Interim Results

26 September 2011

DDD Group PLC

Interim results for the six months to 30 June 2011

Los Angeles, California: DDD Group plc (AIM: DDD, "DDD", "the Group"), the 3D solutions company, announces its unaudited consolidated half yearly report for the six months ended 30 June 2011.

Highlights

As previously stated, the Group has elected to change its accounting policy and present results in U.S. dollars beginning with the first half of 2011. The comparative financial information is included and the 2010 full year amounts have been restated.

·; Turnover, excluding discontinued businesses, up 140% to $2,316,000 (June 2010: $967,000)

·; Loss from continuing operations before tax significantly reduced to $387,000 (June 2010: loss $537,000)

·; Positive net cash generated from operations $77,000 (June 2010: outflow $846,000)

·; Net cash at 30 June 2011 $3,313,000 (June 2010: $5,080,000)

·; Loss per share 0.64c (June 2010: loss 0.50c)

·; Over 4.6m units of DDD TriDef 2D to 3D conversion solutions were shipped by TV and PC licensees in the period bringing the cumulative total of TriDef unit shipments to over 7m

·; The first glasses free mobile 3D phone from LG Electronics using TriDef 3D Mobile technology for Android began worldwide shipments in June

·; Contract momentum continues with nine new license agreements with PC and mobile phone OEMs and TV chip companies, the majority commencing shipments during Q2

Subsequent to the period end - highlights

·; Signed five-year software license with leading PC OEM expected to yield 1 million unit shipment of TriDef 3D game and photo software over next 12 months

Chris Yewdall, Chief Executive said:

"We have delivered strong turnover growth in the first half and generated positive cash from operations. This performance confirms the momentum of the 3D consumer market where we have maintained our market leading position with the addition of more brand name licensees.

"Shipments of our TriDef 2D to 3D conversion solutions in the TV, PC and mobile markets have grown dramatically and now exceed 7m units cumulatively, and the Board remains confident that the Group is on track to achieve its growth objectives for the current fiscal year."

Enquiries

Overview

During the six months ended 30 June 2011, DDD's licensees continued to build momentum in 3D consumer product shipments. In addition to 3D televisions, licensees began shipping chip-based TriDef 3D solutions in Blu-ray players and PC monitors. The late 2010 delay in shipments of software-based solutions to the PC market was resolved and a number of licensees commenced shipments of notebooks, desktop monitors and all-in-one PCs in the second quarter. The Group also secured its first licensee for the recently released Android™ version of its TriDef 3D Mobile solution.

The Group continued to add talented development and support staff to keep pace with the growing demand from OEMs for the preparation and packaging of its TriDef 3D solutions, particularly in the PC and mobile market. The US operation moved to a new, larger office in Los Angeles in order to accommodate the growth in headcount.

The focus remains on ensuring current licensees achieve optimal success with their current products while leveraging the Group's market leadership to secure additional licensees in the TV, PC and mobile markets.

The Group is also placing additional emphasis on the development of next generation products that are expected to build value for existing and future licensees by leveraging the current TriDef 3D solutions.

Financial Review

The 2011 interim results include two accounting changes that have been applied retrospectively.

The first was the previously announced change in accounting policy for the Group's presentational currency from British pounds sterling to US dollars. The other changes are presentational changes within the Consolidated Statement of Comprehensive Income. The Group has reclassified non-cash Depreciation and Amortisation expense into a separate line item of the Consolidated Statement of Comprehensive Income to assist investors in reviewing the underlying performance of the operations. Additionally, the Group has reclassified foreign withholding taxes that are paid as incurred from Administrative expense to Tax expense as discussed more fully in Note 2.

Revenue from turnover for the period ended 30 June 2011 rose 140% to $2,316,000 (June 2010: $967,000). The June 2010 revenue amount excludes $137,500 from discontinued businesses.

Total technology revenue, including licensing, royalties and software sales, increased by 134% to $1,991,000 (June 2010: $852,000).

This increase has been predominantly driven by a 117% increase in high margin royalty revenues to $1,757,000 (June 2010: $809,000) resulting from the growing deployment of the Group's TriDef 3D technologies. Additionally, $175,000 of licensing revenues (June 2010: $0) related to implementation agreements signed in the second half of 2010 and $59,000 of direct-to-consumer software product sales (June 2010: $43,000) also contributed to the increase in technology revenue for the period.

Consulting revenues attributable to one-time development fees were $250,000 (June 2010: $77,000) as the Group added engineering staff who performed chargeable specialised engineering services in the PC and mobile markets. Other revenues were $75,000 (June 2010: $38,000).

Gross profit increased by 166% to $2,224,000 (June 2010: $835,000) and gross margin increased to 96% (June 2010: 86%) as a result of the shift in the revenue mix toward higher margin intellectual property royalties and additional consulting services.

As planned, administrative expenses increased to $1,875,000 (June 2010: $1,050,000) with the expansion of headcount to facilitate growth. The weakness in the US dollar against the Australian dollar also contributed to the increase in administrative expense given that approximately half the Group's cost base is in Australia.

Other income was $74,000 (June 2010: $29,000).

Depreciation and amortisation expense totalled $501,000 (June 2010: $218,000). The increase is due to the increase in IFRS qualifying R&D activities from the second half of 2010 when the additional engineering staff joined the Group.

The non-cash share-based incentive cost was $319,000 (June 2010: $121,000) as performance-based objectives were achieved on historical grants and as a result of the January 2011 grant of new share options.

The adjusted Group loss before tax, before share-based incentive costs, improved to $68,000 (June 2010: loss $416,000). The reported pre-tax loss was $387,000 (June 2010: loss $537,000).

Taxation of the Group 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 now included in the taxation line item. Taxation for the period was $474,000 (June 2010: $47,000).

The Group's loss per share after taxation increased to 0.64c (June 2010: loss 0.50c per share).

Net cash generated from operations was $77,000 (June 2010: outflow of $846,000). Cash used in operating activities was $332,000 (June 2010: outflow of $830,000). Capitalised expenditure and interest paid was $764,000 (June 2010: $404,000). These cash outflows were offset by $208,000 raised from the exercise of employee stock options in the period, resulting in cash of $3,313,000 at the end of June 2011 (June 2010: $5,080,000).

Business Review

DDD licenses its patented stereoscopic 3D software, hardware and content conversion/creation solutions as one technology licensing business segment across four 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 normal 2D television shows, DVDs, Blu-ray discs and console games to be presented in 3D.

·; Desktop and Notebook PC Displays, refers primarily to consumer users who use 3D notebook and desktop PCs and monitors bundled with DDD's automatic 2D to 3D conversion software, 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.

·; 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.

Consumer Television

Samsung has continued its dominance in the market for 3D TVs and expanded its product lineup to include Blu-ray players and PC monitors that utilize the TriDef 2D to 3D conversion solution.

Licensees who signed agreements during the second half of 2010 to integrate the TriDef 3D technologies into next generation video processors made good progress on the development and testing of their products and are on track to deliver chips containing the TriDef IP in the second half of 2011.

Since 30 June 2011, the Group also signed a license agreement with another leading TV chip maker to integrate the TriDef 2D to 3D conversion into the manufacturers' TV chips.

Shipments in the TV market represented the majority of IP shipments in the period, growing by 275% from 1.2m in the first half of 2010 to 4.5m in the first half of 2011.

Desktop and Notebook PCs

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

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

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

The PC market saw the strongest growth in new licensees during the period with eight new license agreements for DDD's TriDef 3D Experience software being signed. New licensees signed in the period include Samsung, LG Electronics, HP and AOC, China's leading supplier of consumer PCs.

The Group invested heavily in developing the PC product range, increasing the number of supported languages to 37 and providing support for more than 500 of the most popular PC games, including online games in Korea and China. With comprehensive game support, original 3D content from the Yabazam! portal and compatibility with 3D processors from AMD, Intel and nVIDIA, TriDef 3D Experience is the most flexible PC content solution currently available to OEMs.

In addition to working directly with the PC OEMs, the Group also continued to secure agreements with key technology suppliers including Intel and Taiwan-based Chi Mei Innolux. The partnership with Intel marries the TriDef 3D game conversion solution with Intel's new 2nd Generation Core processors that are capable of supporting 3D games without the need for a separate graphics processor. This is an important step for delivering lower cost, higher volume PC products. The first Intel-based 3D products are expected to arrive in the second half of 2011, building into 2012 as Intel introduces its more powerful 'Ivybridge' series 2nd Generation Core processor.

The Group has also forged relationships with key 3D display technology providers including Taiwan-based Chi Mei Innolux and LG Display in Korea.

PC OEMs looking to deliver 3D solutions are now able to source the TriDef 3D solutions directly from DDD or from their 3D chip or display component vendors and TriDef is now the recommended solution from key suppliers including Intel, AMD and LG Display.

In addition to active and passive 3D glasses-based PC displays, the TriDef 3D software is also now compatible with emerging 'glasses-free' 3D PC displays such as the DX2000 that was launched by LG Electronics in Korea in July.

Since 30 June 2011, the Group has signed three further license agreements for its PC software including a five-year license agreement with a leading PC OEM to supply TriDef game and photo software with a range of 3D PC products that will launch in the third quarter of 2011. The Group expects that the OEM will purchase approximately one million software licenses in the first 12 months of the agreement with an anticipated value in excess of $1 million.

Shipments in the PC market largely commenced in the second quarter and grew by 276% year on year to 94k.

Consumer Handheld Devices

In March, Texas Instruments demonstrated the TriDef 3D Mobile Android application running on the OMAP4 smartphone processor at the Mobile World Congress conference in Barcelona. TriDef 3D Mobile is a 2D to 3D conversion solution capable of converting photos and videos to 3D on the latest ARM-based smartphone processors.

The Group subsequently signed a license agreement with LG Electronics to include the TriDef 3D Mobile solution in the new Optimus 3D smartphone that is being introduced worldwide during the second half of 2011.

In addition to support for TI's OMAP4 processor, the TriDef 3D Mobile software is compatible with ARM-based smartphone application processors from Qualcomm and two other suppliers.

Since the TriDef 3D Mobile solution was introduced during the period, IP shipments are expected to grow as current licensees commence product shipments in the second half and as other licenses are secured.

(Android is a trademark of Google Inc. Use of this trademark is subject to Google Permissions.)

3D Conversion & Content Publishing

During the period, DDD continued to expand the range of original 3D content available from the Yabazam! content portal. A growing number of PC products launched in the second quarter 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.

The Group has also completed the development of a Smart TV Application for Samsung's line of 3D TVs. The Yabazam App connects the TV to the Yabazam 3D movie portal using the TV's broadband internet connection. Development activities are underway to connect to other leading 3D Smart TVs in the second half. The Group expects to debut the Yabazam Smart TV App towards the end of 2011.

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 the opportunities in this market and has migrated its 2D to 3D content conversion capabilities from Perth to Los Angeles in readiness for the anticipated opportunities to create 3D TV content for the US networks.

Outlook

The Group continues to secure market leading licensees for its TriDef 3D solutions in key growth markets for consumer 3D products. 2D to 3D conversion has become a 'must have' feature on the majority of new products and DDD remains the only vendor with licensees and products shipping in all major 3D product categories including TV, Blu-ray, PC and smartphones.

With an increase in 3D consumer product shipments, the Group expects to place additional emphasis on research and development to support the growing number of licensees across all markets with the assistance of local support resources in key markets such as Taiwan and Korea.

The balance sheet remains healthy with the impact of high margin IP shipments now being seen in the reduced use of working capital during the first half, resulting in a small surplus of cash generated from operations despite increased headcount.

As the 3D consumer market continues to evolve, the Group will continue to invest in product development and the research into new and innovative techniques that can be built upon the existing TriDef 3D solutions to improve the 3D experience for the end user.

The seasonality of the consumer electronics market is expected to yield continued growth in IP shipments during the second half of 2011 and the Group is positioned to meet the full year forecasts for IP shipments for 2011. Whilst macro-economic volatility could have some impact on the rate of our deployment, the Board remains confident that the Group is on track for further growth in the current financial year.

C M Yewdall

Chief Executive Officer

26 September 2011

Consolidated statement of changes in equity

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 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 Two London Bridge, London, SE1 9RA, 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 consolidated financial statements is for the six month period ended 30 June 2011. It does not include all the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 31 December 2010, 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 2010, 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 2010, 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.

Change of accounting policy

Presentational currency

From 1 January 2011 the Group has changed its presentation currency to US dollars. Comparative information has been restated in US dollars in accordance with the guidance defined in IAS 21. The 2010 interim and full year financial statements and associated notes have been retranslated from pounds sterling to US dollars using the procedures outlined below:

·; Assets and liabilities were translated into US dollars at closing rates of exchange.

·; Trading results were translated into US dollars at the rates of exchange prevailing at the dates of transaction, or average rates where they are a suitable proxy.

·; Share capital, share premium and other capital reserves were translated at closing rates of exchange.

·; Differences resulting from the retranslation on the opening net assets and the results for the year have been taken to reserves.

Presentational change

Withholding tax

From 1 January 2011 the Group has changed its presentation of foreign withholding taxes to the taxation line of the consolidated statement of income. These withholding taxes are on transactions with the US entity and are available as tax credits against future foreign earnings. These withholdings were insignificant historically but are now increasing due to the growth in the business and the Group has therefore determined it appropriate to make this change.

Comparative information has been restated in accordance with the guidance defined in IAS 8. There is no change to net income or EPS as a result of the change.

The amount of the reclassification (restatement) in USD is as follows on the prior periods:

June 2010 - $3,000

December 2010 - $231,000

The foreign withholding taxation component of taxation in these interim results is $419,000.

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. Loss per share

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

6. Shares in issue

1) On 14 May 2010, the Company announced that it had raised £3,500,000 before expenses through a placing of 14,000,000 ordinary shares of 1 penny each in the capital of the Company ("May Placing Shares") at a placing price of 25 pence per share. The May Placing Shares were placed with key shareholders as well as existing and new institutional investors. The shares were admitted to AIM on 4 June 2010 following shareholder approval at the Company's Annual General Meeting.

2) On 7 June 2010, the 2008 Convertible Loan Notes totaling £510,000 to certain Directors of the Group and to Arisawa were converted to 5,100,000 ordinary shares of 1 penny each in the capital of the Company ("Loan Note Conversion") at the pre-determined price of 10 pence per share, pursuant to the existing authorities granted to the Board of Directors. The principal value of the debt was extinguished with the issuance of the shares and the remaining interest due of £12,000 was paid.

3) Employees exercised issued and vested stock options.

 7. Related party transactions

On the 6th of January 2011, the Company announced that two of its Directors (Messrs. Yewdall and Snook) had expressed their intent to exercise their respective January 2006 share options set to expire on 12 January 2011 at the established option price of 12p per ordinary share. Mr. Yewdall exercised 464,476 shares and sold 250,000 immediately representing a net increase in his holdings of 214,476 to 2,081,808 or 1.58%. Mr. Snook's exercise of 250,000 options increased his net holdings to 3,856,652 or 2.9%.

8. Events after the balance sheet date

Financial:

On the 7th of July 2011, the Company announced that CEO & Executive Director Chris Yewdall had exercised his July 2006 share options (set to expire) at the established option price of 13p per ordinary share. Mr. Yewdall exercised 325,325 shares and sold 125,325 immediately representing a net increase in his holdings of 200,000 to 2,281,808 or 1.7%.

Operational:

Since the 30th of June 2011, the Group has announced [two] significant new license agreements that have been executed. These agreements include licensing of the Group's TriDef 3D software technologies to LG Electronics, a leading mobile phone handset maker as well as a leading PC manufacturer.