Interim Results

Flomerics Group PLC
29 July 2004


 
                                                                   29 July 2004

 
                           Interim results for Flomerics

                       'Stabilisation of market conditions'


Flomerics Group PLC, supplier of analysis software to the telecommunications,
semiconductor and computer industries, and other sectors of the electronics
industries, announces its results for the six months ended 30 June 2004.


Key Points

  • Turnover down 9% at £4.43 million (2003: £4.88 million)

  • Turnover flat at constant exchange rates (compared to a contraction of 15%
    in the first half of 2003).

  • Loss before amortisation of goodwill and taxation of £65,000 (2003:
    £103,000)

  • Strong performance in the Asia Pacific region with turnover up 39%.

  • Strong cash position of  £2.0 million, net of borrowings (2003: £1.4
    million).

  • New product FLO/PCB, launched ahead of schedule in March. Very encouraging
    initial response from customers for this lower priced product.



Commenting on the results and prospects, David Mann, the Chairman, said:

"Results for the first half of 2004 have been in line with our expectation.
After the long period of contraction in the electronics industry, which has been
affecting our results since 2001,we have found our market conditions relatively
stable with some positive signs of recovery.

Flotherm continues to be the market leader and should benefit from any increase
in investment by electronics companies in research and development. The company
has a strong balance sheet and is well placed to take advantage of the more
favourable economic climate."



For further information please contact:

Flomerics:
David Mann, Chairman                                  020 8941 8810
David Tatchell, Chief Executive
Chris Ogle, Finance Director

Buchanan Communications:
Tim Thompson / Nicola Cronk                           020 7466 5000




Chairman's Statement


Introduction

Results for the first half of 2004 have been in line with our expectations.
Whilst headline turnover was down on the same period last year, at constant
exchange rates turnover was flat (compared to contraction of 15% in the first
half of last year). This indicates that, after the long period of contraction in
the electronics' industry, which has been affecting our results since 2001, we
have found our market conditions this year relatively stable with some positive
signs of recovery.


Results

Turnover was down 9% at £4.43million (2003: £4.88 million). Recurring revenues
accounted for 52% (2003: 57%) of turnover. Administrative costs were down 8%.
The result is a loss before amortisation of goodwill and taxation of  £65,000
(2003: £103,000).

The cash position, net of borrowings, at the end of June was £2.0 million - an
improvement of nearly £700,000 compared to a year ago.


Regions

The results for the period have been significantly affected by the strength of
Sterling, especially against the US Dollar. In this section and the section on
Products all comparatives with 2003 are therefore given at constant rates of
exchange.

Revenues from the US, which is still the predominant market for our products,
showed contraction of 14%, but this was due mainly to some large multi-year
licences, which were signed last June. Without this factor, turnover from the US
would have been broadly flat, which is representative of the underlying trend
for this region.

Revenues from Europe were flat compared to the same period last year. Sales in
the UK and Germany increased by 6% and 9% respectively.

The Asia Pacific region has performed particularly well with turnover up by 39%.
Sales in China more than doubled and in Japan increased by 35%. The region
accounted for 23% of turnover in the period, compared to 16% last year.


Products

Flotherm continues to be the dominant product, accounting for 72% of turnover
(2003:77%). Sales of the product were down by 7% (2003:down 12.5%) because of
the effect of the multi-year licences referred to above.

FLO/PCB, a new product that tackles thermal issues at the printed circuit board
level, was released in March, ahead of schedule. This has a lower price than our
other products, but we believe that there are many more potential users. We are
at an early stage of developing this market; interest from our customers has
been very good but sales have so far been slow.

With the new FLO/EMC product, we are diversifying from heat flow into the
analysis of electromagnetic compatibility, as part of our strategy to offer
multiple solutions to mechanical designers of electronic goods. The experience
of early adopters has been encouraging, but it is again taking longer than
expected to secure take up across a wider front and sales were at the same level
as last year. Current campaigns are being directed primarily at existing
Flotherm users, who can most readily obtain the benefits offered by the new
product.

During the last twelve months we have decided to make further investments in
Micro-Stripes, in order to make it more competitive in the antenna design
market. Sales have responded well and were almost 40% ahead of the same period
last year - most of the revenue coming from the UK and Japan. Similarly
investment in Flovent has led to sales 14% up on last year.


Other Developments

In the annual report I announced that we would be investing in an off-shore
development and sales office in India. I am pleased to say that that facility is
now up and running. It will be used initially for non-core development
activities, such as testing, and will enable us to develop products more
cost-effectively. By co-locating a sales office there we will be able to sell
into the indigenous electronics companies in India.


International Accounting Standards

All AIM companies will be required to adopt International Accounting Standards
(IAS) with effect from 1 January 2006 and may do so from 1 January 2005. In
order to apply what we believe will be best practice, we shall be adopting IAS
with effect from 1 January 2005.


Management

David Tatchell, who has been CEO since co-founding Flomerics in 1988, wishes to
be able to relinquish the position before he reaches the age of 60 in 2006. The
board has therefore recently initiated the recruitment of a Chief Operating
Officer to take a leading role in exploiting the opportunities currently facing
the company. After a period, it is intended that the COO will take over as CEO.


Outlook

Flomerics' revenues are normally skewed towards the second half of the year,
because of the pattern of licence renewals.  The directors consider that there
are currently good prospects for the turnover in the year as a whole being at a
level similar to last year's.

The company is aiming to take advantage of the current stability in its
worldwide market to get back on the front foot. Although the Flotherm business
has contracted, the product continues to be the market leader and should benefit
any increase in investment by electronics companies in research and development.
Our new products address important requirements in other areas of mechanical
design and determined efforts are now being made to secure their wider adoption.
The company has a strong balance sheet and is well placed to take advantage of
the more favourable economic climate.




CONSOLIDATED PROFIT AND LOSS ACCOUNT
Interim results for the six months to 30 June 2004
                                                                    30-Jun-04        30-Jun-03    31-Dec-03
                                                                  (Unaudited)      (Unaudited)    (Audited)
                                                                        £'000            £'000        £'000
Turnover                                                                4,430            4,881       10,221

Cost of sales                                                            (74)            (152)        (259)

Gross Profit                                                            4,356            4,729        9,962

Administrative expenses                                               (4,452)          (4,855)      (9,489)

Amortisation of goodwill                                                 (41)             (41)         (82)

Operating (Loss) / Profit                                               (137)            (167)          391

Interest receivable and other income                                       71               46          101

Interest payable and similar charges                                     (40)             (23)         (37)

(Loss) / Profit on Ordinary Activities Before Taxation                  (106)            (144)          455

Tax on profit on ordinary activities                                        -                -         (52)

(Loss) / Profit on Ordinary Activities After Taxation                   (106)            (144)          403

Dividends                                                                   -                -        (146)

Transferred to Reserves                                                 (106)            (144)          257

Earnings / (loss) per share                                           (0.72p)          (0.98p)        2.75p

Diluted earnings / (loss) per share                                   (0.71p)          (0.98p)        2.74p

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
                                                                    30-Jun-04        30-Jun-03    31-Dec-03
                                                                  (Unaudited)      (Unaudited)    (Audited)
                                                                        £'000            £'000        £'000

(Loss) / Profit for the Period                                          (106)            (144)          403

Unrealised (loss) / gain on translation of foreign currency
investments
                                                                         (59)               17         (75)

Total Recognised (Loss) / Gain                                          (165)            (127)          328






CONSOLIDATED BALANCE SHEET                                              30-Jun-04       30-Jun-03    31-Dec-03
At 30 June 2004                                                       (Unaudited)     (Unaudited)    (Audited)
                                                                            £'000           £'000        £'000
Fixed Assets
Intangible assets                                                             411             499          458
Tangible assets                                                             1,648           1,783        1,675
                                                                            2,059           2,282        2,133

Current Assets
Debtors                                                                     3,232           3,934        3,835
Cash at bank and in hand                                                    2,571           1,975        2,490
                                                                            5,803           5,909        6,325


Creditors: amounts falling due within
one year                                                                  (2,666)         (3,072)      (3,067)

Net Current Assets                                                          3,137           2,837        3,258

Total Assets Less Current Liabilities                                       5,196           5,119        5,391

Creditors: amounts falling due after
one year                                                                    (476)           (543)        (506)

Net Assets                                                                  4,720           4,576        4,885


Capital and Reserves
Called up share capital                                                       146             146          146
Share premium account                                                       1,602           1,602        1,602
Merger reserve                                                                759             759          759
Profit and loss account                                                     2,213           2,069        2,378

Equity Shareholders' Funds                                                  4,720           4,576        4,885






CONSOLIDATED CASH FLOW STATEMENT                                    30-Jun-04        30-Jun-03    31-Dec-03
for the six months to 30 June 2004                                (Unaudited)      (Unaudited)    (Audited)
                                                                        £'000            £'000        £'000
Operating Activities
Operating (loss) / profit                                               (137)            (167)          391
Depreciation and amortisation charges                                     216              281          505
Loss on disposal of fixed assets                                            -                -            1
Exchange differences                                                     (59)               17         (70)
Decrease / (increase) in debtors                                          603              282          381
Decrease in creditors                                                   (249)            (261)        (419)
Net Cash Inflow From Operating Activities                                 374              152          789


Net cashflow from returns on investments and servicing
of finance                                                                 31               23           64
Taxation                                                                  (6)             (38)         (76)
Net cashflow from capital expenditure and
financial investment                                                    (142)            (115)        (196)
Equity Dividend paid                                                    (146)            (146)        (146)
Net Cashflow Before Financing                                             111            (124)          435

Net Cashflow From Financing                                              (30)             (60)        (104)


Increase / (decrease) in Cash in the Period                                81            (184)          331


RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
                                                                    30-Jun-04        30-Jun-03    31-Dec-03
                                                                  (Unaudited)      (Unaudited)    (Audited)
                                                                        £'000            £'000        £'000
Increase / (decrease) in Cash in the Period                                81            (184)          331

Cash outflow from decrease in debt and lease financing                     30               60          104

Movement in Net Funds in the Period                                       111            (124)          435

Net Funds at Beginning of Period                                        1,921            1,486        1,486

Net Funds at End of Period                                              2,032            1,362        1,921




                      This information is provided by RNS
            The company news service from the London Stock Exchange