PUR.L Regulatory News (PUR)

18 Sep 2006 07:01

Pure Wafer PLC18 September 2006 18 September 2006 PURE WAFER PLC ("Pure Wafer" or "the company") Preliminary Results for year ended 30 June 2006 Pure Wafer plc, a company that provides high quality silicon wafer reclaimservices for many of the world's leading semiconductor manufacturers as anintegral part of their cost control programmes, today reports its second set offull year results since listing on AIM and its first full year profit. HIGHLIGHTS Financial Highlights • Turnover £14.52m (2005: £9.17m) up 58% • EBITDA £3.93m (2005: £1.38m) up 185% • Operating profit £1.99m (2005: loss of £0.23m) • Pre-tax profit £2.04m (2005: loss of £0.14m) • H2 PBT £1.34m, 91% increase on H1 • Adjusted diluted EPS of 7.63p (2005: loss per share of 0.58p) • Diluted EPS of 14.73p (2005:loss per share of 0.58p) • Net cash inflow from operating activities of £2.68m (2005: outflow of £0.05m) Operational Highlights • Established as the leader in 300mm wafer reclaim outside of Japan • Qualification achieved with further major semiconductor manufacturers • Increased 300mm capacity by 100% during the period through capital expenditure of £5.40m (2005: £1.97m) Giles Clarke, Chairman of Pure Wafer, commented: "We have built ourselves a valuable technology platform in the 300mm waferreclaim market which continues to grow quickly as our blue chip customers opennew semiconductor fabs and convert existing 200mm production facilities to 300mmcapable plants. As well as the strong growth experienced in the expanding 300mm marketplace, weare also experiencing good levels of demand from 200mm customers adopting ouradvanced high performance products. Management is therefore confident ofanother year of significant growth. We are now a leading market player in a consolidating global industry ensuringthat we are well placed to capitalise on the growth opportunities as the marketcontinues to develop." For further information, call: Keith Baker, Chief Executive, Pure Wafer 01792 311 200James Dearing, Group Finance Director, Pure Wafer 01792 311 200Billy Clegg/Edward Westropp, Financial Dynamics 020 7831 3113 CHAIRMAN'S STATEMENT Introduction It has been a very satisfactory year for the company as we report our second setof full year results since listing on AIM, and I am pleased that the managementteam has met expectations and delivered Pure Wafer's first full year profit.300mm wafer throughput has rapidly increased, generating a large increase inturnover leading to sustainable and increasing profitability. The success of the business was recently recognised when as a result of thecompany's continuing growth and achievements we won the accolade of being namedthe Western Mail's "Welsh Company of the Year 2006". Financial Results • Turnover £14.52m (2005:£9.17m) up 58% • EBITDA £3.93m (2005: £1.38m) up 185% (see note 3) • Operating profit £1.99m (2005: loss of £0.23m) • Pre-tax profit £2.04m (2005: loss of £0.14m) • H2 PBT £1.34m, 91% increase on H1 • Adjusted diluted EPS of 7.63p (2005: loss per share of 0.58p) • Diluted EPS of 14.73p (2005:loss per share of 0.58p) • Net cash inflow from operating activities of £2.68m (2005: outflow of £0.05m) Management We have continued to strengthen our management team during this financial yearwith the appointment to the board of James Dearing (Group Finance Director), andthe management appointments of Professor Tony Peaker (Chief Scientific Officer)and Trevor Hoskins (Operations Director). These three appointments bring awealth of experience and skills into the business to support our growth into thehigh volume manufacturing phase and solidify our new product introduction. We have initiated a SAYE scheme during the period to incentivise our staff,aligning their interests with those of the shareholders. I would like to thank the entire team, led by Keith Baker for their hard workand congratulate them on their achievements. Outlook We have built ourselves a valuable technology platform in the 300mm waferreclaim market which continues to grow quickly as our blue chip customers opennew semiconductor fabs and convert existing 200mm production facilities to 300mmcapable plants. As well as the strong growth experienced in the expanding 300mm marketplace, weare also experiencing good levels of demand from 200mm customers adopting ouradvanced high performance products. Management is therefore confident ofanother year of significant growth. We are now a leading market player in a consolidating global industry ensuringthat we are well placed to capitalise on the growth opportunities as the marketcontinues to develop. Giles Clarke Chairman 18 September 2006 CHIEF EXECUTIVE'S REVIEW Introduction High quality wafer reclaim provides an opportunity for our semiconductormanufacturer customers to achieve significant cost savings. As expected, thesemiconductor industry's transition to the larger 300mm wafers continues atpace, as 300mm is now providing the cost standard for the majority of highvolume semiconductor devices including semiconductor memories and microprocessordevices. During the period we have qualified with two more of the world's leadingsemiconductor manufacturers and progressed a number of our existingrelationships. We have doubled our 300mm wafer output whilst 200mm wafer outputhas remained stable. Total wafer output, revenue, and PBT all continue toincrease month on month. Significant progress has been made this year on new technology developmentsupported by the introduction to manufacturing of the most advanced particlemetrology available. Our new 50 nanometre product offering is now in productionand is expected to deliver a significant contribution to our growth next year. Market dynamics The fast take up of the semiconductor industry into 300mm manufacturing isconfirmed by the frequent announcement of new 300mm fabs. There are currently36 300mm fabs in the world, and the construction of another 29 fabs has alreadybeen announced, most expected to be operational by the end of 2008. With themajority of these new facilities owned by our existing customer base, we areextremely well positioned to expand our business in line with the growth in300mm manufacturing sites. As several of the leading semiconductor manufacturers embrace new technologiesto improve the speed performance of their products, the demand for our new 50nanometre products is expected to grow over the next year. Our 300mm revenue, the main focus of our business, grew by 79% over the year.As capacity tightens on 200mm products we are experiencing a stabilisation ofprices and increased demand in this market segment. Customers Important progress has been made with new customers during the period. We arenow qualified with a significant number of the world's major semiconductormanufacturers outside of Japan, and our first work has been carried out in theChinese marketplace. Qualification of new customers occurred towards the end of the period. Volumesare ramping quickly with these new customers and we are continuing to makeprogress developing our more established customer relationships though ourglobal sales network. New technology Whilst concentrating on our core business of wafer reclaim, through theappointment of Professor A R Peaker as Chief Scientific Officer we are exploringnew products and markets for our advanced polishing and cleaning process whichrepresent key enabling technologies for new electronic products. The company has made some key advances in our new 50 nanometre productdevelopment. This new process utilises more advanced technology than waferreclaim, and does not relate to test wafers. As this new offering issubstantially different to standard reclaim, the development costs incurred onthis process during the year have been capitalised. These costs will beamortised over 5 years, following commencement of sales of the product. Strategy for wafer reclaim growth 300mm wafer reclaim is our key focus, and we are well positioned in this segmentthat is growing as fast as had been anticipated. We plan to capitalise on ourestablished position in the marketplace and ensure that we are able to benefitfrom the continued strong growth in demand. We are also aiming to furtherdevelop the applications for our products to help our customers expand their useof wafer reclaim as a key part of their continual cost improvement programme.Our high performance products enable our customers to use reclaimed silicon inmany new applications where historically lower quality reclaimed wafers wouldnot be used. 200mm wafer reclaim is beginning to present some increasingly interestingopportunities for us. Following some price deflation in the first half of 2005,pricing has remained stable and supply is now beginning to tighten in thissegment. Some of our larger customers are keen to secure their long term supplyof 200mm and 300mm wafers and are looking to Pure Wafer as a well investedglobal leader who can provide a reliable supply of both sizes. Keith Baker Chief Executive 18 September 2006 FINANCIAL REVIEW Turnover Turnover for the period was £14.52m, an increase of 58% on last year (2005:£9.17m), with 300mm now comprising 88% of total group revenue (2005: 78%). • Europe £4.27m up 41% (2005: £3.02m) • North America £6.51m up 134% (2005: £2.78m) • South East Asia & Middle East £3.73m up 10% (2005: £3.38m) • 300mm £12.76m up 79% (2005:£7.14m) • 200mm £1.77m down 13% (2005:£2.03m) Profit before tax Profit before tax was £2.04m (2005: loss of £0.14m). This improvement is aresult of the ramped wafer throughput and the lower absorbed cost per wafer as adirect effect of our high operational gearing. Turnover for the periodincreased by 58%, with costs increasing by just 34%. The fast growth of the business can be seen by our strong second halfperformance which generated a profit before tax of £1.34m, 91% ahead of thefirst half of £0.70m. Manufacturing efficiency remains a key focus for the business with wafer outputper employee having increased in excess of 30% during the financial year. Themanagement team will continue to pursue cost reduction activities as thebusiness grows, to reduce the unit cost of manufacture. Foreign exchange Pure Wafer's sales are predominantly US Dollar based, whilst the cost base ispredominantly in sterling. For the year to 30 June 2006, the average exchangerate achieved by Pure Wafer was £1 = US$ 1.77. Pure Wafer has a rolling 12 monthhedging policy where a proportion of the forecast 12 monthly exposure is hedged. Cash flow and capital expenditure Net cash inflow from operating activities was £2.68m (2005: outflow of £0.05m).Working capital net cash outflow was £1.25m. Included in this is the casheffect of an increase in stocks (£0.65m), reflecting a management decision tomake more flexible and efficient the tooling procedures and process. During the period we acquired capital equipment with the value of £5.40m,primarily relating to manufacturing equipment, increasing our capacity in thelast quarter of this financial year. This expenditure has been partially fundedthrough a finance leasing facility. Taxation The group has reported its first full year of taxable profits, which have beenrelieved against brought forward tax losses. As the directors are confident ofthe trading and financial prospects of the group, based upon short-termforecasts a deferred tax asset has been recognised for part of the unutilisedtax losses at 30 June 2006. The quantum of the deferred tax asset will bereassessed annually. International Financial Reporting Standards (IFRS) The London Stock Exchange has confirmed that companies listed on AIM will nothave to apply IFRS until accounting periods commencing on or after 1st January2007. Consequently, the first set of IFRS financial statements will not berequired until the year ending 30 June 2008. In the mean time the group will beappraising the impact of adopting IFRS and briefing accordingly. Earnings per share and Dividend Diluted EPS for the period was 14.73p (2005: loss per share of 0.58p), whichincluded the effect of the recognition of the deferred tax asset. Excludingthis impact, adjusted diluted EPS for the group was 7.63p (2005: loss per shareof 0.58p). The Board does not recommend payment of a dividend this financial year. Thecompany is growing fast, generating profits and in a positive cashflow position.Following the end of the financial year Pure Wafer International Limited, thesubsidiary trading company of the group, has begun the process of a capitalreduction which would eliminate the brought forward losses in the profit andloss reserve, and put the company in a position to be able to distribute anyfuture profits in coming years, when appropriate. James Dearing Group Finance Director 18 September 2006 Consolidated Profit & Loss Account Year ended Year ended 30 June 2006 30 June 2005 Notes £000 £000 2 Turnover 14,521 9,171 Cost of sales (8,136) (5,956) Gross profit 6,385 3,215 Administrative expenses (4,400) (3,445) 3 Operating profit/(loss) 1,985 (230) Interest receivable 198 164 4 Interest payable and similar charges (145) (76) Profit/(loss) on ordinary activities before taxation 2,038 (142) 5 Taxation 1,895 - Profit/(loss) for the financial period 3,933 (142) 6 Earnings/(loss) per share Basic 14.84p (0.59p) Adjusted basic 7.69p (0.59p) Diluted 14.73p (0.58p) Adjusted diluted 7.63p (0.58p) The operating result stated above arose entirely from continuing activities. The group has no recognised gains or losses other than those included in theresult above and, therefore, no separate statement of total recognised gains orlosses has been presented. There is no difference between the result for the financial period stated aboveand its historical cost equivalent. Consolidated Balance Sheet 30 June 2006 30 June 2005Notes £000 £000 Fixed assets 7 Intangible assets 261 - 8 Tangible assets 19,576 16,432 19,837 16,432 Current assets 9 Stock 1,065 420 10 Debtors 4,700 3,624 5 Debtors - deferred taxation 1,895 - Cash at bank and in hand 5,652 4,974 13,312 9,018 Creditors: amounts falling due within one year (4,029) (2,370) Net current assets 9,283 6,648 Total assets less current liabilities 29,120 23,080 Creditors: amounts falling due after more than one year (2,433) (12) Accruals and deferred income (3,175) (3,489) Net assets 23,512 19,579 Share capital 530 530 Share premium 12,644 12,644 Merger reserve 30,425 30,425 Profit and loss account (20,087) (24,020) Shareholders' funds 23,512 19,579 Consolidated Cash Flow Statement Notes Year ended Year ended 30 June 2006 30 June 2005 £000 £000 11 Net cash inflow/(outflow) from operating activities 2,677 (52) Return on investments and servicing of finance Interest received 201 164 Interest paid (127) - Net cash inflow from returns on investments and servicing of finance 74 164 Taxation UK corporation tax - - Capital expenditure and financial investment Grants received - 200 Expenditure on intangible fixed assets (261) - Purchase of tangible fixed assets (4,869) (1,703) Net cash outflow on capital expenditure and financial investment (5,130) (1,503) Net cash outflow before use of liquid funds and financing (2,379) (1,391) Financing Funds received in relation to ordinary share capital - 7,000 Expenses of issue of ordinary shares - (1,247) Drawdown of finance leases 3,488 - Capital repayment of finance leases (323) (9) Cash inflow from financing 3,165 5,744 12 Increase in cash in the year 786 4,353 Notes to the consolidated Financial Statements 1. Basis of preparation These financial statements have been prepared using accounting policies thathave been consistently applied and are those used in the preparation of thefinancial statements for the period ended 30 June 2005. The group accounts of Pure Wafer plc comprise the consolidation ofthe accounts of the company and its subsidiary undertaking after eliminatingintragroup balances and transactions. Merger accounting has been applied to the reconstruction of thegroup that took place during the period ended 30 June 2005. In consequence, theresults for that period are presented as if the Pure Wafer plc group had existedand traded in its present form for the entire period. These financial statements do not constitute the company's statutory accountsfor the year ended 30 June 2006. The comparative data in these financialstatements are the audited financial statements for the year ended 30 June 2005of Pure Wafer plc, which have been delivered to the Registrar of Companies. Theauditors reported on those accounts; their report was unqualified and did notcontain a statement under s237(2) or (3) Companies Act 1985. The statutoryaccounts for the year ended 30 June 2006 will be delivered to the Registrar ofCompanies after the company's Annual General Meeting. The auditors have reportedon those financial statements; their report was unqualified and did not containa statement under S237(2) or (3) of the Companies Act 1985. 2. Turnover The company's activities and turnover consist solely of the reclamation andreprocessing of silicon test wafers in the UK for external customers. The company's turnover is analysed by geographical territory of destination asfollows: Year ended Year ended 30 June 2006 30 June 2005 £000 £000 Europe 4,274 3,019North America 6,514 2,775South East Asia & Middle East 3,733 3,377 14,521 9,171 The company's turnover is analysed by product variant as follows: Year ended Year ended 30 June 2006 30 June 2005 £000 £000 200mm wafer reclaim 1,763 2,034300mm wafer reclaim 12,758 7,137 14,521 9,171 3. Reconciliation of operating profit/(loss) for the year to EBITDA Year ended Year ended 30 June 2006 30 June 2005 £000 £000 Operating profit/(loss) for the period 1,985 (230)Depreciation 2,255 1,904Release of deferred capital grant (314) (292)Earnings before interest, tax, depreciation andamortisation (EBITDA) 3,926 1,382 4. Interest payable The interest payable charge during the period related entirely to fixed interestrate US Dollar finance leases used to fund the purchase of capital equipmentacquired during the year. The average annual rate of interest on finance leasesdrawndown at 30 June 2006 was 8.1%. All finance leases are repayable over 4years. 5. Taxation The Pure Wafer group, headed by Pure Wafer plc, has approximately £25.1m (2005:£26.6m) of taxation losses. Of this, £5.1m (2005: £4.5m) has been utilised toeliminate the requirement for a deferred tax liability, £6.3m (2005: nil) hasbeen recognised as a deferred tax asset (tax value of £1.9m) and £13.7m (2005:£22.1m) was carried forward not yet recognised as a deferred tax asset (taxvalue of £4.1m). 6. Earnings per share The basic earnings per share is calculated by dividing profit attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year. The calculation for 2005 is based upon the number of shares inissue at the date of group reconstruction. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. Earnings/(loss) per share have been calculated as follows: 2006 2005 Number '000 Number '000Weighted average number of ordinary shares: - In issue during the year 26,494 24,206 - Fully diluted 26,699 24,279 £000 £000Unadjusted earnings/(losses) 3,933 (142)Less: recognition of deferred tax asset (1,895) -Adjusted earnings/(losses) 2,038 (142) 7. Intangible fixed assets Intangible fixed assets comprise expenditure made on a 50 nanometre processdeveloped within Pure Wafer. This new process utilises more advanced technologythan wafer reclaim, and does not relate to test wafers. The expenditure on theproject meets the guidelines within SSAP13 for capitalisation so management hascapitalised this development work in order to match the costs incurred to theassociated revenue in the following years. The intangible asset will beamortised over 5 years. 8. Tangible fixed assets Long Plant and Fixtures, Total leasehold machinery fittings and land and equipment buildings £000 £000 £000 £000CostAt 30 June 2005 10,329 15,327 366 26,022Additions 5 5,303 91 5,399Disposals - (73) - (73)At 30 June 2006 10,334 20,557 457 31,348DepreciationAt 30 June 2005 2,577 6,703 310 9,590Charge for the year 689 1,521 45 2,255Disposals - (73) - (73)At 30 June 2006 3,266 8,151 355 11,772Net book valueAt 30 June 2006 7,068 12,406 102 19,576At 30 June 2005 7,752 8,624 56 16,432 9. Stocks Year ended Year ended 30 June 2006 30 June 2005 £000 £000 Raw materials & work in progress 789 384Work in progress 247 -Finished goods 29 36 1,065 420 10. Debtors Year ended Year ended 30 June 2006 30 June 2005 £000 £000 Trade debtors 3,207 2,790Accrued income 779 276Other debtors and prepayments 714 558 4,700 3,624 11. Cash flow from operating activities Year ended Year ended 30 June 2006 30 June 2005 £000 £000 Operating profit/(loss) 1,985 (230)Depreciation of tangible fixed assets 2,255 1,904Release of deferred income (314) (292)Increase in debtors (1,369) (1,423)Increase in stocks (645) (212)Increase in creditors 765 201Cash inflow/(outflow) from operating activities 2,677 (52) 12. Reconciliation of movement in net funds At 1 July 2005 Non-cash flow & currency At 30 June 2006 movements Cash flow £000 £000 £000 £000 Cash at bank 4,974 786 (108) 5,652Finance leases (21) (3,165) 98 (3,088)Net funds 4,953 (2,379) (10) 2,564 13. Circulation A copy of this announcement is available from the Company Secretary, Pure Waferplc, Central Business Park, Swansea Vale, Swansea, SA7 0AB. This information is provided by RNS The company news service from the London Stock Exchange