FLOMERICS GROUP PLC - Interim Results

IMMEDIATE RELEASE   30 July 2003

FLOMERICS GROUP PLC

Interim Results

For the 6 months ended 30 June 2003

Flomerics Group PLC, supplier of analysis software to the telecommunications, semiconductor and computer industries, and other sectors of the electronics industries, announces its results for the six months to 30 June 2003.        

Key Points

• Turnover fell 18% to £4.88 million (2002: £5.97 million). (14% at constant exchange rates).
• Loss before amortisation of goodwill of £103,000 (2002: profit of £188,000).
• Strong cash balance of £2 million. (2002 : £1.1m)
• A major new release of FLOTHERM in June 2003 and the release of the first merged product of FLO/EMC with FLOTHERM – already benefiting the sales of both products.
• Increased turnover from FLO/EMC although sales of other products continued to be difficult.

Commenting on the results, David Mann, the Chairman, said:

“When the economic conditions improve, we are well placed for growth and there are some signs that the worst is over. We expect the remainder of 2003 to be challenging, but with the release of the major new merged product of FLO/EMC and FLOTHERM, measures taken to reduce costs and some scheduled large renewals, the directors currently see good prospects for the Company to end the year with reasonable results.”

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Interim Results 2003

Chairman’s Statement

Results

In common with the electronics industry as a whole, Flomerics continued to experience difficult trading in the six months ended 30 June 2003. By tight management of costs the Company incurred only a small loss in the period and maintained strong cash balances.

In spite of lower turnover overall, customer renewals were good and exceeded our budget; all of the major accounts that were expected to renew during the period did so and there was some expansion of use within existing accounts. Recurring revenues accounted for 74% of sales (2002:73%). However, sales to new customers continued to be difficult and the levels were disappointing compared to previous years.

Turnover from FLO/EMC increased compared to the same period last year.  Whilst sales were slower to close than hoped for, the reception from our customers has been extremely positive and we expect to benefit significantly from the release of the new version of the product.

Total turnover at £4.88 million (2002: £5.97 million) was down 18% (14% at constant rates of exchange). Administration costs of £4.85 million (2002: £5.54 million) were down by 12%.  The reduction in costs was achieved by overall vigilance but also by some reduction in staff during the period.

The result was a loss before amortisation of goodwill in the period of £103,000 (2002: £188,000 profit). With some large licence renewals occurring in the second half of the year, it is not abnormal for Flomerics to make a loss at the interim stage, although in the last three years we have been pleased to achieve a small profit.

Cash remains strong and at the end of June was £2.0 million (30 June 2002: £1.1 million).

I am very pleased to announce that a very significant milestone was reached in June with a major new release of FLOTHERM, and the release of the first merged product of FLO/EMC with FLOTHERM.

Kimberley Communications Consultants Limited was acquired as a means of entering the EMC market, but we knew that the full potential benefit would be realised only when the FLO/EMC product could be combined with FLOTHERM, giving customers the benefit of the FLOTHERM user interface and allowing users of both products to share models. The linking of thermal and EMC, now available in the new release is unique, and has proved of real interest to existing and potential customers. We believe that it will benefit the sales of both products, and indeed is already doing so.

In addition, the new release of FLOTHERM represents a major upgrade in its own right, and provides many valuable benefits to users, including automatic design optimisation and a multi-level nested grid, which reduces calculation times by up to a factor of ten. This release has also been well received by the market.

The fundamental drivers of Flomerics’ business remain unchanged: because of the relentless growth in the power of today’s microprocessors, there is a continuing and increasing need for analysis software to address both thermal and EMC problems in electronics. Nevertheless, since mid-2001, sales of the Company’s products have been disappointing; extreme financial pressures on organisations operating in the electronics sector around the world have caused them to defer expenditure on many items, inevitably affecting our business.

When the economic conditions improve, we are well placed for growth and there are some signs that the worst is over. We expect the remainder of 2003 to be challenging, but with the release of the major new product, measures taken to reduce costs and some scheduled large renewals, the directors currently see good prospects for the Company to end the year with reasonable results.

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

NOTES TO THE INTERIM REPORT

1.      ACCOUNTING  POLICIES

The financial information contained in this Interim Report does not constitute statutory accounts. The interim results, which have not been audited, have been prepared using accounting policies consistent with those used in the preparation of the Annual Report and Accounts for the year ended 31 December 2002. Those accounts have been filed with the Registrar of Companies and received an unqualified audit report.

2.      TAXATION

During the six months to 30 June 2003 the company incurred a loss and no provision for taxation has been made.

3.      (LOSS)/EARNINGS PER SHARE

Basic (loss)/earnings per share have been calculated by dividing the (loss)/profit on ordinary activities after taxation in the period by the weighted average number of shares in issue in the period of 14,646,580 (six months to 30 June 2002: 14,646,580). The diluted (loss)/earnings per share calculation has been based on a fair value of 54p per share (30 June 2002: 73p). The diluted weighted average number of shares is 14,676,338 (30 June 2002: 14,694,665).

4.      SEGMENTAL INFORMATION

The group’s turnover for each geographic area of operation is:

Segmental information on profit before tax and net assets is disclosed in the Annual Report.

5.      ANALYSIS OF NET FUNDS

Debt represents a mortgage that was taken out on a property acquired in 2001.