PVCS.L Regulatory News (PVCS)

11 Sep 2007 07:02

PV Crystalox Solar PLC11 September 2007 PV Crystalox Solar PLC ("PV Crystalox Solar" the "Company" or the "Group") PV Crystalox Solar PLC, one of the leading independent producers of solar-gradesilicon products for solar electricity generation systems, is pleased toannounce its half year results for the period ended 30 June 2007. These results reflect the Company's successful flotation on the main market ofthe London Stock Exchange on 11 June 2007. This raised €73 million to strengthenthe Company's equity base in preparation for investment in additional productioncapacity. The key results are as follows: 6 Mths Ended 6 Mths Ended 12 Mths Ended 30-Jun-2007 30-Jun-2006 31-Dec-2006 '000 '000 '000 Total Revenues 123,558 114,666 242,366 Earnings Before Interest & Tax 28,984 25,591 48,327Earnings Before Interest TaxDepreciation & Amortisation 31,135 28,296 49,013 IPO Expenses -3,486 0 0Employee Share Schemes -2,891 0 0 EBIT after exceptional items 22,607 25,591 48,327Earnings before tax afterexceptional items 22,922 25,598 49,013 NET INCOME 13,576 16,451 31,594 Earnings per share (Euro cents) 3.6 4.4 8.4 Adjusted earnings per share(Euro cents) before IPO & EBTcosts 5.0 4.4 8.4 • Total sales revenues increased by 8% and sales of silicon products increased by 3.7% reflecting higher sales prices and the continued transition from the supply of ingots to wafers, although this was tempered somewhat by the average exchange rate of the Japanese yen falling by 12.3% • Earnings (EBIT) before exceptional items increased by 13.3% on H1 2006 • Production output was 89MW in the period • IPO successfully carried out in June on the London Stock Exchange raising approximately €73 million which strengthened the equity base in preparation for investment in additional production capacity • Approval granted by the state authority for an 1800MT solar grade silicon production facility in Bitterfeld Germany with output expected to start in Q1 2009 • The ongoing transition from the sale of ingots to the sale of wafers is progressing well; with over 90% of ingots now processed into wafers • Good progress in wafer thickness reduction with the transition to 200 (micro)m maximum thickness now complete. 25% of output in H1 supplied as 180 (micro)m wafers Iain Dorrity Chief Executive of PV Crystalox Solar PLC said: "Our first halfyear results demonstrate that we have achieved the goals set out at the time ofour IPO. The market outlook for PV generation remains extremely positive and PVCrystalox Solar has seen its sales and earnings continue to increase. We aim tocapitalise on this growth through a strategic move into the production ofpolysilicon, thereby diversifying our supply sources and strengthening ourposition as one of the industry's lowest cost wafer producers." Enquiries: PV Crystalox Solar PLC +44 (0) 20 7554 1400Peter Finnegan, Chief Financial Officer JPMorgan Cazenove +44 (0) 20 7588 2828Nick GarrettPatrick Magee Gavin Anderson +44 (0) 20 7554 1400Kate HillRobert Speed CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT Overview and Strategic Update We are pleased to announce our first results as a public company. Ourperformance in the first half of 2007 has been in line with expectations at thetime of our IPO and our strengthened equity base is allowing us to invest in thefuture development of the business. We continue to make progress in the Board's medium and long-term aim of furtherreducing wafer production costs to enhance the Group's position as a low costproducer. It is the Board's intention for the Group to be the PV industry's costleader enabling it to supply quality wafers at competitive prices withoutsacrificing margins. Further reductions have been achieved in wafer thicknessand all wafers currently being shipped to customers are now at 200(micro)m orbelow. Indeed 25% of H1 output was supplied as 180(micro)m wafers. We believe that the long-term success of the solar electric industry dependsupon the cost per kilowatt of electricity produced by solar electricity systemsbeing at or below the cost to the consumer of buying that power from the localelectricity utility (grid parity). Market commentators have pointed out thatreaching grid parity in regions such as Southern Europe and California is lessthan a decade away and requires no breakthrough in technology but only continuedincremental cost reduction against a background of costs increasing forelectricity produced by traditional non-renewable methods. We believe that thePV Crystalox Solar commitment to crystalline silicon wafer technology makes uswell placed to lead the way in enabling the industry to reach grid parity.Reaching grid parity will mean that the market for solar electricity will belimited only by the demand for electrical power. We announced in May our intention to construct a solar grade polysiliconproduction facility in Bitterfeld, Germany. Degussa will be an importantstrategic partner by not only supplying chlorosilanes (the main raw material forthe production of polysilicon) from an adjacent facility but also assisting withthe design and engineering of the chemical infrastructure. Commercial productionis expected to start in early 2009 with output of 900MT in that year andincreasing to 1800MT in 2011. Approval to build the facility was granted inAugust by the Sachsen-Anhalt State authorities and the ground breaking ceremonywill be held on September 19th. Planning and purchasing of equipment is on trackand in line with our expectations. Results All areas of our operation performed well and in line with our expectations. Weare continuing to benefit from strong levels of customer demand and our abilityto supply is limited only by the availability of silicon feedstock. Salesrevenue in the six months review was €123.6 million against €114.7 million inthe first half of last year, equal to an increase of 8%. Higher sales prices andthe continued transition from ingot to wafer sales had a positive effect on oursales revenues, whilst the weakness of the Japanese yen (average exchange rate12.3% weaker) during the first six months of 2007 had a negative effect on salesrevenues expressed in euros. Actual output in the period was 89MW. Additionalpolysilicon supply quantities from existing contracts will be available in thesecond half of 2007 and our capacity utilisation is expected to increase as theyear progresses. EBIT before exceptional items (IPO costs and employee share scheme costs) was€29 million (2006 €25.6 million) an increase of 13.3% over the same period lastyear. Exceptional expenses are made up of IPO expenses (net of the amount written-offagainst the share premium account) and expenses in respect of employee shareschemes. Part of the total IPO costs (approximately 10%) relating to the issueof new shares has been written off against the share premium account. Thebalance of the IPO costs relating to the public listing of the original shareshas been expensed in the period. We have cash deposits of approximately €148 million and a net cash balance ofapproximately €94 million. This net cash balance is to finance investment inexpansion of production and is earmarked for new capital equipment for both ourexisting operations and the new solar grade polysilicon plant. Our borrowings(mainly in Japanese yen) are approximately €54 million. Consideration is beinggiven to repaying a large part of these borrowings due to the current weaknessof the Japanese currency and a formal decision will be made in this respectlater in the year. Management We have continued to develop and strengthen our organisation. We have employed anumber of key personnel to manage the construction stage of our polysiliconplant in Germany under the leadership of the plant manager Dr Hilmar Tiefel andwe will continue to strengthen this team as the project progresses. A seniorfinancial professional has been appointed at our Japanese subsidiary. Mr EizoWatanabe will leave the Group at the end of September to join our waferingsubcontractor in Japan; it is anticipated that this change will strengthen anddevelop this important relationship. We intend to appoint a small number ofadditional senior personnel later in the year. Our Employee Benefit Trustcurrently holds 1.7% of the Group's shares and consideration is being given toallocating approximately one third of these shares to key employees in thesecond half of this year. Outlook PV Crystalox Solar continues to make progress in discussions with customers interms of negotiating longer term contracts and expects to announce definitive agreements before the year end. Additional polysilicon from existing contracts started to be delivered in July,bringing the total expected quantity of polysilicon to 1,280 MT for 2007. Supplyof scrap silicon has tightened during the second half of 2007 and is beingpartially offset by increased levels of recycling. As a result we expect to be alittle below our targets for overall sourcing of feedstock in 2007. However,higher wafer prices have compensated and are expected to continue to compensatefor this effect and the Company anticipates that this position will continue forat least the remainder of 2007. Accordingly, we are confident about the outlookfor the full year 2007. Generally the generation of solar electricity is becoming increasingly importantthroughout the world; with the world market growing at 40% pa since thebeginning of the decade. The cumulative installed capacity was 6.6GW at the endof 2006 and the EPIA (European Photovoltaic Industries Association) expects thiscapacity to increase threefold to 21GW by 2010 with crystalline silicontechnology continuing to dominate. We share this positive outlook and are aimingto participate in this growth through our planned strategic move into theproduction of polysilicon thereby diversifying our supply and strengthening ourposition as one of the PV industry's lowest cost wafer producers. PV Crystalox Solar PLC------------------------Group Consolidated Income Statement------------------------------------- 6 Mths Ended 6 Mths Ended 12 Mths Ended 30-Jun-2007 30-Jun-2006 31-Dec-2006 •'000 •'000 •'000 Revenues - Silicon Products 92,796 89,489 185,267Revenues - Equipment, Parts & Trading 30,762 25,177 57,099 Change in inventory finished andunfinished goods 3,572 -777 -2,248Own work capitalised 0 4 154Other income 1,045 484 1,381 Cost of material and servicesCost of material -84,561 -75,511 -165,110Cost of services -2,962 -3,541 -7,136 Personnel expensesWages and salaries -3,836 -3,431 -6,932Social Securities -473 -424 -907Pension Cost -197 -138 -384 Depreciation on fixed and intangibleassets -2,151 -2,705 -5,467 Other expenses -3,761 -2,878 -6,568 Currency gains and losses -1,251 -157 -820 -------- -------- --------Earnings before execptional itemsinterest & tax 28,983 25,591 48,327 IPO Expenses -3,486 - -Employee Schemes -2,891 - - -------- -------- --------EBIT after execptional items 22,607 25,591 48,327 Interest Income 865 483 1,625Interest Expense -550 -477 -939 -------- -------- --------Earnings before taxation 22,922 25,598 49,013 Income taxes - currently payable -9,290 -8,994 -17,189Income taxes - deferred -56 -153 -229 -------- -------- --------NET INCOME 13,576 16,451 31,594 -------- -------- --------Unadjusted Earnings Per Share (Eurocents) 3.6 4.4 8.4 ======== ======== ======== PV Crystalox Solar PLC------------------------Group Consolidated Balance Sheet---------------------------------- 6 Mths Ended 6 Mths Ended 12 Mths Ended 30-Jun-2007 30-Jun-2006 31-Dec-2006 •'000 •'000 •'000 Cash 148,048 48,843 61,527Accounts receivable 76,380 62,506 74,874Inventories 13,068 16,443 13,833Prepaid expenses and other assets 7,272 1,976 4,618Income Tax Claims 2,240 116 2,240 -------- -------- --------Total Current Assets 247,007 129,883 157,092 -------- -------- -------- Intangible assets 170 207 176Property, plant and equipment 14,580 13,471 13,967Other long term assets 7,669 3,686 1,926Deferred tax asset 958 968 1,023 -------- -------- --------Total Non-current Assets 23,377 18,332 17,091 -------- -------- -------- -------- -------- --------TOTAL ASSETS 270,384 148,216 174,183 -------- -------- -------- Loans payable short-term 54,284 49,690 53,342Accounts payable 14,452 11,829 15,745Advance payments received 0 511 723Accrued expenses 7,014 2,597 3,208Deferred income current portion 864 801 817Income tax payable 9,458 8,060 9,310Other current liabilities 1,406 1,511 1,116 -------- -------- --------Total Current Liabilities 87,477 74,999 84,260 -------- -------- -------- Loans payable long-term 71 1,864 1,735Advance payments received 10,000 0 0Accrued Expenses 145 167 272Pension benefit obligation 540 622 631Deferred income less current portion 2,411 2,135 2,861Deferred tax liability 256 249 267Other long term liabilities 43 43 43 -------- -------- --------Total Non-current Liabilities 13,466 5,080 5,810 -------- -------- -------- -------- -------- --------TOTAL LIABILITIES 100,944 80,079 90,070 -------- -------- -------- Share capital 12,332 7,500 7,500 Additional paid-in capital 75,606 0 0Employee Benefit Trust -5,508 0 0Reverse acquisition reserve -3,601 0 0Retained Earnings 90,611 60,637 76,613 -------- -------- --------TOTAL SHAREHOLDERS' EQUITY 169,440 68,137 84,113 -------- -------- -------- -------- -------- --------TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY 270,384 148,216 174,183 -------- -------- -------- PV Crystalox Solar PLC Consolidated Cash flow statement 6 mths ended 6 mths ended 12 mths ended 30-Jun-2007 30-Jun-2006 31-Dec-2006 •'000 •'000 •'000 Profit before income taxes & interest 22,607 25,591 48,326Adjustments for: Depreciation and amortization 2,151 2,705 5,467 Appreciation 0 0 -69 Change in pension accruals -91 -128 -119 Change in other provisions 3,679 446 592 -Profit /+loss from the disposal of assets 0 0 -24 Unrealised gain/losses in foreign currency exchange 849 417 1,929 Deferred income -464 -399 -868 -------- ------- ------- 28,731 28,631 55,234 -------- ------- ------- Changes in working capital: Change in inventory 765 2,996 5,606 Increase in trade receivables -5,222 -10,106 -27,746 Increase in trade payables and advance payments 7,984 -1,810 2,317 Other assets -8,397 -3,175 -4,058 Other liabilities 290 -36 -370 -------- ------- ------- 24,151 16,500 30,983 -------- ------- ------- Income taxes paid -9,142 -7,264 -16,334 Interest received 865 483 1,625 -------- ------- -------Net Cash from operating activities 15,874 9,719 16,274 -------- ------- ------- Cash flow from investing activities Proceeds from sale of property, plant & equipment 0 0 30 Proceeds from investment grants 60 0 1,211 Payments to acquire assets -2,758 -1,112 -3,652 -------- ------- -------Cash used in investing activities -2,698 -1,112 -2,411 -------- ------- ------- Cash flow from financing activities Short term borrowings received 2,271 9,188 16,976 Repayment of bank and other borrowings -125 -118 -305 Dividends 0 0 0 Interest paid -550 -477 -939 Proceeds from IPO 76,838 0 0 Investment in own shares -5,508 0 0 -------- ------- -------Net cash flows from financing activities 72,925 8,593 15,732 -------- ------- -------Net Change in cash and cash equivalentsavailable 86,101 17,200 29,595 Effects of fx on cash and cash equivalents 420 -208 81Cash and equivalents at beginning of period 61,527 31,851 31,851 -------- ------- -------Cash and equivalents at end of period 148,048 48,843 61,527 -------- ------- ------- PV Crystalox Solar PLC------------------------ Statement of changes in equity------------------------------ Share Additional Investment in Reverse Profit Currency Total Capital paid-in Capital own Shares Acquisition Carryforward translation Equity (EBT) Reserve and other adjustment reserves •'000 •'000 •'000 •'000 •'000 •'000 •'000 As of 1 January 2007 7,500 - - - 77,588 -975 84,113Dividends Paid - - - - - - -Currency TranslationAdjustment - - - - - 422 422Net Profit - - - - 13,576 - 13,576Additional Capital 4,832 - - - - - 4,832Share Premium - 75,606 - - - - 75,606Investment in own shares - - -5,508 - - - -5,508Reverse Acquistion reserve - - - -3,601 - - -3,601 ------- -------- -------- ------- ------ ------ -------- As of 30th June 2007 12,332 75,606 -5,508 -3,601 91,164 -553 169,440 ------- -------- -------- ------- ------ ------ -------- Notes to the Interim Financial Statements These interim financial statements do not constitute statutory accounts withinthe meaning of the Companies Act 1985 and are unaudited. The Board approved theunaudited interim financial statements on 10 September 2007. 1. Basis of Preparation This interim financial information has been prepared applying the accountingpolicies and presentation that were applied in the preparation of the PVCrystalox Solar AG consolidated financial statements for the year ended 31December 2006 as presented in the prospectus in respect of the Company's listingon the London Stock Exchange on 6 June 2007 (conditional trading andunconditional trading on 11 June 2007). 2. Basis of Consolidation The Group financial statements consolidate those of the Company and itssubsidiary undertakings drawn up to 30 June 2007. On 5 January 2007, PVCrystalox Solar PLC became the legal parent company of PV Crystalox Solar AG(and its subsidiary companies) in a share for share transaction. The former PVCrystalox Solar AG shareholders became the shareholders of PV Crystalox SolarPLC. Following the transaction the Company's continuing operations and executivemanagement were those of PV Crystalox Solar AG. Accordingly, the substance ofthe combination was that PV Crystalox Solar AG acquired PV Crystalox Solar PLCin a reverse acquisition. The Companies Act 1985 and IFRS would normally require the Company'sconsolidated accounts to follow the legal form of the business combination. Inthat case the pre-acquisition results would be those of PV Crystalox Solar PLCand its subsidiary undertakings, which would exclude PV Crystalox Solar AG. Theresults of PV Crystalox Solar AG would then be included in the Group from 5January 2007. However, this would portray the combination as an acquisition ofPV Crystalox Solar AG by PV Crystalox Solar PLC and would, in the opinion of thedirectors, fail to give a true and fair view of the substance of the businesscombination. Accordingly, the directors have adopted reverse acquisitionaccounting as the basis of consolidation in order to give a true and fair view.As a consequence of applying reverse acquisition accounting, the comparativeresults for the Group for the period ended 30 June 2007 comprise the results ofPV Crystalox Solar AG for its half-year ended 30 June 2007 plus those of PVCrystalox Solar PLC for the same period. 3. Functional and presentation currency The financial information is presented in euros, which is the functionalcurrency. All financial information has been rounded to the nearest thousand. 4. Business and geographical information PV Crystalox Solar PLC------------------------Segment information - 6 months to June 2007--------------------------------------------- Silcon Trading & Products Equipment Consolidation GroupBy business segment •'000 •'000 •'000 •'000---------------------Revenue External revenues 92,796 30,762 - 123,558 Intercompany revenues - 651 -651 0 Segment Results Operating profit before interest and tax 27,484 1,499 - 28,983 Other information Assets 244,757 25,225 - 269,982 Liabilities 78,202 22,339 - 100,541 Fixed Asset additions 2,764 - - 2,764 Depreciation charged 2,151 - - 2,151 Note;The Silicon Products segment includes the non-recurring sale of a quantity of out of specification scrap silicon that added •'2.3 million to operating profitin the 6 months to 30 June 2007. This sale was made to Asia. Japan Other Asia Germany Other Europe USA GroupBy geographical area •'000 •'000 •'000 •'000 •'000 •'000---------------------- External revenues 80,074 14,149 26,012 1,060 2,263 123,558Assets 74,517 - 58,095 137,371 - 269,982Liabilities 64,812 - 24,284 11,445 - 100,541 Other information Fixed Asset additions 3 - 2,514 247 - 2,764 Depreciation charged 8 - 1,181 962 - 2,151 PV Crystalox Solar PLC------------------------Segment information - 6 months to June 2006--------------------------------------------- Silcon Trading & Products Equipment Consolidation GroupBy business segment •'000 •'000 •'000 •'000--------------------- Revenue External revenues 89,489 25,177 - 114,666 Intercompany revenues - 757 -757 0 Segment Results Operating profit before interest and tax 24,011 1,580 - 25,591 Other information Assets 131,353 16,863 - 148,216 Liabilities 63,856 16,223 - 80,079 Fixed Asset additions 993 - - 993 Depreciation charged 2,705 - - 2,705 Japan Other Asia Germany Other Europe USA GroupBy geographical area '000 •'000 •'000 •'000 •'000 •'000---------------------- External revenues 77,490 8,019 23,891 1,635 3,632 114,666Assets 60,509 - 37,267 50,440 - 148,216Liabilities 6,827 - 14,127 9,125 - 80,079 Other information Fixed Asset additions 9 - 955 29 - 993 Depreciation charged 10 - 1,080 1,615 - 2,705 5. Earnings per share The calculation of earnings per share is based on a profit after tax for theperiod of €13.6m (2006 half-year profit €16.5m and 2006 full year €31.6m) andthe number of shares as set out below: 6 Mths Ended 6 Mths Ended 6 Mths Ended 30-Jun-2007 30-Jun-2006 31-Dec-2006 Number of shares (adjusted for2006) 375,000,100 375,000,100 375,000,100 New Shares(41,725,235) issues on6th June 2007 2,857,893 - - Shares held by the EmployeesBenefit Trust -3,181,849 - - Weighted average number of sharesfor fully diluted 377,857,993 375,000,100 375,000,100earnings per share calculation 6. Adjusted earnings per share The calculation of adjusted earnings per share is based on a profit after taxafter adding back the expensed costs in the period in respect of the IPO and inrespect of grants made by the EBT. Accordingly, the profit after tax is adjustedto €19.1m (2006 half-year profit €16.5m and 2006 full year €31.6m) and thenumber of shares as set out above. It should be noted that IFRS dictates that grants made by an EBT should be shownas part of personnel expenses. However, due to the magnitude and non-recurringnature of the item in the current period it has been shown separately as anexceptional item. The directors feel that this treatment presents the Groupsnormal business operation in a clearer fashion. 7. Employee Benefit Trust (EBT) The employee benefit trust currently holds 7,125,000 shares (1.7% of the issuedshare capital) in the Company that it holds in trust for the benefit ofemployees. At the date of this report there are no options or other suchinstruments outstanding in respect of these shares. However, the directors aregiving consideration to allocating approximately one third of these shares tokey employees before this year end. Further grants will be considered in thefuture. 8. Shares In December 2006 the Company made an offer to each of the shareholders of PVCrystalox Solar AG to purchase all their shares in PV Crystalox Solar AG inexchange for the issue to them of an equivalent number of shares in the Company.On 5 January 2007 75% of the shares of PV Crystalox Solar AG were acquired andthe remaining 25% were acquired on 10 May 2007. PV Crystalox Solar AG had anordinary share capital of 7,500.000 shares with a nominal value of €1 each andthe Company at the time of the acquisition had an ordinary share capital of7,500,002 shares (including two subscriber shares) with a nominal value of £1each. On 21 May 2007 the Company split its share capital into 375,000,100ordinary shares of 2 pence each. A further 41,725,235 new ordinary shares wereissued at the time of the IPO on 6 June 2007 at £1.30 per share. The currenttotal issued share capital of the Company is 416,725,335 ordinary shares. 9. Glossary EBIT Earnings Before Interest and TaxationEBITDA Earnings Before Interest Taxation Depreciation and AmortisationEBT Employee Benefit TrustIFRS International Financial Reporting StandardsMT Metric tonnesMW MegawattIPO Initial Public Offering This information is provided by RNS The company news service from the London Stock Exchange