30th Jun 2005 12:04
DDD Group PLC30 June 2005 30 June 2005 DDD GROUP PLC AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 DDD Group plc ("DDD" or "the Company"), the 3D software and content company, ispleased to announce its preliminary results for the twelve months ended 31December 2004. Highlights 2004 • Delivery of the TriDef DVD Player real time 2D to 3D conversion software • Turnover increased 8% to £322,000 (2003: £298,000) • Loss before tax decreased 12% to £1.870 million (2003: £2.123 million) • Cash reserves of £1.429 million • Strategic investment of £1.1 million by Arisawa Manufacturing Co., Ltd. (" Arisawa") Subsequent to the balance sheet date • Expansion of worldwide licensing agreement with Sharp Corporation ("Sharp ") to include DDD's TriDef DVD Player real time 2D to 3D conversion software pre-loaded on Sharp's new second generation Actius(TM)AL3D ("AL3D") 3D notebook PC Paul Kristensen, Chairman of DDD Group plc commented, "2004 saw steady growth in the market for 3D products following the introductionof Sharp's 3D notebook PC in late 2003. During the year, the Company delivered an important new solution capable ofconverting 2D content to 3D in real time. This has attracted interest from themajor corporations who are seeking to develop consumer markets for a range of 3Ddisplay products and is evidenced by the investment and development agreementwith Arisawa in the latter part of 2004. This same capability played an important role in expanding our licensingrelationship with Sharp for their second generation 3D notebook PC, launched inMarch 2005. Finally, the real time 3D image processing is proving to be a keyfactor in the development of our glasses-free, 3D mobile telephone capabilitiesand in our discussions with mobile handset manufacturers. With increasing interest in 3D display products, the Company intends to build onits market leading position, focusing on the development of the consumer marketwhere we anticipate growing our development fees, licensing royalties andcontent revenues." Enquiries: DDD Group plc Chris Yewdall, President and Chief Executive OfficerTel: (+1) 310 566-3340E-mail: [email protected] Mark McGowan, Chief Financial Officer Bell Pottinger Corporate & Financial Nick LambertTel: (+44) 20 7861-3232 DDD GROUP PLC CHAIRMAN AND CHIEF EXECUTIVE'S JOINT STATEMENT FINANCIAL RESULTS During the year, turnover increased by 8% to £322,000 (2003: £298,000) whilepre-tax losses were reduced to £1.870 million (2003: £2.123 million).Geographically, U.S. sales accounted for 97% (2003: 87%) of total revenues and abreakdown of revenue by platform is detailed below. Cash balances at theyear-end amounted to £1.429 million (2003: £1.807 million). EXECUTIVE SUMMARY Real time 2D to 3D content conversion is now possible on multiple platformsincluding PC, mobile telephone and television. This critical development isdriving the global consumer electronics firms towards developing consumerdevices with 3D displays since the key constraint, the lack of 3D content, hasbeen removed. The implementation of the Company's real time and off line 2D to 3D conversioncapabilities on the leading mobile telephone development platform is expected toassist in securing licensees in the mobile telephone market, a significantconsumer market that the Company is seeking to address. The Company's strategic relationship with Arisawa is expected to continue toprovide many benefits. Arisawa is a successful Tokyo Stock Exchange listedcompany and its financial strength, operations knowledge and Asian businessdevelopment capabilities are expected to supplement the existing skills of DDD'smanagement team and board of directors. BUSINESS REVIEW DDD is presently pursuing the deployment of its software and content conversion/creation capabilities on four main platforms. Given that the 3D market isbeginning to shift towards the consumer market, the Company believes it is moremeaningful to report its results in terms of the technological platforms uponwhich its solutions are being deployed as opposed to reporting in terms ofmarket segments. Desktop Displays and Notebook PCs, refers primarily to business users,government agencies and universities who use 3D displays and DDD's relatedsoftware to enhance visual data in the medical, pharmaceutical, education, oil &gas and manufacturing sectors. Consumer Television, refers to an emerging category of flat screen LCD andplasma displays being developed and marketed by major consumer electronicscompanies where DDD's automatic 2D to 3D content conversion solutions areexpected to provide an important bridge towards mass-market consumer adoption. Consumer Handheld Devices, refers to the emerging market for 3D mobiletelephones where the DDD Mobile(TM) suite of software can be used to convert,present, download and share popular mobile content such as wallpapers,animations and video in glasses-free 3D. Public Space Entertainment (Digital Signage), refers to retail advertising,promotions and trade shows where customers either purchase or hire a 3D displayand purchase DDD's related software products and content conversion/creationservices. DESKTOP DISPLAYS AND NOTEBOOK PCs The desktop displays and notebook PCs platform grew by 24% to account for 50% oftotal turnover for the full year at £161,000 (2003: 44% and £130,000). The first shipments of Sharp's Actius RD3D switchable 2D/3D notebook PC began inlate 2003. In 2004, the Company saw the full year benefit of this product,through resale of the notebook to international customers as well as through thesale of additional TriDef software applications to these business users. FourTriDef software products are pre-loaded on the notebook PC during manufacturefor which the Company receives quarterly royalty payments. The September 2003software licensing agreement with Sharp was expanded in March 2005 to includeDDD's TriDef DVD Player. This product enables real time 2D to 3D conversion ofDVD content and has been added to the bundle of DDD software for Sharp's newsecond generation Actius AL3D notebook PC. Sharp released a switchable 2D/3D desktop display, the LL-151-3D, in August 2004for which DDD developed and delivered the TriDef Movie Encoder to Sharp Systemsof America. TriDef Movie Encoder allows the 3D output from popular computeranimation packages to be presented on Sharp's desktop display and notebook PCs. CONSUMER TELEVISION The consumer television platform represents a new commercial market for DDD byvirtue of the development agreement entered into with Arisawa in late 2004. Ofthe £140,000 development fee, £84,000 was earned in 2004, with the balanceexpected to be earned during 2005. The catalyst for this agreement was the development of the TriDef DVD Player,the most significant breakthrough for the Company during 2004. This was a keytechnological achievement since its application extends beyond the real time 2Dto 3D conversion of DVDs to the real time 2D to 3D conversion of any media,including broadcast, satellite and cable signals. The development agreementwith Arisawa should result in a hardware set top box product, the TriDef Vision+system, that can ultimately be reduced to a single silicon chip solution whichthe mass consumer markets may require. CONSUMER HANDHELD DEVICES The consumer handheld devices platform is also a new and exciting commercialmarket for DDD. In response to a number of display manufacturers developingsmaller mobile 3D displays, DDD acknowledged the necessity for related softwareand the DDD Mobile suite of software is currently in development. The mobile telephone market is an attractive platform for 3D because: • Sharp successfully launched two handsets into the Japanese market, one in late 2002 and the other in mid-2003, with combined sales of just under three million units. • the global market is substantial with sales of 735 million handsets forecast for 2005. (Source: Strategy Analytics, Inc.) • handset manufacturers are eager to differentiate their product offerings. • mobile telephone network operators ("carriers") are keen to earn data revenues and the technological performance of advanced handsets is rapidly progressing, turning a mobile telephone into a mobile entertainment device. The Company is currently engaged in discussions with handset manufacturers toenter into development and licensing agreements which the Directors expect maylead to commercial deployment as early as the second half of 2005. The Companyis also pursuing revenue sharing agreements with carriers and various contentproviders for the download of popular mobile content converted to 3D by DDD. PUBLIC SPACE ENTERTAINMENT (Digital Signage) The PSE platform accounted for 22% of total turnover for the full year at£72,000 (2003: 53% and £159,000). In response to the difficulties display manufacturers have had in refining thelarge, multi viewer 3D displays, and in achieving competitive pricing, theCompany has shifted resources away from this platform to focus upon those withgreater growth potential. The Company will continue to monitor developmentswithin the relevant display manufacturers. HEADCOUNT The total number of DDD employees fell from 27 in December 2003 to 18 byDecember 2004, resulting in a reduction in payroll-related costs of 14% to£1.037m (2003: £1.208m). This is partly the result of some key research andsoftware development projects having been successfully completed. ANALYSIS AND OUTLOOK 2004 was a year of modest growth for the Company as the business market for thefirst mass produced PC 3D display products was established by Sharp. During theyear, the revenue growth from the PC and Desktop 3D Displays platform offset thedisappointing decline in revenues from the Public Space Entertainment platform.Since the majority of the Company's revenues are US Dollar denominated, theweakness of the US Dollar versus the UK Pound reduced, on translation, theunderlying 22% annual revenue growth to 8%. The Company expects to continue to supply 3D display and software solutions tobusiness users, largely based on Sharp's second generation Actius AL3D notebook. The arrival of the AL3D also allowed DDD to expand the existing softwarelicensing agreement with Sharp, adding the real time 2D to 3D DVD movieconversion capabilities of TriDef DVD Player, and increase the per unit royalty. The growing interest in mainstream 3D displays is enabling the Company to expandits revenue streams into higher margin development and licensing agreements suchas the agreement with Arisawa to develop a hardware version of the Company'sreal time 2D to 3D conversion solution. In the near term, the Company intendsto place increasing focus on procuring similar agreements. The area of greatest focus for the Company during the second half of 2004 wasthe development of a commercial and technical plan to address the growingopportunities in the mobile telephone market. Following the success enjoyed byDoCoMo in Japan with two models of 3D handsets developed by Sharp, an increasingnumber of display manufacturers; including Sanyo-Epson, Samsung SDI and Philips,have publicly demonstrated 3D LCD displays intended for use in mobile handsets. DDD is continuing to develop its commercial and technical plans in relation tomobile telephones. DDD Mobile is a comprehensive 3D content solution for mobiletelephone users that also includes 'on handset' automatic 2D to 3D conversionfor pictures and video sequences. The Company has already implemented DDDMobile on the leading mobile telephone hardware platform used by the majority ofthe global handset manufacturers. DDD Mobile provides the Company with the opportunity to earn revenues throughthe custom integration of DDD's software with a potential licensee's handset andto earn subsequent per handset royalties. Through the conversion of existingimage libraries, using DDD's off line conversion process, DDD Mobile may alsoleads to participation in the data revenues earned as subscribers downloadpremium 3D images, animations and movies. The Company is in discussions withmobile handset manufacturers to license its product and is expected to make itsfirst deployment in 2005. The Company intends to aggressively pursue handsetdevelopment and licensing opportunities as well as relationships with carriersand content aggregators as the 3D mobile markets develop in different countriesaround the world. The alliance with Arisawa in Japan will continue to be developed. DDD andArisawa are already collaborating closely on the development of key commercialrelationships in Asia and North America where Arisawa's high quality 3D opticalmaterials are being used by consumer electronic companies in their 'glasses-free' mobile 3D displays. The combination of DDD's real time 2D to 3Dconversion solution, which is capable of transforming any incoming signal from aDVD, VCR, satellite or broadcast television, together with Arisawa'scomfortable, polarized glasses should allow the initial market for 3D televisionto be explored. Using this approach, viewers will have a flat panel LCD, plasmaor rear-projection television capable of working in 3D at the touch of a buttonon the DDD remote. The use of polarized glasses means that there is norestricted viewing position around the television, and since there are no wiresor transmitters involved, installation and use is ideally suited to the consumermarket. As the volume consumer markets for 3D displays develops, the Company expects tosee increased interest from Hollywood studios in this new viewing medium. Anumber of prominent directors including George Lucas, Robert Rodriguez, JamesCameron and Robert Zemeckis have already expressed their interest in producing3D theatrical movies through a combination of original 3D film making and 3Dconversion of existing footage. DDD believes that its growing number of mobile,PC and television licensees should provide a strong consumer distribution modeland encourage the studios to support more 3D film making. DDD continues to believe in the long-term growth potential of the emergingmarkets for 3D displays, software applications and content conversion/creation.The overall plan for the year ahead is a continued balance between maintainingshort-term revenue growth, investing in response to the market and an effectiveapplication of cash reserves. DIVIDEND POLICY The Company is not in a position to pay a dividend. In due course, theDirectors will consider the payment of dividends, if and when the Company is ina position to do so. SHAREHOLDER AND EMPLOYEE SUPPORT We would like to thank all employees and shareholders for their continuingsupport 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 fromthe Company's website at www.DDD.com. Paul Kristensen, Chairman Christopher Yewdall, Chief Executive30 June 2005 30 June 2005 DDD GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNT 2004 2003Year ended 31 December Notes £'000 £'000 Turnover 322 298 Administrative expenses (2,215) (2,509) Operating loss (1,893) (2,211) Net interest 23 88 Loss on ordinary activities before taxation (1,870) (2,123) Tax on loss on ordinary activities 3 - - Retained loss for the financial year (1,870) (2,123) Basic loss per share 4 (4.8p) (6.0p) All transactions arose from continuing operations. DDD GROUP PLCCONSOLIDATED BALANCE SHEET 2004 2003As at 31 December Note £'000 £'000 Fixed assetsIntangible assets 25 68Tangible assets 73 224 98 292 Current assetsDebtors: due within one year 138 140Debtors: due after more than one year - 84Investment in money market deposits - 861Cash at bank and in hand 1,429 946 1,567 2,031 Creditors: amounts falling duewithin one year (112) (158) Net current assets 1,455 1,873 Net assets 1,553 2,165 Capital and reservesCalled up share capital 4,657 3,534Share premium account 4,690 4,416Merger reserve 13,279 13,279Other reserve 267 302Exchange equalisation reserve (478) (339)Profit and loss account (20,862) (19,027) Shareholders' funds - equity 5 1,553 2,165 DDD GROUP PLCCOMPANY BALANCE SHEET 2004 2003 As at 31 December £'000 £'000 Fixed assetsInvestments 8,829 7,735 Current assetsDebtors 17 6Cash at bank and in hand 169 11 186 17 Creditors: amounts falling duewithin one year (21) (17) Net current assets 165 - Net assets 8,994 7,735 Capital and reservesCalled up share capital 4,657 3,534Share premium account 4,690 4,416Other reserve 21 21Exchange equalisation reserve 93 42Profit and loss account (467) (278) Shareholders' funds - equity 8,994 7,735 DDD GROUP PLCCONSOLIDATED CASH FLOW STATEMENT 2004 2003Year ended 31 December Note £'000 £'000 Net cash outflow from operating activities 6 (1,761) (2,084) Returns on investmentsInterest received 23 88Net cash inflow from returns on investments 23 88 Capital expenditurePurchase of tangible fixed assets (18) (27)Net cash outflow from capital expenditure (18) (27) Management of liquid resourcesInvestment in money market deposits - (861)Sale of money market deposit 861 1,750Sale of short-term bank deposit 33 37Net cash inflow from management 894 926of liquid resources FinancingIssue of shares 1,480 -Expenses paid in connection with issue of shares (135) -Capital element of finance leases - (5)Net cash inflow/(outflow) from financing 1,345 (5) Increase/(decrease) in cash 483 (1,102) DDD GROUP PLCCONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2004 2003Year ended 31 December £'000 £'000 Loss for the financial year (1,870) (2,123) Currency differences on foreign currency net (139) (39)investments Total recognised losses for the financial year (2,009) (2,162) DDD GROUP PLCNOTES TO THE PRELIMINARY ANNOUNCEMENT 1 BASIS OF PREPARATION The preliminary announcement has been prepared under the historical costconvention and in accordance with applicable United Kingdom accountingstandards. The principal accounting policies of the Group have remained unchanged from theprevious year and have been consistently applied in all material respects. 2 BASIS OF CONSOLIDATION The Group financial statements consolidate those of the company and of itssubsidiary undertakings drawn up to 31 December 2004. 3 TAX ON LOSS ON ORDINARY ACTIVITIES No tax charge or credit has been recorded in light of the tax losses generatedby the Group. The unrelieved tax losses, which arise in the USA, UnitedKingdom, Canada and Australia may be limited in their ability to offset futuretaxable trading profits. Accordingly, a full valuation allowance has beenprovided against this resulting deferred tax asset. 4 LOSS PER SHARE 2004 2003 Weighted Loss per Weighted Loss per average share average share Loss number amount Loss number amount £'000 of shares pence £'000 of shares penceBasic loss per shareLoss attributable toordinary shareholders (1,870) 38,657,999 (4.8) (2,123) 35,194,046 (6.0) Share options outstanding at the year-end were anti-dilutive. DDD GROUP PLCNOTES TO THE PRELIMINARY ANNOUNCEMENT 5 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2004 2003Year ended 31 December £'000 £'000 Loss for the financial year (1,870) (2,123)Exchange differences (139) (39)Issue of stock options - 4Issue of shares 1,532 18Expenses paid in connection with issue of shares (135) - Net decrease in shareholders' funds (612) (2,140) Shareholders' funds at 1 January 2004 2,165 4,305 Shareholders' funds at 31 December 2004 1,553 2,165 6 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2004 2003Year ended 31 December £'000 £'000 Operating loss (1,893) (2,211)Amortisation 40 39Depreciation 159 222Issue of stock options - 4Loss on sale of tangible fixed assets 5 1Decrease/(increase) in debtors 47 (2)Increase/(decrease) in creditors 7 (98)Foreign exchange differences (126) (39) Net cash outflow from operating activities (1,761) (2,084) 7 PUBLICATION OF NON-STATUTORY ACCOUNTS The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985. The preliminary announcement includes extracts from the audited statutoryaccounts for the year to 31 December 2004. The comparative figures relating tothe year to 31 December 2003 are taken from the audited statutory accounts forthat year. 8 COPIES OF ANNOUNCEMENT Copies of this announcement will be available from the Company's registeredoffice at 22 Melton Street, London NW1 2BW. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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