Aptitude Software Group PLC — Earnings Release 2012

Feb 25, 2013

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RNS Number : 5294Y

Microgen PLC

25 February 2013

25 February 2013

MICROGENplc ("Microgen")

Audited Preliminary Results for the Year ended

31 December 2012

Microgen, the software and services provider to the global financial services, digital media and commercial sectors reports its audited preliminary results for the year ended 31 December 2012.

SUMMARY

·        Resilient performance in difficult market conditions.

·        Revenue of £32.3 million (2011: £38.8 million) with growth in annual software licences and other recurring revenue offset by a decline, as anticipated, in consultancy and non-core activities.

·        MASD annual software licence and recurring revenue growth of 23% to £7.2 million (2011: £5.9 million) representing 44% of the Division's revenue (2011: 27%). 

·        Operating margins increased to 28% (2011: 24%). Operating profit of £9.0 million (2011: £9.5 million).

·        Diluted earnings per share of 8.3 pence (2011: 8.7 pence).

·        Strong balance sheet with net cash of £32.1 million (2011: £27.0 million).

·        Proposed final dividend of 2.2 pence per share (2011: 2.2 pence) representing a full year dividend of 3.3 pence (2011: 3.3 pence). 

·        Proposed special dividend of 5.2 pence per share.

·        Upon payment of the proposed final and special dividends, the Group will have returned 100% of its market capitalisation prior to the introduction of VERBS in October 2008, while maintaining a very strong balance sheet and creating a highly profitable business.

Contacts

Martyn Ratcliffe, Chairman	020-7496-8100
David Sherriff, Chief Executive Officer
Philip Wood, Group Finance Director
Clare Thomas, FTI Consulting	020-7831-3113

MICROGEN plc ("Microgen")

Audited Preliminary Results for the Year ended 31 December 2012

Chairman's Statement

Microgen reports a resilient performance for the year ended 31 December 2012 in difficult market conditions. Operating margins increased and strong cash flow was maintained demonstrating the benefit of the Group's conservative operational approach and annual licencing model.

The Microgen Aptitude Solutions Division ("MASD") reported a 23% growth in annual software licences and other recurring revenue, benefitting from the Group's annual licencing model and customers extending the use of Microgen Aptitude and Microgen Accounting Hub. (Recurring revenue includes annual licence fees, software maintenance and support). However, the Division's consulting revenue reflected the economic climate as customer budgetary pressures reduced deployment levels. While the market environment has made the transition more challenging, the increase in software as a proportion of Divisional revenue is consistent with the Board's strategy of value enhancement for this Division.

The Financial Systems Division ("FSD") which provides software products and services in more mature financial market sectors remains highly profitable producing operating margins of 52% in 2012 (2011: 46%) with strong cash flow and high recurring revenues. The FSD division continues to see growth opportunities in the wealth management sector endorsing the investment made in the Division's trust and fund software in recent years.

In summary, taking into account the challenging market environment throughout most of 2012, the Board is satisfied with the financial performance of the Group, particularly the resilient operating profit and cash flow. While sales cycles continue to be extended, the Board remains cautious in its outlook and prudent in its management of the business, but is also responding to the market by developing solutions compatible with more limited customer budgets.

The Group's balance sheet remains very robust with net cash of £32.1 million at 31 December 2012 (2011: £27.0 million). As a result of the strong financial position of Microgen, the Board has decided to propose a special dividend of 5.2 pence per share. The Board is also recommending a final dividend of 2.2 pence per share (2011: 2.2 pence), representing a full year dividend of 3.3 pence (2011: 3.3 pence). Subject to shareholder approval, the proposed final and special dividends will be payable on 28 May 2013 to shareholders on the register at the close of business on 26 April 2013.

As shareholders are aware, the Board introduced the Value Enhancement and Realisation Bonus Scheme ("VERBS") in October 2008 at which time the market capitalisation of Microgen was £37.0 million. Upon payment of the proposed final and special dividends, the Group will have returned 100% of its October 2008 market capitalisation to shareholders through ordinary dividends, special dividends, share buy-backs and tender offers. Furthermore, in addition to this substantial return of capital to shareholders, Microgen had a market capitalisation of £99.1 million at 31 December 2012.

Despite the challenging economic climate in recent years, Microgen has delivered significant value to shareholders and the Board considers the return of 100% of its market capitalisation to be a significant milestone achievement. At the same time, Microgen has maintained a very strong balance sheet throughout this process while reporting excellent profit margins and investing in its products, solutions and operating businesses. The Board continues to explore opportunities to extend this successful value creation and realisation strategy as appropriate. 

Martyn Ratcliffe

Chairman

Chief Executive Officer's Report

Microgen has reported a resilient financial performance in 2012 despite the difficult market environment which caused new business sales cycles to be extended and reduced consultancy deployment on existing projects. The resilient financial performance has benefitted from the Group's long term promotion of software sales on multi-year annual licence contracts, conservative revenue recognition policies and the Group's disciplined approach to overhead and operating costs.

·      Microgen Aptitude Solutions Division ("MASD")

MASD provides enterprise level application products and solutions to some of the world's largest financial and digital media organisations, typically where customers require very high volume (often referred to as "Big Data") processing of complex, business event-driven transactions.

Revenue from annual software licences and other recurring revenue grew by 23% to £7.2 million (2011: £5.9 million) and now represents 44% of the Division's revenue. However, customer budgetary constraints, particularly in the financial services sector, have led to reductions in the number of consultants deployed and services revenue declined to £8.8 million (2011: £15.3 million). While the market environment has made the transition more challenging, the growth in higher margin annual software licences and other recurring revenue, and its increase as a proportion of Divisional revenue, is consistent with the Board's strategy of value enhancement for this Division. 

As a result, MASD reported revenue of £16.3 million (2011: £21.8 million) with 57% of the Division's revenue being generated by its top 5 clients (2011: 64%). Strong operating margins of 18% (2011: 19%) delivered an operating profit of £2.9 million (2011: £4.2 million) while increasing investment in research and development to £3.5 million (2011: £3.2 million) and continuing to expense all research and development costs.

MASD has continued to invest in the Microgen Aptitude and Microgen Accounting Hub software and technology. The results of Microgen Aptitude performance tests at a third party test facility in 2012 demonstrated that this high performance Enterprise Application Platform achieved 7 billion transactions per hour performing in-memory processing and further tests, involving database to database processing, resulted in Microgen Aptitude achieving over 800 million transactions per hour. This exceptional performance, combined with the rich functionality provided in both Microgen Aptitude and Microgen Accounting Hub, confirms Microgen's leadership in delivering the high transaction-processing performance required in addressing the challenges associated with "Big Data" in high volume complex systems.

The Division also launched Version 4 of Microgen Aptitude and a new 3D Navigator module. This new module, together with the additional functionality within Version 4, further strengthens the product's market leading combination of functionality, business/IT collaboration and transaction-processing performance. To protect the Group's intellectual property Microgen continues to file patents related to the innovative enterprise technology associated with Microgen Aptitude. Patent applications have now been filed internationally for 13 separate inventions within Microgen Aptitude, the first of which was granted by the US Patent Office during 2012 with a further two being allowed for grant by the US patent office subsequent to the year end.

In response to the caution and budget constraints being demonstrated by organisations to large-scale investments in enterprise projects, MASD is modularising the Microgen Accounting Hub to provide targeted solutions to specific industry requirements within organisations. These highly functional software modules are capable of being extended to a full finance transformation solution while providing a lower entry-level commitment appropriate to the current economic climate. For example, as part of this strategy, a "Profitability" module has been developed providing a solution to address the increasing market need to improve cost allocations and profitability modelling, an area of demand MASD is seeing across a number of vertical sectors.

·      Financial Systems Division ("FSD")

The Financial Systems Division has a well-established customer base with 74% (2011: 69%) of Divisional revenue being derived from its core financial systems software including software for the wealth management and banking sectors. Reflecting the market maturity of the Division, the recurring revenues account for 78% (2011: 78%) of the Divisional revenue, with 28% of the Division's revenue being generated by its top 5 clients (2011: 24%).

FSD reported revenue of £16.0 million (2011: £17.0 million which as previously reported benefitted from unusually strong consultancy demand and some one-off benefits). Core financial systems reported growth in revenue to £11.9 million (2011: £11.8 million) of which £9.5 million is recurring (2011: £9.6 million). As anticipated, non-core activities declined to £4.1 million (2011: £5.2 million) of which £2.9 million is recurring in nature (2011: £3.6 million). The Division remains highly profitable producing operating margins of 52% in 2012 (2011: 46%).

The FSD division continues to see growth opportunities in the wealth management sector endorsing the investment made in the Division's trust and fund software in recent years. In parallel, the Division continues to review the viability of a number of its smaller product offerings and non-core activities with a view to optimising profit contribution as these offerings approach end-of-life. At the same time, the Group's strong balance sheet affords the Division the capability to evaluate add-on acquisitions in financial back office processing to complement its current market offerings if such opportunities arise.

Operations Summary

The Group has a strong and established portfolio of products and solutions, combining proven domain and industry expertise with leading technical and functional capability. The benefits of scale are achieved through the use of shared services centres for support functions. This foundation has enabled the Group to report a resilient financial performance in 2012 despite a challenging market environment.

David Sherriff

Chief Executive Officer

Group Financial Performance and Finance Director's Report

Revenue for the year ended 31 December 2012 was £32.3 million (2011: £38.8 million), with the higher margin annual software licences and other recurring revenue comprising 61% of overall revenue (2011 : 49%), producing an operating profit of £9.0 million (2011: £9.5 million). The Group reported a profit for the year attributable to equity shareholders of £6.9 million (2011: £7.3 million).

In accordance with IFRS, the Board has continued to determine that all internal research and development costs incurred in the year are expensed and therefore the Group has no capitalisation of development expenditure. The overall group expenditure on research, development and support activities in 2012 was £5.7 million (2011: £5.4 million) of which £3.5 million (2011: £3.2 million) was incurred by the Microgen Aptitude Solutions Division.

Despite the reduction in revenue, operating margins increased to 28% (2011: 24%) due to the Group's conservative operational approach. This has been achieved by the growth in the Group's higher margin annual software licences and other recurring revenues together with reductions in the use of contractors and associates, lower variable remuneration and reduced discretionary expenditure. Headcount at 31 December 2012 was 238 including contractors and associates (31 December 2011: 273). 

Diluted earnings per share for the year ended 31 December 2012 was 8.3 pence (2011: 8.7 pence). The total tax charge of £2.2 million (2011: £2.3 million) represents 24% of the Group's profit before tax (2011: 24%). The Group's tax charge benefitted from the recognition of £0.2 million (2011: £0.3 million) tax losses in the year. The deferred tax asset in relation to taxable trading losses represents only £0.2 million (2011: £0.2  million) of the overall deferred tax asset of £1.0 million (2011: £1.3 million) with short term timing differences representing the principle component at £0.4 million (2011: £0.5 million).

The Group continues to have a strong balance sheet with net assets at 31 December 2012 of £64.7 million (2011: £60.0 million) including net cash at 31 December 2012 of £32.1 million (2011: £27.0 million). 97% of cash at the year end was held in the United Kingdom. Benefitting once again from excellent customer debt collections in the final quarter, the cash generated from operations in the year was £10.3 million (2011: £12.5 million) with cash conversion, measured by cash generated from operations as a percentage of operating profit, of 115% (2011: 132%).

Philip Wood

Group Finance Director

Group Income Statement

for the year ended 31 December 2012

		Year Ended 31 Dec 2012			Year Ended 31 Dec 2011
	Notes	Before intangible amortisation	Intangible amortisation	Total	Before intangible amortisation	Intangible amortisation	Total
		£000	£000	£000	£000	£000	£000
Revenue	1	32,318	-	32,318	38,776	-	38,776
Operating costs	1	(23,187)	(118)	(23,305)	(29,177)	(117)	(29,294)
Operating profit		9,131	(118)	9,013	9,599	(117)	9,482
Finance income		174	-	174	258	-	258
Finance cost		-	-	-	(142)	-	(142)
		174	-	174	116	-	116
Profit before income tax		9,305	(118)	9,187	9,715	(117)	9,598
Income tax expense	2			(2,238)			(2,348)
Profit for the year				6,949			7,250
Earnings per share
Basic	3			8.5p			8.9p
Diluted	3			8.3p			8.7p
Ordinary Dividends			Pence per share	£000		Pence per share	£000
Paid	4		3.3p	2,691		3.2p	2,575
Proposed	4		2.2p	1,795		2.2p	1,794
Special Dividends			Pence per share	£000		Pence per share	£000
Paid	4		-	-		5.0p	4,070
Proposed	4		5.2p	4,242		-	-

group statement of comprehensive income

For the year ended 31 December 2012

	Year ended 31 Dec 2012	Year ended 31 Dec 2011
	£000	£000
Profit for the year	6,949	7,250
Other comprehensive income
Cash flow hedges, net of tax	409	(367)
Currency translation difference	80	(142)
Other comprehensive income for the year, net of tax	489	(509)
Total comprehensive income for the year	7,438	6,741

Group Balance Sheet

For the year ended 31 December 2012

		As at 31 Dec 2012	As at 31 Dec 2011
	Notes	£000	£000
ASSETS
Non-current assets
Property, plant and equipment		5,391	5,521
Goodwill		41,774	41,774
Other intangible assets		-	118
Deferred income tax assets		1,041	1,324
		48,206	48,737
Current assets
Trade and other receivables	5	3,163	5,611
Financial assets  - derivative financial instruments		69	-
Cash and cash equivalents		32,134	26,971
		35,366	32,582
Total assets		83,572	81,319
LIABILITIES
Current liabilities
Financial liabilities
- derivative financial instruments		(15)	(353)
Trade and other payables	6	(17,845)	(19,981)
Current income tax liabilities		(742)	(768)
Provisions for other liabilities and charges	7	(42)	(107)
		(18,644)	(21,209)
Net current assets		16,722	11,373
Non-current liabilities
Provisions for other liabilities and charges	7	(256)	(135)
NET ASSETS		64,672	59,975
SHAREHOLDERS' EQUITY
Share capital	8	4,078	4,069
Share premium account		11,885	11,842
Capital redemption reserve		1,152	1,146
Other reserves		37,028	36,619
Retained earnings		10,529	6,299
TOTAL EQUITY		64,672	59,975

Group Statement of changes in shareholders' equity

for the Year Ended 31 December 2012

		Share capital £000		Share premium £000		Retained earnings £000
At 1 January 2012		4,069		11,842		6,299
Profit for the year		-		-		6,949
Cash flow hedges – net fair value gains in the year		-		-		-
Exchange rate adjustments		-		-		80
Total comprehensive income for the year		-		-		7,029
Shares issued under share option schemes		15		43		-
Share options – value of employee service		-		-		61
Own shares purchased and cancelled		(6)		-		(146)
Deferred tax on financial instruments		-		-		(89)
Deferred tax on share options		-		-		25
Corporation tax on share options		-		-		41
Dividends to equity holders of the Company		-		-		(2,691)
Total Contributions by and distributions to owners of the company recognised directly in equity income		9		43		(2,799)
At 31 December 2012		4,078		11,885		10,529

Group Cash Flow Statement

for the Year Ended 31 December 2012

		Year ended	Year ended
		31 Dec 2012	31 Dec 2011
	Notes	£000	£000
Cash flows from operating activities
Cash generated from operations	9	10,348	12,542
Interest paid		-	(156)
Income tax paid		(2,023)	(1,758)
Net cash flows generated from operating activities		8,325	10,628
Cash flows from investing activities
Purchase of property, plant and equipment		(624)	(1,171)
Interest received		174	186
Net cash used in investing activities		(450)	(985)
Cash flows from financing activities
Net proceeds from issuance of ordinary share capital		59	395
Dividends paid to company's shareholders	4	(2,691)	(6,645)
Repayment of mortgage		-	(1,852)
Purchase of own shares		(146)	-
Net cash used in financing activities		(2,778)	(8,102)
Net increase in cash and cash equivalents		5,097	1,541
Cash, cash equivalents and bank overdrafts at beginning of year		26,971	25,412
Exchange rate gains on cash and cash equivalents		66	18
Cash and cash equivalents at end of year		32,134	26,971

Notes to the Audited preliminary results for the year ended 31 December 2012

1.     Segmental analysis

Business segments

The Board, which is considered to be the chief operating decision maker, has determined the operating segments based on the reports it receives from management to make strategic decisions. 

The segmental analysis is split into Microgen Aptitude Solutions Division ("MASD") and Financial Systems Division ("FSD").

The principal activity of the Group is the provision of IT services and solutions, including software based activity generating the majority of its revenue from software licences, maintenance, support, funded development and related consultancy. 

The Divisions and business categories are allocated central function costs in arriving at operating profit.  Group overhead costs are not allocated into the Divisions or business categories as the Board believes that these relate to Group activities as opposed to the Division or business category.

1 (a) Revenue and operating profit by Division

Year ended 31 December 2012				MASD	FSD	Group	Total
				£000	£000	£000	£000
Revenue				16,316	16,002	-	32,318
Operating costs				(13,388)	(7,588)	-	(20,976)
Operating profit before Group overheads				2,928	8,414	-	11,342
Unallocated Group overheads						(2,211)	(2,211)
Operating profit before intangible amortisation							9,131
Intangible amortisation				-	(118)	-	(118)
Operating profit/(loss)				2,928	8,296	(2,211)	9,013
Net finance income							174
Profit before tax							9,187
Income tax expense							(2,238)
Profit for the year							6,949

Year ended 31 December 2011			MASD	FSD	Group	Total
			£000	£000	£000	£000
Revenue			21,799	16,977	-	38,776
Operating costs			(17,590)	(8,983)	-	(26,573)
Operating profit before Group overheads			4,209	7,994	-	12,203
Unallocated Group overheads					(2,604)	(2,604)
Operating profit before intangible amortisation						9,599
Intangible amortisation			-	(117)	-	(117)
Operating profit/ (loss)			4,209	7,877	(2,604)	9,482
Net finance income						116
Profit before tax						9,598
Income tax expense						(2,348)
Profit for the year						7,250

1(b) Geographical analysis

The Group has two geographical segments for reporting purposes, the United Kingdom & Ireland and the Rest of the World.

The following table provides an analysis of the Group's sales by origin and by destination.

	Sales revenue by origin		Sales revenue by destination
	Year ended	Year ended	Year ended	Year ended
	31 Dec 2012	31 Dec 2011	31 Dec 2012	31 Dec 2011
	£000	£000	£000	£000
United Kingdom and Ireland	23,696	30,876	16,157	22,434
Rest of World	8,622	7,900	16,161	16,342
	32,318	38,776	32,318	38,776

2.     Income tax expense

	Year ended	Year ended
	31 Dec 2012	31 Dec 2011
Analysis of charge in the year	£000	£000
Current tax:
- current year charge	(1,973)	(2,269)
- prior year (charge)/credit	(71)	75
	(2,044)	(2,194)
Deferred tax:
- current year charge	(139)	(165)
- prior year (charge)/credit	(55)	11
	(194)	(154)
Income tax expense	(2,238)	(2,348)

The total tax charge of £2,238,000 (2011: £2,348,000) on continuing operations represents 24.4% (2011: 24.5%) of the Group's profit before tax of £9,187,000 (2011: £9,598,000). 

After adjusting for the impact of amortisation, change in tax rates, share based payment charge and prior year tax charges, the tax charge for the year of £2,319,000 (2011: £2,687,000) represents 25.2% of the profit before intangible amortisation (2011: 28.0%) which is the tax rate used for calculating the adjusted earnings per share.

At the balance sheet date, the Group has unused tax losses of £7,606,000 (2011: £8,518,000) available to offset against future profits.  A deferred tax asset has been recognised in respect of £790,000 (2011: £822,000) of such losses which is the maximum the Group anticipates being able to utilise in the year ending 31 December 2012.  No deferred tax asset has been recognised in respect of the remaining £6,816,000 (2011: £7,696,000) due to the unpredictability of future profit streams.

The difference between the total tax charge and the amount calculated by applying the effective United Kingdom corporation tax rate of 24.5% (2011: 26.5%) to the profit on ordinary activities before tax is as follows: 

	Year ended	Year ended
	31 Dec 2012	31 Dec 2011
	£000	£000
Profit on ordinary activities before tax	9,187	9,598
Tax at the UK corporation tax rate of 24.5% (2011: 26.5%)	(2,251)	(2,543)
Effects of:
Adjustment to tax in respect of prior period	(126)	86
Adjustment in respect of foreign tax rates	7	39
Foreign exchange gains on intercompany balances	(42)	(126)
Research and development tax credit	135	53
Expenses not deductible for tax purposes
- Share based payment expenses	(89)	(1)
- Other	(58)	(15)
Changes in UK Corporation Tax Rates	(20)	(97)
Recognition of tax losses	206	256
Total taxation	(2,238)	(2,348)

3.     Earnings per share

To provide an indication of the underlying operating performance per share, the adjusted profit after tax figure shown below excludes intangibles amortisation and has a tax charge using the effective rate of 25.2%

(2011: 28.0%)

	Year ended	Year ended
	31 Dec 2012	31 Dec 2011
	£000	£000
Profit on ordinary activities before tax and intangibles amortisation	9,305	9,715
Tax charge at a rate of 25.23% (2011: 28.0%)	(2,348)	(2,720)
Adjusted profit on ordinary activities after tax	6,957	6,995
Prior years' tax (charge)/ credit	(126)	86
Share options	-	(1)
Amortisation of intangibles net of tax	(88)	(86)
Recognition of tax losses	206	256
Profit on ordinary activities after tax	6,949	7,250

	2012 Number (thousands)	2011 Number ( thousands)
Weighted average number of shares	81,572	81,144
Effect of dilutive share options	1,873	2,205
	83,445	83,349

	2012 Basic EPS	2012 Diluted EPS
	pence	pence
Earnings per share	8.5	8.3
Amortisation of intangibles net of tax	0.1	0.1
Prior years' tax charge	0.2	0.2
Tax losses recognised	(0.3)	(0.3)
Adjusted earnings per share	8.5	8.3

Adjusted earnings per share are calculated using adjusted profit after tax.

4.    Dividends

	2012 pence per share	2011 pence per share	2012 £000	2011 £000
Dividends paid:
Interim dividend	1.1	1.1	897	874
Final dividend (prior year)	2.2	2.1	1,794	1,701
Special dividend	-	5.0	-	4,070
	3.3	8.2	2,691	6,645
Proposed but not recognised as a liability:
Final dividend (current year)	2.2	2.2	1,795	1,794
Special dividend (current year)	5.2	-	4,242	-
	7.4	2.2	6,037	1,794

The proposed final and special dividends were approved by the Board on 22 February 2013 but were not included as a liability as at 31 December 2012, in accordance with IAS 10 'Events after the Balance Sheet date'. If approved by shareholders at the Annual General Meeting the proposed final and special dividends will be payable on 28 May 2013 to shareholders on the register at the close of business on 26 April 2013.

5.     Trade and other receivables

	31 Dec 2012	31 Dec 2011
	£000	£000
Trade receivables	2,411	5,146
Less: provision for impairment of receivables	(61)	(64)
Trade receivables - net	2,350	5,082
Other receivables	139	42
Prepayments and accrued income	674	487
	3,163	5,611

6.     Trade and other payables

	31 Dec 2012	31 Dec 2011
	£000	£000
Trade payables	368	247
Other tax and social security payable	658	1,097
Other payables	657	253
Accruals	1,877	3,345
Deferred income	14,285	15,039
	17,845	19,981

7.     Provisions for other liabilities and charges

	Property provision
	31 Dec 2012	31 Dec 2011
	£000	£000
Group
At 1 January	242	289
(Credited) / charged to income statement	(45)	55
Charged to property, plant and equipment	100	-
Utilised	-	(93)
Foreign exchange	1	(9)
At 31 December	298	242

Provisions have been analysed between current and non-current as follows:

	Property provision
	31 Dec 2012	31 Dec 2011
	£000	£000
Current	42	107
Non-current	256	135
	298	242

8.     Share capital

The movement in authorised and issued Ordinary Share Capital of 5 pence each during the year is detailed below.

	Authorised		Issued and fully paid
	Number	Amount	Number	Amount
		£000		£000
At 1 January 2012	145,000,000	7,250	81,395,677	4,069
Issued under share option schemes	-	-	307,173	15
Share buyback	-	-	(121,000)	(6)
At 31 December 2012	145,000,000	7,250	81,581,850	4,078

9.     Notes to the Group Cash Flow Statement

Reconciliation of profit for the year to net cash inflow from operating activities

	Year ended 31 Dec 2012	Year ended 31 Dec 2011
	£000	£000
Profit before tax	9,187	9,598
Adjustments for:
Depreciation	788	739
Amortisation of intangible assets	118	117
Share-based payment expense	61	115
Finance income	(174)	(258)
Finance costs	-	142
Changes in working capital:
Decrease in receivables	2,448	360
(Decrease)/ increase in payables	(2,136)	1,776
Increase/ (decrease)  in provisions	56	(47)
Cash generated from operations	10,348	12,542

10.  Statement by the directors

The preliminary results for the year ended 31 December 2012 and the results for the year ended 31 December 2011 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS").  The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2011.

The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for the years ended 31 December 2012 or 31 December 2011.  The financial information for the year ended 31 December 2011 is derived from the Annual Report delivered to the Registrar of Companies.  The Annual Report for 2012 will be delivered to the Registrar of Companies in due course. The auditors' report on those accounts was unqualified and neither drew attention to any matters by way of emphasis nor contained a statement under either section 498(2) of Companies Act 2006 (accounting records or returns inadequate or accounts not agreeing with records and returns), or section 498(3) of Companies Act 2006 (failure to obtain necessary information and explanations).

The Board of Microgen approved the release of this audited preliminary announcement on 22 February 2013.

The Annual Report for the year ended 31 December 2012 will be posted to shareholders in due course and will be delivered to the Registrar of Companies following the Annual General Meeting of the Company.  The report will also be available on the investor relations page of our web site (www.microgen.com).  Further copies will be available on request and free of charge from the Company Secretary at Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UURBROKAUUAR