Q1 Trading Update

RNS Number : 2698V

Flomerics Group PLC

27 May 2008

 



Flomerics Group plc

27 May 2008

Flomerics Group plc

('Flomerics' or 'the Group')

Trading Update Q1 2008

Flomerics, the global supplier of simulation software, announces a trading update for the three month period to 31 March 2008.

Trading has been strong in the first three months of this year.

• Adjusted Revenue* up approximately 42% to £3.65m (2007: £2.57m)
  

• Adjusted Profit** up approximately £1.1m to £0.34m (2007: £0.74m loss)
  

• Cash balances up approximately £3.0m to £5.9m

Adjusted Revenue for the first quarter was up approximately 42% at £3.65m, compared to £2.57m in the equivalent period of 2007.

This increase in Adjusted Revenue has resulted in Adjusted Profit** for the three months up £1.1m on the equivalent period in 2007, reflecting in part the results of the investment in sales and marketing in 2007.

The Group has previously tended to make a first half loss followed by a full year profit, as demonstrated in 2007. The Board, therefore, is particularly encouraged by an Adjusted Profit in the first quarter of this year of £342,000, in comparison to an Adjusted Loss of

£740,000 made for the first quarter of 2007.

The Board has also been particularly encouraged by strong growth in the sales of the EFD product range, acquired from NIKA, in both its established and new markets 

Cash balances have grown by approximately £3m since 31 December 2007 to £5.9m as at 31 March 2008. 

The Board of Directors of Flomerics continues to believe Mentor Graphics' Offer materially undervalues Flomerics ("the Company") and is actively engaged in assessing other alternatives available to the Company, including potential interest expressed by a number of other parties, which are the subject of ongoing discussions. Shareholders are therefore strongly urged to ignore any documents or announcements that may be made or issued by Mentor Graphics or its advisers and not to sell their valuable Flomerics shares.

Any discussions with other interested parties continue to be at an early stage and there can be no certainty that an alternative offer will be forthcoming. However, shareholders are strongly recommended to take no action at this stage. 

The Board's response and further information in relation to the offer document posted to shareholders by Mentor Graphics Corporation on 19 May 2008 will be issued shortly.

The Board of Directors confirms that no profit forecast has been made for the year ending 31 December 2008.

Basis of preparation

The unaudited financial information included in the first quarter trading update has been prepared on a basis consistent with the accounting policies expected to be used in Flomerics' 2008 annual report.

The unaudited financial information is based on the unaudited management accounts for the three months ended 31 March 2008.

Please note:

• *Adjusted Revenue excludes revenues from the electromagnetics business disposed of on 31 January 2008.

• **Adjusted Profit/Loss is from continuing operations and before tax, amortisation of intangible assets (excluding software and development costs) and share-based payments.

www.flomerics.com

Retail shareholder helpline: 0800 987 8753

Letters

BDO Stoy Hayward LLP Chartered Accountants

BDO Stoy Hayward LLP 55 Baker Street London W1U 7EU

The Directors Flomerics Group plc 81 Bridge Road Hampton Court Surrey KT8 9HH	27 May 2008
The Directors Jefferies International Limited Vintners Place 68 Upper Thames Street London EC4V 3BJ

Dear Sirs

We report on the profit estimate comprising the revenue (excluding revenue from the electromagnetics business disposed of on 31 January 2008) and profit from continuing operations and before tax, amortisation of intangible assets (excluding software and development costs) and share-based payments of Flomerics Group plc (the "Company") and its subsidiaries (together "the Group") for the three months ended 31 March 2007 and 2008 (the "Profit Estimate"). The Profit Estimate and the basis on which it is prepared is set out in the Trading Update Q1 2008 (the "Trading Update").

This report is required by Rule 28.3(b) of the City Code and is given for the purpose of complying with that rule and for no other purpose. Accordingly, we assume no responsibility in respect of this report to the Offeror or to any person connected to, or acting in concert with, the Offeror or to any other person who is seeking or may in future seek to acquire control of the Company (an "Alternative Offeror") or to any other person connected to, or acting in concert with, an Alternative Offeror.

Responsibilities 

It is the responsibility of the directors of the Company (the "Directors") to prepare the Profit Estimate in accordance with the requirements of the City Code. In preparing the Profit Estimate the Directors are responsible for correcting errors that they have identified which may have arisen in unaudited financial results and unaudited management accounts used as the basis of preparation for the Profit Estimate.

It is our responsibility to form an opinion as required by Rule 28.3(b) of the City Code as to the proper compilation of the Profit Estimate and to report that opinion to you. 

Save for any responsibility arising under Rule 28.3(b) of the City Code to any person as and to the extent there provided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Rule 28.4 of the City Code consenting to the issue of the Trading Update containing this report.

Basis of preparation of the Profit Estimate

The Profit Estimate has been prepared on the basis stated in the Trading Update and is based on the unaudited management accounts for the three months ended 31 March 2007 and 2008. The Profit Estimate is required to be presented on a basis consistent with the accounting policies of the Group. 

Basis of opinion 

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included evaluating the basis on which the historical financial information for the three months to 31 March 2007 and 2008 included in the Profit Estimate has been prepared and considering whether the Profit Estimate has been accurately computed using that information and whether the basis of accounting used is consistent with the accounting policies of the Group. 

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Profit Estimate has been properly compiled on the basis stated. 

However, the Profit Estimate has not been audited. The actual results reported, therefore, may be affected by revisions required to accounting estimates due to changes in circumstances, the impact of unforeseen events and the correction of errors in the management accounts. Consequently, we can express no opinion as to whether the actual results achieved will correspond to those shown in the Profit Estimate and the difference may be material.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices. 

Opinion 

In our opinion, the Profit Estimate has been properly compiled on the basis stated and the basis of accounting used is consistent with the accounting policies of the Group. 

Yours faithfully

BDO Stoy Hayward LLP

  Jefferies International Limited

  Vintners Place

  68 Upper Thames Street

  London

  EC4V 3BJ

  United Kingdom    

The Directors

Flomerics Group plc
81 Bridge Road
Hampton Court

Surrey KT8 9HH

                                                                                         27th May 2008

Dear Directors 

We refer to the estimate (the "Profit Estimate") comprising of the revenue (excluding revenue from the electromagnetics business disposed of on 31 January 2008) and profit from continuing operations and before tax, amortisation of intangible assets (excluding software and development costs) and share based payments for the period 1 January 2008 to 31 March 2008 for Flomerics Group plc (the "Company") and its subsidiary undertakings (together the "Flomerics Group").

The Profit Estimate and the basis on which it is prepared is set out in the Trading Update Q1 2008 (the "Trading Update").

We have discussed the Profit Estimate, together with the basis on which it is prepared, with the Company and with BDO Stoy Hayward LLP. 

We have also considered the letter dated 27th May 2008 addressed to the Company and Jefferies International Limited from BDO Stoy Hayward LLP regarding the accounting policies and calculations upon which the Profit Estimate is based. 

This letter is provided in compliance with Rule 28.3(b) of The City Code on Takeovers and Mergers and may be included in the Trading Update solely for the purposes of that Rule.

On the basis of the foregoing, we consider that the Profit Estimate, for which the directors of the Company are solely responsible, has been made with due care and consideration and after due and careful enquiry by the Company.

Yours faithfully,

Jefferies International Limited

Enquiries: 

Flomerics Group PLC Gary Carter Keith Butcher	Tel: [phone]
Jefferies International Ltd (Financial adviser to Flomerics) Andres Pieczanski Sarah McNicholas	Tel: [phone]
Oriel Securities Limited (Nominated Adviser and Corporate Broker to Flomerics) Andrew Edwards Michael Shaw	Tel: [phone]
Citigate Dewe Rogerson Ginny Pulbrook Seb Hoyle	Tel: [phone]
Salisbury Associates (Proxy Solicitation Company) David Chase Lopes	Tel: [phone]

Jefferies International Limited ('Jefferies International'), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for Flomerics and no-one else in connection with the matters referred to herein and will not be responsible to anyone other than Flomerics for providing the protections afforded to clients of Jefferies International or for giving advice in relation to such matters.

Oriel Securities Limited ('Oriel Securities'), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for Flomerics and no-one else in connection with the matters referred to herein and will not be responsible to anyone other than Flomerics for providing the protections afforded to clients of Oriel Securities or for giving advice in relation to such matters.

Dealing Disclosure Requirements 

Under the provisions of Rule 8.3 of the Takeover Code (the 'Code'), if any person is, or becomes, 'interested' (directly or indirectly) in 1% or more of any class of 'relevant securities' of Flomerics, all 'dealings' in any 'relevant securities' of that company (including by means of an option in respect of, or a derivative referenced to, any such 'relevant securities') must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which the offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the 'offer period' otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an 'interest' in 'relevant securities' of Flomerics, they will be deemed to be a single person for the purpose of Rule 8.3. 

Under the provisions of Rule 8.1 of the Code, all 'dealings' in 'relevant securities' of Flomerics by a potential offeror or by Flomerics, or by any of their respective 'associates', must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction. 

A disclosure table, giving details of the companies in whose 'relevant securities' 'dealings' should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk. 

'Interests in securities' arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an 'interest' by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities. 

Terms in quotation marks are defined in the Code, which can also be found on the Takeover Panel's website. If you are in any doubt as to whether or not you are required to disclose a 'dealing' under Rule 8, you should consult the Takeover Panel.

Consent:

Jefferies hereby consents to the use of their name in this Trading Update in the form and context in which it is included

BDO Stoy Hayward LLP hereby give their consent to the issue by the Company of the Trading Update containing their letter relating to the profit estimate for the three months ended 31 March 2007 and 2008 and included in the form and context in which it is included.

 

END

 

 

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