Interim Results

RNS Number : 7761K

Microgen PLC

21 July 2011

 



21 July 2011

MICROGEN plc ('Microgen' or 'Group')

INTERIM RESULTS FOR THE SIX MONTHS ENDED

30 JUNE 2011

Microgen, the software and services provider to the financial services, digital media and commercial sectors, reports unaudited results for the six months ended 30 June 2011 showing strong organic growth in revenue and profits.

Highlights

·     Revenue of £19.0 million (H1, 2010 : £16.1 million) representing 18% growth overall driven by a strong performance from the Microgen Aptitude Solutions Division.

·     Adjusted operating profit increased by 20% to £4.6 million (H1, 2010 : £3.8 million). 

·     Adjusted Basic EPS (excluding intangible amortisation) increased by 27% to 4.2 pence (H1, 2010 : 3.3 pence).

·     Strong balance sheet with cash at 30 June 2011 of £26.9 million (H1, 2010 : £25.0 million) after returning £8.6 million of cash to shareholders in the last twelve months.

·     Interim dividend increased by 22% to 1.1 pence per share (2010 : 0.9 pence per share).

Statutory results

·          Operating profit increased to £4.5 million (H1, 2010 : £3.7 million).

·          Basic EPS increased to 4.2 pence (H1, 2010 : 3.1 pence).

Contacts

Martyn Ratcliffe, Chairman                               020-7496-8100

David Sherriff, Chief Executive Officer

Philip Wood, Group Finance Director

James Melville-Ross, Financial Dynamics          020-7831-3113

* Throughout this statement adjusted operating profit and margin excludes intangible amortisation, unless stated to the contrary.

Microgen reports another period of strong operating performance for the six months ended 30 June 2011, showing continued organic growth in revenue and profits.  This performance has again been driven by the Microgen Aptitude Solutions Division ("MASD"), which now accounts for 57% of the Group's revenue.  After several years of investment in MASD, the recent financial performance has affirmed the Board's decision to develop this market-leading software technology.

Group Financial Performance

In the six months ended 30 June 2011 Group revenue grew 18% to £19.0 million (H1, 2010 : £16.1 million) with adjusted operating profit increasing by 20% to £4.6 million (H1, 2010 :  £3.8 million).  Operating profit on a statutory basis for the period increased by 22% to £4.5 million (H1, 2010 : £3.7 million).  Adjusted basic earnings per share for the six months ended 30 June 2011 increased by 27% to 4.2 pence (H1, 2010 : 3.3 pence) with basic earnings per share increasing by 35% to 4.2 pence (H1, 2010 : 3.1 pence). 

Cash generated from operations of £4.4 million was consistent with the operating profit and continues Microgen's history of excellent cash conversion.  (This cash conversion reflects the fact that the Board has continued to determine that all internal research and development costs incurred in the period are expensed).  The Group continues to have a strong balance sheet with cash of £26.9 million at 30 June 2011 (H1, 2010 : £25.0 million) and net funds of £25.2 million at 30 June 2011 (H1, 2010 : £23.0 million) after returning £8.6 million to shareholders in the last twelve months via dividend and tender offer.  (The difference between cash and net funds relates to borrowings associated with the Group's freehold property in Fleet.) 

Reflecting the strong performance in the period, the interim dividend has been increased by 22% to 1.1 pence per share (2010 : 0.9 pence per share).  The dividend will be paid on 24 August 2011 to shareholders on the register as at 29 July 2011.

Microgen Aptitude Solutions Division ("MASD")

MASD provides enterprise level application products and solutions to some of the world's largest financial institutions and digital media organisations, where the business requires very high processing volumes of complex, business-event driven transactions. Through the combination of Microgen Aptitude (both in its native software and as the core technology platform for the Microgen Accounting Hub) and the extensive business domain knowledge and experience of the divisions' consultants, MASD continues to win and successfully deploy large scale projects beyond the capability of most competing products.  

MASD revenue grew by 38% in the period to £10.8 million (H1, 2010 : £7.8 million) and now represents 57% of Group Revenue (H1, 2010 : 48%).  Operating profit of MASD increased by 103% to £2.0 million (H1, 2010 : £1.0 million), representing an operating margin of 19.0% (H1, 2010 : 12.9%).  In the period the division has benefitted from higher than anticipated levels of overtime on a number of its clients' projects.

Since the start of the year, along with the continued success in the investment banking/insurance and digital media sectors, MASD has now extended the division's customer base into the retail banking sector.  Product developments over the past year have further enhanced Microgen Aptitude's ability to deliver market leading levels of transaction processing performance, making the product ideally suited to retail banking where transaction volumes are considerably greater than investment banking. 

The fundamental business concept behind the investment in the development of Microgen Aptitude has now been justified as the growth in transactional data volume continues and the challenge of "Big Data" is increasingly being recognised.  (The Big Data term is currently applied to data sets whose size is beyond the ability of commonly used software tools to capture, manage, and process the data within a tolerable elapsed time.)  Microgen Aptitude has been designed to address the challenges of processing exceptionally large volumes of data and complex transactions in a timescale to meet operational and reporting requirements.  This capability together with the ability to integrate heterogeneous technology environments enables Microgen to position successfully against some of the world's largest software vendors.

Financial Systems Division ("FSD")

The Microgen Financial Systems Division operates in more mature sectors of the financial services software market.  FSD combines proven, established applications with domain knowledge and expertise to deliver back office processing software and solutions in the Wealth Management, Banking, Asset Management and Energy sectors.

Reflecting the market maturity, revenue in FSD for the period ended 30 June 2011 was flat at £8.3 million (H1, 2010 : £8.3 million) benefitting from the division's significant recurring revenue and annual licencing model.  As a result, FSD has maintained high operating margins at 47% (H1, 2010 : 48%).

Whilst FSD continues to review the continued viability of a number of its smaller product offerings, the Group's strong balance sheet affords the division the capability to evaluate add-on acquisitions in financial back office processing to complement its current market offerings.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the Disclosure and Transparency Rules the Group provides the following information on its principal risks and uncertainties.  The Group considers strategic, operational and financial risks and identifies actions to mitigate those risks.  These risk profiles are updated at least annually.  The principal risks and uncertainties detailed within the Group's 2010 Annual Report remain applicable for the final six months of the financial year.  The Group's 2010 Annual Report is available from the Microgen website : www.microgen.com.

There were no related party transactions during the period, as disclosed in Note 14.

Prospects

The continuing growth of the Microgen Aptitude Solutions Division has driven the Group's performance in the first half of 2011 and provides a strong platform for the second half of the year.  This has been complemented by the underlying resilience of the Financial Systems Division where high margins and recurring revenues were maintained throughout the period.  As a result, and as reported in the recent trading update, the Board anticipates the current year to continue the progress achieved in recent years.

INTERIM CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2011

		Unaudited six months ended 30 Jun 2011						Unaudited six months ended 30 Jun 2010						Audited year ended 31 Dec 2010
	Note	Before intangible amortisation		Intangible amortisation		Total		Before intangible amortisation		Intangible amortisation		Total		Before intangible amortisation		Intangible amortisation		Total
		£000		£000		£000		£000		£000		£000		£000		£000		£000
Revenue	5	19,014		-		19,014		16,147		-		16,147		33,669		-		33,669
Operating costs		(14,438)		(58)		(14,496)		(12,326)		(128)		(12,454)		(25,576)		(255)		(25,831)
Operating profit	5	4,576		(58)		4,518		3,821		(128)		3,693		8,093		(255)		7,838
Finance income		97		-		97		30		-		30		140		-		140
Finance costs		(40)		-		(40)		(44)		-		(44)		(126)		-		(126)
Profit before income tax		4,633		(58)		4,575		3,807		(128)		3,679		8,107		(255)		7,852
Income tax expense	6					(1,144)						(994)						(1,341)
Profit for the period						3,431						2,685						6,511
Earnings per share	7
Basic						4.2p						3.1p						7.7p
Diluted						4.0p						3.0p						7.5p
				pence per share		£000				pence per share		£000				pence per  share		£000
Dividends
Paid dividend per share	9			2.1p		1,701				1.5p		1,303				2.4p		2,084
Proposed dividend per share	9			1.1p		892				0.9p		782				2.1p		1,701

All results derive from continuing operations.

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2011

		Unaudited six months ended		Unaudited six months ended		Audited year ended
		30 Jun  2011		30 Jun  2010		31 Dec  2010
		£000		£000		£000
Profit for the period		3,431		2,685		6,511
Other comprehensive income
Cash flow hedges, net of tax		70		(329)		(36)
Currency translation difference		41		79		95
Other comprehensive income for the period, net of tax		111		(250)		59
Total comprehensive income for the period		3,542		2,435		6,570

INTERIM CONSOLIDATED BALANCE SHEET

As at 30 June 2011

	Note	Unaudited as at 30 Jun 2011		Unaudited as at 30 Jun 2010		Audited as at 31 Dec 2010
ASSETS		£000		£000		£000
Non-current assets
Property, plant and equipment	10	5,512		5,274		5,157
Goodwill		41,774		41,774		41,774
Intangible assets	10	177		362		235
Deferred income tax asset		1,384		1,356		1,402
		48,847		48,766		48,568
Current assets
Trade and other receivables		6,461		5,750		5,971
Financial assets - derivative financial instruments		56		-		56
Cash and cash equivalents		26,866		25,008		25,412
		33,383		30,758		31,439
Total assets		82,230		79,524		80,007
LIABILITIES
Current liabilities
Financial liabilities
- borrowings associated with property	11	(370)		(370)		(370)
- derivative financial instruments		(40)		(317)		(115)
Trade and other payables		(18,330)		(14,474)		(18,205)
Current income tax liabilities		(842)		(809)		(408)
Provisions for other liabilities and charges	12	-		-		(150)
		(19,582)		(15,970)		(19,248)
Net current assets		13,801		14,788		12,191
Non-current liabilities
Financial liabilities
- borrowings associated with property	11	(1,297)		(1,667)		(1,482)
Provisions for other liabilities and charges	12	(151)		(267)		(139)
		(1,448)		(1,934)		(1,621)
NET ASSETS		61,200		61,620		59,138
SHAREHOLDERS' EQUITY
Ordinary shares	13	4,055		4,344		4,041
Share premium account	13	11,693		11,285		11,531
Capital redemption reserve		1,146		804		1,146
Other reserves		37,136		36,964		37,066
Retained earnings		7,170		8,223		5,354
TOTAL EQUITY		61,200		61,620		59,138

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2011

		Ordinary  Shares	Share premium	Retained earnings	Capital Redemption Reserve	Other reserves	Total
		£000	£000	£000	£'000	£000	£000
At 1 January 2011		4,041	11,531	5,354	1,146	37,066	59,138
Comprehensive income
Shares issued under share option schemes		14	162	-	-	-	176
Cash flow hedges
- net fair value gains net of tax		-	-	-	-	70	70
Exchange rate adjustments		-	-	41	-	-	41
Share options - value of employee service		-	-	45	-	-	45
Dividends paid		-	-	(1,701)	-	-	(1,701)
Retained profit for the period		-	-	3,431	-	-	3,431
Total comprehensive income		14	162	1,816	-	70	2,062
At 30 June 2011 (unaudited)		4,055	11,693	7,170	1,146	37,136	61,200

		Ordinary  Shares	Share premium	Retained earnings	Capital Redemption Reserve	Other reserves	Total
		£000	£000	£000	£'000	£000	£000
At 1 January 2010		4,344	11,285	6,637	804	37,293	60,363
Comprehensive income
Cash flow hedges
- net fair value losses net of tax		-	-	-	-	(329)	(329)
Exchange rate adjustments		-	-	79	-	-	79
Share options - value of employee service		-	-	125	-	-	125
Dividends paid		-	-	(1,303)	-		(1,303)
Retained profit for the period		-	-	2,685	-	-	2,685
Total comprehensive income		-	-	1,586	-	(329)	1,257
At 30 June 2010 (unaudited)		4,344	11,285	8,223	804	36,964	61,620

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2011

		Unaudited as at 30 Jun 2011		Unaudited as at 30 Jun 2010		Audited as at 31 Dec 2010
	Note	£000		£000		£000
Cash flows from operating activities
Cash generated from operations	8	4,448		3,115		11,348
Interest received		97		30		140
Interest paid		(40)		(44)		(94)
Tax paid		(691)		(725)		(1,506)
Net cash generated from operating activities		3,814		2,376		9,888
Cash flows from investing activities
Proceeds from sale of investments		-		336		336
Purchase of property, plant and equipment	10	(685)		(360)		(586)
Net cash used in  investing activities		(685)		(24)		(250)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		176		-		285
Dividends paid	9	(1,701)		(1,303)		(2,084)
Repayment of mortgage	11	(185)		(185)		(370)
Purchase of own shares		-		-		(6,288)
Net cash used in financing activities		(1,710)		(1,488)		(8,457)
Net increase in cash and cash equivalents		1,419		864		1,181
Opening cash and cash equivalents		25,412		24,178		24,178
Effects of exchange rate changes		35		(34)		53
Closing cash and cash equivalents		26,866		25,008		25,412

 NOTES TO THE INTERIM FINANCIAL INFORMATION

1.         General information

Microgen plc and its subsidiaries (together, 'the group') provide IT services and solutions, including software, managed services and consultancy, to the business community.

The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange. The address of its registered office is Old Change House, 128 Queen Victoria Street, London, England, EC4V 4BJ.

This condensed consolidated interim financial information was approved for issue on 20 July 2011.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were approved by the Board of directors on 23 February 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been reviewed, not audited.

2.         Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

3.         Accounting policies

The accounting policies adopted are consistent with those of the full year financial statements, except as described below.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2011:

-     IAS 24, 'Related party disclosures' - amends the definition of a related party and modifies certain related party disclosure requirements for government-related entities. It supersedes IAS24, 'Related Party Transactions', issued in 2003. Microgen's related party disclosure accounting meets this latest guidance.

-     'Prepayments of a minimum funding requirement' (Amendment to IFRIC 14) was issued in November 2009. The amendments correct an unintended consequence of IFIC 14, 'IAS19 - The limit on a defined benefit asset, minimum funding requirements and their interaction'. Without the amendments, entities are not permitted to recognise as an asset some voluntary prepayments for minimum funding contributions. This was not intended when IFRIC 14 was issued, and the amendments correct the problem.

-     Improvements have been made to IFRSs in 2010 which are applicable for periods beginning after 1 January 2011.

o IFRS 7, 'Financial instruments', emphasises the interaction between quantitative and qualitative disclosures about the nature and extent of risks associated with financial instruments.

o IAS 1, 'Presentation of financial statements', clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or the notes to the financial statements.

o IAS 34, 'Interim financial reporting', provides guidance to illustrate how to apply disclosure principles in IAS 34 and add disclosure requirements around:

§ The circumstances likely to affect fair values of financial instruments and their classification;

§ Transfers of financial instruments between different levels of fair value hierarchy;

§ Changes in classification of financial assets; and

§ Changes in contingent liabilities.

o IFRIC 12, 'Customer loyalty programmes', clarifies the meaning of 'fair value' in the context of measuring award credits under customer loyalty programmes.

-     IFRS 9, 'Financial instruments', addresses the classification, measurement and derecognition of financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. However, the standard has not yet been endorsed by the EU.  The group is yet to assess IFRS 9's full impact.  However, initial indications are that it may affect the group's accounting for its available-for-sale financial assets, as IFRS 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.  Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss.  The group has not yet decided when to adopt IFRS 9.

The new requirements affect the accounting for financial liabilities that are designated at fair value through profit or loss. The derecognition rules have been transferred from IAS 39, 'Financial instruments: Recognition and measurement', and have not been changed.

The group has adopted those policies that are relevant to its circumstances but there have been no substantive changes as a result of so doing.

4.         Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2010.

5.         Segmental information

The Board of Microgen plc has been identified as the chief operating decision-maker of Microgen.  Management has determined the operating segments of the group based on the reports provided to the Board of Microgen plc.

	Unaudited six months ended 30 Jun 2011
		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		10,763		8,251		19,014
Operating costs before group overheads		(8,719)		(4,410)		(13,129)
Operating profit before group overheads		2,044		3,841		5,885
Group overheads						(1,309)
Operating profit before intangible amortisation						4,576
Divisional intangible amortisation		-		(58)		(58)
Divisional operating profit		2,044		3,783
Operating profit						4,518
Net finance income						57
Profit before tax						4,575
Income tax expense						(1,144)
Profit for the period						3,431

	Unaudited six months ended 30 Jun 2010
		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		7,813		8,334		16,147
Operating costs before group overheads		(6,806)		(4,300)		(11,106)
Operating profit before group overheads		1,007		4,034		5,041
Group overheads						(1,220)
Operating profit before intangible amortisation						3,821
Divisional intangible amortisation		-		(128)		(128)
Divisional operating profit		1,007		3,906
Operating profit						3,693
Net finance cost						(14)
Profit before tax						3,679
Income tax expense						(994)
Profit for the period						2,685

	Audited year ended 31 Dec 2010
		Microgen Aptitude Solutions		Financial Systems		Total
		£000		£000		£000
Revenue		16,995		16,674		33,669
Operating costs before group overhead		(14,386)		(8,590)		(22,976)
Operating profit before group overheads		2,609		8,084		10,693
Group overheads						(2,600)
Operating profit before intangible amortisation						8,093
Divisional  intangible amortisation		-		(255)		(255)
Divisional operating profit		2,609		7,829
Operating profit						7,838
Net finance income						14
Profit before income tax						7,852
Income tax expense						(1,341)
Profit for the year						6,511

6.         Income taxes

Income tax expense is recognised based on management's estimate of the weighted average income tax rate expected for the full financial year of 25% (the estimated tax rate for the six months ended 30 June 2010 was 27%).

7.         Earnings per share

		Unaudited six months ended 30 Jun 2011		Unaudited six months ended 30 Jun 2010		Audited year ended 31 Dec 2010
		pence		pence		pence
Earnings per share
Basic		4.2		3.1		7.7
Diluted		4.0		3.0		7.5
Adjusted earnings per share
Basic		4.2		3.3		7.0
Diluted		4.0		3.2		6.8

To provide an indication of the underlying operating performance the adjusted earnings per share calculation above excludes intangible amortisation, exceptional items and has a tax charge based on the effective rate.

		Unaudited six months ended 30 Jun 2011		Unaudited six months ended 30 Jun 2010		Audited year ended 31 Dec 2010
		pence		pence		pence
Basic earnings per share		4.2		3.1		7.7
Prior years' tax charge		-		-		(0.2)
Intangible amortisation net of tax		0.1		0.2		0.2
Tax losses recognised		(0.1)		-		(0.7)
Adjusted earnings per share		4.2		3.3		7.0

8.         Cash generated from operations

		Unaudited six months ended 30 Jun 2011		Unaudited six months ended 30 Jun 2010		Audited year ended 31 Dec 2010
		£000		£000		£000
Profit for the period		3,431		2,685		6,511
Adjusted for:
Taxation		1,144		994		1,341
Depreciation		330		310		649
Amortisation of intangible assets		58		128		255
Share-based payment expense		45		125		215
Finance income		(97)		(30)		(140)
Finance costs		40		44		126
Changes in working capital:
(Increase)/ decrease in receivables		(490)		1,877		1,656
Increase/  (decrease) in payables		125		(3,063)		668
(Decrease)/ Increase in provisions		(138)		45		67
Cash generated from operations		4,448		3,115		11,348

9.         Dividends

The interim dividend of 1.1 pence per share (2010: 0.9 pence per share) was approved by the Board on 20 July 2011. It is payable on 24 August 2011 to shareholders on the register at 29 July 2011.  This interim dividend, amounting to £892,000 (2010: £782,000), has not been included as a liability in this interim financial information.  It will be recognised in shareholders' equity in the year to 31 December 2011.

The dividend that relates to the period to 31 December 2010 and that amounts to £1,701,000 was paid in May 2011 (2010: £1,303,000).

10.       Property, plant and equipment and intangible assets

Six months ended 30 June 2011	Tangible assets		Intangible assets
	£000		£000
Opening net book amount 1 January 2011	5,157		235
Additions	685		-
Depreciation, amortisation and other movements	(330)		(58)
Closing net book amount 30 June 2011 (unaudited)	5,512		177

,

Six months ended 30 June 2010	Tangible assets		Intangible Assets
	£000		£000
Opening net book amount 1 January 2010	5,224		490
Additions	360		-
Depreciation, amortisation and other movements	(310)		(128)
Closing net book amount 30 June 2010 (unaudited)	5,274		362

The group have placed contracts for £602,000 of future capital expenditure which has not been provided for in the financial statements.

11.       Borrowings and loans

	Unaudited six months ended 30 Jun 2011		Unaudited six months ended 30 Jun 2010		Audited year ended 31 Dec 2010
	£000		£000		£000
Non-current	1,297		1,667		1,482
Current	370		370		370
	1,667		2,037		1,852
Movements in borrowings is analysed as follows:					£000
Six months ended 30 June 2011
Opening amount as at 1 January 2011					1,852
Repayments of borrowings					(185)
Closing amount as at 30 June 2011					1,667
Six months ended 30 June 2010
Opening amount as at 1 January 2010					2,222
Repayments of borrowings					(185)
Closing amount as at 30 June 2010					2,037

12.       Provisions for other liabilities and charges

		Unaudited six months ended 30 Jun 2011		Unaudited six months ended 30 Jun 2010
		£000		£000
Property provision
At 1 January		289		222
Utilised		(71)		-
(Credited)/ charged to income statement		(67)		45
At 30 June		151		267

13.       Share capital

Six months ended 30 June 2011	Number of  shares  (thousands)	Ordinary shares £000		Share premium £000	Total £000
Opening balance as at 1 January 2011	80,839	4,041		11,531	15,572
Proceeds from shares issued - employee share option scheme	281	14		162	176
Closing balance as at 30 June 2011	81,120	4,055		11,693	15,748
Six months ended 30 June 2010	Number of  shares   (thousands)		Ordinary  shares £000	Share  premium £000	Total £000
Opening balance as at 1 January  2010	86,897		4,344	11,285	15,629
Closing balance as at 30 June 2010	86,897		4,344	11,285	15,629

Employee share option scheme: options exercised during the period to 30 June 2011 resulted in 281,336 shares being issued (30 June 2010: nil shares), with exercise proceeds of £176,000 (30 June 2010: nil). The related weighted average share price at the time of exercise was £1.39 per share.

14.       Related party transactions

There were no related party transactions during the period to 30 June 2011 (30 June 2010: nil), as defined by International Accounting Standard No 24 'Related Party Disclosures' other than key management compensation.

There were no related party transactions in the year to 31 December 2010 as defined by International Accounting Standard No 24 'Related Party Disclosures' other than those disclosed in the Microgen plc Annual Report for the year ending 31 December 2010.

15.       Statement of directors' responsibilities

The directors' confirm that this consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union, and that the half yearly management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

-    an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and 

-    material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Microgen plc are listed in the Microgen plc Annual Report for 31 December 2010.  A list of current directors is maintained on the Microgen plc website: www.microgen.com

Copies of this statement are being posted to shareholders and will also be available on the investor relations page of our website (www.microgen.com).  Further copies are available from the Company secretary at Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ.

By order of the Board

	P Wood
	20 July 2011
	Group Finance Director

Independent review report to Microgen plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial information in the interim financial report for the six months ended 30 June 2011, which comprises the Interim consolidated income statement, Interim consolidated statement of comprehensive income, Interim consolidated balance sheet, Interim consolidated statement of changes in equity, Interim consolidated statement of cash flows, comparative figures and related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP
Chartered Accountants

London
20 July 2011

Notes

1)     The maintenance and integrity of the Microgen plc's website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred  to the financial statements since they were initially presented on the website.

2)     Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

END

 

 

IR MMGZNRGKGMZM