We recognise that there are concerns in the market that economic factors in the United States will impact the European business climate.

However, CMG has no direct and little indirect exposure to the US services market and currently does not see any feedback from there into its customer base of largely European-headquartered corporations and governments. We continue to expect double digit organic revenue growth in our key ICT services business. Full year profit margins are expected to improve in the UK, Germany and France, while remaining at a high level in the Benelux market.

At the 2000 results announcement on 26 February 2001, we noted that our telecom products business, CMG Wireless Data Solutions (WDS), was experiencing a slow start to the year together with evidence of the deferral of SMS upgrades by telecom operators. In the quarter ended March 2001, WDS reported turnover of GBP21.5m, compared to GBP19.6m in 2000. Consistent with other recent market commentaries, our current pipeline for the second quarter indicates that the anticipated increase in demand is not being realised. As a result, WDS turnover in the first half of 2001 is expected to be a little lower than the same period in 2000. The Board has looked very closely at the WDS business in light of these market conditions and remains fully committed to pursuing its strategy for long term growth.

The GBP60 million expenditure on research & development already announced for 2001 is vital to fuel that future growth. It will be focused on an expanded product portfolio, including:

. Prepaid SMS, enhanced messaging and customer data analysis tools

. EPPIX tier one scaled Customer Care & Billing product, Oracle database support and cross-service rating

. Wireless Service Broker support for security, pull services and i-mode

. Unified Messaging for our Mobile E-mail product

. Enhanced scaleability for Cell Broadcast System and new base station controller support

Maintaining our product investment means that we now expect the WDS business to post an operating loss of around GBP30 million in the first half after charging GBP30 million research and development expenditure.

Worldwide growth in short messaging is continuing according to the GSM Association and others, and January to March 2001 showed traffic levels around 20 billion messages a month – up from 15 billion in December 2000. Historically, the rising trend in text messaging means that the operators have to install further capacity during the year to maintain and enhance this valuable revenue stream. For that reason, WDS revenues have also traditionally increased quarter by quarter through the year with the second half reported figures markedly higher than the first. We are also seeing growth in the development of interactive applications and information services using the SMS carrier which will increase volumes of traffic. However, at this stage, precise timing is difficult to predict and WDS’ performance through the remainder of 2001 will be dependent on a sustained increase in message volumes and consequent licence and system upgrades being delivered.

CMG has taken the following actions in WDS to manage the short term results:

. Sales activities in growth markets in the Far East and Americas are being increased

. Recruitment in WDS to be focused on key specialists

. Consultants who were moved from our ICT services businesses to support the rapid growth in demand for WDS products last year are being re-assigned to active client projects back in their original markets

. Variable overhead costs are being reduced

. CMG Group Director Hugo Schaap will act as Chairman of CMG Wireless Data Solutions with immediate effect

. Wim Rimmelzwaan, previously President of CMG Wireless Data Solutions, remains on the Executive Committee of CMG, focusing on the ICT services operations.