Interim Results

Microgen PLC 18 July 2001 FOR IMMEDIATE RELEASE 18 July 2001 MICROGEN plc ('Microgen') INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001 HIGHLIGHTS * Profit before tax and goodwill amortisation of £0.8 million (2000: loss of £2.2 million) * Adjusted eps (excl. goodwill amortisation) of 1.5p (2000: loss per share of 3.6p) * Positive operating cash flow of £1.6 million in the period producing net free cash at 30 June of £10.1 million * Consultancy revenue growth of 25% with operating profit margin of 24% * Hosted e-services revenue growth of 25%. * Continued investment and growth in B2B e-billing with 25 billers and over 600 recipients connected to Microgen's hosted service. Martyn Ratcliffe, Chairman, commented : 'Throughout the recent turmoil in the IT sector, the Board has maintained disciplined financial management enabling both operating divisions to deliver a solid performance during the first half of the year. In the current market environment, the balance between profitability, investment and revenue growth in our strategic sectors is very satisfactory.' Contacts : Martyn Ratcliffe, Chairman 01753-847123 Mike Phillips, Group Finance Director Steve Liebmann, Buchanan Communications 020-7466-5000 MICROGEN plc INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001 CHAIRMAN'S STATEMENT The performance of the Group in the first six months of the year has been very satisfactory with the return to profitability, following the restructuring in 2000. The growth in the strategic sectors is particularly pleasing considering the current IT market environment and the overall performance is affirmation of the Board's commitment to disciplined financial management. FINANCIAL PERFORMANCE In the six months ended 30 June 2001, Microgen generated operating profit before goodwill amortisation of £0.5 million (2000 : £0.0 million) from revenue of £11.0 million (2000 : £11.0 million from continuing operations). Profit before tax and goodwill amortisation was £0.8 million (2000 : loss of £ 2.2 million), producing an adjusted earnings per share (excluding goodwill amortisation) of 1.5p (2000 : loss per share of 3.6p ). During the period, the Group produced positive cash flow of £1.6 million, including a contribution of £0.7 million due to improved debtor management and continues to have a robust balance sheet with net free cash of £10.1 million at 30 June 2001 (30 December 2000 : £8.4 million). As previously announced, the Group does not pay interim dividends (2000: 0.0 p). MICROGEN-TELESMART The consolidation of the billing services (legacy and e-billing), payment solutions and hosted database services operations into a single division, renamed Microgen-Telesmart, has enabled increased efficiency and cost reductions while developing a larger customer base for cross-marketing of Group services. Revenue in the division was £6.3 million (2000 : £7.2 million) producing operating profit before Group overhead of £0.5 million (2000 : £0.3 million), including a one-off benefit of £0.1 million from a discontinued legacy business. The planned decline in revenue occurred in the legacy print & mail services through the restructuring and associated account rationalisation in 2000, although there was underlying organic growth of 11% from the retained account base and new customer acquisition. In particular, the e-services revenue grew by 25 % compared with the first half of 2000. In the B2B e-billing business, Microgen now has 25 companies enabled with over 600 recipients having access to on-line invoices, statements, remittance advice notes and related billing documentation via Microgen's hosting infrastructure. MICROGEN-KAISHA Microgen Kaisha, the Group's consultancy division, had a good start to the year with revenue growth of 25%, compared to the first half of 2000, despite the widely reported deterioration in the IT consultancy sector. Revenue for the division was £4.7 million producing an operating profit before Group overhead and goodwill amortisation of £1.1 million, equivalent to an operating margin of approximately 24%. (2000 : revenue of £3.8 million and operating profit before Group overhead and goodwill amortisation of £0.9 million). PROSPECTS The Board's decision last year to accelerate the transition of the Group towards IT consultancy, focused on information management, and value-added e-services has enabled Microgen to return to profitability despite the recent slowdown in the IT market. These results demonstrate the success of the Board's strategy of balancing profitability, investment and growth. In terms of corporate development, the Board continue to explore merger and acquisition opportunities, but maintain a prudent approach when evaluating such activities. In summary, the Board are pleased with the solid performance of the Group in the first half of the year and are cautiously optimistic for the year as a whole. Martyn Ratcliffe 18 July 2001 Chairman GROUP PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2001 Notes Unaudited Unaudited Audited six six Year months months ended ended ended 31 Dec 30 June 30 June 2000 2001 2000 £'000 £'000 £'000 Turnover 1 (a) - continuing operations 11,020 10,994 22,578 - discontinued operations - 2,766 2,766 11,020 13,760 25,344 Operating costs (11,226) (14,877) (26,711) Operating profit/(loss) Continuing operations - Operating profit/(loss) before goodwill 1 (b) 511 (2) 415 amortisation - Goodwill amortisation 1 (b) (717) (627) (1,328) (206) (629) (913) Discontinued operations 1 (b) - (488) (454) Operating loss after goodwill amortisation 1 (b) (206) (1,117) (1,367) Exceptional Items - discontinued operations 1 (c) - (2,037) (2,323) Loss on ordinary activities before interest (206) (3,154) (3,690) and tax Net interest 265 346 604 Profit/(Loss) on ordinary activities before 59 (2,808) (3,086) tax Tax on profit/(loss) on ordinary activities 2 (14) 351 358 Profit/(Loss) on ordinary activities after 45 (2,457) (2,728) taxation Dividends - - (512) Retained profit/(loss) transferred to 45 (2,457) (3,240) reserves Earnings per share 3 Basic 0.1p (4.9)p (5.4)p Diluted 0.1p (4.7)p (5.2)p Adjusted earnings per share (before 3 goodwill amortisation) Basic 1.5p (3.6)p (2.8)p Diluted 1.5p (3.5)p (2.7)p Dividend per share Nil Nil 1.0p GROUP BALANCE SHEET AS AT 30 JUNE 2001 Unaudited Unaudited Audited as at as at as at 30 June 2001 30 June 2000 31 Dec 2000 Notes £'000 £'000 £'000 Fixed assets - Tangible 1,587 2,224 2,044 - Intangible 25,949 23,650 26,665 - Investments 192 312 252 27,728 26,186 28,961 Current assets - Stocks - raw materials 131 171 122 - Debtors 4 4,249 5,090 5,023 - Cash at bank and in hand 11,556 18,091 13,871 15,936 23,352 19,016 Creditors: due within one year 5 (8,326) (13,966) (12,236) Net current assets 7,610 9,386 6,780 Total assets less current 35,338 35,572 35,741 liabilities Creditors: due after more than one 6 (115) (105) (295) year Provisions for liabilities and 7 (1,366) (1,796) (1,708) charges Net assets 33,857 33,671 33,738 Equity capital and reserves - Called up share capital 8 2,561 2,544 2,560 - Share premium account 9 17,592 16,785 17,569 - Other reserves 9 300 200 250 - Profit and loss account 9 13,404 14,142 13,359 Equity shareholders' funds 33,857 33,671 33,738 GROUP CASH FLOW SUMMARY FOR THE SIX MONTHS ENDED 30 JUNE 2001 Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 2001 2000 2000 Notes £'000 £'000 £'000 Net cash flow from operating activities 10(i) 1,555 49 1,520 Returns on investments and servicing of 240 305 604 finance Taxation (366) 89 102 Capital expenditure and financial (145) (71) (503) investment Acquisitions and disposals - (324) (2,675) Equity dividends paid to shareholders (512) (509) (509) Cash inflow/(outflow) before use of liquid 772 (461) (1,461) resources and financing Management of liquid resources 2,008 (766) 4,040 Financing 10(ii) (3,087) (272) (3,492) Decrease in cash 10(iii) (307) (1,499) (913) NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001 1. Turnover, profit and exceptional items Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 2001 2000 2000 £000 £000 £000 1 (a) Turnover Continuing operations - Microgen-Telesmart 6,293 7,223 14,533 - Microgen-Kaisha 4,727 3,771 8,045 11,020 10,994 22,578 Discontinued operations - 2,766 2,766 11,020 13,760 25,344 1 (b) Operating profit/(loss) Continuing operations - Microgen-Telesmart 508 257 141 - Microgen-Kaisha 1,115 901 2,198 1,623 1,158 2,339 - Group overhead (1,112) (1,510) (2,255) 511 (352) 84 Movement on property provision - 350 331 Operating profit from continuing operations before goodwill amortisation 511 (2) 415 Goodwill amortisation - Microgen-Telesmart (90) - (75) - Microgen-Kaisha (627) (627) (1,253) (717) (627) (1,328) Operating loss after goodwill amortisation from (206) (629) (913) continuing operations Discontinued operations - (488) (454) Operating loss after goodwill amortisation (206) (1,117) (1,367) 1 ( c ) Exceptional items - discontinued operations Loss on disposal of discontinued operations - (240) (240) Loss on disposal of fixed assets - discontinued - (1,024) (1,006) operations Restructuring costs - discontinued operations - (773) (1,077) - (2,037) (2,323) 1 (d) Profit/(loss) before tax and goodwill amortisation Profit/(loss) on ordinary activities before tax 59 (2,808) (3,086) Add back goodwill amortisation 717 627 1,328 Profit/(loss) before tax and goodwill 776 (2,181) (1,758) amortisation 2. Taxation Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 2001 30 June 2000 31 Dec £000 £000 2000 £000 UK corporation tax (charge)/credit at (14) 351 358 30% The effective rate of tax for the Group on its profit on ordinary activities after tax but before goodwill is 1.8% (2000:11.3%). At 30 June 2001, the Group had a potential deferred tax asset of £1,250,469 due to timing differences relating to accounting provisions and capital allowances which, in accordance with UK GAAP, has not been recognised in the accounts. The movement in the potential deferred tax asset in the period was £173,000 and without this movement the effective rate of tax would have been 24.5%. The remainder of the difference is due to permanent timing differences. 3. Earnings per share Unaudited Unaudited Audited Six months Six Year ended months ended 30 June ended 31 Dec 2001 30 June 2000 2000 Basic earnings per share 0.1p (4.9)p (5.4)p Diluted earnings per share 0.1p (4.7)p (5.2)p Adjusted basic earnings per share (before goodwill amortisation) 1.5p (3.6)p (2.8)p Adjusted diluted earnings per share (before goodwill amortisation) 1.5p (3.5)p (2.7)p Adjusted and basic earnings per share are based on the share capital of 50,844,577 shares (2000: 50,509,231) being the weighted average number of shares in issue during the period. Diluted earnings per share are based on share capital of 51,924,802 (2000: 52,769,356). A reconciliation of earnings to adjusted earnings is set out below: Basic Diluted Earnings EPS EPS £000 Pence Pence Profit on ordinary activities after tax 45 0.1 0.1 Goodwill amortisation 717 1.4 1.4 Profit on ordinary activities after tax but before 762 1.5 1.5 goodwill amortisation Adjusted earnings per share were previously based on profit or loss before exceptional items, goodwill amortisation and charges related to share price movements 4. Debtors Unaudited Unaudited Audited as at as at as at 30 June 2001 30 June 2000 31 Dec 2000 £'000 £'000 £'000 Trade debtors 2,888 3,873 3,911 Corporation tax recoverable 369 - 369 Other debtors 992 1,217 743 4,249 5,090 5,023 5. Creditors: due within one year Unaudited Unaudited Audited as at as at as at 30 June 2001 30 June 2000 31 Dec 2000 £'000 £'000 £'000 Net obligations under finance leases - 701 358 Trade creditors 1,083 1,029 1,559 Corporation tax 417 393 769 Other taxes and social security costs 909 796 835 Other creditors 1,745 293 834 Deferred consideration on acquisition 399 2,430 773 Loan notes payable 1,050 4,600 3,219 Accruals 2,723 3,724 3,377 Proposed dividend - - 512 8,326 13,966 12,236 6. Creditors: due after more than one year Unaudited Unaudited Audited as at as at as at 30 June 2001 30 June 2000 31 Dec 2000 £'000 £'000 £'000 Net obligations under finance leases - - 210 Other taxes and social security costs 115 105 85 115 105 295 7. Provisions for liabilities and charges Provisions for liabilities and charges relate to surplus property and may be analysed as follows: Unaudited Unaudited Audited as at as at as at 30 June 2001 30 June 2000 31 Dec 2000 £'000 £'000 £'000 Balance brought forward 1,708 2,438 2,438 Utilised in the period (342) (292) (399) Credit to the profit and loss account - (350) (331) 1,366 1,796 1,708 8. Share Capital Number £ Authorised ordinary shares of 5p each 70,000,000 3,500,000 Issued allotted and fully paid: 51,202,281 2,560,114 At 1 January 2001 Shares issued as deferred consideration to the 10,690 535 Vendors of Microgen - Kaisha under the terms of the Acquisition Agreement dated 29 March 1999 At 30 June 2001 51,212,971 2,560,649 9. Reserves --------- Profit & Loss Account -------- Share Other Revenue Goodwill Total Premium Reserves Reserve Reserve Account £'000 £'000 £'000 £'000 £'000 At 1 January 2001 17,569 250 25,003 (11,644) 13,359 Retained profit for the period - - 45 - 45 Shares issued during the period 23 - - - - UITF 17 charge arising on - 50 - - - previous grant of share options At 30 June 2001 17,592 300 25,048 (11,644) 13,404 10. Notes to the group cash flow statement (i) Reconciliation of operating loss to net cash flow from operating activities: Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 2001 30 June 31 Dec £'000 2000 2000 £'000 £'000 Operating loss (206) (1,117) (1,367) Depreciation 656 1,148 1,832 Loss on disposal of tangible fixed - 17 24 assets Goodwill amortisation 717 627 1,328 Property provision release - (350) (331) Non-cash share price related items 138 119 208 Decrease/(Increase) in debtors 774 (376) 535 (Increase)/Decrease in stocks (9) 109 158 (Decrease) in creditors (515) (128) (867) Net cash inflow from operating 1,555 49 1,520 activities (ii) Analysis of movement in Financing Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 30 June 31 Dec 2001 2000 2000 £'000 £'000 £'000 Issue of Ordinary shares - 24 124 Payment of deferred consideration (350) - (1,806) Repayment of capital element of finance lease (568) (296) (429) obligations Repayment of Loan notes (2,169) - (1,381) Net cash outflow from financing (3,087) (272) (3,492) (iii) Reconciliation of net cash flow to movement in net funds: Unaudited Unaudited Audited Six months Six months Year ended ended ended 30 June 2001 30 June 31 Dec £'000 2000 2000 £'000 £'000 Decrease in cash in the period (307) (1,499) (913) Cash outflow from decrease in lease 568 296 429 financing Cash (outflow)/inflow from movement in term (2,008) 766 (4,040) deposits Change in net funds resulting from cash flow (1,747) (437) (4,524) Disposal of leases from discontinued - 18 18 operations Redemption of loan notes 2,169 - 1,381 Movement in net funds in the period 422 (419) (3,125) Net funds at beginning of period 10,084 13,209 13,209 Net funds at end of period 10,506 12,790 10,084 The net free cash figure of £10.1 million referred to in the Chairman's Statement is arrived at after deducting net Corporation Tax payable and deferred consideration, totaling £0.4 million from the net funds of £10.5 million shown above. (iv) Analysis of net funds 1 Jan 2001 Cash Flow 30 June 2001 £000 £000 £000 Cash at bank and in hand 13,871 (2,315) 11,556 Debt due within 1 year (3,219) 2,169 (1,050) Finance leases (568) 568 - Total 10,084 422 10,506 11. Statement by the directors The figures in the Group Profit and Loss Account and Consolidated Balance Sheet do not amount to full accounts within the meaning of Section 254 of the Companies Act 1985. Full accounts of Microgen plc for the year ended 31 December 2000, on which the auditors gave an unqualified report, have been delivered to the Registrar of Companies. This interim statement has neither been audited nor reviewed by the Company's Auditors. Copies of this statement are being posted to shareholders and will also available on the investor relations page of our web site (www.microgen.co.uk). Further copies are available on request and free of charge from the Company Secretary at 11 Park Street, Windsor, Berkshire SL4 1LU.

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