to the Consolidated Cash Flow Statement 33
Notes to the Accounts 34
Five Year Review 57
Implementation of International Financial 
Reporting Standards (unaudited) 58
Officers and Professional Advisors 64
CONTENTS
R&A AW Front16_2005 5  17/1/06  7:04 pm  Page 2  4
DRIVING GROWTH
Through our cooperation with The Innovation
Group we have significantly improved our
customer relationships to the point where
98% are “highly satisfied“ and would 
recommend us to others.This partnership
has not only led to increased customer 
retention but has also significantly reduced
our claim costs by 15-25% depending on 
the claim type.
Markus Troche, Head Of Claims Processes/Supply
Chain Management / Motor Experts
AXA Serive AG, Germany
“
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R&A AW Front16_2005 5  17/1/06  7:04 pm  Page 4 5
CHAIRMAN’S STATEMENT
The Innovation Group provides outsourcing services and software
solutions to improve policy and claims management for the world’s
insurance market. Our vision is to enable efficiencies to improve
revenue generation, customer service and profitability. The Group
is totally focused on this market and delivers these two broad
offerings through a single client-centric organisation.
We are a global player operating in the world’s largest insurance
markets with a strong proportion of our clients being international
in nature. Our 1200 people across the world have extensive insurance
experience and they are ably supported by our partners.
The year in review
During 2005 we made strong underlying progress in our business. 
We enjoyed robust cash generation with an operating cash inflow of
£8.9m. Our strategy to migrate the business model continues to be
successful, with recurring revenue up from £30.9m in 2004 to £40.5m
in 2005. 67% of our total revenue is now recurring, allowing us
improved visibility and reduced reliance on unpredictable licence
sales over time. However, during this financial year, licence revenue
was still disproportionately important to the Group’s overall financial
result and consequently the year was adversely impacted by a
disappointing level of up front licence sales. 
The outsourcing business continued to perform well with over 25
new or extended relationships formed during the year . Outsourcing
has developed well in the geographies of Australia, Germany and
the United Kingdom and we look to find opportunities for them to
emulate South Africa as a major profit and growth contributor. 
We delivered our major Policy software system to CSAA in the USA,
and also won a new client for each of our Policy and Claims software
applications. We continue to invest in our software partnership with
IBM and announced a new five year strategic partnership with them
in March 2005.
During the year we continued our M&A activity with the acquisition
of Websoft in South Africa and the disposal of our small Public Sector
consulting business in the USA to further intensify our focus on the
insurance market. 
Financial results
As we set out in our trading statement at the end of September 2005
approximately £7.5m of licence income which was expected in the
fourth quarter was not concluded. One of the transactions was
particularly significant but it is now more likely that the deal will be
split into smaller components.
Our revenue for the year ended 30 September 2005 was £61.0m
(2004: £58.1m); recurring revenues increased from £30.9m to £40.5m
and now represent 67% of the Group’s total revenue. Software (TSD)
turnover was £26.0m (2004: £32.9m) and outsourcing (SBPO) turnover
was £35.0m (2004: £25.2m). 
Adjusted profit* was £3.0m (2004: £7.5m) and loss before tax was
£11.3m (2004: loss of £7.3m), representing adjusted EPS of 0.33p
(2004: 1.49p) and basic loss per share of 2.94p (2004: loss per share
of 1.98p).
*Adjusted profit is the profit before tax after adding back the amortisation
charge of £14.3m and a loss on disposal of operations of £0.1m as analysed
on page 13.
Organisation and employees
Until now the Group has operated as two divisions, Technology
Solutions Division (TSD) and Specialised Business Process
Outsourcing (SBPO), each with its own Chief Operating Officer (COO).
This was an important strategy for developing a choice of offerings
for our clients. As we move to the next stage of our development, we
have created a single client-facing organisation which will deliver
an integrated outsourcing and software offering in each of the major
territories. Eric Wadsworth, who was COO of SBPO, will focus on
developing the regions globally as COO for the Group. Ed Ossie,
previously COO of TSD, will concentrate his efforts on developing
the IBM relationship to further the global distribution of our software
as well as leading the marketing of the company to increase brand
awareness. 
I would like to pay tribute to the outstanding teamwork and
commitment to clients displayed by our people. I would also like to
extend a warm welcome to our new recruits and to partners’
employees, who are working with us on client engagements. I would
like to thank all employees for their invaluable contribution to the
progress made during the year. The Group continues to attract and
retain some of the best people in the industry and we recognise them
as the foundation of our future success. 
Our strategy to migrate
the business model 
continues to be successful,
with recurring revenue up
from £30.9m in 2004 to
£40.5m in 2005.
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R&A AW Front16_2005 5  18/1/06  11:20 am  Page 5 6
The Board and Corporate Governance
In line with the changes to executive management, we are also
streamlining the Board. Hassan Sadiq, Chief Executive Officer and
Paul Smolinski, Group Finance Director will continue as the executive
directors of the Group. Ed Ossie, Eric Wadsworth and Steve Scott
move from the PLC board to the operating board, and I would like to
take this opportunity on behalf of the shareholders to thank them for
their tireless contribution to the PLC Board, and will look forward to
their ongoing contribution as members of the Group’s executive
management team.
Chris Banks and David Thorpe continue as non-executive directors
and chairmen of the Audit and Remuneration Committees
respectively, and I remain as non-executive Chairman of the Board.
This ratio of executive directors to non-executive directors (2:3) is now
in line with best practice corporate governance for a company of 
The Innovation Group’s size.
The Group has been in full compliance with the provisions of the
Combined Code throughout the year .
EGM and future reporting requirements 
Following the approval of the resolutions at the Group’s EGM on 
29 June 2005, we have finalised the capital reduction and restructured
the Company’s balance sheet. This has restored the Company’s
distributable reserves and thus enables the Group to be in a position
to pay dividends when it is appropriate to do so.
The Prospectus Directive, issued on 1 July 2005, has removed the
requirement for companies such as The Innovation Group, which
listed under chapter 25 of the old Listing Rules, to report to
shareholders on a quarterly basis. We will therefore be reporting to
shareholders at the half year and full year, as is the case with the vast
majority of UK Listed companies. The next set of results released
following these preliminary results for the year ended 30 September
2005 will therefore be for the half year ended 31 March 2006. 
Outlook
The Group is in a much stronger position as we enter 2006. The level
of recurring revenue has increased, reducing our reliance on upfront
licence fees and underpinning planned growth in the coming years. 
We now have an extensive outsourcing client base and the pipelines
remain healthy in each geography. We anticipate organic growth to
continue in 2006 through our simple objective of delivering more
benefits to more clients in more markets.
Software licence sales still remain attractive and we now have a
better business model through which to manage the volatility of
software licence revenue. The software pipeline is healthy, particularly
in North America where we have put most focus, and there are a
number of opportunities which are reaching the latter stages of the
sales cycle. Our five year relationship with IBM gives us the platform
to distribute our software products on a global basis and we anticipate
seeing some results from this investment in the 2006 financial year .
In summary, we aim to continue the momentum gained throughout
2005. Our business plan calls for further organic revenue growth
augmented by selected acquisitions. In addition, we plan for Group
operating margins to improve over the coming year and we look
forward to the future with optimism.
Geoff Squire, OBE
Chairman
CHAIRMAN’S STATEMENT continued
Outsourcing is expected 
to regain interest from
insurers due to the 
proven cost savings and
increasing flexibility of
arrangements. 
Datamonitor, June 2005
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R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 6 7
Our best interests are always the driving force
behind any action that The Innovation Group
takes; seeking out data opportunities, 
proposing new product ideas, and simply
excelling in our sales targets is an added 
benefit to the aforementioned philosophy.
Megan Parker, Marketing Manager
AMH Financial Services, South Africa
“
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EXCEEDING EXPECTATIONS 
R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 7 8
During 2005 we continued to strengthen the visibility and predictability
of our revenue and to generate a robust cash flow. Recurring revenue
is now the driving force behind long term revenue and profit growth,
and our dependence on the lumpy flow of up front licence
transactions will continue to diminish. Our commitment to quality
service is paramount, and our satisfied clients are willing to share
their positive views on our company, people and products. This
continues to increase our momentum in the markets that we serve.
We have conducted a strategic reorganisation, designed to better
structure the business into a single client-facing entity capable of
offering an integrated outsourcing and software capability in each of
our geographies. This move enforces our transformation to a specialist
provider to the insurance industry. 
Strategic update
Market drivers
We operate within a rapidly transforming global insurance market
driven principally by deregulation, new technology and the need to
improve efficiency within client organisations. Each market varies in
the rate of change and is dependent on culture, market dynamics and
deregulation. Industry transformation is inspiring new entrants, such
as banks, supermarkets, car manufacturers and others to add
insurance to their portfolio of services, and this in turn enables us
to widen our target market. 
These market drivers are forcing the remainder of the industry to
change to remain competitive. One of the major inhibitors to
undergoing the necessary change, however, is the software in use,
as most systems were implemented a few decades ago.
However, technology alone is not the answer. There are a host of
other crucial components with which software must be integrated for
a favourable return on investment. For example, when The Innovation
Group clients entrust us with managing a part or all of the process
through our outsourcing service, we are able to deliver not only the
pioneering software but also those other elements, such as retraining
integration and expertise in both technology and insurance, that will
ensure success.
Vision
The Group’s vision is to help the insurance industry to provide a
better service to policyholders by implementing leading edge
practices and technology for the administration of policies and the
handling of claims.
Products
We have assembled a wide portfolio of important assets comprising
high quality software technology for both policy and claims
administration, and a set of business processes for the handling of
many aspects of back office functions for insurers and risk carriers.
We offer these assets either as a software and service implementation
project, or as an outsourced service, and this choice enables our
clients to embark on lower risk, lower cost transformations and the
opportunity to gain a high impact return on investment. Our focus is
now to make these assets available to a wider client audience. 
Roadmap
Our strategy is to develop a single client-facing organisation, which
will deliver an integrated outsourcing and software offering in each
of the major territories. This organisation will enable us to benefit
from our considerable successes and to leverage them for the benefit
of clients and markets across the world.
We are the market leader in insurance outsourcing in South Africa
and we aim to extend these outsourcing services to our global
operations. This involves expanding the range of categories we
provide in other territories beyond our traditional market of motor
to include household claims administration activities, warranty
administration and the administration of public sector claims. We will
then follow our successful business model for launching these
products which is a staged process whereby we establish a reputation
for ourselves in relation to each piece of the value chain in turn and
underpin the outsourcing service with our own software.
We will continue to build on our software successes in the United
States by aiming to add more clients and increasing our visibility in
the markets in which we operate. 
We will continue to invest in our new five year relationship with IBM,
believing that this is the most effective way to reach the largest
insurers and to broaden the distribution of our software. To facilitate
this we are fully dedicating Ed Ossie, one of our most senior executives,
to ensuring the success of this partnership.
CHIEF EXECUTIVE’S REVIEW
The Group’s vision is to 
help the insurance industry
to provide a better service
to policyholders by 
implementing leading edge
practices and technology
for the administration of
policies and the handling 
of claims.
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R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 8 9
We strongly believe that if we follow this course, we will achieve our
simple objective of delivering more benefits to more clients in more
markets.
Geographic review
South Africa, which provides many of the elements of the insurance
value chain on an outsourced basis, has revenue growth of 65% (31%
organically) with revenue of £23.1m for the year ended 30 September
2005. The technology acquisition of Websoft announced on 1 July
2005 contributed £0.5m to revenue in the year . We continue to explore
the possibility of a partnership to address the Black Economic
Empowerment (BEE) rules legislated by the South African
government. We are discussing with potential partners to help us
address these issues and help us further extend our product range
and take advantage of the unique opportunities that are available in
this part of the world.
In Europe, we have a solid revenue base of £16.4m (2004: £27.2m).
We have made significant progress in integrating our outsourcing
and technology offerings in the UK. We have a software business
servicing tier one clients as well as claims outsourcing for motor
and household. UK revenues are £13.6m (2004: £25.3m). Revenue for
our UK technology business is substantially lower than last year due
to the successful completion of product implementation projects
and the absence of a significant up-front licence this year . However,
the UK pipeline has been steadily improving. An important pilot for
policy software was completed successfully and although
negotiations are continuing for the licencing of the software and it is
now more likely that the deal will be split into smaller components.
In Germany, where we perform claims outsourcing for motor
insurance, we have seen revenue growth of 47% in 2005 to £2.8m
(2004: £1.9m) as a result of an increase in the volumes from existing
clients. All of the revenue in Germany is recurring and transactional.
We are looking to extend the product range in Germany and also to
use the country as a base to further extend into Central Europe.
In North America, the largest insurance market in the world, revenue
has grown by 31% to £16.7m (2004: £12.7m) in 2005. All revenue is
software related. The pipeline is healthy and is underpinned by the
two wins in 2005 of our Policy and Claims systems. In addition, work
continues on the new Policy engagement referred to in our trading
statement in September 2005, although the licence element is still
under negotiation. We continue to work closely with IBM on tier 1 and
tier 2 insurance companies. Our pipelines in North America have
continued to grow due to an increased level of sales enquiries. During
2006 we will continue to carefully qualify all sales opportunities and
be selective in which we pursue as we are now seeing a more
demanding contract and due diligence process from our clients. 
We continue to explore the opportunities for outsourcing in North
America as we believe this represents a significant opportunity for
the Group.
In Asia Pacific, the revenue has grown by 14% to £4.8m (2004: £4.2m).
Our activities comprise outsourcing for motor claims and warranty
administration in Australia and software sales in both Japan and
Australia. Outsourcing revenue has increased relative to the same
period last year and we have launched the warranty administration
product into the Australian market. Revenue in the Australian
technology business has fallen compared to last year, however the
pilot work with a new client is continuing and we are hopeful that this
will result in a full roll out, now forecast to be in early 2006. We are
also working with IBM to distribute our technology products in Japan
and the Asian market. 
Summary
In summary, we aim to grow organically by adding more products and
services to our existing substantial client base. This will be
underpinned by our stronger pipeline and our targeting of top tier
insurers through our relationship with IBM. The existing client
relationships, of which we have over 90, are the backbone to our
future growth. 
Where appropriate we will also look to consolidate smaller players
and add capability into existing regions via strategic and tactical
acquisitions to further expand our outsourcing service offering.
Hassan Sadiq
Chief Executive
Claims and policy 
administration remain the
key areas for technology
spend for non-life and 
life insurers.
Datamonitor, June 2005
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R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 9 Our relationship with The Innovation Group has been
a great success. Customers, agents and claims 
handlers alike have expressed ever-increasing levels
of satisfaction and, due to the significant reduction 
in our claims costs as a result of the Group’s 
efficient network, we have even been able to lower
our customers’ premiums.
Ulrich Schmitz, Head of Claims Processes Vehicle
Gothaer Insurance, Germany
“
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EXTENDING OUR IMPACT 
10
R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 10 11
Results
Total revenue for the year grew by 5% to £61.0m (2004: £58.1m).
Within this, there was growth of 39% in our recurring outsourcing
revenue (up from £25.2m to £35.0m), tempered by a decrease of 21%
in software revenues (reduced from £32.9 to £26.0m), primarily as a
result of lower licence sales (down by £5.6m to £3.3m). Maxicare,
which administers warranty claims for brown and white goods in
South Africa and was acquired by the Group in August 2004,
contributed £4.8m (2004: £0.3m) to outsourcing revenue in 2005. 
The underlying revenue performance of the Group improved over
the year with the second half-year period being stronger than the first.
Revenue in the first six months of the year was £28.8m and increased
to £32.2m in the second six months. Of this growth software revenue
grew from £12.4m to £13.6m led by increased implementation 
(up from £6.6m to £8.5m) and outsourcing revenue grew from £16.4m
to £18.6m. Licence sales reduced from £2.4m in the first half of the
year to £0.9m in the second half. This resulted in adjusted profit*
for the Group of £2.0m and £1.0m in the first and second halves of
the year respectively.
For the year as a whole, the loss before tax was £11.3m (2004: £7.3m)
after an amortisation charge of £14.3m (2004: £14.6m) and a loss on
disposal of operations of £0.1m (2004: profit of £1.3m). Adjusted
profit* was £3.0m (2004: £7.5m). Within this there was, as anticipated,
a substantial increase in outsourcing profitability, which recorded
an adjusted profit of £4.2m (2004: £0.2m). The decline in software
profitability, an adjusted loss for the year of £1.2m (2004: adjusted
profit of £7.3m) reflected the decrease in licence sales year on year .
Adjusted EPS was 0.33p (2004: 1.49p) and basic loss per share was
2.94p (2004: 1.98p). 
*Adjusted profit is the profit before tax after adding back the amortisation
charge of £14.3m and a loss on disposal of operations of £0.1m as analysed
on page 13.
Costs
Administrative costs for 2005 of £24.3m remained at broadly the 
same level as 2004. However, cost of sales increased for both the
software and outsourcing divisions. The former has risen despite
implementation delivery being flat year on year. This was due to 
the solution delivery revenue being lower than planned following the
delay in a US policy project early in the year and increased investment
in the IBM relationship and in our offshore capabilities. In outsourcing,
cost of sales have increased in line with the revenue growth.
Taxation 
The Group tax charge of £1.4m (2004: £1.1m) arose, despite a loss
before tax, primarily due to the goodwill amortisation charge being
non-deductible for tax purposes. The charge is also higher than
would normally be expected for a UK based company as profits
earned in certain countries (principally South Africa) cannot be offset
against losses in other countries. The tax rate increased in the final
quarter as a result of licence sales not materialising. These licence
sales would have been in countries with available tax losses. 
The Group continues to have significant tax losses in the UK and
USA to offset against future profits arising in these countries. 
Cash flow and financing
The Group continues to be cash generative and at an operating level
generated a cash inflow of £8.9m (2004: £6.6m). As a Group we had
set positive cash inflow as one of our key objectives and this result
reflects the underlying strength of our business. Cash inflow was
significantly ahead of adjusted profit due to an increase in deferred
income across both the software and outsourcing divisions, which
increased from £6.4m in 2004 to £11.9m in 2005. The growth of our
outsourcing business and the increased number of claims that we
settle on behalf of our clients also increased our cash balance across
the year. Consequently, approximately £1.4m of the inflow was
attributable to an increase in amounts due to repairers and other
third parties and funds held to settle future claims administered by
the Group. 
Our net funds position is positive at £13.8m compared to £9.4m in
2004. The Group’s only significant debt at the year end being the
£3.8m borrowed as a mortgage on our properties in Whiteley, UK, and
a £1.2m convertible loan note redeemable in December 2007. 
Our year-end cash balance of £19.6m included approximately £5.0m
of cash (2004: £3.6m) representing amounts due to repairers and
funds held to settle future claims. In addition, approximately £1.0m
was held as advance payments from a client for subsidence claims
in the UK. 
Cash held and available for use within the business in our South
African operation continues to be subject to government imposed
exchange controls, however this does not adversely affect us either
on a day to day basis, or in any of our strategic plans. Cash held in
South Africa (excluding amounts held to settle future claims) as at
30 September 2005 totalled approximately £2.6m (2004: £1.1m). 
FINANCE DIRECTOR’S REVIEW
“
The underlying revenue
performance of the Group
improved over the year
with the second half-year
period being stronger than
the first. Revenue in the
first six months of the year
was £28.8m and increased
to £32.2m in the second 
six months.
”
R&A AW Front16_2005 5  18/1/06  11:20 am  Page 11 12
FINANCE DIRECTOR’S REVIEW continued
Non core businesses
In March 2005, we ceased trading in our Chartoak car-rental
business. Chartoak had made a loss of £0.3m for the six month
period to March 2005 and was our last remaining non-core
outsourcing business. In September 2005, we sold the assets and
certain liabilities of the US public sector business to a new company
formed by the existing managers, in return for a two year loan note
for approximately £0.1m. In the year to 30 September 2005, the public
sector business contributed £1.8m to revenue and was approximately
break-even.
Investment activity
On 1 October 2004 the Group settled the final instalment of deferred
consideration on the acquisition of InterX by issuing £1.0m in shares
(approximately 3.7 million shares).
During the year the Group has also concluded a number of tactical
acquisition activities to eliminate minority interests in subsidiaries
or expand product ranges in geographies. 
In December 2004 the Group acquired the remaining 30% of its South
African subsidiary Statsure at a cost of £0.35m. During the year, the
Group also acquired a further 49% of InFront (which performs
buildings subsidence administration in the UK) for up to £1.5m in
cash depending on its future results. Of the £1.5m, £0.7m was paid
during the year to 30 September 2005 and a further £0.5m was paid
in October 2005. This acquisition brings the Group’s total shareholding
in InFront to 84%. 
On 1 July 2005 we acquired Websoft for approximately £1.0m in cash,
which allows the Group to offer software solutions alongside
outsourcing in South Africa.
Foreign Exchange
Approximately 80% of the Group’s turnover is generated outside the
UK and is denominated in currencies other than sterling. The Group,
therefore, has exposure to translation risk when the accounts of
overseas subsidiaries are converted into sterling.
The Group does not hedge against this translation risk. The Group
is most affected by movements in the US Dollar and South African
Rand relative to Sterling, however the combined effect of these on
the Group’s trading results in the year has again been broadly neutral.
Finance activities 
During December 2004, we concluded our audit and tax tender
process which resulted in Ernst & Young LLP being appointed in
time for them to report on our first quarter results. We have worked
hard to rationalise the Group’s legal entities, liquidate holding and
non-trading companies that are no longer required and increase the
efficiency of the financial processes. These factors have resulted in
decreased audit fees for 2005 and will reduce statutory compliance
costs in overseas territories going forward.
We also continued our corporate governance led initiatives
implemented by the finance team. This included the second year of
internal audit, which included the appointment of Deloitte & Touche
as internal auditors for South Africa. An accounting polices manual
has been issued and has been adopted throughout the Group.
Capital reduction and communication with shareholders 
Following an extraordinary general meeting on 29 June 2005 
The Innovation Group plc petitioned the High Court of Justice to
cancel its share premium account. Permission was granted on 23
August 2005 and as a result £483,033,000 was cancelled and
transferred to retained earnings. 
With the Prospectus Directive coming into force on 1 July 2005 we 
will be reporting to shareholders for the financial year ended 
30 September 2006 at the half year and at the full year as is the case
for most UK Listed companies.
International Financial Reporting Standards (IFRS)
The Group is required to report its results in accordance with IFRS
from 1 October 2005. We will therefore be reporting our interim
results for the six months to March 31 2006 under IFRS, together with
the restated comparatives. The unaudited provisional reconciliations
and notes on pages 58 to 63 set out the main differences between 
UK GAAP and IFRS as at, and for the comparative year ended, 
30 September 2005.
The Group has utilised the following exemptions available on first time
adoption of IFRS:
• The Group has elected not to apply the provisions of IFRS 2,
‘Share Based Payments’ to options granted after 7 November
2002, which had not vested at 1 January 2005; 
• The Group has elected not to retrospectively apply the provisions
of IFRS 3, ‘Business Combinations’, to acquisitions that occurred
prior to the Group’s transition date of 1 October 2004. Therefore,
business combinations prior to this date have not been restated; 
• The Group has elected to apply the provisions of IAS 21, ‘The
effects of changes in foreign exchange rates’, prospectively from
the date of transition of 1 October 2004. The effect of this being
that the Group has taken advantage of the one-off exemption
available to reset cumulative exchange differences on net
investment in foreign operations to zero at the date of transition.
As with most companies within our industry segment the most
significant areas of consideration are associated with differences in
accounting for share based payments, goodwill and development
expenditure. We are not currently proposing to capitalise any historic
development expenditure. Details of the main differences are given
on pages 62 and 63.
Paul Smolinski
Group Finance Director
R&A AW Front16_2005 5  17/1/06  7:05 pm  Page 12 13
FINANCIAL HIGHLIGHTS
2005 2004
£’000 £’000
Turnover 60,916 58,051
Adjusted profit before tax* 3,005 7,525
Loss before tax (11,344) (7,349)
Adjusted earnings per share (pence) 0.33 1.49
Basic and diluted loss per share (pence) (2.94) (1.98)
Adjusted diluted earnings per share (pence) 0.32 1.46
Note:
* Adjusted profit before tax is calculated as:
2005 2004
£’000 £’000
Loss before tax (11,344) (7,349)
Add back/(exclude):
Amortisation 14,295 14,621
Exceptional items – 868
Loss/(profit) on disposal of operations 54 (1,340)
Amounts written off investments – 725
Adjusted profit before tax 3,005 7,525
References to adjusted profit and adjusted earnings per share reflect the Directors’ view that this is an important measure for their own,
and shareholders’, assessment of the Group’s underlying performance.
GEOGRAPHIC SPREAD OF REVENUE
£16.4m
(2004: £27.2m)
Europe
27%
North 
America
27%
South
Africa
38%
Asia
Pacific
8%
£16.7m
(2004: £12.7m)
£23.1m
(2004: £14.0m)
£4.8m
(2004: £4.2m)
R&A AW Front16_2005 5  17/1/06  7:06 pm  Page 13 The Innovation Group has added significant value to
our business, with their innovative approach to new
opportunities, excellent fulfillment of existing product
partnerships, and their dedication to consistent 
customer service excellence. We look forward to a
continuation of the service delivery excellence 
during 2006.
Keith Watson, Head of Products and Segments
Standard Bank Vehicle and Asset Finance, South Africa
“
”
ACHIEVING 
FULL POTENTIAL
14
R&A AW Front16_2005 5  17/1/06  7:06 pm  Page 14 15
DIRECTORS’ BIOGRAPHIES
The directors of the Company and their responsibilities within the
Group are set out below:
Geoff Squire OBE (58), 
(Non-Executive Chairman)
Geoff Squire joined the Board of The Innovation Group as a non-
executive director in June 2001, and in May 2002, he became
Chairman of the Board. Geoff has been involved in the information
technology industry for over 40 years. He is also Chairman of Kognitio
Limited and a director of Informatica Corporation, Bellex H Limited
and Hursley 2000 Limited. Geoff held positions with ICL and CACI
Consultancy Group before joining Oracle Corporation where he
ultimately became President of Worldwide Operations. Geoff
previously served as a director of the Cranfield IT Institute from 1989
to 1991 and was President of the Computing Services & Software
Association during 1994 and 1995. In September 1993, he was
awarded an honourary Doctorate of Science by Oxford Brookes
University for his outstanding contribution to the information
technology profession. In recognition of his services to the information
technology industry, he was awarded an OBE in 1997.
Hassan Sadiq (37), 
(Chief Executive Officer)
Hassan Sadiq joined the Group as Chief Operating Officer following
the acquisition of Cosy in October 2001 and was appointed Chief
Executive Officer in March 2003. Hassan has held numerous senior
management positions in companies involved in software development
and distribution. In 1994, together with several partners, Hassan
created Chatsworth Systems, where he assumed the role of Managing
Director . In 1998, Hassan was appointed CEO of New Planet Solutions,
part of the Cosy Group, where he played a key role in driving the
firm’s business and technology vision, which led the company into its
first vertical market as an e-Claims Insurance specialist organisation. 
Paul Smolinski (41), 
(Group Finance Director) 
Paul Smolinski joined the Group in May 2002 from Compaq UK &
Ireland Limited, where, since 1999, he held the position of Finance
and Administration Director with overall control of the finance and
administration team for the UK subsidiary of Compaq Inc. employing
3500 employees and with turnover in excess of $3 billion prior to 
the merger with Hewlett Packard in May 2002. Paul managed a
department of 220 staff and was responsible for financial control,
business finance and was a board member of each of the Compaq
UK & Ireland’s six subsidiaries. Prior to becoming Finance and
Administration Director, Paul held various positions within Compaq
in the UK, Europe and the US from 1990 to 1999. Paul qualified as a
Chartered Accountant in 1990.
Chris Banks (55), 
(Non-Executive Director, Audit Committee Chairman)
Chris Banks joined the Group in June 2003. He has over 25 years
experience in the management and financial development of leading
technology companies and experience providing leadership and
support to organisations through non-executive directorships. Chris
was the Finance Director at CMG plc and a core member of the
management team through the company’s flotation where he was
responsible for a full range of finance functions. Prior to joining CMG,
Chris was the Finance Director of The BIS Group. Chris became a
non-executive director of Detica Group plc in 2000 and currently
serves as senior Non-Executive Director and Chairman of its Audit
Committee. He is also a trustee of The Barbara Ward Children’s
Foundation. He qualified as a Chartered Accountant in 1973 and is a
member of the Association of Corporate Treasurers.
David Thorpe (55), 
(Non-Executive Director, Remuneration Committee Chairman)
David Thorpe joined the Group in July 2003. He recently retired from
EDS where he had held a series of senior positions culminating as
the head of their European Business with responsibility for operations
in 20 countries and revenue of $4 billion. Before joining EDS, David
was at Bull Information Systems, where he was a member of the
UK Board and Managing Director of Bull’s largest operating unit,
Systems Integration and Services. He is a member of The Institute
of Public Finance and Accountancy and has over 25 years experience
in the IT software, services and outsourcing market. David is currently
a Director of VT Group Plc and Isoft Plc. In 2004, he was also appointed
as Chairman of the Race Course Association and a director of the
British Horse Racing Board.
Geoff Squire OBE, 
(Non-Executive Chairman)
Hassan Sadiq, 
(Chief Executive Officer)
Paul Smolinski, 
(Group Finance Director) 
Chris Banks, 
(Non-Executive Director, 
Audit Committee Chairman)
David Thorpe, 
(Non-Executive Director,
Remuneration Committee
Chairman)
R&A AW Front16_2005 5  18/1/06  11:21 am  Page 15 16
Ed Ossie, 
(President)
Ed Ossie has extensive US and international operational experience
in software solutions. From 1996 and until its acquisition by the
Group in July 2001, Ed was President and Chief Executive Officer of
MTW. Prior to MTW, he worked for Texas Instruments for 19 years.
In the TI Software Division he was Vice President and General
Manager for the Americas. In this role, Ed was instrumental in leading
the division’s revenue growth, staff expansion and customer
satisfaction.
Steve Scott, 
(Commercial Director and UK Managing Director)
Steve Scott joined The Innovation Group in 1999. Steve has been in
the IT industry for over 30 years, beginning his career as a software
developer and moving into marketing and operations, most notably
with Nixdorf Computer Limited from 1979 to 1992. In 1992, he became
Manager of ACT Financial Systems Limited’s Insurance Product and
Development Unit. In 1994 Steve was appointed to the Board of ACT
Financial Systems Limited and in the following year joined CMG (UK)
Limited. In 1997, he joined the UK Board of CMG (UK) Limited as
Director responsible for the finance sector. He was also the UK
Director responsible for finance. In 2005, Steve qualified as a
Chartered Director .
Eric Wadsworth, 
(Group Chief Operating Officer)
Eric Wadsworth joined The Innovation Group in May 2001 as a result
of the Group’s acquisition of the South African based Corporate
Warranty Administrators (Proprietary) Limited (“CWA”).
Eric has been with CWA since 1997 and was appointed as Chief
Executive Officer of the Group’s South African business in May 2001.
He was appointed to the role of Executive Director responsible for the
groups Outsourcing Division in April 2004. Since November 2005, he
has been tasked with developing the regions globally as COO for the
Group
He has extensive experience in the insurance market, most notably
in the area of supply chain management in insurance-related
processes. Before joining CWA, Eric held the position of Finance
Executive at Aegis Insurance where he was responsible for the
financial and procurement divisions. Eric qualified as a Chartered
Accountant in 1988, and has been actively involved as Director with
Read Educational Trust, an NGO focused on enhancing educational
and reading skills in South Africa. 
Andy Labrot,  
(Chief Technology Officer)
Andy Labrot joined The Innovation Group in July 2001 following the
Group’s acquisition of MTW in that year . Andy leads the Group’s R&D
efforts globally and drives the evolution of our products based on
continuous customer feedback, industry evolution and best practices.
With more than 20 years in the IT industry, Andy’s experience with
service-based architectures and the development of distributed
systems, has guided the Group’s technical strategies and supported
customer implementation efforts. From 1981 to 1993, Andy led
research development and implementation efforts for Aetna, IBM
and Hartford Steam Boiler, during which he was among the first
technologists to build distributed systems with CICS technology. 
He was Chief Technologist for Texas Instruments Software Division’s
field operations from 1993 to 1997, and most recently was Chief
Technology Officer for MTW where he led the development of the
company’s component-based policy system, and co-authored the
patented PROgression® Method, which continues to be leveraged
worldwide.
Stuart Herd,  
(Global Operations Executive)
Stuart Herd joined The Innovation Group through the acquisition of
CWA in South Africa in May 2001. Prior to this, Stuart had begun his
career as a Management Consultant with Andersen Consulting (now
Accenture) in 1990, focusing on technology implementation projects.
In 1996, he joined a large insurance company in South Africa as IT
Manager responsible for claims systems amongst other areas. In
1997, Stuart joined CWA as IT Executive and through the following
management buyout, become a founding member of the eQuals
Group, which was developed from the CWA business.
During the period from May 2001 to April 2004, Stuart executed
operational management roles for the business within South Africa,
and from April 2004 to November 2005, has performed a leading
international level role for the Outsourcing Division of the business
with responsibility in UK, Australia, Germany and South Africa.
Since November 2005, Stuart has been focused on group operational
aspects and in this role is looking to improve the business flexibility
within solution delivery lines across the Group.
EXECUTIVES’ BIOGRAPHIES
R&A AW Front16_2005 5  18/1/06  11:21 am  Page 16 17
The directors present their annual report and the audited financial
statements for the year ended 30 September 2005. 
Activities
The principal activities of the Group during the year were the provision
of insurance software and outsourcing on an international basis. 
Review of the business and future developments
The results for the year are set out on page 28 and the financial
position is set out on page 30. Further information on the review of
the business and the directors’ expectation for the development of
the Group’s activities for the coming year are given in the Chairman’s
statement, Chief Executive Officer’s review and Finance Director’s
report on pages 5 to 12.
Dividends
The directors do not propose a final dividend for the year (2004: £nil). 
Capital reduction
Following approval at an extraordinary general meeting held on 29
June 2005, The Innovation Group plc petitioned the High Court of
Justice to cancel its share premium account. Permission was granted
on 23 August 2005 and as a result £483,033,000 was cancelled and
transferred to retained earnings.
Directors and their interests
A list of the present directors of the Company is given on page 15. 
As described in the Chairman’s statement on pages 5 and 6, on 21
November 2005, E. Ossie, S. Scott and E. Wadsworth ceased to be
members of the Board but will continue with senior management
roles within the Group. 
The interests in the Company of the directors in office at the year end
are set out in the Directors’ Remuneration Report on pages 23 to 26.
There were no changes in the directors’ interests or share option
holdings in the Company between 30 September 2005 and the date
of this report. All of the non-executive directors are considered to be
independent. J. C. Banks is currently the senior Non-Executive Director .
J. C. Banks and D. A. Thorpe being eligible, offer themselves for re-
election at the forthcoming Annual General Meeting on 6 March
2006. The Board believes that these directors should be re-elected
as their individual participation and experience within the industry
and markets the Group operates adds considerably to the Group’s
overall ability to deliver on its objectives.
Substantial shareholdings
At 21 November 2005, the Company had been notified of the following
shareholdings of 3% or more of the Company’s share capital.
Ordinary shares % of capital
Cantor Fitzgerald Europe 46,219,000 10.5
Merrill Lynch Investment Management 40,193,760 9.1
M&G Investment Management 39,969,956 9.1
Artemis Investment Management Limited 39,198,257 8.9
Global Asset Management 24,546,309 5.6
Ordinary shares % of capital
Jupiter Asset Management 23,163,796 5.3
Gartmore Investment Management 17,066,365 3.9
Legal & General Group plc 15,544,852 3.5
Credit Agricole Cheuvreux Limited 13,282,925 3.0
Research and development
The Group continues to be active in its research and development of
software and services and intends to remain so for the foreseeable
future. All such expenditure has been expensed in the year .
Employment policies
The Group is committed to a policy of recruitment and promotion on
the basis of aptitude and ability without discrimination. Applications
for employment by disabled persons are given full and fair
consideration for suitable vacancies, having regard to their particular
aptitude and abilities. Where a person becomes disabled while in the
Group’s employment, a suitable position will be sought for that person.
Environmental policies
The Group recognises that it has a corporate responsibility to carry
out its operations whilst minimising environmental impacts. The
Group aims to comply with all applicable environmental legislation,
to prevent pollution and to minimise environmental damage occurring
as a result of its activities.
Employee involvement
Information on the Group is provided through internal newsletters and
notices and by the circulation of press releases. Regular meetings
are held with employees to discuss operations, sales, product
development and the financial progress of the business. During the
year, the Group initiated an independent survey to gather feedback
from all employees, the results of which will be communicated during
the forthcoming financial year .
Where appropriate, employees are also encouraged to become
involved in the success of the Company through share option
schemes.
Supplier payment policy
It is company policy to agree and clearly communicate the terms of
payment as part of the commercial arrangement negotiated with
suppliers and then to pay according to these terms based upon the
satisfactory completion of contractual obligations and timely receipt
of an accurate invoice. Trade creditor days of the company for the year
ended 30 September 2005 were 42 days (2004: 43 days), calculated
in accordance with the requirements set down in the Companies 
Act 1985.
Approved by the Board of Directors and signed on behalf of 
the Board
L. Moorse
Company Secretary
21 November 2005
DIRECTORS’ REPORT
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 17 18
CORPORATE GOVERNANCE
The Innovation Group is committed to high standards of corporate
governance. For the year ending 30 September 2005, the Group
complied fully with the provisions of Section 1 of the Revised
Combined Code published by the FSA in July 2003, which became
mandatory at the start of this financial year. As required, this
statement describes how the Group has applied the principles of the
Revised Combined Code (“the Code”).
The Board
During the year the Board of Directors comprised five executive directors
and three non-executive directors (including a non-executive chairman)
as detailed below. As described on page 6, with effect from 21 November
2005 the Board will comprise two executive directors and three non-
executive directors. This change, which enables the executive team to
operate more effectively, also ensures that the structure of the Board
aligns itself with the requirements of the Code, which for large
companies requires a board structure where at least half the members
of the Board, excluding the chairman, are independent non-executive
directors. This was not a requirement for The Innovation Group plc for
2005.
The Board is responsible to shareholders for the proper management
of the Group and for its system of corporate governance. The Board
normally meets at least twice each quarter and prior to significant
decisions being taken. During the year, there were eight scheduled
board meetings. Prior to each meeting, each member receives
documentation concerning the Group’s operational performance, an
update on legal matters and other information, to enable decisions
to be taken on the resolutions proposed. These resolutions are made
with reference to a formal schedule of matters reserved for board
approval, which include:
• the Group’s long-term objectives, commercial strategy and
related plans
• approval of quarterly, interim and final financial statements
and reports
• the Group’s acquisition and divestment policy and any
transactions arising
• approval of major capital expenditure projects and consideration
of significant financing matters
• approval of all circulars, listing particulars and press releases
concerning matters decided by the Board
• the approval of the annual budgets
• matters concerning the Board and its committees’ membership
and terms of reference.
Operational management of the Group is delegated to the executive
directors and senior management team who meet regularly to
discuss and approve operational matters, again under a schedule of
matters reserved for this forum. 
The Board considers that Geoff Squire (notwithstanding his role as
Non-Executive Chairman), Chris Banks and David Thorpe are
independent of management in both character and judgement. 
In coming to this assessment, the Board has taken into consideration
the criteria contained in the Revised Combined Code which are
whether the director: 
• has been an employee of the Group within the last five years
• has, or has had within the last three years, a material business
relationship with the Group
• has received or receives additional remuneration from the Group
apart from a director’s fee
• has close family ties with any of the Group’s advisers, directors
or senior employees
• holds cross-directorships or has significant links with other
directors through involvement in other companies or bodies
• represents a significant shareholder
• has served on the Board for more than nine years from the date
of their first election.
All directors, in accordance with the Code, will submit themselves for
re-election at least once every three years and at the first annual
general meeting following their appointment as a director .
All directors have access to the advice and services of the Company
Secretary and are entitled in furtherance of their duties to take
independent professional advice at the Group’s expense, including,
if necessary, requesting the attendance of external legal counsel or
other professional advisors at board meetings.
The Board has established three standing committees which deal
with specific aspects of the Group’s affairs as determined by their
written terms of reference which are available for inspection on the
Group’s website. The board members, their respective committee
responsibilities and their attendance details, including those where
attendance has been by telephone, for the year ended 30 September
2005 are as follows:
Board and Audit Remuneration Nomination
Committee Board Committee Committee Committee
Membership (B) (A) (R) (N)
Total number of 
meetings in year 8 4 5 2
Geoff Squire
Non-Executive Chairman B*ARN* 8 4 5 2
Hassan Sadiq
Chief Executive Officer B 8
Paul Smolinski
Group Finance Director B 8
Ed Ossie
Executive Director B 7
Steve Scott
Executive Director B 8
Eric Wadsworth
Executive Director B 7
Chris Banks
Senior Non-Executive 
Director BA*RN 8 4 5 2
David Thorpe
Non-Executive Director BAR*N 8 4 5 2
* denotes Chairman
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 18 19
Audit Committee
The Audit Committee meets prior to the release of financial results
to consider the quarterly, interim and full year results announcements.
The external auditors, Chief Executive Officer and Group Finance
Director attend each meeting by invitation as required. The committee
also meets the auditors without the executive directors present and
is authorised by the Board to obtain outside legal or independent
professional advice if it considers this necessary. 
The purpose of the committee includes:
• assisting the Board in its review of the effectiveness of the
Group’s financial reporting and internal control policies and
procedures for the identification, assessment and reporting of
risks
• reviewing the Group’s internal and financial controls, monitoring
the effectiveness of internal audit and agreeing on the annual
internal audit plan
• considering matters associated with the external audit process
including its effectiveness, the independence and objectivity of
external audit, the annual plan and associated fees, and making
recommendations to the Board as regards the appointment,
re-appointment or removal of the Group’s external auditors
• reviewing the appropriateness and consistency of accounting
policies and challenging where necessary the Group’s financial
statements, taking into account matters such as decisions
requiring a major element of judgement, the clarity of
disclosures, and compliance with accounting standards
• reviewing arrangements by which staff may, in confidence, raise
concerns about possible improprieties in financial reporting or
other matters
• developing and implementing a policy on the engagement of
the external auditors to supply non-audit services, taking into
account ethical guidance reporting to the Board identifying areas
of improvement and recommendations.
During the year the Audit Committee met four times to fulfil these
responsibilities.
Remuneration Committee
The Remuneration Committee meets at least once a year to:
• consider and recommend to the Board the total individual
remuneration package of each executive director, the Chairman
and certain senior employees. No director plays a part in setting
their own remuneration
• propose targets for any performance-related pay schemes and
measure performance against those targets
• determine the policy for, and scope of, pension arrangements,
service agreements for the executive directors, termination
payments and compensation commitments.
The Committee consults the Chairman about its proposals and has
access to professional advice from outside the Group as necessary.
During the year the Group adopted a Performance Share Plan for the
purposes of providing share-based remuneration to key employees.
The Directors’ Remuneration Report is set out on pages 23 to 26, and
includes full details of the components of directors’ remuneration.
During the year the Remuneration Committee met five times to fulfil
these responsibilities.
Nomination Committee
The Nomination Committee meets at least annually and its key
responsibilities include:
• making recommendations to the Board as to its structure, size
and composition
• preparing a description of the role and capabilities required for
any particular appointment
• being responsible for identifying, and nominating for the
approval of the Board, candidates to fill board vacancies as and
when they arise
• reviewing succession planning processes with regard to both
board and senior appointments
• assessing and articulating the time needed to fulfil the role of
Chairman and non-executive directors 
• undertaking an annual performance evaluation to ensure that
all the members of the board have devoted sufficient time to
their duties.
During the year the Nomination Committee met twice to fulfil these
responsibilities.
Performance evaluation
The Code requires each company to conduct performance evaluations
of its board, committees and individual directors, and to report on
these evaluations. Evaluations of the Board, the Nomination,
Remuneration and Audit Committees were performed during the
year through the use of tailored questionnaires completed by the
attendees of each board or committee. The results of each
questionnaire were reviewed and reported back to the Board or
relevant committee by the chairman of that body. In each case,
specific strengths and perceived weaknesses were highlighted and
discussed, and any resultant requirements documented.
The performance evaluation of each individual director, including
the Chairman, was also performed during the year by the completion
by each board member and the Company Secretary of a series of
questionnaires. The results of these were communicated to the Board
by the Chairman, or in the case of the appraisal of the Chairman, 
by the senior independent Non-Executive Director noting any
appropriate actions that were required.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 19 20
Communication with shareholders
The Board recognises the significance of effective communication
with both institutional and private investors, and the need to respond
promptly to queries received. During the year the Group published
quarterly financial statements, which are available to all shareholders
via the Group’s website www.tigplc.com. The website also includes
material presented at institutional investor meetings, a library of all
stock exchange notices issued by the Group and other information
on the Group such as press releases and contact details.
During the year the Chairman, Chief Executive Officer and Group
Finance Director held presentations for, and attended meetings with,
analysts and institutional shareholders. The annual general meeting
is also used as a forum to introduce the directors to shareholders and
to take questions from investors. All non-executive directors attended
the annual general meeting held in 2005, including the senior
independent Non-Executive Director .
The directors meet the Group’s brokers to discuss items raised by
shareholders, and feedback from the analysts attending the interim
and annual presentations is collated by the Group’s advisors and
reviewed by the directors. The directors also receive copies of analyst
coverage as and when it is released.
Internal control and risk management
The directors are responsible for establishing and maintaining the
Group’s system of internal control and reviewing its effectiveness. By
its nature, however, such a system is designed to manage rather
than eliminate the risk of failure to achieve business objectives and
can only provide reasonable but not absolute assurance against
material misstatement or loss.
The Board views risk management as integral to good business
practice and has designed its risk identification and management
processes so as to be part of its normal review and decision-making
activities. These include a continuous process for identifying,
evaluating and managing the significant risks faced by the Group
with controls and review processes designed to ensure effort and
management time is focused on the areas where attention is
required. The Board is also regularly updated on issues of importance
through the board meeting documentation and determines
appropriate actions as necessary.
As with any business, risk factors may affect the Group, its results
and the Board’s ability to deliver on its strategy. A list of some of the
main risk areas, not all of which are within the directors’ control, is
given below: 
• clients’ strategy and changes in their approach to technology or
outsourcing
• timing of milestones and project delivery relative to the Group’s
financial calendar 
• conversion of the sales pipeline and length of sales cycles
• the Group’s footprint within a territory compared to competitors
• litigation 
• long-term product strategy
• foreign exchange
• changes in legislation in a territory such as Black Economic
Empowerment legislation in South Africa. 
Other factors may also affect the Group.
Key elements of the Group’s internal control system, targeted at
mitigating the above risks include: 
• a clearly defined management structure and delegation of
authority to committees of the Board, Executive Committee and
business units
• a detailed budgeting process culminating in approval by the
Board
• timely and accurate financial reporting of historical results and
regular reforecasting of future profit and cash flow performance
• board information and meeting agendas linked to identified
risks to ensure review of progress in key risk areas
• quality, knowledge and integrity of personnel maintained
through recruitment, training and communication activities
• day-to-day hands-on involvement in selected business areas
by the executive directors 
• board-level representation for each division within the Group
• use of internal audit and external professional advisors.
This process is regularly reviewed by the Board and complies with
Turnbull guidance. It has been in place for the year under review
and up to the date of the approval of these financial statements. The
Board, with the assistance of the Audit Committee has reviewed the
effectiveness of the Group’s systems of internal control, including
financial, operational and compliance controls, based on a review
of significant risks identified and reports prepared by management,
and the internal and external auditors.
Auditor independence
The Audit Committee and the Board consider auditor objectivity and
independence, ensuring, in particular, that this is not compromised
where the auditor provides non-audit services. It is the Group’s policy
to use the services of advisors other than the external auditors for
non-audit work where conflicts may arise for significant new
assignments, but it is also recognised that in certain cases the
incumbent auditor is often best placed to provide a cost and time
efficient service, in particular in areas such as tax advice and
compliance and due diligence. In order to safeguard and help ensure
independence, the Chairman of the Audit Committee is consulted
CORPORATE GOVERNANCE continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 20 21
prior to each major, non-audit engagement, where the use of the
auditors is proposed. During the year, the Group concluded an audit
and tax tender which resulted in Ernst & Young LLP replacing Deloitte
& Touche LLP as the Group’s auditors.
Going concern basis
After making appropriate enquiries, the directors have formed a
judgement, at the time of approving the financial statements, that
there is a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the directors have adopted the going concern
basis in preparing the financial statements.
Corporate and social responsibility
The Board recognises that to achieve our objectives over the long-
term, sustainability of the environment, contributing to the local and
global communities, taking a responsible and positive approach to
employment practices and employees and generally building a position
as a respected corporate citizen are issues that cannot be overlooked.
The Board also recognises that corporate social responsibility needs
to be considered as part of the Board’s strategy of actively managing
the risks faced by the business, its responsibilities to its clients and
stakeholders, as well as to its reputation.
Our approach to corporate responsibility consequently covers three
key areas:
• governance, in which the Group has an established governance
framework compliant with the requirements of the Combined
Code for listed companies
• employees and health and safety, where our aim is to have
skilled and motivated employees working in safe environments
supported through our HR and health and safety policies
• the environment, community involvement and corporate conduct.
The Board as a whole is responsible for health and safety and
environmental matters, however, on a day-to-day basis these matters
are reported to P. Smolinski.
The Board is supportive of environmental initiatives where these are
commercially viable, and has welcomed the recycling program started
by the Group’s UK business during the year .
Across the Group, the following have been identified as areas where
its activities directly impact the environment:
• employee travel
• water and energy consumption
• waste management and use of hazardous materials
• site management and good housekeeping
• materials used in its purchases of fixed assets and
consumables.
The Group also indirectly impacts the environment through the
actions of its suppliers, in particular where the outsourcing
businesses perform supply chain management services. In these
cases, the Group’s supply chain are required to ensure they comply
with local health and safety and environmental legislation. 
In support of their local community, employees in the Group’s South
African business have continued during the year to support the
activities of Paradise Bend School through the organisation of fund
raising, voluntary work and other similar events aimed at improving
living conditions and assisting in obtaining education for the charity’s
beneficiaries.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 21 22
United Kingdom company law requires the directors to prepare
financial statements for each financial year that give a true and fair
view of the state of affairs of the Company and the Group as at the
end of the financial year, and of the profit or loss of the Group for that
period. In preparing those financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently
• make judgements and estimates that are reasonable and
prudent
• state whether applicable accounting standards have been
followed.
The directors are responsible for keeping proper accounting records
which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the
financial statements comply with the Companies Act 1985. They are
also responsible for the system of internal financial control, for
safeguarding the assets of the Company, and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
By order of the board
L. Moorse
Company Secretary
21 November 2005
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 22 23
UNAUDITED INFORMATION
The Remuneration Committee comprises David Thorpe (Chairman),
Geoff Squire and Chris Banks who are, in the opinion of the Board,
independent of management. As described in more detail in the
Corporate Governance report above, the Committee is responsible
for recommending the remuneration of the executive directors and
the Chairman to the Board. 
Remuneration policies
Executive remuneration packages are designed to attract, motivate
and retain directors of the high calibre needed to maintain the Group’s
position as a market leader and to reward them for enhancing value
to shareholders. 
There are three main elements of the remuneration package for
executive directors:
1. basic annual salary, pension scheme contributions and other
benefits
2. annual performance-related remuneration
3. longer-term performance-related remuneration in the form of
share options and performance share plan (“PSP”) incentives
(see audited section below).
Over the past two years the Committee has taken active steps to move
the Group’s remuneration policies to those representing best practice.
In particular, the Group has adopted the following policies in respect
of share options issued to directors and key management:
• setting of annual limits on the quantity of options and grants
under the PSP that can be issued to an individual
• linking the exercise of options issued after 4 October 2003 and
awards under the PSP scheme to performance criteria
• increasing the minimum exercise period for options issued after
1 October 2004 from two to three years from date of grant 
• removing the ability to retest option performance criteria in
subsequent years for options issued after 1 April 2005.
During the year, independent advice from Deloitte & Touche LLP
was sought by the Remuneration Committee with regard to the
remuneration packages currently offered by the Group. As a result
of this advice, the Board requisitioned a general meeting of the
Company’s shareholders in order to consider and approve amongst
other items, proposals for a Performance Share Plan. Prior to
finalising the proposed terms of the PSP, the Committee also sought
feedback from some of the Company’s major shareholders. The
resolution to adopt the PSP was subsequently passed at the EGM on
29 June 2005 and awards were issued on 19 August 2005.
In August 2005, the Company wrote to holders of significantly
underwater options where their right to exercise was in respect of
more than 40,000 shares. As described in the Company’s notice of
EGM dated 3 June 2005, these holders were invited to cancel their
options without inducement in order to provide headroom for the
issue of future options and PSP awards. As at the date of this report,
2,654,683 of these options have been cancelled. To date, none of the
holders who cancelled options have subsequently been granted
awards under the Group’s option or PSP schemes. 
The remuneration of each of the non-executive directors is
determined by the executive members of the Board within the limits
set out in the Articles of Association. Non-executive directors are
not eligible to participate in any share option, PSP or bonus schemes,
or receive any pension from the Group.
The salary and bonus arrangements of executive directors are
reviewed annually during the first quarter of each financial year . The
review of executive directors’ base salaries for the forthcoming year
has been performed and there are no changes. 
Share ownership
The beneficial interests in the ordinary shares of the Company of the
directors in office as at 30 September 2005 and 30 September 2004
were as follows:
At At
30 September 2005 30 September 2004
No. No.
Geoff Squire 5,231,672 4,231,672
Hassan Sadiq 3,342,348 5,342,348
Paul Smolinski 434,000 434,000
Ed Ossie 1,000,000 1,000,000
Steve Scott 7,000,000 8,978,572
Eric Wadsworth — —
Chris Banks 400,000 400,000
David Thorpe 150,000 150,000
Due to local legislation, Eric Wadsworth, who is a South African
citizen, is unable to hold shares in non South African entities on a
long-term basis.
Service contracts
The Directors have each entered into service agreements or letters
of appointment between themselves and the Group as noted below.
The policy of the company is to have service contracts for all the
executive directors that continue indefinitely unless determined by
notice. Each of the non-executive directors is employed for an initial
term of three years. In line with the Code, each non-executive director
is typically expected to serve two three-year terms, although in
certain circumstances the Board may decide to extend this to three
or more three-year terms.
DIRECTORS’ REMUNERATION REPORT
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There are no predetermined special provisions for executive directors
with regard to compensation in the event of loss of office. 
Date of contract Notice period Early termination
(by either party) provision
Geoff Squire 1 October 2004 1 month No
Hassan Sadiq 11 October 2001 12 months No
Paul Smolinski 10 June 2002 12 months No
Ed Ossie 17 July 2001 12 months No
Steve Scott 24 May 2000 12 months No
Eric Wadsworth 1 May 2001 6 months No
Chris Banks 1 October 2004 1 month No
David Thorpe 1 October 2004 1 month No
Annual performance-related remuneration
In line with the recommendations of the Code, each executive
director’s remuneration includes a significant element of 
performance-related pay. This is designed so as to align their
interests with those of the other shareholders and give these directors
incentives to perform at the highest levels. In addition to their basic
pay, therefore, the executive directors are able to earn an annual
bonus, assuming specific performance criteria are met.
Year ended 30 September 2005
The total potential bonus payable to directors was 100% of their
basic salary in the case of the Chief Executive and between 50%
and 75% of basic salary for all other executive directors. These
bonuses, which were payable on a sliding scale, were at the 
discretion of the Remuneration Committee and were calculated
with reference to adjusted profit targets as defined in the Finance
Director’s Report (up to 75% of total bonus), and operating cash
flow after returns on investments and servicing of finance, tax
paid, capital expenditure and financial investment targets (up to
25% of total bonus). Based on the Group’s performance relative to
these targets, each director received a bonus on account of the
Group’s cash flow performance of between 9 and 18% of base
salary and zero on account of the profit target. 
Year ending 30 September 2006 
The total potential bonus payable to directors is 100% of basic salary
in the case of the Chief Executive and 75% of basic salary in the case
of the Group Finance Director . These bonuses, which are payable on
a sliding scale, are at the discretion of the Remuneration Committee
and are calculated with reference to adjusted profit targets as defined
in the Finance Director’s Report (up to 85% of total bonus), and
operating cash flow after returns on investments and servicing of
finance, tax paid, capital expenditure and financial investment targets,
excluding movements on certain funds held to settle claims
administered by the Group (up to 15% of total bonus). 
Total shareholder return
The following graph shows the total shareholder return for the Group
for the last five years compared to the FTSE Software and computer
services index and FTSE small cap index. The Committee considers
these benchmark indices to be the most appropriate equity indices
for illustrating the Group’s performance.
AUDITED INFORMATION
Share options and long-term incentives
The Group has adopted five share option schemes and a Performance
Share Plan, which allow the granting of options to acquire ordinary
shares and the awarding of performance shares to directors and
employees of the Group. Details of the three schemes being operated
are given in note 25 to the financial statements. The share options
and long-term incentives held by the directors at the year end are set
out in the table opposite.
Performance conditions
(a) In common with all options granted by the Company prior to 4
October 2003, these options had no performance conditions
attached.
(b) The awards will vest and become exercisable between the dates
given in the table if EPS growth, adjusted for goodwill amortisation
and any adjustments required in respect of exceptional gains or
charges that may arise (including for example the impact of IFRS
on the Group’s future results) as made at the discretion of the
remuneration committee, exceeds RPI plus 3% per annum, the
base EPS being that for the year ended 30 September 2004.
Future options issued will vest based on EPS growth plus 10%.
(c) Awards will vest subject to meeting two performance conditions.
Vesting of up to 50% of the award is based upon the Group’s
Total Shareholder Return (“TSR”), relative to the TSR of a
comparator group of other companies comprising the software
and computer services and the support services sector of the
FTSE, over a three-year performance period ending 30
September 2007. If the Group’s TSR growth ranks below the 50th
percentile over the three-year period, 0% of the award will 
vest. At the 50th percentile, 15% will vest and at 75% or above, 
DIRECTORS’ REMUNERATION REPORT continued
0
Sept 00
FTSE small cap index
Sept 01 Mar 02 Mar 01 Sept 02 Mar 03 Sept 03 Mar 04 Sept 04 Mar 05 Sept 05
20
40
60
80
100
120
TiG plc Software and computer services index
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 24 25
50% will vest. Between the 50th and 75th percentile vesting will
occur on a straight line basis. Vesting of the remaining 50% of
the award will be subject to the growth of the Group’s Earnings
Per Share (“EPS”). Fifteen per cent of an award will vest for total
EPS growth of 12% above the Retail Prices Index ("RPI") over
the performance period, with 50% of an award vesting for total
EPS growth of 45% or more above RPI over the performance
period. Between these points, vesting will occur on a straight line
basis.
The market price of one ordinary share in the Company at 30
September 2005 was £0.285 and the range during the year was £0.25
to £0.5525.
Basic salaries
The basic annual salaries as at 30 September 2005 and 2004 of the
executive directors who were in office at that date are set out below.
2005 2004
Sterling denominated (£’000)
Hassan Sadiq 220 180
Steve Scott 150 150
Paul Smolinski 175 150
US dollar denominated ($’000)
Ed Ossie 320 305
South African rand denominated (R‘000)
Eric Wadsworth 1,500 1,224
Granted Cancelled Held at Exercise Options or LTIP
Held at during during 30 September price Performance Earliest Expiry/
1 October 2004 year year (1) 2005 £ Conditions exercise date award date
Hassan Sadiq 1,000,000 1,000,000 0.136 Option (a) 18 August 2005 18 August 2013
500,000 500,000 0.136 Option (a) 18 August 2006 18 August 2013
358,333 358,333 0.277 Option (b) 7 September 2006 7 September 2014
358,333 358,333 0.277 Option (b) 7 September 2007 7 September 2014
358,334 358,334 0.277 Option (b) 8 September 2008 7 September 2014
700,000 700,000 0.000 LTIP (c) — 19 August 2008 
Paul Smolinski 1,000,000 1,000,000 0.136 Option (a) 18 August 2005 18 August 2013
500,000 500,000 0.136 Option (a) 18 August 2006 18 August 2013
283,333 283,333 0.277 Option (b) 7 September 2006 7 September 2014
283,333 283,333 0.277 Option (b) 7 September 2007 7 September 2014
283,334 283,334 0.277 Option (b) 8 September 2008 7 September 2014
400,000 400,000 0.000 LTIP (c) — 19 August 2008 
Ed Ossie (2) 600,000 (600,000) — 2.975 Option (a) 25 July 2003 25 July 2011
666,667 666,667 0.136 Option (a) 18 August 2005 18 August 2013
333,333 333,333 0.136 Option (a) 18 August 2006 18 August 2013
258,333 258,333 0.277 Option (b) 7 September 2006 7 September 2014
258,333 258,333 0.277 Option (b) 7 September 2007 7 September 2014
258,334 258,334 0.277 Option (b) 8 September 2008 7 September 2014
400,000 400,000 0.000 LTIP (c) — 19 August 2008 
Steve Scott 500,000 (500,000) — 2.290 Option (a) 24 May 2002 24 May 2010
666,667 666,667 0.136 Option (a) 18 August 2005 18 August 2013
333,333 333,333 0.136 Option (a) 18 August 2006 18 August 2013
300,000 300,000 0.000 LTIP (c) — 19 August 2008 
Eric Wadsworth 666,667 666,667 0.140 Option (a) 3 October 2005 3 October 2013
333,333 333,333 0.140 Option (a) 3 October 2006 3 October 2013
133,333 133,333 0.277 Option (b) 7 September 2006 7 September 2014
133,333 133,333 0.277 Option (b) 7 September 2007 7 September 2014
133,334 133,334 0.277 Option (b) 8 September 2008 7 September 2014
400,000 400,000 0.000 LTIP (c) — 19 August 2008
(1) On 30 September 2005, Ed Ossie and Steve Scott cancelled the above options without inducement.
(2) In addition to the above, Ed Ossie has options over 661,500 and 1,772,820 shares already issued by the Company as a consequence of the acquisition of MTW Corporation
in July 2001 at an option price of $1.435 and $0.313 per share respectively.
Share options and long-term incentives
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 25 26
Director’s emoluments for 2005
Basic Performance Benefits Total Total
salary Fees related in kind 2005 2004
£’000 £’000 £’000 £’000 £’000 £’000
Geoff Squire — 50 – – 50 50
Hassan Sadiq 220 — 40 29 289 281
Paul Smolinski 175 — 24 19 218 240
Ed Ossie 173 — 24 12 209 271
Steve Scott 150 — 14 23 187 250
Eric Wadsworth 150 — 20 — 170 53
Chris Banks — 35 — — 35 35
David Thorpe — 35 — — 35 35
868 120 122 83 1,193 1,215
Benefits in kind include company car, private medical and permanent health insurance.
Pension entitlements
The contributions made by the Group in respect of money purchase schemes for each executive director are as follows:
2005 2004
£’000 £’000
Hassan Sadiq 16 13
Paul Smolinski 13 11
Ed Ossie 13 7
Steve Scott 11 11
Eric Wadsworth 24 4
77 46
Approved by the Board of Directors and signed on behalf of the Board
D. Thorpe
Chairman of the Remuneration Committee
21 November 2005
DIRECTORS’ REMUNERATION REPORT continued
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We have audited the group’s financial statements for the year ended
30 September 2005 which comprise Consolidated Profit and Loss
Account, Consolidated Balance Sheet, Company Balance Sheet,
Consolidated Cash Flow Statement, Consolidated Statement of Total
Recognised Gains and Losses, and the related notes 1 to 27. These
financial statements have been prepared on the basis of the
accounting policies set out therein. We have also audited the
information in the Directors’ Remuneration Report that is described
as having been audited.
This report is made solely to the company’s members, as a body, in
accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an
auditors’ report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors are responsible for preparing the Annual Report,
including the financial statements which are required to be prepared
in accordance with applicable United Kingdom law and accounting
standards as set out in the Statement of Directors’ Responsibilities
in relation to the financial statements. The directors are also
responsible for preparing the Directors’ Remuneration Report.
Our responsibility is to audit the financial statements and the part of
the Directors’ Remuneration Report to be audited in accordance with
relevant legal and regulatory requirements, United Kingdom Auditing
Standards and the Listing Rules of the Financial Services Authority.
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements and
the part of the Directors’ Remuneration Report to be audited have
been properly prepared in accordance with the Companies Act 1985.
We also report to you if, in our opinion, the Directors’ Report is not
consistent with the financial statements, if the company has not kept
proper accounting records, if we have not received all the information
and explanations we require for our audit, or if information specified
by law or the Listing Rules regarding directors’ remuneration and
transactions with the group is not disclosed.
We review whether the Corporate Governance Statement reflects
the company’s compliance with the nine provisions of the 2003 FRC
Combined Code specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does not. We are not
required to consider whether the board’s statements on internal
control cover all risks and controls, or form an opinion on the
effectiveness of the group’s corporate governance procedures or its
risk and control procedures.
We read other information contained in the Annual Report and
consider whether it is consistent with the audited financial
statements. This other information comprises the Directors’ Report,
unaudited part of the Directors’ Remuneration Report, Chairman’s
Statement, Financial Review and Corporate Governance Statement.
We consider the implications for our report if we become aware of
any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom Auditing
Standards issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements and the part of the
Directors’ Remuneration Report to be audited. It also includes an
assessment of the significant estimates and judgements made by the
directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the group’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable
assurance that the financial statements and the part of the Directors’
Remuneration Report to be audited are free from material
misstatement, whether caused by fraud or other irregularity or error .
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements and the part
of the Directors’ Remuneration Report to be audited.
Opinion
In our opinion the financial statements give a true and fair view of the
state of affairs of the company and of the group as at 30 September
2005 and of the loss of the Group for the year then ended and the
financial statements and the part of the Directors’ Remuneration
Report to be audited have been properly prepared in accordance
with the Companies Act 1985.
Ernst & Young LLP
Registered Auditor
Apex Plaza Reading
21 November 2005
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF 
THE INNOVATION GROUP PLC
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 27 28
2005 2004
Note £’000 £’000
Turnover — continuing 2 60,916 58,051
Cost of sales (33,725) (25,520)
Gross profit 27,191 32,531
Administrative expenses — amortisation 11 (14,295) (14,621)
— exceptional items 3 — (868)
— other (24,328) (24,825)
Total administrative expenses (38,623) (40,314)
Operating loss — continuing 4 (11,432) (7,783)
Share of operating profit/(loss) of associate undertaking 42 (54)
(Loss)/profit on disposal of continuing operations 5 (54) 1,340
Amounts written off investments — (725)
Net interest receivable/(payable) 7 100 (127)
Loss on ordinary activities before taxation (11,344) (7,349)
Loss on ordinary activities before taxation (11,344) (7,349)
— amortisation 11 14,295 14,621
— exceptional items 3 — 868
— loss/(profit) on disposal of continuing operations 5 54 (1,340)
— amounts written off investments — 725
Adjusted profit 3,005 7,525
Tax on loss on ordinary activities 8 (1,369) (1,129)
Loss on ordinary activities after taxation (12,713) (8,478)
Equity minority interest (202) (14)
Retained loss for the financial year 24 (12,915) (8,492)
Basic and diluted loss per ordinary share (pence) 10 (2.94) (1.98)
Adjusted earnings per ordinary share (pence) 10 0.33 1.49
Adjusted diluted earnings per ordinary share (pence) 10 0.32 1.46
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 30 September 2005
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CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Year ended 30 September 2005
RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS’ 
FUNDS 
Year ended 30 September 2005
2005 2004
Note £’000 £’000
Loss for the financial year (12,915) (8,492)
Currency translation differences 24 627 1,414
Total recognised gains and losses relating to the year (12,288) (7,078)
2005 2004
Note £’000 £’000
Loss for the financial year (12,915) (8,492)
Currency translation differences 24 627 1,414
Issue of shares 23, 24 1,207 7,520
Shares to be issued 24 (1,000) (736)
Net reduction in shareholders’ funds (12,081) (294)
Opening shareholders’ funds 36,229 36,523
Closing shareholders’ funds 24,148 36,229
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CONSOLIDATED BALANCE SHEET
30 September 2005
2005 2004
Note £’000 £’000
Fixed assets
Intangible assets 11 11,877 23,521
Tangible assets 12 11,086 11,656
Investments 13 272 91
23,235 35,268
Current assets
Stocks 14 — 172
Debtors 15 14,550 10,563
Investments 16 153 —
Cash at bank and in hand 19,603 15,789
34,306 26,524
Creditors: amounts falling due within one year 17 (25,213) (17,334)
Net current assets 9,093 9,190
Total assets less current liabilities 32,328 44,458
Creditors: amounts falling due after more than one year
Convertible loan notes 18 (1,249) (1,101)
Other creditors 18 (5,640) (5,996)
(6,889) (7,097)
Provisions for liabilities and charges 21 (884) (1,058)
Equity minority interests (407) (74)
Net assets 24,148 36,229
Capital and Reserves
Called up share capital 23 8,793 8,697
Shares to be issued 24 — 1,000
Share premium account 24 75 481,997
Profit and loss account 24 15,280 (455,465)
Equity shareholders’ funds 24,148 36,229
These financial statements were approved by the Board of Directors on 21 November 2005. 
Signed on behalf of the Board of Directors
P. Smolinski
Director
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 30 31
COMPANY BALANCE SHEET
30 September 2005
2005 2004
Note £’000 £’000
Fixed assets
Investments 13 55,773 53,881
Current assets
Debtors: amounts falling due within one year 15 521 283
Debtors: amounts falling due after more than one year 15 19,184 16,491
Cash at bank and in hand 2,593 1,210
22,298 17,984
Creditors: amounts falling due within one year 17 (16,124) (19,485)
Net current assets/(liabilities) 6,174 (1,501)
Total assets less current liabilities 61,947 52,380
Creditors: amounts falling due after more than one year
Convertible loan notes 18 (1,249) (1,101)
Other creditors 18 (284) —
(1,533) (1,101)
Provision for liabilities and charges 21 (480) (283)
Net assets 59,934 50,996
Capital and Reserves
Share capital 23 8,793 8,697
Shares to be issued 24 — 1,000
Share premium account 24 75 481,997
Profit and loss account 24 51,066 (440,698)
Equity shareholders’ funds 59,934 50,996
These financial statements were approved by the Board of Directors on 21 November 2005. 
Signed on behalf of the Board of Directors
P. Smolinski
Director
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 31 32
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 September 2005
2005 2005 2004 2004
Note £’000 £’000 £’000 £’000
Net cash inflow from operating activities a 8,925 6,611
Returns on investments and servicing of finance
Interest received 726 653
Interest paid (268) (753)
Interest element of finance lease rental payments (248) (165)
Net cash inflow/(outflow) from returns on 
investments and servicing of finance 210 (265)
Taxation
Tax paid (1,579) (2,067)
Capital expenditure and financial investment
Purchase of tangible fixed assets (807) (847)
Sale of tangible fixed assets 56 97
Purchase of fixed asset investments (72) (503)
Loans — 92
(823) (1,161)
Acquisition and disposals
Payments to acquire subsidiary undertakings (2,187) (4,652)
Cash acquired with subsidiaries 415 195
Sale of subsidiary undertakings 172 1,059
Sales of associated undertakings — 1,143
Net cash disposed of with subsidiary (15) (25)
(1,615) (2,280)
Management of liquid resources*
Net (purchase)/sale of current asset investments (153) 1,700
Net cash inflow before financing 4,965 2,538
Financing
Issue of share capital 206 4,768
Repayment of borrowings (800) (2,353)
Capital element of finance lease rentals (557) (323)
Net cash (outflow)/inflow from financing (1,151) 2,092
Increase in cash b, c 3,814 4,630
* Liquid resources are defined as investments held as current assets.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 32 33
a. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
2005 2004
£’000 £’000
Operating loss (11,432) (7,783)
Exceptional items — 868
Operating loss before exceptional items (11,432) (6,915)
Depreciation 2,013 2,077
Amortisation of goodwill and intangible fixed assets 14,295 14,621
Profit on disposal of tangible fixed assets (6) (18)
Decrease in stocks 172 7
(Increase)/decrease in debtors (2,574) 642
Increase/(decrease) in creditors 6,457 (2,077)
8,925 8,337
Cash outflow arising from exceptional items — (1,726)
Net cash inflow from operating activities 8,925 6,611
b. ANALYSIS OF CHANGES IN NET FUNDS
At 1 October Other non-cash At 30 September
2004 Cash flowchanges 2005
£’000 £’000 £’000 £’000
Cash at bank and in hand 15,789 3,814 — 19,603
Debt due beyond one year (4,901) — 652 (1) (4,249)
Debt due within one year (800) 800 (800) (1) (800)
Finance leases and hire purchase contracts (680) 557 (834) (1) (957)
Current asset investments — 153 — 153
Total net funds 9,408 5,324 (982) 13,750
Cash at bank and in hand includes £5,010,000 (2004: £3,659,000) representing amounts due to repairers and funds held to settle future
maintenance claims as part of the normal administration of the outsourcing businesses. An equal amount representing the liability to the
third parties involved is included as part of the Group’s current and long-term liabilities.
Cash held and available for use within the business in our South African operation of £2,600,000 (2004: £1,100,000) continues to be subject
to the normal government imposed exchange controls for that country.
(1) Refer to Note 19 for details of the above non cash movements.
c. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2005 2004
£’000 £’000
Increase in cash in the year 3,814 4,630
Cash outflow from decrease in debt and lease financing 1,357 2,989
Cash inflow/(outflow) from management of liquid resources 153 (1,700)
Change in net funds resulting from cash flows 5,324 5,919
Loans, loan notes and finance leases (947) (465)
Foreign exchange (35) 154
Transfer to fixed asset investments — (21)
Movement in net funds 4,342 5,587
Net funds at start of financial year 9,408 3,821
Net funds at end of financial year 13,750 9,408
NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 September 2005
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 33 34
NOTES TO THE ACCOUNTS
1. ACCOUNTING POLICIES
The following are the principal accounting policies which have been applied consistently throughout the year and preceding year. 
Accounting convention
The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom accounting
standards.
Basis of consolidation
The Group financial statements include those of the Company and all its subsidiary undertakings made up to 30 September 2005. 
Turnover 
The Group derives its revenues from the sale of software licences, solution delivery implementation services, maintenance and post-contract
customer support services (“PCS services”), licence rental fees and fees for transactions processed on behalf of clients. 
New solution sales often involve software licences being sold together with PCS and/or implementation services. Where the commercial
substance of such a combination is that the individual components operate independently of each other and fair values are attributable to
each of the components, each are then recognised in accordance with their respective policies described below.
Where it is not possible to attribute reliable fair values to two or more components, these are viewed as a combination and revenue is
recognised on the combined revenue streams in proportion to the Group’s right to receiving consideration on the combination at the balance
sheet date. For example, when software licences are sold together with implementation services and the fair value of either element is not
determinable, both software licence and the implementation services are recognised using the percentage of completion method with
provisions for estimated losses on uncompleted contracts being recorded in the period in which such losses become probable based on
the current contract cost estimates. When software licences are sold together with PCS services and the fair value of either revenue stream
is not determinable, the licence income is recognised over the period of the PCS services.
The revenue recognition policies for separately identifiable revenue streams are as follows:
Initial licence fees — revenues are recognised when persuasive evidence of an arrangement exists, delivery has occurred, the licence fee
is fixed or determinable, the collection of the fee is reasonably assured, no significant obligations with regard to installation or implementation
of the software remain and customer acceptance, when applicable, has been obtained.
Maintenance and other PCS services — revenues are recognised rateably over the explicit, or an implicit, PCS services term.
Solution delivery implementation services — revenues are billed on a time-and-materials basis and are recognised as the related services
are performed. However, if the consulting agreement is a fixed-fee arrangement, revenue may be recognised using the percentage of
completion method as the related services are performed, or recognised, in stages on achievement of milestones. Provisions for estimated
losses on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract cost
estimates. 
Fees earned by the outsourcing division — the Group receives payments for acting either as principal or agent. These receipts typically
comprise one or more of the following elements: administrative fees, fees for which the Group provides an additional service or where the
Group receives funds in relation to claims it has assumed the risk for settling. 
Revenue is normally recorded on a net basis and comprises fees for administration and other services. Where the Group has assumed the
risk of settling claims on behalf of the client, revenue is recorded on a gross basis and includes the element of income relating to that cost.
Revenues are recognised in line with the performance of the related services or referred work, including where appropriate, an assessment
of accrued income. 
Where the fee includes an amount for subsequent servicing, for example the administering of a vehicle warranty plan, an amount is deferred
and recognised as revenue over the period during which the service is performed. The deferred element is calculated so as to cover the
expected costs of the services under the agreement, together with a reasonable profit on those services.
In the small number of contracts where the Group has entered into ‘risk and reward’ contracts, revenues are recognised when both the fee
has become determinable, and collectability is probable. Individual contracts are assessed on a case-by-case basis with any forecast losses
being provided for in full as soon as they are anticipated.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 34 35
1. ACCOUNTING POLICIES continued
Acquisitions and disposals
On the acquisition of a business, including an interest in an associated undertaking, fair values are attributed to the Group’s share of net
separable assets. Where the cost of acquisition exceeds the fair values attributable to such net assets, the difference is treated as purchased
goodwill and capitalised in the balance sheet in the year of acquisition.
The results and cash flows relating to a business are included in the consolidated profit and loss account and the consolidated cash flow
statement from the date of acquisition or up to the date of disposal.
Goodwill and intangible fixed assets
Goodwill is capitalised in the year in which it arises and amortised on a straight line basis, subject to impairment tests, over its useful economic
life in accordance with FRS 10. The decision as to the useful economic life of the goodwill is considered by the directors on an acquisition-
by-acquisition basis at the time of acquiring the businesses, considering factors such as the nature of the business, the stability of the industry
in which the acquired business operates and typical lifespan of the products to which the goodwill attaches. These are as follows:
Outsourcing businesses — up to 20 years
Software and consultancy businesses — 5 to 15 years
Other businesses — 2 to 5 years
During the year ended 30 September 2002, the directors reassessed the useful economic life of the goodwill in existence at this date
concluding that a reduced period was appropriate. Accordingly, goodwill for all acquisitions made prior to 30 September 2002 continues
to be amortised over a useful economic life of up to 5 years. 
Software products purchased from third parties are capitalised and amortised over their estimated useful economic lives of not more than
5 years.
Tangible fixed assets
Depreciation is not provided on freehold land. On other assets it is calculated to write off their cost less estimated residual value, based on
prices prevailing at the date of acquisition, in equal annual instalments over the estimated useful economic lives of the assets. These are
as follows:
Freehold property 50 years 
Property improvements 10 — 15 years
Fixtures and fittings 4 — 15 years 
Motor vehicles 4 years
Computer systems 5 years
Computer equipment 2 — 3 years
Investments
Investments held as fixed assets are stated at cost less provision for any impairment in value. 
Associates
In the Group financial statements, investments in associates are accounted for using the equity method. The consolidated profit and loss
account includes the Group’s share of associates’ profits less losses while the Group’s share of the net assets of the associates is shown
in the consolidated balance sheet. Goodwill arising on the acquisition of shareholdings in associates is accounted for in accordance with
the policy set out above. 
Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 35 36
1. ACCOUNTING POLICIES continued
Stocks
Stocks are stated at the lower of cost and net realisable value.
Leases and hire purchase contracts 
Assets acquired under leases and hire purchase contracts are capitalised and disclosed under tangible fixed assets at their estimated fair
value on the inception of each lease or contract and depreciated over their estimated useful lives. The capital element of the future payments
is treated as a liability and the total finance charge is allocated over the period of the lease or contract in such a way as to give a constant
charge on the outstanding liability.
Operating lease rentals payable or receivable are charged or credited to the profit and loss account over the lease term.
Deferred taxation
Deferred taxation is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right
to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law.
Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in
which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered. Deferred tax assets and liabilities are not discounted. 
Research and development expenditure 
Research and development expenditure, including the cost of software products developed in house, is written off in the period in which it
is incurred.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date. The results of
overseas operations are translated at the average rates of exchange during the period and their balance sheets at the rates ruling at the
balance sheet date. Exchange differences arising on translation of the opening net assets and results of overseas operations are reported
in the statement of total recognised gains and losses. All other exchange differences are included in the profit and loss account.
During the year, the most significant currencies, other than sterling, were the US$ and South African Rand. The average exchange rates
used to convert results into sterling were US$1.85:£1 (2004: US$1.79:£1) and SA Rand 11.49:£1 (2004: SA Rand 11.87:£1).
Pensions
The Group does not operate its own occupational pension scheme but contributes to group personal pension schemes for its staff according
to individuals’ contract terms. Contributions payable by the Group to these schemes are charged to the profit and loss account in the period
to which they relate. All such schemes are defined contribution arrangements, the assets of which are held separately from the Group.
Debt
Debt is initially stated at the amount of the net proceeds after deduction of issue costs. The carrying amount is increased by the finance
cost in respect of the accounting period and reduced by payments made in the period. Convertible debt is reported as a liability unless and
until conversion actually occurs. No gain or loss is recognised on conversion.
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 36 37
2. ANALYSIS OF TURNOVER, LOSS BEFORE TAXATION AND NET ASSETS
In the view of the directors, the primary reporting segments for the Group are Software and Outsourcing. 
Turnover can be analysed by origin and destination into the following categories:
2005 2004
£’000 £’000
Software
Licence fees 3,348 8,979
Solution delivery 15,231 15,242
Maintenance and recurring 5,611 5,760
US public sector 1,797 2,938
25,987 32,919
Outsourcing 34,929 25,132
60,916 58,051
The results of the year analysed into the Group’s two principal activities are as follows:
Software Outsourcing Total
2005 2004 2005 2004 2005 2004
£’000 £’000 £’000 £’000 £’000 £’000
Turnover 25,987 32,919 34,929 25,132 60,916 58,051
EBITA before R&D, central and 
exceptional costs 3,635 14,638 4,242 914 7,877 15,552
R&D (2,719) (3,658) — (216) (2,719) (3,874)
Central costs (1,836) (3,177) (459) (795) (2,295) (3,972)
Net interest (300) (490) 400 363 100 (127)
Share of operating profit/(loss) of associate — — 42 (54) 42 (54)
Adjusted (loss)/profit (1,220) 7,313 4,225 212 3,005 7,525
(Loss)/profit on disposal of 
continuing operations (100) — 46 1,340 (54) 1,340
Amounts written off investments — (429) — (296) — (725)
Exceptional costs — — — (868) — (868)
Amortisation (7,505) (8,811) (6,790) (5,810) (14,295) (14,621)
Loss on ordinary activities before taxation (8,825) (1,927) (2,519) (5,422) (11,344) (7,349)
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 37 38
2. ANALYSIS OF TURNOVER, LOSS BEFORE TAXATION AND NET ASSETS continued
The reference to EBITA before R&D, central and exceptional costs in the table above reflects the directors’ view that this is an important
measure for their own, and shareholders’, assessment of the Group’s underlying performance by division. Reconciling items between this
figure and loss on ordinary activities before taxation are as shown in the table above.  
The analysis of turnover, loss before tax and net assets on a geographical basis was as follows:
Turnover Loss before taxation Net assets/(liabilities)
2005 2004 2005 2004 2005 2004
£’000 £’000 £’000 £’000 £’000 £’000
Europe, Middle East and Africa 39,408 41,185 (9.660) (5,046) (37,348) (23,384)
Americas 16,706 12,700 (1,037) (1,258) 67,911 65,472
Asia Pacific 4,802 4,166 (647) (1,045) (6,415) (5,859)
60,916 58,051 (11,344) (7,349) 24,148 36,229
The analysis of net assets/(liabilities) by division was as follows:
2005 2004
£’000 £’000
Software 28,946 39,061
Outsourcing (4,798) (2,832)
24,148 36,229
3. EXCEPTIONAL ITEMS
2005 2004
£’000 £’000
Exceptional administrative expenses
Settlement of legal actions — 868
Exceptional administrative expenses incurred in 2004 relate to the settlement of a legal action and associated costs. The Group is fully
indemnified for these expenses but in view of the uncertainty as to their recovery, full provision has been made against this debtor.
4. OPERATING LOSS
Operating loss is stated after charging/(crediting):
2005 2004
£’000 £’000
Depreciation — owned assets 1,558 1,895
— leased assets 455 182
Amortisation — goodwill 14,286 13,359
— other intangible assets 9 1,262
Profit on disposal of fixed assets (6) (18)
Auditors’ remuneration — statutory audit services 228 307
— audit related services 42 —
— tax services 179 364
— other non audit services — 6
Operating leases — hire of plant and machinery 127 205
— other 1,330 1,710
Exchange gain (38) (486)
Research and development 2,719 3,874
In addition to the above, £61,000 was paid to the auditors and capitalised as part of the cost of acquisitions in the year (2004: £nil). The auditors’
remuneration for the Company was £7,500 (2004: £7,500). 
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 38 39
5. (LOSS)/PROFIT ON DISPOSAL OF CONTINUING OPERATIONS
2005 2004
£’000 £’000
Disposal of subsidiary undertakings 46 726
Disposal of associated undertaking — 614
Disposal of trade and assets (100) —
(54) 1,340
The above transactions have no impact on taxation or minority interests.
2005
The Group disposed of its 51% share in its subsidiary MiNett Data Management (Pty) Limited on 1 August 2005, resulting in a profit of
£46,000. Details of the disposal are provided below.
2005
£’000
Net assets disposed of:
Tangible fixed assets 120
Cash at bank and in hand 15
Creditors (135)
Minority interests 123
123
Related goodwill (see note 11) 3
Profit on disposal 46
172
Satisfied by:
Cash 172
On 30 September 2005, the Group disposed of the trade and certain assets in The Innovation Group/MTW Inc, its US public sector business.
The assets disposed of had a net book value totalling £100,000. In exchange, the Group received a loan note of the same value. Due to the
uncertainty surrounding the collectability of this loan note, this debt has been provided for in full, resulting in a loss on disposal of £100,000.
2004
The Group disposed of its subsidiary Intelligent Business Services Limited (“IBS”) on 31 March 2004, resulting in a profit of £455,000. In August
2004, the Group also received deferred consideration totalling £271,000 in respect of the sale of its French outsourcing business disposed
of in 2003, which had not been recognised due to uncertainty about its recoverability prior to receipt.
The Group disposed of its 50% share in its associate Mead & McGrouther (Proprietary) Limited (“M&M”) on 21 November 2003, resulting
in a profit of £614,000.
Details of the IBS and M&M disposals are provided below.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 39 40
5. (LOSS)/PROFIT ON DISPOSAL OF CONTINUING OPERATIONS continued
IBS
2004
£’000
Net assets disposed of:
Tangible fixed assets 148
Stocks 61
Debtors 163
Cash at bank and in hand 25
Creditors (188)
209
Related goodwill (see note 11) 124
Profit on disposal 455
788
Satisfied by:
Cash 788
M&M
2004
£’000
Group’s share of net liabilities (see note 13) (160)
Attributable goodwill (see note 13) 689
529
Profit on disposal 614
1,143
Satisfied by:
Cash 1,143
6. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Directors’ emoluments
Details of Directors’ emoluments, share options and grants under the Performance Share Plan are contained in the Directors’ Remuneration
Report on pages 23 to 26, and forms part of the financial statements.
Employee costs during the year (including directors)
2005 2004
£’000 £’000
Wages and salaries 27,832 26,180
Social security costs 2,183 1,934
Other pension costs 591 518
30,606 28,632
Average number of persons employed
2005 2004
No. No.
Software division 280 238
Outsourcing division 805 722
Central and administration 18 23
1,103 983
Total number of employees at the year end 1,262 1,028
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 40 41
7. NET INTEREST PAYABLE
2005 2004
£’000 £’000
Interest receivable and similar income
Bank interest 729 648
Income and gains on current asset investments — 5
729 653
Interest payable and similar charges
Convertible loan notes 113 166
Other loans 268 451
Finance leases 248 163
629 780
100 (127)
8. TAX ON LOSS ON ORDINARY ACTIVITIES
2005 2004
£’000 £’000
Current taxation
Adjustments in respect of prior periods (57) (166)
Overseas taxation 1,770 1,542
Group’s share of tax charge from associate — —
Total current tax 1,713 1,376
Deferred taxation
Origination and reversal of timing differences (344) (247)
Tax on loss on ordinary activities 1,369 1,129
Taxation on exceptional items is £nil (2004: £nil).
The tax assessed for the year differs from that resulting from applying the standard 30% rate of corporation tax in the UK (2004: 30%). 
The differences are explained below.
2005 2004
% %
Standard rate tax as a percentage of profit 30 30
Disallowable expenses (2) (3)
Non taxable income 6 —
Amortisation (38) (60)
Unrelieved tax losses carried forward (14) (6)
Depreciation in excess of capital allowances (2) —
Utilisation of brought forward tax losses 6 18
Adjustments in respect of prior periods 1 2
Other timing differences (2) —
Current tax rate for year as a percentage of loss (15) (19)
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 41 42
9. PROFIT FOR THE YEAR ATTRIBUTABLE TO THE INNOVATION GROUP PLC
As permitted by section 230 of the Companies Act, the profit and loss account of the parent company is not presented separately as part
of these accounts. The parent company’s profit for the year ended 30 September 2005 was £8,731,000 (2004: loss of £22,545,000).
10. LOSS PER ORDINARY SHARE
2005 2004
pence pence
Basic and diluted loss per share (2.94) (1.98)
Adjustments 
— amortisation 3.26 3.40
— exceptional items — 0.21
— loss/(profit) on disposal of continuing operations 0.01 (0.31)
— amounts written off investments — 0.17
Adjusted earnings per share 0.33 1.49
Adjustment for dilutive potential ordinary shares (0.01) (0.03)
Adjusted diluted earnings per share 0.32 1.46
Earnings per share is calculated as follows:
2005 2004
Basic and diluted earnings (£’000)
Basic and diluted loss for the year (12,915) (8,492)
— add amortisation 14,295 14,621
— add exceptional items — 868
— add/(less) loss/(profit) on disposal of continuing operations 54 (1,340)
— add amounts written off investments — 725
Adjusted and adjusted diluted earnings for the year 1,434 6,382
Number of shares (thousand)
Average number of shares in issue used to calculate basic and diluted loss 
and adjusted earnings per share 438,667 429,587
Dilutive potential ordinary shares
— add share options 9,398 8,298
Shares used to calculate adjusted diluted earnings per share 448,065 437,885
References to adjusted profit, earnings per share and diluted adjusted earnings per share reflect the directors’ view that these are important
measures for their own, and shareholders’, assessment of the Group’s underlying performance. FRS 14 requires presentation of diluted
EPS when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss-making
company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. 
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 42 43
11. INTANGIBLE FIXED ASSETS
Software
Goodwill licences Total
The Group £’000 £’000 £’000
Cost
At 1 October 2004 437,981 4,664 442,645
Foreign exchange 480 — 480
Additions 2,282 45 2,327
Disposals (4) — (4)
Adjustments in respect of prior year acquisitions (153) — (153)
At 30 September 2005 440,586 4,709 445,295
Accumulated amortisation
At 1 October 2004 414,460 4,664 419,124
Charge for the year 14,286 9 14,295
Disposals (1) — (1)
At 30 September 2005 428,745 4,673 433,418
Net book value
At 30 September 2005 11,841 36 11,877
At 30 September 2004 23,521 — 23,521
Additions
On 1 October 2004, the Group acquired the remaining 30% of its subsidiary Statsure (Pty) Limited at a cost of £497,000 which resulted in
the creation of a further £325,000 of goodwill.
At various points during the year the Group acquired an additional 49.4% in its subsidiary InFront Solutions Limited at a combined cost of
£1,557,000. Of this, the cash outflow during the year was £656,000, with the balance of £901,000 being deferred with £617,000 payable within
one year and £284,000 being due after more than one year. This deferred element, which is contingent on the profits of InFront over the
next two years, is included within ‘other creditors’ in notes 17 and 18. These acquisitions bring the Group’s total shareholding in this
company to 84.0%.
On 1 July 2005, the Group acquired 95.3% of Websoft (Pty) Limited. The details of which are as follows:
Alignment of Other
accounting fair value
Book value policies adjustments Fair value
£’000 £’000 £’000 £’000
Net assets acquired:
Intangible fixed assets 30 — — 30
Tangible fixed assets 70 — — 70
Debtors 445 — — 445
Deferred taxation 394 (132) — 262
Cash at bank 283 — — 283
Creditors (419) — — (419)
803 (132) — 671
Minority interests (37)
Goodwill 374
1,008
Satisfied by:
Cash 1,008
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 43 44
11. INTANGIBLE FIXED ASSETS continued
The acquisition has been accounted for using the acquisition method and the related goodwill is being amortised over a useful economic
life of 5 years. The acquisition of Websoft (Pty) Limited is not considered material to the Group and has therefore been included within
continuing activities.
Adjustments in respect of prior year acquisitions
The adjustment in respect of prior year acquisitions relates to Maxicare Holdings (Pty) Limited. Goodwill has been adjusted by £153,000,
representing a change in the fair value of accrued income at the date of acquisition.
12. TANGIBLE FIXED ASSETS
Computer 
Land and Property Fixtures Motor systems and
buildings improvements and fittings vehicles equipment Total
The Group £’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 October 2004 7,703 3,762 3,049 105 12,629 27,248
Foreign exchange — 15 39 3 108 165
Additions — 77 58 158 1,304 1,597
Disposals — (230) (78) (86) (1,618) (2,012)
Acquired with subsidiary — — 31 3 36 70
Sale of subsidiary ———— (126) (126)
At 30 September 2005 7,703 3,624 3,099 183 12,333 26,942
Accumulated depreciation
At 1 October 2004 1,072 2,113 2,544 31 9,832 15,592
Foreign exchange — 10 32 2 72 116
Charge for the year 71 216 550 29 1,147 2,013
Disposals — (230) (78) (32) (1,519) (1,859)
Sale of subsidiary ———— (6) (6)
At 30 September 2005 1,143 2,109 3,048 30 9,526 15,856
Net book value
At 30 September 2005 6,560 1,515 51 153 2,807 11,086
At 30 September 2004 6,631 1,649 505 74 2,797 11,656
Land and buildings relates to assets all of which are held as freehold. Freehold land included within land and buildings totals £3,075,000
(2004: £3,075,000). In accordance with FRS 15, this is not depreciated. Within land and buildings are assets with a net book value of
£6,528,000 (2004: £6,599,000) against which the loan of £3,800,000 (2004: £4,600,000) disclosed in note 19 is secured. 
Included within the total net book value is £120,000 (2004: £nil), £198,000 (2004: £298,000) and £602,000 (2004: £351,000) relating to motor
vehicles, fixtures and fittings and computer equipment and systems respectively held under hire purchase or finance lease agreements.
These assets are security for the obligations under hire purchase and finance lease of £956,000 (2004: £680,000) disclosed in note 19.
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 44 45
13. INVESTMENTS HELD AS FIXED ASSETS
Associates
Share of net Other Loans to other
Loans Goodwill assets investments investments Total
The Group £’000 £’000 £’000 £’000 £’000 £’000
Cost
At 1 October 2004 50 210 36 6,091 311 6,698
Foreign exchange — — — 1 — 1
Additions — 50 — — — 50
Transfer from current assets — — — 88 — 88
Profit retained for the year — — 42 — — 42
At 30 September 2005 50 260 78 6,180 311 6,879
Amounts provided
At 1 October 2004 and at 30 September 2005 50 210 36 6,000 311 6,607
Net book value
At 30 September 2005 — 50 42 180 — 272
At 30 September 2004 — — — 91 — 91
The Group
Other investments held at 30 September 2005 are unlisted and represent the Group’s 10% stake in Insurance Decisions Inc. (“IDI”), an
insignificant shareholding of 25 class ‘A 93’ preference shares in Guardrisk Insurance Company Limited, and 2,937,500 ordinary shares in
The Claims People Group plc, a company listed on the Alternative Investment Market.
Associates Shares in
Share of subsidiary Other Loans to
Loans Goodwill net assets undertakings investments investments Total
The Company £’000 £’000 £’000 £’000 £’000 £’000 £’000
Cost 
At 1 October 2004 50 210 36 516,636 6,070 311 523,313
Foreign exchange — ——————
Additions — 50 — 1,712 — — 1,762
Transfers from current assets — — — — 88 — 88
Profit retained for the year — — 42 — — — 42
At 30 September 2005 50 260 78 518,348 6,158 311 525,205
Amounts provided
At 1 October 2004 and at
30 September 2005 50 210 36 462,825 6,000 311 469,432
Net book value
At 30 September 2005 — 50 42 55,523 158 — 55,773
At 30 September 2004 — — — 53,811 70 — 53,881
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 45 46
13. INVESTMENTS HELD AS FIXED ASSETS continued 
The Company held the following investments in principal subsidiary undertakings during the year:
Direct/indirect 
Country of holding and percentage 
Subsidiary undertakings incorporation of ordinary shares held
Software
The Innovation Group (EMEA) Limited UK Direct 100%
The Innovation Group Australia Pty Limited Australia Indirect 100%
The Innovation Group Japan Pty Limited Australia Indirect 100%
The Innovation Group Inc USA Indirect 100%
The Innovation Group (TIG) Limited Canada Direct 100%
TiG — Netsol (Pvt) Limited * Pakistan Direct 49.5%
Outsourcing
motorCare Services Limited UK Indirect 100%
eQuals Group (Proprietary) Limited South Africa Direct 100%
The Innovation Group (SBPO) GmbH Germany Indirect 100%
InFront Solutions Limited UK Direct 84%
Property
DIMO Computing Limited UK Direct 100%
Associates — Outsourcing
Absolute Customer Management Limited UK Direct 32%
I.V.R.B. Limited UK Direct 30%
* The directors have concluded that the Group exercises a dominant influence over this company as it is able to control its operating and
financial decisions through its position on the Board. 
The Group’s share of the results and assets of Absolute Customer Management Limited for the year is as follows:
£’000
Turnover 433
Profit before tax 60
Fixed assets 10
Current assets 142
Liabilities due within one year (56)
The Group’s share of the results and assets of I.V.R.B. Limited for the year is as follows:
£’000
Loss before tax 18
Fixed assets 1
Current assets 25
Liabilities due within one year (32)
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 46 47
14. STOCKS
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Consumables — 172 — —
15. DEBTORS
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Trade debtors 8,819 7,372 — —
Amounts owed by subsidiary undertakings — — 19,184 16,491
Deferred taxation 893 247 — —
Other debtors 840 616 521 283
Prepayments 1,002 709 — —
Accrued income 2,996 1,619 — —
14,550 10,563 19,705 16,774
Group
All amounts are due within one year.
Company
£19,184,000 (2004: £16,491,000) is due after more than one year.
16. INVESTMENTS HELD AS CURRENT ASSETS
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Money market deposit 153 — — —
The above investment is held on 30-day deposit and bears interest at an annual rate of 6.9%. 
17. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Other loans (note 19) 800 800 — —
Obligations under finance leases and hire purchase agreements (note 19) 430 362 — —
Trade creditors 2,059 2,471 — —
Taxation and social security 1,665 1,559 — —
Corporation tax 2,029 1,889 — —
Accruals 4,042 4,170 125 40
Deferred income 10,104 4,598 — —
Other creditors 4,084 1,485 2,124 874
Amounts due to subsidiary undertakings — — 13,875 18,571
25,213 17,334 16,124 19,485
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 47 48
18. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Convertible loan notes (note 19) 1,249 1,101 1,249 1,101
Other loans (note 19) 3,000 3,800 — —
Obligations under finance leases and hire purchase agreements (note 19) 526 318 — —
Deferred income 1,830 1,752 — —
Other creditors 284 126 284 —
5,640 5,996 284 —
6,889 7,097 1,533 1,101
19. BORROWINGS
Group Group Company Company
2005 2004 2005 2004
£’000 £’000 £’000 £’000
Other loans (secured) 3,800 4,600 — —
Convertible loan notes 1,249 1,101 1,249 1,101
Obligations under finance leases and hire purchase agreements 956 680 — —
6,005 6,381 1,249 1,101
Due within one year or on demand
Other loans (secured) 800 800 — —
Obligations under finance leases and hire purchase agreements 430 362 — —
Due between one and two years
Other loans (secured) 800 800 — —
Obligations under finance leases and hire purchase agreements 330 195 — —
Due between two and five years
Other loans (secured) 2,200 2,400 — —
Convertible loan notes 1,249 1,101 1,249 1,101
Obligations under finance leases and hire purchase agreements 196 123 — —
Due after more than five years
Other loans (secured) — 600 — —
6,005 6,381 1,249 1,101
Finance leases are secured on the underlying assets. 
Other loans comprise a mortgage of £3,800,000 secured on the Group’s two freehold premises and is repayable according to a standard
quarterly repayment schedule ending on 2 January 2010. The mortgage bears interest at 1.5% above LIBOR. 
The convertible loan notes are denominated in US$ and are convertible into ordinary shares at the option of the note holder at any time or
become repayable on 31 December 2007. At the year end, the convertible loan notes were convertible into 2,572,499 ordinary shares (2004:
2,288,053 ordinary shares). The convertible loan notes bear interest at 10% per annum.
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 48 49
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
Objectives, policies and strategies
The Group’s objective has been to finance acquisitions through new capital and cash reserves. Investments in fixed assets have been made
through cash and finance lease borrowings.
The Group’s policy towards using financial instruments is to manage interest rate, liquidity and currency exposure risk without exposing
the Group to undue risk or speculation. The policy is kept under review by the directors according to the Group’s foreign exchange and treasury
policy.
Risk management
The risks arising from the Group’s operations are explained below.
Interest rate risk
Interest bearing financial assets comprise cash and other debtors and receivables (all due within one year). Interest bearing financial
liabilities comprise convertible loan notes issued as part of acquisitions, net obligations under finance leases and property mortgages
(see note 19 for maturity profile). The Group currently relies on the natural hedge of financial assets versus financial liabilities to manage
the risk arising from changes to floating interest rates. 
The interest rate risk profile of the Group’s financial assets and liabilities is as follows:
Financial assets
Year ended 30 September 2005
Floating Fixed
rate rate Total
£’000 £’000 £’000
Sterling 5,367 — 5,367
US dollar 3,729 — 3,729
Canadian dollar 759 — 759
Euro 1,522 — 1,522
South African rand 6,962 — 6,962
Australian dollar 960 — 960
Japanese yen 184 — 184
Pakistan rupees 120 153 273
19,603 153 19,756
Year ended 30 September 2004
Floating Fixed
rate rate Total
£’000 £’000 £’000
Sterling 6,908 — 6,908
US dollar 3,261 — 3,261
Canadian dollar 145 — 145
Euro 621 — 621
South African rand 4,122 — 4,122
Australian dollar 638 — 638
Japanese yen 94 — 94
15,789 — 15,789
Interest on floating rate assets is based on the relevant national inter-bank rates.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 49 50
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Financial liabilities
Year ended 30 September 2005
Floating Fixed
rate rate Total
£’000 £’000 £’000
Sterling 4,327 — 4,327
US dollar 3 1,249 1,252
Canadian dollar 426 — 426
4,756 1,249 6,005
Year ended 30 September 2004
Sterling 5,116 — 5,116
US dollar 108 1,101 1,209
Canadian dollar 56 — 56
5,280 1,101 6,381
Interest on floating rate liabilities is based on the relevant national inter-bank rates.
Interest on the fixed rate liability is at a rate of 10%. The liability relates to convertible loan notes and is repayable on 31 December 2007.
Liquidity risk
The Group’s funds are principally held either as cash or short-term money market investments. Short-term debtors and creditors have been
excluded from the disclosures as permitted by FRS 13. The maturity profile of the Group’s financial liabilities, other than short-term
creditors such as trade creditors and accruals, was as follows:
2005 2004
£’000 £’000
In one year or less, or on demand 1,230 1,162
In more than one year but less than two years 1,130 995
In more than two years but less than five years 3,645 3,624
In more than five years — 600
6,005 6,381
Fair values of financial assets and liabilities
A summary of the fair values and book values of the Group’s financial assets and liabilities is noted below. Fair values have b een calculated
by discounting expected future cash flows at the prevailing interest rates.
Carrying Estimated Carrying Estimated 
amount fair value amount fair value
2005 2005 2004 2004
£’000 £’000 £’000 £’000
Financial liabilities
Convertible loan notes 1,249 1,388 1,101 1,251
Other loans 3,800 3,800 4,600 4,600
Obligations under finance lease and hire purchase agreements 956 956 680 680
6,005 6,144 6,381 6,531
Financial assets
Fixed asset investments 180 180 91 91
Cash at bank and in hand 19,603 19,603 15,789 15,789
Current asset investments 153 153 ——
19,936 19,936 15,880 15,880
NOTES TO THE ACCOUNTS continued
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20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS continued
Currency risk
Currency exposure arises through intra-group loans and trading balances, principally in the United States, Canada, South Africa and
Europe. Natural hedging is employed, to the extent possible, to minimise net exposures. However, where significant exposures arise outside
of intra-group trading, it is Group policy to enter into formal hedging arrangements where these can be shown to be effective.
Currency exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in the functional currency
of the operating unit involved, other than those borrowings treated as hedges of foreign equity investments. As at 30 September 2005,
these exposures were as follows:
Currency exposures
30 September 2005
Net foreign currency monetary assets/(liabilities)
SA Rand US Dollar Canadian Dollar Euro Other
£’000 £’000 £’000 £’000 £’000
Functional currency
Net cash position
Sterling — 557 — 798 —
Other net assets/(liabilities)
Sterling 401 3,502 144 (722) —
US dollar — (211) (340) — —
Canadian dollar — — (296) — —
Euro — — — (17) —
Other ———— 111
Total net assets/(liabilities) 401 3,848 (492) 59 111
30 September 2004
Net foreign currency monetary (liabilities)/ assets
SA Rand US Dollar Canadian Dollar Euro Other
£’000 £’000 £’000 £’000 £’000
Functional currency
Net cash position
Sterling — 1,565 — 49 —
Other net assets/(liabilities)
Australian dollar (10) — — —
Sterling — (4,957) 156 (5) —
US dollar — (200) (350) — —
Yen denominated entities — — (5) — —
Canadian dollar — — (23) — —
Rand — — — (205) —
Euro — — — (18) —
Other ———— 259
Total net (liabilities)/assets (10) (3,592) (222) (179) 259
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 51 52
21. PROVISIONS FOR LIABILITIES AND CHARGES
The Group
Property NI on share 
leases options Total
£’000 £’000 £’000
Balance at 1 October 2004 775 283 1,058
Additions in the year — 202 202
Utilised in the year (136) (5) (141)
Released in the year (235) — (235)
Balance at 30 September 2005 404 480 884
These provisions are expected to be utilised over the coming 24-month period. There are no significant assumptions included in calculating
these provisions and the amounts provided are known with reasonable certainty.
Deferred Taxation
2005 2004
Recognised Unprovided Recognised Unprovided
£’000 £’000 £’000 £’000
Accelerated capital allowances — (2,851) — (3,176)
Short-term timing differences (457) — (247) (51)
Tax losses carried forward — trading (436) (16,007) — (14,638)
— capital — (50,725) ——
Total (893) (69,583) (247) (17,865)
Deferred
taxation
£’000
Balance at 1 October 2004 (247)
Additions in the year (344)
Acquired with subsidiary (262)
Utilised in the year 5
Foreign exchange (45)
Total (893)
The deferred tax asset of £893,000 (2004: £247,000) is included in note 15.
The Group has not recognised a deferred tax asset of £16,007,000 (2004: £14,638,000) in respect of tax losses carried forward, predominantly
in the UK, USA and Canada, and a deferred tax asset of £2,851,000 (2004: £3,176,000) in respect of accelerated capital allowances in the
UK at 30 September 2005, as it cannot be regarded as more likely than not that they will be utilised against income arising in the near future.
These tax losses may only be utilised against future trading profits.
A similar position has been taken in respect of unprovided deferred tax assets of £50,725,000 arising in respect of UK capital losses. These
capital losses have primarily arisen as a result of the rationalisation of dormant subsidiaries during the year . The UK capital losses will only
be available to offset against UK capital gains arising in future periods.
A deferred tax asset has been recognised on short-term timing differences arising in South Africa.
The Group will monitor its profitability in forthcoming periods to determine whether additional deferred tax assets should be recognised
in accordance with IAS 12. 
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 52 53
21. PROVISIONS FOR LIABILITIES AND CHARGES continued
NI on share options 
The share option provision reflects the directors’ estimate of the employer’s national insurance and other similar tax liabilities arising on
outstanding share options calculated in accordance with the requirements of UITF 25. This is matched by an amount recoverable from the
relevant employees which is included within other debtors. 
Property leases
The property lease provision relates to the cost of onerous lease contracts following the closure of certain locations in previous financial
periods.
The Company
NI on share
options
£’000
Balance at 1 October 2004 283
Additions in the year 202
Utilised in the year (5)
Balance at 30 September 2005 480
The company had no unrecognised deferred tax assets or liabilities at the balance sheet date (2004: £nil).
22. LITIGATION
In common with other businesses operating in the IT sector, particularly those that have acquired a significant number of companies on a
global basis, the Group is subject to, or instigates, complaints which may or may not lead to litigation. 
The quarterly results to 31 December 2004 referred to one case in particular relating to a former officer of a company acquired by the Group
in 2001 who had lodged a substantial claim against the former legal owner and the Group for a loss of profit on options over consideration
shares, resulting from these shares being subject to customary transfer restrictions. The claim was concluded at trial during the quarter
ended 31 March 2005, with the outcome that the Group was successful in its defence on all counts. An appeals process is in progress, however,
the Group has been advised that this too should be concluded successfully in the Group’s favour. Legal costs associated with the claim have
been provided in full.
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 53 54
23. SHARE CAPITAL
2005 2004
£’000 £’000
Authorised share capital
1,000,000,000 (2004: 1,000,000,000) ordinary shares of 2 pence each 20,000 20,000
2005 2004
No. £’000 No. £’000
Allotted, called up and fully paid
Ordinary shares of 2 pence each 439,641,679 8,793 434,859,585 8,697
The following share issues took place during the year.
Date of issue Description No. of shares Price Consideration
££
1 October 2004 InterX deferred consideration 3,700,277 0.270 1,000,000
22 August 2005 Exercise of options 1,819 0.020 36
22 August 2005 Exercise of options 446,666 0.136 60,747
23 August 2005 Exercise of options 500,000 0.136 68,000
19 September 2005 Exercise of options 133,332 0.136 18,133
24. RESERVES
Shares to Share premium Profit and 
be issued account loss account
£’000 £’000 £’000
Group
At 1 October 2004 1,000 481,997 (455,465)
Currency translation differences — — 627
Loss retained for the year — — (12,915)
Shares issued (1,000) 1,051 —
Costs of issue —60 —
Capital reduction — (483,033) 483,033
At 30 September 2005 — 75 15,280
Company
At 1 October 2004 1,000 481,997 (440,698)
Profit retained for the year — — 8,731
Shares issued (1,000) 1,051 —
Costs of issue —60 —
Capital reduction — (483,033) 483,033
At 30 September 2005 — 75 51,066
Capital reduction
Following an extraordinary general meeting on 29 June 2005, The Innovation Group plc petitioned The High Court of Justice to cancel its
share premium account. Permission was granted on 23 August 2005 and as a result £483,033,000 was cancelled and transferred to retained
earnings. The reserves created cannot be distributed until all creditors existing at 23 August 2005 have been settled.
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 54 55
25. SHARE OPTIONS AND PERFORMANCE SHARE PLAN
The number of shares subject to options (including those granted to executive directors), the date on which they were granted and the periods
in which they may be exercised are given below:
Unapproved Company Share Option Scheme
Date of grant Exercise price Note Exercise period from date of grant 2005 2004
No. No.
24 May 2000 £2.29 a Between 2 and 10 years 795,000 1,460,000
31 May 2000 £2.29 a Between 2 and 10 years 130,000 400,000
26 June 2000 £3.24 a Between 2 and 10 years 20,000 20,000
10 August 2000 £4.64 a Between 2 and 10 years 512,350 605,350
1,457,350 2,485,350
Global Share Option and Incentive Plan
Date of grant Exercise price Note Exercise period from date of grant 2005 2004
No. No.
15 June 2001 £0.02 a Between 2 and 10 years 13,001 58,360
16 July 2001 £2.97 a Between 2 and 10 years 500,000 1,510,000
19 October 2001 £2.46 a Between 2 and 10 years 2,510,888 3,873,571
1 May 2003 £0.073 a Between 2 and 10 years 450,000 450,000
18 August 2003 £0.136 a Between 2 and 10 years 8,333,167 9,250,000
18 August 2003 £0.136 a Between 3 and 10 years 4,225,166 4,625,000
3 October 2003 £0.14 a Between 2 and 10 years 1,000,000 1,000,000
3 October 2003 £0.14 a Between 3 and 10 years 500,000 500,000
16 March 2004 £0.357 a Between 2 and 10 years 1,323,597 1,593,644
16 March 2004 £0.357 a Between 3 and 10 years 661,798 796,821
16 March 2004 £0.357 a Between 4 and 10 years 661,800 796,821
7 September 2004 £0.277 b Between 2 and 10 years 1,216,666 1,216,666
7 September 2004 £0.277 b Between 3 and 10 years 1,216,667 1,216,667
7 September 2004 £0.277 b Between 4 and 10 years 1,216,667 1,216,667
22 December 2004 £0.360 a Between 12 and 18 months 150,000 —
22 December 2004 £0.360 b Between 3 and 10 years 250,000 —
22 December 2004 £0.360 b Between 4 and 10 years 250,000 —
22 December 2004 £0.360 b Between 5 and 10 years 250,000 —
31 March 2005 £0.458 b Between 3 and 10 years 150,000 —
31 March 2005 £0.458 b Between 4 and 10 years 150,000 —
31 March 2005 £0.458 b Between 5 and 10 years 150,000 —
25,179,417 28,060,288
Performance Share Plan
Date of grant Exercise price Note Release date 2005 2004
No. No.
19 August 2005 £0.00 c 19 August 2008 4,610,000 —
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 55 56
25. SHARE OPTIONS AND PERFORMANCE SHARE PLAN continued
Performance conditions
a These options had no performance conditions attached.
b The awards will vest and become exercisable between the dates given above if EPS growth, adjusted for goodwill amortisation and any
adjustments required in respect of exceptional gains or charges that may arise (including for example the impact of IFRS on the Group’s
future results) as made at the discretion of the remuneration committee, exceeds RPI plus 3% per annum. The base EPS is that for the
year ended 30 September 2004. Future options issued will vest based on EPS growth plus 10%.
c The awards will vest subject to meeting two performance conditions. Vesting of up to 50% of the award is based upon the Group’s Total
Shareholder Return (“TSR”) relative to the TSR of a comparator group of other companies comprising the software and computer
services and the support services sector of the FTSE over a three-year performance period ending 30 September 2007. If the Group’s
TSR growth ranks below the 50th percentile over the three-year period, 0% of the award will vest. At the 50th percentile, 15% will vest
and at 75% or above, 50% will vest. Between the 50th and 75th percentile, vesting will occur on a straight line basis. Vesting of the remaining
50% of the award will be subject to the growth of the Group’s Earnings Per Share (“EPS”). Fifteen per cent of an award will vest for total
EPS growth of 12% above the Retail Prices Index (“RPI”) over the performance period, with 50% of an award vesting for total EPS
growth of 45% or more above RPI over the performance period. Between these points, vesting will occur on a straight line basis.
26. OPERATING LEASE COMMITMENTS
At 30 September 2005, the Group was committed to making the following payments during the following year in respect of operating leases:
Land and buildings Other
2005 2004 2005 2004
£’000 £’000 £’000 £’000
The Group
Leases which expire:
Within one year 72 137 80 49
Between one and two years 184 602 44 23
Between two and five years 1,349 495 102 87
After five years 67 71 ——
1,672 1,305 226 159
There were no commitments for the Company at 30 September 2005 (2004: £nil).
27. CAPITAL AND FINANCIAL COMMITMENTS
At 30 September 2005, there was no capital expenditure (2004: £nil) contracted or provided in the accounts.
The Group has guaranteed a line of credit to the buyer of the trade and assets of The Innovation Group/MTW Inc. to the extent of £226,000
($400,000), none of which had been utilised at 30 September 2005.
NOTES TO THE ACCOUNTS continued
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 56 57
Note 2005 2004 2003 2002 2001
Profit and loss account
Turnover £’000 60,916 58,051 58,514 100,071 43,695
Adjusted EBITDA a £’000 4,876 9,783 6,533 15,094 3,428
Adjusted profit/(loss) b £’000 3,005 7,525 3,331 10,028 3,804
Loss on ordinary activities before taxation £’000 (11,344) (7,349) (24,088) (391,114) (10,806)
Dividends £’000 — — — (1,255) (4,370)
(Loss)/earnings per share c
— Basic pence (2.94) (1.98) (7.67) (173.78) (9.98)
— Adjusted pence 0.33 1.49 0.79 2.46 (1.09)
Dividend per share pence — — — 0.60 2.50
Balance sheet
Fixed assets £’000 23,235 35,268 49,793 81,462 366,014
Other assets less liabilities £’000 (12,837) (8,447) (17,091) (22,808) 1,987
Net funds/(debt) £’000 13,750 9,408 3,821 (1,255) 38,051
Net assets £’000 24,148 36,229 36,523 57,399 406,052
Operating cash flow £’000 8,925 6,611 (5,230) (8,086) (4,601)
Key ratios
EBITDA margin d % 8.0 16.9 11.2 15.1 7.8
Adjusted profit margin e % 4.9 13.0 5.7 10.0 8.7
Employees (average) No. 1,103 983 1,004 1,158 641
Notes
a. Adjusted EBITDA is operating loss before amortisation, depreciation and exceptional administrative expenses.
b. Adjusted profit/(loss) is loss before tax, adding back amortisation, exceptional administrative expenses, profits on disposal of
operations and amounts written off investments.
c. Earnings per share has been adjusted for 2000 to 2002 in respect of the shares issued by way of rights issue in March 2003.
d. EBITDA margin is EBITDA as a percentage of turnover.
e. Adjusted profit margin is adjusted profit as a percentage of turnover.
FIVE YEAR REVIEW
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 57 58
In line with all other Listed companies in the European Union, the Group is required to report its results in accordance with International
Financial Reporting Standards adopted for use in the European Union (“IFRS”) with effect from the start of its new financial year commencing
1 October 2005. The Innovation Group plc will therefore be reporting its interim results for the six months to 31 March 2006  and its full year
accounts for the year ending 30 September 2006 under IFRS, together with the restated comparatives.
The unaudited provisional reconciliations set out on pages 59 to 63, identify the main differences between UK GAAP and IFRS as at, and
for, the IFRS comparative year ended 30 September 2005. 
These unaudited provisional reconciliations have been prepared on the basis of all IFRSs issued at the date of this report which are expected
to be effective at the time of the reporting of the interim and final financial statements for the year ended 30 September 2006. However,
the IFRSs are the subject of ongoing review and endorsement by the European Commission and therefore may be subject to change.
IMPLEMENTATION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS 
(UNAUDITED)
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 58 PROVISIONAL RECONCILIATION OF THE CONSOLIDATED BALANCE SHEET
FROM UK GAAP TO IFRS 
As at 30 September 2004
UK GAAP IFRS Adjs IFRS IFRS
£’000 £’000 Notes £’000
ASSETS
Non current assets
Property plant and equipment 11,656 — 11,656
Intangible assets 23,521 — 23,521
Other financial assets 91 — 91
Deferred taxation — 247 247
35,268 247 35,515
Current assets
Inventories 172 — 172
Trade and other receivables 9,607 — 9,607
Prepayments 709 — 709
Deferred taxation 247 (247) —
Cash and short-term deposits 15,789 — 15,789
26,524 (247) 26,277
TOTAL ASSETS 61,792 — 61,792
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 8,697 — 8,697
Share premium 481,997 — 481,997
Shares to be issued 1,000 — 1,000
Retained earnings (455,465) (58) 2,3,4 (455,523)
36,229 (58) 36,171
Minority interests 74 — 74
TOTAL EQUITY 36,303 (58) 36,245
Non current liabilities
Trade and other payables 1,878 212 4 2,090
Interest bearing loans and borrowings 5,219 (206) 4 5,013
Provisions 1,058 — 1,058
8,155 6 8,161
Current liabilities
Trade and other payables 14,283 52 2 14,335
Interest bearing loans and borrowings 1,162 — 1,162
Income tax payable 1,889 — 1,889
17,334 52 17,386
TOTAL LIABILITIES 25,489 58 25,547
TOTAL EQUITY AND LIABILITIES 61,792 — 61,792
59
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 59 UK GAAP IFRS Adjs IFRS IFRS
£’000 £’000 Notes £’000
ASSETS
Non current assets
Property plant and equipment 11,086 — 11,086
Intangible assets 11,877 13,905 5, 6 25,782
Investments in associates — using the equity method 92 — 92
Other financial assets 180 — 180
Deferred taxation — 893 893
23,235 14,798 38,033
Current assets
Inventories — — —
Trade and other receivables 12,655 — 12,655
Prepayments 1,002 — 1,002
Deferred taxation 893 (893) —
Investments 153 (153) —
Cash and short-term deposits 19,603 153 19,756
34,306 (893) 33,413
TOTAL ASSETS 57,541 13,905 71,446
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Issued capital 8,793 — 8,793
Share premium 75 — 75
Shares to be issued — — —
Foreign currency translation — 627 3 627
Retained earnings 15,280 13,171 28,451
24,148 13,798 37,946
Minority interests 407 — 407
TOTAL EQUITY 24,555 13,798 38,353
Non current liabilities
Trade and other payables 2,114 116 4 2,230
Interest bearing loans and borrowings 4,775 (172) 4 4,603
Provisions 884 — 884
7,773 (56) 7,717
Current liabilities
Trade and other payables 21,954 163 2 22,117
Interest bearing loans and borrowings 1,230 — 1,230
Income tax payable 2,029 — 2,029
25,213 163 25,376
TOTAL LIABILITIES 32,986 107 33,093
TOTAL EQUITY AND LIABILITIES 57,541 13,905 71,446
PROVISIONAL RECONCILIATION OF THE CONSOLIDATED BALANCE SHEET
FROM UK GAAP TO IFRS
As at 30 September 2005
60
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 60 PROVISIONAL RECONCILIATION OF THE CONSOLIDATED INCOME 
STATEMENT FROM UK GAAP TO IFRS 
For the year ended 30 September 2005
UK GAAP IFRS Adjs IFRS IFRS
£’000 £’000 Notes £’000
Revenue — continuing operations 60,916 60,916
Cost of sales (33,725) (11) 2 (33,736)
Gross profit 27,191 (11) 27,180
Administrative expenses (38,623) 12,831 (25,792)
14,170 5
(1,239) 1
(100) 2
(Loss)/profit from continuing operations 
before tax and finance costs (11,432) 12,820 1,388
Finance costs (629) 62 4 (567)
Finance income 729 — 729
Loss on disposal of continuing operations (54) — (54)
Share of profit of associate 42 — 42
(Loss)/profit before tax (11,344) 12,882 1,538
Income tax expense (1,369) (265) 6 (1,634)
Loss for the year (12,713) 12,617 (96)
Attributable to:
Equity holders of the parent (12,915) 12,617 (298)
Minority interests 202 — 202
(12,713) 12,617 (96)
61
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 61 62
NOTES TO THE IFRS RECONCILIATIONS
For the year ended 30 September 2005
Transitional arrangements upon first time adoption of IFRS (IFRS 1)
The Group has utilised the following exemptions available on first time adoption of IFRS:
• The Group has elected not to apply the provisions of IFRS 2, ‘Share-Based Payments’ to options granted on or before 7 November 2002; 
• The Group has elected not to retrospectively apply the provisions of IFRS 3, ‘Business Combinations’, to acquisitions that occurred prior
to the Group’s transition date of 1 October 2004. Therefore, business combinations prior to this date have not been restated;
• The Group has elected to apply the provisions of IAS 21, ‘The effects of changes in foreign exchange rates’, prospectively from the date
of transition of 1 October 2004. The effect of this being that the Group has taken advantage of the one-off exemption available to reset
cumulative exchange differences on net investment in foreign operations to zero at the date of transition. 
Explanatory notes to the provisional IFRS adjustments
The primary statements have been presented in a format consistent with IFRS. The material adjustments between UK GAAP and IFRS are
explained as follows:
1.  SHARE-BASED PAYMENTS (IFRS 2)
In accordance with IFRS 2, the Group has recognised a charge to income representing the fair value of outstanding employee share options
and options under the Performance Share Plan granted since 7 November 2002 and which vest on or after 1 January 2005. This charge has
been spread according to the vesting period of the option. As a result, £949,000 has been charged to periods prior to 30 September 2004.
The charge to the IFRS income statement in the year to 30 September 2005 is £1,239,000.
In calculating the fair value of these options, the Group has used the following variables:
Expected option life 2-4 years depending on vesting period
Volatility 42%-131% depending on date of grant
Risk-free rate 3.5%-4.75% depending on date of grant
The charge will be amended in future periods to take account of the expiry of options as beneficiaries leave.
2.  EMPLOYEE BENEFITS (IAS 19)
The Group has complied with the provision of IAS 19 and has accrued holiday pay for all staff from the date of transition. A charge of
£111,000 has been recorded in the IFRS income statement for the year to 30 September 2005, representing the movement on holidays accrued,
but not taken, from 30 September 2004 (accrued - £52,000) to 30 September 2005 (accrued - £163,000). This charge is reflected in cost of
sales (£11,000) and administrative expenses (£100,000).
3.  THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES (IAS 21)
The Group has taken advantage of the one-off exemption available to reset cumulative exchange differences on net investment in foreign
operations to zero at the date of transition. 
Cumulative exchange differences on net investment in foreign operations from 1 October 2004 are now shown in a separate foreign exchange
reserve.
4.  FINANCIAL INSTRUMENTS (IAS 32 and IAS 39)
The Group has separated the convertible loan notes into two components in accordance with IAS 32. In calculating the value of the two
components, the Group has assumed the comparable debt only interest rate to be 16%. The fair value of the derivative element of the loans
has been reflected in the balance sheet. Any movement in the derivative element has been recorded in the income statement. 
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 62 5.  GOODWILL AND INTANGIBLE ASSETS (IAS 36 and IFRS 3)
IAS 36 prohibits the amortisation of goodwill. Goodwill is only written down when an annual impairment test suggests the carrying value
is overstated. The goodwill amortisation charge for the year to 30 September 2005 of £14,264,000 under UK GAAP has been reversed under
IFRS. An impairment test has been carried out at 30 September 2005 and no impairment is deemed necessary.
An amortisation charge of £94,000 has been recorded in the IFRS income statement representing amortisation on separately identifiable
intangible assets acquired as part of the acquisition of Websoft (Pty) Limited on 1 July 2005. 
6.  INCOME TAXES (IAS 12)
In accordance with IAS 12, the Group has considered the current and future tax consequences of the carrying amounts of all assets and
liabilities. As a result, an additional tax charge of £265,000 has been recorded in the IFRS income statement for the year ended 30 September
2005 for the utilisation of £882,000 of tax losses by InFront Solutions Limited. The corresponding entry has been made against the goodwill
capitalised in the year resulting from the Group’s increased shareholding in that company.
The effects of tax deductions for share-based payment under Schedule 23 have not been recognised as a deferred tax asset as it cannot
be shown that there will be sufficient taxable profits in future periods against which these deductions can be offset.
7.  RESEARCH AND DEVELOPMENT (IAS 38)
Under UK GAAP, the Group has previously expensed all research and development costs. IAS 38 now requires the Group to capitalise and
amortise development costs, providing certain criteria are met.
Following a review of development expenditure incurred prior to 30 September 2005, it has been concluded that no costs qualify for
capitalisation. The primary reasons for this are that:
• a significant element of development costs are funded by clients
• a large proportion of development is enhancement of base products
• commercial feasibility can often only be concluded at the end of the development project.
The Group will continue to review development expenditure incurred post 1 October 2005, although it is not envisaged that a significant amount
will be capitalised during the year.
63
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 63 64
Directors
G. W. Squire OBE
Chairman
H. Sadiq
Chief Executive Officer
P. Smolinski
Group Finance Director
J. C. Banks
Non-Executive
D. A. Thorpe
Non-Executive
Secretary
J. Hall 
Company Number: 3256771
Registered Office
The Innovation Group plc
Yarmouth House
1300 Parkway
Solent Business Park
Whiteley 
Hampshire PO15 7AE
Auditors
Ernst & Young
Apex Plaza
Reading RG1 1YE
Bankers
The Royal Bank of Scotland
Corporate Banking
Solent Corporate Centre
Notebeme House
84 High Street
Southampton SO14 2NT
Solicitors
DLA Piper Rudnick Gray Cary
3 Noble Street
London EC2V 7EE 
Registrars
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
OFFICERS AND PROFESSIONAL ADVISERS
R&A FINANCIALS 17-64   17/1/06  7:05 pm  Page 64 UNITED KINGDOM
The Innovation Group plc
Head Office
Yarmouth House 
1300 Parkway
Solent Business Park
Whiteley
Hampshire
PO15 7AE
United Kingdom
+ 44 (0) 1489 898300
+ 44 (0) 1489 579181
info@tigplc.com
AUSTRALIA
The Innovation Group plc
Melbourne
1 Bowen Crescent
Melbourne
Victoria 3004
Australia
61 (0) 3 9864 1800
61 (0) 3 9864 1801
info@tigplc.com
The Innovation Group plc
Sydney
Level 2, 37 Bligh Street
Sydney
NSW 2000
Australia 
61 (0) 2 8257 3391
61 (0) 2 8257 3399
info@tigplc.com
CANADA
The Innovation Group plc
Toronto
BCE Place
Canada Trust Tower
161 Bay Street
26th Floor
Toronto, Ontario 
M5J 2S1
Canada
416-572-2068
416-572-4068
info@tigplc.com
GERMANY
TiG eQuals Motorcare
Services
Schwabstrassee 33 
70197 Stuttgart
Germany
+49 (711) 664 900
+49 (711) 664 9035
info@tig-equals.com
JAPAN
The Innovation Group plc
Tokyo
Izumi Shiba Koen Bldg. 6F
1-6-8 Shiba Koen
Minato-ku
Tokoyo
Japan
+81364021680
+81 3 6402 1681
Info@tigplc.com
SOUTH AFRICA
TiG eQuals
Fourways Office Park
eQuals House Building 1 
CNR Roos & Fourways Blvd
Private Bag X99
Bryanston 2021
South Africa
+27 (0) 11 790 5200
+27 (0) 11 790 5299
info@tig-equals.com
USA
The Innovation Group plc
Danbury
7 Kenosia Avenue 
1st Floor
Danbury
CT
USA
06810
+1 (203) 743-6000
+1 (203) 743-6003
info@tigplc.com
The Innovation Group plc
Kansas City
7800 College Blvd. 
2nd Floor
Overland Park
KS
USA
66210
+1 (913) 888-4100
+1 (913) 562-3101
info@tigplc.com
The Innovation Group plc
Hartford
One Constitution Plaza,
Ninth Floor
Hartford
CT
USA
06103
+1 (860) 218-9250
+1 (860) 727-0244
info@tigplc.com
GLOBAL OPERATIONS
R&A AW Cover_2005  18/1/06  3:27 pm  Page 4 Innovation Group plc • 1300 Parkway • Solent Business Park • Whiteley • Hampshire • England • PO15 7AE
Tel: +44 (0)1489 898300 • Fax: +44 (0)1489 579181 • Web: www.innovation-group.com • E-mail: info@tigplc.com
www.innovation-group.com
R&A AW Cover_2005  17/1/06  7:22 pm  Page 1