Interim Results

RNS Number : 7258P

Microgen PLC

22 July 2010

 



22 July 2010

MICROGEN plc ('Microgen')

Interim Results for the six months ended

30 June 2010

Microgen plc reports results for the six months ended 30 June 2010 showing excellent growth in revenue and profitability.

Highlights

·      Adjusted operating profit from continuing operations increased by over 50% to £3.8 million (H1, 2009 : £2.5 million). 

·      Revenue from continuing operations of £16.1 million (H1, 2009 : £13.6 million) representing 19% growth overall with revenue growth of 66% from the Microgen Aptitude Solutions Division.

·      Adjusted Basic EPS (excluding intangible amortisation and exceptional items) increased to 3.3p (H1, 2009 : 2.2p).

·      Strong balance sheet with cash at 30 June 2010 of £25.0 million.

·      Proposed tender offer to return up to £10 million to shareholders.

·      Interim dividend increased by 12.5% to 0.9 pence per share (2009 : 0.8 pence per share).  This is the fourth consecutive increase in the interim dividend representing an increase of 80% since 2006.

Statutory results

·      Operating profit increased by over 80% to £3.7 million (H1, 2009 : £2.0 million).

·      Basic EPS of 3.1p (H1, 2009 : 2.3p).

Contacts

Martyn Ratcliffe, Chairman	01252-772300
David Sherriff, Chief Operating Officer Philip Wood, Group Finance Director
James Melville-Ross, Financial Dynamics	020-7831-3113
Haya Herbert-Burns, Financial Dynamics

* Throughout this statement adjusted operating profit and margin from continuing operations excludes intangible amortisation, exceptional items and discontinued operations, unless stated to the contrary.

Microgen reports another period of strong operating performance for the six months ended 30 June 2010 showing growth in revenue and profitability led by the Microgen Aptitude Solutions Division ("MASD"). 

MASD revenue grew by 66% in the period compared to H1 2009 whilst continuing to improve profitability, reporting an operating margin for the division of 12.9%, compared to a loss in the first half of 2009.  During the period Microgen Aptitude Version 3.0 was released enhancing the product's market leading combination of performance and functionality, with a continuing roadmap intended to maintain this leadership position.

With its high proportion of recurring revenue and diverse client base the Financial Systems Division ("FSD") has shown continued resilience in H1 2010 with strong profitability and the division is starting to see early stage recovery in some of its markets.

With a cash balance at 30 June 2010 of £25.0 million the Board is proposing to undertake a tender offer to return up to £10 million to shareholders.  The proposed tender offer and interim dividend will bring the total cash returned to shareholders to £25.5 million since 13 October 2008, the date prior to the initial announcement of the Microgen Value Enhancement and Realisation Bonus Scheme.  The total cash returned represents approximately 69% of the Group's market capitalisation as at 13 October 2008. A circular to shareholders detailing the tender offer will be distributed in due course.

Group Financial Performance

Throughout this statement adjusted operating profit and margin from continuing operations excludes intangible amortisation, exceptional items and discontinued operations, unless stated to the contrary.

In the six months ended 30 June 2010 revenue from continuing operations was £16.1 million (H1, 2009 : £13.6 million) increasing adjusted operating profit by over 50% to £3.8 million from  £2.5 million in H1 2009.  Operating profit on a statutory basis for the period increased by over 80% to £3.7 million (H1, 2009 : £2.0 million). 

Recurring revenues increased to £8.5 million (H1, 2009 : £8.2 million) equivalent to 52% of Group revenue (H1, 2009 : 60%).  The percentage reduction reflects the growth in the period of MASD revenue and the division's higher services component.

In accordance with IFRS, the Board has continued to determine that all internal research and development costs incurred in the period are expensed and therefore the Group has no capitalisation of development expenditure.  This is consistent with the Group's conservative accounting policies.  The overall level of group expenditure on research, development and support activities remains consistent with the level incurred in H1 2009.

Adjusted basic earnings per share for the six months ended 30 June 2010 increased by 50% to 3.3p (H1, 2009 : 2.2p) with a basic earnings per share of 3.1p (H1, 2009 : 2.3p). 

Cash generated from operations of £3.1m represents over 80% of operating profit and the Group continues to have a strong balance sheet with cash of £25.0 million at 30 June 2010 (H1, 2009 : £15.2m) and net funds of £23.0 million at 30 June 2010 (H1, 2009 : £12.8 million).  The difference between cash and net funds relates to borrowings associated with the Group's freehold property in Fleet. 

Reflecting the strong performance in the period the interim dividend has been increased by 12.5% to 0.9 pence per share (2009 : 0.8 pence per share), the fourth consecutive year of an increase in interim dividend.  The dividend will be paid on 25 August 2010 to shareholders on the register as at 30 July 2010.

Operational Overview

Microgen is organised into two operating divisions with the benefits of scale being achieved through shared central services which are charged into each business.

·      Microgen Aptitude Solutions Division ("MASD")

Combining the capability of Microgen Aptitude with the Group's business domain knowledge and experience, MASD provides products and solutions for financial services, digital media and commercial markets. 

In June 2010 Microgen Aptitude Version 3.0 was released, further increasing the product's market leading combination of transaction processing performance and business process functionality.  Microgen Aptitude Version 3.0 can now process in the order of 200 million ETL (Extract Transform and Load) transactions per hour.  Additional modules are scheduled for release later in 2010 to further strengthen the market leading position of the product whilst work is currently underway to deliver performance levels in excess of 500 million ETL transactions per hour by 2012.

MASD revenue increased 66% to £7.8 million (H1, 2009 : £4.7 million) and now represents 48% of Group revenue (H1, 2009 : 35%).  The division reported an operating profit of £1.0 million (H1, 2009 : loss of £0.6 million), representing an operating margin of 12.9%, building on the profitability established in H2 2009.  

·      Financial Systems Division ("FSD")

With its high proportion of recurring revenue (81%) and diverse client base FSD has shown continued resilience in H1 2010.  As a result, FSD has maintained its very strong operating margin at 48% (H1, 2009 : 48%).

Revenue in FSD for the period ended 30 June 2010 was £8.3 million (H1, 2009 : £8.9 million). However, revenue from the financial systems sectors was consistent with H2 2009 reflecting the stabilisation of these market sectors and the initial recovery now being seen in the Wealth Management and Offshore Banking sector. With the recent appointment of a new managing director to lead the division, FSD is anticipated to build on this recovery.

Share Tender Offer

The Board continues to recognise the illiquid nature of small-cap shareholdings and as a result the Board is to propose to shareholders to undertake a tender offer to repurchase and cancel shares by way of an on-market tender offer at a price range of 80 to 90 pence per share. The strike price of the tender offer will be determined by the tender process. Under no circumstances will the tender offer exceed the lower of £10 million or 12.5 million shares and it will be scaled back if necessary.

While the tender offer will reduce the Group's cash balance, the Board considers that the Group will still retain a robust balance sheet which is essential for customer confidence and to continue to pursue acquisition opportunities when appropriate. All members of the Board have advised that they do not intend to sell any shares under the tender offer.

A circular to shareholders detailing the tender offer will be distributed in due course.  Included within the circular to shareholders, the Board will also propose to renew the authorisation from shareholders to purchase up to 14.99% of the post-tender authorised share capital, consistent with the Board's current authority.  This will retain the Board's discretionary share buy-back facility.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties.  The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks.  These risk profiles are updated at least annually.  The principal risks and uncertainties detailed within the Group's 2009 Annual Report remain applicable for the final six months of the financial year.  The Group's 2009 Annual Report is available from the Microgen website : www.microgen.com.

There were no related party transactions during the period, as disclosed in Note 12.

Prospects

The Group's strong performance in the first half of 2010 reflects the success of Microgen Aptitude and related products, supported by a solid performance from the Financial Systems Division. 

Whilst the Board remains cautious and prudent, Microgen has delivered another robust operating performance and remains on track to meet the Board's expectations for the year.

GROUP INCOME STATEMENT

For the six months ended 30 June 2010

		Unaudited six months ended 30 Jun 2010						Unaudited six months ended 30 Jun 2009 Restated						Audited year ended 31 Dec 2009
	Note	Before intangible amortisation		Intangible amortisation		Total		Before intangible amortisation and exceptional items		Intangible amortisation and exceptional items		Total		Before goodwill, property and intangible impairment / amortisation and exceptional items		Goodwill, property and intangible impairment / amortisation and exceptional items		Total
CONTINUING OPERATIONS		£000		£000		£000		£000		£000		£000		£000		£000		£000
Revenue	4	16,147		-		16,147		13,597		-		13,597		29,060		-		29,060
Operating costs		(12,326)		(128)		(12,454)		(11,092)		(476)		(11,568)		(23,116)		(3,635)		(26,751)
Operating profit	4	3,821		(128)		3,693		2,505		(476)		2,029		5,944		(3,635)		2,309
Finance income		30		-		30		94		-		94		162		-		162
Finance costs		(44)		-		(44)		(111)		-		(111)		(198)		-		(198)
Profit before income tax		3,807		(128)		3,679		2,488		(476)		2,012		5,908		(3,635)		2,273
Income tax expense	5					(994)						(575)						(974)
Profit for the period from continuing operations						2,685						1,437						1,299
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations						-						527						7,243
Profit for the period						2,685						1,964						8,542
Earnings per share	6
Basic						3.1p						2.3p						9.8p
Diluted						3.0p						2.2p						9.6p
				pence per share		£000				pence per share		£000				pence per share		£000
Dividends
Paid dividend per share	8			1.5p		1,303				1.4p		1,217				2.2p		1,900
Proposed dividend per share	8			0.9p		782				0.8p		695				1.5p		1,303

GROUP STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2010

		Unaudited six months ended		Unaudited six months ended		Audited year ended
		30 Jun 2010		30 Jun 2009		31 Dec 2009
		£000		£000		£000
Profit for the period		2,685		1,964		8,542
Other comprehensive income
Fair value gain on investment		-		581		70
Reversal of prior year impairment		-		-		354
Cash flow hedges, net of tax		(329)		(104)		37
Currency translation difference		79		(342)		39
Other comprehensive income for the period, net of tax		(250)		135		500
Total comprehensive income for the period		2,435		2,099		9,042

GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2010

	Note	Unaudited as at 30 Jun 2010		Unaudited as at 30 Jun 2009		Audited as at 31 Dec 2009
ASSETS		£000		£000		£000
Non-current assets
Goodwill		41,774		44,054		41,774
Intangible assets	9	362		685		490
Property, plant and equipment	9	5,274		6,356		5,224
Investments		-		1,497		336
Deferred income tax asset		1,356		1,177		1,350
		48,766		53,769		49,174
Current assets
Inventories - raw materials		-		134		-
Trade and other receivables		5,750		5,847		7,627
Financial assets - derivative financial instruments		-		-		87
Cash and cash equivalents		25,008		15,212		24,178
		30,758		21,193		31,892
Total assets		79,524		74,962		81,066
LIABILITIES
Current liabilities
Financial liabilities
- borrowings associated with property	10	(370)		(360)		(370)
- derivative financial instruments		(317)		(211)		(74)
Trade and other payables		(14,474)		(14,005)		(17,537)
Current income tax liabilities		(809)		(541)		(648)
Provisions for other liabilities and charges	11	-		(146)		(43)
		(15,970)		(15,263)		(18,672)
Net current assets		14,788		5,930		13,220
Non-current liabilities
Financial liabilities
- borrowings associated with property	10	(1,667)		(2,047)		(1,852)
Provisions for other liabilities and charges	11	(267)		(345)		(179)
		(1,934)		(2,392)		(2,031)
NET ASSETS		61,620		57,307		60,363
SHAREHOLDERS' EQUITY
Ordinary shares		4,344		4,341		4,344
Share premium account		11,285		11,285		11,285
Capital redemption reserve		804		804		804
Other reserves		36,964		37,379		37,293
Retained earnings		8,223		3,498		6,637
EQUITY SHAREHOLDERS' FUNDS		61,620		57,307		60,363

GROUP CASH FLOW STATEMENT

For the six months ended 30 June 2010

		Unaudited as at 30 Jun 2010		Unaudited as at 30 Jun 2009		Audited as at 31 Dec 2009
	Note	£000		£000		£000
Cash flows from operating activities
Cash generated from operations	7	3,115		4,029		9,788
Interest received		30		94		162
Interest paid		(44)		(264)		(205)
Tax paid		(725)		(516)		(1,057)
Net cash generated from operating activities		2,376		3,343		8,688
Cash flows from investing activities
Proceeds from sale of investments		336		-		1,118
Proceeds from disposal of subsidiary		-		-		6,928
Purchase of property, plant and equipment	9	(360)		(179)		(541)
Net cash (used in) / generated from  investing activities		(24)		(179)		7,505
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		-		-		153
Dividends paid	8	(1,303)		(1,217)		(5,372)
Repayment of mortgage	10	(185)		(1,268)		(1,453)
Net cash from financing activities		(1,488)		(2,485)		(6,672)
Net increase in cash and cash equivalents		864		679		9,521
Opening cash and cash equivalents		24,178		14,675		14,675
Effects of exchange rate changes		(34)		(142)		(18)
Closing cash and cash equivalents		25,008		15,212		24,178

GROUP STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2010

		Share capital	Share premium	Retained earnings	Capital Redemption Reserve	Other reserves	Total
		£000	£000	£000	£'000	£000	£000
At 1 January 2010		4,344	11,285	6,637	804	37,293	60,363
Cash flow hedges
- net fair value gains net of tax		-	-	-	-	(329)	(329)
Exchange rate adjustments		-	-	79	-	-	79
Share options - value of employee service		-	-	125	-	-	125
Dividends		-	-	(1,303)	-		(1,303)
Retained profit for the period		-	-	2,685	-	-	2,685
At 30 June 2010 (unaudited)		4,344	11,285	8,223	804	36,964	61,620

		Share capital	Share premium	Retained earnings	Capital Redemption Reserve	Other reserves	Total
		£000	£000	£000	£'000	£000	£000
At 1 January 2009		4,341	11,285	2,555	804	37,256	56,241
Cash flow hedges
- net fair value gains net of tax		-	-	-	-	(104)	(104)
Exchange rate adjustments		-	-	(342)	-	-	(342)
Share options - value of employee service		-	-	184	-	-	184
Unrealised gain on investment		-	-	354	-	227	581
Dividends		-	-	(1,217)	-	-	(1,217)
Retained profit for the period		-	-	1,964	-	-	1,964
At 30 June 2009 (unaudited)		4,341	11,285	3,498	804	37,379	57,307

NOTES TO HALF YEARLY FINANCIAL INFORMATION

1.         General information

The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange.

This condensed consolidated half yearly financial information was approved for issue on 21 July 2010.

This condensed consolidated half yearly financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2009 were approved by the Board of directors on 17 February 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

This condensed consolidated half yearly financial information has been reviewed, not audited.

2.         Basis of preparation

This financial information comprises the group statement of financial position as at 30 June 2010 and 30 June 2009, related group income statements, cash flows, statement of comprehensive of income, statement of changes in equity and related notes for the six months then ended of Microgen plc (hereinafter referred to as 'financial information').

This condensed consolidated half yearly financial information for the six months ended 30 June 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated half yearly financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

3.         Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2009, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2010:

-     IFRS 3 (revised), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009.  Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the group.  The group does not have any joint ventures.

The revised standard continues to apply the acquisition method to business combinations, with some significant changes.  For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the statement of comprehensive income.  There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interest's proportionate share of the acquiree's net assets.  All acquisition related costs should be expensed.  The group will apply IFRS 3 (revised) to all business combinations from 1 January 2010.

The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2010, but are not currently relevant for the group. 

-      IFRIC 17, 'Distributions of non-cash assets to owners'

-      IFRIC 18, 'Transfers of assets from customers'

-      IFRS 1 (amendment), 'Additional exemptions for first-time adopters'

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:

-     IFRS 9, 'Financial instruments', issued in December 2009.  This addresses the classification and measurement of financial assets and is likely to affect the Group's accounting for its financial assets.  The standard is not applicable until 1 January 2013 but is available for early adoption.  The Group is yet to assess IFRS 9's full impact.  However, initial indications are that it may affect the Group's accounting for its available-for-sale financial assets, as IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.  Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss. The Group has not yet decided when to adopt IFRS 9.

-     Revised IAS 24, 'Related party disclosures', issued in November 2009.  It supersedes IAS 24, 'Related party disclosures', issued in 2003.  The revised IAS 24 is required to be applied from 1 January 2011.  Earlier application, in whole or in part, is permitted.

-     'Classification of rights issues' (Amendment to IAS 32), issued in October 2009.  For rights issues offered for a fixed amount of foreign currency, current practice appears to require such issues to be accounted for as derivative liabilities.  The amendment states that if such rights are issued pro rata to all the entity's existing shareholders in the same class for a fixed amount of currency, they should be classified as equity regardless of the currency in which the exercise price is denominated.  The amendment should be applied for annual periods beginning on or after 1 February 2010. Earlier application is permitted.

-     'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009.  The amendments correct an unintended consequence of IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'.  Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions.  This was not intended when IFRIC 14 was issued, and the amendments correct the problem.  The amendments are effective for annual periods beginning 1 January 2011.  Earlier application is permitted.  The amendments should be applied retrospectively to the earliest comparative period presented.

-     IFRIC 19, 'Extinguishing financial liabilities with equity instruments'.  This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after 1 July 2010.  Earlier application is permitted.

4.         Segmental information

The Board of Microgen plc has been identified as the chief operating decision-maker of Microgen.  Management has determined the operating segments of the group based on the reports provided to the Board of Microgen plc.

	Unaudited six months ended 30 Jun 2010
		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		7,813		8,334		16,147
Operating costs before group overheads		(6,806)		(4,300)		(11,106)
Operating profit before group overheads and intangible amortisation		1,007		4,034		5,041
Group overheads						(1,220)
Operating profit before intangible amortisation						3,821
Divisional intangible amortisation		-		(128)		(128)
Divisional operating profit		1,007		3,906
Operating profit						3,693
Net finance cost						(14)
Profit before tax						3,679
Income tax expense						(994)
Profit for the period						2,685

	Unaudited six months ended 30 Jun 2009 Restated
CONTINUING OPERATIONS		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		4,715		8,882		13,597
Operating costs before group overheads		(5,290)		(4,584)		(9,874)
Operating profit before group overheads, intangible amortisation and exceptional items		(575)		4,298		3,723
Group overheads						(1,218)
Operating profit before intangible amortisation and exceptional items						2,505
Divisional intangible amortisation		-		(196)		(196)
Divisional operating (loss)/profit		(575)		4,102
Group exceptional cost						(280)
Total intangible amortisation and exceptional costs						(476)
Operating profit						2,029
Net finance cost						(17)
Profit before tax						2,012
Income tax expense						(575)
Profit for the period from continuing operations						1,437
DISCONTINUED OPERATIONS
Profit for the period from discontinued operations						527
Profit for the period						1,964

	Audited year ended 31 Dec 2009
CONTINUING OPERATIONS		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		11,806		17,254		29,060
Operating costs before group overheads		(11,476)		(9,042)		(20,518)
Operating profit before group overheads, goodwill, property and intangible impairment / amortisation and exceptional items		330		8,212		8,542
Group overheads						(2,598)
Operating profit before goodwill, property and intangible impairment / amortisation and exceptional items						5,944
Divisional  intangible amortisation		-		(391)		(391)
Divisional goodwill impairment		-		(2,000)		(2,000)
Divisional operating profit		330		5,821
Property impairment						(896)
Group exceptional costs
-     Gain on sale of shares held in investments						205
-     Other						7
-     Goodwill adjustment						(560)
Total intangible amortisation and exceptional income / (costs)						(3,635)
Operating profit						2,309
Net finance cost						(36)
Profit before income tax						2,273
Income tax expense						(974)
Profit for the year from continuing operations						1,299
DISCONTINUED OPERATIONS
Profit for the year from discontinued operations						7,243
Profit for the year						8,542

5.         Income taxes

Income tax expense is based on management's best estimate of the income tax rate expected for the full financial year. The tax charge of £994,000 is at an effective tax rate of 27.0% (2009: 28.6%) of the profit before tax.

6.         Earnings per share

		Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009		Audited year ended 31 Dec 2009
		pence		pence		pence
Earnings per share
Basic		3.1		2.3		9.8
Diluted		3.0		2.2		9.6
Adjusted earnings per share
Basic		3.3		2.2		5.1
Diluted		3.2		2.1		5.0

To provide an indication of the underlying operating performance the adjusted earnings per share calculation above excludes intangible amortisation, exceptional items and has a tax charge based on the effective rate.

		Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009		Audited year ended 31 Dec 2009
		pence		pence		pence
Basic earnings per share		3.1		2.3		9.8
Exceptional charge net of tax		-		0.3		1.6
Discontinued operations		-		(0.6)		(8.3)
Prior years' tax charge		-		-		0.2
Share options		-		-		(0.1)
Goodwill impairment		-		-		2.3
Intangible amortisation net of tax		0.2		0.2		0.3
Tax losses recognised		-		-		(0.7)
Adjusted earnings per share		3.3		2.2		5.1

7.         Cash generated from operations

		Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009		Audited year ended 31 Dec 2009
		£000		£000		£000
Profit for the period		2,685		1,964		8,542
Adjusted for:
Taxation		994		788		1,381
Depreciation		310		397		841
Profit on disposal of subsidiary		-		-		(6,189)
Trading assets of Billing Services Division on disposal		-		-		(552)
Profit on disposal of investments		-		-		(205)
Amortisation of intangible assets		128		196		391
Property impairment		-		-		896
Share-based payment expense		125		184		158
Change in value of goodwill		-		280		560
Goodwill impairment		-		-		2,000
Finance income		(30)		(94)		(162)
Finance costs		44		111		198
Changes in working capital:
(Increase)/decrease in inventories		-		(88)		46
Decrease in receivables		1,877		1,959		179
(Decrease)/increase in payables		(3,063)		(1,768)		1,873
Increase/(decrease) in provisions		45		100		(169)
Cash generated from operations		3,115		4,029		9,788

8.         Equity dividends on ordinary shares

		Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009		Audited year ended 31 Dec 2009
		£000		£000		£000
Dividends paid:
Interim dividend		-		-		691
Final dividend		1,303		1,217		1,209
Special dividend		-		-		3,472
Proposed but not recognised as a liability:
Interim dividend		782		695		-
Final dividend		-		-		1,303

The proposed interim dividend of 0.9 pence per share was approved by the Board on 21 July 2010 but was not included as a liability as at 30 June 2010, in accordance with IAS 10 'Events after the Balance Sheet date'. This interim dividend will be payable on 25 August 2010 to shareholders on the register at the close of business on 30 July 2010.

9.         Capital expenditure

Six months ended 30 June 2010	Tangible assets		Intangible assets
	£000		£000
Opening net book amount 1 January 2010	5,224		490
Additions	360		-
Depreciation, amortisation and other movements	(310)		(128)
Closing net book amount 30 June 2010 (unaudited)	5,274		362

,

Six months ended 30 June 2009	Tangible assets		Intangible assets
	£000		£000
Opening net book amount 1 January 2009	6,574		881
Additions	179		-
Depreciation, amortisation and other movements	(397)		(196)
Closing net book amount 30 June 2009 (unaudited)	6,356		685

The group have placed contracts for no future capital expenditure which has not been provided for in the financial statements.

10.        Borrowings and loans

	Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009		Audited year ended 31 Dec 2009
	£000		£000		£000
Non-current	1,667		2,047		1,852
Current	370		360		370
	2,037		2,407		2,222
Movements in borrowings is analysed as follows:					£000
Six months ended 30 June 2010
Opening amount as at 1 January 2010					2,222
Repayments of borrowings					(185)
Closing amount as at 30 June 2010					2,037
Six months ended 30 June 2009
Opening amount as at 1 January 2009					3,675
Repayments of borrowings					(1,268)
Closing amount as at 30 June 2009					2,407

11.        Provisions for other liabilities and charges

		Unaudited six months ended 30 Jun 2010		Unaudited six months ended 30 Jun 2009
		£000		£000
Property provision
At 1 January		222		391
Charged to income statement		45		-
Provision for dilapidations		-		100
At 30 June		267		491

12.        Related party transactions 

There were no related party transactions during the period to 30 June 2010 (30 June 2009, 31 Dec 2009: nil), as defined by International Accounting Standard No 24 'Related Party Disclosures' other than key management compensation.

13.        Statement of directors' responsibilities

The directors' confirm that this condensed set of half yearly financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the half yearly management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

-      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and 

-      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Microgen plc are listed in the Microgen plc Annual Report for 31 December 2009.  A list of current directors is maintained on the Microgen plc website: www.microgen.com

Copies of this statement are being posted to shareholders and will also be available on the investor relations page of our website (www.microgen.com).  Further copies are available from the Company Secretary at Fleet House, 3 Fleetwood Park, Barley Way, Fleet, GU51 2QJ.

P Wood

21 July 2010

Director

INDEPENDENT REVIEW REPORT TO MICROGEN PLC

Introduction

We have been engaged by the company to review the condensed consolidated half yearly financial information in the half yearly financial report for the six months ended 30 June 2010, which comprises the group income statement, group statement of financial position, group statement of comprehensive income, group cash flow statement, group statement of changes in equity and related notes.  We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated half yearly financial information.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated half yearly financial information included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated half yearly financial information in the half yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of half yearly financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated half yearly financial information for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants

West London

21 July 2010

Notes:

(a) The maintenance and integrity of the Microgen plc website 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 financial statements since they were initially presented on the website.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

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