25th May 2007 07:01
DDD Group PLC25 May 2007 25 May 2007 DDD GROUP PLC 2006 ANNUAL REPORT AND ACCOUNTS AND NOTICE OF AGM DDD Group plc (the "Company") announces that it is today posting the AnnualReport and Accounts for the financial year ending 31 December 2006. The Companyis also posting a circular containing a Notice of AGM convening the AGM to beheld at 9:00 a.m. on Tuesday 19 June 2007 at 3 More London, Riverside, LondonSE1 2AQ (the "Circular"). Copies of the Annual Report and Accounts and theCircular may be requested directly from the Company and are also available atthe Company's registered office, 22 Melton Street, London NW1 2BW. Enquiries: Chris Yewdall, President and Chief Executive OfficerTel: +1 310 566 3340E-mail: [email protected] Kenneth Fleming, Director - Corporate FinanceBell LawrieTel: +44 141 221 7733 CHAIRMAN'S STATEMENT The year 2006 held particularly great promise. It is therefore a commensuratedisappointment to have to report that revenues, reasonably anticipated by yourcompany, have been delayed for reasons over which DDD has had no control. Notwithstanding this situation, DDD has made substantial progress in broadeningits ability to address additional 3D platforms, as detailed by CEO Chris Yewdallin his report to shareholders. DDD has been very active in working with prospective commercial partners with aview towards generating substantial development, licensing and content relatedrevenues. The company's prospective partners include major consumer electronicsfirms, telecommunications carriers, content creators and aggregators andcomplementary software partners. DDD's market-ready technologies are now easilyadapted to the commercial requirements of the marketplace. The technical team has again excelled by delivering innovative and practicalsolutions to very demanding technical specifications. DDD's technicalcapabilities are increasingly known and respected throughout the 3D industry. The business development team has performed admirably in strategising,initiating and handling a growing level of interest and inquiries with the aimof generating earnings to increase the market value of the company. The major shareholders, in particular Arisawa Manufacturing Co., Ltd. ("Arisawa"), have continued to support DDD in many ways, not least as lead investors inthe February and December 2006 capital raisings. This support has been vital toDDD and I wish to express to Arisawa, and the other investors, the sincerethanks of the directors and executive management for the confidence that hasbeen expressed in such a tangible fashion. There is a rapidly growing understanding among industry participants that 3D isthe next frontier in consumer entertainment. Television has gone through thedigital transition, flat screens dominate sales and high-definition displays aredemonstrating that consumers are receptive to advancements in technology. All ofthese developments suggest that 3D will become commonplace in major markets,from mobile phones to laptops to TV sets and 3D digital cinemas. The Board believes that DDD has a unique opportunity, and correspondingchallenge, to deploy its leading technologies across the relevant technologicalplatforms, so that its depth map encoding / decoding software system becomes anaccepted standard for creation, encoding, transmission and display of 3Dcontent. DDD has again carefully managed its finances and productivity. It is nowimportant for our company to generate the revenues that DDD's leadingtechnologies should readily enable. All efforts of the company are directedtowards this outcome. My thanks go to my fellow directors for their contribution during the year. Onbehalf of the Board, I would like to express our deep appreciation to bothmanagement and staff for their dedication, enthusiasm and plain hard work. CHIEF EXECUTIVE'S REPORT 2006 was a year of measured growth in the 3D industry as the new markets thatemerged in 2005 developed at a modest rate. As the company confirmed inSeptember 2006, DDD's mobile phone licensee experienced further delays in thelaunch of their 3D mobile phone in order to incorporate a higher quality 3Ddisplay in a slimmer phone which has further delayed per handset royalties andanticipated mobile content revenues for DDD. This had a negative effect onfull-year revenues for 2006 as development and licensing revenues failed tomaterialise from the additional mobile phone development and licensingagreements that were anticipated. On learning of the postponement of the 3D mobile phone launch, DDD acted quicklyto mitigate the medium-term risk to the company's growth in the mobile phonemarket. This included the development of a prototype 3D mobile phone that hasallowed DDD to actively pursue the various international mobile carriers with acompelling business case for introducing 3D to their subscribers. DDD expects to benefit from the continued growth in the 3D cinema market. SonyColumbia and Disney released two new 3D films during 2006. Both Monster Houseand The Nightmare Before Christmas performed well in the box office, garneringfurther support from the Hollywood studios to produce more 3D movies. Thecompany began to undertake 2D to 3D conversion tests for both animated and liveaction Hollywood materials in the second half of the year. The objective is toensure that DDD's 2D to 3D movie conversion tools achieve the necessary level ofimage quality and productivity. Based on the anticipated growth of 3D cinemascreens, DDD believes that by late 2007, there will be sufficient 3D cinemascreens for the box office revenues to generate a viable return on investmentfor 2D to 3D movie conversion projects. The increasing popularity of 3D movies is also encouraging consumer electronicscompanies to find innovative ways to bring the 3D movie-going experience to thehome theater and television. At the January 2007 Consumer Electronics Show ("CES"), Syntax-Brillian Corporation demonstrated a 32" OleviaTM 3D LCD TV based onArisawa's polarized material together with DDD's TriDef suite of 3D contentsolutions. A number of other well-known companies including Texas Instruments,Samsung Electronics, LG Electronics and Philips also demonstrated a variety of3D flat screen and rear projection TVs during CES. In May 2006, in conjunction with Texas Instruments' Wireless group andOxford-based Ocuity Limited, the company developed a prototype 3D mobile phonecapable of demonstrating the full capabilities of DDD MobileTM. TexasInstruments demonstrated the 3D prototype phone internationally at the JapanWireless conference in Tokyo in July 2006 and more recently at the 3GSM WorldCongress in Barcelona and the CTIA Wireless Show in Orlando in February andMarch 2007, respectively. Assisted by Hans Snook, the business development team undertook a number ofpresentations of the prototype 3D mobile phone to senior level executives ofvarious international mobile phone operators during the second half of 2006.Response to the prospect of bringing a 'glasses-free' 3D viewing experience totheir subscribers was positive and resulted in the completion of a consultingproject for one European carrier in December 2006. Since 3D can be deployed on present day mobile phones through the inclusion of a3D display and the DDD Mobile software library, the DDD prototype clearlydemonstrates the ease with which a 3D equipped mobile phone can be delivered.The discussions with the carriers have centered on how best to harness consumerinterest in 3D and the 'wow' factor of the 3D phone. This includes increasingsubscriber usage of existing mobile content services like Multimedia MessagingService ("MMS") and creating differentiation for emerging services such asMobile TV. The company believes that demonstrating the 3D phone and explaining the expectedincrease in a subscriber's usage of their mobile phone will help accelerate theadoption of 3D phones since the carriers will have a clear understanding ofwhere the 3D phone fits within their business. In October 2006 DDD completed its first mobile 3D content license agreement toprovide 3D pictures, animations and movies for the SIM+ card that was introducedby Orange Romania. Several of the images were produced from the Jamba andJamster! mobile content that was converted to 3D during 2005 and the revenuefrom these images was shared with Jamba/Jamster!. The company still expects that the first 3D enabled televisions will beintroduced during 2007, yielding development and licensing opportunities forDDD's TriDef 3D content solutions in an additional consumer mass market. Inresponse to the increase in sales of high-definition, flat-panel televisions andthe introduction of HD DVD's, DDD introduced TriDef(R) Media Player, capable ofconverting full HD resolution video from 2D to 3D in real-time. The development of the TriDef Vision+ set top box continued with the objectiveof delivering an embedded 'in display' solution. Following recent developmentsin image processing chipsets used in advanced, flat-screen televisions, thecompany is pursuing the integration of DDD's 3D conversion and image processingcapabilities in third party chips. This approach offers the potential forconsumer electronics companies to offer 3D enabled flat-screen televisions atlittle incremental cost using components that are already used in their existing2D televisions. A growing installed base of 3D capable television sets will create additionalreturn on investment for the filmmakers and studios that are already consideringthe conversion of their film libraries to 3D, driving the demand forhigh-quality 3D conversion tools. In the medium term, the availability of 3Dtelevisions should also catalyse the requirement for efficient delivery of both2D and 3D versions of the content on DVD or via broadcast. Historically DDD's business development task has been that of 3D 'evangelist',promoting a well-designed, high quality 3D content solution for a variety ofmass-market consumer electronics' platforms. The increasing momentum in the 3Dmarket is changing this approach as prospective customers look to take advantageof the products that DDD has successfully delivered to existing customers andlicensees for mobile phones, personal computers and televisions. As the 3Dmarket grows, the company expects to expand the number of consumer devices inwhich the TriDef and DDD Mobile solutions are deployed, thereby reducing thedependence on any one single market as was the case in 2006. DDD's team of dedicated staff has continued to deliver market-leading solutionsand develop lasting commercial relationships, which should enable the company tofulfill its potential. DDD remains fortunate that it has maintained a dedicatedand talented staff from which the company can continue to successfully meetincreasingly complex technical and commercial challenges. Finally, I would like to thank our shareholders for their continued supportduring the year, and look forward to a very promising future for the 3D marketin which DDD intends to play its part. CONSOLIDATED PROFIT AND LOSS ACCOUNT RestatedYear ended 31 December 2006 2005 £'000 £'000 Turnover 305 747 Administrative expenses (2,103) (1,862) Operating loss (1,798) (1,115) Net interest 18 29 Loss on ordinary activities before taxation (1,780) (1,086) Tax charge on loss on ordinary activities (8) (74) Loss for the financial year (1,788) (1,160) Basic loss per share (3.1p) (2.5p) All transactions arose from continuing operations. CONSOLIDATED BALANCE SHEET RestatedAs at 31 December 2006 2005 £'000 £'000 Fixed assetsIntangible assets - 10Tangible assets 54 85 54 95 Current assetsDebtors 127 202Investment in a money market deposit - 76Cash at bank and in hand 1,467 210 1,594 488 Creditors (163) (110) Net current assets 1,431 378 Net assets 1,485 473 Capital and reservesCalled up share capital 7,442 4,657Share premium account 4,612 4,690Merger reserve 13,279 13,279Other reserve 274 229Exchange equalisation reserve (494) (418)Profit and loss account (23,628) (21,964)Shareholders' funds 1,485 473 CONSOLIDATED CASH FLOW STATEMENT Year ended 31 December 2006 2005 £'000 £'000 Net cash outflow from operating activities (1,527) (1,103) Returns on investmentsInterest received 18 29Net cash inflow from returns on investments 18 29 TaxationForeign withholding taxes paid (8) (74)Net cash outflow from taxation (8) (74) Capital expenditurePurchase of tangible fixed assets (9) (68)Sale of tangible fixed assets - 26Net cash outflow from capital expenditure (9) (42) Management of liquid resourcesInvestment in money market deposits (473) (76)Sale of money market deposits 549 -Sale of short-term bank deposit - 47Net cash inflow/(outflow) from management of 76 (29)liquid resources FinancingIssue of shares 2,900 -Expenses paid in connection with issue of shares (193) -Net cash inflow from financing 2,707 - Increase/(decrease) in cash 1,257 (1,219) NOTE TO THE ANNOUNCEMENT The Group has applied the requirements of Financial Reporting Standard 20 ("FRS20"), Share Based Payments, in accordance with the transitional provisions, toall equity instruments granted after 7 November 2002 that had not vested as of 1January 2006. As a result, certain amounts have been restated as at 31 December2005 and for the year then ended. The financial information set out in this announcement does not constitutestatutory accounts as defined in Section 240 of the Companies Act 1985. This announcement includes extracts from the audited statutory accounts for theyear to 31 December 2006. The comparative figures relating to the year to 31December 2005 are taken from the audited statutory accounts for that year,except as noted above in relation to the FRS 20 restatement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
DDD.L