Final Results - Year Ended 31 Dec 1999, Part 1

Flomerics Group PLC
16 March 2000


PART I
                              
                     FLOMERICS GROUP PLC
                              
 RECORD PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 1999
                              
 Earnings per share increase from 10.1p to 20.0p on turnover
                           up 26%

Flomerics  Group PLC, supplier of analysis software  to  the
telecommunications, semiconductor, and computer  industries,
and  other  sectors of the electronics industries, announces
its results for the year to 31 December 1999.

Highlights:

*    Turnover up 26% to £8.7 million (1998 : £6.9 million)

*    Profit before tax up 110% to £807,000 (1998 : £384,000)

*    Operating Profit margin increased to 9.5% from 5.6%

*    EPS  before amortisation of goodwill up 98 % to  20.0p
     (1998 : 10.1p)

*    Proposed dividend increased to 4.0p per share
     (1998 : 3.3 p)

*    Key  acquisition announced in July 1999  of  Kimberley
     Communications Consultants Limited (KCC)

Commenting  on  the opportunities facing  the  company,  the
Chief Executive, David Tatchell, commented:

'Flomerics  is increasingly focussing on its primary  market
sectors of telecommunications, computers and semiconductors.
These   both   support  and  are  driven  by   the   ongoing
communications  revolution, associated  with  the  explosive
growth of the Internet, the digital revolution in media, and
the  breakthrough  of wireless technology in  replacing  and
extending traditional communications systems.'

Commenting on the results, the Chairman, David Mann, said:

'The  results  for  1999  reflect  a  continuation  of   the
company's  impressive year-on-year growth record  and  this,
combined with significant improvements in margins,  has  led
to a doubling of pre-tax profits for the year.

The  acquisition  of  Kimberley  Communications  Consultants
Limited  during 1999 has added key electromagnetics analysis
technology to the company's portfolio, and positions it as a
broader-based   provider   of  design   solutions   to   the
electronics industries.

Consequently,  the directors continue to view the  company's
future with confidence, and are exploring ways of addressing
most  effectively the enlarged opportunities now facing  the
company.'


FOR FURTHER INFORMATION PLEASE CONTACT:

David Mann         Chairman            020 8941 8810
David Tatchell     Chief Executive     020 8941 8810
Chris Ogle         Finance Director    020 8941 8810

Richard Thompson   Teather & Greenwood 020 7426 9073
Jodie Downes       Teather & Greenwood 020 7426 9011
Rupert Dearden     Teather & Greenwood 020 7426 9036

Tom  Gadsby        Buchanan
                    Communications     020 7466 5113

CHAIRMAN'S STATEMENT

Results - Continuing quality growth

Flomerics'  performance for the year ended 31 December  1999
reflects  a continuation of the company's impressive  growth
record  and this, combined with significant improvements  in
margins, has led to a doubling of pre-tax profits.

Including   the  effect  of  the  acquisition  of  Kimberley
Communication  Consultants Limited (KCC) in  July,  turnover
increased  by  26.1% to £8.7 million (1998 : £6.9  million).
Profit  before  tax increased by 110% to  £807,000  (1998  :
£384,000).

Earnings per share before amortisation of goodwill increased
98% to 20.0p (1998 : 10.1p).

The  Directors propose to pay an increased dividend of  4.0p
per  share  (1998 : 3.3p) in respect of the  year.  Dividend
cover is 5.1 times. Subject to approval by the shareholders,
the  dividend will be paid on 9 May 2000 to shareholders  on
the register at close of business on 14 April 2000.

Acquisition of Kimberley Communications Consultants Limited

On  27  July  1999  the Board announced the  acquisition  of
Kimberley  Communications  Consultants  Limited   (KCC),   a
private  Nottingham-based company.  KCC's  business  is  the
development  and  marketing of analysis software  for  high-
frequency  elecromagnetic processes, primarily in  microwave
and antenna applications.

The  acquisition  of KCC opens up substantial  cross-selling
opportunities for the enlarged group.

First   there   is   a  major  new  market  opportunity   in
electromagnetic   compatibility   (EMC)   for    electronics
equipment, which complements and strengthens Flomerics' core
thermal-simulation business.

Secondly,  for  KCC's  existing business  in  microwave  and
antenna applications, Flomerics offers KCC the international
support  infrastructure and sales channels  in  the  US  and
continental Europe which it currently lacks. Leveraging this
infrastructure  on  behalf of KCC's existing  products  will
enable KCC to address more effectively the global market for
high-frequency  electronic  analysis  software  -  currently
estimated at £20m annually, and growing at 25% per annum.


Achieving a major repositioning of Flomerics' business

Flomerics  has  established a position  as  a  world-leading
player   in   the  rapidly  expanding  field  of    'virtual
prototyping' - the provision of software enabling  engineers
to  test  virtual models of their equipment  on  a  computer
before building physical prototypes.

Specifically,  the  company  has,  over  the  last   decade,
achieved  a   position  as the global market-leader  in  the
supply of thermal-design software to the telecommunications,
semiconductor and computer industries, and other sectors  of
the  electronics  industries, and to the  building  services
industries.    The customer base includes the world's  most-
respected  engineering companies, including  Intel,  Hewlett
Packard, Lucent and Siemens.

As  a  result  of the acquisition of KCC, it  is  has  added
leading-edge  electromagnetics analysis  technology  to  its
portfolio. It is consequently now repositioned as a broader-
based  supplier  of engineering analysis software,  able  to
provide   additional   products  addressing   the   critical
electromagnetics problems faced by the same customer base.

The   strategic  thinking  underlying  this  move,  and  the
resulting longer-term opportunities, are covered more  fully
in the Chief Executive's report.

The business

The  company's  principal  current  products  are  FLOTHERM,
FLOVENT   and   (as   a  result  of  the  KCC   acquisition)
Microstripes.

FLOTHERM is used by electronics manufacturers to analyse and
improve the thermal design of electronics equipment  of  all
kinds.  FLOVENT  is used by building services  engineers  to
analyse the ventilation, thermal environment and air quality
in buildings. Microstripes is used to analyze high-frequency
electromagnetics  processes,  primarily  in  microwave   and
antenna applications.

Continuing growth in FLOTHERM

The  FLOTHERM  business accounts for 86%  of  turnover,  and
achieved growth in turnover of 21% on top of 15.4% growth in
1998. Good growth has been achieved in all territories.  The
US,  accounting for 56% of FLOTHERM turnover (1998  :  53%),
remains  the largest market, Europe represents 32%  (1998  :
36%), and the Far East 12% (1998 : 11%).

A  new  business  was  launched during 1999,  targeting  the
provision   of   thermal  design  services  to   electronics
companies.   This   complements  the   mainstream   FLOTHERM
business,  by  offering  full design services  to  companies
wishing  to  outsource  their  thermal  designs.  This   new
business initiative, based initially in the US, was launched
successfully during the first half of 1999. This has been an
important  new source of revenue for the Group  and  in  its
first  year  contributed £223,000 of revenue. In  the  first
half  of  2000  this initiative will be extended  to  Europe
(from the Hampton Court office).

During 1999 the company achieved a significant strengthening
of  the  FLOTHERM product line, with a major new release  in
October.  This  has contributed to the continuing  expansion
achieved  during  the  year  within  Flomerics'  blue   chip
customer  base throughout the world, and to the adoption  of
the FLOTHERM technology by a number of new customers.

And in FLOVENT

FLOVENT  turnover grew by 24% on top of 71% growth  in  1998
and  accounts  for  10% of company turnover  (1998  :  10%).
Particularly good growth was achieved in the US (up by 47%).

In  October  1999 a major upgrade, FLOVENT  Version  2,  was
released,  and  has  been extremely  well  received  by  the
market.  This, coupled with the investment made during  1999
in  establishing dedicated FLOVENT resources in the  UK  and
US,   positions  the  company  to  address  the  substantial
opportunities that it believes this emerging market offers.

Web-enabled products

The  new Web product, FLOPACK, launched during 1998, enables
users  to create complex models of electronics packages  via
the  Web,  and download them to FLOTHERM. It is  sold  as  a
subscription  service, and has already  been  adopted  by  a
significant proportion of the FLOTHERM users. Based on  this
successful  experience, Flomerics is developing a  suite  of
Web  applications, the first of which is planned for release
during 2000.

Plus the contribution from Electromagnetics products

During  the  five  months  August to  December  1999,  KCC's
business,  based  on  the Microstripes product,  contributed
£267,000   to  revenue,  and  achieved  a  contribution   to
operating profit of £21,000.

In  November  1999  a  major  new version  of  Microstripes,
Version  5, was released in beta test form. This new release
provides  a  completely  new  user  interface  designed  for
Windows  NT  operation, and includes  many  enhancements  in
analysis functionality targeted at the specific applications
of  antennae  and microwave devices. The reaction  from  the
user  base  has been extremely encouraging. Full release  is
planned for Q2 2000.

Exploring the EMC market

To  address the EMC market identified above, the company has
embarked  on  the creation of a major new product,  FLO/EMC.
This will involve appropriate specialization of the existing
Microstripes   product   and,  ultimately,   embedding   the
Microstripes  analysis  functionality  within  the  FLOTHERM
product structure. This work is already well advanced,  with
a  first  product release scheduled for the second  half  of
2000.

In  parallel, as a first stage in marketing the new  product
concept,  the  company  is marketing a product-plus-services
package to selected major FLOTHERM customers. This is  aimed
at achieving three things: an in-depth assessment of the EMC
market;  getting  some major customers on board  early;  and
working  with  these customers as partners, achieving  input
into the detailed product definition for FLO/EMC.

The   response   to  this  initiative  has  been   extremely
encouraging,  and  sales have already  been  achieved  to  a
number of major US and European corporations.

Extending and strengthening global infrastructure

Flomerics   is   committed   to   continue   building    the
infrastructure needed to enable it effectively to market and
support its products worldwide.

To  this  end,  during  1999, as well as  strengthening  the
existing  US  offices in Massachusetts, Northern California,
and  Texas,  the company opened a new office in  San  Diego,
Southern  California to provide local sales and  support  in
this important region.

In order to address the important, emerging market in China,
Flomerics has, during the early part of 2000, secured direct
representation in Shanghai.

In  addition,  in order to exploit the market  opportunities
for   KCC's   electromagnetics  products,   electromagnetics
specialists  are  being  recruited  to  join  the   existing
Flomerics offices, particularly in the US.

Management and staff

During  the   year,  the  senior management  team  has  been
strengthened  by two appointments to the Board of  Flomerics
Group  plc (Tom Rowbotham as Deputy Chairman and Chris  Ogle
as  Finance  Director)  and two to the  Board  of  Flomerics
Limited  (Barbara  Evans as Development Director  and  David
Johns, the Managing Director of KCC). We welcome these  four
people,  who  have brought considerable new  experience  and
additional resources to the overall direction of the Group.

Achievements and Prospects

I  congratulate  all  the management and  staff  on  meeting
market  expectations  for  the  1999  results,  which   were
established  over two years ago, when it became  clear  that
the  company  needed  a  period of increased  investment  to
produce  and  launch  new  versions  of  its  key  products,
FLOTHERM   and  FLOVENT.    That  programme  has  now   been
completed successfully and Flomerics is much better equipped
to introduce additional functions and complementary products
in  its  traditional  markets. The acquisition  of  KCC  has
simultaneously opened up opportunities across a  much  wider
field.

Thus  the  company  has  entered an exciting  new  phase  of
business  development. The directors see good prospects  for
continuing   growth  by  focusing  on  a  range   of   these
opportunities  that  can  be  addressed  directly   with   a
sustainable   level   of   expenditure   on   research   and
development.  Additional opportunities  may  be  pursued  in
other  ways,  for  example by working in  co-operation  with
industrial partners.


David Mann
Chairman
16 March 2000
CHIEF EXECUTIVE'S REVIEW

Flomerics' established market position - and resulting
opportunities

Competitive  pressures are increasingly forcing industry  to
enhance  productivity by accelerating product development  -
shortening   product  design cycles and  reducing  'time  to
market'    -   and   simultaneously   to   improve   product
functionality  and reliability, and often to reduce  product
size.

Engineers   are  consequently  seeking  ways   of   avoiding
traditional  'build  and  test'  design  methodologies,  and
replacing  them  with  computer  analysis  -  creating   and
analyzing  virtual models of their equipment  on  computers,
and  thereby  ensuring  that their design  is  'right  first
time'.   The   use   of   such  'virtual   prototyping'   is
revolutionizing   product  development   process   in   many
industries,   enabling   design   cycles   to   be   reduced
considerably, with improved product quality.

The  competitive pressures driving these trends are  nowhere
more  intense than in the fields of communication equipment,
semiconductors, and computers, and the other sectors of  the
electronics  industry  -  which are simultaneously  enjoying
explosive  growth and suffering from cut-throat competition.
It  is  in these sectors that Flomerics' software is already
well  established as a key component in one critical  aspect
of equipment design - thermal design.

Thermal  design  is  only one part (albeit  an  increasingly
important  one)  of  the  'physical design'  of  electronics
equipment -  namely, the packaging of the electronics  into
the physical equipment which is supplied to the customer. We
see  substantial opportunities in this wider physical-design
market. Consequently, as explained below, we are seeking  to
expand  Flomerics from its established base as  the  primary
supplier of thermal solutions to the electronics industries,
to become a major supplier of broader-based software used in
other critical aspects of physical design of electronics.

A major repositioning

The  provision  of  design analysis software  of  this  kind
relies  on  complex  mathematical  methods,  implemented  in
computer software, which can correctly and efficiently solve
the  underlying equations governing the physical process  in
question.  Thus  our current products, which  simulate  heat
transfer   and  air  flow  (in  electronics  equipment   and
buildings)   have   at  their  heart  'computational   fluid
dynamics'  technology  - which solves  the  basic  governing
equations  of heat transfer and fluid dynamics.  To  provide
effective  design  tools,  this must  then  be  packaged  in
appropriate  user-friendly  software,  and  backed   up   by
international marketing and support infrastructure.

Flomerics  business  strategy has been  to  identify  market
niches  where  such  engineering  analysis  software  yields
demonstrable  productivity benefits, and, by providing  best
in   class  software,  backed  up  by  high-quality  support
services,  to establish a dominant position in  this  market
niche. This has been achieved in the FLOTHERM market, and to
establish  a  leading  position  in  the  embryonic  FLOVENT
market. Alongside these world- leading  market  positions,
and a blue  chip  customer  base comprising virtually all
the industry majors, Flomerics  has created the
infrastructure and processes required to develop complex
engineering analysis software, and to market it  and
support it globally.

The  company's  strategy is now, using this market  position
and  infrastructure  as the foundations,  to  seek  ways  of
broadening  the  business, by providing  a  wider  range  of
engineering design technologies to its established  customer
base.  The  key  to  this is acquiring  additional  analysis
capabilities,  which we can cross-sell  to  our  established
customer  base.  The  acquisition  on  27th  July  1999   of
Kimberley    Communications   Consultants   Limited    (KCC)
represents a major step in this direction.

The significance of the KCC acquisition

Although  KCC  is small (£643,000 annualized  turnover,  and
with  just  ten  employees) we see  the  company  as  a  key
component of Flomerics' future strategy, and expect that  it
will contribute significantly to Flomerics' growth over  the
next 10 years.

KCC's  existing business is the provision of  software  that
analyses high frequency electromagnetic processes, primarily
used in the design of microwave devices and to optimise  the
shapes of antennae. KCC's product, Microstripes, is used  by
major  corporations  such  as  Nortel,  Nokia,  and  British
Aerospace.

Flomerics  gives  KCC an international sales  and  marketing
infrastructure, which will enable it to exploit this  market
far more effectively than it has been able to so far.

More  significantly  there is a huge  opportunity  for  this
software  to complement Flomerics' current thermal  software
in   providing  another  key  solution  to  the  electronics
industries. In essence, FLOTHERM provides a solution to  the
problem of heat in electronics equipment. KCC's product  can
provide  a  solution  to the equally  important  problem  of
electromagnetic   radiation   and   interference    -    or,
'electromagnetic compatibility' (EMC).

EMC   is  one  of  the  most  serious  problems  facing  the
electronics industries. Increasing competitive pressures are
forcing  designers more and more into increased  density  of
electronics  and  higher  frequency  ranges.  These   higher
frequencies have not only led to increased heat dissipation,
but  also  to  increased  electromagnetic  emissions.  These
emissions   cause  interference,  which   can   affect   the
performance  of the device itself, or other devices  nearby.
The  designer needs to limit these emissions - and  also  to
ensure  that  his  equipment is not  vulnerable  to  imposed
radiation.

To  cite a familiar example - the reason that mobile  phones
cannot  be  switched  on  in  an  aircraft  is  because  the
emissions could affect the plane's navigation systems.
Electromagnetic emissions can also be a health risk - as  is
well  known  there  is  concern that emissions  from  mobile
phones may cause brain tumours. For these reasons, and  many
more,   regulators   in  the  industrialized   nations   are
tightening  the  legislative rules governing  the  permitted
levels  of electromagnetic emissions from equipment  of  all
types,  and  are imposing rigorous performance tests  before
equipment is licensed for release and shipment.

The  new  Flomerics EMC product (FLO/EMC) and  FLOTHERM  are
highly  complementary because there is a  trade-off  between
the  emissions problem and the heat problem. In  essence,  a
designer  of  a  computer with a radiation problem  puts  in
shields to stop radiation getting out. But by doing this  he
also  stops  the  heat from getting out - so  the  equipment
overheats. If a software solution can enable the engineer to
see  both  of  these problems at once, he will  be  able  to
optimize the trade-off between these two conflicting  design
considerations in the minimum possible time.

With these two products Flomerics will be in the position of
offering   two   complementary,   best-in-class   predictive
analysis tools to the electronics design community,  thereby
exploiting  and  reinforcing  our  current,  strong   market
position.

KCC's  trading  results  since  the  acquisition  have  been
satisfactory   and   as  expected.  We   have   spent   time
positioning the company so that the EMC opportunities  can
be exploited. The response from our major customers has been
universally  positive. They are as excited as we  are  about
our  new  EMC  solution, and a number of sales have  already
been  achieved. This confirms our belief that a  substantial
proportion of the FLOTHERM user base has immediate need  for
the FLO/EMC product.

Opportunities

Flomerics  is  increasingly focusing on its  primary  market
sectors     of     telecommunications,    computers,     and
semiconductors.  These both support and are  driven  by  the
ongoing  communications  revolution,  associated  with   the
explosive growth of the Internet, the digital revolution  in
media,  and  the  breakthrough  of  wireless  technology  in
replacing and extending traditional communications systems.

Flomerics  is  well positioned as a global provider  of  key
enabling technology to these markets. We therefore see great
potential for growth in these sectors.


David Tatchell
Chief Executive
16 March 2000


FINANCE DIRECTOR'S REVIEW

Profit and Loss Account

Turnover,    including    the   results    from    Kimberley
Communications Consultants Limited (KCC) increased by 26% to
£8.713m from £6.910m.  Operating profit for the Group is  up
112% at £826,000 . The operating profit margin has increased
to 9.5% from 5.6%.

The  end result is an increase in profit before tax of  110%
from £384,000 to £807,000.

Earnings per share before amortisation of goodwill is up 98%
at  20.0  pence  compared to 10.1 pence. The  fully  diluted
earnings per share and post goodwill figure is 18.6 pence.


Balance Sheet

Goodwill  of £786,000 arising from the purchase of  KCC  has
been  included in fixed assets. The Chief Executive's Review
explains  in  some  detail  the  strategic  value  of   this
acquisition  and the fact that we expect it to  benefit  the
Group  for at least ten years. For this reason the  goodwill
will  be  amortised  over ten years  but  will  be  reviewed
annually.

Trade  debtors  have  increased from £2.895m  to  £3.522  m.
Debtors  at  the  end  of  the year are  traditionally  high
because  of the disproportionate amount of business that  is
done  in  the  last quarter. Debtor days at  the  year  end,
however,  have been reduced from 98.8 days in 1998  to  90.8
days.

Cashflow

Cash flow from operating activities was £752,000 compared to
£839,000   in  1998.  After  capital  expenditure  including
finance  lease  repayments( £514,000), taxation  (£121,000),
acquisition costs (£164,000) and dividend payment  (£85,000)
cash  balances for the year fell by £150,000.   The  group's
net  debt  at  the  year end has increased from  £74,000  to
£281,000.

Working Capital and Financial Instruments

The   Group   manages   its  short  term   working   capital
requirements  through the use of its overdraft facility  and
the   management  of  debtors  and  creditors.   Significant
investments  in  hardware are financed  by  finance  leases,
normally  over three years. There is an exposure to interest
rate  fluctuations as the bank overdraft  interest  rate  is
charged  at  2.75%  over the Bank's base rate.  The  finance
leases  on  the  other hand are taken out at fixed  interest
rates.  The overdraft facility was used more extensively  in
1999 than in 1998 and as a consequence interest paid on bank
borrowings was greater than in 1998.

The  Group's  US Company, Flomerics Inc, trades in  dollars.
The  Group  also has branch offices in France,  Germany  and
Italy and uses distributors in Japan, Taiwan and Korea,  all
of  which trade in their domestic currencies. The Group's UK
operation  also  exports to various  other  territories  and
invoices  in a variety of currencies. These various overseas
activities mean that there is a foreign currency risk.  This
exposure  is  monitored but it has not  been  the  company's
policy to hedge against this risk.

Capital Expenditure

Capital  expenditure for the group in the year was £452,000,
compared  to  £509,000  in  1998.  The  majority   of   this
(£340,000)  was  for  computer hardware.  £172,000  of  this
expenditure has been financed by hire purchase.

Research and Development

Research and Development costs for the period were £1.559m ,
compared  to  £1.225m  in  1998. This  represents  17.9%  of
turnover, a slight increase from last year's 17.7%.

Taxation

The  tax  rate for the year is 38.8% compared  to  32.9%  in
1998. This is partly due to the amortisation of goodwill but
more  significantly because of the high amount of disallowed
depreciation  and  the lesser amount of  capital  allowances
when compared to last year.

Issue of Shares

In  order  to finance the acquisition of KCC 188,466  shares
were issued to the previous shareholders. The effect on  the
share premium account of this transaction was an increase of
£475,000 to £524,000.

Retained Profit

Retained  profit  for  the  year is  £384,000.  After  other
movements in reserves, shareholders' funds at the end of the
year have increased from £1.576m to £2.388m.


Chris Ogle
Finance Director
16 March 2000


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