RNS Number : 7937X
DDD Group PLC
30 June 2008
30 June 2008
DDD GROUP PLC
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
DDD Group plc ("DDD" or the "Company"), the 3D software and content company, announces its
results for the twelve months ended 31
December 2007.
Highlights
Financial
* Turnover increased 7% to £327,000 (2006 restated: £305,000)
* Loss before tax decreased 30% to £1.203 million (2006 restated: £1.728 million)
Operational
* Launch of Samsung SCH-B710 3D mobile phone in July in Korea yielding licensing and
royalty income.
* Launch of TriDef® 3D Experience software in August, a comprehensive 3D
entertainment solution for gaming and DVD video for PC and
3D TV users.
* Development agreement with Arisawa Manufacturing Co., Ltd. ("Arisawa") of Japan for
the TriDef® Core embedded 3D TV hardware
solution for the delivery of two of three development milestones during the year.
* Selection of the TriDef 3D Experience by Samsung Electronics as the 3D enabling
solution for Samsung America's range of 3D Ready
DLP® rear projection HDTVs. TriDef DLP 3D Starter Packs including software and 3D glasses
launched online on DDD's website store in
September.
* US cable network broadcast in October by Cartoon Network of two twenty-minute
episodes of 'Out of Jimmy's Head' and 'Fosters Home
for Imaginary Friends' converted to 3D by DDD using improved, TriDef Media Creator lower cost
3D conversion software.
Post balance sheet events - highlights
* Development agreement signed with Samsung Electronics to integrate DDD's TriDef 3D
functions into a custom made chip for Samsung's
next generation 3D HDTVs valued at £107,000.
* License agreement signed with Samsung Electronics allowing Samsung to bundle the
TriDef 3D Experience with Samsung's 3D accessory
pack for Samsung DLP and plasma 3D HDTVs.
* Hyundai 46" 3D LCD HDTV incorporating TriDef Core processor introduced into retail
stores in Japan in April 2008.
* Issue of £510,000 of convertible loan notes raising approximately £473,000, after
expenses, on 24 April 2008.
Enquiries:
DDD Group
Chris Yewdall, President & CEO
e-mail: info@ddd.com +1 310 566-3340
Brewin Dolphin
Ken Fleming, Director - +44 (0) 141 314 8114
Corporate Finance +44 (0) 141 314 8208
Paul Mason, Assistant Director
- Corporate Finance
CHAIRMAN'S STATEMENT
Dear Shareholder,
Your Company is doing considerably better than indicated merely by the share price at the
time of writing this report. In fact, 2007 has
marked very substantial achievements for DDD. The future for DDD and its technologies is
looking bright.
The awareness of 3D has been considerably assisted by the growth of digital 3D capable
cinemas and by the release of spectacular,
crowd-pulling movies such as Disney's Meet The Robinsons and Paramount's Beowulf. These movies
clearly demonstrate the power of immersive 3D
and prove that the general public in growing numbers is prepared to pay a premium for the
exciting 3D experience. No doubt, this heightened
3D awareness will become a booster of consumer demand for 3D TV's in the home, for 3D equipped
mobile phones and for 3D capable computers
and computer displays.
I am pleased to note that DDD's 3D technologies are already an essential functionality
built into several consumer electronics products
that are available in the stores and being sold on a daily basis. Consequently, the Company's
sales and income are increasing.
The main commercialisation achievements in 2007, based on DDD's unique TriDef®
technology, have included the introduction of Samsung 3D
mobile telephone on the Korean market, the launch of the Samsung range of 3D-ready
High-definition DLP® TV's in the USA, and - throughout
the year - 2D to 3D conversion services, contracted by Cartoon Network and other customers.
During 2007 it became evident to DDD that the 3D television and display markets were
developing more rapidly than the 3D mobile phone
market and indeed faster than anticipated. DDD has used this trend to its advantage by
concluding significant commercial contracts with
Samsung Electronics, one of the world's leading consumer electronics manufacturers. The value
of these contracts should become self-evident
as the sales volumes take off beyond the initial baseline and as DDD's TriDef® solutions get
incorporated in chipsets for a whole range of
plasma and LCD TV's. These will be produced and sold in much larger numbers than the 3D-ready
DLP® displays. However, all of this does not
mean that the mobile phone market has lost importance, only that our emphasis has shifted in
line with the clear market signals.
The increased levels of revenue have enabled DDD to avoid equity dilution during the 2007
year. Rather than issuing further equity,
additional working capital was raised after balance date in the form of convertible debt. The
investment was made by major shareholders and
three of the Company's Directors. With the conversion price set at a much higher level than
the concurrent share price, this demonstrates
their trust in the Company's prospects.
DDD's entire team is to be congratulated for the promising commercial achievements, but
none more so than the CEO, Mr Chris Yewdall, who
has done an outstanding job.
The board has kept salary expenses under close control but is conscious that the ongoing,
exceptional efforts being demanded from all
personnel requires additional compensation and recognition. This has been delivered in the
form of an issue of share options from the
Company's option pool. Although these options are non-dilutive at the current share price, the
board is confident that the Company's
performance will ultimately be reflected by the market, thereby making the options the genuine
compensation and reward that is intended.
I commend and thank Chris Yewdall, the DDD team and my fellow Directors for their tireless
dedication to DDD's success.
Yours faithfully,
Paul Kristensen
Chairman
27 June 2008
CHIEF EXECUTIVES REPORT
It is my pleasure to present this review of the operations of the Company for the
financial year January to December 2007.
2007 yielded significant milestones for DDD with the introduction of the first 3D consumer
products incorporating the Company's TriDef®
3D solutions. The Samsung SCH-B710 3D mobile telephone was introduced in mid 2007 in Korea and
the Samsung range of DLP® 3D ready HDTVs was
launched in September in the United States. The growth in license and royalty income from the
new consumer products provided a stronger
second half, allowing the Company to record an increase in revenues (before restatement into
sterling) and an improvement in gross margins
over the prior year.
DDD's expansion into the emerging 3D television market was a direct result of the actions
taken in 2006 to mitigate the Company's
reliance on the mobile telephone market, coupled with breakthroughs in 3D TV display
technologies from leading consumer electronics
companies.
2007 also marked another first when Cartoon Network, a US cable television network,
broadcast a one-hour 3D Halloween special in
October, produced using the Company's proprietary 2D to 3D conversion process.
In September, the Company announced the delivery of the TriDef 3D Experience, a
comprehensive content solution for the first generation
Samsung 3D-Ready HDTVs. Targeted at early adopters for 3D TV, the TriDef 3D Experience enables
a variety of 3D entertainment experiences
including PC gaming, DVD movies, high definition video and interactive online applications.Coupled with the launch of the TriDef 3D
Experience, the Company introduced an online store through which customers can purchase 3D
glasses for the new DLP TVs along with 3D
enabling software for the latest PC video games and 3D DVD movies. PC games are the most
popular online store downloads with Microsoft's
Flight Simulator X, Blizzard Entertainment's World of Warcraft and Electronic Arts' Need For
Speed: Carbon being the most popular.
The reception to the 3D feature on the Samsung HDTVs has been very positive, having been
reviewed in trade and consumer press including
Hollywood Reporter and WIRED magazine. The Samsung 3D-Ready DLP HDTVs and the TriDef 3D
Experience were selected by Popular Science as one
of the "100 Best of What's New" products for 2007 in the Home Entertainment category.
Consistent with the objectives that were outlined in the Interim Results announcement, the
Company continued to invest in the
development of its automatic 3D conversion solution and in the transformation of the TriDef
Vision+* set top box into an embedded solution
for the emerging 3D TV market. This resulted in the delivery of an improved, third generation
automatic 3D conversion technology in late
2007 that formed the basis for DDD's first hardware licensing agreements in the 3D TV market
that were announced in early 2008.
Working closely with Arisawa Manufacturing, the TriDef Core was developed for the new
Hyundai IT 46" 3D LCD HDTV. The TriDef Core
integrates with the existing electronics inside the television, adding key 3D features
including automatic 3D conversion and the ability to
decode a variety of 3D DVD, Blu Ray® and broadcast signal formats. The Hyundai IT 46" LCD TV
was launched by Japanese electronics retailer
Bic Camera in April 2008, allowing Japanese consumers to purchase 3D TVs to watch the
specially made 3D programming that is now available
daily on the Nippon BS Broadcasting Corporation's BS-11 satellite network.
Building on Samsung's selection of the TriDef 3D Experience for their range of 3-D Ready
DLP HDTVs, Samsung chose DDD's automatic 3D
conversion as the basis for a new 3D TV image processing chip that is planned for Samsung's
next generation 3D HDTVs, including the latest
3D-Ready plasma HDTVs that debuted at the Consumer Electronics Show in early January 2008.This development and licensing agreement was
announced in February 2008.
The objective of the embedded TriDef HDTV processors is to provide a simple, easy to use
3D feature for television that is analogous to
the present-day 2D television experience. Through the inclusion of a TriDef processor, the
viewer simply presses the 3D button on their
remote control and puts on their 3D glasses. The TV is then able to automatically convert any
of their current TV content into 3D, including
broadcast programming, DVD and Blu Ray movies and console games. The TriDef architecture also
supports a range of 3D delivery formats,
providing a flexible solution for studios and broadcasters who are expected to seek effective
3D content distribution solutions for DVD, Blu
Ray and broadcast content as the market for 3D HDTVs grows.
Having been selected as Samsung's 3D solution provider, the Company is now in discussions
with other leading consumer electronics
manufacturers who are looking to emulate Samsung's market leadership.
While the 3D cinema market continued to grow, reaching just over 1,300 screens worldwide
in early 2008, DDD elected to focus on the
development of content solutions for the emerging 3D HD television market. In contrast to the
requirements of the cinema market, the
television market requires highly efficient, cost effective solutions.
During the year, the Company's engineers combined the capabilities of the very latest
automatic conversion technologies with the
post-production tools used to convert 2D content to 3D. The result is TriDef Media Creator
that was used to deliver forty minutes of live
action and animated broadcast 3D content for Cartoon Network, a subsidiary of Turner Broadcast
Systems. The episodes were delivered cost
effectively and also very efficiently, with some scenes being converted only four days before
the broadcast took place.
The Company also licensed the 3D conversion tools to Asuna, its first content partner
based in Japan. Asuna is actively undertaking
conversion work aimed at the emerging market for 3D television in Japan and has already
completed the 3D conversion of a one hour production
from which DDD receives a royalty. The Company will continue to invest in the development of
TriDef Media Creator with a view to licensing
it to additional partners who are seeking to produce cost effective content for the 3D HDTV
market.
An important transition began during 2007 as DDD played a key role in enabling the first
mass markets for 3D consumer devices. The
selection of the TriDef hardware and software solutions by Hyundai IT and Samsung Electronics
provides DDD with a substantial lead over the
competition that the Company intends to rapidly build upon. DDD's automatic 3D conversion
capabilities are now acknowledged as the highest
quality available and the Company is in active discussions with other prospective licensees
seeking to deliver high quality, easy to use 3D
consumer products.
Through the anticipated inclusion of the TriDef 3D solutions in growing numbers of 3D
HDTVs, the Company expects to be in a position to
promote the capabilities of the embedded TriDef 3D decoders to studios and broadcasters
seeking to deliver high quality DVD, Blu Ray and
broadcast programming as the installed base of 3D televisions continues to grow.
DDD's team of dedicated staff has continued to deliver market-leading solutions and
develop lasting commercial relationships, allowing
the Company to remain competitive in this evolving and growing market. I would like to express
particular thanks to Julien Flack, DDD's
Chief Technology Officer, who has guided our development team to the successful delivery of
many of these latest products. As the 3D market
continues to grow, DDD's goal will be to maintain our market leadership in the face of
increasingly complex technical and commercial
challenges.
Finally, I would like to once again thank our shareholders for their continued support
during the year, and look forward to a very
promising future for the 3D market and for DDD.
Chris Yewdall
Chief Executive Officer
27 June 2008
CONSOLIDATED INCOME STATEMENT
12 months to 31 Dec 12 months to 31 Dec
2007 2006
£'000 £'000
Notes
Revenue 327 305
Cost of sales (93) -
Gross profit 234 305
Administration expenses (1,606) (1,882)
Other income 1 158 -
Share based payment (26) (169)
Operating loss (1,240) (1,746)
Finance income 2 37 18
Loss before tax 1 (1,203) (1,728)
Taxation 3 (17) (24)
Loss for the year (1,220) (1,752)
Loss per share
Basic and diluted (pence per 4 (1.64) (3.06)
share)
All transactions arose from continuing operations.
CONSOLIDATED BALANCE SHEET
31 Dec 31 Dec
2007 2006
£'000 £'000
Notes
Assets
Non-current assets
Property, plant and equipment 6 43 54
Intangible assets 5 441 353
Financial assets 1 1
Total non-current assets 485 408
Current assets
Trade and other receivables 7 111 115
Inventory 8 13 11
Cash and cash equivalents 9 286 1,467
Total current assets 410 1,593
Total assets 895 2,001
Equity and liabilities
Capital and reserves
Issued capital 12 7,442 7,442
Share premium 12 4,612 4,612
Merger reserve 13,279 13,279
Other reserve - 85
Share based payment reserve 215 189
Translation reserve (55) (76)
Retained earnings (24,934) (23,799)
Total equity 559 1,732
Non-current liabilities
Deferred tax liabilities 11 123 106
Total non-current liabilities 123 106
Current liabilities
Trade and other payables 10 213 163
Total current liabilities 213 163
Total liabilities 336 269
Total equity and liabilities 895 2,001
CONSOLIDATED CASHFLOW STATEMENT
12 months to 31 Dec 12 months to 31 Dec
2007 2006
£'000 £'000
Cash flows from operating
activities
Loss for the period (1,220) (1,752)
Finance costs in the income (37) (18)
statement
Tax in the income statement 17 24
Depreciation of non-current 32 36
assets
Amortisation 254 110
Gain on sale of property, plant & - (1)
equipment
Share based payments 26 169
(Increase) in inventory (2) -
Decrease in trade and other 4 75
receivables
Increase in trade and other 50 53
payables
Net cash used in operations (876) (1,304)
Interest received 37 18
Income tax paid (8) (8)
Net cash used in operating (847) (1,294)
activities
Cash flows from investing
activities
Interest paid - -
Payments for property, plant and (20) (9)
equipment
Payments for intangible assets (342) (152)
Long term deposits - -
Sale of property plant, & - 1
equipment
Net cash used in investing (362) (160)
activities
Cash flows from financing
activities
Proceeds from issue of equity - 2,900
shares
Issue costs - (193)
Net cash generated by financing - 2,707
activities
Net (decrease) / increase in cash (1,209) 1,253
and cash equivalents
Exchange gains / (losses) 28 (72)
Total (decrease) / increase in (1,181) 1,181
cash and cash equivalents
Cash and cash equivalents at the 1,467 286
start of the period
Cash and cash equivalents at the 286 1,467
end of the period
1. Loss before tax
2007 2006
Loss before tax has been arrived at after charging (crediting): £'000 £'000
Foreign exchange gains / (losses) 1 -
Depreciation and amortisation:
Depreciation of property, plant and equipment 31 36
Amortisation of intangible assets 255 110
Employee benefits expense:
Employee costs 985 1,139
Land and buildings held under operating leases
Other operating leases 127 117
Audit and non-audit services:
Fees payable to the Company's auditor for the audit of the 55 53
Group accounts
Fees payable to the Company's auditor and its associates for
other services:
The audit of the Company's subsidiaries pursuant to legislation 4 1
Tax services 12 26
Other services pursuant to legislation 2 1
During the year the Group's Australian subsidiary received a refund of research and
development expenditures from the Australian
Government amounting to £151,000 (2006: £146,000).
2. Finance income
2007 2006
£'000 £'000
Interest 37 18
37 18
3. Income tax expense
2007 2006
£'000 £'000
Current Tax:
Corporation tax on loss for the year 8 8
Overseas tax - -
Adjustment in respect of previous periods - -
Total current tax 8 8
Deferred Tax:
Origination and reversal of timing differences
-current period 26 16
-attributable to the reduction in the rate of domestic income (9) -
tax
Total income tax on loss for the year 17 24
The tax assessed for the period 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:
2007 2006
£'000 £'000
Loss for the period before tax (1,203) (1,728)
Loss for period multiplied by the respective standard rate (337) (518)
of corporation tax applicable in each domain (28% 2007, 30%
2006).
Effects of:
Higher foreign tax rates (1) (28)
Expenses not deductible for tax purposes 42 11
Tax losses carried forward 317 503
Other timing differences (30) 24
Foreign withholding tax (8) (8)
Total income tax on loss for the year (17) (16)
There are substantial unrelieved tax losses of £20,749,000 (2006: £19,179,000) across
the Group companies as set out below:
USA UK Canada Australia Total
£'000 £'000 £'000 £'000 £'000
At 31 December 2007
Unrelieved tax loss 7,783 1,492 1,510 9,964 20,749
Local rate of tax 34% 28% 30% 30% n/a
Unprovided potential deferred tax 2,646 418 453 2,989 6,506
asset
At 31 December 2006
Unrelieved tax loss 7,494 1,231 1,415 9,039 19,179
Local rate of tax 34% 30% 30% 30% n/a
Unprovided potential deferred tax asset 2,548 369 424 2,712 6,053
At 31 December 2007, the availability to offset unrelieved tax losses against future
taxable trading profits may be subject to
restrictions in the respective tax jurisdictions. The potential deferred tax asset of
£6,506,000 (2006: £6,053,000) has not been recognised
due to the uncertainty of the timing and recoverability of the asset. The asset will be
recovered in line with future profits.
4. Loss per share
2007 2006
£'000 £'000
Loss for the year attributable to equity shareholders (1,220) (1,752)
Loss per share
Basic & diluted (pence per share) (1.64) (3.06)
Shares Shares
Issued ordinary shares at start of the period 74,416,547 46,566,547
Ordinary shares issued in the period - 27,850,000
Issued ordinary shares at end of the period 74,416,547 74,416,547
Weighted average number of shares in issue for the 74,416,547 57,315,680
period.
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 Total
£'000 £'000 £'000
Cost
At January 1 2006 301 192 493
Additions 153 - 153
At 31 December 2006 454 192 646
Additions 342 - 342
At 31 December 2007 796 192 988
Amortisation
At January 1 2006 - 182 182
Charge for the year 101 10 111
At 31 December 2006 101 192 293
Charge for the year 254 - 254
At 31 December 2007 355 192 547
Net book value
At January 1 2006 301 10 311
At 31 December 2006 353 - 353
At 31 December 2007 441 - 441
6. Property, plant and equipment
Leasehold Furniture fittings and equipment Total
improvements
£'000 £'000 £'000
Cost or valuation
At 1 January 2006 12 430 442
Additions 9 9
Disposals (172) (172)
Exchange rate differences (24) (24)
At 31 December 2006 12 243 255
Additions 20 20
Disposals
Exchange rate differences 1 (2) (1)
At 31 December 2007 13 261 274
Depreciation
At 1 January 2006 7 350 357
Provided in the year 2 34 36
Disposals - (172) (172)
Exchange rate differences (2) (18) (20)
At 31 December 2006 7 194 201
Provided in the year 1 31 32
Disposals
Exchange rate differences 1 (3) (2)
At 31 December 2007 9 222 231
Net book value
At 1 January 2006 5 80 85
At 31 December 2006 5 49 54
At 31 December 2007 4 39 43
7. Trade and other receivables
2007 2006
£'000 £'000
Trade receivables 79 82
Restricted cash - 1
Prepayments 21 22
Other receivables 11 10
111 115
The following financial assets are aged as follows:
2007 2006
£'000 £'000
Trade receivables
Not more than 3 months 76 30
More than 3 months but not more than 6 months 2 1
More than 6 months but not more than 1 year 1 1
More than one year - -
79 32
No receivables are currently judged to be impaired and therefore there are no allowance
account balances.
8. Inventory
2007 2006
£'000 £'000
Finished goods 13 11
9. Cash and cash equivalents
2007 2006
£'000 £'000
Cash at bank and in hand 286 1,467
10. Trade and other payables
2007 2006
£'000 £'000
Non-current liabilities
Deferred tax liabilities 123 106
Current liabilities
Trade payables 44 5
Accrued expenses 169 158
213 163
11. Deferred tax
2007 2006
£'000 £'000
1 January 106 90
Timing differences 26 16
Change in income tax rate on deferred tax (9) -
31 December 123 106
12. Issued share capital
Shares Nominal Premium Total
Value (10p) net of costs
£'000 £'000 £'000
In issue 1 January 2006 46,566,547 4,657 4,690 9,347
Issue 17 February 11,500,000 1,150 32 1,182
Option exercise 10 March 50,000 5 - 9
Issue 12 December 16,300,000 1,630 (110) 1,520
31 December 2006 74,416,547 7,442 4,612 12,054
31 December 2007 74,416,547 7,442 4,612 12,054
There have been no share issues during the period and no options have been exercised.
Events after the balance sheet date
On April 23rd, 2008, the Company announced that it had raised £510,000 through the issue
of Convertible Loan Notes ("Notes") to certain
Directors of the Group and to Arisawa pursuant to the existing authorities granted to the
board of Directors. The Notes have an annual
interest rate of 8%. The Notes can be converted by the holders into ordinary shares of 10
pence each in the capital of the Company
("Shares") at a conversion price of 10 pence nominal amount of Notes per Share. The Company
has the option to redeem the Notes at any time
at a 5% premium to their nominal value plus accrued interest. Any Notes outstanding on 17
April 2010 will at the option of the Company be
repaid in cash or settled by the issue of Shares at the conversion price; in both cases
accrued interest will be payable in cash.
Arisawa, currently a holder of 28.64% of the existing issued ordinary share capital of the
Group acquired £425,000 of the Notes (the
"Transaction"). Upon full conversion, this would increase Arisawa's current interest to
25,564,807 ordinary shares representing 32.13% of
the enlarged issued ordinary share capital of the Group (assuming full conversion of all the
Notes).
The Transaction is a related party transaction for the purpose of AIM rule 13, Arisawa and
certain Directors being related parties
within the meaning of the AIM rules. The Directors of the Company, other than Messrs. Yewdall,
Littlefield and Snook and Dr Sanji Arisawa,
consider, having consulted with the Company's nominated adviser, that the terms of the
Transaction are fair and reasonable insofar as the
shareholders are concerned.
In view of the potential for the transaction to result in Arisawa's future ownership of
more than 30% of the issued shares of the
Company that would require Arisawa to tender an offer for the outstanding shares of the
Company, the Company's nominated adviser has
discussed whether Rule 9 of the Takeover Code applies to the Company with the Takeover Panel.The Takeover Panel has confirmed to the
Company's nominated advisor that the Company is not subject to the Takeover Code (including
Rule 9) since the Company's central management
and control is based outside the United Kingdom.
NOTE TO THE ANNOUNCEMENT
The financial information set out in this announcement does not constitute statutory
accounts as defined in Section 240 of the Companies
Act 1985.
This announcement includes extracts from the audited statutory accounts for the year to 31
December 2007. The comparative figures
relating to the year to 31 December 2006 are taken from the audited statutory accounts for
that year.
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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