RNS Number:6073I
VI Group PLC
07 September 2006
RNS Release
7 September 2006
VI Group plc
("VI Group" or "the Company")
Interim results for the six months to 30 June 2006
VI Group plc, leading suppliers of CAD/CAM software for the mould and die
industry, announces further progress in the interim results for the six months
to 30 June 2006.
These results have been prepared under International Financial Reporting
Standards ("IFRS") as adopted for use by the European Union ("EU") that the
Group expects to be applicable to the year ending 31 December 2006.
Financial highlights:
* Turnover increased by 6% to #5.3 million (2005: #5.0 million),
reflecting sales growth in North America, Japan and Germany
* 35% increase in earnings before interest, tax, depreciation and
amortisation ("EBITDA") to #0.39 million (2005: #0.29 million)
* Pre-tax profits rose #152,000 to #0.2 million (2005: #0.05 million)
* After tax profit of #12,000 (2005: loss of #138,000)
* Strong contribution to North American revenues resulting from the 2005
acquisition of Smirtware Inc.
* Previously conditional acquisition of Plastics and Computer
International announced in June now completed
* New product lines introduced last year now contributing positively to
revenues
Commenting on the interim results, Don Babbs, Chief Executive of VI Group, said:
"The new product lines introduced at the end of last year are already making a
positive contribution, and have helped us to continue to grow revenues and
profits. We have also been pleased to successfully expand our client list which
now includes corporations such as Chrysler in the USA, UMIX of Japan, and Comau
and Fiat in Italy. Our latest acquisition also expands our product line and
presents us with new opportunities in our largest current markets. VI Group
remains optimistic for the rest of 2006 and the year ahead."
Enquiries, please contact:
Don Babbs Justin Lewis
Chief Executive Corporate Synergy Plc
VI Group plc 020 7448 4400
01453 732 900
Julie Randall Neil Boom
Finance Director Gresham PR Ltd.
VI Group plc 020 7404 9000
01453 732 900
Chairman's statement
I am pleased to announce a further period of encouraging results for VI Group
for the six months to 30 June 2006 and to update shareholders on progress to
date.
VI Group has enjoyed a productive six months reflected in continued sales
growth, a significant increase in EBITDA and a welcome return to bottom line
profits.
The improvement in sales and profitability has partly been due to our aggressive
broadening of the product line over the last year to include software solutions
for shoe moulds, large stamping dies and the prediction of plastic flow within
plastic injection moulds. Many of these sectors are entirely new to the Company
and we expect it to take a little time to establish our products among the
market leaders.
It is pleasing to report that the SMIRTware acquisition completed in August of
last year has provided growth in North America and elsewhere. As anticipated on
acquisition, we have been able to use our distribution network to extend sales
of SMIRTware products to other regions. Accordingly, we can report the first
SMIRTware sales in the UK, Italy and Japan - all of which have been made in the
last six months.
While growth of sales in most parts of the world has been strong there has been
a fall off in demand in Italy where the economic and political circumstances in
the first half could not be entirely offset by an increase in market share.
Sales to larger companies grew despite a continuing stream of bad news from the
automotive sector. We believe we were able to achieve these significant sales to
Ford, Chrysler, Fiat and Assa Abloy because these corporations recognised that
our solutions would enhance their overall productivity.
Financial results
This is the first period in which the Group has reported its results in
accordance with IFRS. The interim results for 2005 shown as comparatives have
been restated to reflect IFRS. The notes include a reconciliation between the UK
GAAP ('UK Generally Accepted Accounting Practice', the accounting convention
previously used) and IFRS results as at 30 June 2005 and 31 December 2005.
Group revenue for the six month period increased by 6% to #5.3 million (2005:
#5.0m). Earnings before interest, tax, depreciation and amortisation (EBITDA)
rose to #0.39 million (2005: #0.29m). The profit on ordinary activities before
taxation was #197,000 (2005: #45,000) after a charge of #73,000 for amortisation
of intangible assets is taken into account (2005: #126,000).
This produced a small profit after tax of #12,000 (2005: loss of #138,000),
resulting in basic earnings per share of 0.03 pence (2005: loss per share of
0.37 pence).
Cost controls have intensified in 2006. Selling costs increased by 4% over the
last year but fell slightly when the effect of acquisitions is taken out.
General and administrative costs were reduced by 11%, while on-going development
costs rose as we increased our efforts across a broader product range.
Operating cash flow for the six months was #0.98 million (2004: #0.7m). Cash
balances were nearly #1.7 million at 30 June 2006 (31 December 2005: #1.0m)
while net cash balances were #1.6m (31 December 2005: #0.7m).
New developments
As part of our focus on the emerging markets we are expanding our organisation
in Shanghai to address the increasing production of moulds and dies in the
region. As well as providing marketing and support services the new organisation
will add sales and development divisions to its structure. In addition to China
we are also paying closer attention to India as an emerging market with its
consistently high manufacturing growth rate.
We are pleased to report that the US re-organisation reported last year has
progressed well, and that new parts of the US being addressed now include the
mid-west, the west coast and the east coast. We expect our efforts to provide a
much greater US presence beyond our current activities in Detroit and Toronto.
The recent acquisition of Milan-based Plastics and Computer International
provides the Group with a new aid to customers working with plastic injection
moulds. Its software, when used in conjunction with our mould design solutions,
allows customers to predict much more accurately how plastic materials will
perform in moulds, producing a 'right first time' approach to difficult moulding
problems. The product is already proven and is well used by multinational
plastic moulding companies such as Flextronics and by car maker Fiat.
Outlook
VI Group has made further progress in the first six months with the new product
lines that were introduced at the end of last year starting to positively impact
results. The Group has continued to grow revenues and profits as the product
range has expanded, despite adverse market conditions in parts of Europe.
Moreover, because of our expanded product range, we have added a number of
larger companies to our list of clients which in turn tends to bring further
gains through their supply chains. Going forward, in time we hope to replicate
the strong market presence we enjoy in our current markets in some of the
emerging economies that have the best growth potential. We remain optimistic for
the rest of 2006 and the year ahead.
Stephen Palframan
Chairman
7 September 2006
Consolidated Income Statement
-------------------------------
for the 6 months ended 30 June 2006 (unaudited) 6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December 2005
unaudited unaudited unaudited
restated restated
# 000 # 000 # 000
Revenue 5,308 5,006 10,196
Cost of Goods (480) (495) (980)
-------- -------- --------
Gross Profit 4,828 4,511 9,216
Selling expenses (2,685) (2,578) (5,083)
Administrative expenses (970) (1,092) (1,910)
Product development (779) (560) (1,268)
Net other operating income 4 6 95
-------- -------- --------
Earnings before interest, tax,
depreciation and amortisation
(EBITDA) 398 287 1,050
Depreciation (89) (93) (196)
Amortisation (73) (126) (195)
-------- -------- --------
Operating Profit 236 68 659
Interest receivable and
similar income 10 17 25
Interest payable and similar
charges (49) (40) (80)
-------- -------- --------
Profit before tax 197 45 604
Tax (185) (183) (231)
-------- -------- --------
Profit/(Loss) after tax 12 (138) 373
-------- -------- --------
Earnings /(loss) per share -
pence (basic and diluted) 0.03 (0.37) 1.00
Consolidated Balance Sheet
----------------------------
As at 30 June 2006 (unaudited) As at As at As at
30 June 2006 30 June 2005 31 December 2005
unaudited unaudited unaudited
restated restated
# 000 # 000 # 000
ASSETS
Non-current assets
Property, plant and equipment 638 402 410
Intangible assets 2,542 1,346 2,279
-------- -------- --------
3,180 1,748 2,689
-------- -------- --------
Current assets
Inventories 16 36 21
Trade and other receivables 5,342 5,620 5,623
Cash and cash equivalents 1,689 1,411 1,077
-------- -------- --------
7,047 7,067 6,721
-------- -------- --------
-------- -------- --------
Total assets 10,227 8,815 9,410
-------- -------- --------
LIABILITIES
Non-current liabilities 1,145 586 1,104
Current liabilities 4,647 4,259 3,837
-------- -------- --------
Total liabilities 5,792 4,845 4,941
-------- -------- --------
EQUITY
Issued Share Capital 186 186 186
Share Premium 5,860 5,860 5,860
Other Reserves (13) 45 33
Retained earnings (1,598) (2,121) (1,610)
-------- -------- --------
Total Equity 4,435 3,970 4,469
-------- -------- --------
-------- -------- --------
Total liabilities and equity 10,227 8,815 9,410
-------- -------- --------
Consolidated Statement of Changes in Equity
---------------------------------------------
for the 6 months ended 30 June 2006 (unaudited)
Share Share Share Based Translation Other Retained Total
Capital Premium Compensation Reserve Reserves Earnings Equity
At 31 December 2004
as previously
reported 186 5,860 0 0 10 (1,727) 4,329
IFRS
adjustments
(note 2) 0 0 5 0 0 (256) (251)
At 31 December 2004
------- -------- ------- --------- -------- -------- -------
(under IFRS -
unaudited) 186 5,860 5 0 10 (1,983) 4,078
Profit for the
period (under
IFRS - note 2) 0 0 17 0 0 (138) (121)
Currency
translation
differences 0 0 0 15 (2) 0 13
------- -------- ------- --------- -------- -------- -------
At 30 June 2005 186 5,860 22 15 8 (2,121) 3,970
Profit for the
period (under
IFRS - note 2) 0 0 16 0 0 511 527
Currency
translation
differences 0 0 0 (28) 0 0 (28)
------- -------- ------- --------- -------- -------- -------
At 31 December
2005 186 5,860 38 (13) 8 (1,610) 4,469
Profit for the
period 0 0 17 0 0 12 29
Currency
translation
differences 0 0 0 (66) 3 0 (63)
------- -------- ------- --------- -------- -------- -------
At 30 June 2006 186 5,860 55 (79) 11 (1,598) 4,435
------- -------- ------- --------- -------- -------- -------
Consolidated Cash Flow Statement
----------------------------------
for the 6 months ended 30 June 2006 (unaudited)
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December 2005
unaudited unaudited unaudited
restated restated
# 000 # 000 # 000
Cash flows from operating activities
Cash generated from
operations 1,112 821 743
Interest paid (64) (40) (80)
Taxes paid (72) (64) (258)
-------- -------- --------
Net cash from operating
activities 976 717 405
-------- -------- --------
Cash flows from investing activities
Acquisition of subsidiary net
of cash acquired 113 (29) (492)
Purchase of plant , property
and equipment (80) (55) (120)
Proceeds from sale of
equipment 17 6 59
Purchases of intangible
assets (7) (10) (26)
Interest received 11 17 25
-------- -------- --------
Net cash used in investing
activities 54 (71) (554)
-------- -------- --------
Cash flows from financing activities
Payments of finance lease
liabilities (45) (36) (99)
New loan 0 0 465
Loans repaid (69) 0 0
-------- -------- --------
Net cash used in financing
activities (114) (36) 366
-------- -------- --------
Net increase in cash and cash
equivalents 916 610 217
Cash and cash equivalents at
beginning of period 652 407 407
Exchange gains / (losses) on
cash and bank overdrafts (17) 46 28
-------- -------- --------
Cash and cash equivalents at
end of period 1,551 1,063 652
-------- -------- --------
Notes to the Interim Financial Statements
1. Basis of preparation
The Group previously reported its financial statements in accordance with UK
GAAP. From 1 January 2006 the Group is preparing its financial statements in
accordance with those International Accounting Standards, International
Financial Reporting Standards, and Interpretations (collectively "IFRS") that
are expected to be adopted in the Group's first full IFRS financial statements
for the year ended 31 December 2006, and has restated its comparative figures
accordingly. However, the IFRS are subject to ongoing review and endorsement by
the European Commission and therefore may be subject to change.
The interim financial information is unaudited and does not constitute statutory
accounts as defined in Section 240 of the Companies Act 1985.
The accounting policies followed by the Group in this interim report are derived
from those set out in the audited financial statements for the year ended 31
December 2005. These accounting policies have been amended for changes arising
from the adoption of IFRS as the basis of preparation of this interim report.
Basis of consolidation
The consolidated interim financial information incorporates the financial
information of the Company and entities controlled by the Company (its
subsidiaries). Control is achieved where the Company has the power to govern the
financial and operating policies of an investee entity so as to obtain benefits
from its activities.
On acquisition, the assets and liabilities of a subsidiary are measured at their
fair value at the date of acquisition. Any excess of the cost of acquisition
over the fair value of the identifiable net assets is recognised as goodwill.
All intra-group transactions, balances, income and expenditure are eliminated on
consolidation.
Segmental Reporting
The board consider that the company operates in only one business segment, the
supply of software and associated services. They do not consider it useful or
meaningful to analyse the interim results by geographical segment.
2.Transition from UK GAAP to IFRS
The rules for first time adoption of IFRS are set out in IFRS1 ('First-time
adoption of International Financial Reporting Standards'). In preparing the
transition from UK GAAP to IFRS, the Group has utilised 3 exemptions available
on first time adoption of IFRS, namely:
- VI Group plc has elected not to apply retrospectively the provisions of IFRS3,
('Business Combinations'), to acquisitions that occurred prior to the Group's
transition date of 1 January 2005.
- VI Group plc has elected not to apply retrospectively the provisions of IFRS2,
('Share Based Payments'), to share options granted on or before 7 November 2002.
- VI Group plc has elected to apply the exemption which allows cumulative
translation differences to be set to zero at the transition date
Reconciliation of restated IFRS consolidated financial information to UK GAAP
Profit 6 months to Year to
30 June 2005 31 December 2005
unaudited unaudited
# 000 # 000
Profit/(loss) for the
period under UK GAAP as
previously reported 6 (154)
Reversal of amortisation
of goodwill 195 310
Goodwill impairment (70) (70)
Share based payments
charges (17) (33)
Holiday pay accruals (19) (11)
Capitalisation of
development 178 333
Amortisation of
intangible assets 0 (8)
Revenue Recognition (411) 3
Interest on borrowings 0 3
-------- ---------
Profit/(loss) for the
period under IFRS (138) 373
-------- ---------
Total Equity
As at As at As at
30 June 2005 31 December 2005 31 December 2004
unaudited unaudited unaudited
# 000 # 000 # 000
Total equity under UK
GAAP as previously
reported 4,346 4,159 4,329
Reversal of amortisation
of goodwill 195 310 0
Goodwill impairment (70) (70) 0
Holiday pay accruals (44) (38) (27)
Capitalisation of
development 178 333 0
Amortisation of
intangible assets 0 (8) 0
Revenue Recognition (635) (220) (224)
Interest on borrowings 0 3 0
-------- --------- ---------
Total equity under IFRS 3,970 4,469 4,078
-------- --------- ---------
Changes in accounting policies
The following notes explain the main differences between UK GAAP and IFRS which
affect the Group's financial statements:
Intangible assets (IFRS 3 and IAS 38)
Under UK GAAP, all capitalised software is included within tangible fixed assets
on the balance sheet. Under IAS 38 "Intangible Assets", only computer software
that is embedded in computer-controlled equipment that cannot be operated
without that specific software is an integral part of the related hardware and
is treated as property, plant and equipment. All other computer software should
be recorded as an intangible asset.
Accordingly, a net reclassification has been made in the opening balance sheet
and the balance sheet as at 31 December 2004 between property, plant and
equipment and intangible assets. There is no impact on the income statement from
this reclassification
Goodwill (IFRS 3 and IAS 36)
Under IFRS 3, goodwill has an indefinite life and is only written down when an
impairment test suggests that the carrying value is overstated. Any previously
reported goodwill amortisation charged under UK GAAP since the transition date
of 1 January 2005 is reversed under IFRS and subject to an impairment review.
Holiday Pay Accruals (IAS 19)
Previously no provision was made for holiday pay. Under IAS 19 - "Employee
Benefits" the expected cost of compensated short-term absences (e.g. holidays)
should be recognised when employees render the service that increases their
entitlement. As a result an accrual has been made for holidays earned but not
taken.
Share based payments (IFRS 2)
Charges have been made in the IFRS income statement to spread the fair value of
share options issued since November 2002 over the vesting period of those
options. Share options have been valued on the basis of a Black-Scholes Model
using the criteria below:
- Expected volatility of 33%
- Expected average life of the option of 3 years
Research and development (IAS 38)
Expenditure on research activities, undertaken with the prospect of gaining new
scientific or technical knowledge and understanding is recognised in the income
statement as an expense as incurred. Development costs incurred after the point
at which the commercial and technical feasibility of the product has been
proven, the decision to complete the development has been taken and the
resources made available, are capitalised. The expenditure capitalised includes
the cost of direct labour and an appropriate proportion of overheads.
Capitalised development expenditure is stated at cost less accumulated
amortisation and impairment losses. Development expenditure has an estimated
useful life of 6 years and is written off over that period.
Prior to the transition date of 1 January 2005, the Group did not have the
necessary records and assessments in place in order to meet the criteria
required by IAS 38 and therefore no adjustment has been made at that date.
Borrowing costs (IAS 23)
Borrowing costs directly attributable to the acquisition of a subsidiary have
been capitalised as part of the cost of the acquisition, as allowed by the
alternative treatment under IAS 23.
Revenue Recognition (IAS 18 and IAS 34)
Revenue represents the invoiced value of sales of software and related services
to third parties, exclusive of value added tax or equivalent. Software licences
are recognised on delivery of the software licence. Maintenance renewals are
recognised rateably over the period of the maintenance contract. The group's
accounting policy has previously been to recognise software sales revenue in
full once the licence has been delivered. In accordance with IAS 18 the group
now defers a portion of software sales revenue to cover the cost of servicing
activities in the first year. There has also been a change in the method of
calculation of certain maintenance contract revenues leading to an additional
deferral of revenue in the first half of the year. The impact on the full year
results arising from this change is unlikely to be material.
3. Earnings per share
6 months to 30 June 2005
Earnings EPS
restated Shares restated
# 000 000 pence
Basic loss per share (138) 37,261 (0.37)
Number of shares for which options were
outstanding - 3,111 -
Non dilutive options - (3,111) -
------- -------- -------
Fully diluted loss per share (138) 37,261 (0.37)
------- -------- -------
6 months to 30 June 2006
Earnings Shares EPS
# 000 000 pence
Basic earnings per share 12 37,261 0.03
Number of shares for which options were
outstanding - 3,111 -
Non dilutive options - (3,111) -
------- -------- -------
Fully diluted earnings per share 12 37,261 0.03
------- -------- -------
4. Notes to Cash Flow Statement
Reconciliation of operating profit to net cash inflow from operating activities:
6 months to 6 months to Year to
30 June 2006 30 June 2005 31 December 2005
unaudited unaudited unaudited
restated restated
# 000 # 000 # 000
Cash generated from operations
--------------------------------
Operating profit for the
period 236 68 659
Adjustments for:
Depreciation & Amortisation 162 149 321
Goodwill impairment charge 0 70 70
Share based compensation 17 17 33
(Profit) / loss on sale of
plant, property and equipment 4 (2) (17)
Increase in inventories 5 10 27
Decrease in trade and other
receivables 402 72 124
Increase in trade and other
payables 511 615 (141)
Increase in capitalised
development costs (225) (178) (333)
-------- -------- ----------
Cash generated from
operations 1,112 821 743
-------- -------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
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