INTERIM RESULTS For the six months to 30 June 2004

Financial Objects plc, a leading international supplier of advanced technology banking products and services, announces a return to profitability following the implementation of its new business model.

Trading performance:

· Return to profitability - operating profit of £26,000 (H1 2003 loss: £0.75m)
· Profit before tax of £125,000 (H1 2003 loss: £1.17m)
· Revenues reduced to £4.6m (H1 2003: £5.7m) reflecting continuing difficult market conditions
· Earnings of 0.45p per share (H1 2003 LPS: 4.44p)
· Cash balances of £5.0m

Operations:
· Positive results from first stages of strategic review implementation
· Profitable period for IBIS, with encouraging signs of activity among user base
· Additional orders for ActiveBank has boosted order book
· Overseas development centre fully operational
· Order book at £7.0m – represents 67% of prior year’s revenue

Commenting on the results, Roger Foster, Chairman, said:

"The implementation of the new business model, as first announced in June 2003, has continued apace. The overseas development centre has been established and we are already benefiting from the cost savings. Our focus on a strengthened partner programme is also developing well, with promising business opportunities coming from our new relationship with Siemens."

"In the context of the ongoing difficult trading conditions, the decision to create a leaner organisation focused on sales partnerships and cost control has resulted in the return to profitability. The second half of 2004 will continue to see the Group press ahead with its transition to its new business model. Once fully implemented, the Group will be well positioned to return to a period of revenue growth and improved performance."

CHAIRMAN’S STATEMENT

I am pleased to be able to announce a return to profitability for the Group in respect of the six months to 30 June 2004.

This return to profitability, albeit marginal, marks an important milestone in the turnaround of the Group’s trading after the problems of the past two years.

The results for the first-half are especially encouraging, given the fact that the Group is currently mid-way through the implementation of a new business model and related restructuring programme. The cornerstones of the new business model are substantial cost savings, to make the Group significantly more competitive, and a sales strategy of working with partners around the world.

The establishment of our overseas development centre in Bangalore was a vitally important aspect of the cost saving plan and I am pleased to report that the software development centre is operating far more successfully than we would have expected at this stage. We expect the number of people employed in Bangalore, currently 40, to continue to increase significantly over the next six to twelve months.

We have made equally significant progress with regard to partners. In February, we announced the appointment of Siemens as our UK partner and we are already working with them on new business opportunities, which, if successful, would make a major contribution to the Group’s future performance.

Financial Results

Financial Objects recorded an operating profit of £26,000 for the six months to 30 June 2004, compared with a loss before amortisation of goodwill of £0.75 million for the same period last year. Taking into account net interest received of £99,000 (2003: £145,000) and amortisation of goodwill of £nil (2003: £0.57 million) the Group delivered a profit before taxation of £125,000 (2003: loss of £1.17 million). Group revenues fell to £4.6 million compared with £5.7 million in the same period last year reflecting the ongoing difficult trading conditions in our markets. Earnings per share were 0.45 pence (2003: 4.44 pence per share loss).

IBIS revenues remained constant at £3.0 million for the first half of 2004 when compared with the same period for 2003. ActiveBank revenues, however, declined from £2.6 million in the first half of 2003 to £1.6 million in the first half of 2004, although its order book for the period increased encouragingly. ActiveBank revenues were adversely affected during the first half-year by the amount of non-chargeable work carried out to fulfil contractual commitments. The exceptional contract provision of £1.7m made at the year end in respect of a number of client implementations is progressing to our plan.

The total value of the Group’s order book at the end of the period was £7.0 million, down from £8.0 million in at 31 December 2003. The Group’s operating cash flow for the first six months was an outflow of £1.7 million, leaving it with a closing balance of £5.0 million. This is primarily as a result of the exceptional operating provisions made in the 2003 accounts.

No interim dividend will be paid.

IBIS Division

Trading in the IBIS Division continues to be profitable and was in line with expectations for the first half of this year. We are seeing increased activity within the user base as banks look to improve efficiency and reduce costs and we are focusing efforts on developing business from our existing customers.

The rollout of the IBIS/S2 product has increased in pace with over ten banks now live or in the process of implementing this software. We expect a large proportion of the IBIS base to upgrade to IBIS/S2 over the next eighteen months, which should sustain and generate additional service revenues.

During the first half of the year, we saw the successful implementation of IBIS/S2 Internet Banking solutions in three European banks and our anti-money laundering software in a further four banks.

The division’s year end order book position was inflated by one large contract which has now been largely worked through. On an underlying basis, there has been no material change to the IBIS order book at the half year.

ActiveBank Division

I can report positive progress with regard to a number of key ActiveBank client implementations. These implementations are central to our future strategy, as they will increase significantly the number of reference sites available to us worldwide. A number of our existing clients have placed orders this year for additional ActiveBank developments. The division’s order book has encouragingly increased to £2.3m from £1.8m at the end of last year.

Our overseas development centre is fully operational and carrying out chargeable work for a number of our clients. This allows us to be more competitive when quoting for new business.

The combination of an increasing number of reference sites, a much lower cost base and a growing partner distribution channel combine to give us confidence in the future of ActiveBank.

The Board

Paul Fullagar was appointed to the Board as a Non-Executive Director immediately following our Annual General Meeting on 6 May 2004. Paul has considerable experience of the software industry, having worked for many years in the sector, including twelve years as Chairman of Staffware plc until May 2000. Paul is already making a valuable contribution to the Board’s strategic thinking through his extensive knowledge of the industry.

Outlook

In the context of the ongoing difficult trading conditions, the decision to create a leaner organisation focused on sales partnerships and cost control has resulted in the return to profitability. The second half of 2004 will continue to see the Group press ahead with its transition to its new business model. Once fully implemented, the Group will be well positioned to return to a period of revenue growth and improved performance.

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