Interim Management Statement

3 Nov 2009 07:00



microgen

www.microgen.com

3 November 2009

INTERIM MANAGEMENT STATEMENT

Microgen plc ('Microgen' or 'Group') announces its Interim Management Statement covering the period from 1 July 2009 to the date of this announcement. Microgen announced its interim results for the period ending 30 June 2009 on 21 July 2009.

The Group's financial results for the three months ended 30 September 2009 are ahead of the Group's annual plan. The Group's balance sheet remains strong, with £17.5 million of cash (30 June 2009: £15.2 million) and net funds of £15.2 million (30 June 2009: £12.8 million) at 30 September 2009, including proceeds of approximately £0.8 million from the disposal of 54% of the Group's shareholding in Scisys plc.

In a separate announcement this morning, Microgen has announced the proposed disposal of the Billing Services Division ("BSD") to a subsidiary of Swiss Post for a cash consideration of £7.5 million before expenses. Subject to shareholder approval of the proposed disposal, a special dividend of 4.0 pence per share will be paid. As the core business of Microgen has evolved to be based around software and associated consultancy, BSD has become increasingly non-core with little strategic overlap with the other Microgen business activities. With the success of Microgen Aptitude, the Board considers that it is now the right time to dispose of the BSD operations. If approved by shareholders, the proposed disposal will produce an exceptional profit in the current financial year, which will be partially offset by a revaluation of the Group's freehold property in line with the decline in the commercial property market. Further details on the proposed disposal and the special dividend are provided in the separate announcement.

In the third quarter, Microgen Aptitude Solutions Division ("MASD") reported an operating profit, ahead of the Board's expectations. In the period, MASD won a major new banking customer in Asia for Microgen Accounting Hub and Microgen Aptitude. This project is now underway and additional opportunities for further Microgen Aptitude based products in this account are anticipated in the future. The two major USA prospects referred to in the trading update released on 7 July 2009 have now completed their design phase, although one of these prospects is likely to be delayed until the new year due to a change in FASB accounting rules. Even with this delay, the performance of the MASD business is ahead of the Group's annual plan and MASD now anticipates reporting an operating profit for the year as a whole. (For reference, MASD reported an operating loss of £0.6 million for the first half of 2009 and an operating loss of £2.4 million for 2008). Furthermore, with the currently contracted/scheduled business and the prospect opportunities, the Board anticipates a strong performance in 2010, which should materially compensate for the reduction in profit contribution associated with the disposal of BSD.

As reported at the interim results, the Financial Systems Division ("FSD") has experienced some effects of the economic climate, but the high levels of recurring revenue and strong profitability of the business provide resilience to the economic instability. This strong foundation is derived from the Group's emphasis on multi-year annual licensing. As a result, despite the market environment, the FSD strong operating margins and cash flow have been sustained. The Board has also reviewed the product portfolio within FSD and have decided to end-of-life a number of smaller product lines, with revenue in the first half of 2009 in the order of £0.3 million.

In summary, the Board is pleased that the Group is on track to exceed the Board's current expectations, which have, despite the economic environment, already been increased this year. The success in 2009 also provides an excellent platform for 2010 and the Group's strong balance sheet, further enhanced by the proposed disposal of BSD, provides the Board with the resources to consider acquisition opportunities if appropriate.