RNS Number:1176M
DDD Group PLC
10 June 2003
DDD GROUP PLC
10 June 2003
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
DDD Group plc ("DDD"), the developer and publisher of content enabling
technologies and applications for the 3D displays market, is pleased to announce
its preliminary results for the twelve months ending December 31st 2002.
* Turnover increased 6% to #182,000 (2001: #172,000)
* Loss before tax of #2.629 million (2001: #3.419 million)
* Cash reserves at #3.8 million
* Level of sales enquiries increasing in all three market segments
* Overheads reduced and expenditure contained
Commenting on the results, Paul Kristensen, Chairman said:
"2002 was planned to be a year of growth for the company, both in terms of human
resource, customer base and revenues following the company's successful fund
raising in January 2002. However, during the early months of the year specific
commercial opportunities being pursued did not reach sign-off stage.
Consequently the Board decided to reduce expenditure and overhead while
maintaining its technological and business development progress without
compromise. DDD continues to believe in the long-term growth potential of the
three core markets for 3D displays and applications. The overall plan for the
year ahead is of a careful balance between maintaining short-term revenue growth
and gross margin, investing in response to market growth, and effective
application of cash reserves."
CHAIRMAN AND CHIEF EXECUTIVE'S JOINT STATEMENT
FINANCIAL RESULTS
During the year turnover increased by 6% to #182,000 (2001: #172,000) while
pre-tax losses for the year narrowed to #2.629 million (2001: #3.419 million).
Turnover comprised sales of 3D displays and software of #98,917 and sales of 3D
Conversion services of #46,946, primarily to purchasers and owners of 3D
displays. Sales of hardware video processors declined to #14,135 with no further
sales in the medical imaging sector. Revenues from consultancy and custom
development totaled #21,583. Geographically, customers based in North America
accounted for 85% of total revenues. The cash balance at the year-end amounted
to #3.8 million (2001: #0.5 million).
MANAGEMENT & VARIABLE COSTS
Faced with the disappointing levels of revenue the company took action to reduce
costs and refocus resources without significantly impairing its ability to
continue business development once market conditions improve. From May 2002, all
expenditure budgeted for the remainder of the year was reviewed and either
eliminated or reduced.
BOARD CHANGES
In March 2002, Brett Cohen joined the board as a non-executive Director. Brett
is a Portfolio Manager with Elliott Associates, L.P (affiliated with Liverpool
Limited Partnership and Westgate International LP), who have been investors in
the company since 1997.
In May 2002, Paul Kristensen succeeded Neil Speakman as non-executive Chairman
and Neil stepped down from the board in June of 2002.
In February 2003, Mark Schwartz resigned his position as Chief Financial Officer
and will be leaving the company at the end of July 2003.
STAFF REDUCTIONS
As a consequence of the reduction in costs, a number of positions in the company
became redundant. The total number of DDD employees fell from 41 in December
2001 to 30 by December 2002, resulting in a reduction in payroll-related costs
of 22% to #1.37m (2001: #1.76m).
BUSINESS REVIEW
DDD presently pursues sales opportunities in two key segments, reflecting
current patterns of revenue, technology and market activity.
The major division, Public Space Entertainment, builds upon the use of 3D
displays, software and 3D conversion for retail advertising, promotions and
trade shows.
The second, Consumer, recognizes the emergence of a consumer market for 3D
display products and the relevance of the company's products, services and
intellectual property to provide solutions to several key requirements that
accompany mass markets for 3D.
Finally, in the fourth quarter, based upon the substantially improved image
quality being made possible by the latest 3D displays, the company identified a
third segment, Professional, where a number of opportunities exist for software
development, licensing and systems integration.
PUBLIC SPACE ENTERTAINMENT (PSE)
Demand for 3D Display systems, software and content conversion grew steadily as
the year progressed, accounting for approximately 70% of 2002 revenues. Display
sales and hardware accounted for 65% of PSE revenues, 3D conversion represented
27% and software license accounted for the remaining 8%.
Our progress in the PSE market was helped by the launch of the SynthaGramTM 3D
display by StereoGraphics Corporation. This provided a brighter, clearer 3D
image for the viewer and generated a competitive market for 3D displays
resulting in lower costs and choice of display sizes for our prospective
customers.
During the year we continued to improve productivity in our 3D conversion
process allowing us to reduce our list price while maintaining strong margins.
We were successful in securing reference sites with the debut of 3D displays at
the Farnborough Airshow in July, exhibited by The Boeing Company on their
tradeshow stand. We were also selected to supply the 3D displays and content for
the Christmas window at Harvey Nichols in Knightsbridge, London underscoring the
value of 3D promotions in retail locations.
We anticipate that these early sales will lead to repeat orders for displays,
software and services as well as building reference users from which other
prospective customers may measure the benefits of working with the company.
CONSUMER
Building upon the business development initiatives that had commenced in the
third quarter of 2001, we continued the process of establishing relationships
with consumer electronics companies who are at various stages in the delivery of
3D displays.
We have identified a number of North American, Japanese and Korean display
manufacturers who are pursuing the delivery of 3D flat panel LCD and plasma
displays and we have visited several of them to meet their research and
development teams to establish their requirements for their intended markets.
We anticipate the availability of the first mass market 3D displays from brand
name manufacturers to become available towards the end of 2003. In the fourth
quarter of 2002, Sharp and Sanyo demonstrated their prototype 3D LCD and plasma
displays and this was followed shortly afterwards by the launch of a mobile
telephone by DoCoMo in Japan featuring a Sharp 3D LCD display module.
Another important step towards the creation of a mass market for 3D has been the
formation of the "3D Consortium" which DDD has invited at the invitation of two
of the five founding member companies.
Our goal is to license our software products to mass-market display
manufacturers to provide effective 3D content creation and presentation tools
for their end users. In addition we are seeking to establish our patented 2D
Compatible 3DTM format as a standard for media encoding and delivery.
PROFESSIONAL
In the third quarter of 2002, StereoGraphics introduced the SynthaGram SG202,
the first high-resolution 3D LCD display. The improvement in image quality and
price performance yielded a product that for the first time offered an image
quality and 3D effect that met the requirements of the professional user for 3D
displays.
A growing number of companies who have traditionally used 3D glasses to
visualize computer graphics models in markets as diverse as molecular modeling
and architectural design have approached the company seeking solutions for 3D
displays to complement or replace their 3D glasses. In the third quarter 2002,
the company began to evaluate the technical feasibility of enabling these
professional visualization software applications to be integrated with the
latest high-resolution 3D displays.
The challenge is to achieve the 3D display integration without requiring changes
to the software code of the visualization application. In the current economic
climate and with the relatively small installed base of 3D displays, software
developers are reticent to commit their time and resources to a relatively small
market opportunity. Our Research group has demonstrated that it is possible to
deliver such a solution and we are now developing the TriDefTM Visualizer
software solution for licensing to business users with professional and
scientific visualization applications.
ANALYSIS AND OUTLOOK
2002 was planned to be a year of growth for the company, both in terms of human
resource, customer base and revenues following the company's fund raising in
January 2002. Despite the reductions in expenditure and overhead, the company
has been able to maintain its technological and business development progress
without compromise.
Through continued investment in our core image science capabilities, we are
anticipating that we can continue to offer competitively priced content
conversion and creation services while sustaining our gross margin ratios. As
the customer base in the PSE market grows, we are expecting that the ratio of
content business with new customers compared to existing customers will shift in
favor of repeat customers, with a resultant impact on the costs associated with
creating the sales opportunity.
With the recent improvements in image quality and the competitive nature of the
3D displays market, the next major milestone will be the delivery of 3D displays
by major consumer electronics manufacturers. It is hoped that this will further
reduce the price differential between a 3D display and its 2D equivalent to a
level more acceptable to wider adoption by business users in our target PSE
segment.
The mass-market availability of 3D displays, including lower unit pricing and
the ability to switch between conventional 2D and 3D viewing modes from the same
display, is likely to prove very attractive to a number of prospective users who
are now becoming aware of the ability to view in 3D without glasses. Unlike a
standard 2D display, a 3D display requires a 3D enabled application in order for
the customer to make their purchase decision.
We are seeking to leverage our expertise in the integration and enabling of a
variety of professional and consumer applications by assisting mass-market
manufacturers in building and maintaining market share with their target end
user. By partnering with leading display manufacturers, we expect to reach large
audiences of prospective customers without the need to create substantial sales
and marketing infrastructure to reach these customers directly.
As the market for consumer 3D displays emerges, which we expect to occur in
early 2004, we are hopeful that our patented 2D Compatible 3DTM encoding format
will form the basis for the standard for the publishing and playback of 3D video
media. This is also the focus of our participation in the 3D Consortium.
We expect to address a wider base of business users through the capabilities of
our interactive TriDefTM Visualizer software, extending our reach from still
images and video to interactive computer graphics in the scientific
visualization market. Here too we are targeting market leaders in high
performance graphics applications and platforms, allowing us to reach large
installed bases of customers through our partners without the need to incur
substantial sales and marketing expense.
DDD continues to believe in the long-term growth potential of the three core
markets for 3D displays and applications. The overall plan for the year ahead is
of a careful balance between maintaining short-term revenue growth and gross
margin, investing in response to market growth, and effective application of
cash reserves.
DIVIDEND POLICY
As indicated in the flotation Prospectus, the directors are not declaring a
dividend in relation to these results and the Board will keep the dividend
policy under review.
SHAREHOLDER AND EMPLOYEE SUPPORT
We would like to thank all employees and shareholders for their continuing
support and hope that they will enjoy a long association with the company.
FURTHER INFORMATION
Further information on DDD Group plc, its markets and products is available from
the company's Web site at www.DDD.com.
Paul Kristensen, Chairman Christopher Yewdall,
Chief Executive
10 June 2003 10 June 2003
DDD GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended Year ended
31 December 31 December
2002 2001
Notes #'000 #'000
Turnover 182 172
Administrative expenses (2,971) (3,609)
-------------- -------------
Operating loss (2,789) (3,437)
Net interest 160 18
-------------- -------------
Loss on ordinary activities before
taxation (2,629) (3,419)
Tax on loss on ordinary activities 3 - -
-------------- -------------
Retained loss for the financial year (2,629) (3,419)
============== =============
Basic loss per share 4 (7.5p) (14.6p)
-------------- -------------
DDD GROUP PLC
CONSOLIDATED BALANCE SHEET
As at As at
31 31
December December
2002 2001
Notes #'000 #'000
Fixed assets
Intangible assets 90 63
Tangible assets 427 1,226
-------------- -------------
517 1,289
Current assets
Debtors: due within one year 138 1,759
Debtors: due after more than one year 131 184
Investment in money market deposit 1,750 -
Cash at bank and in hand 2,048 460
-------------- -------------
4,067 2,403
Creditors: amounts falling due
within one year (279) (2,012)
-------------- -------------
Net current assets 3,788 391
-------------- -------------
Total assets less current liabilities 4,305 1,680
Creditors: amounts falling due
after more than one year - (5)
-------------- -------------
Net assets 4,305 1,675
============== =============
Capital and reserves
Called up share capital 3,516 50
Share premium account 4,416 15,702
Merger reserve 13,279 -
Other reserves 894 942
Exchange equalisation reserve (300) (83)
Profit and loss account (17,500) (14,936)
-------------- -------------
Shareholders' funds - equity 5 4,305 1,675
============== =============
DDD GROUP PLC
Company BALANCE SHEET
As at As at
31 31
December December
2002 2001
Notes #'000 #'000
Fixed assets
Investments 6,295 -
Current assets
Debtors 60 50
Investment in money market deposit 1,750 -
Cash at bank and in hand 40 -
-------------- -------------
1,850 50
Creditors: amounts falling due
within one year (19) -
-------------- -------------
Net current assets 1,831 50
-------------- -------------
Net assets 8,126 50
============== =============
Capital and reserves
Called up share capital 3,516 50
Share premium account 4,416 -
Other reserves 17 -
Exchange equalisation reserve 233 -
Profit and loss account (56) -
-------------- -------------
Shareholders' funds - equity 8,126 50
============== =============
DDD GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
Year ended Year ended
31 31
December December
2002 2001
Notes #'000 #'000
Net cash outflow from operating
activities 6 (2,394) (2,878)
Returns on investments and servicing of
finance
Interest received 102 38
Interest paid (4) (14)
Finance lease interest paid (2) (6)
-------------- -------------
Net cash inflow from returns on
investments and servicing of finance 96 18
-------------- -------------
Capital expenditure
Purchase of tangible fixed assets (78) (93)
Purchase of intangible fixed assets (63) (26)
Sale of tangible fixed assets 460 23
-------------- -------------
Net cash inflow/(outflow) from capital
expenditure 319 (96)
-------------- -------------
Management of liquid resources
Investment in money market deposit (1,750) -
Sale of short term bank deposits 53 33
-------------- -------------
Net cash (outflow)/inflow from
management of liquid resources (1,697) 33
-------------- -------------
Financing
Issue of shares 7,105 2,315
Expenses paid in connection with issue
of shares (1,559) -
Redemption of shares (50) -
Repayment of borrowings (193) (14)
Capital element of hire purchase (39) (36)
leases
------------- -------------
Net cash inflow from financing 5,264 2,265
-------------- -------------
Increase/(decrease) in cash 1,588 (658)
============== =============
DDD GROUP PLC
consolidated statement of total recognised gains and losses
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
Loss for the financial year (2,629) (3,419)
Currency differences on foreign currency net (217) (83)
investments
-------------- -------------
Total recognised losses for the financial year (2,846) (3,502)
============== =============
DDD GROUP PLC
NOTES TO THE PREMILINARY ANNOUNCEMENT
1 BASIS OF PREPARATION
The preliminary announcement has been prepared under the historical cost
convention and in accordance with applicable United Kingdom accounting
standards.
The principal accounting policies of the Group are set out in the group's 2002
financial statements and have been consistently applied in all material
respects.
2 BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the company and of its
subsidiary undertakings drawn up to 31 December 2002.
3 TAX ON LOSS ON ORDINARY ACTIVITIES
The tax charge represents:
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
Tax loss on ordinary activities - -
============== =============
The current tax charge can be explained as follows:
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
Loss on ordinary activities before tax (2,629) (3,419)
============== =============
Loss on ordinary activities multiplied by the
large companies rate of 30% (2001: 30%) (789) (1,026)
Effect of:
Expenses not deductible for tax purposes 19 -
Tax loss carried forward 770 1,026
-------------- -------------
Current Tax - -
============== =============
The unrelieved tax losses, which arise in the USA, Canada and Australia, may be
limited in their ability to offset future taxable trading profits. Accordingly,
a full valuation allowance has been provided against this resulting deferred tax
asset.
DDD GROUP PLC
NOTES TO THE PREMILINARY ANNOUNCEMENT
4 LOSS PER SHARE
2002 2001
Weighted Loss per Weighted Loss per
average share average share
Loss number amount Loss number amount
#'000 of shares pence #'000 of shares pence
Basic loss per
share:
Loss
attributable
to ordinary
shareholders (2,629) 34,917,158 (7.5) (3,419) 23,369,394 (14.6)
======= ======== ====== ======= ======== ========
Share options outstanding at the year end were anti-dilutive.
5 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
Loss for the financial year (2,629) (3,419)
Exchange differences (217) (83)
Issue of stock options 17 198
Redemption of preference shares (50) -
Issue of shares 5,509 2,352
-------------- -------------
Net increase/(decrease) in shareholders' funds 2,630 (952)
-------------- -------------
Shareholders' funds at 1 January 2002 1,675 2,627
============== =============
Shareholders' funds at 31 December 2002 4,305 1,675
============== =============
6 NET CASH OUTFLOW FROM OPERATING ACTIVITIES
Year ended Year ended
31 December 31 December
2002 2001
#'000 #'000
Operating loss (2,789) (3,437)
Amortisation 35 20
Depreciation 360 418
Issue of stock options 17 198
Loss on sale of tangible fixed assets 27 89
Loss on sale of intangible fixed assets 1 50
Decrease/(increase) in debtors 1,648 (1,654)
(Decrease)/increase in creditors (1,506) 1,509
Foreign exchange differences (187) (71)
-------------- -------------
Net cash outflow from operating activities (2,394) (2,878)
============== =============
DDD GROUP PLC
NOTES TO THE PREMILINARY ANNOUNCEMENT
7 PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The consolidated balance sheet and company balance sheet at 31 December 2002 and
the consolidated profit and loss account, consolidated cash flow statement and
consolidated statement of total recognised gains and losses for the year then
ended have been extracted from the Group's 2002 statutory financial statements
upon which the auditors opinion is unqualified and does not include any
statement under Section 237 of the Companies Act 1985.
8 PUBLICATION OF NON-STATUTORY ACCOUNTS
The Report and Accounts will be posted to shareholders on or about 20 June 2003
and, from the date of posting, will be available from Arbuthnot Securities, 2
Lambeth Hill, London EC4V 4GG, United Kingdom and on the Company's website:
www.DDD.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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