Interims/Acqn./Directorate

FLOMERICS GROUP PLC 29 July 1999 FLOMERICS GROUP PLC INTERIM RESULTS FOR SIX MONTHS ENDING 30 JUNE 1999 Continuing Strengthening in Trading Performance, Announcement of Acquisition, and Board Appointment Flomerics Group PLC, developer of FLOTHERM thermal management software used to determine the cooling requirements of electronic systems, and FLOVENT ventilation software used to analyse thermal environment and air quality in buildings, announces its results for the six months ending 30 June 1999. Highlights for the period, which reflect a continuation of quality growth and improvements in margins, are as follows: - Turnover up 17% to £3.443 million (1998: £2.938 million) - Gross margin up to 94% against 90% in 1998 - Cyclical loss (majority of licence renewals due end of second half) reduced from £269K in 1998 to £150K - Net cash balances positive, at £330K In addition - announced today - the strategically important acquisition of Kimberley Communication Consultants Limited (KCC) creates two substantial, new market opportunities. Good prospects for the enlarged Group Flomerics has, during the first half of 1999, achieved a continuing strengthening and expansion in its core businesses, and, through the strategically important acquisition of KCC, is now in a position to exploit additional market opportunities. As a consequence, the directors continue to view the remainder of 1999 and beyond with confidence. CONTACTS David Mann Chairman 020 8941 8810 David Tatchell Chief Executive 020 8941 8810 Richard Thompson Teather & 020 7426 9073 Greenwood Jonathan Downes Teather & 020 7426 9011 Greenwood Richard Pollen Pollen Associates 01428 608 860 CHAIRMAN'S STATEMENT Continuing Strengthening in Trading Performance Flomerics' trading performance for the first half of 1999 reflects a continuation of the quality growth and improvements in margins achieved in 1998. The turnover for the six months ending 30 June 1999 was £3.443m, a 17% increase on the same period last year. The gross margin has improved to 94%, as compared with 90% for the comparable period last year - the erosion in margin last year being caused by third-party software costs associated with the FLOTHERM Version 2.0 shipments in 1998. Flomerics' trading pattern exhibits a high proportion of license renewals close to the year-end. As a consequence, Flomerics has traditionally made a loss in the first half. This year the loss to 30 June was £150k, as compared with a loss of £269k for the same period last year. The company continues to have a positive cash position with cash balances of £330k at 30 June 1999. The directors do not intend to pay interim dividends at this stage of the company's development. FLOVENT sales have grown by 27% respectively over the same period last year, and now account for just over 10% of turnover. This continuing strengthening of the FLOVENT business will be reinforced by the launch of FLOVENT Version 2, planned for later this year. North America continues to represent Flomerics' largest market, accounting for 54% of turnover for the period. In order to further strengthen the sales and support infrastructure in this important region, in April Flomerics opened a new office, in San Diego, southern California, to supplement the three existing U S offices. To broaden its offerings to the electronics market, Flomerics has recently launched a new business, targeting the provision of thermal design services to electronics companies. This complements Flomerics' existing FLOTHERM business - in which Flomerics supplies the software used in electronics thermal design - by offering full design services for companies wishing to out-source the thermal design. This new business initiative, based initially in the US, was launched successfully during the first half of 1999, and is already making an encouraging contribution to turnover. Acquisition of Kimberley Communication Consultants Limited The Board is delighted to announce the acquisition, on 28 July 1999, of Kimberley Communications Consultants Limited (KCC), a private Nottingham-based company specializing in software for electromagnetic analysis. KCC's business is the development and marketing of analysis software for high-frequency electromagnetic processes, primarily in microwave and antenna applications. KCC has achieved steady growth over the last five years, and has just completed a major new release of its Microstripes product. For year ended 30 Oct 1998 KCC's turnover was £658k, and the pre-tax profit was £61k. Overseas business (principally from US and Japan) accounted for roughly 25% of turnover. Unaudited net assets as at 28 July 1999 are £35k. The total consideration payable by Flomerics is £700k, satisfied by £38.4k cash, £190k as a qualifying corporate bond redeemable after 12 months, and the balance of £471.6k by the issue and allotment of 188,640 new ordinary shares of one pence each. The new shares will rank pari passu with the existing ordinary shares, and application will be made for these new shares to be admitted to trading on AIM. The acquisition of KCC offers Flomerics two substantial market opportunities. Firstly, there is, the directors believe, a major new market opportunity in electromagnetic compatibility (EMC) for electronics equipment which complements and strengthens Flomerics' core thermal-simulation business. Flomerics has been increasingly aware of the growing importance of EMC and its strong association with thermal design. As the operating frequencies of electronics equipment of almost all kinds increase, EMC is becoming an increasingly critical factor in electronics design. Strict electromagnetic radiation limits, imposed by legislation, are now applied to virtually all classes of electronics equipment - and, in almost every case, the design and optimisation of the electromagnetic shielding is tightly coupled with the thermal design of the equipment. There is therefore an enormous potential for a new EMC design tool, coupled to a thermal-analysis tool (such as FLOTHERM), offering users these two key analysis functionalities within the same software package. KCC's software provides exactly the required analysis capability. As a result of the acquisition, Flomerics will be well placed to merge this with FLOTHERM, and to market this to both the existing and potential FLOTHERM customer base, thereby achieving two major benefits: - Opening up a potential market which, the directors estimate, could be of comparable size to the current FLOTHERM market. - Strengthening Flomerics' position within the FLOTHERM market by providing a unique combination of best-in-class tools addressing two, related, critical problems facing electronics manufacturers The second market opportunity arises from KCC's existing business in microwave and antenna applications. For these markets, Flomerics offers KCC enhanced international support infrastructure and sales channels in US and continental Europe. Leveraging this infrastructure on behalf of KCC's existing products will enable KCC to address more effectively the global market for high-frequency electronic analysis software - currently estimated at £15m annually, and growing at 25% per annum. Board Appointments Dr Thomas Robert Rowbotham, age 58, who will continue as non- executive Chairman of KCC, will join the Board of Flomerics Group PLC as a non-executive director and Deputy Chairman. In return for his services he will receive a fee of £15,500 per annum, and under the terms of his appointment he is subject to a three-month notice period. Save for the above information, there are no further disclosures required under the AIM rules relating to directors. Dr Rowbotham is a specialist in microwave transmission, and has spent the bulk of his career at BT, where he is currently Director of Technology, a Group wide function responsible for the long-term technical direction of the company. He is a Fellow of the Royal Academy of Engineering, a member of the IEEE Foundation, and Vice Chairman of the Electronics and Communications Division of the IEE. He is also visiting Professor at Kings College, London. The directors are confident that Dr Rowbotham's extensive industry knowledge and experience will enable him to make a major contribution to the Group Board. Dr David Johns, age 34, will continue as Managing Director of KCC and will join the board of Flomerics Limited. After reading Communication Engineering at Plymouth University he worked for Plessey Microwave as a research engineer on surface acoustic wave devices for direct broadcast by satellite receivers and TV filters. In 1989 he joined KCC where he secured several defence contracts and performed research and development work on aerospace, lightning and electromagnetic compatibility projects. In 1991 he became Marketing Director of KCC and initiated the development of the Microstripes product. He was awarded a PhD from Nottingham University in 1996 and appointed Managing Director of KCC in 1997. Good prospects for the enlarged Group Flomerics has, during the first half of 1999, achieved a continuing strengthening and expansion in its core businesses, and, through the strategically important acquisition of KCC, is now in a position to exploit additional market opportunities. As a consequence, the directors continue to view the remainder of 1999 and beyond with confidence. David Mann 29 July 1999 FLOMERICS GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT Unaudited Unaudited Audited 6 months 6 months 12 months to to to 30.06.99 30.06.98 31.12.98 £ £ £ Turnover 3,443,222 2,938,163 6,910,106 Cost of Sales (215,912) (286,009) (584,191) Gross profit 3,227,310 2,652,154 6,325,915 Administrative (3,378,097)(2,909,195)(5,937,313) expenses Operating (150,787) (257,041) 388,602 (loss)/profit Other interest receivable and 22,639 23,729 71,602 similar income Interest payable and similar charges (21,458) (35,387) (76,081) -------- --------- --------- (Loss)/profit on ordinary activities (149,606) (268,699) 384,123 before taxation Tax on profit on ordinary activities Note 1 Note 1 (126,216) Profit for the financial year 257,907 Dividends (84,502) -------- Retained profit 173,405 -------- Earnings per share Note 1 Note 1 10.1 pence Dividend per share Nil Nil 3.3 pence Notes: 1. The consolidated profit and loss account does not include amounts for taxation or earnings per share for the six-month periods ended 30 June 1999 and 1998. The directors consider that it would not be meaningful to present these amounts for the half-year as the trading pattern of the company is such that all of its profits are typically generated in the last four months of the year. 2. The comparative figures for the financial year ended 31 December 1998 are not the company's statutory accounts but are extracted from the audited statutory accounts. The statutory accounts for the year ended 31 December 1998, which have been filed with the Registrar of Companies, received an unqualified audit report which did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 3. Earnings per share for the audited 12 months to 31.12.98 has been calculated on the profit on ordinary activities after taxation and the shares in issue during the year of 2,560,676 (1997: 2,560,676). In accordance with FRS14 issued in October 1998 the fully diluted earnings per share was 10.1 pence per share (0.03p 1997). The diluted number of shares was 2,560,676 (1997: 2,568,002). 4. Copies of this announcement are available at the registered office of the company (81 Bridge Road, Hampton Court, Surrey, KT8 9HH) for a period of 14 days from the date of this announcement.
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