Final Results
05 April 2003 - 1:30AM
UK Regulatory
RNS Number:6548J
VI Group PLC
04 April 2003
Friday 4th April 2003
VI GROUP plc
(AIM (VIG) and AMEX (GVI))
PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2002
VI Group plc ("VI" or "the Company"), one of the leading software providers to
the mould and die industry, today announces another year of significant growth
in its turnover for the year ended 31st December 2002. Profits have been
impacted by the investments made in acquiring a new product line during the year
(including higher goodwill and amortisation charges) designed to position the
Company for future growth, but are ahead of recent expectations.
SUMMARY
* Turnover up 16.8% to #7.5m (2001: #6.4m)
* EBITDA of #520,000 (2001: #1,033,000)
* Pre tax profits reduced to #70,000 (2001: #726,000) but ahead of recent
expectations
* Acquisition of Vero Tooling Systems of Canada completes the VI presence in
the North American market around the "Detroit mould & die area"
* Acquisition of Machining Strategist business adds 3D CAM distribution and
product as a foundation for enhanced future CAM sales
* Very strong growth in North America, plus continued expansion in Germany
and Italy despite economic uncertainties in all areas
Don Babbs, Chief Executive of VI, commented:
"In a very busy year for VI we have grown revenues faster than our competitors
and against the background of a poor economic climate. As we envisaged, we have
taken part in the consolidation of the CAM market and invested heavily in the
future expansion of our business. We are confident that product sales will
continue to grow substantially."
- Ends -
For further information please contact:
VI Group plc Tel: 01453 732 900
Don Babbs, Chief Executive
Julie Randall
Merlin Financial Tel: 020 7606 1244
Paul Downes / Tom Randell
Attached : Chairman's Statement
Operating and Financial Review
Un-audited Consolidated Profit & Loss Account
Un-audited Consolidated Balance Sheet
Un-audited Consolidated Cash Flow Statement
CHAIRMAN'S STATEMENT
VI Group is reporting its financial results for 2002 against a background of
unprecedented world uncertainty - record stock market lows, a further year of
falling UK manufacturing production, US economic difficulties, and another
problematic year for the automotive sector. Despite this background, VI has
achieved a 17% growth in turnover to #7.542m (2001: #6.456m) and invested
heavily for its future prosperity, resulting in a pre-tax profit of #0.07m
(2001: #0.726m).
We have been quick to put the #3m of net funds raised in the Spring to good use
in structuring for further growth and in the acquisition of the Machining
Strategist product line. Few companies in our sector have managed to grow sales
significantly during 2002 and these investments have provided for an
acceleration of our future growth plans. There is a lag between the timing of
the investments and the return, and the result was an initial reduction in
profit in the financial year prior to achieving the full sales benefit.
The Company successfully listed on the American Stock Exchange (AMEX) in New
York in October 2002 and this development provides further currency for future
acquisition possibilities in North America where valuations are now more
inviting than before. With this strategy in mind, the Company has entered into
an agreement with Hemisphere Capital to initially provide a convertible loan of
$1.0m (#662,000) with the availability of further acquisition finance in the
future.
The Machining Strategist acquisition is an important step in providing a shop
floor based 3D CAM product as part of our mould and die offering and will be a
fundamental element in the portfolio for developing our OEM channels.
The acquisition of the Canadian company of our former distributor Vero Tooling
also provided an opportunity to address seamlessly the important mould and die
corridor between Detroit and Toronto.
Once again, the efforts and sacrifices of our staff in expanding our business
that have been paramount to the year's growth should not be overlooked. Much of
our success has resulted from the efforts of product managers and developers to
provide ever improving products that match customer requirements. These
endeavours have been complemented by the diligence and dedication of our
customer support staff, resulting in further improvements in our software
maintenance business.
The Company continues its twin strategy of broadening the product offering to
achieve organic growth and market share whilst taking an opportunistic approach
to the consolidation of the CAM market.
The current year is once again a difficult year to forecast but I am confident
that we will see significant growth following the investments made in 2002.
Stephen Palframan
Chairman
4th April 2003
OPERATING AND FINANCIAL REVIEW
VI Group has produced yet another year of strong revenue growth, an increase of
17% on 2001, against a difficult economic background. The Company grew
particularly strongly in the two highly competitive markets of North America
(where sales more than doubled) and Germany (+18%), thanks to well organised
local sales activities and improved product capabilities. With the exception of
the UK, where the continuing engineering recession had a negative effect on
sales (-3%) our more traditional market strongholds of Italy (+6%) and Japan
(+8%) also grew despite their own market uncertainties.
Following the investment by new and existing institutional investors in April
the Company embarked on a plan to further accelerate growth - in development
terms, completing its product line by providing end to end design-to-build
capabilities; and in sales terms, by the expansion of resources for our direct
sales offices. This foundation for accelerated growth had the short term effect
of keeping earnings before interest, tax, depreciation and amortisation (EBITDA)
lower at #520,000 (2001: #1,033,000), and reducing pre-tax profits to #70,000
(2001: #726,000). This reduction was also partly due to higher goodwill and
amortisation costs associated with the acquisitions which took place during the
year.
New Operations
The Company opened new branch offices in France (near Lyon and Lille) with the
objective of directly addressing the second largest European mould and die
software market. This operation should improve our market presence in a country
where our technology has already been widely acknowledged. Similarly, the
purchase of our Canadian distributor, Vero Tooling also provides us with an
opportunity to build on their experience in the important 'border' mould and die
sector by integrating the operation with our existing Detroit office. Since the
acquisition in July, the two offices have been working closely together on some
of the largest mould builder accounts in North America.
The most significant event of the year was our largest acquisition to date. The
Company purchased the Machining Strategist business belonging to NC Graphics
(Cambridge) Ltd.. Machining Strategist is a 3D computer aided manufacturing
(CAM) product with a good reputation as a fast and easy to use CAM system. The
development team now forms our Cambridge based Technology Centre from which we
will further develop Machining Strategist as an automated shop floor programming
system. Many of Machining Strategist's techniques will be incorporated in our
VISI-Series products during this year.
Operating Expenses
Gross profit increased to #5.9m, representing 79% of turnover (2001: #5.1m and
78%) after deducting the cost of product sales and providing maintenance
services.
Selling expenses rose 45% to #2.9m attributable in part to the new activities
outlined above as well as the inclusion of the first full financial year of
operation of the Detroit office. Administrative expenses were 40% higher at
#1.7m for similar reasons. The Company also strengthened its information
technology infrastructure to one more appropriate for its expanded activities
and this contributed to increased administration costs.
Product Development and Other Operating Income
The last quarter saw a new release of VISI-Series which includes a large number
of additional design capabilities for the production of electrodes, automatic
drilling of complex mould plates, the parametric design of progressive die
strips and numerous 3D modelling features. These additions have been well
received by distributors and customers alike and place VISI-Series very firmly
in the lead as a premier mould design package. Product development costs
increased from just under #1.0m in 2001 to #1.3m in 2002, reflecting the
additional investments made in expanding the breadth of the product.
The Company finally received approval of its application for a Eureka grant
based on a collaborative European research and development project for mould
making software. The project started in July 2001 and is scheduled to continue
until the end of December 2003. The revenues for this grant have been recognised
in proportion to the expenses and are included in the other operating income
total of #458,000.
Taxation and Earnings per Share
The Company made a loss of #231,000 (2001: profit of #438,000) after applying a
tax charge of #301,000. Most of this tax charge originates in Italy. It includes
taxes not relating directly to current profitability and so distorts any
calculation of a tax rate as measured against pre-tax profits.
Basic and fully diluted losses per share were 0.74 p (2002: profits per share of
2.12p) reflecting the tax charge and reduced pre-tax profit.
Cash flow and net funds
Cash outflow from operations was #0.4m compared to an inflow of #0.2m in 2001 as
a result of the additional spending in the expansion of sales outlets and the
product line. Cash balances at the year end were #1.2m (2001: #0.5m), with #0.5m
of short-term borrowings (2001: #0.5m), giving a net cash figure of #0.7m (2001:
#0.1m). The increase in net funds reflects the residual amount of cash remaining
from the funds raised earlier in the year.
Fund raising and investor activities
The Company raised #3.1m of funds from institutional investors in May against
the issue of 14.7 million new shares. Both new and existing institutional
shareholders participated in this placement which has undoubtedly assisted the
Company in accelerating its growth.
The Company proceeded with its plan to list American Depositary Receipts
("ADR's") on the American Stock Exchange and trading commenced on October 28th
2002 with each ADR representing twenty underlying common shares.
In conclusion, 2002 has been a growth year in which we have invested for future
returns. Naturally, not all of these activities could bear their full fruit
during 2002 and we expect still further growth during the coming year.
Don Babbs
Chief Executive
4th April 2003
Note: As the company is listed on both the London Stock Exchange AIM market and
the American Stock Exchange (AMEX) it is issuing two simultaneous announcements
concerning the results. The results will appear differently in each announcement
as they are made in UK# and US$ and according to the differing UK and US
accounting standards ("GAAP").
Un-audited Consolidated Profit and Loss Account
Year ended 31 December
2002 2001
#'000 #'000
Turnover
Continuing operations 6,984 6,456
Acquisitions 558 -
7,542 6,456
Cost of sales (1,595) (1,391)
Gross profit 5,947 5,065
Selling expenses (2,917) (2,005)
Administrative expenses (1,686) (1,204)
Product development (1,282) (955)
Net other operating income 458 132
Earnings before interest, tax, depreciation and amortisation ('EBITDA') 520 1,033
Depreciation (195) (159)
Amortisation of goodwill and other intangible assets (278) (150)
Operating profit 47 724
Continuing operations (67) 724
Acquisitions 114 -
47 724
Interest receivable and similar income 63 24
Interest payable and similar charges (40) (22)
Profit on ordinary activities before taxation 70 726
Taxation on profit on ordinary activities (301) (288)
(Loss) Profit on ordinary activities after taxation (231) 438
Basic and diluted (loss) earnings per share (0.74)p 2.12p
Un-audited Consolidated Balance Sheet
At 31 December
2002 2001
#'000 #'000
Fixed assets:
Intangible fixed assets 1,963 572
Tangible fixed assets 636 393
Investments - 1
2,599 966
Current assets:
Stock 20 27
Debtors 5,675 4,165
Cash at bank and in hand 1,185 513
6,880 4,705
Creditors; amounts falling due within one year (2,924) (2,238)
Net current assets 3,956 2,467
Total assets less current liabilities 6,555 3,433
Creditors; amounts falling due after more than one year (146) (58)
Provisions for liabilities and charges (242) (193)
6,167 3,182
Capital and reserves:
Called up share capital 186 107
Share premium account 5,860 2,718
Other reserves 10 10
Profit and loss account 111 347
Equity shareholders' funds 6,167 3,182
Un-Audited Consolidated Cash Flow Statement
Year ended
31 December
2002 2001
#'000 #'000
Cash inflow from operating activities (419) 185
Returns on investments and servicing of finance:
Interest received 51 9
Interest paid (35) (22)
Net cash (outflow) inflow from returns on
investments and servicing of finance 16 (13)
Taxation:
Taxes paid (191) (292)
Capital expenditure and financial investment:
Purchase of tangible fixed assets (469) (195)
Purchase of intangible fixed assets (1,419) (14)
Sale of tangible fixed assets 50 15
Net cash outflow from capital expenditure
and financial investment (1,838) (194)
Acquisitions and disposals:
Payments in respect of acquisitions - (274)
Net bank loans and overdrafts acquired with subsidiary - -
Net cash outflow from acquisitions and disposals - (274)
Cash flows from financing activities:
Finance leases received 170 57
Mortgage loans repaid (41) (40)
Repayment of finance leases (31) (14)
Issue of share capital 2971 250
Net cash flow from financing activities 3069 253
Net increase (decrease) in cash 637 (335)
Cash at beginning of year 82 412
Exchange movements (5) 5
Cash at the end of the year 714 82
Cash
Cash at bank and in hand 1,185 513
Bank loans and overdrafts (471) (431)
714 82
This information is provided by RNS
The company news service from the London Stock Exchange
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