Aptitude Regulatory News (APTD)

17 Jul 2008 07:00



17 July 2008

MICROGEN plc ('Microgen')

INTERIM RESULTS FOR THE SIX MONTHS ENDED

30 JUNE 2008

Microgen plc, the information management company, reports results for the six months ended 30 June 2008 ahead of the Board's declared operating margin target supported by strong organic growth in Microgen Aptitude, the Group's flagship product.

Highlights

Positive operating cash flow of £5.7 million (H1, 2007 : £2.4 million). Including proceeds from the disposal of the Group's London long leasehold property, the cash balance at 30 June 2008 was £21.2 million and net funds were £17.3 million. 

Contacts
Martyn Ratcliffe, Chairman	01252-772300
David Sherriff, Chief Operating Officer
Philip Wood, Group Finance Director
Giles Sanderson, Financial Dynamics	020-7831-3113

* Throughout this statement adjusted operating profit and margin excludes goodwill/intangible impairment/amortisation & exceptional items and comparisons to 2007 are based on continuing operations.

MICROGEN plc ('Microgen')

Interim Results for the six months ended

30 June 2008

Chairman's Statement

In unpredictable market conditions, Microgen has produced an excellent operating performance in the first half of 2008 with operating margins ahead of the Board's defined target and a strong performance from Microgen Aptitude. As a result of the investments made in recent years, Microgen Aptitude based solutions now account for 18% of the Group's turnover (H1, 2007 : 8%), an organic growth rate of over 140%. With a very strong balance sheet, including cash of £21.2 million, high levels of recurring revenue and a flagship product, Microgen Aptitude, delivering strong organic growth, Microgen is well positioned in the current market uncertainty.

Group Financial Performance

Throughout this statement adjusted operating profit and margin excludes goodwill/intangible impairment/amortisation & exceptional items and comparisons to 2007 are based on continuing operations.

In the six months ended 30 June 2008, Microgen generated adjusted operating profit of £2.9 million (H1, 2007 : £2.7 million) from revenue of £16.9 million (H1, 2007 : £16.4 million). Adjusted operating margin at 17.4% (H1, 2007 : 16.6%) was ahead of the Group's defined target. Microgen has not capitalised R&D costs, yet the Group has consistently reported strong operating margins.

Profit before tax for the period was £3.9 million (H1, 2007 : £3.2 million), an increase of 23%. Profit before tax includes net exceptional income of £0.6m including a gain on the disposal of the Group's London long leasehold property. The Group's London operations are now located in a new leased office facility. Adjusted basic earnings per share was 2.4p (H1, 2007 : 2.0p) with a basic earnings per share of 2.8p (H1, 2007 : 2.4p). Recurring revenues remain high at 65% of Group turnover (H1, 2007 : 64%) and the cost base is tightly controlled with headcount at 30 June 2008 of 319 (31 December 2007 : 323)

Cash conversion has been excellent, benefiting from the seasonality of recurring billing cycles. As a result, the Group produced positive operating cash flow of £5.7 million (H1, 2007: £2.4 million). The Group therefore continues to have a strong balance sheet with cash of £21.2 million (H1, 2007 : £11.0 million) and net funds of £17.3 million at 30 June 2008 (H1, 2007 : £6.5 million). The difference between cash and net funds relates to borrowings associated with the Group's freehold property in Fleet. At 30 June 2008 investments in marketable securities were valued at £1.3 million (30 June 2007 : £5.7 million).

The interim dividend has been increased to 0.7 pence per share (2007 : 0.6 pence per share). The interim dividend will be paid on 22 August 2008 to shareholders on the register as at 25 July 2008.

Operational Overview

Operating margins referred to below exclude interest, exceptional items, goodwill & intangible amortisation and Group costs, but include allocated costs of shared functional services to provide a fair reflection of the divisional operating performance.

The organic growth rate derived from Microgen Aptitude based solutions in excess of 140%, compared to the first half of 2007, is validation of the technical and marketing investment decisions made by the Board in recent years. This success has been achieved across a number of vertical sectors where the benefits of the high transaction processing capability, transaction integrity and event-driven architecture of Microgen Aptitude are increasingly being recognised, positioning the product as a leading, high performance business process management suite (BPMS) for the development of process-driven solutions. 

The Group's Banking Division had a strong first half with revenue growth of 12% compared to the first half of 2007, driven by Microgen Aptitude based solutions and in particular the Microgen Accounting Hub. For the period ended 30 June 2008, the Banking division reported revenue of £5.1 million (H1, 2007 : £4.6 million) with an operating margin of 22% (H1, 2007 : 25%). Despite the challenges in the banking sector, which have created an unpredictable environment with some customers/prospects accelerating projects and others cancelling, delaying or suspending projects, the Banking division is focused on areas of financial control which in general remain a key investment priority within this sector.

The Asset & Wealth Management Division delivered a solid performance in accordance with the Board's expectations, reporting revenue in the period ended 30 June 2008 of £5.4 million (H1, 2007 : £5.7 million) and an operating margin of 28% (H1, 2007 : 27%). The slight revenue decline resulted from the completion of some large projects in 2007 and the weakening of the South African Rand which produced a negative revenue impact of £0.1 million. 

The Commercial, Public & Utilities Division delivered strong organic revenue growth in Microgen Aptitude based solutions, offset by declines in other areas, resulting in revenue of £3.2 million (H1, 2007 : £3.1 million). Operating margin for the period to 30 June 2008 increased to 23% (H1, 2007 : 19%). In accordance with the planned transition of this business, Microgen Aptitude based solutions contributed 32% of the divisional revenue, compared to 12% on continuing operations in the first half of 2007. 

The Group's Billing & Database Management Division maintained good organic growth of 6% in the period to 30 June 2008, compared to the first half of 2007, resulting in revenue of £3.3m (H1, 2007 : £3.1m). Operating margins declined slightly due to price negotiations associated with successful contract extensions but remain very strong at 30% (H1, 2007 : 34%). The continued migration from paper-based to electronic services, particularly in the telecom sector, has continued, with 35% of all documents in June 2008 distributed electronically (June 2007 : 22%). The Division's e-services are delivered using a Software-as-a-Service (SaaS) model with over 300,000 recipients of electronic documents, including approximately 30,000 corporate entities, making Microgen one of the largest e-billing based transaction hubs in the UK.

Statement on Principal Risks and Uncertainties

Pursuant to the requirements of the new 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 2007 Annual Report remain applicable for the final six months of the financial year. In addition, currency movements are more pronounced than in recent times with a weakening of the South African Rand and a strengthening of the Polish Zloty against Sterling being of particular note for Microgen. The Group's 2007 Annual Report is available from the Microgen website: www.microgen.com.

Prospects

The Group's performance reflects the success of the Board's investments in Microgen Aptitude and electronic document services, underpinned by high recurring revenues from the Group's products and services in slower growth market sectors. As a result, despite the uncertain market, the operating margins reported in the first half of the year were very strong, with all development costs expensed. 

Microgen Aptitude is increasingly being recognised by customers, prospects and technical analysts for its event-driven architecture and high transaction volume processing capability. The product continues to win against leading competitors, both as a product in its own right and as a development platform for business process based solutions.

As always, however, the Board remains cautious and prudent particularly in the current unpredictable markets. Yet within this complex, uncertain environment, Microgen has delivered another excellent operating performance and remains on track to meet the Board's expectations for the year.

Martyn Ratcliffe

Chairman

Microgen plc

GROUP INTERIM INCOME STATEMENT

For the six months ended 30 June 2008

		Unaudited six months ended 30 Jun 2008						Unaudited six months ended 30 Jun 2007 Restated						Audited year ended 31 Dec 2007
	Note	Before intangible amortisation and exceptional items		Intangible amortisation and exceptional items		Total		Before intangible amortisation and exceptional items		Intangible amortisation and exceptional items		Total		Before goodwill and intangible impairment/ amortisation and exceptional items		Goodwill and intangible impairment/ amortisation and exceptional items		Total
		£000		£000		£000		£000		£000		£000		£000		£000		£000
Revenue	4	16,934		-		16,934		16,447		-		16,447		33,271		-		33,271
Operating costs		(13,992)		558		(13,434)		(13,718)		188		(13,530)		(27,326)		(2,281)		(29,607)
Operating profit	4	2,942		558		3,500		2,729		188		2,917		5,945		(2,281)		3,664
Finance income		496		-		496		415		-		415		855		-		855
Finance costs		(125)		-		(125)		(173)		-		(173)		(290)		-		(290)
Profit on ordinary activities before tax		3,313		558		3,871		2,971		188		3,159		6,510		(2,281)		4,229
Income tax expense	5					(1,065)						(976)						(1,478)
Profit from continuing operations						2,806						2,183						2,751
Discontinued operations
Profit/(loss) from discontinued operations						-						279						(121)
Profit for the period						2,806						2,462						2,630
Earnings per share	6
Basic						2.8p						2.4p						2.6p
Diluted						2.7p						2.4p						2.5p
Adjusted earnings per share	6
Basic						2.4p						2.0p						4.6p
Diluted						2.3p						1.9p						4.5p
Dividend per share				Pence per share		£000				Pence per share		£000				Pence per share		£000
Paid dividend per share	8			1.4p		1,434				1.0p		1,027				1.6p		1,640
Proposed dividend per share	8			0.7p		717				0.6p		616				1.4p		1,441

Microgen plc

GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the six months ended 30 June 2008

	Unaudited	Unaudited	Audited
	six months ended	six months ended	year ended
	30 Jun 2008	30 Jun 2007	31 Dec 2007
	£000	£000	£000
Cash flow hedges:
- net fair value gains net of tax	134	74	81
- reclassified and reported in net profit	(4)	-	(7)
Deferred tax on share options	(14)	8	(4)
Exchange differences on translation of foreign operations	(13)	50	57
Net income recognised directly in equity	103	132	127
Profit for the period	2,806	2,462	2,630
Total recognised income and expense for the period	2,909	2,594	2,757

Microgen plc

GROUP BALANCE SHEET 

As at 30 June 2008

			Unaudited	Unaudited	Audited
	Note		as at	as at	as at
			30 Jun 2008	30 Jun 2007	31 Dec 2007
ASSETS			£000	£000	£000
Non-current assets
Goodwill			44,726	46,880	44,880
Intangible assets	9		1,092	934	1,292
Property, plant and equipment	9		6,851	7,311	6,490
Investments	10		1,270	5,683	-
Deferred tax asset			1,138	1,883	1,419
			55,077	62,691	54,081
Current assets
Inventories			47	93	61
Trade and other receivables			5,945	7,833	8,919
Financial assets - derivative financial instruments			366	225	248
Cash and cash equivalents			21,192	11,014	18,081
Non-current assets held for sale	9		-	-	971
			27,550	19,165	28,280
LIABILITIES
Current liabilities
Financial liabilities
- borrowings associated with property	11		(533)	(533)	(533)
- derivative financial instruments			-	-	(16)
Trade and other payables			(14,364)	(14,057)	(14,949)
Current tax liabilities			(1,272)	(1,753)	(1,694)
Provisions	12		(104)	(39)	(130)
			(16,273)	(16,382)	(17,322)
Net current assets			11,277	2,783	10,958
Non-current liabilities
Financial liabilities - borrowings associated with property	11		(3,404)	(3,967)	(3,734)
Provisions	12		(287)	(143)	(285)
			(3,691)	(4,110)	(4,019)
NET ASSETS			62,663	61,364	61,020
SHAREHOLDERS' EQUITY
Ordinary shares			5,144	5,132	5,143
Share premium account			11,283	11,214	11,277
Other reserves			37,666	37,536	37,536
Retained earnings			8,570	7,482	7,064
EQUITY SHAREHOLDERS' FUNDS	13		62,663	61,364	61,020

Microgen plc

GROUP CASH FLOW STATEMENT

For the six months ended 30 June 2008

		Unaudited	Unaudited	Audited
		six months ended	six months ended	year ended
		30 Jun 2008	30 Jun 2007	31 Dec 2007
	Note	£000	£000	£000
Cash flows from operating activities
Cash generated from operations	7	5,675	2,409	5,651
Interest received		496	415	854
Interest paid		(130)	(157)	(332)
Tax paid		(1,222)	(549)	(1,105)
Net cash from operating activities		4,819	2,118	5,068
Cash flows from investing activities
Purchase of investments		(1,270)	(5,683)	(5,683)
Proceeds from sale of investments		-	-	5,741
Proceeds from the sale of property, plant and equipment		1,978	2,100	2,068
Purchase of property, plant and equipment	9	(656)	(253)	(552)
Purchase of intangible assets	9	(11)	-	(576)
Net cash used in investing activities		41	(3,836)	998
Cash flows from financing activities
Net proceeds from issue of ordinary share capital		7	-	74
Dividends paid	8	(1,434)	(1,027)	(1,640)
Repayments of borrowings		(330)	(1,500)	(1,733)
Net cash from financing activities		(1,757)	(2,527)	(3,299)
Net increase/(decrease) in cash and cash equivalents		3,103	(4,245)	2,767
Opening cash and cash equivalents		18,081	15,297	15,297
Effects of exchange rate changes		8	(38)	17
Closing cash and cash equivalents		21,192	11,014	18,081

Notes to interim financial information

1.  General information

The Company is a public limited company incorporated and domiciled in England and Wales.

This condensed consolidated interim financial information was approved for issue on 16 July 2008.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2007 were approved by the Board of directors on 21 February 2008 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 237 of the Companies Act 1985.

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

2.  Basis of preparation

This financial information comprises the group interim balance sheets as at 30 June 2008, 30 June 2007 and 31 December 2007, related group interim statements of income, cash flows and recognised income and expense, and related notes for the six months then ended of Microgen plc (hereinafter referred to as 'financial information'). 

This condensed consolidated interim financial information for the six months ended 30 June 2008 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 2007, which have been prepared in accordance with IFRSs as adopted by the European Union.

During 2007 the Group exited the SAP and testing consultancy businesses. In accordance with IFRS 5, Non current Assets Held for Sale and Discontinued Operations, the interim prior year comparatives for the income statement and related notes have been restated to separately disclose discontinued operations.

3.  Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2007, as described in those annual financial statements.

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 2008:

- IFRIC 11, 'IFRS 2 - Group and treasury share transactions'. It is not expected to have any impact on the Group's consolidated financial statements;

- IFRIC 12, 'Service concession arrangements' IFRIC 12 is not relevant to the group's operations because none of the Group's companies provide public sector services; and

- IFRIC 14, 'IAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction'. It is not expected to have any impact on the Group's consolidated financial statements.

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2008 and have not been early adopted: 

- IFRS 8, 'Operating segments', effective for annual periods beginning on or after 1 January 2009. IFRS 8 replaces IAS 14, 'Segment reporting', and requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. The expected impact is still being assessed.

- IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009. It is not expected to have any impact on the Group's consolidated financial statements.

- IFRS 2 (amendment) 'Share-based payment', effective for annual periods beginning on or after 1 January 2009. Management is assessing the impact of changes to vesting conditions and cancellations on the group's SAYE schemes;

- IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the group. The group does not have any joint ventures;

- IAS 1 (amendment), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. Management is in the process of developing proforma accounts under the revised disclosure requirements of this standard;

- IAS 32 (amendment), 'Financial instruments: presentation', and consequential amendments to IAS 1, 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. This is not relevant to the group, as the group does not have any puttable instruments; and

- IFRIC 13, 'Customer loyalty programmes', effective for annual periods beginning on or after 1 July 2008. This is not relevant to the group, as the group does not have any customer loyalty programmes.

4.  Segmental information

The segmental information below reflects the divisional operating structure of the Group, which is the primary segmentation of the operating performance reviewed by the Board.

 

		Unaudited six months ended 30 Jun 2008
		Asset & Wealth Management		Banking		Commercial, Public & Utilities		Billing & Database Management		Total
		£000		£000		£000		£000		£000
Revenue		5,390		5,092		3,150		3,302		16,934
Operating costs before group overheads		(3,885)		(3,947)		(2,414)		(2,299)		(12,545)
Operating profit before group overheads, intangible amortisation and exceptional items		1,505		1,145		736		1,003		4,389
Group overheads										(1,447)
Operating profit before intangible amortisation and exceptional items										2,942
Divisional intangible amortisation		(189)		(22)		-		-		(211)
Divisional operating profit		1,316		1,123		736		1,003
Group exceptional income/(costs)
- Property exit costs										(135)
- Profit on sale of long leasehold property										1,025
- Other										(121)
Total intangible amortisation and exceptional income/(costs)										558
Operating profit										3,500
Net finance income										371
Profit before tax										3,871
Income tax expense										(1,065)
Profit for the period										2,806

 

		Unaudited six months ended 30 Jun 2007 Restated
		Asset & Wealth Management		Banking		Commercial, Public & Utilities		Billing & Database Management		Total
		£000		£000		£000		£000		£000
Revenue		5,693		4,556		3,069		3,129		16,447
Operating costs before group overheads		(4,159)		(3,437)		(2,500)		(2,073)		(12,169)
Operating profit before group overheads, intangible amortisation and exceptional items		1,534		1,119		569		1,056		4,278
Group overheads										(1,549)
Operating profit before intangible amortisation and exceptional items										2,729
Divisional intangible amortisation and exceptional costs
- Intangible amortisation		(131)		(22)		(9)		-		(162)
Divisional operating profit		1,403		1,097		560		1,056
Group exceptional income/(costs)
- Profit on sale of property, plant and equipment										429
- Other										(79)
Total intangible amortisation and exceptional income/(costs)										188
Operating profit										2,917
Net finance income										242
Profit before tax										3,159
Income tax expense										(976)
Profit from continuing operations										2,183
Discontinued operations
Profit for the year from discontinued operations										279
Profit for the period										2,462

 

		Audited year ended 31 Dec 2007
		Asset & Wealth Management		Banking		Commercial, Public & Utilities		Billing & Database Management		Total
		£000		£000		£000		£000		£000
Revenue		11,442		9,475		5,981		6,373		33,271
Operating costs before group overheads		(8,317)		(7,358)		(4,777)		(4,410)		(24,862)
Operating profit before group overheads, goodwill and intangible amortisation/ impairment and exceptional items		3,125		2,117		1,204		1,963		8,409
Group overheads										(2,464)
Operating profit before goodwill and intangible amortisation/ impairment and exceptional items										5,945
Divisional intangible amortisation and exceptional costs
- Goodwill impairment		-		-		(2,000)		-		(2,000)
- Intangible amortisation		(261)		(44)		-		-		(305)
Divisional operating profit/(loss)		2,864		2,073		(796)		1,963
Group exceptional income/(costs)
- Property provision										66
- Profit on sale of property, plant and equipment										666
- Aborted acquisition costs										(629)
- Other										21
- Goodwill adjustment										(100)
Total intangible amortisation and exceptional income/(costs)										(2,281)
Operating profit										3,664
Net finance income										565
Profit before tax										4,229
Income tax expense										(1,478)
Profit from continuing operations										2,751
Discontinued operations
Loss for the year from discontinued operations										(121)
Profit for the year										2,630

5. Income taxes

Income tax expense is based on management's best estimate of the income tax rate expected for the full financial year.  The tax charge of £1,065,000 is at an effective tax rate of 27.5% (2007: 30.9%) of the profit before tax, benefiting from capital losses being utilised against the gain on the sale of the long leasehold property.

6. Earnings per share

	Unaudited six months ended 30 Jun 2008	Unaudited six months ended 30 Jun 2007	Audited year ended 31 Dec 2007
	pence	pence	pence
Earnings per share
Basic	2.8	2.4	2.6
Diluted	2.7	2.4	2.5
Adjusted earnings per share
Basic	2.4	2.0	4.6
Diluted	2.3	1.9	4.5

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

	Unaudited six months ended 30 Jun 2008	Unaudited six months ended 30 Jun 2007 Restated	Audited year ended 31 Dec 2007
	pence	pence	pence
Basic earnings per share	2.8	2.4	2.6
Exceptional (credit) / charge net of tax	(0.6)	(0.2)	0.1
Prior years' tax charge	-	-	(0.5)
Discontinued operations	-	(0.3)	0.1
Intangible amortisation net of tax	0.2	0.1	0.2
Change in tax rates	-	-	0.1
Goodwill & intangible impairment	-	-	2.0
Adjusted earnings per share	2.4	2.0	4.6

7.  Cash generated from operations

	Unaudited six months ended 30 Jun 2008	Unaudited six months ended 30 Jun 2007	Audited year ended 31 Dec 2007
	£000	£000	£000
Profit for the period	2,806	2,462	2,630
Adjusted for:
Taxation	1,065	1,080	2,029
Depreciation	365	376	731
Profit on disposal of property, plant and equipment	(1,043)	(429)	(606)
Profit on disposal of investments	-	-	(58)
Intangible amortisation	211	162	305
Goodwill and intangible impairment	-	-	2,000
Share-based payment expense	161	216	248
Change in value of goodwill	154	100	100
Finance income	(496)	(415)	(855)
Finance expense	125	173	290
Changes in working capital:
Decrease/(increase) in inventories	14	(20)	12
Decrease/(increase)  in receivables	2,974	169	(1,118)
(Decrease)/increase in payables	(637)	(638)	551
Decrease in provisions	(24)	(827)	(608)
Cash generated from operations	5,675	2,409	5,651

8.  Equity dividends on ordinary shares

	Unaudited six months ended 30 Jun 2008	Unaudited six months ended 30 Jun 2007	Audited year ended 31 Dec 2007
	£000	£000	£000
Dividends paid:
Interim dividend	-	-	613
Final dividend	1,434	1,027	1,027
Proposed but not recognised as a liability:
Interim dividend	717	616	-
Final dividend	-	-	1,441

The proposed interim dividend was approved by the Board on 16 July 2008 but was not included as a liability as at 30 June 2008, in accordance with IAS 10 'Events after the Balance Sheet date'. This interim dividend will be payable on 22 August 2008 to shareholders on the register at the close of business on 25 July 2008.

9.  Capital expenditure

Six months ended 30 June 2008	Tangible assets		Intangible assets
	£000		£000
Opening net book amount 1 January 2008 (including assets held for sale)	7,461		1,292
Additions	656		11
Disposals	(935)		-
Depreciation, amortisation and other movements	(331)		(211)
Closing net book amount 30 June 2008 (unaudited)	6,851		1,092
Six months ended 30 June 2007	Tangible assets		Intangible assets
	£000		£000
Opening net book amount 1 January 2007	9,104		1,021
Additions	230		75
Disposals	(1,647)		-
Depreciation, amortisation and other movements	(376)		(162)
Closing net book amount 30 June 2007 (unaudited)	7,311		934

During the period, the group completed the sale of the London property in City Road for a consideration of £2,050,000, together with proceeds of £18,000 on the disposal of other assets.

The group have placed contracts for future capital expenditure for £37,000, which has not been provided for in the financial statements.

10.  Investments

At 30 June 2008 investments represent the group's holding of 12.89% in the share capital of Scisys plc.

11.  Borrowings and loans

	Unaudited six months ended 30 Jun 2008		Unaudited six months ended 30 Jun 2007		Audited year ended 31 Dec 2007
	£000		£000		£000
Non-current	3,404		3,967		3,734
Current	533		533		533
	3,937		4,500		4,267
Movements in borrowings is analysed as follows:					£000
Six months ended 30 June 2008
Opening amount as at 1 January 2008					4,267
Repayments of borrowings					(330)
Closing amount as at 30 June 2008					3,937
Six months ended 30 June 2007
Opening amount as at 1 January 2007					6,000
Repayments of borrowings					(1,500)
Closing amount as at 30 June 2007					4,500

12.  Provisions for other liabilities and charges

	Unaudited six months ended 30 Jun 2008		Unaudited six months ended 30 Jun 2007
	£000		£000
Property provision
At 1 January	415		1,028
Charged to income statement	126		-
Provision for dilapidations	100		-
Utilised in the period	(250)		(865)
Other	-		19
At 30 June	391		182

13.  Statement of changes in equity

		Share capital	Share premium	Retained earnings	Other reserves	Total
		£'000	£'000	£'000	£'000	£'000
At 1 January 2008		5,143	11,277	7,064	37,536	61,020
Shares issued under share option schemes		1	6	-	-	7
Cash flow hedges
- net fair value gains net of tax		-	-	-	134	134
- reclassified and reported in net profit		-	-	-	(4)	(4)
Exchange rate adjustments		-	-	(13)	-	(13)
Share options - value of employee service		-	-	161	-	161
Deferred tax on share options		-	-	(14)	-	(14)
Dividends		-	-	(1,434)	-	(1,434)
Retained profit for the period		-	-	2,806	-	2,806
At 30 June 2008 (unaudited)		5,144	11,283	8,570	37,666	62,663

		Share capital	Share premium	Retained earnings	Other reserves	Total
		£000	£000	£000	£000	£000
At 1 January 2007		5,132	11,214	5,773	37,462	59,581
Net fair value gain on cash flow hedges net of tax					74	74
Exchange rate adjustments		-	-	50	-	50
Share options - value of employee service		-	-	216	-	216
Deferred tax on share options		-	-	8	-	8
Dividends		-	-	(1,027)	-	(1,027)
Profit for the period		-	-	2,462	-	2,462
At 30 June 2007 (unaudited)		5,132	11,214	7,482	37,536	61,364

14. Related party transactions

There were no related party transactions during the period to 30 June 2008 (30 June 27, 31 Dec 2007: nil), as defined by International Accounting Standard No 24 "Related Party Disclosures" other than key management compensation.

Key management compensation amounted to £1,331,000 for the six months ended 30 June 2008 (30 June 2007: £1,318,000).

15. Statement of directors' responsibilities

The directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein 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 Group are listed in the Microgen Group Annual Report for 31 December 2007. A list of current directors is maintained on the Microgen Group 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 the registered office: Fleet House, 3 Fleetwood Park, Barley Way, Fleet. GU51 2QJ.

P Wood

16 July 2008

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 2008, which comprises the group income statement, group statement of recognised income and expense, group balance sheet, group cash flow statement 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 interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim 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 consolidated interim financial information included in this interim 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 consolidated interim financial information in the interim 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 consolidated interim financial information in the interim financial report for the six months ended 30 June 2008 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

West London

16 July 2008

Notes:

(a) The maintenance and integrity of the Microgen plc 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.

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

ENDIR ZGGMNNVRGRZM