Last checked at 21 Jul 2009 07:00
Microgen PLC
21 July 2009
MICROGEN plc ('Microgen')
INTERIM RESULTS FOR THE SIX MONTHS ENDED
30 JUNE 2009
Microgen plc reports results for the six months ended 30 June 2009 ahead of the Group's annual plan ("Plan") driven by strong performance from Microgen Aptitude.
Highlights
Statutory results
| Contacts | |
| Martyn Ratcliffe, Chairman | 01252-772300 |
| David Sherriff, Chief Operating Officer | |
| Philip Wood, Group Finance Director | |
| Giles Sanderson, Financial Dynamics | 0207-8313113 |
* Throughout this statement adjusted operating profit and margin excludes intangible amortisation & exceptional items.
21 July 2009
MICROGEN plc ('Microgen')
Interim Results for the six months ended
30 June 2009
Chairman's Statement
The significant investment made in recent years in the development of Microgen Aptitude and associated products, particularly the Microgen Accounting Hub, is now converting into demand for these market leading products in both Europe and North America. Microgen is now engaged on a number of strategic projects and with a strong pipeline of further opportunities, the Board remains confident in the potential of this product category.
This performance is even more satisfying having been delivered in a very difficult economic environment. These same market conditions, however, have affected the Group's other businesses, although both the Financial Systems Division and the Billing Services Division remain profitable, high margin businesses with strong cash flow.
Group Financial Performance
Throughout this statement adjusted operating profit and margin excludes intangible amortisation & exceptional items.
In the six months ended 30 June 2009, Microgen generated adjusted operating profit of £3.2 million (H1, 2008 : £2.9 million) from revenue of £16.5 million (H1, 2008 : £16.9 million). Adjusted operating margin at 19.7% (H1, 2008 : 17.4%) was ahead of Plan. Whilst the Group has consistently reported strong operating margins, Microgen has not capitalised R&D costs, including the investment made in Microgen Aptitude and related products. Furthermore, by expensing all R&D costs, not only does Microgen have good correlation between profit and cash flow, but the profitability of the Microgen Aptitude business should correlate with the growth in revenue.
Profit before tax for the period was £2.8 million (H1, 2008 : £3.9 million) with the comparable period in 2008 benefiting from an exceptional gain of £1.0 million from the disposal of a long leasehold property and £0.4 million due to higher interest rates on the higher cash balance prior to the share buy-back of £8.0 million in November 2008. Adjusted basic earnings per share was 2.8p (H1, 2008 : 2.4p) with a basic earnings per share of 2.3p (H1, 2008 : 2.8p, including the exceptional profit on the property disposal). Recurring revenues remain high at 66% of Group turnover (H1, 2008 : 65%) and the cost base is tightly controlled with headcount at 30 June 2009 of 284 (31 December 2008 : 286) although recruitment is currently active in the Microgen Aptitude Solutions Division.
Cash conversion has been excellent with cash generated from operations ahead of operating profit. The Group continues to have a strong balance sheet with cash of £15.2 million at 30 June 2009 (H1, 2008 : £21.2 million before share buy-back of £8.0 million, dividends of £1.9 million and repayment of £1.3 million of the debt on the Group's freehold property) and net funds of £12.8 million at 30 June 2009 (H1, 2008 : £17.3 million). The difference between cash and net funds relates to borrowings associated with the Group's freehold property in Fleet. At 30 June 2009 investments in marketable securities were valued at £1.5 million (H1, 2008 : £1.3 million).
Reflecting the increasing confidence in Microgen Aptitude, the interim dividend has been increased by 14% to 0.8 pence per share (2008 : 0.7 pence per share). The interim dividend proposed will be paid on 28 August 2009 to shareholders on the register as at 31 July 2009.
Operational Overview
Microgen plc is structured into three operating divisions, with shared central services to achieve the benefits of scale. Operating margins referred to below include the costs of the shared services but exclude interest, exceptional items, intangible amortisation and Group costs. The allocated costs of shared functional services are included within the divisional operating results.
Microgen Aptitude Solutions Division ("MASD")
The highlight of the first half has been the demand for Microgen Aptitude and the Microgen Accounting Hub. MASD is now engaged in the UK, Europe and North America, on a number of strategic customer projects, either directly or in conjunction with major systems integrators. In addition, a number of smaller contracts and project extensions have been secured and the pipeline of prospects continues to be strong.
Microgen Aptitude's reputation is built not only on its technology but also on its track record of delivering successful projects that realise a tangible return on investment for its customers. During the first half of 2009, projects with a major North American bank and with a large UK transport infrastructure provider have gone live with very positive feedback from these customers. The first of these was managed directly by Microgen and the second was delivered in conjunction with a major systems integrator, reflecting the capability and flexibility of the Microgen structure and delivery methodology.
For the period ended 30 June 2009, MASD reported revenue of £4.7 million (H1, 2008 : £3.7 million). In line with this revenue growth, the operating loss was reduced by 55% to £0.6 million (H1, 2008 : loss of £1.3 million) ahead of Plan and whilst maintaining the investment in development activities. With the momentum noted above, the Board anticipates significant growth in the second half of the year.
Financial Systems Division ("FSD")
The Financial Systems Division has been affected by the economic climate with a slow down in new business activity. However the high recurring revenue (approximately 76%) and installed base provide a solid foundation and underpin the operating performance of this division. Revenue in FSD for the period ended 30 June 2009 was £8.9 million (H1, 2008 : £9.9 million) with approximately half of this decline associated with the managed exit from general IT consultancy which is now effectively complete. FSD has maintained its very strong operating margin at 48% (H1, 2008 : 47%) and good cash flow.
Billing Services Division ("BSD")
The revenue in the Billing Services Division is directly related to the number of transactions processed. The economic environment has affected a number of BSD customers and hence transaction volume has declined with a corresponding impact on BSD revenue. This correlation resulted in BSD reporting revenue of £2.9 million in the period ended 30 June 2009 (H1, 2008 : £3.3 million) and the Board anticipates a further decline in the second half of the year. However operating margins remained strong at 26% (H1, 2008 : 30%) and electronic document distribution now accounts for approximately 60% of all document output (H1, 2008 : 31%).
Consultant Utilisation and Fee Rates
Over recent years, Microgen has progressively and pro-actively reduced its exposure to general IT consultancy, such that this revenue accounted for just 2% in the period ended 30 June 2009 (H1 2008 : 3%). Where possible consultants with legacy skills have been cross-trained onto Microgen Aptitude and the Microgen Accounting Hub. Throughout this transition, utilisation has been maintained at high levels and Microgen is currently actively recruiting both functional and technical consultants in both Europe and North America to support the demand for Microgen Aptitude and Microgen Accounting Hub resources. As a result, contrary to the market trend, consultancy fee rates have increased by 16% compared to the first half of 2008.
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 2008 Annual Report remain applicable for the final six months of the financial year. The Group's 2008 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 Group's performance in the first half of 2009 reflects the success of the investment in Microgen Aptitude and related products, supported by high recurring revenues from the Group's other products and services in slower growth market sectors. As a result, despite the difficult economic and market conditions, the operating margins reported in the first half of the year were ahead of Plan, with all development costs expensed.
The market-leading capability of Microgen Aptitude and the Microgen Accounting Hub is now converting into tangible results and the products continue to win against market leading competitors in Europe and North America. With a rapidly expanding blue-chip customer base and excellent references from successful projects (often leading to further projects within existing customers), the Board are confident that the return on the investment in Microgen Aptitude will be realised. While the Board remains cautious and prudent, particularly in the current unpredictable market, Microgen has delivered another excellent operating performance and, as advised in the recent trading update, remains on track to meet, or possibly exceed, the Board's expectations for the year.
Martyn Ratcliffe
Chairman
GROUP INTERIM INCOME STATEMENT
For the six months ended 30 June 2009
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | ||||||||||||||||
| 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 intangible amortisation and exceptional items | Intangible amortisation and exceptional items | Total | |||||||||
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | ||||||||||
| Revenue | 4 | 16,468 | - | 16,468 | 16,934 | - | 16,934 | 33,041 | - | 33,041 | ||||||||
| Operating costs | (13,223) | (476) | (13,699) | (13,992) | 558 | (13,434) | (26,997) | (95) | (27,092) | |||||||||
| Operating profit | 4 | 3,245 | (476) | 2,769 | 2,942 | 558 | 3,500 | 6,044 | (95) | 5,949 | ||||||||
| Finance income | 94 | - | 94 | 496 | - | 496 | 931 | - | 931 | |||||||||
| Finance costs | (111) | - | (111) | (125) | - | (125) | (380) | - | (380) | |||||||||
| Profit on ordinary activities before tax | 3,228 | (476) | 2,752 | 3,313 | 558 | 3,871 | 6,595 | (95) | 6,500 | |||||||||
| Income tax expense | 5 | (788) | (1,065) | (909) | ||||||||||||||
| Profit for the period | 1,964 | 2,806 | 5,591 | |||||||||||||||
| Earnings per share | 6 | |||||||||||||||||
| Basic | 2.3p | 2.8p | 5.6p | |||||||||||||||
| Diluted | 2.2p | 2.7p | 5.5p | |||||||||||||||
| pence per share | £000 | pence per share | £000 | pence per share | £000 | |||||||||||||
| Dividends | ||||||||||||||||||
| Paid dividend per share | 8 | 1.4p | 1,217 | 1.4p | 1,434 | 2.1p | 2,151 | |||||||||||
| Proposed dividend per share | 8 | 0.8p | 695 | 0.7p | 717 | 1.4p | 1,217 | |||||||||||
GROUP STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2009
| Unaudited six months ended | Unaudited six months ended | Audited year ended | ||||
| 30 Jun 2009 | 30 Jun 2008 | 31 Dec 2008 | ||||
| £000 | £000 | £000 | ||||
| Profit for the period | 1,964 | 2,806 | 5,591 | |||
| Other comprehensive income | ||||||
| Fair value gain/(loss) on investment | 581 | - | (354) | |||
| Cash flow hedges, net of tax | (104) | 134 | (217) | |||
| Currency translation difference | (342) | (13) | 85 | |||
| Other comprehensive income for the period, net of tax | 135 | 121 | (486) | |||
| Total comprehensive income for the period | 2,099 | 2,927 | 5,105 |
GROUP BALANCE SHEET
As at 30 June 2009
| Note | Unaudited as at 30 Jun 2009 | Unaudited as at 30 Jun 2008 | Audited as at 31 Dec 2008 | |||
| ASSETS | £000 | £000 | £000 | |||
| Non-current assets | ||||||
| Goodwill | 44,054 | 44,726 | 44,334 | |||
| Intangible assets | 9 | 685 | 1,092 | 881 | ||
| Property, plant and equipment | 9 | 6,356 | 6,851 | 6,574 | ||
| Investments | 10 | 1,497 | 1,270 | 916 | ||
| Deferred tax income asset | 1,177 | 1,138 | 1,360 | |||
| 53,769 | 55,077 | 54,065 | ||||
| Current assets | ||||||
| Inventories | 134 | 47 | 46 | |||
| Trade and other receivables | 5,847 | 5,945 | 7,806 | |||
| Financial assets - derivative financial instruments | - | 366 | 48 | |||
| Cash and cash equivalents | 15,212 | 21,192 | 14,675 | |||
| 21,193 | 27,550 | 22,575 | ||||
| LIABILITIES | ||||||
| Current liabilities | ||||||
| Financial liabilities | ||||||
| - borrowings associated with property | 11 | (360) | (533) | (525) | ||
| - derivative financial instruments | (211) | - | (182) | |||
| Trade and other payables | (14,005) | (14,364) | (15,773) | |||
| Current income tax liabilities | (541) | (1,272) | (378) | |||
| Provisions for other liabilities and charges | 12 | (146) | (104) | (104) | ||
| (15,263) | (16,273) | (16,962) | ||||
| Net current assets | 5,930 | 11,277 | 5,613 | |||
| Non-current liabilities | ||||||
| Financial liabilities | ||||||
| - borrowings associated with property | 11 | (2,047) | (3,404) | (3,150) | ||
| Provisions for other liabilities and charges | 12 | (345) | (287) | (287) | ||
| (2,392) | (3,691) | (3,437) | ||||
| NET ASSETS | 57,307 | 62,663 | 56,241 | |||
| SHAREHOLDERS' EQUITY | ||||||
| Ordinary shares | 4,341 | 5,144 | 4,341 | |||
| Share premium account | 11,285 | 11,283 | 11,285 | |||
| Capital redemption reserve | 804 | - | 804 | |||
| Other reserves | 37,379 | 37,666 | 37,256 | |||
| Retained earnings | 3,498 | 8,570 | 2,555 | |||
| EQUITY SHAREHOLDERS' FUNDS | 13 | 57,307 | 62,663 | 56,241 |
GROUP CASH FLOW STATEMENT
For the six months ended 30 June 2009
| Unaudited as at 30 Jun 2009 | Unaudited as at 30 Jun 2008 | Audited as at 31 Dec 2008 | ||||
| Note | £000 | £000 | £000 | |||
| Cash flows from operating activities | ||||||
| Cash generated from operations | 7 | 4,029 | 5,675 | 8,885 | ||
| Interest received | 94 | 496 | 931 | |||
| Interest paid | (264) | (130) | (244) | |||
| Tax paid | (516) | (1,222) | (2,216) | |||
| Net cash from operating activities | 3,343 | 4,819 | 7,356 | |||
| Cash flows from investing activities | ||||||
| Purchase of investments | - | (1,270) | (1,270) | |||
| Proceeds from the sale of property, plant and equipment | - | 1,978 | 1,980 | |||
| Purchase of property, plant and equipment | 9 | (179) | (656) | (806) | ||
| Purchase of intangible assets | 9 | - | (11) | (11) | ||
| Net cash used in investing activities | (179) | 41 | (107) | |||
| Cash flows from financing activities | ||||||
| Net proceeds from issue of ordinary share capital | - | 7 | 10 | |||
| Dividends paid | 8 | (1,217) | (1,434) | (2,151) | ||
| Repayment of mortgage | 11 | (1,268) | (330) | (592) | ||
| Purchase of own shares | - | - | (8,039) | |||
| Net cash from financing activities | (2,485) | (1,757) | (10,772) | |||
| Net increase/(decrease) in cash and cash equivalents | 679 | 3,103 | (3,523) | |||
| Opening cash and cash equivalents | 14,675 | 18,081 | 18,081 | |||
| Effects of exchange rate changes | (142) | 8 | 117 | |||
| Closing cash and cash equivalents | 15,212 | 21,192 | 14,675 |
NOTES TO INTERIM FINANCIAL INFORMATION
1. General information
The Company is a public limited company incorporated and domiciled in England and Wales with a primary listing on the London Stock Exchange.
This condensed consolidated half yearly financial information was approved for issue on 20 July 2009.
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 2008 were approved by the Board of directors on 23 February 2009 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 financial information comprises the group interim balance sheets as at 30 June 2009 and 30 June 2008, related group interim statements of income, cash flows and statement of comprehensive of income, 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 2009 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 2008, which have been prepared in accordance with IFRSs as adopted by the European Union.
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 2008, 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 2009:
IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner change in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The group has elected to present two statements: an income statement and statement of comprehensive income. The interim financial statements have been prepared under the revised disclosure requirements.
IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has not resulted in any change to the reportable segments presented. Operating segments are reported in a manner consistent with the internal reporting provided to Microgen's chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Microgen plc.
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently relevant for the group.
- IFRIC 13, 'Customer loyalty programmes'
- IFRIC 15, 'Agreements for the construction of real estate'
- IFRIC 16, 'Hedges of a net investment in a foreign operation'
- IAS 39 (amendment), 'Financial instruments: Recognition and measurement'
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:
IFRS 3 (revised), '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. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measure through the statement of comprehensive income. There is a choice on an acquisition-by-acquisition basis to measure the minority interest in the acquiree either at fair value or at the minority interest's proportionate share of the acquiree's net assets. All acquisition related costs should be expensed. The group will apply IFRS 3 (revised) to all business combinations from 1 January 2010.
IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the group, as it has not made any non-cash distributions.
IFRIC 18, 'Transfers of assets from customers', effective for transfers of assets received on or after 1 July 2009. This is not relevant to the group, as it has not received any assets from customers.
4. 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 2009 | ||||||||
| Microgen Aptitude Solutions | Billing Services | Financial Systems | Total | |||||
| £000 | £000 | £000 | £000 | |||||
| Revenue | 4,715 | 2,871 | 8,882 | 16,468 | ||||
| Operating costs before group overheads | (5,290) | (2,131) | (4,584) | (12,005) | ||||
| Operating profit before group overheads, intangible amortisation and exceptional items | (575) | 740 | 4,298 | 4,463 | ||||
| Group overheads | (1,218) | |||||||
| Operating profit before intangible amortisation and exceptional items | 3,245 | |||||||
| Divisional intangible amortisation | - | - | (196) | (196) | ||||
| Divisional operating (loss)/profit | (575) | 740 | 4,102 | |||||
| Group exceptional cost | (280) | |||||||
| Total intangible amortisation and exceptional costs | (476) | |||||||
|
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|
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| Operating profit |
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| 2,769 |
| Net finance cost |
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| (17) |
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| |
| Profit before tax |
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| 2,752 |
| Income tax expense |
|
|
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|
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| (788) |
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| Profit for the period |
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|
|
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| 1,964 |
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| Unaudited six months ended 30 Jun 2008 | ||||||||
| Microgen Aptitude Solutions | Billing Services | Financial Systems | Total | |||||
| £000 | £000 | £000 | £000 | |||||
| Revenue | 3,736 | 3,302 | 9,896 | 16,934 | ||||
| Operating costs before group overheads | (5,025) | (2,299) | (5,221) | (12,545) | ||||
| Operating profit before group overheads, intangible amortisation and exceptional items | (1,289) | 1,003 | 4,675 | 4,389 | ||||
| Group overheads | (1,447) | |||||||
| Operating profit before intangible amortisation and exceptional items | 2,942 | |||||||
| Divisional intangible amortisation | - | - | (211) | (211) | ||||
| Divisional operating (loss)/profit | (1,289) | 1,003 | 4,464 | |||||
| Group exceptional income/(costs) | ||||||||
| - Property exist costs | (135) | |||||||
| - Profit on sale of property, plant and equipment | 1,025 | |||||||
| - Other | (121) | |||||||
| Total intangible amortisation and exceptional income | 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 | |||||||
| Audited year ended 31 Dec 2008 | ||||||||
| Microgen Aptitude Solutions | Billing Services | Financial Systems | Total | |||||
| Revenue | 7,614 | 6,381 | 19,046 | 33,041 | ||||
| Operating costs before group overheads | (10,004) | (4,471) | (10,157) | (24,632) | ||||
| Operating profit before group overheads, intangible amortisation and exceptional items | (2,390) | 1,910 | 8,889 | 8,409 | ||||
| Group overheads | (2,365) | |||||||
| Operating profit before goodwill and intangible amortisation/ impairment and exceptional items | 6,044 | |||||||
| Divisional intangible amortisation | - | - | (422) | (422) | ||||
| Divisional operating (loss)/profit | (2,390) | 1,910 | 8,467 | |||||
| Group exceptional costs | ||||||||
| Property | (139) | |||||||
| -Profit on sale of property, plant and equipment | 1,025 | |||||||
| Other | (13) | |||||||
| Goodwill adjustment | (546) | |||||||
| Total intangible amortisation and exceptional costs | (95) | |||||||
| Operating profit | 5,949 | |||||||
| Net finance income | 551 | |||||||
| Profit before tax | 6,500 | |||||||
| Income tax expense | (909) | |||||||
| Profit for the year | 5,591 | |||||||
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 £788,000 is at an effective tax rate of 28.6% (2008: 27.5%) of the profit before tax.
6. Earnings per share
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | ||||
| pence | pence | pence | ||||
| Earnings per share | ||||||
| Basic | 2.3 | 2.8 | 5.6 | |||
| Diluted | 2.2 | 2.7 | 5.6 | |||
| Adjusted earnings per share | ||||||
| Basic | 2.8 | 2.4 | 4.8 | |||
| Diluted | 2.7 | 2.3 | 4.7 |
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 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | ||||
| pence | pence | pence | ||||
| Basic earnings per share | 2.3 | 2.8 | 5.6 | |||
| Exceptional charge / (credit) net of tax | 0.3 | (0.6) | (0.3) | |||
| Prior years' tax charge | - | - | (0.3) | |||
| Intangible amortisation net of tax | 0.2 | 0.2 | 0.3 | |||
| Tax losses recognised | - | - | (0.5) | |||
| Adjusted earnings per share | 2.8 | 2.4 | 4.8 |
7. Cash generated from operations
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | ||||
| £000 | £000 | £000 | ||||
|
| ||||||
| Profit for the period | 1,964 | 2,806 | 5,591 | |||
| Adjusted for: | ||||||
| Taxation | 788 | 1,065 | 909 | |||
| Depreciation | 397 | 365 | 795 | |||
| Profit on disposal of property, plant and equipment | - | (1,043) | (1,045) | |||
| Intangible amortisation | 196 | 211 | 422 | |||
| Share-based payment expense | 184 | 161 | 282 | |||
| Change in value of goodwill | 280 | 154 | 546 | |||
| Finance income | (94) | (496) | (931) | |||
| Finance costs | 111 | 125 | 380 | |||
| Changes in working capital: | ||||||
| Decrease/(increase) in inventories | (88) | 14 | 15 | |||
| Decrease/(increase) in receivables | 1,959 | 2,974 | 1,113 | |||
| (Decrease)/increase in payables | (1,768) | (637) | 832 | |||
| Increase/(decrease) in provisions | 100 | (24) | (24) | |||
| Cash generated from operations | 4,029 | 5,675 | 8,885 |
8. Equity dividends on ordinary shares
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | ||||
| £000 | £000 | £000 | ||||
| Dividends paid: | ||||||
| Interim dividend | - | - | 717 | |||
| Final dividend | 1,217 | 1,434 | 1,434 | |||
| Proposed but not recognised as a liability: | ||||||
| Interim dividend | 695 | 717 | - | |||
| Final dividend | - | - | 1,217 | |||
The proposed interim dividend of 0.8 pence per share was approved by the Board on 20 July 2009 but was not included as a liability as at 30 June 2009, in accordance with IAS 10 'Events after the Balance Sheet date'. This interim dividend will be payable on 28 August 2009 to shareholders on the register at the close of business on 31 July 2009.
9. Capital expenditure
| Six months ended 30 June 2009 | Tangible assets | Intangible assets | |
| £000 | £000 | ||
| Opening net book amount 1 January 2009 (including assets held for sale) | 6,574 | 881 | |
| Additions | 179 | - | |
| Depreciation, amortisation and other movements | (397) | (196) | |
| Closing net book amount 30 June 2009 (unaudited) | 6,356 | 685 |
| Six months ended 30 June 2008 | Tangible assets | Intangible assets | |
| £000 | £000 | ||
| Opening net book amount 1 January 2008 | 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 |
The group have placed contracts for no future capital expenditure which has not been provided for in the financial statements.
10. Investments
The investment of £1,496,906 represents the group's holding of 12.89% in the share capital of Scisys plc.
11. Borrowings and loans
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | Audited year ended 31 Dec 2008 | |||
| £000 | £000 | £000 | |||
| Non-current | 2,047 | 3,404 | 3,150 | ||
| Current | 360 | 533 | 525 | ||
| 2,407 | 3,937 | 3,675 | |||
| Movements in borrowings is analysed as follows: | £000 | ||||
| Six months ended 30 June 2009 | |||||
| Opening amount as at 1 January 2009 | 3,675 | ||||
| Repayments of borrowings | (1,268) | ||||
| Closing amount as at 30 June 2009 | 2,407 | ||||
| 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 |
12. Provisions for other liabilities and charges
| Unaudited six months ended 30 Jun 2009 | Unaudited six months ended 30 Jun 2008 | |||
| £000 | £000 | |||
| Property provision | ||||
| At 1 January | 391 | 415 | ||
| Charged to income statement | - | 126 | ||
| Provision for dilapidations | 100 | 100 | ||
| Utilised in the period | - | (250) | ||
| At 30 June | 491 | 391 |
13. Statement of changes in equity
| Share capital | Share premium | Retained earnings | Capital Redemption Reserve | Other reserves | Total | ||
| £000 | £000 | £000 | £'000 | £000 | £000 | ||
| At 1 January 2009 | 4,341 | 11,285 | 2,555 | 804 | 37,256 | 56,241 | |
| Cash flow hedges | - | ||||||
| - net fair value gains net of tax | - | - | - | - | (104) | (104) | |
| Exchange rate adjustments | - | - | (342) | - | - | (342) | |
| Share options - value of employee service | - | - | 184 | - | - | 184 | |
| Unrealised gain on investment | - | - | 354 | - | 227 | 581 | |
| Dividends | - | - | (1,217) | - | (1,217) | ||
| Retained profit for the period | - | - | 1,964 | - | - | 1,964 | |
| At 30 June 2009 (unaudited) | 4,341 | 11,285 | 3,498 | 804 | 37,379 | 57,307 |
| Share capital | Share premium | Retained earnings | Capital Redemption Reserve | Other reserves | Total | ||
| £000 | £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) | |
| Profit for the period | - | - | 2,806 | - | - | 2,806 | |
| At 30 June 2008 (unaudited) | 5,144 | 11,283 | 8,570 | - | 37,666 | 62,663 |
14. Related party transactions
There were no related party transactions during the period to 30 June 2009 (30 June 2008, 31 Dec 2008: nil), as defined by International Accounting Standard No 24 "Related Party Disclosures" other than key management compensation.
Key management compensation amounted to £1,363,000 for the six months ended 30 June 2009 (30 June 2008: £1,331,000).
15. Statement of directors' responsibilities
The directors' confirm that this condensed set of interim 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 plc are listed in the Microgen plc Annual Report for 31 December 2008. 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 Fleet House, 3 Fleetwood Park, Barley Way, Fleet. GU51 2QJ.
P Wood
20 July 2009
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 2009, which comprises the group income statement, group statement of comprehensive income, 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 2009 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
20 July 2009
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.