PUR.L Regulatory News (PUR)

PURE WAFER PLC

(AIM: PUR)

Preliminary Results for year ended 30 June 2012

Pure Wafer plc ("Pure Wafer" or "the Group"), the provider of high quality silicon wafer reclaim services for many of the world's leading semiconductor manufacturers as an integral part of their cost control programmes, today reports its financial results for the year to 30 June 2012.

Chairman's statement

Introduction

The year to 30 June 2012 has seen the semiconductor industry maintaining its growth path with Pure Wafer continuing to enjoy increasing and sustained demand for its wafer reclaim services from all geographical areas in which we trade and with all customers across the various sectors of the industry. These market conditions have enabled Pure Wafer to consolidate its standing in the semiconductor industry as one of the leading wafer reclaim companies in the world.

Pure Wafer and indeed, the semiconductor industry as a whole is to a very large extent insulated from the much publicised economic problems of the Eurozone, with revenues denominated in USD and also because the semiconductor industry is a global market which is currently being driven by the increasing demand for hand-held devices in the heavily populated economies of China, India, Russia and Brazil.

With industry analysts forecasting continued growth through to 2015 and beyond, our major customers have committed and commenced substantial new investment in 300mm silicon chip manufacturing facilities amounting to tens of billions of US Dollars, demonstrating their confidence in sustainable growth, which will give rise to further wafer reclaim opportunities in the near future. These announcements and actions also give exciting long term prospects for Pure Wafer.

During the financial year as volume demand strengthened, both manufacturing sites in Swansea and Prescott have continued to run at record levels of productivity, which together with the close management of the overall level of costs, has resulted in Pure Wafer's cost per wafer running at an all-time low giving further confidence in the strength of the business going forward.

During the financial year we saw the Pure Wafer solar business make a meaningful contribution to the Group's results despite the challenges set by the UK Governments indecision over levels of feed-in-tariffs. In its first full year of trading Pure Wafer Solar has successfully completed many domestic, commercial and public sector projects and has quickly gained a reputation for being one of the foremost solar companies in the South Wales region.

The key performance indicators that are monitored by the Board are as follows:

Financial results

• Turnover $35.8m (2011: $29.7m)

• EBITDA $6.0m (2011: $3.2m)

• EBITDA pre stock option charge $6.1m (2011: $3.3m)

• Operating profit $0.5m (2011: $3.8m loss)

• Pre-tax loss $0.7m (2011: $5.1m)

• Basic loss per share 0.2c (2011: loss per share 3.6c)

• Net cash inflow from operating activities $5.7m (2011: $1.4m)

Once again we are pleased that the results show significant improvement on prior years, and the board is encouraged by the actions of the management team during the period to take advantage of the market conditions to maximise revenue and to continue reducing costs across all sectors of the business.

Group Funding

During the period we re-commenced capital repayments to our asset based funders in January 2012. This followed the successfully completed negotiations with our bank and asset funders of a further financial restructuring package to assist the management of our working capital requirement, arising from the increased volumes of wafer reclaim and the initial growth of our solar business.

The latest financial restructuring agreement further demonstrates the commitment that the bank and asset funders have to Pure Wafer and shows a confidence in the sustained recovery and continued growth of the business, and I would like to thank them for their support.

Management

I would like to thank the entire team for their support and efforts during a year in which volumes have shown continued growth, productivity levels have been at record levels, a high level of cost control has been maintained and our new products have made a meaningful contribution.

In December 2011, we announced the appointment of Richard Howells (aged 38) to the Board as Group Finance Director. I am pleased to welcome Richard onto the Board. He has some excellent experience in the technology industry and more specifically relevant experience in financial restructuring. The Board sees this as a good addition to the Pure Wafer Group and looks forward to Pure Wafer receiving the benefits of his experience.

Tim Lowe resigned his position as Group Finance Director on 4 January 2012 to pursue other opportunities. The Board would like to thank Tim for his contribution to the Group and wish him well with his future endeavours.

Outlook

The current period has commenced strongly with a continuation of high volumes enjoyed during the prior period. It is particularly pleasing that high and stable volumes are being seen from our customers in all geographical regions. This together with the 300mm manufacturing facilities currently under construction by the semiconductor industry and in some cases nearing completion gives an optimistic long term outlook.

With industry analysts forecasting many years of sequential growth for the industry fuelled by the world's emerging economies the outlook for further growth is encouraging.

With our installed capacity and high quality offering together with our low cost of manufacturing Pure Wafer is in a strong position to take advantage of this stable and growing market.

We fully expect that Pure Wafer's solar division will continue to trade strongly and produce results in line with management expectations during the period, despite the uncertainty over the Government's long term position on feed-in-tariffs. The reputation that Pure Wafer has quickly gained in this sector has resulted in many orders being in place with some exciting opportunities in both commercial and public sector projects for the upcoming period.

These factors give Pure Wafer a strong foundation on which to move forward, and build upon for further growth and improved profitability.

Stephen Boyd

Chairman

1 October 2012

Chief Executive's review

Operational Review

The financial results to June 2012 continued the upward trend that we enjoyed during last financial year with continued growth in volumes of wafers both in Swansea and Prescott as the semiconductor industry continued its growth.

Volume sales for the Group grew during the period with 300mm wafer reclaim up by 28% when compared to the prior year, whilst 200mm wafer reclaim was as expected lower by 9% as one of our major customers completed their transition to 300mm. It was also encouraging to see the second half of the year achieve an even stronger growth with increases on 300mm of a further 18% when compared to the first half, demonstrating a continuing growth pattern.

Once again our operational teams met the significant challenge of achieving increasing volumes whilst maintaining the cost reductions and benefits gained during the prior periods, in a market where our suppliers were requesting price increases for the majority of our consumable items. I am very pleased to report that we managed to build on our past successes and reduce costs per wafer even further by 9% compared with the prior financial year. These cost savings were in part due to the economies of scale as well as successful engineering activities to reduce consumable usage and costs within our processes, all without affecting the quality of the Group's product offering.

As volumes increased our operational teams processed the increased volumes with only a modest increase in headcount and thus Pure Wafer benefited from the cost efficiencies as record levels of productivity were once again achieved in both the Swansea and Prescott facilities. I would like to thank all our employees for their hard work and support during the year, enabling Pure Wafer to continue to trade competitively throughout this period.

Highlights

• Sales Volumes have seen continued growth

- 300mm up by 28% when compared to prior year

- Strong increases in volumes in the 2nd half over 1st half

• Cost reductions continued leading to 9% reduction in cost per unit compared to prior year

• Record levels of productivity at both Swansea and Prescott sites

• Group banking arrangements were restructured to ease increased working capital demands in line with increased volumes

- asset based debt was rescheduled over existing term including an initial six month capital moratorium

- additional banking facilities negotiated

• Business now stabilised with low cost of manufacture, in a growing market, with significant installed capacity

Swansea site, UK

Strong and growing demand from both our European and Asian customers during the period enabled the Swansea site to increase 300mm volume sales by 22% compared to the prior year, whilst 200mm volumes dropped by 24% as one of our major customers completed their transition from 200mm to 300mm manufacturing. The second half of the financial year showed strong growth compared to the first half for our 300mm volumes with a 21% increase which reflects the continuing growth of the industry across all geographical regions. High levels of cost control and productivity levels have produced results which have contributed to the Group results.

Prescott site, Arizona, USA

The Prescott, Arizona facility continues to make significant progress in increasing our 300mm wafer reclaim market share in the US, where we are actively engaged with every major 300mm integrated chip manufacturer which has a manufacturing presence in the US. Volume sales grew for the period with 300mm up by 43% when compared to the prior year with 200mm volumes remaining stable. With record productivity levels and a low cost of manufacture the Prescott site continues to make a significant contribution to the Group results.

With the Group's current installed capacity for 300mm and smaller diameter wafers at Pure Wafer's high quality facilities in Swansea and Prescott, Arizona, together with the reduced cost per wafer, the Board believes that the Company is well placed for future growth.

Solar pv

The first full year of trading for our Solar pv division was both successful and frustrating with trading experiencing much volatility due to the UK Government's indecision and many changes over the level of feed-in-tariff rates. We have now established a flexible workforce that is inter-changeable between wafer reclaim and solar panel manufacturing such that the peaks and troughs in the demand for our products can be met whilst managing labour costs efficiently. We have established a good customer base, mainly in South Wales, with both commercial and public sector property owners, which together with the domestic demand resulted in a first year revenue outcome of $2.4m. This customer base gives confidence that we will be successful in building on this first year of business.

Peter Harrington

Group Chief Executive

1 October 2012

Financial review

Reporting currency

We continue to report in US dollars, the currency of the industry we operate in. This alignment of functional currency and reporting currency allows us to produce accounts that are clearer and more transparent without the need for the large and numerous adjustments required at the year.

EBITDA and cash generation

Increased sales volumes and steady selling prices, whilst reducing costs per wafer of production, have resulted in increased EBITDA and cash generation. EBITDA for the year was $6.0m, an increase of 88% on last year (2011: $3.2m). This increased profit along with successful management of working capital has resulted in net cash inflow from operating activities of $5.7m, an increase of 316% on last year (2011: $1.4m). Underlying cash has increased by $1.8m (2011: Reduction of $2.0m).

Volumes and Revenue

Wafer reclaim

Overall volumes shipped based on 300mm equivalent wafers increased by 12.8% in the year. Revenue for the year was $33.4m, an increase of 13.7% on last year (2011: $29.3m); reflecting the impact of increased volumes. An analysis of turnover by origin and destination can be found in note 5.

Solar pv

Revenue for the year was $ 2.4m, (2011: $0.4m); reflecting the first full period of trading for the UK solar business.

Gross profit

Gross profit stood at $11.5m (2011: $8.3m), an increase of 38.4%, as a result of increased volumes processed and the cost saving initiatives implemented in the period.

Administrative expenses

Administrative expenses of $11.0m (2011: $12.1m) for the Group show a decrease on the prior year. This decrease has been driven principally by a reduction in the depreciation and amortisation charge as a result of certain tangible fixed assets becoming fully depreciated.

Operating profit

The operating profit of $0.5m (2011: loss of $3.8m) was achieved as a result of increased revenue and a reduction in administrative expenses.

Loss before tax

The loss before tax was $0.7m (2011: $5.1m).

Foreign exchange

We continue to maintain as much of the cost base as possible in US Dollars in order to provide a natural hedge against the US Dollar revenue streams.

Taxation

During the year the Group submitted a claim in respect of qualifying Research and Development, the amounts received are shown in note 11. Due to the losses incurred during the year, the board has taken the decision not to recognise the deferred tax asset of $10.8m (2011: $9.3m) pertaining to accumulated losses in the UK as it is not expected to be utilised within the foreseeable future.

Funding arrangements

On 3 August 2011 the Group reached an agreement with its lenders to restructure the capital repayment terms of hire purchase and finance leases. Under the terms of this revised arrangement capital repayments recommenced in January 2012 and will conclude by 30 June 2015. The agreement also included an increased overdraft facility of $2.7m, which has been reduced during the period to $1.6m as at 30 June 2012.

Richard Howells

Group Finance Director

1 October 2012

Consolidated income statement

year ended 30 June 2012

All activities derive from continuing operations.

Consolidated statement of comprehensive income

year ended 30 June 2012

Consolidated statement of changes in equity

year ended 30 June 2012

Consolidated balance sheet

As at 30 June 2012

Consolidated cash flow statement

As at 30 June 2012

NOTES TO THE PRELIMINARY RESULTS

Year ended 30 June 2012

1. Publication of Non-Statutory Accounts

The financial information set out in this announcement does not comprise the Group`s statutory accounts for the years ended 30 June 2012 or 30 June 2011.

The financial information has been extracted from the statutory accounts of the Company for the year ended 30 June 2011 which have been delivered to the Registrar of Companies. The auditors` opinion on those accounts was unqualified and did not contain a statement under section 498 (2) or section 498 (3) Companies Act 2006 and did not include references to any matters to which the auditor drew attention by the way of emphasis.

The statutory accounts for the year ended 30 June 2012 will be finalised on the basis of the financial information presented by the directors in this announcement and will be delivered to the Registrar of Companies following the Company`s Annual General Meeting.

2. GENERAL INFORMATION

Pure Wafer plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Pure Wafer plc, Central Business Park, Swansea Vale, Swansea SA7 0AB.

ADOPTION OF NEW AND REVISED STANDARDS

The financial statements have been prepared in accordance with International Financial Reporting Standards "IFRSs" as adopted by the European Union as they apply to financial statements of the group for the year ended 30 June 2012 and applied in accordance with the Companies Act 2006. The financial statements have been prepared in accordance with the historical cost convention.

The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning 1 July 2011 and have not been early adopted.

·; IFRS 9 'Financial instruments - classification of financial assets and financial liabilities' effective for periods beginning on or after 1 January 2015. The group is yet to assess IFRS 9's full impact however initial indications are that there will not be a material impact on adoption of the standard.

·; IFRS 10 'Consolidated financial statements' effective for periods beginning on or after 1 January 2013. This standard changes the basis of including companies in the consolidated financial statements but is not expected to impact the group financial statements significantly.

·; IFRS 11 - 'Joint arrangements' effective for periods beginning on or after 1 January 2013. This standard significantly amends the accounting treatment of joint arrangements but is not expected to impact the group.

·; IFRS 12 - 'Disclosure of interests in other entities' effective for periods beginning on or after 1 January 2013. This alters the disclosure requirements for companies holding investments in subsidiaries, joint arrangements and other entities. It will amend the disclosures of the company but is not expected to have a significant impact.

·; IFRS 13 - 'Fair value measurements' effective for periods beginning on or after 1 January 2013. This standard applies to all fair value amounts and disclosures in the financial statements and may, therefore, have an impact on the group. The company has not yet assessed this potential impact.

·; Amendment to IAS 12 'Income taxes - deferred tax accounting for investment properties' effective for periods beginning on or after 1 January 2012. This is not expected to impact the group.

3. business and geographical segments

Business and geographical segments are reported in a manner consistent with internal reporting provided to the Chief Operating Decision-Maker, which has been identified as the executive directors of the Pure Wafer plc Board.

The group's activities and turnover primarily consist of the reclamation and reprocessing of silicon test wafers, in the UK and the US, for external customers. The group is also involved in the design, manufacture and installation of photovoltaic systems in the UK.

For management purposes, the group is organised into three operating divisions based on the geographical territory of origin. These divisions are the basis on which the group reports its primary segment information.

Segment information is presented below:

Management information does not separately analyse the UK assets and liabilities between the UK wafer reclaim and UK solar businesses. Assets and liabilities of the solar business are not considered to be material in the overall context of the UK business.

4. Business and geographical segments (continued)

Management information does not separately analyse the UK assets and liabilities between the UK wafer reclaim and UK solar businesses. Assets and liabilities of the solar business are not considered to be material in the overall context of the UK business.

Analysis by-product

The revenue by-product variant was as follows:

Analysis by destination

The revenue by destination was as follows:

5. LOSS per share 

The calculation of the basic and diluted loss per share is based on the following data:

6. Interest-bearing loans and borrowings

Overdrafts are repayable on demand. Bank loans, hire purchase and finance lease obligations are repayable as follows:

Obligations under finance lease and hire purchase contracts are secured on the related assets. See note 20 for further detail on finance lease contracts. The bank loans are secured on the assets and undertakings of the Group.

The fair value of the group's loan, finance leases and hire purchase obligations approximates to their carrying amount.

On 3 August 2011 the Group reached an agreement with its lenders to restructure the capital repayment terms of hire purchase and finance leases. Under the terms of this revised arrangement capital repayments recommenced in January 2012. At 30 June 2012 the relevant borrowings were classified according to the repayment profile in place at that date.

7. Obligations under finance leases

It is the Group's policy to lease certain plant and machinery under finance leases.

The contractual payments in respect of finance leases based on the undiscounted cash flows and the earliest date on which the Group and company can be required to pay are shown above.

For the year ended 30 June 2012, the average effective borrowing rate was 6.1% (2011: 7.4%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The carrying amount of the borrowings approximates their fair value.

All lease obligations are denominated in USD. The fair value of the Group's lease obligations approximates to their carrying amount. The Group's obligations under finance leases are secured by the lessors' rights over the leased assets.

8. notes to the consolidated cash flow statement

9. Annual Report and Annual General Meeting

The Annual Report will be will be posted to shareholders on or around 19 October 2012 and will be available from the Company`s website, www.purewafer.com, shortly thereafter. The Annual Report contains notice of the Annual General Meeting of the Company which will be held at 11.00am on 13 November 2012 at Pure Wafer plc, Central Business Park , Swansea Vale, Swansea SA7 0AB.