25th May 2006 07:01
DDD Group PLC25 May 2006 25 May 2006 DDD GROUP PLC AUDITED PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 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 2005. Highlights Financial • Turnover increased 132% to £747,000 (2004: £322,000) • Loss before tax decreased 43% to £1.066 million (2004: £1.870 million) Operational • Software development agreement completed with top five mobile phone manufacturer for glasses-free 3D mobile phone yielding revenue of £500,000 • Two-year, non-exclusive, DDD Mobile(TM) software licensing agreement signed with the top five mobile phone manufacturer • Second hardware development milestone achieved with Arisawa Manufacturing Co., Ltd. ("Arisawa") of Japan for the TriDef(R) Vision+ 3D set top box yielding revenue of £34,000 • Expansion of worldwide licensing agreement with Sharp Corporation ("Sharp") to include DDD's TriDef DVD Player real-time 2D to 3D content conversion software pre-loaded on Sharp's second-generation Actius(TM) AL3D ("AL3D") notebook PC • Memorandum of understanding signed with Jamster! International Sarl (" Jamster!") for the 2D to 3D conversion of images and animations from Jamster!'s mobile content library using DDD's offline content conversion process. DDD intends to publish the 3D mobile content to 3D mobile phone subscribers with over 200 images and animations already converted from 2D to 3D by DDD • Development of DDD Mobile suite of software completed which enables the conversion, presentation, downloading and sharing of popular mobile phone content including wallpapers, animations and movies in glasses-free 3D Post balance sheet events - highlights • Appointment of Hans R. Snook, the founder and former Chief Executive of Orange and the current Chairman of MonsterMob Group PLC, to the board of DDD as a non-executive director on 12 January 2006 • Placing of 11,500,000 ordinary shares of 10p each at a price of 11p per ordinary share raising approximately £1,182,000, after expenses, on 17 February 2006 • Final hardware development milestone achieved with Arisawa for the TriDef(R) Vision+ 3D set top box yielding revenue of £22,000 on 28 April 2006 Paul Kristensen, Chairman of DDD Group plc commented: "2005 was a year in which DDD's sustained investment in 3D began to generate amore meaningful level of revenue. The Company's technology advanced rapidly andits ability to address the 3D software and content needs of this evolving marketis evidenced by further commercial agreements with some of the world's largestconsumer electronics firms. In July 2005, one of the world's leading mobile phone manufacturers entered intoa development agreement with DDD for the integration of DDD's software withtheir glasses-free 3D mobile phone. DDD completed the development work inDecember 2005. The £500,000 of revenue from this agreement was a majorcomponent of the 132% increase in the Company's 2005 turnover when comparedagainst the Company's 2004 turnover. The manufacturer subsequently decided to upgrade the phone with an improved 3Ddisplay, which has caused a delay in the introduction of the 3D phone while itis redesigned. As a result of this delay, the Company has been temporarilydeprived of the opportunity to receive additional revenue streams from royaltiesfor the use of its software and from 3D content downloads from this particularproject. However, DDD is actively demonstrating the capabilities of DDD Mobileon prototype 3D phones to additional mobile phone manufacturers and mobile phonenetwork operators with the goal of securing further licensees for its mobilesoftware and content solutions. The Company continued its development work with Arisawa allowing for thesuccessful demonstration of the TriDef RealTV system in late 2005. The systemcombines DDD's TriDef Vision+ 3D set top box with Arisawa's polarising materialson a 30" LCD television where virtually any 2D content can be converted into 3Din real-time and viewed in 3D on the television. DDD and Arisawa areaggressively pursuing licensing opportunities with global televisionmanufacturers. Based on the progress made to date, Arisawa and DDD expect todeliver the first large flat screen prototypes to our prospective customers inlate 2006 with the prospect for availability for consumers from mid-2007onwards. During 2005, the Company began investigating opportunities to license itsintellectual property ("IP") to potential customers in the 3D digital cinemamarket. This market emerged in the U.S. in November 2005 upon the release ofChicken Little, a feature length 3D film from Walt Disney Pictures. Theopportunities encompass the licensing of DDD's core IP for the conversion of 2Dcontent into 3D and the efficient transmission of 3D content alongside 2Dcontent. DDD is already in discussions with leading post-production companieswho have established relationships with the Hollywood studios and the growinggroup of internationally renowned filmmakers, including, George Lucas, JamesCameron and Robert Zemeckis. This licensing approach is consistent with DDD'soverall technology adoption strategy and presents an opportunity for the Companyto benefit from 2D to 3D content conversion royalties on each film that utilisesDDD's technology. Finally, Arisawa increased its stake in DDD from 20% to 25% in early 2006 and,as a result of the February 2006 placing, Michael Stubbs, Nigel Wray and Hans R.Snook acquired reportable interests in the Company of 14.2%, 5.7% and 3.1%,respectively. The Company is grateful for their support and indeed for thecontinued support of all of its shareholders. DDD is confident that its focus on developing the consumer markets for 3Dsoftware and content will remain consistent during 2006 when the Companyanticipates continuing growth of its 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 132% to £747,000 (2004: £322,000) whilethe loss on ordinary activities before taxation decreased by 43% to £1.066million (2004: £1.870 million). Cash and short-term bank deposits at year-end amounted to £0.286 million (2004:£1.429 million) and a placing after the balance sheet date raised approximately£1.182 million, after expenses. Operational update • Executive summary Real-time 2D to 3D content conversion is now possible on multiple platformsincluding the PC, mobile phone and television. This key development allows theglobal consumer electronics firms to develop consumer devices with 3D displays,as the lack of 3D content is no longer a constraint. The implementation of the Company's mobile phone content solution on the leadingmobile phone development platform from ARM Holdings plc is expected to assist insecuring additional licensees in the mobile phone market. Securing furthermobile phone licensees and demonstrating the capabilities to mobile phonenetwork operators is a top priority for the Company. Despite the appearance of competitive real-time 3D conversion solutions,predominately from suppliers in Asia, DDD's patented image processing techniquescontinue to yield the highest quality 3D images, allowing the Company to competeeffectively for contracts on all platforms. The Company's strategic relationship with Arisawa is expected to continue toprovide many benefits. Arisawa is a successful Tokyo Stock Exchange listedcompany. Its financial strength, operations knowledge and Asian businessdevelopment capabilities have supplemented the existing skills of DDD'smanagement team and board of directors. • Business review DDD is presently pursuing the adoption of its IP and the resulting software,hardware and content conversion/creation solutions on four main platforms.Given that the 3D market continues to shift towards the consumer market, theCompany believes it is more meaningful to report its results in terms of thetechnological platforms its solutions address. These are as follows. Consumer Handheld Devices, refers to the emerging market for 3D mobile phones,personal digital assistants ("PDAs") and personal media players ("PMPs") wherethe DDD Mobile suite of software can be used to convert, present, download andshare popular mobile content such as wallpapers, animations and video inglasses-free 3D. Consumer Television, refers to large flat screen LCD and plasma displays beingdeveloped and marketed by major consumer electronics companies where DDD'sreal-time 2D to 3D content conversion solution is expected to provide animportant bridge towards mass-market consumer adoption of 3D capabletelevisions. 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. Public Space Entertainment (Digital Signage), refers to retail advertising,promotions and tradeshows where customers either purchase or hire a 3D displayand purchase DDD's related software products and content conversion/creationservices. • Consumer Handheld Devices The consumer handheld devices platform is a new commercial market for DDD andaccounted for 67% of total turnover at £500,000 (2004: NIL) as a result of thecompletion of the software development agreement with a top five mobile phonemanufacturer. In response to a number of display manufacturers developingsmaller mobile 3D displays, DDD acknowledged the necessity for related softwareand developed the DDD Mobile suite of software during 2005. The mobile phone market is an attractive platform for 3D because: - Sharp successfully launched two glasses-free 3D mobile phones into the Japanese market in 2003/2004 with combined sales of just under three million units - The global market is substantial with sales of 1 billion mobile phones forecast for 2006 (Source: Strategy Analytics, Inc.) - Mobile phone manufacturers are eager to differentiate their product offerings - Mobile phone network operators ("carriers") are keen to earn data revenues and the technological performance of mobile phones is rapidly progressing, turning a mobile phone into a mobile entertainment device The Company is currently engaged in discussions with other mobile phonemanufacturers to enter into similar development and licensing agreements for theDDD Mobile suite of software. Discussions are also taking place with selectglobal carriers with the aim of creating demand for 3D mobile phones from mobilephone manufacturers. The Company's memorandum of understanding with Jamster! is indicative of thetype of arrangement the Company is seeking to secure with various contentproviders intended to allow the Company to participate in a share of therevenues generated from the download of popular mobile content pre-converted to3D by DDD. • Consumer Television The consumer television platform is a relatively new commercial market for DDDby virtue of the £140,000 hardware development agreement entered into in late2004 with Arisawa. This platform accounted for 5% of total turnover at £34,000(2004: 26% and £84,000) with the balance of £22,000 invoiced and collectedsubsequent to the balance sheet date upon completion of the final hardwaredevelopment milestone. The catalyst for this agreement was the development of the Company's real-time2D to 3D content conversion solution. This was a key technological achievementallowing real-time 2D to 3D content conversion to be applied to most mass-marketmedia, including broadcast, satellite and cable television, any recorded media,such as DVD and videocassette, and game consoles. DDD and Arisawa are currently demonstrating the TriDef RealTV system, which isthe combination of DDD's TriDef Vision+ 3D set top box and Arisawa's polarisingmaterials on a 30" LCD television. The goal is to license the TriDef RealTVsystem to global television manufacturers who have the requisite manufacturingcapabilities, distribution channels and consumer marketing expertise. • Desktop Displays and Notebook PCs The desktop displays and notebook PCs platform accounted for 23% of totalturnover at £173,000 (2004: 50% and £161,000). In March 2005, the licensing agreement with Sharp was expanded to include DDD'sTriDef DVD Player, a software product that enables the real-time 2D to 3Dcontent conversion of DVDs. The expanded licensing agreement coincided with theintroduction of the Actius AL3D, Sharp's second-generation, switchable 2D/3Dnotebook PC. DDD resells the notebook PC and additional TriDef software applications tointernational business users. The AL3D is pre-loaded during manufacture withfive TriDef software products, including the TriDef DVD Player. The Company'sper unit royalty fee doubled for the AL3D due to the inclusion of the TriDef DVDPlayer. • Public Space Entertainment (Digital Signage) The public space entertainment platform accounted for 5% of total turnover at£40,000 (2004: 24% and £77,000). During the year, the Company continued to shift resources away from thisplatform to focus upon those with greater growth potential. The Company will,however, continue to monitor developments within the relevant displaymanufacturers to ascertain their success, or otherwise, in refining the large,multi-viewer 3D displays and pricing them competitively. HEADCOUNT The total number of DDD employees remained stable at 18 from December 2004 toDecember 2005, however, payroll-related costs decreased by 13% to £0.906m (2004:£1.037m) as a result of the successful completion of some key research andsoftware development projects in mid-2004 which led to an immediate decrease inheadcount. DIVIDEND POLICY The Company is not in a position to pay a dividend. In due course, thedirectors will consider the payment of dividends, as 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 Executive 25 May 2006 25 May 2006 NOTES TO EDITORS DDD, also known as Dynamic Digital Depth, is transforming the viewing experiencewith software applications for glasses-free 3D displays. Its patentedtechnologies enable 3D viewing without glasses; simple integration of computergraphics applications with 3D displays; supply of 3D content through 2D to 3Dconversion; and 3D content transmission over existing networks. DDD is quotedon the London Stock Exchange's Alternative Investment Market (AIM: DDD). • A new category of flat screen LCD and plasma displays are beingdeveloped and marketed by major consumer electronics companies that providestereoscopic 3D images without the need for the viewer to wear glasses.Stereoscopic 3D images appear to have natural in and off-screen depth. 3Ddisplays have already been included in mobile phones in Japan and in desktop PCdisplays and notebook computers in North America and Japan. • DDD's solutions provide an important bridge between conventionaltwo-dimensional (2D) software applications and content and the new 3D displays.Normal 2D pictures, video and computer graphics images are manipulated by DDD'spatented software enabling them to be displayed on 3D displays without requiringthe content to be created specially for a 3D display. DDD's solutions alsoenable automatic conversion of virtually any media from 2D to 3D without anypre-processing of the 2D image. • DDD licenses these software applications, marketed under the TriDef(R)and DDD Mobile(TM) brand names, to consumer electronics manufacturers forinclusion with the 3D display products supplied to their end users. DDD alsolicenses its software directly to end users who already own 3D displays andthrough an international sales channel. • In September 2003, DDD entered into a multi-year, non-exclusivesoftware licensing agreement with Sharp which allows them to include five ofDDD's 3D software applications with their Actius range of switchable 2D/3Dnotebook PCs sold in Japan and North America. • In 2003 and 2004, DoCoMo introduced two models of Sharp mobile phonesthat included 3D LCD displays developed by Sharp. DoCoMo sold approximately 2.8million glasses-free 3D mobile phones in Japan. • In July 2005, DDD entered into a two-year, non-exclusive, DDD Mobilesoftware licensing agreement and a development agreement with one of the world'stop five mobile phone manufacturers for a second-generation, glasses-free 3Dmobile phone. • DDD expects to license its DDD Mobile software library to additionalmobile phone manufacturers who wish to include 3D LCD displays in a variety ofwireless devices, including next generation smartphones and PDAs. The licensingarrangements are expected to yield per unit royalties. These projects may alsoinclude one-time development fees for assisting the manufacturer with theintegration of DDD's software into the 3D wireless device. • In July 2005, DDD entered into a memorandum of understanding withJamster! for the 2D to 3D conversion of images and animations from Jamster!'smobile content library using DDD's offline content conversion process forsubsequent download by 3D mobile phone owners. • DDD intends to enter into revenue sharing agreements with mobile phonenetwork operators (carriers) and content providers for the conversion anddelivery of existing libraries of premium wallpaper, animations and movies towireless subscribers who download 3D content that has been converted from 2D to3D by DDD. • In September 2004, DDD entered into a hardware development agreementwith Arisawa for the TriDef Vision+ 3D set top box. DDD's set top box, combinedwith Arisawa's polarising materials applied to a large LCD television, allowsfor the real-time conversion of virtually any media from 2D to 3D for viewing onthe switchable 2D/3D television. DDD and Arisawa intend to license thissolution to global television manufacturers. • DDD is currently investigating IP licensing opportunities in thedigital cinema market. DDD GROUP PLCCONSOLIDATED PROFIT AND LOSS ACCOUNT 2005 2004Year ended 31 December Notes £'000 £'000 Turnover 747 322 Administrative expenses 3 (1,842) (2,215) Operating loss (1,095) (1,893) Net interest 29 23 Loss on ordinary activities before taxation (1,066) (1,870) Tax charge on ordinary activities 4 (74) - Loss for the financial year (1,140) (1,870) Basic loss per share 5 (2.4p) (4.8p) All transactions arose from continuing operations. DDD GROUP PLC CONSOLIDATED BALANCE SHEET 2005 2004As at 31 December Note £'000 £'000 Fixed assetsIntangible assets 10 25Tangible assets 85 73 95 98 Current assetsDebtors 202 138Investment in money market deposits 76 -Cash at bank and in hand 210 1,429 488 1,567 Creditors (110) (112) Net current assets 378 1,455 Net assets 473 1,553 Capital and reservesCalled up share capital 4,657 4,657Share premium account 4,690 4,690Merger reserve 13,279 13,279Other reserve 209 267Exchange equalisation reserve (418) (478)Profit and loss account (21,944) (20,862)Shareholders' funds 6 473 1,553 DDD GROUP PLC COmpany BALANCE SHEET 2005 2004As at 31 December £'000 £'000 Fixed assetsInvestments 8,829 8,829 Current assetsDebtors 23 17Cash at bank and in hand 8 169 31 186 Creditors (243) (21) Net current (liabilities)/assets (212) 165 Net assets 8,617 8,994 Capital and reservesCalled up share capital 4,657 4,657Share premium account 4,690 4,690Other reserve 21 21Exchange equalisation reserve 102 93Profit and loss account (853) (467)Shareholders' funds 8,617 8,994 DDD GROUP PLC CONSOLIDATED CASH FLOW STATEMENT 2005 2004Year ended 31 December Note £'000 £'000 Net cash outflow from operating activities 7 (1,103) (1,761) Returns on investmentsInterest received 29 23Net cash inflow from returns on investments 29 23 TaxationForeign withholding taxes paid (74) -Net cash outflow from taxation (74) - Capital expenditurePurchase of tangible fixed assets (68) (18)Sale of tangible fixed assets 26 -Net cash outflow from capital expenditure (42) (18) Management of liquid resourcesInvestment in money market deposits (76) -Sale of money market deposit - 861Sale of short-term bank deposit 47 33Net cash (outflow)/inflow from (29) 894 management of liquid resources FinancingIssue of shares - 1,480Expenses paid in connection with issue of shares - (135)Net cash inflow from financing - 1,345 (Decrease)/increase in cash (1,219) 483 DDD GROUP PLC consolidated statement of total recognised gains and losses 2005 2004Year ended 31 December £'000 £'000 Loss for the financial year (1,140) (1,870) Currency differences on foreign currency net 60 (139)investments Total recognised losses for the financial year (1,080) (2,009) DDD GROUP PLC NOTES 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 have remained unchanged from the previous yearand have been consistently applied in all material respects. 2 BASIS OF CONSOLIDATION The financial statements consolidate those of the company and of its subsidiaryundertakings (the "Group") drawn up to 31 December 2005. 3 ADMINISTRATIVE EXPENSES During the year ended 31 December 2005, one of the Group's Australiansubsidiaries received refunds of research and development expenditures from theAustralian government amounting to approximately £184,000. No such research anddevelopment expenditure refunds were received during the year ended 31 December2004. 4 TAX CHARGE ON ORDINARY ACTIVITIES A tax charge of £74,000 was incurred during the year ended 31 December 2005 inconnection with foreign withholding taxes on sales recorded by one of theGroup's operating subsidiaries, Dynamic Digital Depth Australia Pty. Ltd. Theresulting foreign tax credit is available for a maximum of five years to offsetforeign taxable income of a similar nature to that which gave rise to theforeign withholding tax. There are substantial unrelieved tax losses of approximately £19,276,000, whicharise in the USA (£7,782,000), UK (£849,000), Canada (£1,607,000) and Australia(£9,038,000). The availability to offset unrelieved tax losses against futuretaxable trading profits may be subject to restrictions in the respective taxjurisdictions. The potential deferred tax asset of £6,094,000 has not beenrecognised due to the uncertainty of the timing and recoverability of the asset.The asset will be recovered in line with future profits. 5 LOSS PER SHARE 2005 2004 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 (1,140) 46,566,547 (2.4) (1,870) 38,657,999 (4.8) Share options outstanding at the year-end were anti-dilutive. DDD GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT (cont.) 6 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 2005 2004Year ended 31 December £'000 £'000 Loss for the financial year (1,140) (1,870)Exchange differences 60 (139)Issue of shares - 1,532Expenses paid in connection with issue of shares - (135)Net decrease in shareholders' funds (1,080) (612) Shareholders' funds at 1 January 2005 1,553 2,165 Shareholders' funds at 31 December 2005 473 1,553 7 NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2005 2004Year ended 31 December £'000 £'000 Operating loss (1,095) (1,893)Amortisation 34 40Depreciation 61 159(Gain)/loss on sale of tangible fixed assets (26) 5(Increase)/decrease in debtors (108) 47(Decrease)/increase in creditors (2) 7Foreign exchange differences 33 (126)Net cash outflow from operating activities (1,103) (1,761) 8 ANALYSIS OF CHANGES IN NET FUNDS At 1 January Exchange At 31 December 2005 Cash flow movement 2005 £'000 £'000 £'000 £'000 Cash at bank and in hand 1,429 (1,219) - 210Investment in money - 76 - 76market depositShort-term deposits 45 (47) 2 - 1,474 (1,190) 2 286 DDD GROUP PLC NOTES TO THE PRELIMINARY ANNOUNCEMENT (cont.) 9 POST BALANCE SHEET EVENTS (a) On 12 January 2006, Hans Roger Snook was appointed as a non-executivedirector and granted 250,000 options to subscribe for ordinary shares of 10peach in the company at an exercise price of £0.12. These options areexercisable up to 11 January 2011. (b) On 12 January 2006, certain employees were granted 928,952 options tosubscribe for ordinary shares of 10p each in the company at an exercise price of£0.12. These options are exercisable up to 11 January 2011. (c) On 17 February 2006, 11,500,000 ordinary shares of 10p each were placedat a price of £0.11 per ordinary share raising approximately £1,182,000, afterexpenses. (d) On 10 March 2006, a former consultant to the company exercised an optionover 50,000 ordinary shares of 10p each at 10.7p. 10 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 2005. The comparative figures relating tothe year to 31 December 2004 are taken from the audited statutory accounts forthat year. 11 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:
DDD.L