Interims/Acqn./Directorate
FLOMERICS GROUP PLC
29 July 1999
FLOMERICS GROUP PLC
INTERIM RESULTS FOR SIX MONTHS ENDING 30 JUNE 1999
Continuing Strengthening in Trading Performance,
Announcement of Acquisition, and Board Appointment
Flomerics Group PLC, developer of FLOTHERM thermal
management software used to determine the cooling
requirements of electronic systems, and FLOVENT ventilation
software used to analyse thermal environment and air quality
in buildings, announces its results for the six months
ending 30 June 1999.
Highlights for the period, which reflect a continuation of
quality growth and improvements in margins, are as follows:
- Turnover up 17% to £3.443 million (1998: £2.938
million)
- Gross margin up to 94% against 90% in 1998
- Cyclical loss (majority of licence renewals due end of
second half) reduced from £269K in 1998 to £150K
- Net cash balances positive, at £330K
In addition - announced today - the strategically important
acquisition of Kimberley Communication Consultants Limited
(KCC) creates two substantial, new market opportunities.
Good prospects for the enlarged Group
Flomerics has, during the first half of 1999, achieved a
continuing strengthening and expansion in its core
businesses, and, through the strategically important
acquisition of KCC, is now in a position to exploit
additional market opportunities.
As a consequence, the directors continue to view the
remainder of 1999 and beyond with confidence.
CONTACTS
David Mann Chairman 020 8941 8810
David Tatchell Chief Executive 020 8941 8810
Richard Thompson Teather & 020 7426 9073
Greenwood
Jonathan Downes Teather & 020 7426 9011
Greenwood
Richard Pollen Pollen Associates 01428 608 860
CHAIRMAN'S STATEMENT
Continuing Strengthening in Trading Performance
Flomerics' trading performance for the first half of 1999
reflects a continuation of the quality growth and
improvements in margins achieved in 1998.
The turnover for the six months ending 30 June 1999 was
£3.443m, a 17% increase on the same period last year. The
gross margin has improved to 94%, as compared with 90% for
the comparable period last year - the erosion in margin last
year being caused by third-party software costs associated
with the FLOTHERM Version 2.0 shipments in 1998.
Flomerics' trading pattern exhibits a high proportion of
license renewals close to the year-end. As a consequence,
Flomerics has traditionally made a loss in the first half.
This year the loss to 30 June was £150k, as compared with a
loss of £269k for the same period last year.
The company continues to have a positive cash position with
cash balances of £330k at 30 June 1999. The directors do not
intend to pay interim dividends at this stage of the
company's development.
FLOVENT sales have grown by 27% respectively over the same
period last year, and now account for just over 10% of
turnover. This continuing strengthening of the FLOVENT
business will be reinforced by the launch of FLOVENT Version
2, planned for later this year.
North America continues to represent Flomerics' largest
market, accounting for 54% of turnover for the period. In
order to further strengthen the sales and support
infrastructure in this important region, in April Flomerics
opened a new office, in San Diego, southern California, to
supplement the three existing U S offices.
To broaden its offerings to the electronics market,
Flomerics has recently launched a new business, targeting
the provision of thermal design services to electronics
companies. This complements Flomerics' existing FLOTHERM
business - in which Flomerics supplies the software used in
electronics thermal design - by offering full design
services for companies wishing to out-source the thermal
design. This new business initiative, based initially in the
US, was launched successfully during the first half of 1999,
and is already making an encouraging contribution to
turnover.
Acquisition of Kimberley Communication Consultants Limited
The Board is delighted to announce the acquisition, on 28
July 1999, of Kimberley Communications Consultants Limited
(KCC), a private Nottingham-based company specializing in
software for electromagnetic analysis.
KCC's business is the development and marketing of analysis
software for high-frequency electromagnetic processes,
primarily in microwave and antenna applications. KCC has
achieved steady growth over the last five years, and has
just completed a major new release of its Microstripes
product.
For year ended 30 Oct 1998 KCC's turnover was £658k, and the
pre-tax profit was £61k. Overseas business (principally from
US and Japan) accounted for roughly 25% of turnover.
Unaudited net assets as at 28 July 1999 are £35k. The total
consideration payable by Flomerics is £700k, satisfied by
£38.4k cash, £190k as a qualifying corporate bond redeemable
after 12 months, and the balance of £471.6k by the issue and
allotment of 188,640 new ordinary shares of one pence each.
The new shares will rank pari passu with the existing
ordinary shares, and application will be made for these new
shares to be admitted to trading on AIM.
The acquisition of KCC offers Flomerics two substantial
market opportunities.
Firstly, there is, the directors believe, a major new market
opportunity in electromagnetic compatibility (EMC) for
electronics equipment which complements and strengthens
Flomerics' core thermal-simulation business.
Flomerics has been increasingly aware of the growing
importance of EMC and its strong association with thermal
design. As the operating frequencies of electronics
equipment of almost all kinds increase, EMC is becoming an
increasingly critical factor in electronics design. Strict
electromagnetic radiation limits, imposed by legislation,
are now applied to virtually all classes of electronics
equipment - and, in almost every case, the design and
optimisation of the electromagnetic shielding is tightly
coupled with the thermal design of the equipment.
There is therefore an enormous potential for a new EMC
design tool, coupled to a thermal-analysis tool (such as
FLOTHERM), offering users these two key analysis
functionalities within the same software package. KCC's
software provides exactly the required analysis capability.
As a result of the acquisition, Flomerics will be well
placed to merge this with FLOTHERM, and to market this to
both the existing and potential FLOTHERM customer base,
thereby achieving two major benefits:
- Opening up a potential market which, the directors
estimate, could be of comparable size to the current
FLOTHERM market.
- Strengthening Flomerics' position within the FLOTHERM
market by providing a unique combination of best-in-class
tools addressing two, related, critical problems facing
electronics manufacturers
The second market opportunity arises from KCC's existing
business in microwave and antenna applications. For these
markets, Flomerics offers KCC enhanced international support
infrastructure and sales channels in US and continental
Europe. 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 £15m annually,
and growing at 25% per annum.
Board Appointments
Dr Thomas Robert Rowbotham, age 58, who will continue as non-
executive Chairman of KCC, will join the Board of Flomerics
Group PLC as a non-executive director and Deputy Chairman.
In return for his services he will receive a fee of £15,500
per annum, and under the terms of his appointment he is
subject to a three-month notice period. Save for the above
information, there are no further disclosures required under
the AIM rules relating to directors.
Dr Rowbotham is a specialist in microwave transmission, and
has spent the bulk of his career at BT, where he is
currently Director of Technology, a Group wide function
responsible for the long-term technical direction of the
company. He is a Fellow of the Royal Academy of Engineering,
a member of the IEEE Foundation, and Vice Chairman of the
Electronics and Communications Division of the IEE. He is
also visiting Professor at Kings College, London.
The directors are confident that Dr Rowbotham's extensive
industry knowledge and experience will enable him to make a
major contribution to the Group Board.
Dr David Johns, age 34, will continue as Managing Director
of KCC and will join the board of Flomerics Limited. After
reading Communication Engineering at Plymouth University he
worked for Plessey Microwave as a research engineer on
surface acoustic wave devices for direct broadcast by
satellite receivers and TV filters. In 1989 he joined KCC
where he secured several defence contracts and performed
research and development work on aerospace, lightning and
electromagnetic compatibility projects. In 1991 he became
Marketing Director of KCC and initiated the development of
the Microstripes product. He was awarded a PhD from
Nottingham University in 1996 and appointed Managing
Director of KCC in 1997.
Good prospects for the enlarged Group
Flomerics has, during the first half of 1999, achieved a
continuing strengthening and expansion in its core
businesses, and, through the strategically important
acquisition of KCC, is now in a position to exploit
additional market opportunities.
As a consequence, the directors continue to view the
remainder of 1999 and beyond with confidence.
David Mann
29 July 1999
FLOMERICS GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited Unaudited Audited
6 months 6 months 12 months
to to to
30.06.99 30.06.98 31.12.98
£ £ £
Turnover 3,443,222 2,938,163 6,910,106
Cost of Sales (215,912) (286,009) (584,191)
Gross profit 3,227,310 2,652,154 6,325,915
Administrative (3,378,097)(2,909,195)(5,937,313)
expenses
Operating (150,787) (257,041) 388,602
(loss)/profit
Other interest
receivable and 22,639 23,729 71,602
similar income
Interest payable and
similar charges (21,458) (35,387) (76,081)
-------- --------- ---------
(Loss)/profit on
ordinary activities (149,606) (268,699) 384,123
before taxation
Tax on profit on
ordinary activities Note 1 Note 1 (126,216)
Profit for the
financial year 257,907
Dividends (84,502)
--------
Retained profit 173,405
--------
Earnings per share Note 1 Note 1 10.1 pence
Dividend per share Nil Nil 3.3 pence
Notes:
1. The consolidated profit and loss account does not
include amounts for taxation or earnings per share for the
six-month periods ended 30 June 1999 and 1998. The directors
consider that it would not be meaningful to present these
amounts for the half-year as the trading pattern of the
company is such that all of its profits are typically
generated in the last four months of the year.
2. The comparative figures for the financial year ended 31
December 1998 are not the company's statutory accounts but
are extracted from the audited statutory accounts. The
statutory accounts for the year ended 31 December 1998,
which have been filed with the Registrar of Companies,
received an unqualified audit report which did not contain a
statement under section 237(2) or (3) of the Companies Act
1985.
3. Earnings per share for the audited 12 months to
31.12.98 has been calculated on the profit on ordinary
activities after taxation and the shares in issue during the
year of 2,560,676 (1997: 2,560,676). In accordance with
FRS14 issued in October 1998 the fully diluted earnings per
share was 10.1 pence per share (0.03p 1997). The diluted
number of shares was 2,560,676 (1997: 2,568,002).
4. Copies of this announcement are available at the
registered office of the company (81 Bridge Road, Hampton
Court, Surrey, KT8 9HH) for a period of 14 days from the
date of this announcement.