PUR.L Regulatory News (PUR)

4 Sep 2007 07:02

Pure Wafer PLC04 September 2007 4th September 2007 PURE WAFER PLC ("Pure Wafer" or "the Group") Preliminary Results for year ended 30 June 2007 Pure Wafer plc, the provider of high quality silicon wafer reclaim services formany of the world's leading semiconductor manufacturers as an integral part oftheir cost control programmes, today reports its financial results for the yearto 30 June 2007. HIGHLIGHTS Financial Highlights • Turnover £22.35m (2006: £14.52m) up 54% • EBITDA £6.07m (2006: £3.93m) up 54% (see note 3) • Operating profit £2.98m (2006: £1.90m) up 57% • Pre-tax profit £2.70m (2006: £1.96m) up 38% • Pre-tax profit at constant exchange rates up 165% (see financial review for details) • Adjusted diluted EPS 11.11p (2006: 7.63p) up 46% (see financial review for details) • Net cash inflow from operating activities £4.26m (2006: £2.68m) up 59% Operational Highlights • Completed transforming acquisition in February 2007 • Continued increase in 300mm capacity • Good performance from our recently acquired site in Arizona • 51% increase in output from Swansea site • Operating margins improved at constant exchange rates Giles Clarke, Chairman of Pure Wafer, commented: "This has been a good year of progress and gives a firm basis for optimism aboutthe future. I am pleased to announce that the management team has again metexpectations and continued to deliver growth in profit, in particular a 54%increase in EBITDA and a 46% increase in adjusted diluted EPS. "The Board expects profitable growth during financial year 2008 as the Groupexploits its strong position in the expanding global 300mm wafer reclaim market." 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 This has been a good year of progress and gives a firm basis for optimism aboutthe future. I am pleased to announce that the management team has again metexpectations and continued to deliver growth in profit, in particular a 54%increase in EBITDA and a 46% increase in adjusted diluted EPS. This year has been the most significant in terms of strategic positioning sincethe formation of the Group. We acquired a wafer reclaim facility in Arizona, USduring February of this year which gives us further access to a very excitingmarket. We also saw the exit of our original venture capital funding partner, ApaxPartners Limited ("Apax"). On behalf of all at Pure Wafer, I would like tothank Apax for their continued support from formation until the day they exited.Without Apax's initial financial and management support to one of the UK'slargest ever venture capital backed greenfield start-ups, Pure Wafer would notbe in the enviable position that we find ourselves in today. Shareholders may wish to note that the Group's results have been significantlyaffected by movements in the US Dollar. I draw your attention to the financedirector's analysis in the financial review, and point out that movements in theexchange rate this year have had a negative impact of approximately £1.4m on ourpre-tax profits. It is worth noting that the US acquisition will reduce ourexposure to currency movements on new business in our largest market. Financial Results Turnover £22.35m (2006: £14.52m) up 54%EBITDA £6.07m (2006: £3.93m) up 54% (see note 3)Operating profit £2.98m (2006: £1.90m) up 57%Pre-tax profit £2.70m (2006: £1.96m) up 38%Pre-tax profit at constant exchange rates up 165% (see financial review fordetails)Adjusted diluted EPS 11.11p (2006: 7.63p) up 46% (see financial review fordetails, where other EPS measures are also included)Net cash inflow from operating activities £4.26m (2006: £2.68m) up 59% Management We have further strengthened our Board this year by the appointment of PaulDolan, a chartered accountant and formerly a partner of Deloitte, asnon-executive director following the departure of the Apax representative, JohnSamuel. Our senior management team is also benefiting from the wealth of experience andskills acquired as part of the purchase of our US facility. The seniormanagement of the US site has many years experience of the semiconductor andwafer reclaim industry between them, in many key areas from manufacturing andprocess development through to sales. I shall take this opportunity to welcome our new colleagues in Arizona and allnew employees in Swansea, and to congratulate them on joining this successful,results driven group. I would like to thank the entire team across both sites, led by Keith Baker, fortheir hard work and continued delivery of results. I am confident that theywill continue to strive for success and achievement in the current financialyear. Outlook The Board expects profitable growth during the next financial year as the Groupexploits its strong position in the expanding global 300mm wafer reclaim market.The results for the first quarter of financial year 2008 are expected to beaffected by technical difficulties slowing down the ramp of a new product linewith a single customer. With support from the customer we have recentlydeveloped an improved manufacturing process that we believe will enable us torun this product in higher volume. We look to the future with confidence. GILES CLARKECHAIRMAN3 SEPTEMBER 2007 CHIEF EXECUTIVE'S REVIEW Operational review Volumes for all wafer sizes were increased during the year, with 300mm volumesup by 53% and 200mm volumes up by 131% (enhanced by our North Americanacquisition). The month of June 2007 saw a record for 300mm wafer reclaim atPure Wafer. We are planning to further increase our 300mm wafer reclaim capacity at theSwansea site to 100,000 wafers per month at the end of the financial year toJune 2008, through further process development and capital expenditure. Suchexpenditure will be fully funded through cash generation and existingfacilities. Prescott site, Arizona, US The development of the US site that we acquired in February this year continuesin line with our original plans. The existing business is cash positive andprofitable on an operating profit level. I am pleased to announce that thetransfer of the 300mm technology from our Swansea site is progressingsatisfactorily: the first 300mm wafer reclaim line is now substantially in placeand the installation is running according to plan, both in terms of cost andtime. We expect capacity of this 300mm line to be approximately 20,000 wafersper month at the end of our financial year to June 2008. Market & Products Our customer base has significantly increased as a result of the acquisition,more than doubling to over 80 customer sites, and I would like to take thisopportunity to welcome all new Pure Wafer customers and to thank them for theirsupport through the change of ownership of the US plant. Smaller diameter wafer reclaim (100mm, 125mm, and 150mm) is a new addition tothe Pure Wafer product portfolio and has been gained through our US acquisition.These are profitable product lines, with well established processes in adeveloped market place. The current slowdown within the semiconductor industry is having the impact ofreducing the demand for smaller diameter wafer reclaim as customers look toswitch towards the more efficient 300mm manufacturing. With the comprehensiveproduct offerings within the business we are well placed to support ourcustomers through this transition. As expected, the competitive landscape is increasing as the market continues itsgrowth, with two new 300mm competitors emerging in Taiwan, and existingcompetitors continuing to increase capacity. We feel that we are well placedwith our multi-site locations, leading technology, and wealth of experience, tomaintain our position as a leading supplier of 300mm products. During the year we shipped in high volume our new 50nm product offering. Thisproduct is very much in the early stages of product ramp, but we remainoptimistic about the future potential of this product line. New Technology We are continuing to look at opportunities outside of wafer reclaim, followingthe successful introduction of our 50 nanometre product. We are confident thatthere are many more ways that we can leverage our world-class cleanrooms andsilicon polishing expertise in order to continue to deliver increasingshareholder value in the future. KEITH BAKERGROUP CHIEF EXECUTIVE3 SEPTEMBER 2007 FINANCIAL REVIEW Turnover Turnover for the period was £22.35m, an increase of 54% on last year (2006:£14.52m). Analysed by destination: • Europe £7.51m, up 76% (2006: £4.27m) • North America £9.32m, up 43% (2006: £6.51m) • South East Asia, £5.52m up 48% (2006: £3.73m) Analysed by product: • 150mm wafer reclaim £0.43m (a new product line in the year as a result of the acquisition) • 200mm wafer reclaim £3.39m up 93% (2006: £1.76m) • 300mm wafer reclaim and 50nm polishing £17.26m up 35% (2006: £12.76m) • Other revenue £1.27m, a new revenue stream in the year comprising smaller diameter wafer reclaim and scrap sales Profit before tax Profit before tax was £2.70m, up 38% on prior year (£1.96m). We added new wafer reclaim product lines with the acquisition (150mm diameterand smaller), and continued to organically grow existing business. Wafervolumes of each size continued to increase, and each size remains profitable. Margins were impacted by the weaker US dollar in the year and the acquisition ofa site currently without the benefit of the higher margin 300mm volumes. Despite the challenges thrown up from the increase in customer specifications asthe requirement for smaller and lower numbers of particles per wafer continuesto progress, the consolidated Group has managed to continue to reduce the costper 300mm equivalent wafer. We are continuing our focus on cost reduction andare pursuing production cost per wafer savings across both manufacturing sites. Foreign exchange As over 95% of Group revenue is in US Dollars, revenue and margins are impactedby the movement in the currency. As can be seen in the table below, year on year the average rate achieved by theGroup (after taking into account the impact of hedging instruments) has movednegatively by approximately 8%. Year ended 30 June Year ended 2007 30 June 2006Opening rate £1 = US$ 1.84 1.79Average rate achieved (after hedging) £1 = US$ 1.91 1.77Closing rate £1 = US$ 2.01 1.84 In order to better review the year on year trading performance of the Groupexcluding the impacts of foreign exchange, the headline numbers are set outbelow: Year ended % Increase 30 June 2006 year on year Year ended 30 (restated at 2007 actual at constant June 2007 rate of £1 = US$1.91) exchange £000 £000 ratesTurnover 22,348 13,478 66%Gross profit 8,917 5,208 71%EBITDA 6,066 2,997 102%Operating profit 2,980 971 207%Profit before tax 2,702 1,020 165%Adjusted diluted EPS 11.11p 4.13p 169% We continue to convert as much of the cost base as possible to US Dollars inorder to provide a natural hedge against the US Dollar revenue streams. Cashflow and capital expenditure The Group continues to be increasingly cash generative on an operating cashlevel, with a net cash inflow from operating activities of £4.26m (2006:£2.68m). During the period, capital equipment with the value of £7.60m was acquired, with£5.64m of this expenditure happening at the UK site. The construction inprogress value (£1.89m) relates to the upgrade of the US site and installationof a 300mm wafer reclaim line. Construction is nearing completion, and iscurrently running broadly in line with the financial budget. Taxation There is no tax charge across the Group, as taxable profits generated within theUK have been set against tax losses brought forward. The directors areconfident of the trading and financial prospects of the Group, so based uponshort term forecasts, the remaining available unutilised UK tax losses (£2.86m)were recognised in the balance sheet during 2007. This will have the impact infuture periods of showing a UK tax charge in the profit and loss account, butwith no cash impact until the deferred tax asset has unwound. Acquisition The total purchase cost of $11.20m comprised a payment of US$7.50m oncompletion, US$1.75m interest free deferred consideration falling due after 12months, and a further US$1.95m interest free deferred consideration falling dueafter 24 months. The initial purchase payment of $7.50m was funded through a four year variablerate interest loan from Royal Bank of Scotland ("RBS") that was fixed through aninterest swap at the time of drawdown to a rate of 6.94% per annum. Thedeferred consideration payments are not contingent, and accordingly are backedby a letter of credit from RBS. The two deferred consideration payments havebeen discounted to present values, and are reflected in the accounts as afinancial liability within net funds. As the amounts have been discounted, animputed non-cash interest charge is levied through the profit and loss accounteach period until the deferred considerations are paid. International Financial Reporting Standards (IFRS) Following a European Union Regulation (IAS Regulation EC 1606/2002) issued inJune 2002, and AIM notice 22, Pure Wafer plc is required to prepare itsconsolidated financial statements under International Financial ReportingStandards with effect for the year ending 30 June 2008. This is the last set of Pure Wafer plc financial statements prepared under UKGAAP. The Group adopted IFRS on 1 July 2007, and consequently future financialreporting will be under IFRS. The Group will hold a briefing at the AnnualGeneral Meeting to update stakeholders on the impact of adoption of IFRS. EPS and dividend Diluted EPS for the period was 20.59p (2006: 14.42p), which included the effectof the recognition of the UK deferred tax asset and FRS20 share option charge.Excluding these items, adjusted diluted EPS for the Group was 11.11p (2006:7.63p). As at 30 June 2007, the Group did not have sufficient distributable reserves forthe Board to be able to recommend a dividend. Accordingly, no dividend ispayable for this financial year. Following the end of the financial year, the subsidiary company Pure WaferInternational Limited completed a capital reduction which is expected to leavethe Group with distributable reserves by 30 June 2008. JAMES DEARINGGROUP FINANCE DIRECTOR3 SEPTEMBER 2007 Consolidated Profit & Loss Account Year Year ended ended 30 June 30 June 2006 Continuing Acquisitions 2007 (restated) Notes £000 £000 £000 £000Turnover 2 20,310 2,038 22,348 14,521Cost of sales (12,296) (1,135) (13,431) (8,136)Gross profit 8,014 903 8,917 6,385Administrative expenses (5,092) (845) (5,937) (4,483)Operating profit 3 2,922 58 2,980 1,902Interest receivable 149 - 149 198Interest payable and similar charges 4 (286) (141) (427) (145)Profit/(loss) on ordinary activities 2,785 (83) 2,702 1,955before taxationTaxation 5 2,860 - 2,860 1,895Profit/(loss) for the financial period 15 5,645 (83) 5,562 3,850Earnings per shareBasic 6 20.97p 14.53pBasic diluted 6 20.59p 14.42pAdjusted 6 11.32p 7.69pAdjusted diluted 6 11.11p 7.63p 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 2007 30 June 2006 Notes £000 £000Fixed assetsIntangible assets 7 3,506 261Tangible assets 8 25,981 19,576 29,487 19,837Current assetsStock 9 2,812 1,065Debtors 10 7,438 4,700Debtors - deferred taxation 5 4,755 1,895Cash at bank and in hand 14 2,976 5,652 17,981 13,312Creditors: amounts falling due within one year 11 (8,765) (4,029)Net current assets 9,216 9,283Total assets less current liabilities 38,703 29,120Creditors: amounts falling due after more than one year 12 (6,323) (2,433)Deferred income (2,865) (3,175)Net assets 29,515 23,512 Capital and reservesCalled up share capital 15 532 530Share premium 15 12,783 12,644Merger reserve 15 30,425 30,425Profit and loss account 15 (14,225) (20,087)Shareholders' funds 15 29,515 23,512 Consolidated Cash Flow Statement Year ended Year ended 30 June 2007 30 June 2006 Notes £000 £000Net cash inflow from operating activities 13 4,259 2,677Returns on investments and servicing of financeInterest received 149 201Interest paid (347) (127)Net cash (outflow)/ inflow from returns on investments andservicing of finance (198) 74TaxationUK corporation tax - -Capital expenditure and financial investmentExpenditure on intangible fixed assets - (261)Purchase of tangible fixed assets (7,927) (4,869)Net cash outflow on capital expenditure and financialinvestment (7,927) (5,130)AcquisitionsPurchase of trade and assets of Exsil, Inc (3,846) -Net cash outflow from acquisitions (3,846)Net cash outflow before use of liquid funds and financing (7,712) (2,379) FinancingFunds received in relation to ordinary share capital 141 -Drawdown of bank loan 3,846 -Capital repayment of bank loan (233) -Drawdown of finance leases 2,369 3,488Capital repayment of finance leases (895) (323)Cash inflow from financing 5,228 3,165(Decrease)/Increase in cash in the year 14 (2,484) 786 Notes to the consolidated Financial Statements 1. Basis of preparation The Group accounts of Pure Wafer plc comprise the consolidation of the accountsof the company and its subsidiary undertakings after eliminating intragroupbalances and transactions. 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 2006 except for theimplementation of FRS20 (share-based payment) which has been adopted for thefirst time in the year to 30 June 2007. These financial statements do not constitute the Group's statutory accounts forthe year ended 30 June 2007. The comparative data in these financial statementsare the audited financial statements for the year ended 30 June 2006 of PureWafer plc which have been delivered to the Registrar of Companies, restated forthe adoption of FRS20 as detailed above. The auditors reported on thoseaccounts; their report was unqualified and did not contain a statement unders237(2) or (3) Companies Act 1985. The statutory accounts for the year ended 30June 2007 will be delivered to the Registrar of Companies after the Group'sAnnual General Meeting. The auditors have reported on those financialstatements; their report was unqualified and did not contain a statement underS237(2) or (3) of the Companies Act 1985. Share-based payment During the year, FRS20 (share-based payments), has been adopted. This resultedin the following restatement to the profit and loss account for the year ended30 June 2006: Year ended 30 June 2006 £000 Profit before tax, as reported 2,038Impact of adoption of FRS20 (83)Profit before tax, restated 1,955 No restatement to the comparative balance sheet or cashflow statement wasrequired. The charge for the current year was £300,000. In accordance with FRS20 (share-based payment), the fair value of equity-settledshare-based payments to employees is determined at the date of grant and isexpensed on a straight line basis over the vesting period based on the Group'sestimate of shares or options that will eventually vest. In the case of optionsgranted, fair value is measured by a Black-Scholes pricing model. 2. Segmental analysis The Group's activities primarily consist of the reclamation and reprocessing ofsilicon test wafers, in the UK and US for external customers. The Group's turnover is analysed by geographical territory of destination asfollows: Year ended Year ended 30 June 2007 30 June 2006 £000 £000Europe 7,509 4,274North America 9,319 6,514South East Asia and Middle East 5,520 3,733 22,348 14,521 The Group's turnover is analysed by product variant as follows: Year ended Year ended 30 June 2007 30 June 2006 £000 £000150mm wafer reclaim 424 -200mm wafer reclaim 3,389 1,763300mm wafer reclaim and 50nm polishing 17,262 12,758Other revenue 1,273 - 22,348 14,521 3. Reconciliation of operating profit for the year to EBITDA Year Year ended Ended 30 June 30 June 2007 2006 £000 £000Operating profit for the period 2,980 1,902Depreciation 2,908 2,255Amortisation of goodwill 57 -Amortisation of other intangible fixed assets 52 -Charges associated with share options* 379 83Release of deferred capital grant (310) (314)Earnings before interest, tax, depreciation and amortisation (EBITDA) 6,066 3,926 * Includes accrual for national insurance 4. Interest payable Year ended Year ended 30 June 2007 30 June 2006 £000 £000Bank loans 96 -Imputed non-cash interest on interest-free deferred consideration 45 -Finance leases 286 145 427 145 5. Taxation All of the available UK tax losses have now been recognised as a deferred taxasset in the balance sheet, leading to a tax credit in the year of £2.86m.Accordingly where future taxable profits arise, a charge will be reflected inthe profit and loss account, although no cash payment will arise until thedeferred tax asset is unwound. The US operation did not make a taxable profit, and has no tax losses to setagainst future taxable profits. 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. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. Earnings per share have been calculated as follows: Year ended Year ended 30 June 2006 30 June 2007 (restated) '000 '000Weighted average number of ordinary shares:- In issue during the year 26,524 26,494- Options 487 205- Fully diluted 27,011 26,699Unadjusted earnings £5,562 £3,850Add: share option charge £300 £83Less: recognition of deferred tax asset £(2,860) £(1,895)Adjusted earnings £3,002 £2,038 7. Intangible fixed assets Process development Goodwill TotalGroup £000 £000 £000CostAt 1 July 2006 261 - 261Exchange movements - (104) (104)Acquisition related - 3,456 3,456At 30 June 2007 261 3,352 3,613AmortisationAt 1 July 2006 - - -Exchange movements - (2) (2)Charge for the year 52 57 109At 30 June 2007 52 55 107Net book valueAt 30 June 2007 209 3,297 3,506At 30 June 2006 261 - 261 8. Tangible fixed assets Long Fixtures, Leasehold Fittings land and Plant and and Motor Construction buildings machinery equipment vehicles in progress Total £000 £000 £000 £000 £000 £000CostAt 1 July 2006 10,334 20,557 457 - - 31,348Exchange movements - (54) - - (29) (83)Acquisition - 1,795 - - - 1,795Additions 36 5,355 276 11 1,922 7,600At 30 June 2007 10,370 27,653 733 11 1,893 40,660DepreciationAt 1 July 2006 3,266 8,151 355 - - 11,772Exchange movements - (1) - - - (1)Charge for the year 689 2,152 67 - - 2,908At 30 June 2007 3,955 10,302 422 - - 14,679Net book valueAt 30 June 2007 6,415 17,351 311 11 1,893 25,981At 30 June 2006 7,068 12,406 102 - - 19,576 9. Stock 30 June 2007 30 June 2006 £000 £000Raw materials 2,043 789Work in progress 615 247Finished goods 154 29 2,812 1,065 10. Debtors 30 June 2007 30 June 2006 £000 £000Amounts falling due within one year:Trade debtors 4,317 3,207Accrued income 1,685 779Other debtors and prepayments 1,436 714 7,438 4,700 11. Creditors: Amounts falling due within one year 30 June 2007 30 June 2006 £000 £000Trade creditors 2,568 1,561Capital creditors 1,278 1,087Obligations under finance leases 1,384 655Bank loan to fund acquisition 942 -Deferred consideration to fund acquisition 834 -Corporation tax 15 15Payroll, other taxation and social security 619 253Accruals and other creditors 1,125 458 8,765 4,029 12. Creditors: Amounts falling due after more than one year 30 June 2007 30 June 2006 £000 £000Obligations under finance leases 2,866 2,433Bank loan to fund acquisition 2,590 -Deferred consideration to fund acquisition 867 - 6,323 2,433 13. Cash flow from operating activities Year ended Year ended 30 June 2006 30 June 2007 (restated) £000 £000Operating profit 2,980 1,902Depreciation of tangible fixed assets 2,908 2,255Amortisation of intangible fixed assets 109 -Share option charge 300 83Release of deferred income (310) (314)Increase in debtors (1,933) (1,369)Increase in stocks (1,425) (645)Increase in creditors 1,630 765Net cash inflow from operating activities 4,259 2,677 14. Reconciliation of movement in net funds/(debt) Non-cash flow At 1 July and foreign At 30 June 2006 Cash flow exchange 2007 £000 £000 £000 £000Cash at bank 5,652 (2,484) (192) 2,976Finance leases (3,088) (1,474) 312 (4,250)Borrowings - (3,613) 81 (3,532)Deferred consideration - - (1,701) (1,701)Net funds 2,564 (7,571) (1,500) (6,507) 15. Movement in shareholders' funds Total Share Share Merger Profit and Total 2006 capital premium reserve loss account 2007 (restated) £000 £000 £000 £000 £000 £000Beginning of the year 530 12,644 30,425 (20,087) 23,512 19,579Net proceeds of new shares 2 139 - - 141 - 532 12,783 30,425 (20,087) 23,653 19,579Adjustment in respect of employee share schemes - - - 300 300 83Profit for the period - - - 5,562 5,562 3,850End of the year 532 12,783 30,425 (14,225) 29,515 23,512 16. Acquisition of trade and assets of Exsil, Inc On 12 February 2007 the Group acquired the trade and assets of Exsil, Inc for acash consideration of $7,500,000 and deferred consideration of $3,700,000 (on aninterest free basis, with $1,750,000 due on 12 February 2008 and $1,950,000 dueon 12 February 2009). A summary of the assets acquired is below: Provisional Provisional fair value fair value £000 £000Net assets acquired:Tangible fixed assets 1,795Stocks 322Debtors 671Creditors, including liabilities associated with the cost of acquisition (689) 2,099Goodwill 3,456Consideration 5,555Consideration satisfied by:Cash 3,846Present value of deferred consideration 1,709 5,555 Assets at the date of acquisition have been translated at the exchange rateprevailing on the date of acquisition. The only fair value adjustment from bookvalue at acquisition was a £285,000 reduction to the value of fixed assets from£2,080,000 to £1,795,000. 17. Circulation A copy of this announcement is available from the Company Secretary, Pure Waferplc, Central Business Park, Swansea Vale, Swansea, SA7 0AB. A copy is alsoavailable from the Group's website: www.purewafer.com This information is provided by RNS The company news service from the London Stock Exchange