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TIDMDDD
RNS Number : 3527B
DDD Group PLC
16 April 2012
16 April 2012
DDD Group PLC
Leading market position established; strong, diversified revenue growth
Los Angeles, California: DDD Group plc ("DDD" or "the Group"), the 3D solutions company, has published its full year results for the year ended 31 December 2011.
Highlights
Financial
-- Over 9m units of DDD TriDef 2D to 3D conversion solutions shipped by TV, PC and mobile licensees
-- Turnover, excluding discontinued businesses, up 176% to $5,534,000 (2010: $2,008,000)
-- Loss from continuing operations before tax $96,000 (2010: loss $1,195,000)
-- Loss per share per share reduced to 0.43c (2010: loss 1.27c)
-- Moved into profit in H2, earnings per share equal to 0.21c/share
-- Net cash inflow from operating activities $120,000 (2010: outflow $1,204,000)
-- Net cash at 31 December 2011 $3,143,000 (2010: $4,230,000)
Operational
-- 10 new licensing deals in 2011
-- 14 licensees shipping royalty bearing products by year-end
-- Revenue diversification from multiple 3D consumer markets
-- Revenue shift continues toward higher margin royalties
-- Attained market leading position in emerging 3D PC market
Chris Yewdall, Chief Executive said:
"We have firmly established our position of leadership for 2D to 3D conversion, with more than 12 million units of TriDef 3D technology shipped worldwide in key 3D consumer markets. DDD is now operating cash generative and moved into profitability in the second half of 2011.
"In 2011, we signed a number of new licensees and moved towards a more balanced revenue composition that is less susceptible to seasonality or performance by any single licensee. As the market for 3D consumer devices continues to grow and diversify, we aim to further expand our licensee base in TVs, PCs and mobile devices, whilst delivering incremental value through services such as Yabazam paid content.
"We are confident that we can build further on the momentum achieved to date to maintain profitable growth in 2012."
Enquiries
DDD Group
Chris Yewdall, President & CEO
Victoria Stull, Chief Financial
Officer +1 310 566 3340
Canaccord Genuity
Simon Bridges 0207 523 8000
College Hill
Kay Larsen / Adrian Duffield 0207 457 2020
Overview
2011 proved to be another significant growth year as the Group delivered record revenues. The Group's licensees shipped over 9 million units of TriDef(R) 2D to 3D conversion during the year bringing the cumulative total to over 12 million units shipped to date.
The Group secured 10 additional licence agreements in the TV, PC and mobile sectors during 2011, including significant design wins with Sony and LG Electronics. Royalty revenues have also diversified as a result of the increase in licensees coupled with shipments into new markets. This has created a more balanced revenue composition that is less susceptible to seasonality or performance by any single licensee.
The PC market provides substantially higher per-unit royalties than the TV and mobile markets and the Group particularly focused on expanding market share here as global demand for 3D notebooks, all-in-one and PC monitors increases. As a result, more than 600,000 units of TriDef 3D software were shipped by PC licensees in the fourth quarter.
Additionally, the Group signed its second mobile phone licence agreement, which lead to the launch of the LG Optimus 3D phone that included TriDef 2D to 3D conversion for video. The phone was launched at the end of June 2011 and delivered nearly 10% of the Group's annual IP unit shipments during the second half. The mobile and tablet market has proven its potential and will be a focus for the Group in 2012 as 'glasses-free' 3D display technologies continue to improve.
The Group achieved positive cash flow from operations for the year and moved into profitability in the second half. DDD continues to invest in the additional staff it requires to meet growing demand from new and prospective licensees. The Group expects the licensing and royalty revenue momentum of 2011 to continue and deliver profitable growth in 2012.
Financial review
Revenues for the year ended 31 December 2011 were $5,534,000 (2010: $2,008,000), an increase of 176%. 2010 revenue excludes $171,000 of revenue from discontinued businesses. The increase was driven by growth in shipments of 3D televisions, Blu-ray players, PCs and smartphones incorporating the Group's TriDef 3D solutions.
Substantial growth came from the PC market as most major manufacturers introduced 3D monitors and PCs. The Group announced 10 new licence agreements during 2011, including a licence agreement with LG for a smartphone that began shipping in the second half of the year. This resulted in strong second half performance with monthly IP shipments across all sectors exceeding 1 million units for the first time in September 2011.
Royalty revenues and per unit revenues from direct to consumer software licensing increased to $4,686,000 (2010: $1,651,000) as shipments across TV, PC and mobile grew from 2.6 million to 9.1 million units. This growth was driven by 100% growth in the number of licensees shipping TriDef products during the year. Royalties from OEM agreements increased to $4,556,000 (2010: $1,524,000) while software licensing sales were $130,000 (2010: $127,000) for the year.
Revenues from licence fees increased to $434,000 (2010: $93,000). This growth was primarily driven by revenue from two TV chip makers and growth in licence fees from a Japan-based 2D to 3D conversion business that licences the Group's technologies.
Consulting revenues attributable to one-time development fees were $407,000 (2010: $227,000) as the Group implemented next-generation, glasses-free, auto-stereoscopic solutions and performed development work for new licensees. Other revenues were $7,000 (2010: $37,000).
Gross profit increased by 182% to $5,219,000 (2010: $1,851,000) and gross margin to 94% (2010: 92%) as a result of the continued shift in revenue mix toward higher margin royalties.
Administrative expenses increased to $4,259,000 (2010: $2,636,000), with the expansion of headcount as planned to 34 from 19 to facilitate the procurement and delivery of more licences for the Group's technologies. The Group also invested in additional R&D resources and staff to expand the Yabazam content library as the Group positions Yabazam to become a leading 3D content portal.
Other income increased 52% to $423,000 (2010: $279,000). The majority of other income is derived from the Australian R&D incentives which increased as a result of the growth in R&D personnel and investment.
The non-cash share-based incentive cost was $621,000 (2010: $176,000) reflecting the additional expense from the 2011 January share option grant as well as options awarded as part of personnel hiring incentives during the year.
During 2011, the Group was profitable on an adjusted profit before tax basis. Adjusted Group profit before tax, before share-based incentive costs, was $525,000 (2010: loss $1,019,000). The reported pre-tax loss was $96,000 (2010: loss $1,195,000).
Given that the Group was profitable in the second half, combined with recent use of accrued net operating losses against profits by the Australian subsidiary, a deferred tax asset of $476,000 has been recognised as further explained in Note 6 to the financial information included below.
The Group's loss per share reduced to 0.43 cents (2010: loss 1.27 cents).
Net cash generated by operating activities was $120,000 (2010: outflow of $1,204,000). Capitalised expenditure was $1,545,000 (2010: $1,072,000). This cash outflow was offset by $291,000 raised from the issue of new shares through employee stock option exercises during the year (2010: $5,503,000), resulting in cash of $3,143,000 at the end of 2011 (2010: $4,230,000).
Business update
During the year the Group's intellectual property licensing program flourished as a direct result of key relationships and agreements pursued during the latter part of 2010. The flexible design that underpins TriDef 3D technologies enabled the Group to improve PC software features and introduce a new ARM-based mobile phone software solution. These product developments allowed the business development team to successfully pursue licensing opportunities with leading customers in the TV, PC and mobile phone markets resulting in a 250% increase in royalty-bearing product shipments.
The TriDef solution is compatible with a wide variety of popular 3D display technologies including the latest 'glasses-free' displays for smartphones and tablets and the new generation of eye-tracked 3D displays that licensees have begun to adopt in the PC market.
Samsung continued to include the Group's 2D to 3D conversion solution in its market-leading range of 3D televisions and expanded its range of licensed products to include 3D Blu-ray players during the year. DDD signed an additional licence agreement with a US-based manufacturer of TV video processing chips and the technology handover was completed before year end.
At the end of year, the Group's Taiwan-based chip licensee advised that there would be a delay in production of its chip while it revises the design to include some additional 3D image processing features. Consequently, the Group expects a delay before this licence agreement yields royalty income.
Recently, a number of TV video processor suppliers including Broadcom and Cambridge Silicon Radio have announced that they are exiting the digital television system on a chip (SoC) market due to the significant investment required to develop next generation digital TV processors. This shift by major manufacturers has eliminated one licensing opportunity for TV chips that was signed during 2010.
As the market for 3D TVs continues to evolve, screen sizes will become smaller and retail prices will continue to fall. Recognising this trend, the Group has completed the development of a simpler, more compact version of the 2D to 3D conversion solution, intended for use in the lower cost video processors used in smaller screen 3D TVs. The Group is also developing a hybrid solution that combines TV chip technology with the Group's software solutions, to address the new generation of TV video processing chips. The first samples of these next generation ARM-based chips have already been received from the Group's prospective licensees in China.
Close alliances with PC chipmakers Advanced Micro Devices (AMD) and Intel Corporation enabled the development of TriDef 3D software solutions that are highly optimised for their respective processors. This cross-platform compatibility provided a significant competitive edge resulting in strong growth in PC licence agreements during the year as these 3D processors became available.
The Group continued to expand the range of games supported by TriDef 3D, which totalled almost 600 by the year end, including the leading games in China, Korea and Japan. The TriDef.com website was recently re-launched and is now available in Chinese, Korean and Japanese reflecting the international nature of the PC customer base.
The Group's agreement with Intel to enable 3D games on Intel's 2(nd) Gen Core(TM) PC processors allows PC manufacturers to create lower cost PC products that do not need a separate graphics processor in order for end users to play 3D games. Over 100 of the latest PC games can now be played on the latest 2(nd) Gen Core processors.
The Group also created partnerships in 2011 with the leading suppliers of 3D LCD panels including LG Display and Chimei Innolux. As a result of these alliances with key 3D component suppliers, the TriDef 3D solution has become a recognised feature of most 3D PC systems. TriDef 3D software is compatible with electronic 3D glasses such as those favoured by Samsung and HP, polarized 3D glasses used by LG Electronics and AOC and the very latest eye-tracked glasses free displays demonstrated by LG Electronics and Sony towards the latter part of 2011.
Consistent with the significant growth of 3D PC products in Asia, the Group is now focusing its resources on the substantial internet cafe ('iCafe') market in China where nearly 14 million PCs are used for games, internet surfing and movies in over 144,000 retail locations around the country. Several of the Group's existing licensees are working towards creating a solution allowing them to sell 3D PC monitors into this market for gaming. The Group is partnering with China's largest iCafe software management vendor to enable this having completed a memorandum of understanding to integrate the TriDef 3D game conversion capabilities into their iCafe management software.
TriDef Mobile launched in early 2011. It was first demonstrated by Texas Instruments on its OMAP4 processor at the Mobile World Congress in March. Subsequently, the Group licensed the solution to LG Electronics for 2D to 3D video conversion for LG's Optimus 3D smartphone, launched in June.
DDD will continue to develop licensing opportunities in the emerging 3D smartphone and tablet market during 2012, as 'glasses-free' 3D LCD displays become more widely available, and plans to add new features to the TriDef Mobile solution in response to requests from current and prospective licensees.
The Group continued to expand the range of originally made 3D movies available on the Yabazam online content portal. The portal is initially targeted at 3D PC users with several OEMs shipping sample 3D movie trailers with their 3D PCs during the year. Income from Yabazam was modest due to the heavy weighting of PC shipments during the latest quarter.
Towards the year-end, the Group added further staff to focus on accelerating the acquisition of originally made 3D content for Yabazam. DDD has also developed a Yabazam 3D app for Smart TVs. The Yabazam app allows owners of the latest LG and Samsung 3D TVs that also have Smart TV capability to download Yabazam 3D content using an internet connection to their SmartTVs. In February 2012, LG Electronics approved the Yabazam app for its Smart TVs and in just two weeks, almost 9,000 apps were downloaded by US customers resulting in approximately 70,000 uses. The Group plans to expand the reach of the Yabazam app to other SmartTV platforms from other 3D TV manufacturers during 2012.
At the Consumer Electronics Show in January 2012, a number of the Group's licensees including Samsung, LG Electronics and Sony demonstrated a wide range of products incorporating TriDef 3D solutions representing the broadest demonstration of the Group's solutions at any CES show to date.
Current trading and outlook
DDD has established a position of leadership for automated 2D to 3D conversion with more than 12 million units of TriDef 3D technology shipped worldwide in key 3D consumer markets. In 2011, the Group signed 10 new licence agreements and shifted the revenue mix toward higher market royalties from PCs, where DDD now has a strong foothold. As the market for 3D consumer devices continues to grow and diversify, the Group expects to further capitalise on its development efforts for the TV chip, PC software and mobile device applications of the TriDef 3D solution.
In 2012, the Group aims to further expand its current base of licensees, and deliver incremental value through additional services such as Yabazam paid content and through continuing to develop solutions that enable higher quality 3D experiences on consumer devices. The current year has started in line with the Board's expectations and the Board is confident it can build further on the momentum achieved to date to maintain its profitable growth in 2012.
Consolidated statement of comprehensive
income for the year ended 31 December
2011
12 months 12 months
to to
31 Dec 31 Dec
2011 2010(1)
$'000 $'000
---------- ----------
Notes
Revenue 2 5,534 2,008
Cost of sales 2 (315) (157)
---------- ----------
Gross profit 2 5,219 1,851
Administration expenses (4,259) (2,636)
Other income 423 279
Depreciation/amortisation expense (893) (516)
Share based payments (621) (176)
---------- ----------
Operating loss (131) (1,198)
Finance income 35 35
Finance expense - (32)
---------- ----------
Loss from continuing operations before
tax (96) (1,195)
Income tax expense 3 (486) (355)
---------- ----------
Loss for the year from continuing
operations (582) (1,550)
Loss of the discontinued 3D equipment
product sales operation - (17)
---------- ----------
Loss for the year (582) (1,567)
========== ==========
Other comprehensive income for the
year:
Exchange differences on translation
of foreign operations 47 (374)
---------- ----------
Other comprehensive income for the
year, net of tax 47 (374)
---------- ----------
Total comprehensive loss for the year (535) (1,941)
========== ==========
Loss per share from both total and
continuing operations(2)
Basic and diluted (cents per share) 4 (0.43) (1.27)
========== ==========
(1) See note 1a.
(2) The loss per share from discontinued operations is negligible and has no effect on the total loss per share from continuing operations.
Consolidated statement of financial
position as at 31 December 2011
31 Dec 31 Dec 31 Dec
2011 2010(1) 2009(1)
$'000 $'000 $'000
--------- --------- -----------
Notes
Assets
Non-current assets
Intangible assets 5 1,885 1,250 714
Property, plant and equipment 162 150 112
Deferred tax asset 6 476 - -
Total non-current assets 2,523 1,400 826
Current assets
Inventory - - 12
Trade and other receivables 1,225 798 364
Cash and cash equivalents 3,143 4,230 1,437
--------- --------- -----------
Total current assets 4,368 5,028 1,813
--------- --------- -----------
Total assets 6,891 6,428 2,639
========= ========= ===========
Equity and liabilities
Capital and reserves
Issued capital 7 12,427 12,414 12,444
Share premium 7 16,254 16,003 10,283
Shares to be issued - - 50
Merger reserve 7 20,524 20,544 21,151
Share based payment reserve 7 727 463 460
Translation reserve 7 486 350 (547)
Retained earnings (44,759) (44,490) (43,084)
--------- --------- -----------
Total equity 5,659 5,284 757
Non-current liabilities
Deferred tax liabilities 417 337 200
Total non-current liabilities 417 337 200
Current liabilities
Financial liabilities - - 812
Trade and other payables 815 807 870
Total current liabilities 815 807 1,682
--------- --------- -----------
Total liabilities 1,232 1,144 1,882
--------- --------- -----------
Total equity and liabilities 6,891 6,428 2,639
========= ========= ===========
(1) See note 1a.
Consolidated statement of cash flows for the year
ended 31 December 2011
12 months 12 months
to to
31 Dec 31 Dec
2011 2010
$'000 $'000
---------- ----------
Notes
Cash flows from operating activities
Loss for the year (582) (1,567)
Finance costs in the consolidated statement
of comprehensive income (35) (3)
Tax in the consolidated statement of comprehensive
income 486 355
Amortisation 5 819 453
Depreciation 74 63
Share based payments 621 176
Decrease in inventory - 12
Increase in trade and other receivables (427) (434)
Increase/(decrease) in trade and other payables 8 (63)
Net cash generated by/(used in) operations 964 (1,008)
Income tax paid (879) (231)
Interest received 35 35
---------- ----------
Net cash generated by/(used in) operating
activities 120 (1,204)
Cash flows from investing activities
Interest paid - (32)
Payments for intangible assets 5 (1,439) (939)
Payments for property plant and equipment (106) (101)
Net cash used in investing activities (1,545) (1,072)
Cash flows from financing activities
Proceeds from issue of equity shares 291 5,688
Issue costs - (185)
Net cash generated by financing activities 291 5,503
---------- ----------
Net (decrease)/increase in cash and cash
equivalents (1,134) 3,227
Exchange gains/(losses) 47 (434)
---------- ----------
Total (decrease)/increase in cash and cash
equivalents (1,087) 2,793
Cash and cash equivalents at the start of
the year 4,230 1,437
---------- ----------
Cash and cash equivalents at the end of
the year 3,143 4,230
========== ==========
Consolidated statement of changes in equity
for the year ended 31 December 2011
Share
Shares based
Share Share to be Merger payment Translation Retained Total
capital premium issued reserve reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
At 31 December 2009 12,444 10,283 50 21,151 460 (547) (43,084) 757
Transactions with
owners
Issue of shares 326 6,015 (49) - - - - 6,292
Share based payment
reserve transfer(1) - - - - (161) - 161 -
Equity settled share
options - - - - 176 - - 176
Foreign exchange
differences (356) (295) (1) (607) (12) 1,271 - -
--------- --------- -------- --------- --------- ------------ ---------- --------
Total transactions
with owners (30) 5,720 (50) (607) 3 1,271 161 6,468
Total loss for the
year - - - - - - (1,567) (1,567)
Comprehensive income
Other comprehensive
income Foreign exchange - - - - - (374) - (374)
--------- --------- -------- --------- --------- ------------ ---------- --------
Total comprehensive
loss - - - - - (374) - (374)
--------- --------- -------- --------- --------- ------------ ---------- --------
At 31 December 2010 12,414 16,003 - 20,544 463 350 (44,490) 5,284
Transactions with
owners
Issue of shares 25 266 - - - - - 291
Share based payment
reserve transfer(1) - - - - (313) - 313 -
Equity settled share
options - - - - 621 - - 621
Foreign exchange
differences (12) (15) - (20) (44) 91 - -
--------- --------- -------- --------- --------- ------------ ---------- --------
Total transactions
with owners 13 251 - (20) 264 91 313 912
Total loss for the
year - - - - - - (582) (582)
Comprehensive income
Other comprehensive
income Foreign exchange - - - - - 45 - 45
--------- --------- -------- --------- --------- ------------ ---------- --------
Total comprehensive
income - - - - - 45 - 45
--------- --------- -------- --------- --------- ------------ ---------- --------
At 31 December 2011 12,427 16,254 - 20,524 727 486 (44,759) 5,659
(1) Reserve transfer for exercised, forfeited and expired options.
1. Selected financial data disclosure
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2011, 2010 or 2009 but is derived from those accounts. Statutory accounts for 2010 and 2009 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report except for an emphasis of matter on going concern in 2009 and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
1 (a) Change in presentational currency
The Group has changed its presentational currency from Sterling to US dollars with effect from 1 January 2011, due to the majority of revenues and costs being dollar-denominated. These are the first financial statements to be presented in US dollars and all comparative information has been restated in accordance with the requirements set out in IAS 21, 'The Effects of Changes in Foreign Exchange Rates' with respect to translation of results to presentational currency.
The change in the presentational currency from Sterling to US dollar has been applied retrospectively in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' and therefore comparative information has been restated.
The impact of this change in presentational currency for 2010, is as follows:
(i) The assets and liabilities for the Group at 31 December 2010 and 31 December 2009 has been translated using the closing rate for the same dates of $1.5471/GBP and $1.5928/GBP respectively;
(ii) Share capital, share premium and other capital reserves were translated at the closing rates prevailing at the applicable balance sheet date;
(iii) The consolidated income statement for 2010 has been translated using the average rate for the year ended 31 December 2010 of $1.54633/GBP on the basis that this average rate approximates the exchange rates on the dates of transactions; and
(iv) The resulting gain on retranslation from average to closing rate has been recognised in the consolidated statement of comprehensive income.
2. Segmental reporting
The Group's operating segments are based upon the Group's revenue streams. At present, given the size of the Group, costs of goods sold and operating expenses cannot be allocated on a reasonable basis to the segments below and, as a result, the segmental analysis is limited to the Group gross profit as presented to the Board of Directors.
2011 2010(1)
$'000 $'000
------- --------
REVENUES:
Licensing 434 93
Royalties(2) 4,556 1,524
Consumer software product sales 130 127
Revenue from the Group's technologies: 5,120 1,744
Consulting revenues 407 227
Other revenue streams 7 37
------- --------
Total revenue 5,534 2,008
Cost of goods sold: (315) (157)
------- --------
Gross profit 5,219 1,851
======= ========
Margin 94% 92%
(1) The 2010 figures exclude the effect of the discontinued operation of 3D equipment sales. Total revenues before the removal were $2,179,000. Gross profit before the removal was $1,876,000; an 86% margin. There is no impact of the discontinued operation in 2011.
(2) Includes $61,000 (2010: $nil) of advertising royalty revenue for the inclusion of Yabazam content and links by OEM manufacturers in their PC bundles. A per unit discount incentive is available to PC OEMs for including content and/or desktop icon in the bundle which promotes the Yabazam website. Yabazam records a marketing expense for this amount.
2011 2010
$'000 $'000
------ ------
Identifiable assets:
Trade receivables:
Licensing 35 74
Consulting - 150
Other - 67
3D equipment product sales (discontinued) - -
Total 35 291
Inventory - 3D equipment product sales (discontinued) - -
Intangible Assets - licensing 1,746 1,179
Other unallocated assets 5,110 4,958
------ ------
Total assets 6,891 6,428
====== ======
Identifiable liabilities:
Deferred revenues - customer deposits:
Licensing 70 292
Other unallocated liabilities 1,162 852
------ ------
Total liabilities 1,232 1,144
====== ======
All other assets and liabilities of the Group in addition to the operating expenses are not provided or reviewed at a segmental level.
Major customers
The customers contributing over 10% to the gross revenues of the Group are as noted in the following table:
2011 2010
$000 % $000 %
------ ------- ------ -------
Samsung
(2011: 2.1% Consulting; 97.9%
Royalties)
(2010: 100% Royalties) 2,663 48.1% 1,412 70.3%
LG Electronics
(2011: 12.5% Consulting;
87.5% Royalties)
(2010: 100% Royalties) 1,198 21.6% 52 2.6%
Sony 679 12.3% - -
(2011: 100% Royalties)
(2010: N/A)
------ ------- ------ -------
Major customer total 4,540 82.0% 1,464 72.9%
------ ------- ------ -------
All other sources 994 18.0% 544 27.1%
------ ------- ------ -------
Total gross revenues 5,534 100.0% 2,008 100.0%
====== ======= ====== =======
Regional breakdown
The majority of the Group's revenues (2011: 95%; 2010: 85%) are from customers based in the Asia Pacific region.
3. Income tax
2011 2010
$'000 $'000
------ ------
Current tax:
Current year tax charge 879 231
Adjustment in respect of previous years - -
------ ------
Total current tax 879 231
Deferred tax asset movement (476) -
Deferred tax liability movement 83 124
------ ------
486 355
====== ======
The tax assessed for the year differs from the standard rate of corporation tax as applied in the respective trading domains where the Group operates. The tax charge on ordinary activities is explained below:
2011 2010
$'000 $'000
--------- --------
Loss on ordinary activities before tax (96) (1,195)
--------- --------
Loss at 27% (PY's 28%) (26) (335)
Effects of:
Higher foreign tax rates (2) (50)
Income / Expenses not deductible for tax purposes 31 (60)
Estimated usage of subsidiary NOL to cover income (367) -
tax
Tax losses carried forward 270 358
Recognition of deferred tax asset (Note 6) (476) -
Other timing differences 177 211
Foreign withholding tax 879 231
--------- --------
Tax charge on ordinary activities 486 355
========= ========
Given that a large majority of the Group's revenues are derived from licensees in Asia, foreign withholding taxes deducted at source on royalties and licences from these countries create the majority of the income tax expense recorded in the Group accounts. These taxes will be available as future foreign tax credits for the US group company and therefore are reflected as increased net operating losses for future deferred tax asset ("DTA") consideration.
There are substantial unrelieved tax losses of $40,438,000 (2010: $43,125,000) across the Group companies as set out below:
USA UK Canada Australia Total
$'000 $'000 $'000 $'000 $'000
---------- ------- ------- ---------- --------
At 31 December 2011
Unrelieved tax loss 14,128(1) 4,168 43 22,099 40,438
Local rate of tax 34% 24% 30% 30%
---------- ------- ------- ---------- --------
Potential deferred
tax asset 4,803 1,000 13 6,630 12,446
DTA recognised - - - (476) (476)
---------- ------- ------- ---------- --------
Unprovided potential
deferred tax asset 4,803 1,000 13 6,154 11,970
---------- ------- ------- ---------- --------
At 31 December 2010
Unrelieved tax loss 16,622 3,965 63 22,475 43,125
Local rate of tax 34% 28% 30% 30%
------- ------- ---- ------- --------
Unprovided potential
deferred tax asset 5,651 1,110 19 6,742 13,522
------- ------- ---- ------- --------
(1) During 2011, the Company reviewed its tax losses consistent with the requirements of IRC 382. This review resulted in a $3.5 million reduction to unrelieved tax losses.
At 31 December 2011, the availability to offset unrelieved tax losses against future taxable trading profits may be subject to restrictions in the respective tax jurisdictions. The entire deferred tax asset has not been recognised due to the uncertainty of the timing and recoverability of the asset. The remaining asset will be recovered in line with future profits.
4. Loss per share
2011 2010
$'000 $'000
------------- -------------
Loss for the year attributable to equity
shareholders (582) (1,567)
Loss per share
Basic & diluted (cents per share) (0.43) (1.27)
============= =============
Shares Shares
------------- -------------
Issued ordinary shares par 1p at start
of the year 132,618,340 111,791,406
Ordinary shares issued in the year 1,573,806 20,826,934
------------- -------------
Total outstanding ordinary shares at
end of the year 134,192,146 132,618,340
============= =============
Weighted average number of ordinary shares
for the year 133,837,662 123,167,165
============= =============
Deferred shares:
Issued deferred shares(1) at the start
and end of the year 74,416,547 74,416,547
============= =============
Total share capital (Issued & Outstanding) 208,608,693 207,034,887
============= =============
(1) Deferred Shares:
On 5 July 2008 the share capital of the Company was split so that a total of 74,416,547 ordinary shares of par value 10 pence became 74,416,547 deferred shares of par value 9 pence plus 74,416,547 new ordinary shares of par value 1 penny.
The holders of the deferred shares shall not be entitled to receive any dividend out of the profits of the Company available for distribution. On a distribution of assets on a winding-up or other return of capital (otherwise than on conversion or redemption or purchase by the Company of any of its shares) the holders of the deferred shares shall be entitled to receive the amount paid up on their shares after distribution (in cash or in specie) to the holders of the new ordinary shares the amount of GBP100,000,000 in respect of each new ordinary share held by them. The deferred shares shall not entitle their holders to any further or other right of participation in the assets of the Company. The holders of deferred shares shall not be entitled to receive notice of or to attend (either personally or by proxy) any general meeting of the Company or to vote (either personally or by proxy) on any resolution to be proposed. No certificates will be issued in respect of the deferred shares. The diluted loss per share does not differ from the basic loss per share as these shares are anti-dilutive.
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 Patents Other intangibles Total
development
costs
$'000 $'000 $'000 $'000
------------- ----------- ------------------- -------
Cost
At 1 January 2009 1,628 278 - 1,906
Additions 791 - - 791
Exchange rate differences 175 28 - 203
------------- ----------- ------------------- -------
At 31 December 2009 2,594 306 - 2,900
Additions 939 - - 939
Exchange rate differences 97 (9) - 88
At 31 December 2010 3,630 297 - 3,927
Transfer from PP&E(1) - - 29 29
Additions 1,297 - 142 1,439
Exchange rate differences (12) 11 - (1)
At 31 December 2011 4,915 308 171 5,394
============= =========== =================== =======
Amortisation
At 1 January 2009 1,249 278 - 1,527
Charge for the year 468 - - 468
Exchange rate differences 163 28 - 191
------------- ----------- ------------------- -------
At 31 December 2009 1,880 306 - 2,186
Charge for the year 453 - - 453
Exchange rate differences 47 (9) - 38
------------- ----------- ------------------- -------
At 31 December 2010 2,380 297 - 2,677
Transfer from PP&E(1) - - 10 10
Charge for the year 797 - 22 819
Exchange rate differences (8) 11 - 3
------------- ----------- ------------------- -------
At 31 December 2011 3,169 308 32 3,509
============= =========== =================== =======
Net book value
At 1 January 2009 379 - - 379
At 31 December 2009 714 - - 714
At 31 December 2010 1,250 - - 1,250
At 31 December 2011 1,746 - 139 1,885
============= =========== =================== =======
(1) The transfer was made on 1 January 2011.
Other intangibles include externally developed websites and SmartTV application development for the Group. There is no impairment to the intangibles in any of the reported periods.
6. Deferred tax asset
2011 2010 2009
$'000 $'000 $'000
------ ------ ------
Deferred tax asset:
Initial recognition of deferred tax 476 - -
asset
Movement in deferred tax asset - - -
476 - -
====== ====== ======
Based on management's review of the business units, the fact that the Australian unit has needed to utilise accrued net operating losses in recent periods for tax purposes, and the fact that the Group is profitable in the second half of 2011, a DTA of $476,000 has been recognised in 2011 related to conservative forecasts of 2012 full year profitability.
7. Issued share capital
The issued share capital of the Group is issued by the parent company in Sterling. The parent company accounts provide the currency of issue reconciliation of the share capital. For the Group accounts, the shares outstanding at the end of the period are converted to USD using the closing spot rate while the transactions during the period are converted using the average rate for the period. The resulting difference is a foreign exchange adjustment on the balance.
Nominal Premium Total
value net of costs
Shares $'000 $'000 $'000
------------ -------- ------------- -------
Deferred shares (par 9p)
In issue 1 January 2010 74,416,547 10,669 - 10,669
Foreign exchange adjustment -- (307) - (307)
------------ -------- ------------- -------
31 December 2010 74,416,547 10,362 - 10,362
Foreign exchange adjustment -- (10) - (10)
------------ -------- ------------- -------
31 December 2011 74,416,547 10,352 - 10,352
============ ======== ============= =======
Ordinary shares (par 1p)
In issue 1 January 2010 111,476,406 1,775 10,283 12,058
Share issue May 2010(1) 14,000,000 216 5,004 5,220
Loan note conversion June
2010(2) 5,100,000 79 710 789
Issued option exercises(3) 2,041,934 31 298 329
Foreign exchange adjustment -- (49) (292) (341)
------------ -------- ------------- -------
In issue 31 December 2010 132,618,340 2,052 16,003 18,055
Issued option exercises(3) 1,573,806 26 276 302
Foreign exchange adjustment -- (3) (25) (28)
------------ -------- ------------- -------
In issue 31 December 2011 134,192,146 2,075 16,254 18,329
============ ======== ============= =======
All shares
In issue 31 December 2011 208,608,693 12,427 16,254 28,681
In issue 31 December 2010 207,034,887 12,414 16,003 28,417
============ ======== ============= =======
Key Movements in the Share Capital and Share Premium accounts are as follows:
(1) On 14 May 2010, the Company announced that it had conditionally raised GBP3,500,000 before expenses through a placing of 14,000,000 ordinary shares of 1 penny each in the capital of the Company at a placing price of 25 pence per share. The shares were placed with key shareholders as well as existing and new institutional investors. The placing was completed on 7 June 2010.
(2) On 7 June 2010, the 2008 Convertible Loan Notes totalling GBP510,000 to certain Directors of the Group and to Arisawa Co. were converted to 5,100,000 ordinary shares of 1 penny each in the capital of the Company at the pre-determined price of 10 pence per share, pursuant to the existing authorities granted to the Board of Directors. Further details are included in Note 18.
(3) In each period, shares were issued under the Company's Share Option Plan.
Deferred Shares (par 9p)
On 5 July 2008 the share capital of the Company was split so that a total of 74,416,547 ordinary shares of par value 10 pence became 74,416,547 deferred shares of par value 9 pence plus 74,416,547 new ordinary shares of par value 1 penny.
The holders of the deferred shares shall not be entitled to receive any dividend out of the profits of the Company available for distribution. On a distribution of assets on a winding-up or other return of capital (otherwise than on conversion or redemption or purchase by the Company of any of its shares) the holders of the deferred shares shall be entitled to receive the amount paid up on their shares after distribution (in cash or in specie) to the holders of the new ordinary shares the amount of GBP100,000,000 in respect of each new ordinary share held by them. The deferred shares shall not entitle their holders to any further or other right of participation in the assets of the Company. The holders of deferred shares shall not be entitled to receive notice of or to attend (either personally or by proxy) any general meeting of the Company or to vote (either personally or by proxy) on any resolution to be proposed. No certificates will be issued in respect of the deferred shares.
Ordinary shares (par 1p)
The strategic investment made by Wistron in January 2009 for 12,652,025 ordinary shares included a two year restriction on the sale of those shares which expired 5 January 2011. No other restrictions existed during 2010 or 2011. A description of and relevant rights attached to the ordinary shares as of the date of this report are as set out in the Directors' Report of the Annual Report and Accounts.
Merger reserve
The Merger Reserve arose in the Group reconstruction in January 2002 prior to its flotation.
Share based payment reserve
The Share Base Payment Reserve comprises the carrying value of the recognised expense under IFRS2 for share options granted that are still exercisable. When options are exercised, forfeited or expire, a reserve transfer is performed in order to move the expense into Retained Earnings.
Translation reserve
The Translation Reserve reflects the exchange differences from retranslation of the opening net investments in overseas subsidiaries to the closing rate and translation of the results for the year from average rates to the closing rate.
8. Events after the balance sheet date
Financial:
On 14 February 2012, the Directors approved the grant of options over 2,420,000 ordinary shares (par value 1p) in the Company to the officers and certain management employees under the amended scheme at an exercise price of 27.25p per ordinary share based on the appropriate plan rules for the recipients. Christopher Yewdall, Executive Director of the Company, received options over 1,000,000 shares as part of the grant.
Other:
On 15 February 2012, the Group announced that it had changed its registered office and appointed David Venus and Company LLP as company secretary.
The Group has published regulatory announcements about these activities which can be found on the Group's website at http://www.ddd.com/investors/rns-announcements/.
9. The Group's full Annual Report and Accounts will be made available to shareholders on or before 11th May 2012.
10. The Annual General Meeting of DDD Group plc will be held at Norton Rose LLP, 3 More London Riverside, London SE1 2AQ at 10.00am on 12th June 2012.
About DDD Group
DDD transforms the visual experience by bringing 3D to the consumer. Its TriDef(R) 3D solutions convert 2D to 3D automatically, and enable delivery to 3D TVs, PCs and mobile devices. Leading brands including Samsung, LG Electronics, Sony, Intel and HP licence these solutions. Over 12 million TriDef 3D products have been shipped by DDD's licensees worldwide. DDD's shares are quoted on the London Stock Exchange's AIM Market (AIM:DDD). For more information please visit www.DDD.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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