Final Results - Year Ended 31 Dec 1999, Part 2

Microgen PLC 24 February 2000 PART II MICROGEN PLC Group Profit and Loss Account for the year ended 31 December 1999 Unaudited Audited Year 14 month ended ended 31 Dec 31 Dec 1999 1998 Notes £'000 £'000 Turnover - continuing operations 26,633 35,709 - acquisitions 4,691 - - discontinued operations - 34,396 ------ -------- 1 31,324 70,105 Operating costs (30,352) (72,981) -------- ---------- Operating profit/(loss): Continuing operations - adjusted operating profit/(loss)- including acquisition 2,958 (3,427) - re-structuring costs and surplus property costs provision (299) (3,520) -------- -------- Operating profit/(loss) before goodwill amortisation and Charges related to positive share price movements 2,659 (6,947) Goodwill amortisation and charges related to positive share price movements 4, 5 (1,687) (50) -------- --------- Operating profit/(loss) 972 (6,997) Discontinued operations - 4,121 -------- --------- Operating profit/(loss) 1 972 (2,876) Loss on Disposal of Fixed Assets - (1,552) continuing operations Exceptional items - 12,981 -------- ------- 972 8,553 Net interest 862 (61) -------- ------- Profit on ordinary activities before tax 1,834 8,492 Tax on profit on ordinary activities 6 (446) (7,569) ------- --------- Profit on ordinary activities after taxation 1,388 923 Dividends 2 (762) (435) ------ --------- Retained profit transferred to reserves 626 488 ------ --------- Earnings per share (after goodwill amortisation and charges related to positive share price movements) 3 Basic 2.9p 2.2p Diluted 2.8p 2.2p Adjusted earnings per share (before goodwill amortisation and charges related to positive share price movements) 3 Basic 5.8p 2.2p Diluted 5.7p 2.2p Dividend per share 1.5p 1.0p MICROGEN PLC Consolidated Balance Sheet Unaudited Audited as at 31 as at 31 Dec 1999 Dec 1998 Notes £'000 £'000 Fixed Assets - Tangible 4,524 5,381 - Intangible 5 24,276 - - Investment in own shares 5 372 - ------ ------- 29,172 5,381 Current assets - Stocks - raw materials 288 388 - Debtors 4,855 9,641 - Cash at bank and in hand 18,824 26,695 ------ -------- 23,967 36,724 Creditors: due within one 7(a) (14,056) (16,077) year ------- -------- Net current assets 9,911 20,647 Total assets less current 39,083 26,028 liabilities Creditors: due after more 7(b) (1,104) (997) than one year Provisions for liabilities (2,438) (2,550) and charges ------ -------- Net assets 35,541 22,481 ====== ======== Equity capital and reserves - Called up share capital 8 2,543 2,173 - Share premium account 9 16,762 4,748 - Other reserves 9 150 50 - Profit and loss account 9 16,086 15,510 ------- ------- Equity Shareholders' funds 35,541 22,481 ======= ======= MICROGEN PLC Consolidated Cash Flow Summary for the Year Ended 31 December 1999 Unaudited Audited 14 Year months ended ended 31 Dec 1999 31 Dec 1998 £'000 £'000 Notes Net cash flow from operating 9 (i) 4,647 5,136 activities Returns on investments and 839 (163) servicing of finance Taxation (5,522) (871) Capital expenditure and financial (1,001) (3,080) investment Acquisitions and disposals (5,658) 22,717 Equity dividends paid to (688) (1,029) shareholders ------ ------- Cash (outflow)/inflow before use (7,383) 22,710 of liquid resources Financing (488) (248) ----- ------ (Decrease)/increase in cashin 9(ii) (7,871) 22,462 the period ====== ====== Notes: 1. Turnover and Operating profit/(loss) by division Unaudited Audited year 14 months ended ended 31 Dec 31 Dec 1999 1998 Turnover £'000 £'000 Continuing operations - Billing services and 26,633 35,709 database management Acquisition - - Consultancy 4,691 - ------ ------- 31,324 35,709 Discontinued operations - 34,396 ------ ------- 31,324 70,105 ------ ------- Operating profit/(loss) before group overhead Continuing operations - Billing services and 3,692 (2,272) database management Acquisition - - Consultancy 735 - ------ -------- 4,427 (2,272) Group overhead (1,469) (1,155) Goodwill amortisation - (835) acquisition Charges related to positive share price movements: Charges related to positive (852) (50) share price movements Surplus property provision (299) (2,550) Restructuring costs - (970) ------ ------- 972 (6,997) Discontinued operations - 4,121 ----- -------- Operating profit/(loss) 972 (2,876) ----- -------- 2. Final Dividend The Board recommend a final dividend of 1.0 pence per share (1998: 1.0 pence) and if approved this will be paid on 12 May 2000 to shareholders on the register on 24 March 2000. The total dividend for the year will be 1.5 pence per share (1998: 1.0 pence). 3. Earnings per share Earnings Basic Diluted EPS EPS £'000 Pence Pence Profit on ordinary activities after tax 1,388 2.9 2.8 Charges related to positive share price movements 596 1.2 1.2 (net of tax) Goodwill amortisation 835 1.7 1.7 ----- ---- ----- Profit on ordinary activities after tax but before goodwill & Charges related to positive share price movements 2,819 5.8 5.7 ----- ----- ------- The above basic earnings per share calculations are based on the weighted average number of shares in issue during the period of 48,275,585 (1998: 41,751,023 ). Diluted earnings per share calculations are based on 49,428,598 (1998:41,751,023) ordinary shares calculated as the basic weighted average number of ordinary shares plus 1,092,949 (1998: Nil) dilutive share options. The figures for 1998 have been restated in accordance with FRS 14. 4. Charges related to positive share price movements Group operating profit for the year is determined after charges of £852,000 (1998:£50,000) related to positive share price movements. These comprise National Insurance Contributions (NIC) on grant of share options of £672,000, (1998:£ Nil) and UITF 17 charges of £180,000 (1998:£50,000). For share options granted on or after 6 April 1999 Employers NIC are payable on the uplift in share price form the date of grant to the date of exercise. The Group has made provision in the accounts for the period for the increase in value of those share options granted on or after 6 April 1999 to reflect the increase in share price to 667.5 pence as at 31 December 1999. 5. Acquisition of Kaisha Group On 29 March 1999 the Company announced the acquisition, subject to shareholders approval, of the Kaisha Group, a leading independent business intelligence consultancy. Shareholders' approval was obtained at an EGM on 22 April 1999 and the acquisition of Kaisha Group was formally completed on 23 April 1999. The key financial details in respect of the acquisition are scheduled below. Notes £'000 Consideration and costs in respect of acquisition: Cash 5,965 Loan Notes 4,600 Ordinary shares 7,615 ------ Initial consideration 18,180 Shares issued in respect of (i) 1,048 replacement options Increase in fair value of (ii) 3,137 consideration Deferred consideration 2,430 Fees and costs in respect of the acquisition 885 ------ Total consideration and costs 25,680 ------ (i) At the time of the transaction the Company established The Microgen Employee Share Participation Scheme 1999 to facilitate the issue of replacement options over Microgen plc shares to Kaisha employees in exchange for their options in Kaisha Technology Limited. 1,200,000 shares were issued to the MESPS 1999 at £1.25 per share.Options over 838,000 Microgen shares were issued to Kaisha employees in consideration for their interest in Kaisha share options with a value of £1,048,000. The balance of 362,000 shares are shown as investment in own shares in the consolidated balance sheet of the Group. An option over 280,000 shares has been granted to an employee of Kaisha at nil subscription which are subject to performance criteria. The costs of these shares is being written off over the three year vesting period in accordance with UITF 17. (ii) The increase in fair value of consideration represents the increase in value of the ordinary shares in Microgen plc between exchange of contracts for the transaction and completion. Kaisha Group (at date of acquisition) Preliminary Provisional Net Assets Balance Fair Value Acquired Sheet Adjustment £'000 £'000 £'000 Fixed assets 378 (37) 341 Debtors 1,495 (52) 1,443 Cash at bank 856 - 856 Creditors (1,151) (277) (1,428) Taxation (644) - (644) ------------------------------- Net assets 934 (366) 568 ------------------------------- -------- Goodwill on acquisition 25,112 ======== The provisional fair value adjustments relate to (i) a reduction in the net book value of fixed assets to a directors estimate of their value (£37,000); (ii) adjustment to accounting policies to bring them in line with those of Microgen plc (£52,000) and (iii) an accrual in respect of liabilities not recognised in the preliminary balance sheet (£277,000). The Goodwill on acquisition has been capitalised in accordance with FRS 10 and is being amortised over 20 years. 6. Taxation The taxation charge for the year comprises: Unaudited Audited 14 year months ended ended 31 Dec 31 Dec 1999 1998 £'000 £'000 UK Corporation Tax at 30.25% (1998:31%) 435 (774) Tax on profit on disposal of Nordic and German subsidiaries - 6,488 Overseas Taxation 11 1,855 ----- ------ 446 7,569 ----- ------ The effective rate of tax for the group on its profit on ordinary activities after tax but before goodwill is 16.8% (1998:89.1%). At 31 December 1999 the UK group had a potential deferred tax asset of £1,526,000 (1998:£1,911,000) due to timing differences relating to accounting provisions, principally the property provision, and capital allowance which,in accordance with UK GAAP, has not been recognised in the accounts. The movement in the deferred tax asset in the year was £385,000 (1998: £1,810,000) and without this movement the effective rate of tax would have been 31.3% (1998:67.8%). 7. Creditors: Unaudited Audited as at as at 31 Dec 1999 31 Dec 1998 (a) due within one year £'000 £'000 - Bank loans & overdrafts - - - Finance leases (534) (638) - Creditors (6,125) (9,154) - Corporate taxation (481) (5,850) - Deferred consideration (1,807) - - Loan Notes (4,600) - - Proposed dividend (509) (435) --------- ------- (14,056) (16,077) --------- --------- (b) due after more than one year - Bank loans - - - Finance leases (481) (997) - Deferred consideration (623) - -------- --------- (1,104) (997) -------- -------- 8. Share Capital The movement in authorised and issued Ordinary Share Capital of 5 pence each during the period is detailed below. Authorised Issued and fully paid Number Amount Number Amount At 1 January 1999 61,420,000 £3,071,000 43,469,137 £2,173,457 Increase in authorised share capital at EGM held 8,580,000 £429,000 on 22 April 1999 Shares issued to the shareholders of the Kaisha Group 6,091,866 £304,593 Shares issued to the Microgen Employee Share Participation Trustees Limited 1,200,000 £60,000 Issued under savings related option schemes 94,009 £4,700 --------------------------------------------- At 31 December1999 70,000,000 £3,500,000 50,855,012 £2,542,750 ---------------------------------------------- 9. Movement on reserves Share ----Profit and Loss Account--- Premium Other Revenue Goodwill Account reserves Reserve Reserve Total £'000 £'000 £'000 £'000 £'000 At 1 January 1999 4,748 50 27,254 (11,744)15,510 Retained profit for the period 626 626 Exchange rate (50) (50) adjustments Shares issued 12,014 during the period Charges related to 100 positive share price movements ---------------------------------------------- At 31 December 16,762 150 27,830 (11,744) 16,086 1999 ---------------------------------------------- 10. Notes to the Consolidated Cash Flow Statement (i) Reconciliation of operating profit/(loss) to net cash inflow from operating activities Unaudited Audited14 year months ended ended 31 31 Dec1999 Dec 1998 £'000 £'000 Operating profit/(loss) 972 (2,876) Depreciation 2,305 6,283 (Profit)/loss on sale of (106) 236 fixed assets Other non-cash movements 1,687 50 Decrease/(increase) in stocks 100 220 Decrease/(increase) in debtors 5,292 (2,466) (Decrease)/increase in creditors (5,603) 3,689 ------- ------- Net cash inflow from 4,647 5,136 operating activities ======= ======= Other non-cash movements relate to goodwill amortisation and charges arising from positive share price movements. (ii)Reconciliation of net cash flow to movement in funds/(debt) Unaudited Audited 14 year months ended ended 31 Dec 31 Dec 1999 1998 £'000 £'000 (Decrease)/Increase in cash in the (7,871) 22,462 period Cash outflow from decrease in debt - 3,000 Cash outflow from decrease in lease financing 620 845 ------- ------- Change in net funds/(debt) (7,251) 26,307 resulting from cash flows Issue of loan note (4,600) - New finance leases - (131) Translation difference - 264 ------- -------- Movement in net funds/(debt) (11,851) 26,440 in the period Net funds/(debt) at beginning of the period 25,060 (1,380) -------- -------- Net funds/(debt) at end of period 13,209 26,060 ======== ======== iii) Analysis of net funds Other At Non Cash 1 Jan Cash Changes 31 Dec 1999 1999 Flow £'000 £'000 £'000 £'000 Cash at bank and in 26,695 (7,871) - 18,824 hand Debt due within 1 year - - (4,600) (4,600) Finance leases (1,635) 620 - (1,015) ---------------------------------- Total 25,060 (7,251) (4,600) 13,209 ----------------------------------- 11. Statement by the directors The figures in the consolidated Profit and Loss Account and Balance Sheet do not amount to full accounts within the meaning of Section 254 of the Companies Act 1985. The Annual Report for the period ended 31 December 1999 will be posted to shareholders in due course and will also be available on the investor relations page of our web site (www.microgen.co.uk). Further copies will be available on request and free of charge from the Company Secretary at 11 Park Street, Windsor, Berkshire SL4 1LU.

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