LETTER FROM THE CEO

Welcome to the Redstone Investor Centre.  Since taking the role of CEO in the summer of 2005 there have been major changes at Redstone and I believe the Group is now in a strong position within the rapidly converging markets of IT services and telecoms. 

The level of activity undertaken has been high and to an observer the rationale behind the various acquisitions and strategies may not be apparent, my aim in this letter is to explain our strategy for the Group and Redstone’s current position.   

The last financial year focused on preparing Redstone for growth and success in the converging telecommunications and IT services industries.  Strategic acquisitions were undertaken that strengthened the existing divisions and provided the Group with the required mobile offering – Redstone Mobile.    

You will find within the investor centre an overview of the recent history of Redstone and the rationale behind each acquisition.  We made the acquisitions of Symphony and IDN for two main reasons; to add a mobile division and to utilise underused capacity in Redstone Telecom - our fixed line division.  By bringing the Tolerant group of companies into Redstone we extended our network security services for Redstone Managed Solutions.  

The most recent acquisition of Comunica is central to our strategy of building our Converged Solutions offering.  Redstone Converged Solutions has already installed complete IP solutions in large infrastructure projects such as the Bullring shopping centre in Birmingham and the larger revenues, longer contract period, along with higher margins make these contracts very appetising to Redstone.  Comunica specialised in these form of projects, building excellent relationships and expertise in this area.  

Focusing on large Converged Solutions projects is proving fruitful, in 2006 Redstone signed the largest contract in the Group’s history – the Lancashire Building Schools for the Future project for IP installations in new schools, worth up to £16m.  We have also been awarded preferred bidder status on the White City shopping centre project, due to be Europe’s largest shopping centre and we are actively bidding on further infrastructure projects, both in the public and private fields.

I believe that we have vastly strengthened Redstone’s ability to service both its existing markets and built a good base with which to move further into the fast developing ICT market.  We have also appointed a Director to oversee cross-selling within the Group, this could be a valuable avenue for Redstone as we have a large number of SME and Corporate customers who currently only deal with one or two of our divisions.  The move from traditional telecommunication technologies to modern converged solutions will also benefit the Group, although customers of Redstone Telecom will decline, we hope to migrate these customers to Redstone Converged Solutions.  

The past two years have seen Redstone move from a troubled “old school” telecom firm, to a modern provider of Information & Communication Technology, with over half our revenues now coming from IT services.  There has been increased interest from the investment community in the Group and our profile within the city has improved greatly.  I am happy with the position that Redstone has achieved and hope to continue to execute our strategy successfully.

If you are unable to find the information that you require please contact Redstone’s financial public relations team at ICIS, on 0207 651 8688 or email tom@icisnet.com

Please be aware that ICIS and Redstone plc are not able to give investment advice of any kind. Any enquiries of this nature should be made to an FSA regulated stock broker or financial advisor.