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Full year results

8th Apr 2013 07:00

RNS Number : 7431B
DDD Group PLC
08 April 2013
 



8 April 2013

 

DDD Group PLC

 

Maiden full year profit from strong, diversified revenue growth

 

Los Angeles, California: DDD Group plc (AIM: DDD; OTCQX: DDDGY; "DDD" or "the Group"), the 3D solutions company, has published its full year results for the year ended 31 December 2012.

 

Highlights

 

Financial

·; Over 15m units of TriDef 2D to 3D conversion solutions shipped by TV, PC and mobile licensees

·; Turnover up 56% to $8,620,000 (2011: $5,534,000)

·; Adjusted* EBITDA up 132% to $3,213,000; 37% margin (2011: $1,383,000, 25% margin)

·; Profit from continuing operations before tax of $1,314,000 (2011: loss of $96,000)

·; Profit per share of 0.57c (2011: loss of 0.43c)

·; Net cash inflow from operating activities of $2,217,000 (2011: $120,000 inflow)

·; Net cash at 31 December 2012 of $3,595,000 (2011: $3,143,000)

* Adjusted for non-cash share based payments

 

Operational

·; Licence deals and licence renewals totaled 7 in 2012

·; 16 licensees shipping royalty bearing products by year-end

·; First patent IP licence agreement completed during the year

·; Yabazam streaming 3D video business model beginning to create recurring revenue following launch of VOD and subscription services for Smart TVs during the second half of the year

·; Attained market leading position in 3D PC market

·; Listed ADRs on OTC-QX exchange to enable US investors to access DDD shares more easily

 

 

Chris Yewdall, Chief Executive of DDD, said:

 

"The Group has recorded its second consecutive year of strong revenue growth as the 3D consumer market continues to develop internationally. More than 15 million products with DDD's 2D to 3D solution were manufactured during the year, delivering the Group's maiden full year profit after tax, following our transition into profitability in the second half of 2011.

 

"In addition to strong shipments of the Group's TriDef technology licences, Samsung signed a patent licence to use the Group's intellectual property for a 2D to 3D conversion application aimed at the growing number of 3D consumer devices marketed by Samsung.

 

"During the year, we also launched the Yabazam 3D streaming movie service on Samsung and LG Smart TVs, providing a further opportunity for the Group to generate recurring revenues from the fast growing installed base of 3D Smart TVs.

 

"In 2013, the Group plans to build upon its growing technology licensing income, expanding onto new 3D devices including glasses-free tablet PCs. The Group also plans to further augment the Yabazam streaming service by adding new content, delivering solutions to additional brands of Smart TV and expanding the service to new categories of 3D products including tablet PCs."

 

 

Enquiries

 

DDD Group

Chris Yewdall, President & CEO

Victoria Stull, Chief Financial Officer

+1 310 566 3340

Canaccord Genuity (UK Nomad)

Simon Bridges

 

+44 (0) 207 523 8000

College Hill (UK IR)

Kay Larsen / Adrian Duffield

+44 (0) 207 457 2020

 

Berns and Berns (US PAL)

Jim Berns

+1 212 332 3320

 

 

About DDD Group

 

DDD transforms the visual experience by bringing 3D to the consumer. Its TriDefTM3D solutions convert 2D to 3D automatically, and enable delivery to 3D TVs, PCs and mobile devices. Leading brands including Samsung, LG Electronics, Lenovo and Sony license these solutions. Over 26 million TriDef 3D products have been shipped by DDD's licensees worldwide. DDD's shares are quoted on the London Stock Exchange's AIM Market (AIM: DDD; OTCQX: DDDGY). For more information please visit www.DDD.com.

 

Overview

During 2012, the Group built upon the momentum established in 2011 to deliver another consecutive year of record revenues together with the Group's first net profit after tax. The Group's licensees shipped over 15 million units of TriDef® 2D to 3D conversion technology during the year, bringing the cumulative total to over 26 million units shipped at the end of 2012.

 

The Group also added two additional licensees in the PC market and one new licensee in the TV market. Existing software licence agreements with four licensees including LG, AOC and Lenovo were also renewed during the year.

 

DDD continued to focus on developing the market for its TriDef 3D PC software products, which resulted in an increase in annual OEM shipments of 172% to approximately 2.4 million units. Additionally the Group focused on developing opportunities for its TriDef 3D PC software in the sizeable internet café market in China and formed an alliance with the i-Café market leader, ShunWang Technology Co. Ltd, towards the end of the year.

 

Shipments of the Group's 2D to 3D video conversion solution for the new 'glasses-free' smartphone and tablet products fell during the year as expected, as the LG Optimus 3D smartphone reached end of life. This temporary decline in shipments was due to the longer time required by 3D display manufacturers to perfect the larger 7" and 10" glasses-free 3D displays that are expected to be introduced in tablet PCs in 2013.

 

The Group also introduced the Yabazam! 3D movie streaming service to LG and Samsung Smart TVs in six countries including the United Kingdom, United States and Germany, achieving over 175,000 Smart TV app downloads during the year. The service was upgraded to video on demand in the fourth quarter, allowing viewers to download feature length 3D movies on demand for a fee.

 

DDD signed its first patent licence with Samsung in 2012. This agreement allows Samsung to exploit DDD's extensive international patent library to perform offline 2D to 3D conversion of high definition video content. This is the first such licence for the Group and augments the licence and royalty income that is presently derived from the Group's technology licences.

 

In response to the increasing interest in the Group being shown by US investors, an American Depository Receipts listing of the Group's AIM shares was completed on the OTC-QX stock exchange in December. This cost effective program is expected to simplify the process of trading the Group's shares for US-based investors.

 

Significantly, the Group achieved positive cash flow from operations for the full year and improved upon the profitability achieved in the second half of 2011. The Group expects its technology-based licensing and royalty revenue, coupled with further patent licensing opportunities, to deliver further growth in 2013.

 Financial review

Revenues for the year ended 31 December 2012 were $8,620,000 (2011: $5,534,000), an increase of 56%. The increase was driven by growth in shipments of 3D devices including: televisions, Blu-ray players, PCs and smartphones incorporating the Group's TriDef 3D solutions.

 

Recurring TriDef technology royalty revenues (including direct to consumer software sales) increased to $8,549,000 (2011: $4,686,000) as shipments across TV, PC and mobile grew from 9.1 million to 15 million units. The mix of unit shipments by volume was: 82% TV, 16% PC and 2% mobile devices. Royalties from OEM agreements increased to $8,339,000 (2011: $4,556,000) while software licensing sales were $210,000 (2011: $130,000) for the year.

 

Other licensing royalties were $64,000 (2011: $60,000). This includes royalties received from IP patent licensing as well as royalties from other licence agreements which are non-unit bearing in nature. Revenues from one-time licence fees were nil (2011: $374,000).

 

Consulting revenues attributable to one-time development fees were nil (2011: $407,000) as custom development work required for licensees had been performed and completed in earlier periods. Other revenues were $7,000 (2011: $7,000).

 

Gross profit increased by 60% to $8,376,000 (2011: $5,219,000) and gross margin to 97% (2011: 94%) as a result of the continued shift in revenue mix towards higher margin royalties.

 

Administration expenses increased to $5,242,000 (2011: $4,259,000), with the full year impact of the 2011 hiring and routine cost increases. The Group also added an OTC-QX listing of a new Level I ADR program late in the year.

 

Other income decreased to $79,000 (2011: $423,000). The majority of other income is normally derived from the Australian R&D cash incentive; however rule changes applicable to the year did not allow the Group to receive a cash incentive during the period. A future tax credit for fiscal year 2012 was granted instead and the Group expects to receive the cash incentive in 2013 following a further change in the rules.

 

The non-cash share-based incentive cost was $733,000 (2011: $621,000) reflecting the additional expense from share options granted during 2012.

 

Adjusted Group profit before tax and share-based incentive costs was $2,047,000 (2011: profit $525,000). The reported pre-tax profit was $1,314,000 (2011: loss $96,000).

 

Given continued profitability in the Australian subsidiary and the likelihood of profits in 2013 for the US subsidiary, the deferred tax asset increased to $1,096,000 (2011: $476,000), which results in a benefit of $620,000 recognised through the consolidated statement of income during the period. The total taxation charge was $550,000 (2011: $486,000). Taxation includes foreign withholding taxes withheld at source as well as local sales taxes, offset by the movement in the Deferred Tax Asset and Liability accounts.

 

The Group recorded a profit per share during the year of $0.57 cents (2011: loss 0.43 cents).

 

During the year the Group simplified its legal structure removing the dormant US entity (Dynamic Digital Depth TV, Inc) and the quasi-dormant Canadian holding company (Dynamic Digital Depth, Inc), which was the predecessor parent company prior to the creation of DDD Group plc. The result was a non-taxable distribution of the Canadian holding company's assets and liabilities to DDD Group plc as part of the wind-up. The assets primarily consisted of the loans to the subsidiary operating companies as well as the subsidiary share certificates in issue on the date of wind-up.

 

Net cash generated by operating activities was $2,217,000 (2011: inflow of $120,000). Capitalised expenditure was $1,873,000 (2011: $1,545,000). This cash flow was supplemented by $72,000 raised from the issue of new shares through employee stock option exercises during the year (2011: $291,000), resulting in cash of $3,595,000 at the end of 2012 (2011: $3,143,000).

 

Business update

During 2012, the Group realised the value of the licensing relationships and new product development that had been undertaken during 2011. With continued growth in the shipments of IP for television products and a full year of PC software shipments by multiple licensees, the Group's licensees achieved a 65% annual increase in IP shipments.

 

The largest volume of shipments came from the TV market where Samsung continued to deploy the Group's 2D to 3D conversion solution in its market-leading range of 3D televisions and 3D Blu-ray players. ATEN Technology Inc. also commenced shipment of its IOGear 3D Complete+ video processor that incorporates the Group's TriDef 3D conversion technology. Despite earlier setbacks, DDD's other licensees in the TV chip market continued to make progress towards introducing their next generation video processing chips that include TriDef 3D conversion and the Group believes these additional licensees may become active during 2013.

 

The design of video processing chips for TVs continues to evolve with the latest chips including single and dual core ARM-based processors. This evolution has allowed the Group to develop ARM-compatible implementations of the TriDef 3D conversion for these next generation TV processors and the Group expects that this new packaging may allow new devices to include the TriDef 3D conversion feature implemented as lower risk software. The software approach is expected to reduce delivery times (compared to conventional chip development projects) and reduce technical risk and cost for OEM licensees.

 

In the PC market, the Group added two additional PC software licensees during the year and continued to expand the range of games supported by the TriDef 3D software, which totalled 740 by the year end, including the leading games in China, Korea and Japan.

 

As part of its focus on developing opportunities in China in the Internet Café market, the Group partnered with market leader Shunwang Technology Co. Ltd. to demonstrate 3D PC games at their annual franchisee conference in Hangzhou China. Shunwang's 90,000 i-Café franchisees own over five million PCs and this represents a very attractive upgrade market for DDD's PC monitor licensees including AOC, LG Electronics and Lenovo.

 

Based on the increased interest being shown by game developers in the growing installed base of 3D displays, the Group also introduced a software developer toolkit that enables game developers to include support for 3D features directly from within the game. The toolkit was used by game developer Ubisoft to add 3D support to the PC version of Tom Clancy's "Ghost Recon: Future Soldier" that was released in September. Players can enable 3D from specially designed menus within the game while the 3D version of the game is generated by the TriDef 3D software.

 

The introduction of Windows 8 in October 2012 is likely to slow the growth of new 3D PC shipments by OEMs in 2013 since Windows 8 is a touch driven user experience and there are few large 3D PC displays currently available that also include the touch screen capability. The arrival of Windows 8 is not expected to impact the Group's i-Café market development activities in China, since Windows 8 is not used in Shunwang's i-Cafes.

 

The quality of 'glasses-free' 3D screens in the mobile phone and tablet market continues to make good progress. During 2012, cost and yield issues delayed the introduction of next generation 3D tablets however the Group is now seeing a steady increase in OEM interest, particularly in China.

 

During the year, the Group continued to develop the TriDef 3D Mobile software for Android, resulting in the debut of a new mobile game conversion feature at the Consumer Electronics Show in January 2013. OEMs now have a wider choice of 3D content capabilities that are available for licence including video conversion, photo conversion and game conversion for the latest popular mobile and tablet games. The Group expects to conclude licence agreements for these products during the first half of 2013 for the emerging 3D tablet market as evidenced by the licence agreement with Chinese manufacturer Qingyuan Gadmei Electronics Technology Co. Ltd for its new glasses-free 3D tablets that was announced on 27 March 2013.

 

LG continued to ship its Optimus 3D smartphone during the year, introducing the second generation Optimus 3D Max version. IP shipments for the Group's Android software were lower in 2012, however, as the LG Optimus 3D smartphone reached end of line towards the end of the year. IP shipments of the TriDef 3D Mobile software are expected to recover during 2013 as the new 3D tablets are launched internationally.

 

As the installed base of 3D televisions, personal computers and mobile devices continues to grow, the Group is broadening the reach of the Yabazam 3D movie streaming service. Industry research suggests that around 400 million 3D capable TVs will be in living rooms by the end of 2015, most of which will have the Smart TV internet capabilities. The latest Smart TV trend in the television market allows Yabazam 3D to be delivered as an app from the Smart TV app store.

 

In February 2012, the Yabazam 3D app was launched for LG's range of 3D Smart TVs and in June the app was introduced on Samsung's range of 3D Smart TVs. In September, the Group launched the Yabazam video on demand service allowing Yabazam 3D users to download movies for a pay per view fee. At the end of the year, the Yabazam service in the United States was upgraded to a subscription model allowing users to pay a fixed monthly fee and download as many of the Yabazam movies as they wish.

 

In 2013, the Group expects to continue to expand the reach of the Yabazam 3D streaming service, both geographically by introducing the service in more of the 154 countries where Smart TV services are now available, and also by delivering the Yabazam app for new brands of 3D Smart TV and additional 3D devices. Currently the service is available in 17 countries. The Group debuted the Yabazam app for Android-based smartphones and tablets at the Consumer Electronics Show in January 2013 and 3D tablet manufacturers are already showing solid interest in carrying the service in their new products.

 

At the end of 2012, the Group had increased the number of originally made 3D movies under contract from 32 to 83 titles and had expanded the international content partner network from 13 to 24 3D content producers. Driven by the popularity rankings achieved by the Yabazam Smart TV app, it had been downloaded over 175,000 times by the end of the year and was being used by approximately 1,500 viewers each day to stream 3D content to their Smart TVs.

 

To date, the majority of the Group's licensing revenue has been derived from the technology licensing program, whereby the Group provides a software application or reference design to the licensee for inclusion with the licensee's 3D products. During 2012, the Group concluded its first patent licence agreement with Samsung that allows Samsung to undertake offline 2D to 3D conversion using the patent claims owned by DDD. Unlike a technology licence, the patent licence does not require any software or reference design to be provided by DDD to the licensee since the licensee has the skills to develop its own implementation.

 

With over 26 million 3D consumer products that include the Group's TriDef 3D technologies shipped by leading manufacturers since early 2010, there is now an established value for the internationally registered patent claims on which DDD's solutions have been founded. As new revenue streams continue to be developed, the Group expects that patent licensing revenue will grow as the Group establishes its patent rights with prospective licensees. The patent licensing program also has the potential to create licence and royalty revenue from applications in 3D markets that are outside the scope of the current technology licensing program. The Group is also in discussions with third party licensing specialists regarding partnerships that may help accelerate the contribution and growth of the patent licensing program.

 Current trading and outlook

For 2013, the Group expects to derive revenue from existing and new TriDef technology licensees in the TV, PC and mobile markets, supplemented by a more active approach to patent licensing within the consumer electronics industry and other 3D consumer markets. As the 3D market continues its strong growth, the Group is transitioning from a company that generates the majority of its income solely from technology licensing, to one that generates a diversified range of revenue from the emerging opportunities in the broader 3D consumer market, including content distribution.

 

DDD has maintained its market leadership position, with over 15 million new 3D consumer products produced with the Group's TriDef 3D technologies during 2012. The Group expects that shipments of IP in the TV market and mobile/tablet markets will grow in 2013 while shipments in the PC market will likely slow as more licensees introduce Windows 8 based PC products for which the larger 3D touchscreens are not yet available.

 

Building on the momentum established from over 26 million products that have been shipped in the past three years with the Group's patented TriDef 3D technologies, the Group also plans to place more emphasis on the patent licensing program to augment the revenues that are currently derived from the technology licensing program.

 

The Group will continue to invest in the Yabazam 3D movie streaming service, adding more 3D movies, expanding onto new Smart TV platforms in more countries and delivering Yabazam to new devices such as the emerging glasses-free 3D tablet market. As subscriber growth for Yabazam continues to grow, the Group is exploring the acquisition of rights to 2D content libraries that can be converted to 3D to deliver unique 3D programming exclusive to the Yabazam service.

 

The current year has started in line with the Board's expectations and the Board is confident it can build further on the momentum achieved to date to maintain its profitable growth in 2013.

 

 

Consolidated statement of comprehensive income

for the year ended 31 December 2012

12 months to

 31 Dec

12 months to

 31 Dec

2012

2011

$'000

$'000

 

Notes

Revenue

2

8,620

5,534

Cost of sales

2

(244)

(315)

Gross profit

2

8,376

5,219

Depreciation/amortisation expense

(1,190)

(893)

Share based payments

(733)

(621)

Other administration expenses

(5,242)

(4,259)

Total administrative expenses

(7,165)

(5,773)

Other income

79

423

 

Operating profit/(loss)

 

1,290

 

(131)

Analysed as:

Earnings before interest, taxes, depreciation, amortisation and share based payments (Adjusted EBITDA)

 

3,213

 

1,383

Depreciation/amortisation expense

(1,190)

(893)

Share based payments

(733)

(621)

1,290

(131)

Finance income

24

35

Profit/(loss) from continuing operations before tax

1,314

(96)

Income tax expense

3

(550)

(486)

Profit/(loss) for the year

764

(582)

Other comprehensive income for the year:

Exchange differences on translation of foreign operations

37

45

Other comprehensive income for the year, net of tax

37

45

Total comprehensive profit/(loss) for the year

801

(537)

Profit/(loss) per share from both total and continuing operations

Basic (cents per share)

4

0.57

(0.43)

Diluted (cents per share)

4

0.55

(0.43)

 

 

Consolidated statement of financial position as at 31 December 2012

 

 

31 Dec

31 Dec

 

2012

2011

 

$'000

$'000

 

 

 

Notes

 

Assets

 

Non-current assets

 

Intangible assets

5

2,592

1,885

 

Property, plant and equipment

139

162

 

Deferred tax asset

6

1,096

476

 

 

Total non-current assets

3,827

2,523

 

 

Current assets

 

Inventory

7

-

 

Trade and other receivables

1,678

1,225

 

Cash and cash equivalents

3,595

3,143

 

 

Total current assets

5,280

4,368

 

 

Total assets

9,107

6,891

 

 

Equity and liabilities

 

Capital and reserves

 

Issued capital

13,005

12,427

 

Share premium

17,069

16,254

 

Merger reserve

21,469

20,524

 

Share based payment reserve

1,515

727

 

Translation reserve

(1,825)

486

 

Retained earnings

(43,968)

(44,759)

 

 

Total equity

7,265

5,659

 

 

Non-current liabilities

 

Deferred tax liabilities

543

417

 

 

Total non-current liabilities

543

417

 

 

Current liabilities

 

Trade and other payables

1,299

815

 

 

Total current liabilities

1,299

815

 

 

Total liabilities

1,842

1,232

 

 

Total equity and liabilities

9,107

6,891

 

 

 

 

Consolidated statement of cash flows for the year ended 31 December 2012

12 months to

 31 Dec

12 months to

 31 Dec

2012

2011

$'000

$'000

 

Notes

Cash flows from operating activities

Profit/(loss) for the year

764

(582)

Finance income in the consolidated statement of comprehensive income

(24)

(35)

Tax in the consolidated statement of comprehensive income

550

486

Amortisation

5

1,101

819

Depreciation

89

74

Share based payments

733

621

Increase in inventory

(7)

-

Increase in trade and other receivables

(453)

(427)

Increase in trade and other payables

484

8

Net cash generated by operations

3,237

964

Income tax paid

(1,044)

(879)

Interest received

24

35

Net cash generated by operating activities

2,217

120

Cash flows from investing activities

Payments for intangible assets

5

(1,808)

(1,439)

Payments for property, plant and equipment

(65)

(106)

Net cash used in investing activities

(1,873)

(1,545)

Cash flows from financing activities

Proceeds from issue of equity shares

72

291

Net cash generated by financing activities

72

291

Net increase/(decrease) in cash and cash equivalents

416

(1,134)

Exchange gains

36

47

Total increase/(decrease) in cash and cash equivalents

452

(1,087)

Cash and cash equivalents at the start of the year

3,143

4,230

Cash and cash equivalents at the end of the year

3,595

3,143

 

 

Consolidated statement of changes in equity for the year ended 31 December 2012

 

Share capital

Share premium

Merger reserve

Share based payment reserve

Translation reserve

Retained earnings

Total

 equity

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

$'000

 

At 1 January 2011

12,414

16,003

20,544

463

350

(44,490)

5,284

Transactions with owners

Issue of shares

25

266

-

-

-

-

291

Share based payment reserve transfer1

 

-

 

-

 

-

(313)

-

313

-

Equity settled share options

-

-

-

621

-

-

621

Foreign exchange differences

(12)

(15)

(20)

(44)

91

-

-

Total transactions with owners

 

13

 

251

 

(20)

 

264

 

91

 

313

 

912

Total loss for the year

-

-

-

-

-

(582)

(582)

Comprehensive income

Other comprehensive income Foreign exchange

 

-

 

-

 

-

 

-

 

45

 

-

 

45

 

Total comprehensive income

 

-

 

-

 

-

 

-

 

45

 

-

 

45

At 31 December 2011

12,427

16,254

20,524

727

486

(44,759)

5,659

Transactions with owners

Issue of shares

6

66

-

-

-

-

72

Share based payment reserve transfer1

 

-

 

-

 

-

(27)

-

27

-

Equity settled share options

-

-

-

 733

-

-

733

Foreign exchange differences

572

749

945

82

(2,348)

-

-

Total transactions with owners

 

578

 

815

 

945

 

788

 

(2,348)

 

27

 

805

Total profit for the year

-

-

-

-

-

764

764

Comprehensive income

Other comprehensive income Foreign exchange

 

-

 

-

 

-

 

-

 

37

 

-

 

37

 

Total comprehensive income

 

-

 

-

 

-

 

-

 

37

 

-

 

37

At 31 December 2012

13,005

17,069

21,469

1,515

(1,825)

(43,968)

7,265

 

1 Reserve transfer for exercised, forfeited and expired options.

 

1. Selected financial data disclosure

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2012 or 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

2. Segmental reporting

 

The Group's operating segments are based upon the Group's revenue streams. At present, given the size of the Group, costs of goods sold and operating expenses cannot be allocated on a reasonable basis to the segments below and, as a result, the segmental analysis is limited to the Group gross profit as presented to the Board of Directors.

 

The 3D content publishing and 3D factory segments as described in the Annual Report and Accounts do not yet contribute over 10% of Group revenues and therefore separate disclosure is not yet provided.

 

2012

2011

$'000

$'000

REVENUES:

Licence fees

--

374

Royalties from OEM units shipments1

8,339

4,556

Other licensing royalties

64

60

Consumer software product sales

210

130

Revenue from the Group's technologies:

 

8,613

 

5,120

Consulting revenues

--

407

Other revenue streams

7

7

Total revenue

8,620

5,534

Cost of goods sold

(244)

(315)

Gross profit

8,376

5,219

Margin

97%

94%

 

1 Includes $45,000 (2011: $61,000) of advertising royalty revenue for the inclusion of Yabazam content and links by OEM manufacturers in their PC bundles. A per unit discount incentive is available to PC OEMs for including content and/or a desktop icon in the bundle which promotes the Yabazam website. Yabazam records a marketing expense for this amount.

 

2012

2011

$'000

$'000

Identifiable assets:

Trade receivables:

Licensing

 

15

 

35

Consulting

--

--

Other

--

--

Total

15

35

Intangible Assets - licensing

2,390

1,746

Intangible Assets - publishing

202

126

Other unallocated assets

6,500

4,984

Total assets

9,107

6,891

 

Identifiable liabilities:

Deferred revenues - customer deposits:

Licensing

188

70

Other unallocated liabilities

1,654

1,162

Total liabilities

1,842

1,232

 

All other assets and liabilities of the Group in addition to the operating expenses are not provided or reviewed at a segmental level.

 

 

Major customers

The customers contributing over 10% to the gross revenues of the Group are as noted in the following table:

 

2012

$000

 

%

2011

$000

 

%

Samsung

(2012: 100% Royalties)

(2011: 2.1% Consulting; 97.9% Royalties)

3,921

45.5%

2,663

48.1%

 

LG Electronics

(2012: 100% Royalties)

(2011: 12.5% Consulting; 87.5% Royalties)

 

793

 

9.2%

 

1,198

 

21.6%

 

Sony

(2012: 100% Royalties)

(2011: 100% Royalties)

 

3,034

 

35.2%

 

679

 

12.3%

Major customer total

7,748

89.9%

4,540

82.0%

All other sources

872

10.1%

994

18.0%

Total gross revenues

8,620

100.0%

5,534

100.0%

 

Regional breakdown

The majority of the Group's revenues (2012: 97%; 2011: 95%) are from customers based in the Asia Pacific region.

 

3. Income tax

 

2012

2011

$'000

$'000

Current tax:

Current year tax charge

1,044

879

Total current tax

1,044

879

Deferred tax asset movement

(620)

(476)

Deferred tax liability movement

126

83

550

486

 

The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading domains where the Group operates. The tax charge on ordinary activities is explained below:

 

2012

2011

$'000

$'000

Profit/(loss) on ordinary activities before tax

1,314

(96)

Profit/(loss) at 24.5% (2011: 26%)

322

(26)

Effects of:

Higher foreign tax rates

74

(2)

Income / Expenses not deductible for tax purposes

88

31

Estimated usage of subsidiary historical losses to cover income tax

(830)

(367)

Tax losses carried forward

211

270

Movement of deferred tax asset

(620)

(476)

Other temporary differences

261

177

Foreign withholding tax

1,044

879

Tax charge on ordinary activities

550

486

 

 

Given that a large majority of the Group's revenues are derived from licensees in Asia, foreign withholding taxes deducted at source on royalties and licences from these countries create the majority of the income tax expense recorded in the Group accounts. These taxes will be available as future foreign tax credits for the US subsidiary and therefore are reflected as increased future potential deferred tax assets ("DTA").

 

There are substantial unrelieved tax losses and tax credits of $41,179,000 (2011: $40,438,000) across the Group companies as set out below:

 

USA

UK

Canada

Australia

Total

$'000

$'000

$'000

$'000

$'000

At 31 December 2012

Unrelieved tax losses & credits

14,6161

5,413

N/A

21,150

41,179

Local rate of tax

40%2

23%

30%

30%

Potential deferred tax asset

5,846

1,245

-

6,345

13,436

DTA recognised

-

-

-

(1,096)

(1,096)

 

Unprovided potential

deferred tax asset

 

 

5,846

 

 

1,245

 

 

-

 

 

5,249

 

 

12,340

 

 

At 31 December 2011

 

Unrelieved tax losses & credits

14,1281

4,168

43

22,099

40,438

Local rate of tax

34%

24%

30%

30%

Potential deferred tax asset

4,803

1,000

13

6,630

12,446

DTA recognised

-

-

-

(476)

(476)

 

Unprovided potential

deferred tax asset

 

4,803

 

 

1,000

 

 

13

 

 

6,154

 

 

11,970

 

1During 2011, the Company reviewed its tax losses consistent with the requirements of US tax authorities (Internal Revenue Code Section 382). This review resulted in an anticipated $3.5 million reduction to unrelieved tax losses (included above).

 

2US effective tax rate including federal and state income taxes is anticipated to be 40% based on current tax law.

 

At 31 December 2012, the availability to offset unrelieved tax losses against future taxable trading profits may be subject to restrictions in the respective tax jurisdictions. The entire deferred tax asset has not been recognised due to the uncertainty of the timing and recoverability of the asset. The remaining asset will be recovered in line with future profits.

 

4. Profit/(loss) per share

 

2012

2011

$'000

$'000

Profit/(loss) for the year attributable to equity shareholders

764

(582)

Profit/(loss) per share

Basic (cents per share)

0.57

(0.43)

Diluted (cents per share)

0.55

(0.43)

Shares

Shares

Issued ordinary shares par 1p at start of the year

134,192,146

132,618,340

Ordinary shares issued in the year

436,666

1,573,806

 

Total outstanding ordinary shares at end of the year

 

134,628,812

 

134,192,146

Weighted average number of ordinary shares for the year

134,293,685

133,837,662

Deferred shares:

 

Issued deferred shares1 at the start and end of the year

 

74,416,547

 

74,416,547

 

Total share capital (Issued & Outstanding)

 

209,045,359

 

208,608,693

1 Deferred Shares:

On 5 July 2008 the share capital of the Company was split so that a total of 74,416,547 ordinary shares of par value 10 pence became 74,416,547 deferred shares of par value 9 pence plus 74,416,547 new ordinary shares of par value 1 penny.

 

The holders of the deferred shares shall not be entitled to receive any dividend out of the profits of the Company available for distribution. On a distribution of assets on a winding-up or other return of capital (otherwise than on conversion or redemption or purchase by the Company of any of its shares) the holders of the deferred shares shall be entitled to receive the amount paid up on their shares after distribution (in cash or in specie) to the holders of the new ordinary shares the amount of £100,000,000 in respect of each new ordinary share held by them. The deferred shares shall not entitle their holders to any further or other right of participation in the assets of the Company. The holders of deferred shares shall not be entitled to receive notice of or to attend (either personally or by proxy) any general meeting of the Company or to vote (either personally or by proxy) on any resolution to be proposed. No certificates will be issued in respect of the deferred shares. The diluted loss per share does not differ from the basic loss per share as these shares are anti-dilutive.

 

For 2012, the diluted profit per share includes the effect of outstanding, fully vested, in-the-money share options at the end of the period (4,270,833). For 2011, the diluted loss per share does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

 

5. Intangible assets

 

Capitalised development costs

Patents

Other intangibles

Total

$'000

$'000

$'000

$'000

Cost

At 1 January 2011

3,630

297

-

3,927

Transfer from PP&E1

-

-

29

29

Additions

1,297

-

142

1,439

Exchange rate differences

(12)

11

-

(1)

At 31 December 2011

4,915

308

171

5,394

Additions

1,639

-

169

1,808

Exchange rate differences

2

-

-

2

At 31 December 2012

6,556

308

340

7,204

Amortisation

At 1 January 2011

2,380

297

-

2,677

Transfer from PP&E1

-

-

10

10

Charge for the year

797

-

22

819

Exchange rate differences

(8)

11

-

3

At 31 December 2011

3,169

308

32

3,509

Charge for the year

1,017

-

84

1,101

Exchange rate differences

2

-

-

2

At 31 December 2012

4,188

308

116

4,612

Net book value

At 31 December 2010

1,250

-

-

1,250

At 31 December 2011

1,746

-

139

1,885

At 31 December 2012

2,368

-

224

2,592

1 The transfer was made on 1 January 2011.

 

Other intangibles include externally developed websites and Smart TV application development for the Group. There is no impairment to the intangibles in any of the reported periods.

 

 

6. Deferred tax asset

 

2012

2011

$'000

$'000

Deferred tax asset:

Opening balance January 1

476

-

Initial recognition of deferred tax asset

-

 476

Movement in deferred tax asset

620

-

1,096

476

 

Based on management's review of the business units, the fact that the Australian unit has utilised accrued net operating losses in recent periods for tax purposes, and the fact that the Group is profitable for 2012, a DTA of $1,096,000 has been recognised in 2012 (2011: $476,000) related to conservative business model forecasts of 2013 full year profitability and anticipated tax loss usage.

 

 

7. Events after the balance sheet date

 

Financial:

 

On 17 January 2013, Mr. Warren Littlefield, a Director of the Company, exercised 200,000 of his April 2008 share options at the established option price of 10p per ordinary share. Mr. Littlefield exercised 200,000 of the share options and sold 150,000 ordinary shares immediately, representing a net increase in his holdings of 50,000 to 515,000 or 0.4%.

 

On 28 January 2013, Miss Victoria Stull, Chief Financial Officer and Executive Director of the Company, exercised 25,000 of her December 2009 share options at the established option price of 13.9p per ordinary share.

 

Operational:

 

The Company has announced renewals with Samsung and Lenovo for their PC software licence agreements. Additionally, the Company announced its first software licence agreement with Gadmei in late March which launches a new market in the glasses-free 3D tablet category.

 

The Group has published regulatory announcements about these activities which can be found on the Group's website at http://www.ddd.com/investors/rns-announcements/.

 

 

8. The Group's full Annual Report and Accounts will be made available to shareholders on or before 11th May 2013.

 

 

9. The Annual General Meeting of DDD Group plc will be held at Norton Rose LLP, 3 More London Riverside, London SE1 2AQ at 10.30am on 11th June 2013.

 

 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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