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  Print      Mail a friend       Annual reports

Friday 14 May, 2004

VI Group PLC

Final Results

VI Group PLC
14 May 2004

Friday 14th May 2004

                                  VI GROUP plc


VI Group plc ('VI' or 'the Company'), one of the leading software providers to
the mould and die industry, today announced another year of turnover growth
although, as outlined in last month's announcement, performance has been
significantly impacted by the costs associated with the Company's American Stock
Exchange listing. The underlying business continues to be strong and the 2004
first quarter results show a substantial rise in profits compared to the same
period in 2003.


   • Turnover up 18% to £8.9m (2002: £7.5m)

   • EBITDA of £375,000 before exceptional items and £244,000 after (2002:

   • Pre tax loss of £461,000 before exceptional items and £1,250,000 after
     (2002: Profit of £70,000)

   • Difficult European market conditions restricted growth in Italy and

   • Profitable start up for the new Japanese subsidiary in its first year of

   • First quarter 2004 profits significantly ahead of 2003

Don Babbs, Chief Executive of VI, commented:

'Of the world's major industrial markets, only China managed significant growth
during 2003 yet VI's past investments and efforts helped gain significant market
share by growing at more than twice the rate of any of our direct competitors.

Having taken the painful step to withdraw our listing from AMEX because of the
spiralling increase in the cost of maintaining it and in minimising our 2004
expenses, we are working to ensure that the current year will produce growth in
both revenues and profitability. We have seen encouraging signs in the early
months in this respect. '

                                    - Ends -

For further information please contact:

VI Group plc                                      Tel: 01453 732 900
Don Babbs, Chief Executive
Julie Randall, Finance Director

Merlin                                            Tel: 020 7653 6620
Paul Downes / Tom Randell

Attached : Chairman's Statement
           Operating and Financial Review
           Consolidated Profit & Loss Account
           Consolidated Balance Sheet
           Consolidated Cash Flow Statement


VI Group's financial results for 2003 present a significant rise in turnover and
a positive EBITDA return, but an extremely disappointing result
after the costs of our de-listing from AMEX.

As reported in last month's announcement, the costs of our AMEX listing
increased rapidly. Given the failure to consummate any US investments last year,
it became clear that the costs of the listing outweighed the benefits that were
available from North American acquisitions and we therefore decided to de-list.
This was a painful but necessary decision to take. The associated financing
costs, along with the first full year of amortisation of goodwill for 2002
acquisitions, resulted in a significant loss in 2003. However, the de-listing
and consequent removal of the on-going costs of maintaining the US listing will
improve profitability in 2004 and enable management to focus on profitable
business in our major markets. Our strategy will be to provide a broader product
offering for new and existing customers in order to maximise profits in each of
the markets where VI is now based.

Although the lack of profitability was very disappointing, business volumes did
grow significantly in 2003. This was in a year dominated by the uncertainties of
world events, recessions in Europe and engineering markets in Japan and North
America that showed signs of improvement only late in the year. Indeed, our
growth in turnover recently prompted independent CAM analysts Cimdata to
describe VI as 'the most rapidly growing vendor over the last three year
period'. Turnover has doubled in the last three years and the group has
significantly increased its influence with the introduction of offices in
Detroit, Toronto, Lyon, Rome and Tokyo over the same period.

Given the importance of controlling the expansion costs, we cut more than
£300,000 of annualised costs in the early part of 2003. This has helped to
maintain base costs at the level of 2002, other than those relating to new
ventures and the US listing which are now removed. Profit in EBITDA terms fell
largely due to currency impact and the ending of some government backed
incentives in Italy and Germany, and a later than anticipated recovery by the US
mould and die sector.

After 10 years of operating in Japan with a single exclusive distributor, we
opened our own offices there in April 2003 in order to grow our business in the
world's second largest market for mould and die software. This new venture has
been very successful in gaining new business while maintaining our existing
relationships in Japan.

Our staff have been particularly resourceful in accomplishing 'more with less'
and lending a very helping hand to integrate both new offices and acquired staff
smoothly into the corporate structure.

I am happy to report that, against the difficult backdrop of 2003, the current
year has started well, with the first quarter of 2004 producing a turnover
increase of 27% and EBITDA of £242,000 compared to an EBITDA loss of £104,000 in
the equivalent period in 2003. For the rest of the year, much will depend on the
release of our first five-axis CAM solutions and the durability of the rise in
the industrial markets.

Stephen Palframan
14th May 2004


VI Group produced strong revenue growth on the back of its previous investments
in offices and technologies. The increase of £1.3m represented a growth of
nearly 18% in a year that was marked by the uncertainties of global supply
chains and a radical shift in manufacturing towards the Far East. The strength
of the Euro and the weakness of the US dollar worked in opposite directions for
the Company results providing a little changed 15% revenue growth when
calculated in constant currency terms.

The Company revenues grew particularly strongly in Japan (65%), France (80%) and
Canada (87%) where VI had made initiatives in late 2002 and early 2003. The
existing operations in the UK (33%), and our small and emerging markets
divisions (38%) also grew strongly. Sales rose in our major central European
markets of Germany and Italy but the stronger Euro and the end of some
government backed incentives in those countries reduced growth to single figures
only. Our offices in North America continued to sell successfully to some of the
major automotive suppliers in the Detroit-Toronto corridor despite a generally
depressed market for the majority of 2003.

Software sales accounted for 70% of turnover last year although software
maintenance, services and training grew to 27%, representing a significant rise
in service content. An important part of our work is the updating and
maintenance of our existing users and this is reflected in the fact that the
Company now has more than 5,000 seats of software under annual maintenance
contract. The direct sales channel now accounts for 53% of sales where products
and services are provided directly to end users by our own sales staff and 47%
through independent resellers and competence centres. Both channels grew last
year as the result of the new direct sales offices and new successes within the
OEM channel that was selling our software in combination with machine tools or
as part of third party software.

Gross margin for 2003 was £7.7m compared to £6.5m in 2002, showing a constant
87% of revenues. This margin figure has changed very little over the last three
years and is a tribute to the development team and its ability to provide
localised solutions without the often corresponding need to acquire locally.

New Operations

The Company opened a new wholly owned subsidiary in Japan at the beginning of
April 2003 to serve the existing dealer arrangements forged by the previous
exclusive arrangement with SII. Their mandate was to support and expand this
network which they have successfully done, repaying the start up capital within
six months and contributing profitably to the group while growing local

In January 2004, the Company acquired the Studio4 company that had previously
been one of its more important Italian dealers. The company has more than 200
customers in the very important mould and die area around Brescia in Northern
Italy. This small acquisition was made for only £144,000 but is projected to
generate significantly higher amounts of revenues and profit contributions in

Operating Expenses

Total selling costs rose 22% to £4.3m in 2003 and were wholly attributable to
the expansion of sales offices and 2002 acquisition costs being applied for a
full year, but underlying sales costs actually fell as a result of UK cost
savings and a reduction in UK personnel during 2003. Total administrative
expenses were 16% higher at £2.0m for similar reasons, but underlying costs saw
a comparable reduction.

Product Development and Other Operating Income

Release 11 of VISI-Series was distributed at the end of 2003 and added the
ability to drive CNC based machine tools using wire erosion technology that is
employed particularly in die making. The modelling portion of the product was
updated with new analysis tools important in the design arena and a number of
machining strategies such as core roughing used in the manufacture of moulds for
the automotive industry. The progressive die design system was given new editing
features based on a graphic tree providing a modifiable history of how the tool
was constructed. The release came too late in the year to influence 2003 sales
but has boosted the first quarter of 2004 results. Release 12 of the product
will be made available during the summer of 2004 and the addition of full five
axis machining capabilities is anticipated to be a major provider of new
business in 2004 and 2005.

Product development costs increased from £1.3m in 2002 to £1.5m in 2003 as a
result of the acquisition of the Machining Strategist development team. The
Machining Strategist product is now sold as a stand alone shop floor CAM system
and as a fully integrated part of the VISI-Series product.

The Company completed its Eureka collaborative European research and development
project for mould making software and recognised 2003 revenues of £124,000 in
proportion to the expenses. The actual cash grant for the project finally
started to arrive in the first quarter of 2004. The Company also received
approval for a UK based government award for a research project to be directed
at assisting the production of the more artistic forms of mould making.

Exceptional Items

The Company listed its American Depositary Receipts ('ADR's') on the American
Stock Exchange in October 2002 with a view to providing a currency for
acquisition possibilities in North America. The early cost of this additional
listing was about £50,000 per annum. The Company also sought to raise US funds
for expanding these acquisitions and concluded an agreement for the debenture
and further financing with Hemisphere Capital.

During 2003 it became clear that the costs and dilution associated with this new
financing were not on terms acceptable to the current shareholder base and the
potential further acquisitions were terminated. The costs of listing on the
American Stock Exchange also increased dramatically in 2003 as a result of the
introduction of the newly introduced Sarbanes-Oxley rules. The Company therefore
decided to de-list the ADR's and write off the financing and acquisition costs
totalling £789,000. Most of these costs were incurred in 2001 and 2002 and
consequently the write-off will have no forward effect on the Company's profits
or cash balances. The ADR's will continue to trade in the USA on the
'over-the-counter 'Pink Sheets'' market under the symbol GVIP where, at a
greatly reduced cost to the Company, North American based shareholders can
continue to trade.

Taxation and Earnings per Share

Before the above exceptional items the Company made earnings before interest,
tax, depreciation and amortisation (EBITDA) of £375,000 compared to £520,000 of
the preceding year. The pre-tax loss of £1.25m (2002: profit of £70,000) is a
result of the application of the exceptional items and a full year of
amortisation of goodwill arising from the Machining Strategist acquisition of
2002. The Company made a loss of £1.46m after applying a tax charge of £210,000.
Most of this tax charge originates in Italy. It includes taxes not relating
directly to current profitability and so distorts any calculation of a tax rate
as measured against pre-tax profits.

This translates into basic and fully diluted losses per share of 3.92 p (2002:
loss per share of 0.74p).

Cash flow and net funds

Cash outflow from operations was £0.05m compared to an outflow of £0.2m in 2002
as a result of the cost savings made during 2003. Cash balances at the year end
were £0.5m (2002: £1.2m), with £0.7m of short-term borrowings (2002: £0.5m),
giving a net cash figure of £(0.2)m (2002: £0.7m). The decrease in net funds is
a result of the expansion investments made in 2003.
First Quarter Results 2004

The delay in the 2003 results to allow the de-listing to occur has meant that
the Company can simultaneously comment on the un-audited results in the first
quarter of 2004.

The turnover in the first quarter was £2.6m, an increase of 27% over the same
period in 2002. Gross margin increased by 30% to £2.3m giving an overall gross
margin of 89% of revenue, a 2% improvement over the 2003 figure. Operating costs
rose by 11% to £2.1m for the first quarter as a result of one quarter of the new
Japan office costs and the Studio4 acquisition.

EBITDA for the first quarter grew to £0.2m from a loss of £0.1m for the same
period in 2003. Similarly the Group showed a first quarter pre-tax profit of
£33,000 compared to a first quarter pre-tax loss last year of £272,000.

The Group has made substantial effort in reducing its outstanding debtors and,
although there is still some way to go, is showing the first signs of reward,
with average debtor days falling during the past 12 months from a peak of 195 to
a current level of 143. Cash holdings at the end of March stood at £0.9m
compared to £0.5m at the end of December.

In conclusion, 2003 was the year in which the company settled its US accounts in
order to optimise its resources for 2004 and beyond.

Don Babbs
Chief Executive
14th May 2004

Consolidated Profit and Loss Account
                                            Year ended 31 December
                                    2003                        2002 (as restated*)
                                    £'000                            £'000
                      Ordinary   Exceptional     Total   Ordinary  Exceptional    Total
Turnover                 8,823                   8,823      7,542                 7,542
Cost of sales           (1,145)                 (1,145)    (1,004)               (1,004)
Gross profit             7,678                   7,678      6,538                 6,538
Selling expenses        (4,296)                 (4,296)    (3,508)               (3,508)
Administrative expenses (1,839)        (131)    (1,970)    (1,686)           -   (1,686)
Product development     (1,450)                 (1,450)    (1,282)               (1,282)
Net other operating
income                     282                     282        458            -      458
                         ------       ------     ------     ------         ---    -----
Earnings before interest,
tax, depreciation and
amortisation ('EBITDA')    375         (131)       244        520            -      520
Depreciation              (233)                   (233)      (195)           -     (195)
Amortisation of goodwill
and other intangible 
assets                    (500)                   (500)      (278)           -     (278)
                         ------       ------     ------    -------         ---    ------

Operating (loss)/profit   (358)        (131)      (489)        47            -       47

Interest receivable and
similar income              24                      24         63            -       63
Interest payable and
similar charges           (127)        (658)      (785)       (40)           -      (40)
                         ------       ------     ------     ------         ---    ------
(Loss)/Profit on ordinary
activities before
taxation                  (461)        (789)    (1,250)        70                    70
Taxation on profit on
ordinary activities       (210)                   (210)      (301)           -     (301)
Loss on ordinary
activities after 
taxation                  (671)        (789)    (1,460)      (231)           -     (231)
                         ======       ======    =======    =======         ===    ======

Basic and diluted
(loss)/earnings per 
share                    (1.80)p                 (3.92)p    (0.74)                (0.74)

* The comparative figures for cost of sales and selling expenses have been
restated. Previously an amount of employee costs was reanalysed as cost of
sales. There is no net effect on operating profit.

Consolidated Balance Sheet
                                                                31 December
                                                             2003         2002
                                                            £'000        £'000
Fixed assets:
Intangible fixed assets                                     1,781        1,963
Tangible fixed assets                                         564          636
                                                           -------      -------
                                                            2,345        2,599
                                                           -------      -------
Current assets:
Stock                                                          63           20
Debtors                                                     6,150        5,675
Cash at bank and in hand                                      501        1,185
                                                           -------      -------
                                                            6,714        6,880
Creditors; amounts falling due within one year             (3,910)      (2,924)
                                                           -------      -------
Net current assets                                          2,804        3,956
                                                           -------      -------
Total assets less current liabilities                       5,149        6,555
Creditors; amounts falling due after more than one year      (127)        (146)
Provisions for liabilities and charges                       (319)        (242)
                                                           -------      -------
                                                            4,703        6,167
                                                           =======      =======
Capital and reserves:
Called up share capital                                       186          186
Share premium account                                       5,860        5,860
Other reserves                                                 10           10
Profit and loss account                                    (1,353)         111
                                                          ---------     -------
Equity shareholders' funds                                  4,703        6,167
                                                           ========     =======

Consolidated Cash Flow Statement
                                                        Year ended 31 December
                                                            2003          2002
                                                           £'000         £'000

Cash outflow from operating activities                       (47)         (249)

Returns on investments and servicing of finance:
Interest received                                             36            51
Interest and other financing costs paid                     (297)          (35)
                                                           ------        ------ 
Net cash (outflow)/inflow from returns on
investments and servicing of finance                        (261)           16
                                                           ------        ------
Taxes paid                                                  (151)         (191)
                                                           ------        ------
Capital expenditure and financial investment:
Purchase of tangible fixed assets                           (196)         (469)
Purchase of intangible fixed assets                          (45)       (1,669)
Sale of tangible fixed assets                                 60            50
                                                           ------       -------
Net cash outflow from capital expenditure
and financial investment                                    (181)       (2,088)
                                                           ------       -------
Acquisitions and disposals:
Payments in respect of acquisitions                          (19)            -
Net bank loans and overdrafts acquired with
subsidiary                                                  (170)            -
                                                           -------         ----
Net cash outflow from acquisitions and disposals            (189)            -
                                                           -------         ----
Cash flows from financing activities:
Mortgage loans repaid                                        (21)          (41)
Repayment of finance leases                                 (103)          (31)
Issue of share capital                                         -         3,221
                                                           ------       -------
Net cash flow from financing activities                     (124)        3,149
                                                           ------       -------

Net increase/(decrease) in cash                             (953)          637
Cash at beginning of year                                    714            82
Exchange movements                                            (4)           (5)
                                                           ------        ------
Cash at the end of the year                                 (243)          714
                                                           ------        ======
Cash at bank and in hand                                     501         1,185
Bank loans and overdrafts                                   (744)         (471)
                                                           ------        ------
                                                            (243)          714
                                                           ------        ======

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