TECHNOLOGY ONE LIMITED — Earnings Release 2003

Aug 31, 2003

ASX ANNOUNCEMENT

September 1, 2003

TECHNOLOGY ONE (TNE) 2003 FINANCIAL RESULTS

Technology One Limited today announced the Company's financial results for the period ended 30^th June 2003, which showed a Profit Before Tax of \$10.1m, in line with previous market guidance.

Highlights of the announcement are as follows:

• Net Operating Cash Flows of \$9.56 million, up 40% $\bullet$
• EBITDAR* of \$20.01 million, down 7 percent $\bullet$
• Revenue** of \$47.44 million, up 2 percent $\bullet$
• R&D Expenditure (fully expensed) of \$9.3 million, up 14% and representing 20% of $\bullet$ Revenue**
• Net Profit Before Tax of \$10.1 million, down 21 percent $\bullet$
• Earnings Per Share of 2.3 cents, down 17 percent $\bullet$
• Dividend Per Share of 2.50 cents, up 25 percent
• Net Profit After tax of \$7.03 million, down 20 percent

*Earnings before interest, tax, depreciation, amortisation and R&D

** Revenue excluding interest

The Company's Executive Chairman, Mr Adrian Di Marco, said "The financial results for the year ended 30 June 2003, is a strong result given the continuing difficult market conditions for the IT industry, and the company's substantial investment program this financial year".

RESULTS SUMMARY

Detail	Actual 2002 \$(000)	Actual 2003 \$ (000)	Variance \$(000)	Increase $\%$
Expenses (incl 3rd party costs)	34,478	38,227	(3,749)	(11%)
EBITDAR	21,562	20,007	(1, 555)	(7%)
R&D	8,135	9,306	(1, 171)	(14%)
EBITDA	13,427	10,701	(2,726)	(20%)
Depreciation & amortisation	836	889	(53)	(6%)
Amortisation of Goodwill	695	596	99	14%

• Brisbane • Sydney • Melbourne • Canberra • Adelaide • Perth • Hobart •

R&D as a percentage of revenue	18%	20%
Net Profit After Tax Margin	19%	15%
Net Profit Before Tax Margin	28%	21%
EBITDA Margin	29%	23%
Debt/Equity	5%	3%
Net Operating Cash Flow	6,831	9,559	2,728	40%
Cash on Hand	23,244	17,287	(5, 957)	(26%)
Adjusted Return on Shareholder's Equity	55%	39%
Dps cents - standard	2.00	2.50	0.50	25%
IEPS cents Pre Amortisation	2.97	2.49	(0.48)	(16%)
EPS cents Reported	2.76	2.30	(0.46)	(17%)
NPAT Reported	8,755	7,030	(1,725)	(20%)
NPAT Pre Amoritisation	9,450	7,626	(1,824)	(19%)
Profit Before Tax	12,844	10,121	(2,723)	(21%)
Net Interest Income	948	905	(43)	(5%)
EBIT	11,896	9,216	(2,680)	(23%)

ANALYSIS OF PERFORMANCE

Though the company's revenue did increase slightly, as previously forecast, the Profit was down, as a direct result of the company's commitment to a substantial investment program a year earlier, as follows:

• Increased investment in R&D to build our next generation software products.
• Increased investment in our regional offices to improve our service delivery. $\bullet$

Once again we are taking a conservative approach to our R&D expenditure, which has seen all R&D costs incurred during the year (\$9.3 million) being fully expensed, representing 20% of revenues. Notwithstanding this I am confident this R&D will provide the platform for our next stage of growth. Technology One continues to be one of only a few Australian software companies that has adopted world best practice and fully expenses all R&D in the year it is undertaken.

Our Operating Cashflow was once again strong, at \$9.6 million dollars, with the company's Cash On Hand for the June 30th period reaching \$17.3 million dollars. Our Return on Equity, adjusted for surplus cash, was also exceptionally strong at 39%.

The Company's balance sheet remains strong, with net assets of \$35.6 million, and a Debt/Equity ratio of 3%.

Increased Dividend

In line with the company's continuing confidence in its future, and our strong focus and commitment to our shareholders, the Company also announced a final dividend of 1.50 cents per share, taking the total dividend for the year to 2.50 cents per share. This is an increase of 25% over the previous year.

Share Buy Back

During the financial year, as part of our capital management program, we were able to buy on market 19.7 million shares, for a total investment of \$4.9 million dollars, at an average share price of 25 cents (compared to 43.5 cents as of August 1st 2003). The Board will continue to review its options in respect of the Share Buy Back going forward.

New Business Continues To be Strong

There was a significant amount of new business signed for the 2003 financial year, with 46 medium to large organisations added to the client list, from a wide variety of industry sectors.

The company continued to increase its market penetration in the Australian Local Government market signing contracts with the following Councils:

• Baulkham Hills Council
• City of Burnside

• City of Port Adelaide/Enfield

• City of Stirling

• Queanbeyan City Council
• Wollongong City Council

The company has also established a strong presence in the New Zealand Local Government market signing contracts with the following Councils:

• Ashburton District Council
• Marlborough DC
• Waikato District Council

The New Zealand office performed strongly during this period, signing ten new clients. In only two years Technology One NZ has successfully established a solid foundation in the New Zealand market and has trebled the number of clients and employees. New clients in New Zealand for the year were as follows:

• Harbourside
• Otago Polytechnic
• PowerNet Limited $\bullet$
• Southland Building Society
• State Services Commission

• Summerset Holdings

• Tertiary Education Commission

• Ashburton District Council $\bullet$
• Marlborough DC $\bullet$
• Waikato District Council

Technology One's Asian office also attracted four new clients:

• Mandom (manufacturing)

• Orbit Software Tech Son Bhd

• DDSB (M) Sdn Mhd (IT)

• Teliti Computers Sdn Bhd

The Project Services division attracted primarily Government clients from across Australia for custom software development projects including:

• Access Queensland
• EPA Queensland (two projects)
• Financial Line Brisbane Pty Ltd
• Legal Aid Queensland
• NSW Police

• Office of State Revenue Queensland $\blacksquare$

• Tasmanian Office of Post Compulsory Education and Training

• State Records South Australia
• Telwater Pty Ltd

Finance One, Technology One's financial management solution, continued to perform strongly against the large multinational competitors. There was also increased traction for the new Payroll/HR product, People One, with the signing of fourteen new contracts.

The remaining new clients for the year are as follows:

• Australian Ethical Investment
• Australian Inland Water
• Australian Wine & Brandy Corporation
• BP-Valley Fuel Pty Ltd
• Darwin Port Corporation
• Department Tourism, Parks, Heritage & The Arts
• $\bullet$ Enertrade
• EPA Victoria

• Family Court of Australia

• $\bullet$ . Insearch

• MGM Grand Darwin
• Minda Incorporated
• Prime Infrastructure
• Public Trustee Queensland $\bullet$
• Queanbeyan City Council $\bullet$
• Red Rooster
• Salvation Army (Southern Region)
• Southern Cross Broadcasting $\bullet$

Research and Development

Today, Technology One has arguably one of the largest software IP (intellectual property) portfolios ever developed in Australia, through our extensive range of application solutions:

• Finance One Financial management and accounting
• Retail One Retail
• Sales One Wholesale and distribution
• People One Human Resources and Pavroll $\bullet$
• Proclaim One Local Government
• Student One Student Administration for Universities

This IP portfolio, coupled with our unique business model, allows us to clearly differentiate ourselves from the majority of IT companies in the industry.

As part of our R&D program, we are continuing to improve our existing products, as well as investing heavily to ensure that our products stay at the leading edge of technology, and do not become obsolete.

Our Connected Intelligence Series

We have this financial year accelerated the development of our next generation of software products. The first of these products will be Finance One: CI (Connected Intelligence), which will be available in mid 2004.

• Brisbane • Sydney • Melbourne • Canberra • Adelaide • Perth • Hobart •

This will be a strong offering based on a new generation technology from Microsoft and will provide significant benefits to our customers and potentially give us the opportunity to take a product leadership position over our competitors.

Outlook

In the short term we expect market conditions to continue to be difficult, though in the next 12 to 24 months we should see a significant improvement.

ABOUT TECHNOLOGY ONE

Technology One is one of Australia's largest publicly listed software companies. Its focus is the design, development, implementation and support of powerful, enterprise wide software applications using Client Server, Internet and eBusiness technologies for the corporate and government sectors.

In particular. Technology One delivers totally integrated, powerful enterprise solutions developed to meet the specific requirements of vertical markets, including:

• Financial Management and Accounting (Finance One)
• Higher Education and Universities (Student One)
• Retail (Retail One) $\bullet$
• Wholesale and Distribution (Sales One)
• Human Resource Management (People One)
• Local Government (Proclaim One)

Technology One also provides large scale, fixed time, fixed price custom software development services through its Project Services Group to meet the exact requirements of a specific customer, using Internet, eBusiness and Client Server technologies.

Technology One has achieved compound profit growth of approximately 38 percent per annum since 1992. Last financial year, the company recorded a net profit before tax of \$10.12 million expensing all R&D costs of \$9.3 million.

Technology One employs approximately 300 staff in Australia, New Zealand and Malaysia. For further information, visit the Technology One website www.TechnologyOneCorp.com.