Windar Photo Regulatory News (WPHO)

25 September 2018

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Windar Photonics plc

("Windar", the "Company" or the "Group")

Unaudited interim report for the six months ended 30 June 2018

Windar Photonics plc (AIM:WPHO), the technology group that has developed a cost efficient and innovative LiDAR wind sensor which enhances the productivity of electricity generating wind turbines, is pleased to announce its unaudited interim results for the six months ended 30 June 2018.

Highlights for the first six months of 2018:

· 33% increase in revenue to €1.67 million (H1 2017: €1.25 million) notwithstanding €0.2 million of deferred revenue in H1 2017 (H1 2018 actual dispatched product value increased by 47% vs H1 2017)

· 44% increase in gross profit to €0.82 million (H1 2017: €0.57 million)

· 6% reduction in operating costs to €0.93 million (excluding depreciation, amortisation and warrant costs) (H1 2017: €0.99 million)

· 86% reduction in EBITDA loss to €0.07 million (H1 2017: €0.41 million)

· Significantly enhanced future sales potential having entered into a global distribution agreement with Vestas Wind Systems A/S ("Vestas"), the world's largest maintenance provider in the wind industry with representation across 63 countries worldwide

· Continued progress in OEM market with turbine integration projects with the majority of the top 20 wind turbine OEMs ongoing and some projects now in the final turbine type certification stages

· Strengthened balance sheet and cash holdings post period with a £2.2 million fundraise

· Further investment in sales and service organisation in Shanghai, China from 3 to 8 employees during the period

· Board confident of continued growth in H2 2018 with expected full year revenues of €4.0 - 4.5 million and EBITDA broadly in line with market forecasts

Jørgen Korsgaard Jensen, Chief Executive Officer of the Company, commented: "Our revenues and gross profit have both increased substantially during the period, reflecting the market's increased recognition of the superior quality of our LiDAR based sensors for turbine optimisation in terms of cost, weight and output.

"This growth was achieved even before securing Vestas as a distribution partner post period end and this, together with the progress we continue to make in terms of securing an OEM contract, which could be transformational to our business, underpins our confidence that Windar is well positioned to show continued growth in the second half of 2018. Overall in 2019 we expect sales to the OEM market segment at least to match sales to the retrofit market segment and we therefore look forward to providing updates regarding our business during this exciting moment in our development."

Chairman's Statement

I am pleased to report that we have started 2018 with many positive developments. In particular I am very pleased with the Group's new global distribution agreement with Vestas, who, with more than 78 GW under service, is the world's largest maintenance provider in the wind industry. Vestas' service network consists of more than 10,000 people across 63 countries worldwide. This agreement, combined with our existing distribution agreements in China and India, means we have now reached our objective to establish a strong external distribution network servicing the Independent Power Producers (IPP) markets whilst the Group continues to service the OEM market segment directly.

We are also pleased to report strong continued revenue growth during the period of 33% compared to the same period in 2017. The actual order intake and order back-log was considerably higher, although delivery was constrained by a shortage of certain key long lead time components. Our post period end fundraise enables us to increase stock levels, particularly focusing on the longer lead-time components, and therefore execution on both our current order back-log and new orders is a key focus for the second half of 2018. Additionally, we were able to increase gross profit margins to 49.1% (H1 2017: 45.5%), despite the constraints mentioned above, and total gross profit increased by 44% compared to the same period in 2017.

During the period we further lowered our operational costs (excluding depreciation, amortisation and warrant costs) by 6% compared to the same period in 2017. Notably, over the last two years, the overall the operational cost level in the Group has been reduced by more than 50%.

Overall, the Group significantly reduced its net loss to €0.29 million for the period (H1 2017: €0.85 million loss) after depreciation, amortisation and warrant costs of €0.17 million (2016: €0.38 million).

The realised EBITDA loss in the first six months of 2018 was realised at a near break-even point of €0.07 million compared to EBITDA losses of €0.41 million and €1.4 million in the first six months of 2017 and 2016 respectively.

Cash flow from operations showed a net outflow of €0.76 million for the period compared to a net outflow of €0.05 million in the first half of 2017. The increased outflow during the period was primarily driven by an increase in net receivables of €0.62 million due primarily to the increased revenue realised and two previous large overdue deliveries only being settled after the period under review in August 2018. Excluding restricted cash holdings of €0.31 million, the net cash holding at the end of the period amounted to €0.26 million (2017: €0.39 million), since which time the Company announced a £2.2 million fundraise (€2.4 million) before expenses, further strengthening its balance sheet and cash holdings.   

The majority of Windar's revenue is still primarily generated from the IPP retrofit market and we expect to show accelerated growth in the coming periods following the further strengthened distribution network. The next strategic milestone for Windar is to start volume deliveries to the OEM market segment for new turbine sales. We are working with the majority of the top 20 wind turbine OEMs on various integration projects for new wind turbine designs although it is not always possible to establish firm time lines for these projects and subsequent revenue generation due to the complexity of such turbine designs. However, we are pleased that we are now in a position where some of these OEM projects have moved from the development stages into the final turbine certification stages, and we expect sales to the OEM market segment to contribute to a significant growth in revenue in 2019 and the following years. Overall in 2019 we expect sales to the OEM market segment at least to match sales to the retrofit market segment coming from a very low percentages of our sales in both 2017 and 2018.

Despite the overall reduction in general operational expenditure, we have again been able to increase expenditure in R&D, particularly within the Wind Analytics and Turbine Optimisation team. Our programme to develop new turbine control strategies based on our wake and turbulence measurements has showed good progress in the period and in line for field tests early next year.

Outlook

Based upon current traction with our customers and our increased product offering, the Directors believe the Group is well positioned to show continued growth in the second half of 2018 and expects to generate full year revenues of between €4.0 - 4.5 million. The Board expects to report full year profitability broadly in line with market expectations. 

Johan Blach Petersen

Chairman

For further information:

About Windar:

Windar Photonics is a technology group that develops cost-efficient and innovative Light Detection and Ranging ("LiDAR") optimisation systems for use on electricity generating wind turbines. LiDAR wind sensors in general are designed to remotely measure wind speed and direction.

http://investor.windarphotonics.com 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS

ENDED 30 JUNE 2018

1. BASIS OF PREPARATION

The financial information for the six months ended 30 June 2018 and 30 June 2017 does not constitute the Groups statutory financial statements for those periods with the meaning of Section 434(3) of the Companies Act 2006 and has neither been audited or reviewed pursuant to guidance issued by the Auditing Practices Board. The annual financial statements of Windar Photonics plc are prepared in accordance with International Financial Reporting Standards as endorsed by the European Union ("IFRS"). The principal accounting policies used in preparing the Interim financial statements are those that the Group expects to apply in its financial statements for the year ended 31 December 2018 and are unchanged from those disclosed in the Group's Annual Report for the year ended 31 December 2017.

The comparative financial information for the year ended 31 December 2017 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2017 have been filed with the Registrar of Companies. The Independent Auditor's Report on the Annual Report and Financial Statements for 2017 was unqualified, did not include references to any matters which the auditors drew attention to by

way of emphasis without qualifying their report and did not contain a statement under section 498(2)-498(3) of the Companies Act 2006.

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue operating for the next 12 months. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed consolidated financial statements.

This interim report was approved by the directors.

2. Loss per share

The loss and weighted average number of ordinary shares used in the calculation of basic loss per share are as follows:

There is no dilutive effect of the warrants as the dilution would reduce the loss per share.

3. Inventory

4. Trade and other receivables

5. Share capital

Number of shares €

At 30 June 2018, the share capital comprises 41,808,369 shares of 1 pence each.

6. Borrowings

The carrying value and fair value of Group's borrowings are as follows:

The Growth Fund borrowing from the Danish public institution, Vækstfonden, bears interest at a rate of 12 per cent. The borrowing is a bullet loan with maturity in June 2020. The Group may at any point in time either repay the loan in part or in full or initiate an annuity repayment scheme over four years. If an annuity repayment scheme is initiated, the interest rate will be reduced to 8 per cent in the repayment period.

The loan from Nordea Ejendomme is in respect of amounts included in the fitting out of the offices in Denmark. The loan is repayable over the 6 years and matures I November 2021 and carries a fixed interest rate of 6 per cent.

Both loans are denominated in Danish Kroner.

7. Trade and other payables

There is no material difference between the net book value and the fair values of current trade and other payables due to their short-term nature.

8. Availability of Interim Report

Copies of the Interim Report will not be sent to shareholders but will be available from the Group's websitewww.investor.windarphotonics.com.