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VI Group PLC (VERO)

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Thursday 14 April, 2005

VI Group PLC

Final Results

VI Group PLC
14 April 2005

VI GROUP plc



PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2004



VI Group plc ('VI' or 'the Company'), one of the leading software providers to
the mould and die industry, today announced another year of double figure
turnover growth and an earnings increase.



SUMMARY



•        Turnover up 10% (12% in constant currency terms) to £9.7m (2003: £8.8m)

•        EBITDA of £526,000 (2003: £244,000)

•        Pre tax loss of £259,000 (2003: Loss of £1.25m) after goodwill 
         amortisation of £518,000 (2003: £500,000)

•        Excellent growth of 40% in Japan following only the second year of 
         subsidiary operations.

•        Double figure growth for both North America and Germany provided 
         additional market share gains against a relatively poor economic 
         climate.

•        Operating cashflow for the year also increased from a £47,000 outflow 
         in 2003 to an inflow of £1m, as a result of improvements in
         customer financing facilities and cash collection procedures and 
         government grants received.

•        First release of high end CAM applications





Don Babbs, Chief Executive of VI, commented:



'Despite a fall in sterling equivalent revenues caused by the lower US dollar
exchange rate and our principal European customers suffering from severe
competition from the emerging markets in Eastern Europe and the Far East, VI
still achieved a 10% growth in its revenues and a doubling of EBITDA returns.



We are continuing to invest in the emerging markets and broadening the product
range within our niche market area. The benefits of these investments are
scheduled to produce further gains in market share over the next three years'



- Ends -


For further information please contact:


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


Corporate Synergy                                     Tel: 020 7626 2244
Justin Lewis





CHAIRMAN'S STATEMENT



VI Group's financial results for 2004 represent the Company's sixteenth
consecutive rise in annual revenue. This is despite the relative weakness of all
the foreign currencies in which sales are transacted, in particular the US
dollar. EBITDA (Earnings before interest, tax, depreciation and amortisation)
also rose significantly as a result of the increase in revenue and following
concerted cost reduction efforts and improved administration efficiencies.
Although the amortisation charges from our acquisitions in previous years
produced a pre-tax loss this has been considerably reduced from prior years.
Some of our acquisitions will become fully amortised during 2005, with the
consequence that the charge will start to decline after the end of 2004 and have
a diminishing effect on the Company's reported earnings.



We are continuing to invest in new distribution areas and broadening the product
base and these investments are expected to show their first significant fruits
next year. All of the newer offices in Tokyo, Rome and Brescia performed well in
2004 and have integrated productively into the VI structure. The cost savings
implemented during the year aided our rise in earnings without any damage to our
ability to increase revenues right across the group, with all the major revenue
areas contributing to the increase in turnover.



Our staff have been quick to adapt to many of the new market conditions and
remain both enthusiastic and loyal to the company during this drive to increase
earnings.



The outlook for 2005 is more difficult to predict than usual as a result of
varying macroeconomic and industry indicators. Amongst our largest markets Japan
has re-entered a phase of technical recession, with no clear consensus as to how
long this will last or how it will affect the markets in which we operate. In
the US, confidence remains high but has produced contradicting signals, with the
automotive sector reluctant to commit to multiple model launches. Europe
continues to exhibit slow growth and is suffering from heavy competition with
some of Asia's emerging markets. Conversely, the sector in which the Company
operates in China and many Asian countries is expanding rapidly and we believe
we are well placed to take advantage of this growth. Against this varied
background to current markets VI has developed a robust sales network in all of
these areas and will be helped by new product launches and a further expansion
of the distribution network.



Stephen Palframan

Chairman

14th April 2005





OPERATING AND FINANCIAL REVIEW



VI Group produced another record revenue year to more than triple its annual
revenues since flotation. The increase of £0.9m represented a growth of nearly
10% despite a fall in the value of the US dollar, Japanese Yen and the Euro.
Revenue growth measured on a constant currency basis was in excess of 12%



The Company turnover grew particularly strongly in Japan (40%) where it was
aided by the order from Hitachi Zosen Systems the largest vendor of CAM systems
in Japan announced in July and a long awaited Japanese recovery year. North
American operations grew well (11%) following further investment in management
and technical staff and Germany (12%) also produced a strong performance despite
a lack of confidence in the market. All other areas also grew revenues largely
at the expense of our competitors rather than the result of a growing market.



Overall the OEM sales channel that sells software in combination with machine
tools or with third party software grew faster than the direct or dealer
channels although these remain the largest percentage of VI sales. Software for
improving times to market for mould and die manufacturers remains at 70% of our
revenues and demand has been maintained through difficult economic shifts as the
industry responds to global pressure for cost and lead time reductions.



Gross margin for 2004 was £8.7m or 89% of revenues compared to £7.7m in 2003,
(87%). This margin figure has risen steadily over the last three years as the
product strategy has begun to take effect. In particular the software
development facilities provided to our subsidiaries and third parties is now
enabling a greater production of add on solutions.



New Operations



The Company bought Studio4 Srl based in the strategic mould making area of
Brescia in Northern Italy at the end of 2003. Acquired for £144,000 it has
generated an additional £0.3m in revenues and contributed positively to group
earnings.



VI appointed new dealers in Romania, Japan, Spain and Germany during 2004 and
continues to add further relationships throughout the developing world that is
fast becoming the production centre for many mould and die based products.





Operating Expenses



Total operating expenses rose by about 8% as a result of full year operations in
Japan and the Studio4 acquisition. When combined with cost of goods the overall
running costs rose by just 6%. This reflects a concerted effort to maintain
business expenses while growing revenues.





Product Development and Other Operating Income



VI development activities focussed on broadening the product offering to our
specific industry sector and solutions for machines using wire EDM technologies
and continuous five axis machining were introduced during 2005. The five axis
solution in particular will appeal to customers using the latest methods in
machine tool cutting to reduce unproductive re-positioning time on the machine
tools. Released towards the end of 2005 this module exceeded sales targets set
for the period and is proving particularly robust for such a new technology.



Release 12 of VISI-Series was distributed in the summer of 2004, as planned and
carried a large number of design and manufacturing process improvements to our
maintenance paying customers that represent 25% of our current revenues.



The Department of Trade & Industry awarded a grant of £81,000 for the
development of modelling technologies particularly applicable to areas of mould
design that are not easily accessible to users of current precise modelling
techniques. It is anticipated that this project will come to fruition in late
2006



Product development costs actually fell slightly from £1.5m in 2003 to £1.3m in
2004 although further investments will be made in 2005 as the product portfolio
is expanded to meet further specialisation in the market.



Taxation and Earnings per Share



The Company made earnings before interest, tax, depreciation and amortisation
(EBITDA) of £526,000 and more than double that of £244,000 in the preceding
year. The pre-tax loss of £259,000 (2003: loss of £1.25m) is the result of
amortisation of goodwill charges arising from various earlier acquisitions. The
Company made a loss of £312,000 after applying a tax charge of £53,000.



This translates into basic and fully diluted losses per share of 0.84p (2003:
loss per share of 3.92p).



Cash flow and net funds



Cash inflow from operations was £1m compared to an outflow of £0.05m in 2003 as
a result of improvements in cash collection, additional third party customer
financing and government grants. Cash balances at the year end were £1.2m (2003:
£0.5m), with £0.8m of short-term borrowings (2003: £0.7m), giving a net cash
figure of £0.4m (2003:net debt of £0.2m).



Don Babbs

Chief Executive

14th April 2005



Consolidated Profit and Loss Account
                                                             Year ended 31 December
                                                       2004                       2003
                                                      £'000                      £'000
                                                   Ordinary   Ordinary     Exceptional     Total

Turnover                                             9,698       8,823                     8,823
Cost of sales                                       (1,023)    (1,145)                   (1,145)
Gross Profit                                          8,675      7,678                     7,678
Selling expenses                                    (4,858)    (4,296)                   (4,296)
Administrative expenses                             (2,180)    (1,839)                   (1,970)
Product development                                 (1,339)    (1,450)                   (1,450)
Net other operating income                          228            282                       282
Earnings before interest, tax, depreciation and         526        375           (131)       244
amortisation ('EBITDA)
Depreciation                                          (197)      (233)                     (233)
Amortisation of goodwill and other intangible         (518)      (500)                     (500)
assets
Operating Loss                                        (189)      (358)           (131)     (489)

Interest receivable and similar income                   19         24                        24
Interest payable and similar charges                   (89)      (127)           (658)     (785)

Loss on ordinary activities before taxation           (259)      (461)           (789)   (1,250)
Taxation on profit on ordinary activities              (53)      (210)                     (210)

Loss on ordinary activities after taxation            (312)      (671)           (789)   (1,460)

Basic and diluted loss per share                    (0.84)p    (1.80)p                   (3.92)p

Consolidated Balance Sheet


                                                                                        31 December
                                                                                    2004            2003
                                                                                   £'000           £'000

Fixed Assets:
Intangible fixed assets                                                            1,269           1,781
Tangible fixed assets                                                                451             564
                                                                                   1,720           2,345
Current Assets:
Stock                                                                                 48              63
Debtors                                                                            5,711           6,150
Cash at bank and in hand                                                           1,176             501
                                                                                   6,935           6,714
Creditors; amounts falling due within one year                                   (3,708)         (3,910)
Net Current Assets                                                                 3,227           2,804
Total Assets less current liabilities                                              4,947           5,149
Creditors; amounts falling due after more than one year                            (252)           (127)
Provisions for liabilities and charges                                             (366)           (319)
                                                                                   4,329           4,703
Capital and Reserves
Called up share capital                                                              186             186
Share premium account                                                              5,860           5,860
Other reserves                                                                        10              10
Profit and loss account                                                          (1,727)         (1,353)
Equity Shareholders' Funds                                                         4,329           4,703



Consolidated Cash Flow Statement
                                                                              Year ended 31 December
                                                                                2004         2003
                                                                               £'000        £'000

Cash inflow/(outflow) from operating activities                                1,000         (47)

Returns on investments and servicing of finance:
Interest received                                                                 19           36
Interest and other financing costs paid                                         (89)        (297)
Net cash outflow from returns on investments and servicing of                   (70)        (261)
finance

Taxation:
Taxes paid                                                                     (207)        (151)

Capital expenditure and financial investment:
Purchase of tangible fixed assets                                              (101)        (196)
Purchase of intangible fixed assets                                             (24)         (45)
Sale of tangible fixed assets                                                      6           60
Net cash outflow from capital expenditure and financial                        (119)        (181)
investments

Acquisitions and Disposals:
Payments in respect of acquisitions                                             (28)         (19)
Net bank loans and overdrafts acquired with subsidiary                             -        (170)
Net cash outflow from acquisitions and disposals                                (28)        (189)

Cash flows from financing activities:
New loan                                                                         181            -
Loans repaid                                                                    (25)         (21)
Repayment of finance leases                                                     (24)        (103)
Net cash flow from financing activities                                          132        (124)

Net increase/(decrease) in cash                                                  708        (953)
Cash at beginning of year                                                      (243)          714
Exchange movements                                                              (58)          (4)
Cash at the end of the year                                                      407        (243)

Cash
Cash at bank and in hand                                                       1,176          501
Bank loans and overdrafts                                                      (769)        (744)
                                                                                 407        (243)



Notes



1.    Dividend

The directors do not recommend the payment of a dividend.

2.    Financial information



The financial information contained in this preliminary announcement of audited
results does not constitute the group's statutory accounts for the year ended 31
December 2004. The financial information has been prepared using consistent
financial policies. The accounts for the year ended 31 December 2004 will be
delivered to the Registrar of Companies.



The statutory accounts for the year ended 31 December 2004 have been reported on
by the company's auditors; the reports on these accounts were unqualified and
they did not contain a statement under section 237(2) or (3) of the Companies
Act 1985.



The annual report will be sent to shareholders in due course. Copies of this
announcement and the full statutory accounts are available, free of charge, from
the Company's office at The Mill, Brimscombe Port, Brimscombe, Stroud,
Gloucestershire GL5 2QG.


                      This information is provided by RNS
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