Interim Results
Microgen PLC
15 September 2005
microgen
Information Management Solutions
www.microgen.co.uk
15 September 2005
MICROGEN plc ('Microgen')
INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2005
Microgen plc, the Information Management Solutions company which provides
software, services and consultancy, reports a strong earnings performance for
the six months ended 30 June 2005 and provides an update on the strategic
development of the Group. The results are reported under IFRS with 2004
comparisons restated accordingly.
HIGHLIGHTS
• Adjusted eps (excl. intangible amortisation, exceptional items and with
normalised taxation) increased by 25% to 2.5p (2004: 2.0p). Basic eps of
2.6p (2004: 2.3p)
• Operating profit before intangible amortisation and exceptional items
increased by 43% to £3.3 million (2004: £2.3 million). Operating profit
increased by 40% to £3.2 million (2004: £2.3 million)
• Profit before tax increased by 45% to £3.6 million (2004 : £2.5 million)
• Operating margins before intangible amortisation increased significantly to
15.6% (2004: 10.9%.)
• Revenue £21.2 million (2004: £21.1 million). Significant progress achieved
in the strategic transition of the Group's revenue profile.
o 57% now derived from Microgen software, compared to 32% in the prior
year period.
o 63% now derived from Financial Services sector compared to 46% in
prior year period
• Positive operating cash flow of £2.5 million (2004: £2.3 million) producing
net funds at 30 June 2005 of £17.1 million, before recent acquisitions.
• Investment in development and support of software products increased by 68%
to £3.0 million (2004: £1.8 million). All costs expensed.
• Integration of the acquisitions announced in July, progressing
satisfactorily and on schedule, with relocation to freehold offices in
Fleet, Hampshire, now completed.
Contacts :
Martyn Ratcliffe, Executive Chairman 01252-772312
Mike Phillips, Group Finance Director
Giles Sanderson, Financial Dynamics 020-7831-3113
Ben Way
microgen
Information Management Solutions
www.microgen.co.uk
15 September 2005
MICROGEN plc ('Microgen')
INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2005
Chairman's Statement
Microgen reports another strong operating performance despite market conditions
which continue to be difficult to predict. This performance affirms the Group's
acquisition integration strategy and operational management approach. The
emphasis remains on profitable business activities, with significant progress
made in increasing the proportion of business derived from Microgen software and
the Financial Services sector.
The integration of AFA Systems plc, acquired in September 2004, has been
successfully completed. The integration of the acquisitions announced in July
2005, namely R/base Limited ('R/base') and Lynx Wealth Management Systems
Limited ('LWMS'), are now well advanced following the relocation of these
businesses to the Group's new office in Fleet, Hampshire.
Group Financial Performance
This is the Group's first report issued under International Financial Reporting
Standards ('IFRS'). As such, the comparative prior year figures have been
restated accordingly and a detailed reconciliation between IFRS and UK generally
accepted accounting principles is provided in a separate announcement issued
today. The adoption of IFRS has stimulated a review of the Group's financial
reporting format, to reflect the Group's operating model and approach to
acquisition integration. One of the more relevant elements of IFRS for IT
software companies relates to the capitalisation of product development. The
Board has reviewed the Group's development expenditure against the IFRS
capitalisation criteria and also reviewed best practice of international
software and solutions companies and has determined that the amount to be
capitalised is nil and therefore all costs have been expensed.
In the six months ended 30 June 2005, Microgen generated operating profit before
intangible amortisation and exceptional items of £3.3 million (2004: £2.3
million) from revenue of £21.2 million (2004: £21.1 million). Operating margins
before intangible amortisation and exceptional items increased significantly to
15.6% (2004: 10.9%). Headcount at 30 June 2005 was 431, of which approximately
10% were associates, contractors or temporary staff.
Operating profit for the period was £3.2 million (2004: £2.3 million). Profit
before tax in the period was £3.6 million (2004: £2.5 million). Adjusted
earnings per share increased by 25% to 2.5p (2004: 2.0p) with a basic earnings
per share of 2.6p (2004: 2.3p).
During the period, the Group produced positive operating cash flow of £2.5
million (2004: £2.3 million) and continues to have a strong balance sheet with
net funds of £17.1 million at 30 June 2005, prior to the recent acquisitions.
Consistent with the Group's acquisition strategy, Microgen does not at present
pay a dividend.
Operational Overview
There are two components to Microgen's strategy. Firstly, Microgen is an
acquisitive IT services and solutions organisation. The Group continues to seek
acquisition opportunities where there is a strategic fit and efficiencies can be
realised through a combination. As each acquisition is made, the integration
strategy adopted by Microgen focuses the business unit on sales, delivery and
support for the customer while the internal and administrative functions are
consolidated into shared services, the costs of which are charged to the
business units. This model retains the emphasis on customer development while
minimising the cost of internal administration.
Secondly, the organic development of the Group is based on :
• Customer account management, actively cross-selling the Group's solutions
and services offerings into the vertical market sectors,
• Cross-training of consultants to maximise opportunities for deployment and
to optimise utilisation, and,
• Re-use of software technology, particularly Microgen Aptitude, to
re-engineer existing products and to produce applications and solutions for
vertical market sectors, thereby increasing the efficiency of new product
development and reducing support costs in the medium term.
One of the key features of the past year has been the increasing proportion of
business derived from the Group's software, which now produces 57% of Group
revenue (2004: 32%), including associated customer-funded development and
consultancy. This transition has significantly reduced the Group's exposure to
general IT consultancy where market commoditisation continues. As a result,
consultancy fee rates have increased over the prior year period by 16% and the
average gross margin on consultants/associates has increased by over 20% as
consultants have been retrained and deployed on projects associated with
Microgen software and the Group has reduced the exposure to lower margin
business activities. As a result of these actions, Group operating margins
increased to 15.6% before intangible amortisation and exceptional items (2004:
10.9%), affirming the effectiveness of Microgen's evolution and the Group's
acquisition integration model.
The Group's business units are now categorised as Financial Services (63%) and
Commercial (37%), reflecting the appropriate business sector. The revenue in
each vertical business comprises software, consultancy and managed services and
the detailed breakdown of revenue, costs and margins is provided in note 1 of
this report. The operating income figures referenced below for each business are
before group overhead, intangible amortisation, exceptional items and tax.
Financial Services : These businesses now contribute 63% of Group revenue (2004:
46%) and comprise solutions for Banking, Derivatives Trading, Payment Solutions
and Asset & Wealth Management. Revenue in the period increased to £13.3 million
(2004: £9.6 million), with an operating margin of 20.7% (2004: 14.8%), producing
operating income of £2.8 million (2004: £1.4 million). The improvement in
operating margin has been achieved by increasing the proportion of revenue
derived from Microgen software solutions to over 80% (2004: 53%) and reducing
exposure to the general IT consultancy sector. The margin increase in the first
half has also benefited from the migration of BACS payment solutions to the
BACS-IP architecture.
Commercial : While revenue in the period decreased to £7.9 million (2004: £11.5
million), operating margin increased to 23.4% (2004: 17.2%) producing operating
income of £1.8 million (2004: £2.0 million). The revenue decline is primarily
due to the 2004 revenue being inflated, as highlighted last year, due to the low
margin contractor placement activity acquired with MMT Computing plc, which has
been progressively reduced, together with the scheduled completion of an
MMT-related applications management contract in 2004 and the ongoing decline in
the legacy print operations. In addition, the Board has consciously reduced its
exposure to commoditising sectors of general IT consultancy and has maintained
its emphasis on profitability and cash flow as the primary business performance
metrics.
Software Development
Microgen continues to invest significantly in new software products, with
development spend increasing by 68%, compared to the first half of 2004. In the
period to 30 June 2005, Software development activities total £3.0 million
(2004: £1.8 million), comprising customer-funded developments, investment in new
product development and support of existing products.
All the Group's software development activities are managed in a single
organisation to ensure consistency and quality, with the costs being charged
into the business units. This structure enables a variable investment model that
enables Microgen to respond to market sector dynamics and provide flexibility of
resourcing as development projects progress through the lifecycle stages.
Increasingly, the rules-based Business Process Management product Microgen
Aptitude is providing a core tool for the re-engineering of existing software
products and development of applications/solutions for vertical market sectors.
This re-use of technology is proving to be efficient in terms of the development
process and should produce a reduction of ongoing support costs in the longer
term.
Acquisitions and Financing
In July 2005, Microgen announced the acquisition of R/base and LWMS. R/base is a
UK provider of SAP applications management and consultancy services. The
addition of SAP capability into the Group's offering has been a strategic
objective for some time and will enhance the skill base across several business
sectors. LWMS is a leading provider of solutions for the offshore trust, fund
and banking sector and is being integrated into the Group's Asset Management
business, increasing the scale and offerings in this area of Financial Services.
The integration of both acquisitions is now well advanced and progressing
satisfactorily, with the operations relocated to the Group's new office facility
in Fleet.
The Fleet freehold was acquired in July using cash from existing resources.
Mortgage financing is now being negotiated for £6 million, repayable over 10
years and secured on the Fleet property and the two long-leasehold properties
that the Group occupies in London. The Fleet facility now also houses staff from
the former head office in Windsor, producing both cost and operational benefits.
Exceptional charges in the current year from the integration of R/base and LWMS,
together with the office relocations, are estimated to be £1.1 million.
Prospects
The Group's results once again demonstrate the Board's emphasis on profitability
and cash flow, producing a strong performance despite a continuing unpredictable
market environment. While market conditions appeared to be improving in late
2004 and early 2005, more recently this recovery has become more erratic and
less predictable. The Board is not anticipating a sustainable market recovery in
the near future and will therefore be maintaining its prudent approach.
The benefits of scale achieved through the acquisition strategy continue to be
realised, although the Board does consider that the Group's operating margin is
currently at the upper end for companies of Microgen's size and sector. With the
success of the Group's integration model, the Board continues to explore
strategic opportunities for the further development of Microgen, including
mergers and acquisitions, that could enhance the Group's offerings and improve
shareholder value.
In summary, the Board considers the strong performance of the Group in the first
half to be affirmation of its strategy, but remains cautious in its outlook for
the year. Further opportunities to develop the Group through acquisition
opportunities are continuously explored, but there can be no certainty that any
such transactions will be completed and the Board continues to evaluate each
opportunity in a prudent manner.
Martyn Ratcliffe
Executive Chairman
Microgen plc
CONSOLIDATED INTERIM INCOME STATEMENT
For the six months to Unaudited six months Unaudited six months Unaudited year
30 June 2005 to 30 June 2005 to 30 June 2004 ended 31 Dec 2004
Before Intan- Before Intan- Before Intan-
Intan- gibles Intan- gibles Intan- gibles
gibles amorti- gibles amorti- gibles amorti-
amorti- sation amorti- sation amorti- sation
sation and sation and sation and
and except- and except- and except-
except- ional except- ional except- ional
ional items ional items ional items
items Total items Total items Total
Note £000 £000 £000 £000 £000 £000 £000 £000 £000
Revenue 1 21,227 - 21,227 21,130 - 21,130 42,444 - 42,444
Operating costs (17,924) (54) (17,978) (18,817) - (18,817) (37,452) (1,665) (39,117)
Operating profit 1 3,303 (54) 3,249 2,313 - 2,313 4,992 (1,665) 3,327
Interest payable (50) - (50) (25) (25) (53) - (53)
and similar charges
Interest receivable 362 - 362 163 - 163 479 - 479
Profit on ordinary 3,615 (54) 3,561 2,451 - 2,451 5,418 (1,665) 3,753
activities before tax
Taxation 3 (942) (471) (913)
Profit for the period 2,619 1,980 2,840
Profit attributable to 2,619 1,980 2,815
equity shareholders
Profit attributable to - - 25
minority interests
Retained profit 2,619 1,980 2,840
transferred to reserves
Earnings per share
Basic and Diluted 4 2.6p 2.3p 3.1p
Adjusted earnings per
share
Basic and Diluted 4 2.5p 2.0p 4.2p
Microgen plc
CONSOLIDATED BALANCE SHEET Unaudited Unaudited Unaudited
30 JUNE 2005 as at as at as at
30 June 2005 30 June 2004 31 Dec 2004
£000 £000 £000
ASSETS
Non-current assets
Property, plant and equipment 3,544 3,762 3,774
Goodwill 53,272 44,775 53,272
Other intangible assets 458 - 512
Deferred tax asset 1,642 1,185 1,972
Investments in other company - 2,678 -
58,916 52,400 59,530
Current assets
Inventories 126 127 100
Trade and other receivables 6,829 7,456 8,164
Cash and cash equivalents 17,101 9,083 14,600
24,056 16,666 22,864
Non-current assets classified as held for sale - 535 -
24,056 17,201 22,864
LIABILITIES
Current liabilities
Trade and other payables (12,615) (11,111) (14,769)
Current tax liabilities (814) - (120)
Provisions (680) (701) (1,244)
(14,109) (11,812) (16,133)
Net current assets 9,947 5,389 6,731
Non-current liabilities
Provisions (1,039) (1,683) (1,200)
NET ASSETS 67,824 56,106 65,061
SHAREHOLDERS' EQUITY
Ordinary shares 5,079 4,347 5,079
Share premium account 11,143 8,943 11,143
Merger reserve 36,389 31,075 36,389
Other reserves 334 334 334
Retained earnings 14,879 11,218 12,116
EQUITY SHAREHOLDERS' FUNDS 7 67,824 55,917 65,061
Minority interest - 189 -
TOTAL EQUITY 67,824 56,106 65,061
CONSOLIDATED CASH FLOW STATEMENT
For the six months to 30 June 2005 Unaudited Unaudited six Unaudited
six months months ended year ended
ended
30 June 30 June 2004 31 Dec
2005 2004
Note £000 £000 £000
Cash flows from operating activities
Cash generated from operations 5 2,472 2,317 5,361
Interest received 374 171 433
Interest paid (50) (33) (21)
Tax received/(paid) 82 140 (355)
Net cash from operating activities 2,878 2,595 5,418
Cash flows from investing activities
Acquisition of subsidiaries (net of cash acquired) - - (2,779)
Repayment of subsidiary debt acquired during the period - - (250)
Payment of deferred consideration - (49) (205)
Purchase of property, plant and equipment (355) (365) (919)
Proceeds from the sale of non current assets held for - - 480
resale
Purchase of investment in other company - (2,894) (2,894)
Proceeds from the sale of investments in other company - - 3,500
Net cash used in investing activities (355) (3,308) (3,067)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital - - 2,416
Redemption of loan notes - (652) (652)
Net cash used in financing activities - (652) 1,764
Effects of exchange rate changes (22) (9) 28
Net increase /(decrease) in cash and cash equivalents 2,501 (1,374) 4,143
Opening cash and cash equivalents 14,600 10,457 10,457
Closing cash and cash equivalents 17,101 9,083 14,600
Microgen plc
Notes to consolidated interim statements
1 Segmental information
The segmental information below reflects the divisional operating structure of
the Group, which is the primary segmentation of the operating performance
reviewed by the Board.
Unaudited for the six months Unaudited for the six months Unaudited for the 31 Dec 2004
ended ended
30 June 2005 30 June 2004
Revenue Financial Commercial Total Financial Commercial Total Financial Commercial Total
Services Services Services
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Software Based 10,943 1,204 12,147 5,064 1,675 6,739 14,108 3,293 17,401
Managed Services 799 4,101 4,900 913 5,080 5,993 1,613 9,513 11,126
General consultancy 1,569 2,611 4,180 3,648 4,750 8,398 7,022 6,895 13,917
Total Revenue 13,311 7,916 21,227 9,625 11,505 21,130 22,743 19,701 42,444
Development costs (2,501) (464) (2,965) (1,297) (467) (1,764) (3,189) (1,041) (4,230)
Other operating
costs (8,049) (5,604) (13,653) (6,904) (9,058) (15,962) (15,697) (15,163) (30,860)
Total operating
costs (10,550) (6,068) (16,618) (8,201) (9,525) (17,726) (18,886) (16,204) (35,090)
Operating profit
before group 2,761 1,848 4,609 1,424 1,980 3,404 3,857 3,497 7,354
overheads
Group overheads (1,306) (1,091) (2,362)
Operating profit
before 3,303 2,313 4,992
intangible
amortisation and
exceptional items
Intangible
amortisation (54) - (32)
Exceptional items
Exceptional costs
- Property
provision - - (627)
- Restructuring
costs - - (1,612)
Exceptional
profit
- on disposal
of investment - - 606
in other company
- - (1,633)
Operating profit 3,249 2,313 3,327
2 Basis of preparation
These interim financial statements have been prepared in accordance with the
accounting policies the Group expects to be applicable at 31 December 2005 and
the interpretation of those standards as set out in the separate announcement
issued today on the impact of adoption of International Financial Reporting
Standards ('IFRS'). The IFRS's and IFRICS interpretations that will be
applicable at 31 December 2005, including those that will be applicable on an
optional basis, are not known with certainty at the time of preparing these
interim financial statements. These figures may therefore require amendment to
change the basis of accounting or presentation of certain financial information,
before their inclusion in the IFRS financial statements for the year ended 31
December 2005, which will be the Group's first full set of IFRS financial
statements. These interim financial statements have been prepared under the
historical cost convention, except in respect of certain financial instruments.
3 Taxation
The tax charge of £942,000 is at an effective tax rate of 26.5% (Year
ended 2004 24.3%) of the profit before tax.
4 Earnings per share
To provide an indication of the underlying operating performance per share the
adjusted profit after tax figure used in the calculation of the adjusted
earnings per share excludes intangible amortisation, exceptional items and has a
normalised tax charge.
Unaudited six Unaudited six Unaudited Year
months ended 30 months ended 30 ended 31 Dec
June 2005 June 2004 2004
Earnings per share
Basic and diluted 2.6 2.3 3.1
Adjusted earnings per share
Basic and diluted 2.5 2.0 4.2
Adjusted and basic earnings per share calculations are based on the weighted
average number of shares in issue during the period of 100,966,606 shares (June
2004: 86,302,670; Dec 2004: 90,599,424). Diluted earnings per share
calculations are based on 102,133,393 (June 2004: 86,998,048; Dec 2004:
91,303,621) ordinary shares being the weighted average number of shares in issue
during the period plus 1,166,787 (June 2004: 695,378; Dec 2004: 704,197)
dilutive share options. The Company's authorised share capital at 1 January and
30 June 2005 was 145,000,000 ordinary shares of 5 pence each with a nominal
value of £7,250,000. At 1 January 2005 the issued, allotted and fully paid up
share capital was 101,585,739 ordinary shares and by 30 June 2005 this number
had increased to 101,587,277. At both these dates the issued, allotted and
fully paid up share capital included 620,544 shares held by the Microgen
Employee Share Participation Scheme Trust.
The table below shows a reconciliation of basic to adjusted earnings per share.
Unaudited six Unaudited six Unaudited Year
months ended 30 months ended 30 ended 31 Dec
June 2005 June 2004 2004
pence Pence pence
Basic earnings per share 2.6 2.3 3.1
Adjustments to actual tax charge (0.1) (0.3) (0.7)
Exceptional charge net of tax - - 1.5
Prior years' tax charge - - 0.3
Adjusted earnings per share 2.5 2.0 4.2
5. Cash generated from operations
Unaudited Unaudited Unaudited year
six months six months ended 31 Dec
ended 30 ended 30 2004
June 2005 June 2004
£000 £000 £000
Profit for the period 2,619 1,980 2,840
Adjusted for:
Taxation 942 471 913
Depreciation 488 392 963
Amortisation of other intangible assets 54 - 32
Share based payments charge 75 44 107
Exceptional profit on investing activities - - (606)
Loss on disposal of tangible fixed assets 85 - 52
Loss on disposal of non-current assets held for resale - - 52
Interest income (362) (163) (479)
Interest expense 50 25 53
Changes in working capital:
Decrease in debtors 1,281 1,627 2,068
(Increase)/decrease in stocks (26) (16) 11
Decrease in creditors and provisions (2,734) (2,043) (645)
Cash generated from operations 2,472 2,317 5,361
6. Reconciliation between UK GAAP and IFRS
(i) Reconciliation of profit after tax for the period between UK GAAP and IFRS
The following table summarises the impact of the adoption of IFRS on the Group's
operating profit for the six months ended 30 June 2004 and the year ended 31
December 2004.
Unaudited six Unaudited year
months ended ended 31 Dec
30 June 2004 2004
£000 £000
Profit after tax - UK GAAP 841 173
Amortisation of goodwill 1,317 2,774
Amortisation of other intangible assets - (32)
Staff costs - share based payments (44) (107)
Deferred tax credit on share based payments 13 32
Staff costs - holiday pay (147) -
Profit after tax - IFRS 1,980 2,840
(ii) Reconciliation of total equity between UK GAAP and IFRS
The following table summarises the impact of the adoption of IFRS on total
equity as at 1 January 2004, 30 June 2004 and 31 December 2004.
Unaudited as Unaudited as Unaudited as at
at 1 January at 30 June 31 Dec 2004
2004 2004
£000 £000 £000
Total equity - UK GAAP 54,081 54,923 62,287
Reversal of goodwill amortisation - 1,317 2,774
Deferred tax in respect of share based payments - 13 32
Other intangible assets amortisation - - (32)
Staff costs - holiday pay - (147) -
Total equity - IFRS 54,081 56,106 65,061
7. Statement of changes in Equity
1 January Share based Currency Profit for 30 June 2005
2005 award translation the period
adjustment
£'000 £'000 £'000 £'000 £'000
Share Capital 5,079 - - - 5,079
Share premium 11,143 - - - 11,143
Merger reserve 36,389 - - - 36,389
Other reserves 334 - - - 334
Profit and loss account 12,116 75 69 2,619 14,879
Total equity 65,061 75 69 2,619 67,824
8. Post balance sheet events
On 1 July 2005 Microgen acquired the entire share capital of R/base Limited, a
UK provider of SAP applications management and consultancy services. The
consideration paid in respect of the issued share capital of R/base was £1.22
million, comprising £0.61 million in cash and £0.61 million by the issue of
740,290 new Microgen shares. On acquisition, Microgen repaid an outstanding
bank loan on behalf of R/base of £0.43 million. R/base will be integrated into
Microgen's Commercial Division.
On 13 July 2005 Microgen acquired the entire share capital of Lynx Wealth
Management Systems (Guernsey) Limited, a leading provider of trust, fund and
private banking systems. The cash consideration paid in respect of the issued
share capital of LWMS was £2.1 million. On acquisition, Microgen repaid an
outstanding bank loan on behalf of LWMS of £1.6 million. LWMS will be integrated
into the Group's Financial Services division.
On 26 July 2005, Microgen acquired a freehold property in Fleet, Hampshire for a
purchase price of £5.25 million in cash.
9. Statement by the directors
The financial information in this interim statement has been prepared on the
basis of the accounting policies set out in the Restatement of Financial
information under International Financial Reporting Standards of Microgen plc
for the year ended 31 December 2004.
The financial information does not constitute statutory accounts within the
meaning of section 240 of the Companies Act 1985. This interim statement has
not been audited by the company's Auditors. Statutory accounts for Microgen plc
for the year ended 2004, on which the Auditors gave an unqualified report, have
been delivered to the Registrar of Companies. The directors of Microgen plc
accept responsibility for the information contained in this announcement. To
the best of their knowledge and belief (having taken all reasonable care to
ensure that such is the case) the information contained in this announcement is
in accordance with the facts and does not omit anything that is likely to affect
the import of such information.
Copies of this statement are being posted to shareholders and will also be
available on the investor relations page of our website (www.microgen.co.uk).
Further copies are available from the Company Secretary at Fleet House, 3
Fleetwood Park, Barley Way, Fleet GU51 2QJ.
Independent review report to Microgen plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2005 which comprises consolidated interim balance
sheet as at 30 June 2005 and the related consolidated interim income statement
and cash flows for the six months then ended and related notes. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 2, the next annual financial statements of the group will
be prepared in accordance with accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in Note 2.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 2, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC interpretations that will be applicable and adopted
for use in the European Union at 31 December 2005 are not known with certainty
at the time of preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
London
15 September 2005
Notes:
(a) The maintenance and integrity of the Microgen plc web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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