DDD Group

Last year, 3D technology specialist DDD Group (DDD) delivered 9.1m units of its TriDef 2D and 3D conversion solutions to licensees in the television, PC and mobile phone markets – growth of 250%.

As a result, revenues are likely to come in at $5.5m, which is a 193% increase on the prior year. The AIM-listed company is riding the wave of 3D adoption, so as it signs up more partners to use its products, its ability to drive higher profits should also increase.

The sales mix is changing significantly, though all channels are experiencing solid growth. In the television market, it boosted shipments to TV chip manufacturers by 194%, but whereas it used to account for almost all its revenue (mainly with Samsung), the shift is changing – particularly towards higher PC volumes.

In the final quarter it shipped 600,000 units, and in order to hit 2012 profit forecasts the hope is that this growth will continue to up to 3m this year. Sony is its largest customer by volume, but DDD is keen to tap into soaring demand in countries such as China, which is home to 14m PC monitors across all 144,000 internet cafes.

The mobile market is also ripe for growth. Here DDD notched up 10% of its sales last year but this was with just one manufacturer (LG) on only one device. It is keen to offer new features such as streaming video support, and is also looking to land more partners. Chief executive Chris Yewdall says, 'Our sales mix is now much better, but there is still considerable scope to do more.'

As a largely licensing model, there is huge scope for incremental profit growth at DDD. Broker Canaccord predicts 2011 adjusted pre-tax profits of £200,000, rising to £2m this year. The company is clearly gaining traction, but the huge leap in profits this year still has an element of execution risk. Hold.