Final Results
Microgen PLC
8 February 2002
FOR IMMEDIATE RELEASE 8 February 2002
Microgen plc ('Microgen')
Preliminary Announcement of Audited Results
for the Year ended 31 December 2001
Highlights
• Strong operating performance
• Profit before tax and goodwill amortisation of £1.7m (2000:
loss of £1.8m)
• Fully diluted adjusted earnings per share (before goodwill
amortisation and prior year tax credits) of 2.6p (2000: loss of 2.7p). Fully
diluted net earnings per share of 2.8p (2000: loss per share of 5.2p).
• Revenue of £21.0m in line with planned reduction of legacy
print services (2000: £25.3m)
• Operating cost reductions of £5.4m excluding goodwill
• Net cash inflow from operations of £3.0m in the period.
Additional cash inflow from a £1.3m prior year tax rebate, producing net free
cash at 31 December 2001 of £12.9m.
• Solid performance from Microgen-Kaisha consultancy division
in the current market environment, delivering revenue of £8.8m and operating
profit of £2.2m.
• Significant improvement in profitability in
Microgen-Telesmart division, producing operating profit of £1.0 million on
revenue of £12.2m.
• e-Services revenue growth of 24%
• Over 30 e-billers now operational with over 1,000 live
recipients, maintaining Microgen's leading position in B2B e-billing service
provision in the UK.
• Acquisition of OST Business Rules for an initial
consideration of £13.9m and associated placing of up to 5.12m shares, announced
separately today, expands the Group's information management solutions
portfolio, provides entry into a sector where Microgen has low penetration and
is anticipated to be earnings enhancing in 2002. For the year to 31 December
2001, OST had revenue of £9.3m producing operating profit of £0.9m.
Martyn Ratcliffe, Executive Chairman commented:
'The benefits from Microgen's disciplined management approach are clearly
evident in the results for 2001. In a much more difficult IT market environment,
the Group has delivered a strong performance, at the upper end of expectations.
'The Microgen strategy based on information management is further enhanced today
with the proposed acquisition of OST Business Rules, bringing compatible skills,
technology and new customer sectors into the Group.'
Contact:
Martyn Ratcliffe, Executive Chairman 01753-847123
Mike Phillips, Group Finance Director
www.microgen.co.uk
Steve Liebmann, Buchanan Communications 0207-466-5000
CHAIRMAN'S STATEMENT
The Microgen Group has delivered a strong performance in 2001, despite a
difficult IT market environment. The Group continues to focus on information
management solutions which enable customers to manage their data to enhance
business processes and information, a model called 'Business Process Integration
'. In furthering this strategy, the proposed acquisition of OST Business Rules
Ltd ('OST') is being announced today, together with a placing of up to 5.12
million shares.
Subject to shareholder approval of the proposed acquisition, Microgen plc will
comprise three operating divisions of broadly similar size:
• Microgen-Telesmart: Focused on added-value transactional
services in billing, payment and hosted database management, where Microgen adds
value by processing, distributing, storing and analysing data for a wide variety
of applications, including the Group's market-leading business-to-business ('B2B
') e-billing service.
• Microgen-Kaisha: The Group's consultancy division applies
data warehousing and application integration techniques to deliver information
from customer data, typically in customer relationship management, knowledge
management or business intelligence environments.
• Microgen-OST: A leading provider of enterprise integration
solutions to major financial institutions, using software developed by OST
enabling user-defined business rules, to integrate disparate front, middle and
back office systems.
FINANCIAL SUMMARY
For the year ended 31 December 2001, Microgen generated profit before tax and
goodwill amortisation of £1.7 million from revenue of £21.0 million (2000: loss
of £1.8 million on revenue of £25.3 million). The decline in revenue was due to
the continuing reduction in legacy print services, being partially offset by
growth in the strategic business operations. Operating costs having been tightly
controlled during the year and reduced by £5.4 million, excluding goodwill and
the exceptional costs incurred in 2000. Headcount at 31 December 2001 was 233
(2000: 288)
The Group produced a net profit on ordinary activities after tax and goodwill
amortisation of £1.4 million (2000: net loss £2.7 million) and a fully diluted
adjusted earnings per share (before goodwill amortisation and prior year tax
credits) of 2.6p (2000: loss of 2.7p). Diluted earnings per share of 2.8p
including a one-off tax credit of £1.5 million, equivalent to 3.0p per share
(2000: loss per share of 5.2p).
The Group continues to maintain a strong balance sheet and positive operating
cash flow with net free cash of £12.9 million at 31 December 2001. Together with
the proceeds from the share placing, a proportion of this cash will be used to
finance the proposed acquisition of OST. After careful consideration, the Board
has concluded that it is in the best interests of Microgen and its shareholders
to continue to invest in the strategic development of the Group and are not
therefore recommending a dividend (2000: 1.0p).
MICROGEN-TELESMART
For the year ended 31 December 2002, revenue from the division was £12.2
million, producing an operating profit of £1.0 million before Group overhead
(2000: revenue of £14.5 million produced an operating profit of £0.1 million).
Revenue and profit for the year include £0.25 million of royalty income earned
between January and September 2001, derived under the terms of the 2000
agreement for the disposal of the COM business. The revenue decline occurred in
the legacy print business and the Board anticipate that print revenue will
continue to decline during 2002 as part of the ongoing managed transition
process. Annual revenue growth in hosted e-services (database management,
payment and billing) was 24%.
The division continues to transition customers from legacy output into
electronic services, primarily on a transactional hosted service model using
database management techniques. Investment in this business has continued during
the year, particularly in the billing sector where Microgen continues to lead
the market in B2B e-billing services. The Group now has over 30 billers with in
excess of 1,000 recipients transacting billing and related documentation via
Microgen's hosted service model.
MICROGEN-KAISHA
The Group's consultancy division, had another solid year. Acquired in April
1999, the business was repositioned to focus on information management projects
using data warehousing and application integration techniques, to deliver
customer relationship management, knowledge management and business intelligence
solutions. This positioning, together with the Group's disciplined approach, has
enabled the division to maintain high utilisation rates which have produced the
strong operating performance despite the more difficult market environment.
Revenue for the division was £8.8million, producing an operating profit of £2.2
million before Group overhead and goodwill amortisation, equivalent to a 25%
operating margin. (2000: revenue of £8.0 million, operating profit of £2.2
million).
ACQUISITION
The Board is today announcing the proposed acquisition of OST Business Rules
Limited and details are provided under a separate announcement. OST provides
enterprise application integration ('EAI') solutions, incorporating user-defined
business rules. To date, OST has primarily applied their technology to
integrating the front, middle and back office systems of major financial
institutions, a sector where Microgen has historically had low penetration and
cross-selling opportunities are anticipated in the future. Similarly, the Board
believe that there are areas in the existing businesses where the technology and
skills developed by OST could be applied.
The initial consideration is £13.9 million comprising £6.6 million in cash and/
or loan notes and £7.3 million in new Microgen shares. Subject to performance
criteria, including annualised EBIT of between £1.3 million and £1.8 million,
deferred consideration may be payable up to a maximum of £5.7 million. Since
being formed in 1998, OST has been consistently profitable and has delivered
strong revenue growth. For the year ended 31 December 2001, OST had revenue of
£9.3 million and profit before tax of £0.9 million.
FUTURE PROSPECTS
Despite the more difficult market environment, the disciplined management
approach adopted by the Board has enabled the Group to deliver a solid
performance in 2001. This disciplined style will be maintained in the year
ahead. While the Board do not envisage near-term improvement in the IT market,
the progress achieved in the two operating divisions during the past year is
anticipated to continue.
The proposed acquisition of OST Business Rules will provide greater scale and
new opportunities for the Group, using similar technical and process skills.
Upon completion of the OST acquisition, and based on results for 2001,
businesses acquired or developed during the past three years would account for
approximately 75% of the Enlarged Group revenue on an annualised basis.
Furthermore, the Board believe that the IT sector is likely to consolidate and
the Board will continue to explore strategic opportunities for the further
development of Microgen.
In summary, the Board are pleased with the performance and development of the
Group during the past year.
Martyn Ratcliffe 8 February 2002
Chairman
MICROGEN PLC
Group Profit and Loss Account
for the year ended 31 December 2001
Audited Audited
Year ended Year ended
31 Dec 2001 31 Dec 2000
Notes £'000 £'000
Turnover
- Continuing operations 21,009 22,578
- Discontinued operations - 2,766
1a 21,009 25,344
Operating costs (21,329) (26,711)
Operating loss
Continuing operations
-Operating profit before goodwill amortisation 1,112 415
-Goodwill amortisation (1,432) (1,328)
(320) (913)
Discontinued operations - (454)
Operating loss 1b (320) (1,367)
Exceptional items - discontinued operations 1c - (2,323)
Loss on ordinary activities before interest and tax (320) (3,690)
Net interest 571 604
Profit/(loss) on ordinary activities before tax
Profit/(loss) on ordinary activities before tax and goodwill
amortisation 1,683 (1,758)
Goodwill amortisation (1,432) (1,328)
Profit/(loss) on ordinary activities before tax 251 (3,086)
Tax on profit/loss on ordinary activities 2 1,198 358
Profit/(loss) on ordinary activities after taxation 1,449 (2,728)
Dividends 3 - (512)
Retained profit/(loss) transferred to reserves 1,449 (3,240)
Earnings/(loss) per share (after goodwill amortisation) 4
Basic 2.8p (5.4)p
Diluted 2.8p (5.2)p
Adjusted earnings per share (before goodwill amortisation and
prior years' tax credit) 4
Basic 2.6p (2.8)p
Diluted 2.6p (2.7)p
Dividend per share - 1.0p
Statement of total recognised gains and losses 2001 2000
£000 £000
Profit/(loss) on ordinary activities after taxation 1,449 (2,728)
Exchange rate adjustments - 12
Total recognised gains and losses for the period 1,449 (2,716)
MICROGEN PLC
Consolidated Balance Sheet
Audited Audited
31 Dec 2001 31 Dec 2000
Notes £'000 £'000
Fixed assets
- Intangible assets 24,599 26,665
- Tangible assets 1,215 2,044
- Investment in own shares 114 252
25,928 28,961
Current assets
- Stock - raw materials and consumables 91 122
- Debtors 5 3,423 5,023
- Cash at bank and in hand 13,168 13,871
16,682 19,016
Creditors: due within one year 6(a) (6,074) (12,236)
Net current assets 10,608 6,780
Total assets less current liabilities 36,536 35,741
Creditors: due after more than one year 6(b) - (295)
Provisions for liabilities and charges 7 (1,273) (1,708)
Net assets 35,263 33,738
Equity capital and reserves
- Called up share capital 8 2,561 2,560
- Share premium account 9 17,594 17,569
- Other reserves 9 300 250
- Profit and loss account 9 14,808 13,359
Equity shareholders' funds 35,263 33,738
MICROGEN PLC
Consolidated Cash Flow Summary
for the Year Ended 31 December 2001
Audited Audited
Year ended Year ended
31 Dec 2001 31 Dec 2000
Notes £'000 £'000
Net cash flow from operating activities 10 (i) 2,997 1,520
Returns on investments and servicing of finance
Interest received 702 928
Interest paid (87) (229)
Interest element of finance lease rental payments (16) (95)
599 604
Taxation
Tax paid in respect of the current period (313) -
Tax (paid)/received relating to prior years (360) 102
Tax refund 1,346 -
673 102
Capital expenditure and financial investment
Purchase of tangible fixed assets (559) (736)
Sale of tangible fixed assets 9 233
(550) (503)
Acquisitions and disposals - (2,675)
Equity dividends paid to shareholders (512) (509)
Cash inflow / (outflow) before use of liquid resources and 3,207 (1,461)
financing
Management of liquid resources 1,085 4,040
Financing
Issue of share capital 2 124
Redemption of loan notes (2,994) (1,381)
Payment of deferred consideration (350) (1,806)
Capital element of finance lease rental payments (568) (429)
(3,910) (3,492)
Increase / (decrease) in cash in the period 10 (ii) 382 (913)
Notes: -
1. Turnover, profit and exceptional items
Audited Audited
Year Ended Year Ended
31 Dec 2001 31 Dec 2000
£'000 £'000
1 (a) Turnover
Continuing operations
- Microgen-Telesmart 12,229 14,533
- Microgen-Kaisha 8,780 8,045
21,009 22,578
Discontinued operations - 2,766
21,009 25,344
1 (b) Operating profit / (loss)
Continuing operations
- Microgen-Telesmart 1,025 141
- Microgen-Kaisha 2,204 2,198
3,229 2,339
- Group overhead (2,198) (2,255)
1,031 84
Movement on property provision 81 331
Operating profit from continuing operations before
goodwill amortisation 1,112 415
Goodwill amortisation
- Microgen-Telesmart (180) (75)
- Microgen-Kaisha (1,252) (1,253)
(1,432) (1,328)
Operating loss after goodwill amortisation from
continuing operations (320) (913)
Operating loss on discontinued operations - (454)
Operating loss after goodwill amortisation (320) (1,367)
1 ( c ) Exceptional items - discontinued operations
Loss on disposal of discontinued operations - (240)
Loss on disposal of fixed assets - discontinued operations - (1,006)
Restructuring costs - discontinued operations - (1,077)
- (2,323)
2. Taxation
The taxation credit for the year comprises:
Audited Audited
Year ended Year ended
31 Dec 2001 31 Dec 2000
£'000 £'000
UK corporation tax (charge)/credit (346) 358
Adjustment in respect of prior years 1,544 -
1,198 358
The effective rate of tax for the group on its profit on ordinary activities
before goodwill is 20.6% (2000: 20.4%). At 31 December 2001 the UK group had a
potential deferred tax asset of £737,000 (2000: £1,423,000) due to timing
differences relating to accounting provisions and capital allowances which has
not been recognised in the accounts.
In December 2001 the Company announced that it had agreed Microgen UK Limited's
1998 corporation tax computation resulting in the prior years' tax credit of
£1,544,000.
The principal issues that gave rise to the tax credit were:
(1) the agreement with the Inland Revenue of March 1982 valuations of shares
in Microgen UK Limited's overseas subsidiaries, Capella AB and Eurocom Depora,
disposed of in 1998 in the first phase of the strategic restructuring of the
Group; and
(2) a provision for obligations under surplus property leases made in 1998
that is now an allowable deduction for tax purposes.
The latter has significantly reduced the Group's deferred tax asset. The
decrease in the deferred tax asset in the year was £686,000 (2000: increase
£103,000).
3. Dividends
As explained in the Chairman's Statement the Board do not recommend the payment
of a final dividend (2000: 1.0 pence). The total dividend for the year will be
nil pence per share (2000: 1.0 pence).
4. Earnings per share
Earnings Basic Diluted
EPS EPS
£'000 Pence Pence
Profit on ordinary activities after tax 1,449 2.8 2.8
Goodwill amortisation 1,432 2.8 2.8
Prior years' tax credit (1,544) (3.0) (3.0)
Profit on ordinary activities after tax but before goodwill
amortisation 1,337 2.6 2.6
The above basic earnings per share calculations are based on the weighted
average number of shares in issue during the period of 50,848,517 (2000:
50,617,742). Diluted earnings per share calculations are based on 51,579,616
(2000: 52,386,756) ordinary shares calculated as the basic weighted average
number of ordinary shares plus 731,099 (2000: 1,769,014) dilutive share options.
5 Debtors
Audited Audited
31 Dec 2001 31 Dec 2000
£'000 £'000
Trade debtors 2,449 3,911
Corporation tax recoverable 125 369
Other debtors 258 122
Prepayments and accrued income 591 621
3,423 5,023
6 Creditors
Audited Audited
31 Dec 2001 31 Dec 2000
(a) due within one year £'000 £'000
Finance leases - 358
Trade creditors 642 1,559
Corporation tax - 769
Other taxes and social security costs 854 835
Other creditors 1,617 834
Deferred consideration 150 773
Loan notes payable 225 3,219
Accruals 2,586 3,377
Proposed dividend - 512
6,074 12,236
(b) due after more than one year
Other taxes and social security costs - 85
Finance leases - 210
- 295
7 Provisions for liabilities and charges
Provisions for liabilities in respect of surplus properties.
Audited Audited
31 Dec 2001 31 Dec 2000
£'000 £'000
Balance brought forward 1,708 2,438
Credited to the profit and loss account (243) (748)
Charged to profit and loss account 162 417
Utilised in the year (396) (399)
Amortisation of discount 42 -
Balance carried forward 1,273 1,708
8 Share Capital
The movement in authorised and issued Ordinary Share Capital of 5 pence each
during the period is detailed below.
Authorised Issued and fully paid
Number Amount Number Amount
At 1 January 2001 70,000,000 £3,500,000 51,202,281 £2,560,114
Shares issued during the year:
Under savings related share option scheme 1,982 99
To the vendors of Microgen - Kaisha 10,690 535
At 31 December 2001 70,000,000 £3,500,000 51,214,953 2,560,748
9 Movement on reserves
Share --------Profit and Loss Account--------
Premium Other Revenue Goodwill
Account reserves Reserve Reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2001 17,569 250 25,003 (11,644) 13,359
Retained profit for the year - - 1,449 - 1,449
Shares issued during the year
under savings related share
option scheme 2 - - - -
Shares issued to the vendors of
Microgen - Kaisha 23 - - - -
Charges related to positive
share price movements - 50 - - -
At 31 December 2001 17,594 300 26,452 (11,644) 14,808
10 Notes to the Consolidated Cash Flow Statement
(i) Reconciliation of operating loss to net cash inflow from operating
activities
Audited Audited
year ended year ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Operating loss (320) (1,367)
Depreciation 1,365 1,832
Goodwill amortisation 1,432 1,328
Loss on sale of fixed assets 14 24
Other non-cash movements 146 (123)
Decrease in stocks 31 158
Decrease in debtors 1,356 535
Decrease in creditors (1,027) (867)
Net cash inflow from operating activities 2,997 1,520
(ii) Reconciliation of net cash flow to movement in funds/(debt)
Audited Audited
Year ended Year ended
31 Dec 2001 31 Dec 2000
£'000 £'000
Increase/(decrease) in cash in the period 382 (913)
Cash outflow from movement in term deposits (1,085) (4,040)
Cash outflow from decrease in lease financing 568 429
Change in net funds/(debt) resulting from cash flows (135) (4,524)
Redemption of loan notes 2,994 1,381
Disposal of leases from discontinued operations - 18
Movement in net funds in the period 2,859 (3,125)
Net funds at beginning of the period 10,084 13,209
Net funds at end of period 12,943 10,084
iii) Analysis of net funds
At At
1 Jan 2001 Cash flow 31 Dec 2001
£'000 £'000 £'000
Cash at bank and in hand 13,871 (703) 13,168
Debt due within 1 year (3,219) 2,994 (225)
Finance leases (568) 568 -
Total 10,084 2,859 12,943
11 Statement by the directors
The figures in the consolidated Profit and Loss Account and Balance Sheet do not
amount to full accounts within the meaning of Section 254 of the Companies Act
1985.
The Annual Report for the period ended 31 December 2001 will be posted to
shareholders in due course and will also be available on the investor relations
page of our web site (www.microgen.co.uk). Further copies will be available on
request and free of charge from the Company Secretary at 11 Park Street,
Windsor, Berkshire SL4 1LU.
The comparative figures for 2000 have been extracted from the annual report for
the year ended 31 December 2000.
This information is provided by RNS
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