Interim Results
Flomerics Group PLC
07 August 2006
7 August 2006
Flomerics Group plc
("Flomerics" or "the Company") (AIM: FLO)
Flomerics Group plc, the global supplier of simulation software to the
engineering and electronics industries, today announces its results for the six
months ended 30 June 2006.
• Turnover £5.7 million (2005: £5.3 million)
• Adjusted Profit Before Tax £238,000 following an exceptional item and
increased investment in sales (2005: £380,000)
• Strong cash position £4.0 million (2005: £3.5 million)
• US sales up 29% and Asia Pacific sales up 16% (excluding MicReD and at
constant rates of exchange)
• Electronics thermal line of business sales up 10%
• Sales and operational staff numbers strengthened globally
• Post results - NIKA acquisition 6 July 2006: established European and
Russian based supplier of fluid flow simulation tools
Commenting on the results, Gary Carter, CEO of Flomerics plc, said: "During the
first half of this year we have achieved sales of £5.7m and seen an extremely
promising performance from our product lines in both the US and Asia Pacific.
Profit is down on 2005 but this is due in part to costs relating to the
strengthening of our sales operations and Flomerics is now in an extremely
strong position to drive the business forward into new markets for our
electromagnetic, thermal and recently acquired product lines."
www.flomerics.com
Flomerics Group +44 20 8487 3000
Gary Carter, Chief Executive
Chris Ogle, Finance Director & Company Secretary
Conduit PR +44 20 7429 6666
Laurence Read / Angus Prentice +44 7979 955 923
Chairman's Statement
Introduction
Flomerics has made a good start to the year with sales reaching £5.7 million and
strong performances in the US and Asia Pacific. We have also made an adjusted
profit for the period of £238,000, which was subject to a 13% increase in
administrative costs mainly due to key recruitment. While our European
operations saw a decline, due in part to relatively flat economic conditions in
the region, our integration of Nika GmbH, acquired in July 2006, brings
considerable extra resources in the region as well as exposure to significant
new markets around the world.
Results
Turnover was £5.7 million (2005: £5.3 million) achieving growth of 8%.
Profit before taxation, amortisation of goodwill and share-based payment was
£238,000. While this is down on the 2005 figure of £380,000 the period saw
administrative costs increase by 13% on a like-for-like basis, including an
exceptional charge of £58,000.
Our cash balance continues to be strong with £4.0 million at 30 June 2006,
compared with £3.5 million a year earlier.
In order to compare like-with-like, the comparisons made below with the same
period last year are all at constant rates of exchange. Similarly, the figures
for the regions exclude the contribution from MicReD, which was acquired in
April 2005.
The US had very strong growth (29% with strong contributions from both the
thermal and electromagnetic). Asia Pacific also performed well (up 16%) with
particularly strong performances from our thermal products in China and Japan.
In contrast European sales were down 13% partly attributable to the relatively
flat economy in the region's markets. A key objective for Flomerics during the
next 12 months is to increase sales productivity in Europe. This will partly be
achieved through pursuing synergies between our existing and acquired
businesses.
Looking at sales by product, our electronics thermal line of business grew by
10% (2005: 16%), FLOVENT by 6% (2005: 14%) and the electromagnetics line of
business by 4% (2005: 8%). In order to drive our electromagnetics products more
aggressively, we have recently hired an experienced sales professional with a
background in EM software to take complete responsibility for this line of
business. In addition, and in order to improve profitability in this area, we
have committed to moving FLO/EMC and Microstripes to a common development
platform.
MicReD contributed £128,000 to first half turnover (2005: £264,000). We are
delighted with the performance in the US, where we achieved the first sales of
T3Ster to open up this very significant market. There was some slippage of
MicReD sales in Europe and Asia Pacific, but there continue to be good prospects
in both regions
NIKA
In June we announced the proposed acquisition of NIKA GmbH, which was completed
on 6 July 2006. NIKA develop and sell a suite of software tools for the
simulation of fluid flow that are tightly integrated with leading Mechanical
Computer-Aided Design (MCAD) tools. The NIKA organisation is headquartered in
Germany, and has other operations in France and Russia, with all software
development taking place in Moscow. Over the coming months we will be working
to integrate the organisations and take full and rapid advantage of the
significant opportunities facing the new combined group. In particular we will
be investing in sales organisations in the US and in the UK where NIKA has had
minimal presence up to now.
Dividend
Having carefully considered the dividend policy, the board has decided that it
is appropriate for the Company to continue to pay only a final dividend.
Therefore, as in previous years, we will not be paying an interim dividend.
Outlook
Flomerics' strategy has been to continue to maximise the sales opportunities
associated with the growth in the electronics industries through our market
leading products and our global presence. At the same time we have been looking
to widen the range of applications and markets we address which we have been
able to do by the 2005 acquisition of MicReD and now the addition of the NIKA
business to the Flomerics organisation. We see the latter as bringing a
transformation in the growth of the business over the next few years.
The directors believe that investment in sales and the recent acquisitions have
created increasing momentum in the business. There is now a strong platform for
growth and there are good prospects for the remainder of this year and beyond.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Interim results for the six months to 30 June 2006
30 Jun 06 30 Jun 05* 31 Dec 05*
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Turnover 5,677 5,256 11,424
Cost of sales (159) (238) (291)
Gross Profit 5,518 5,018 11,133
Administrative expenses (5,367) (4,752) (10,197)
Amortisation of goodwill (98) (59) (158)
Other Operating Income 30 35 66
Operating Profit 83 242 844
Interest receivable and other income 54 72 92
Interest payable and similar charges (46) (19) (36)
Profit on Ordinary Activities Before Taxation 91 295 900
Tax on profit on ordinary activities (18) (66) (37)
Profit on Ordinary Activities After Taxation 73 229 863
Earnings per share 0.49 1.55 5.83
Diluted earnings per share 0.46 1.49 5.59
* As restated - see Note 7.
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
30 Jun 06 30 Jun 05* 31 Dec 05*
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit for the Period 73 229 863
Unrealised (loss) / gain on translation of foreign currency investments (23) 31 124
Total Recognised gain 50 260 987
* As restated - see Note 7.
CONSOLIDATED BALANCE SHEET 30 Jun 06 30 Jun 05* 31 Dec 05*
At 30 June 2006 (Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Fixed Assets
Intangible assets 1,255 1,448 1,353
Tangible assets 1,754 1,756 1,726
3,009 3,204 3,079
Current Assets
Stock 51 10 59
Debtors 3,671 3,338 3,953
Cash at bank and in hand 3,976 3,504 4,081
7,698 6,852 8,093
Creditors: amounts falling due within
one year (3,842) (3,582) (4,386)
Net Current Assets 3,856 3,270 3,707
Total Assets Less Current Liabilities 6,865 6,474 6,786
Creditors: amounts falling due after
one year (350) (617) (377)
Net Assets 6,515 5,857 6,409
Capital and Reserves
Called up share capital 150 148 148
Shares to be issued account 108 249 33
Share premium account 1,727 1,734 1,602
Merger reserve 892 759 892
Profit and loss account 3,638 2,967 3,734
Equity Shareholders' Funds 6,515 5,857 6,409
* As restated - see Note 7.
CONSOLIDATED CASH FLOW STATEMENT 30 Jun 06 30 Jun 05* 31 Dec 05*
for the six months to 30 June 2006 (Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Operating Activities
Operating profit 83 242 844
Depreciation and amortisation charges 264 211 492
Gains on disposal of fixed assets - - (1)
Exchange differences (23) 22 113
Share based payment 49 26 66
Increase in stock 8 43 (6)
Decrease in debtors 282 584 53
(Decrease) / increase in creditors (323) (170) 283
Net Cash Inflow From Operating Activities 340 958 1,844
Net cashflow from returns on investments and servicing
of finance 8 53 56
Taxation paid (30) (23) (126)
Net cashflow from capital expenditure (194) (247) (376)
Net cash paid for acquisition - (360) (405)
Equity Dividend paid (195) (161) (161)
Net Cashflow Before Financing (71) 220 832
Net Cashflow From Financing (34) (30) (65)
(Decrease) / increase in Cash in the Period (105) 190 767
* As restated - see Note 7.
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
30-Jun-06 30/06/2005* 31-Dec-05
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
(Decrease) / increase in Cash in the Period (105) 190 767
Cash outflow from decrease in debt and lease financing 34 30 65
Movement in Net Funds in the Period (71) 220 832
Net Funds at Beginning of Period 3,637 2,805 2,805
Net Funds at End of Period 3,566 3,025 3,637
* As restated - see Note 7.
NOTES TO THE INTERIM REPORT
1. ACCOUNTING POLICIES
The financial information contained in this Interim Report does not constitute
statutory accounts. The interim results, which have not been audited, have been
prepared using accounting policies consistent with those used in the preparation
of the Annual Report and Accounts for the year ended 31 December 2005 with one
exception: in accordance with FRS 20, 'Share based payments', the group has now
recognised the cost of share based payments in these financial statements.
The accounts for the year ended 31 December 2005 have been filed with the
Registrar of Companies and received an unqualified audit report.
2. TAXATION
Taxation for the six months to 30 June 2006 is based on the effective rate of
taxation that is estimated to apply to the year ending 31 December 2006.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit on ordinary
activities after taxation in the period by the weighted average number of shares
in issue in the period as follows:
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
30 June 2006 30 June 2005 * 31 December 2005 *
Profit for the period (£'000) 73 229 863
Weighted average number of shares in
issue ('000) 14,932 14,717 14,783
Earnings per share (p) 0.49 1.55 5.83
Diluted weighted average number of
shares ('000) 15,714 15,356 15,439
Diluted earnings per share (p) 0.46 1.49 5.59
The diluted earnings per share calculation is based on a fair value of 99p per
share (30 June 2005: 68p).
* As restated - see Note 7.
4. SEGMENTAL INFORMATION
The group's turnover for each geographic area of operation is:
30 Jun 06 30 Jun 05 31 Dec 05
£'000 £'000 £'000
United States of America 2,796 2,032 4,609
Europe 1,730 2,062 4,438
Asia Pacific 1,151 1,162 2,377
5,677 5,256 11,424
Segmental information on profit before tax and net assets is disclosed in the
Annual Report.
5. ANALYSIS OF NET FUNDS
30 Jun 06 30 Jun 05 31 Dec 05
£'000 £'000 £'000
Cash in hand and at bank 3,976 3,504 4,081
Debt due after one year (343) (416) (377)
Debt due within one year (67) (63) (67)
Total 3,566 3,025 3,637
Debt represents a mortgage that was taken out on a property acquired in 2001.
6. RESERVES
Shares Share Profit
Share to be Premium Merger and loss
Capital issued Account reserve account 30 Jun 06 31 Dec 05*
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Issue of new shares 2 (33) 125 - - 94 135
Profit for the year - - - - 73 73 863
Dividend paid - - - - (195) (195) (161)
Currency translation
movement - - - - (23) (23) 124
Acquistion of MicReD - 108 - - - 108 33
Share based payment - - - - 49 49 66
Net addition to
shareholders funds 2 75 125 - (96) 106 1,060
Opening shareholders funds 148 33 1,602 892 3,734 6,409 5,349
Closing shareholders funds 150 108 1,727 892 3,638 6,515 6,409
* As restated - see Note 7.
7. PRIOR YEAR ADJUSTMENT
Share based payments
In order to conform with the requirements of FRS 20, 'Share Based Payments',
share options that have been granted to employees have been recognised as an
expense as part of employee remuneration. The cost is spread over the vesting
period and has been calculated using a Black-Scholes valuation model.
The effect on the comparatives of this change in accounting policy is that
administrative expenses have increased by £26,000 for the six months to 30th
June 2005 and by £66,000 for the year to 31 December 2005. In the six months
ended 30th June 2006 the charge was £49,000.
Dividends paid
In order to conform with the requirements of FRS 21' Events after the Balance
Sheet Date', dividends have been restated and are recorded in the profit and
loss account in the period that they have been declared.
The effect of this change in accounting policy on the comparatives is that
dividends have increased by £161,000 for the six months to 30 June 2005.
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