FOR IMMEDIATE RELEASE                                                            5 SEPTEMBER 2008

smartFOCUS Group plc

INTERIM RESULTS 

For the six months ended 30 June 2008

smartFOCUS Group plc (AIM : STF) ("smartFOCUS", the "Company" or the "Group), the international provider of high performance multi-channel marketing software, announces its unaudited interim results for the six months ended 30 June 2008 and the acceleration of its strategy to deliver its multi-channel marketing software in the Software as a Service ("SaaS") model in Europe.  

Interim Results

• Loss before tax (and non-recurring costs) of £0.6m (2007 : £0.2m profit)

• Revenue of £5.0m (2007 : £5.0m)

• Net cash of £1.1m (2007 : £0.7m)
• Recurring revenue increased to 46% of total revenues (2007: 41%)

• Significant new clients wins including Chelsea FC, Tenpin, the New Zealand Herald and EasyJet

• New partner territories established in Japan, with 9 new partners signed in Europe and North America

• Acquisition of Astech Intermedia to build US presence

Commenting on the summary and outlook, Chris Underhill, CEO of smartFOCUS said:

"smartFOCUS has experienced difficult trading conditions, specifically in Europe, with delays in the release of budgets for large capital projects, predominantly due to the economic climate. This has created challenges in closing our pipeline for high value, multi-channel marketing perpetual license software. Therefore, the Company is now accelerating its strategy to migrate from the perpetual license model to a SaaS model in Europe. 

We expect this to facilitate our clients' ability to move ahead with smartFOCUS and, in the short term, to assist in the closure of a number of prospects in our sales pipeline. This model change will inevitably impact near term revenues and profit; however, over the medium and long term this strategy will greatly increase the Group's recurring revenues and significantly improve overall revenue quality and visibility."

- Ends -

Enquiries:

smartFOCUS Group plc                                                                                 Tel No:  0117 943 5800    

Chris Underhill, Chief Executive                                                                         www.smartfocus.com       

Neil Thomas, Finance Director 

Buchanan Communications                                                                             Tel No: 020 7466 5000

Lisa Baderoon

Arbuthnot Securities Limited                                                                            Tel No: 020 7012 2000

Tom Griffiths

CHAIRMAN'S STATEMENT

The first half of 2008 was a difficult trading period for the Group, specifically in Europe, where we primarily deliver our high value multi-channel marketing software as a perpetual license. The Company continued to secure preferred supplier status with prospective clients in large software projects, and win these decisions at an expected level.  However, we have experienced challenges in converting these decisions to firm contracts and revenue due to the prevailing economic sentiment.

Despite the trading difficulties experienced in the first half, the Board believes the Company has continued to make good progress; significantly, the Group has continued to develop its international franchise with the acquisition of Astech Intermedia in May 2008, which expands our North American operations. Further,   50 new clients and partners were secured in Japan, Europe, North America and New Zealand, mainly for its software as a service ("SaaS") offering.

The acquisition of Astech Intermedia, the leader in data-driven marketing solutions for the newsmedia industry, further extends the Company's SaaS operational capability, providing a strong platform to grow in North America. The Company's email and digital operation, smartFOCUS Digital, continues to grow strongly and profitably, with revenue growth in the first half of 2008 above 30%.

The Company's strategy continues to focus on delivering more of its multi-channel marketing software in the SaaS model with the aim of developing a sustainable growth business that delivers significantly increased recurring revenues, greatly improved overall revenue quality, and enhanced visibility over the medium term. 

The Company is therefore accelerating this strategy. It will move to deliver its higher value multi-channel marketing software in the SaaS model directly in Europe and away from its traditional perpetual license model and the risk typically associated with such large software contracts. Executing this change should:

• deliver a significant increase in the Company's recurring revenues, greatly improving revenue quality and visibility over the medium term;

• shorten the sales cycle and the decision making process; 

• increase the competitiveness of the Company's offering, thereby broadening the market and  supporting long term growth;

• reduce the operational cost to serve revenue and deliver benefits from on-going efficiencies;

• reduce barriers to client adoption enabling increased new business wins when compared  to the traditional perpetual license model; and

• address short term challenges for clients considering investing in high value capital projects in a difficult economic climate. 

Accelerating this strategy change in 2008 will inevitably impact near term profit and revenue growth as the Company migrates from its current perpetual software revenue model; we will also incur exceptional costs attributable to the reorganisation of operations.

The Board is confident that its strategy will: mitigate future timing risks associated with securing large one-off perpetual software licenses; develop a sustainable growth business with greatly improved overall revenue quality and visibility over the medium term; and reduce the impact of any future economic pressure.

The Board wishes to thank the Company's shareholders, clients and partners for their on-going support and the outstanding contribution by our management and staff in difficult economic and trading conditions.

J Charles

Chairman

05 September 2008

CHIEF EXECUTIVE'S STATEMENT

smartFOCUS experienced difficult trading conditions in the first six months of the year. Revenues were £5.0m (2007: £5.0m) delivering a loss before tax of £0.6m (2007: £0.2m profit). The cash position at 30 June 2008 was £1.1m (2007: £0.7m); after paying £0.5m in cash for the acquisition of Astech Intermedia, the leader in data-driven marketing solutions for the newsmedia industry, in May 2008.

The acquisition of Astech Intermedia, following a productive five-year business relationship, further extends the Company's SaaS operational capability and provides a strong platform for growth in North America. The combined North American operation is well positioned to deliver positive earnings and recurring revenue in excess of 60% of its revenues in 2008 and beyond.

Over 50 new clients and partners were contracted in the period, the majority for SaaS solutions. Significant new client wins included Chelsea FC, Tenpin and the New Zealand Herald. A new partner relationship was established with Brainpad in Japan; nine new partners were signed in Europe and North America further extending the Company's international distribution.

smartFOCUS Digital continued to grow well in the first half. The continued adoption of email and digital software, and the use of these cost effective channels, is expected to continue to deliver strong profitable growth to the Company. Major new users included EasyJet, Datran Media in North America and Nextedia in France.

Progress in software platform development continues to support the Company's strategy to develop a leadership position in multi-channel marketing software for the mid-corporate market, delivered in the SaaS model.

The Company is accelerating its strategy to deliver its high value multi-channel marketing software in the SaaS model in Europe, rather than the traditional perpetual license model. This will enable clients to move forward with projects and the Company to close a number of prospects in its pipeline in the short term. 

Delivering this change in Europe will inevitably impact near term profit and revenue growth as the Company migrates to the SaaS model. A re-organisation cost will be incurred to align European operations to the strategy, which is expected to be completed in 2008. This will deliver ongoing benefit in the form of an improved expense to revenue ratio due to efficiencies realisable in the move to the SaaS model. 

The SaaS model secures new clients that pay for usage of its software on a term basis, rather than a one-off payment for software ownership; this increases recurring revenue while reducing the risks typically associated with large software contracts. The Company has successfully established the operational capability and expertise to deliver SaaS, and currently serves nearly half of its 600 customers in SaaS for email and digital solutions in Europe and analysis software in North America. 

Clients can access the Company's software over a network, served by the Company's own infrastructure or that of its partners, on a term usage contract. This negates the need for marketing departments to secure capital budgets and minimises the need for IT resources; this lowers both the overall cost of ownership and entry cost for clients when compared to a perpetual license model.

Industry analysts Forrester forecast that as a delivery model SaaS will grow by 29% CAGR from 2007 to 2013, (Forrester "Forecast: Global Enterprise Marketing Platforms: 2007 To 2013"). 

Summary & Outlook

smartFOCUS continues to see clients move to outsource non-core operations in order to deliver reductions in the cost and time to market, while marketing departments continue to focus on improving results. The Directors are confident that the Company's multi-channel marketing software, delivered in the SaaS model, addresses these needs and expect the marketplace to respond positively to this competitive offering.

We are making progress towards our ambition of becoming the leading multi-channel marketing SaaS provider in the mid-corporate market internationally. Our strategy enables the Company to build more sustainable growth and returns, through increased recurring revenue and improved revenue visibility over the medium term. Moving forward the SaaS model will mitigate timing risks associated with securing high value perpetual licenses and reduces the impact of any future economic pressure. 

C Underhill

Chief Executive

05 September 2008

Consolidated income statement

 For the six months ended 30 June 2008

Consolidated balance sheet

As at 30 June 2008

Consolidated cash flow statement

 For the six months ended 30 June 2008

Consolidated statement of changes in equity

 For the six months ended 30 June 2008