Re: Group Update

Microgen PLC
25 October 2006


Information Management Solutions

www.microgen.co.uk


25 October 2006: Embargoed until 7.00am


                   Trading Update, Strategic Update and Board Changes

Trading Update


At the time of the Group's preliminary results announcement in March 2006, the
Board defined the Group operating margin target to be in the order of 15%. This
is a strong profit margin, in the upper quartile for the IT industry and the
Board remains comfortable with this target. Total revenue for the financial year
to 31 December 2006 is anticipated to be in the range of £37 million to £38
million, which is slightly below market expectations. There has been
considerable progress in developing the organic opportunities within the Group's
software-based activities, with a strong pipeline established, giving the Board
confidence into 2007. The Group's cash position remains strong at £14.0 million
at 30 September 2006, excluding the mortgage which directly relates to the
Group's freehold and long leasehold property assets.


Strategic Update


In parallel with the organic development, the Board has also recently undertaken
a wide-ranging strategic review covering each of the Group's business areas.
This review has concluded that the Group should be restructured into more
focused business units, to be managed as independent operations, with future
investment reflecting the market opportunity for Microgen and management
incentives being directly related to the individual business unit performance.
A synopsis of each business unit within the Group is provided as an addendum to
this announcement and the Board intends to provide this greater visibility in
future reporting. This approach will lead to a review of goodwill by business
unit which is expected to result in a goodwill impairment charge in the current
financial year, related to the general IT consultancy activities. The Board does
not currently anticipate a goodwill impairment charge associated with the
software-based businesses.


This process has also included an independent review of the Microgen Aptitude
product by the Butler Group which affirmed that the transactional performance of
the product compared more than favourably against other solutions in the market
and that Microgen Aptitude is well positioned to address key vertical sectors as
the market evolves over the next two to three years. This independent report,
together with positive customer and prospect feedback, gives the Board
confidence that the investment in this product will be rewarded in due course.
Furthermore, as a result of investment in recent years, the Group has a number
of additional products which are expected to support the organic growth of its
software businesses in the future.


The Board remains confident in the organic opportunities for the Group's
software-based businesses. The new structure will provide greater clarity and
visibility on the dynamics of each business within the Group. Furthermore the
Board recognise that there may be alternative options to maximising shareholder
value in a timely manner, which could include acquisition opportunities to
accelerate the organic development of certain businesses or to open up new
sectors for the Group's products.


Board Changes


In order to drive this transition and the development of the strategy for each
business unit, Martyn Ratcliffe is to be reappointed Executive Chairman with
immediate effect. David Sherriff will become Chief Operating Officer,
responsible for continuing the good progress on the organic development of the
software businesses and will take on specific responsibility for the Consultancy
and Application Management operations, until a new head of this business is
appointed.


After eight years with the Company, Mike Phillips is to leave Microgen to pursue
other opportunities. The Board would like to thank Mike for his substantial
contribution to the development of the Group and wish him success in his future
career. The Board has appointed a new Finance Director with publicly-listed
software company experience. The appointment will be effective from 2 January
2007 but, due to confidentiality with his current employer, details cannot
currently be disclosed. Mike will remain with the company to effect a smooth
transition to his successor.


Contact :


Martyn Ratcliffe, Chairman                                 01252 772311


Giles Sanderson/Haya  Chelhot Financial Dynamics           020 7831 3113



                     Addendum : Synopsis of Business Units

The business units within Microgen plc are summarised below. The operating
margin figures include costs of shared services, but exclude Group overhead,
interest, intangible amortisation and share-based payments. The figures are
unaudited.


  • Banking - While prior year comparisons in the current financial year are
    impacted by  product transitions, together with the completion of the
    BACS-IP upgrade cycle in 2005, the strong and growing prospect bank for
    Microgen Aptitude gives the Board confidence in the future of this business.
    Operating margins were maintained at 20% in the first half of 2006 on
    revenue of £4.6 million, despite the increased investment being made in
    sales & marketing and ongoing software development.



  • Asset & Wealth Management - Established through the consolidation of three
    acquisitions, this business continues to produce good organic growth. The
    anticipated decline in support contracts on some legacy systems should be
    offset by growth in newer products as they are released out of development.
    Revenue in the first half of 2006 was £5.3 million and operating margins
    increased significantly to 23%, compared to 3% in 2005.



  • Energy & Utilities - Acquired in 2003, the installed base and expertise in
    this sector has provided a platform for Microgen Aptitude applications.
    Although a small business, with revenue of just under £1 million in the
    first half of 2006, operating margins were 21% and the prospect pipeline
    provides the Board with confidence to invest in the potential of this growth
    sector.



  • Consultancy & Applications Management -This business continues to deliver
    strong profitability for a consultancy-based operation, with an operating
    margin of 24% in the first half of 2006 on revenue of £6.0 million. In
    recent years, revenue in the generic IT services business has declined as
    the sector continues to commoditise and the Board has determined to maintain
    its emphasis on profitability.



  • Billing & Database Management - Derived from the original business of
    Microgen, this managed services business maintains a good reputation and
    customer base in multi-channel billing. The business continues to be very
    profitable with operating margins of 23% in the first half of 2006 on
    revenue of £2.7 million. The number of e-billed documents has increased by
    120% and recipients by 150% during the past year as e-commerce matures,
    although the revenue per page has declined significantly during this period.
    Overall, billing volumes and revenue have stabilised.



For completeness, annualised Group overhead (excluding share-based remuneration)
remains stable and consistent with prior year costs.


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