Flomerics Group PLC - Interim Results
"Record profit for the half year"

27 July 2005

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 ended 30 June 2005.

Key Points

• Turnover up 19% at £5.3 million (2004 : £4.4 million) - excluding contribution from the MicReD acquisition, turnover up 13% at £5.0 million.

• Profit before tax and amortisation of goodwill increased to £380,000 (2004 : £65,000 loss).

• Successful acquisition in April 2005 of Microelectronics Research and Development Ltd (MicReD) which contributed £0.3 million to turnover and £93K to profit before tax and amortisation of goodwill.

• Revenue from Europe up by 25%, excluding the contribution from MicReD.

• Sales of the principal thermal analysis product, FLOTHERM, up by 16% (2004 : down 7%) and sales of FLO/EMC, the companion product for electromagnetic analysis, up by 43%.

• Strong cash position of £3.5 million (2004 : £2.6 million).

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

“We have been very encouraged by these excellent results for the first half of 2005. The directors believe that the Company is well placed to meet market expectations for the year, with a better balance between the first and second half than in previous years.

The management team is committed to maintaining this momentum, and to achieving ongoing improvements in profit margin. With a strong balance sheet, the company is well positioned to take advantage of business expansion opportunities as they arise.”

Enquiries:

Chairman’s Statement  

Introduction

I am delighted to report that Flomerics’ results for the first half of 2005 demonstrate both strong progress in our business and continuing recovery in our markets. Turnover (including the recently acquired business, MicReD) is up 19% on the same period last year – on a like-for-like basis (without the contribution from MicReD) turnover growth is 13%. Coupled with continuing careful management of the cost base, the strong turnover figures enabled us to achieve a record profit for the half year.

Results

Turnover was £5.3 million (2004: £4.4 million). Excluding the contribution from MicReD, turnover was £5.0 million. Recurring revenues accounted for 51% (2004: 52%) of total turnover. Administrative costs were up by 6%, resulting in a profit before amortisation of goodwill and taxation of £380,000 (2004: £65,000 loss).

Our cash position continues to strengthen, to £3.5m, compared with £2.6 million a year ago.

In order to compare like-with-like, the comparisons made below with the same period in the prior year are all at constant rates of exchange. For the same reason, the figures exclude contributions from MicReD.

All regions achieved growth in turnover – Europe 25%, the US 12% and Asia Pacific 4%. In Europe, we benefited from a large sale, which enabled our Italian office to triple its sales over 2004. In Asia Pacific we are in the process of changing our distribution arrangements in Japan in order to strengthen our presence in this key market.

Looking at sales by product, FLOTHERM sales were up by 16% (2004: down 7%), reflecting the continuing strength of this market leading, thermal-analysis product in the recovering electronics market.

The new thermal product, FLO/PCB, released last year (for thermal analysis at printed circuit board level) is building momentum. The product is becoming established alongside FLOTHERM at a number of major customers, and is beginning to make a good contribution to sales.

FLO/EMC (the companion product to FLOTHERM, which analyses electromagnetic emissions from electronics equipment) achieved continuing good growth, of 43%.

MicReD

In April we announced the acquisition in Hungary of Microelectronics Research and Development Limited (MicReD). MicReD’s main product (the T3Ster) is instrumentation used for the thermal characterization of electronic chip packages.

In the period to end June, MicReD has been successful in closing sales in Korea and in Europe, contributing a total of £264,000 to first half turnover. We see good opportunities in North America, and consequently we are recruiting to provide dedicated resources in that market.

Dividend

As in previous years no interim dividend will be paid.

Outlook

We have been very encouraged by these excellent results for the first half of 2005. The directors believe that the Company is well placed to meet market expectations for the year, with a better balance between the first and second half than in previous years.

Flomerics’ strategy has been to address the opportunities associated with the recovery in the electronics industries with an improved and expanded set of market leading products and a global presence. The results for the first half of 2005 begin to demonstrate the success of this strategy.

The management team is committed to maintaining this momentum, and to achieving ongoing improvements in profit margin. With a strong balance sheet, the company is well positioned to take advantage of business expansion opportunities as they arise.

David Mann
Chairman
Flomerics Group plc
27 July 2005

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 2004. Those accounts have been filed with the Registrar of Companies and received an unqualified audit report.

2. TAXATION

Taxation for the six months to 30 June 2005 is based on the effective rate of taxation that is estimated to apply to the year ending 31 December 2005.

3. EARNINGS PER SHARE

Basic earnings / (loss) per share is calculated by dividing the profit / (loss) on ordinary activities after taxation in the period by the weighted average number of shares in issue in the period as follows:

The diluted earnings per share calculation is based on a fair value of 68p per share (30 June 2004: 74p).

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.

6. ACQUISITION

On 28 April 2005, the Group acquired the entire share capital of Microelectronics Research and Development Limited (“MicReD”) for a maximum total consideration (before expenses) of approximately €2.1 million (approximately £1.4 million). The maximum consideration is only payable on an over-target performance. For an “on target” performance the total consideration will be approximately £1.2 million. This figure has been assumed in the provisional calculation of the goodwill shown below:

7. PRIOR YEAR RECLASSIFICATION

As noted in last year’s Annual Report, in previous years rental income was classified within other interest receivable and other income. The directors believe it is more accurate for this to be shown in other operating income. The effect of this is to increase operating profit by £35,000 (and to reduce the operating loss in 2004 by £41,000). There is no impact on the retained profits.