Half Yearly Report

24 September 2012

DDD Group PLC

Further profitable growth

Los Angeles, California: DDD Group plc (AIM: DDD, 'DDD' or the 'Group' ), the 3D solutions company, has published its half-yearly results for the six months ended 30 June 2012.

Financial Highlights

·; Revenue up 74% to $4,032,000 (June 2011: $2,316,000)

·; Profit before tax, before non-cash share based payments, of $991,000 (June 2011: loss $68,000)

·; Profit before tax of $663,000 (June 2011: loss $387,000)

·; Net profit after tax of $86,000 (June 2011: loss $861,000)

·; Earnings per share 0.06c (June 2011: loss 0.64c)

·; Cash generated from operating activities of $213,000 (June 2011: outflow $332,000)

·; Net cash at 30 June 2012 $2,455,000 (June 2011: $3,313,000)

·; Working capital balance improved to $3,732,000 (June 2011: $3,652,000)

·; 7m units of DDD TriDef 2D to 3D conversion solutions shipped by TV, PC and mobile licensees in the period bringing cumulative total of TriDef unit shipments to over 18m at 30 June 2012

o Over 20m units shipped by licensees as of the date of this release

Subsequent to the period end - highlights

·; Yabazam! launched as a transactional video on demand (TVOD) service on the top two 3D TV market SmartTV platforms (LG and Samsung)

·; License agreement renewals with LG Electronics and Top Victory Investments Ltd

Chris Yewdall, Chief Executive said:

"We have continued to deliver strong turnover growth and generated a maiden profit after tax for the first half. This performance underscores the momentum of the 3D consumer market and we have maintained our market leading position across a range of 3D devices and extended license agreements with current customers. We are exploring new 3D business opportunities with the launch of the Yabazam! 3D movie app for the latest 3D Smart TVs from Samsung and LG.

"Shipments of our TriDef 2D to 3D conversion solutions in the TV, PC and mobile markets have grown dramatically and now exceed an estimated 20m units cumulatively. The Board remains confident that the Group is on track to achieve its objectives for the current financial year."

Enquiries

About DDD

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 Intel, Samsung, LG Electronics and Sony license these solutions. Over 20 million TriDef 3D products have been shipped by DDD's licensees worldwide. DDD's Yabazam! label delivers 3D everywhere with its online content portal and Smart TV apps. DDD's shares are quoted on the London Stock Exchange's AIM Market (AIM:DDD). For more information please visit www.DDD.com.

Overview

The Group recorded record revenues of $4 million in the first six months of 2012 as licensees shipped an increasing number of TVs, Blu-ray players, personal computers and mobile phones incorporating the Group's TriDef 3D technologies. Shipments of intellectual property ("IP") in the period totaled approximately 7 million units bringing the cumulative total to over 18 million at the end of the period and more than 20 million as of the date of this release.

Shipments of the Group's IP for use in chips for 3D televisions, Blu-ray players and PC monitors represented the largest segment by volume. Shipments of the Group's PC software continued to show strong growth, with over 1.1 million copies shipped with 3D laptops, PC monitors and All-In-One PCs by licensees including Sony, LG, Samsung, Lenovo and AOC. Mobile IP shipments comprised approximately 4% of first half IP volumes as LG continued their line of Optimus 3D smartphones.

While global shipments of televisions and personal computers have declined slightly compared to prior years, the shipments of 3D capable devices within these markets continues to show healthy growth as 3D becomes a more widely available feature.

As the installed base of 3D televisions, personal computers and mobile devices continues to grow, the Group is broadening its focus to include digital delivery of 3D content to internet connected Smart TVs and personal computers through its Yabazam 3D portal. This allows the Group to participate in the revenue derived from content consumption to supplement the established technology royalties.

Headcount remained stable in the first half, following the investment in additional staff in 2011, as the group focused its existing resources on the development of new markets including:

·; the sizeable internet café market in China for the TriDef PC game conversion software;

·; the development of Smart TV apps for LG and Samsung's 3D TVs to provide access to the growing Yabazam 3D content library; and

·; the development of ARM and Android-based applications for the next generation TV chipsets and 3D smartphones and tablets.

As the 3D market continues to grow, the Group has also undertaken the preparation of a patent licensing program. DDD plans to make this available to existing and prospective licensees who wish to distribute products that may not include DDD's own TriDef 3D technologies but are based on the patent claims owned by the Group. Patent license negotiations with potential licensees for this new program commenced in the first half.

The Group has taken steps to simplify the corporate structure initiating the dissolution of dormant subsidiaries in the United States and Canada. In recognition of the increased investment interest in 3D in North America, the Group has also initiated a project to secure the listing of an American Depository Receipt ("ADR") of the Group's existing AIM shares on the OTC-QX market, a low cost, efficient approach to to simplify access to the AIM-listed securities by US-based investors.

Financial Review

Revenue for the period ended 30 June 2012 rose 74% to $4,032,000 (June 2011: $2,316,000). The revenue growth was driven by the continued momentum of the 3D consumer market, with 7 million units of DDD's technology shipped during the period, bringing the total at 30 June 2012 to over 18 million since late 2009.

Total technology revenue, including licensing, royalties and software sales, increased by 96% to $4,030,000, representing 99.9% of total revenues (June 2011: $2,060,000 or 89% of total revenues). This increase has been predominantly driven by a 123% increase in high margin royalty revenues to $3,917,000 (June 2011: $1,757,000), resulting from the growing deployment of the Group's TriDef 3D technologies by existing licensees. Additionally, $98,000 was provided by direct-to-consumer software sales (June 2011: $59,000), an increase of 66% from the prior year. License fee revenues declined to $15,000 (June 2011: $244,000) as up-front license fees for new TV chips were fully realised.

Consulting revenues were $nil (June 2011: $250,000) as chargeable specialised engineering services for the Group's customers were not required in the period. Other revenues were $2,000 (June 2011: $6,000) as the Group focused on acquiring new content and launching SmartTV apps for Yabazam, which are expected to become revenue generating during the second half of 2012.

Gross profit increased by 73% to $3,857,000 (June 2011: $2,224,000) and gross margin was unchanged at 96% (June 2011: 96%).

As planned, administrative expenses increased to $2,321,000 (June 2011: $1,875,000) due to normal operating expense increases and the full period effect of the investment made in new staff hired during the second half of 2011 to facilitate engineering support for the mobile market and new IP technologies, as well as two staff for the Yabazam 3D digital content distribution business.

Depreciation and amortisation expenses totalled $595,000 (June 2011: $501,000). The increase is due to the increase in IFRS qualifying R&D activities since the Group expanded its R&D headcount beginning in the second half of 2010. Note 5 provides the details of development costs which have been capitalised.

The non-cash share-based incentive cost is $328,000 (June 2011: $319,000).

Adjusted Group profit before tax, before share-based incentive costs, improved to a profit of $991,000 (June 2011: loss $68,000). Reported pre-tax profit was $663,000 (June 2011: loss $387,000).

Group taxation expenses increased due to foreign withholding taxes that are deducted at source from royalty revenues by certain non-treaty territories such as Korea and Taiwan. These foreign withholding taxes are available as tax credits in the US for future periods and are therefore included in the taxation line item. Taxation for the period was $577,000 or 14% of gross revenues (June 2011: $474,000 or 20% of gross revenues) reflecting a better mix in revenues from tax treaty jurisdictions during the first half of 2012.

The Group's earnings per share after taxation increased to 0.06c per share (June 2011: loss 0.64c per share).

Cash generated from operations (before tax payments and interest received) was $702,000 (June 2011: $77,000). Net cash generated from operating activities improved to $213,000 (June 2011: outflow of $322,000). Capitalised expenditure was $940,000 (June 2011: $764,000). These cash outflows were offset by $21,000 raised from the exercise of employee stock options in the period, resulting in cash of $2,455,000 at the end of June 2012 (June 2011: $3,313,000).

Business Review

DDD has been diversifying and is now a 3D solutions company that both licenses patented 3D technologies to a broad range of 3D consumer devices and also provides a 3D portal to consumers to bring high quality, diverse content directly to 3D televisions, PCs and mobile devices.

DDD Technology Licensing refers to the licensing of DDD's patented stereoscopic TriDef 3D software, hardware and content conversion/creation solutions as one technology licensing business segment across three main platforms as follows:

·; Consumer Television refers to flat screen HDTV displays, Blu-ray players and set top boxes being developed and marketed by major consumer electronics companies where DDD's automatic 2D to 3D embedded content conversion solution allows 2D television shows, DVDs, Blu-ray discs and console games to be presented in 3D.

·; Desktop and Notebook PC Displays refers primarily to 3D notebook and desktop PCs and monitors bundled with DDD's automatic 2D to 3D conversion software, allowing users to play games and view movies and photos in 3D.

·; Consumer Handheld Devices refers to the market for 3D mobile telephones and tablet PCs, where the TriDef 3D software can be used to convert, present, download and share popular mobile content such as photos, animations and video in glasses-free 3D.

A brief description of the Group's progress by platform follows. More detail on the business model and driver for each of these markets can be found in the 2011 Annual Report available on the Company's website at www.ddd.com.

Consumer Television

Samsung continued to dominate the market for 3D TVs, Blu-ray players and PC monitors that utilise the TriDef 2D to 3D conversion solution. Discussions have commenced with several OEM customers who are interested in bringing 3D content to their 3D Smart TVs via the Yabazam portal.

Late in the first half, IO Gear introduced the 3D complete+TM box to the US market which integrates the Quartics Qvu chip that includes the Group's technologies. Additionally, another chip licensee is nearly complete with its TV chip development and is expected to produce samples for customer evaluations in the second half of the year.

Shipments in the TV market represented the majority of IP shipments in the period, growing by 24% to 5.6 million up from 4.5 million in the first half of 2011.

Desktop and Notebook PCs

The Group generates revenue from the sale of software for 3D PC applications in two ways:

·; Licensing of software to OEM partners for inclusion with 3D PC products (royalties)

·; Direct sales of software to end users via the Group's online website store (software)

Following successful licensing activity directed at the PC market in 2011, TriDef is now licensed widely for use with 3D notebooks, All-In-One PCs and monitors currently marketed by Sony, Lenovo, LG, Samsung, HP, Viewsonic, AOC, Philips and others.

In the first quarter, the Group completed redevelopment of its TriDef consumer website which included Korean, Japanese and Chinese versions to help support the growing Asian customer base. TriDef now enables over 670 of the most popular PC games to be played in high quality 3D, even though the games have not been developed with 3D presentation in mind. With comprehensive game support, original 3D content from the Yabazam! portal and compatibility with 3D processors from AMD, Intel and nVIDIA, TriDef 3D is the most flexible PC content solution currently available to OEMs and has captured an estimated 80% global market share in the 3D PC market.

During the first half of 2012, TriDef has been enhanced to include support for the new Windows 8 operating system to ensure that as consumers upgrade or purchase new PCs based on Windows 8 in late 2012, TriDef 3D will continue to provide state of the art 3D performance.

In February, DDD teamed up with the leading provider of software to the internet café (I-Café) market in China with the objective of introducing 3D games to the sizeable I-Café market, estimated at over 144,000 locations. DDD's TriDef 3D game conversion solution has been integrated into the software and the beta testing was successfully completed during the third quarter. The software provider will begin a roll out of the upgraded solution in the fourth quarter which is anticipated to create demand for 3D monitors and PCs enabled to activate the software, which will return royalties to the Group.

The Group also delivered a software developer kit ("SDK") that allows game developers to easily incorporate the core 3D features of TriDef 3D within a game as it is being developed. The SDK was evaluated by leading game publisher Ubisoft who recently released an update for Tom Clancy's Ghost Recon Future Soldier that includes 3D features enabled by the TriDef 3D game SDK.

Since 30 June 2012, the Group has signed renewals for two license agreements for its PC software, with LG Electronics and Top Victory Investments (supplier of AOC and Philips brand products to Asia).

Shipments in the PC market largely commenced in the second quarter of 2011 and grew by 1027% year on year to nearly 1.1 million units in the first half of 2012.

Consumer Handheld Devices

The first 3D mobile phones were launched late in the first half of 2011 and LG Electronics included the TriDef 3D Mobile solution in the Optimus 3D handset, which was marketed world-wide. In January 2012, LG introduced the new Optimus Max 3D handset, which continued to include the TriDef 3D Mobile Android™ application, in key growth markets.

During the first half of 2012, improvements in glasses-free 3D display technologies have catalysed OEM interest in 3D mobile devices including smartphones and tablets. The Group continues to pursue opportunities for its Android-based application with smartphone and tablet customers and anticipates further product launches of 3D mobile devices in early 2013.

Mobile device shipments represented 4% of the unit shipment volume during the first half of 2012 (June 2011: 1%).

Emerging business segments: 

3D Content Publishing refers to the distribution of original 3D content made by third parties to end users with 3D PCs, TVs and mobile devices. DDD serves as an aggregator of this content through its Yabazam! 3D content portal, acquiring the distribution rights and sharing income with the third party copyright holders.

A growing number of PC products launched in the period feature 3D movie trailers drawn from the Yabazam collection that are preloaded on the hard drive during manufacture. This is beginning to drive additional traffic to the Yabazam portal, where end users can purchase 3D movie content.

Late in 2011, DDD added a staff position dedicated to content acquisition, which has expanded the range of original 3D content available from the Yabazam! content portal. The Group has now licensed 70 titles (58 of which will be available on SmartTVs) from 19 content partners for distribution under a revenue sharing structure, alleviating the need for upfront content acquisition costs.

During the period, DDD began execution of its '3D everywhere' strategy by launching the Yabazam content portal on Smart TVs from LG and Samsung. The Smart TV platforms provide Yabazam as a free downloadable application to view trailers for the growing content library.

Since the launch of the service, over 85,000 customers have downloaded the App. Development of the transactional video on demand service ("TVOD") was completed in September 2012 and initially launched on LG's Smart TV platform. A subscription video on demand model ("SVOD") is underway and expected to be completed in the fourth quarter of 2012.

Post period-end, in July, the Group teamed up with WealthTV, the San Diego based luxury lifestyle and entertainment network, to bring WeathTV's lineup of 3D programming to Yabazam, DDD's 3D content distribution portal. This marks the first time that DDD has entered into a content distribution agreement with a television network.

3D Conversion (or 3D Factory) refers to the potential service business of post-conversion of 2D content to 3D for consumers utilising devices in the markets that DDD services (TV, PC and mobile devices).

During the period, DDD continued its business development activities in conjunction with The Littlefield Company, aimed at US TV networks interested in broadcasting popular TV shows in 3D. The Group continues to monitor this market in readiness for the anticipated opportunities to create 3D TV content for the US networks.

Outlook

The market for 3D consumer devices continues to deliver solid growth opportunities as the Group's licensee's increase shipments of 3D televisions, personal computers and mobile devices. Despite the continued economic uncertainty, 3D consumer device shipments still represent a small percentage of the overall market for televisions, personal computers and mobile devices, offering some degree of stability to the Group's growth plans.

DDD expects to deliver further growth in the IP licensing business through the renewal of existing license agreements, by securing more license agreements and through the introduction of a patent licensing program for companies that wish to license the claims of the Group's internationally registered 3D patent library.

As more 3D products are purchased for use in the home, the Group is also expanding its product offerings to include new use cases such as the delivery of 3D content over the internet directly to the latest 3D Smart TVs. These should allow the Group to participate in the revenue derived from the consumption of 3D content by a growing number of users. This is expected to complement the high margin technology licensing revenues and introduce incremental metrics by which the Group's future growth prospects can be measured.

Having established a profitable, growing high margin business, the balance sheet remains healthy and the Group is well positioned to take advantage of additional opportunities as they arise without the need for significant increases in headcount and operating expense.

The Board is hopeful that a listing on OTC-QX should provide low cost, simplified access to the Group's AIM listed securities for US-based investors, leveraging the proximity of the US-based executive management team, and bring shareholders improved liquidity in the shares to benefit all shareholders. We are now investigating this process and will update shareholders further in due course.

Based on the first half performance, the Group is well positioned to meet the full year forecasts for IP shipments for 2012. Whilst mindful that the current macro-economic volatility could have some impact on the rate of our deployment, the Board remains confident that the Group will deliver the expected growth for the current financial year.

C M Yewdall

Chief Executive Officer

24 September 2012

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of cash flows

Consolidated statement of changes in equity

Notes to the Unaudited Consolidated Half-Yearly Financial Statements of DDD Group plc

for the six months ended 30 June 2012

1. The Company

DDD Group Plc ("the Company") is the parent entity of the consolidated group which is principally involved in the development and licensing of software, hardware, services and IP for the conversion of content from 2D to 3D and to enable the viewing of 3D images on consumer 3D devices.

The Company is a public limited liability company incorporated and domiciled in England and Wales. The address of its registered office is Thames House, Portsmouth Road, Esher, Surrey KT10 9AD, United Kingdom.

The Company has its listing on the Alternative Investment Market ("AIM") of the London Stock Exchange.

2. Basis of preparation

This interim report on the unaudited consolidated financial statements is for the six month period ended 30 June 2012. It does not include all the information required for full annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2011, which were prepared under International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").

The consolidated financial statements have been prepared under the historical cost convention except for share based payments which are valued at the date of grant.

Except as noted below, these consolidated financial statements have been prepared in accordance with accounting policies consistent with those set out in the Group's financial statements for the year ended 31 December 2011, which were prepared in accordance with IFRS as adopted by the EU.

The financial information set out in this interim report does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 December 2011, prepared under IFRS as adopted by the EU, have been filed with the Registrar of Companies. Those accounts have received an unqualified audit report and did not contain statements or matters to which the auditors drew attention under the Act.

The Group's consolidated financial statements are presented in US dollars.

The Group is undergoing restructuring efforts to eliminate dormant and/or unnecessary intermediary entities. Dynamic Digital Depth TV, Inc., a dormant US company, was dissolved in April 2012 and Dynamic Digital Depth, Inc., the previous publicly-listed Canadian holding company, has now been removed from the structure (Sept 2012).

3. Selected segmental reporting data

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.

Please note that the following data is not an IFRS8 compliant disclosure but selected financial information.

The revenues generated from licensees of the Group's intellectual property are categorised based on contractual agreement terms.

4. Earnings (loss) per share

For the prior periods, 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.

For all periods, the deferred shares are not deemed to be dilutive given the characteristics of these shares which are described in full in the 2011 Annual Report and Accounts of the Company.

5. Intangible assets

6. Shares in issue

1) Employees exercised issued and vested stock options.

7. Related party transactions

On 28 June 2012, the Company announced that one of its Directors (Mr. Kristensen) exercised 100,000 of his April 2008 share options, set to expire on 23 April 2013, at the established option price of 10p per ordinary share. Mr. Kristensen's exercise of 100,000 options increased his net holdings to 405,204 ordinary shares or 0.3%.

8. Events after the balance sheet date

Financial:

On 9 July 2012, the Board of Directors approved the grant of options over 600,000 ordinary shares (par value 1p) in the Company to the executive officers at an exercise price of 25p per ordinary share, which is the mid-market closing price on the grant date. Christopher Yewdall, Executive Director of the Company, received options over 300,000 shares as part of the grant.

Operational:

On 18 July 2012, the Group announced that Chief Financial Officer, Victoria Stull, was appointed to the Board of Directors with immediate effect. Victoria joined the Company's finance team in October 2009 and was appointed Chief Financial Officer in June 2010.

License agreement renewals were completed with LG Electronics and Top Victory Investments (the manufacturer of AOC and Philips branded products in Asia). Details can be found in the regulatory news service announcements available on the Company's website at www.ddd.com/investors/rns-announcements/.