INTERIM REPORT OBDUCAT AB (PUBL.) JANUARY - JUNE 2010
Second quarter
• Second quarter sales were SEK 9.8 M (14.7)
• Third quarter profits after taxes were SEK -19.0 M (-10.7) and earnings per share before dilution were SEK –0.03 (–0.03)
• Gross margin stood at 49% (49%)
• Cash flow before financing activities was SEK -14.9 M (-20.9)
• Order intake in Q2 was SEK 4.8 M (10.1)
January - June
• Sales in the first half-year were SEK 22.6 M (30.2)
• Profits after taxes were SEK -31.6 M (–22.4) and earnings per share before dilution were SEK -0.05 (–0.06)
• Gross margin stood at 51% (47%)
• Cash flow before financing activities was SEK -30.7 M (-36.8)
• Order intake in the first half-year was SEK 17.4 M (14.0). At the close of the period the order stock was SEK 10.4 M (45.8)
(All amounts below in SEK 000 unless otherwise stated)
Significant events after the reporting period
The reverse stock split 1:80, decided upon by the AGM, was implemented in the beginning of July. The reverse split has required a recalculation of conditions of both convertibles and options. On account of the reverse split the conversion rate for the Obducat convertibles 2008/2011 has been recalculated (multiplied by 80) and is now SEK 132 (as opposed to SEK 1.65 previously). The conditions of the Obducat warrants 2009/2011:A and B as well as 2009/2012:A and B have also been recalculated. A 2009/2011 warrant now entitles the holder to subscribe for an eighth of a share, at the price of SEK 60 per share. (Previously a 2009/2011 warrant entitled to subscription of one share, at the price of SEK 0.75 per share). A 2009/2012 warrant now entitles the holder to subscribe for an eighth of a share, at the price of SEK 72 per share. (Previously a 2009/2012 warrant entitled to subscription of one share, at the price of SEK 0.90 per share).
Sales/Market – second quarter
The order intake in the second quarter amounted to SEK 4.8 M (10.1), resulting in a total order stock of SEK 10.4 M (45.8) at the end of the reporting period.
The market continues to be sluggish, depending mainly on the need for more extensive development efforts in the customers’ final product development phase. Other reasons impacting the rate of expanding capacity are, among other things, the shortage of substrates and other expendable items used in the manufacture of LED chips. It is however expected that these delivery problems be solved during the second half of 2010.
Obducat continues to be involved in several customer projects related to the LED market. Customers’ businesses range from providing other companies with patterned substrates to securing their own supply of components for their own consumer products.
In the beginning of April Obducat received an order for an Eitre®6 nanoimprint lithography system from Centre National de la Recherche Scientific (CNRS) in Grenoble. The Eitre® system will be installed in the Plateforme Technologique Amont (PTA) clean room at the MINATEC campus, Europe’s largest innovation centre for micro and nanotechnology.
January - June
Total order intake for the first six months of the year amounted to SEK 17.4 M (14.0).
The order intake in the first half of the year is definitely lower than expected. Based on information about customers’ development plans, Obducat estimates that the long-term potential for its NIL products remains unchanged.
During the first quarter Obducat received UniLite’s formal approval (Site Acceptance Test) of the fully automatic Sindre 400® machine delivered in 2009. UniLite is one of the world’s leading manufacturers of LEDs and the Sindre 400® is an essential requirement for UniLite’s increasing production volumes and an important reference plant for Obducat.
In the first quarter Hamamatsu Photonics, world-leading producer of components for optoelectronics and measuring instruments, placed an order for a NIL system through Obducat’s partner Canon Marketing Japan. Hamamatsu Photonics supplies optoelectronic products, such as opto-semiconductors, photosensitive electron tubes, light sources and image measurement systems to industrial enterprises, universities and research institutes all over the world. The Obducat NIL system (nanoimprint lithography system) is intended for use in product development and pilot production of optical equipment. Hamamatsu chose Obducat on account of its superior imprint quality, industrial merits and the strong local support enabled by the partner Canon Marketing Japan. Obducat’s patented process technologies, IPS® and STU®, were employed during the evaluation.
In the first quarter the order for a Sindre HDD HVM system was removed form the order stock while at the same time discussing joint development activities with the customer, in order to meet the customer’s newly arisen needs in the Bit Patterned Media (BPM) segment. The need for a BPM system for production is however later in time than DTR on which the HDD industry has so far been focused, and as a consequence final delivery of the DTR order will not take place.
Sales and result – second quarter
Group sales for the period amounted to 9.775 (14.728). The Group generated a gross profit of 4.748 (7.147), corresponding to a gross margin of 49 (49) per cent.
Operating loss for the quarter was -17.126 (-9.176), which was charged with depreciation according to plan of –2.943 (–2.554).
Loss for the quarter after taxes was -19.043 (-10.740), with the difference compared with the same period the previous year largely depending on a lower gross result related to lower sales, costs in connection with change of CEO, and sales and further development costs in connection with the HVM machines.
January - June
Group sales for the period amounted to 22.623 (30.155), with a gross profit of 11.585 (14.253), corresponding to a gross margin of 51 (47) per cent. Operating loss for the period was -28.037 (-19.328), comprising depreciation according to plan of -5.691(-5.019). The difference in the operating result compared with the corresponding period the previous year is primarily attributable to the second quarter showing lower sales, costs in connection with the change of CEO, and increased sales and development costs pertaining to the HVM machines.
Financing and liquidity – second quarter
At the close of the period equity amounted to 79.770 compared with 68.722 at the beginning of the year (see explanation in third paragraph below). Equity/assets ratio on 30 June was 61 per cent, compared with 42 per cent at the beginning of the year. Interest-bearing liabilities are composed mainly of convertible subordinated debentures, property credits and lease debts.
Cash flow from current operations in the period amounted to -10.446 (–15.859). Total cash flow after investing activities for the period was -14.921 (–20.925). Liquid assets, including current investments of surplus liquid assets in an interest-bearing money market instrument, amounted at the end of the reporting period to 20.072 in comparison with 51.816 at the start of the year. In respect of liquidity, the second quarter was charged with the result for the period as well as investments in capitalised development costs.
In the second quarter the Extraordinary General Meeting of Obducat AB (publ.) resolved to change the conditions for the Obducat convertibles 2008/2011:A and B, meaning that for the conversion required during the time from 19 April 2010 up to and including 30 April 2010 the conversion rate should be SEK 0.27. The Meeting further resolved, in accordance with the Board’s proposal, to change the conditions of the Obducat warrants 2009/2011 A and B as well as 2009/2012 A and B, meaning that rules for the recalculation of the subscription price and the number of shares that each warrant entitles the holder to subscribe for is implemented, with a view to compensating the holders of the warrants for the conversion to a lower conversion rate resulting from the change of conditions for convertibles. The result of the time-limited offer to convert meant that SEK 43.5 M was converted into shares, corresponding to approx. 78 per cent of the total convertible loan.
Obducat’s liquidity development depends mainly on the rate and scope of the quotations on hand turning into orders. In parallel Obducat is working on different working capital-related financing opportunities. Should the need for liquidity arise, the Board and Management will provide the Company’s shareholders with information to that effect.
January - June
Cash flow from current operations for the period amounted to –18.740 (-26.372). Total cash flow after investing activities was -30.721 (-36.782). Cash flow for the period was charged with the result for the period and investments in capitalised development costs.
Investments – Second quarter
The Group’s total net investments amounted to 4.475 (5.066), consisting mostly of intangible assets in the form of capitalised expenditure development and patents, capitalised in compliance with IAS 38 (International Accounting Standards).
January - June
Net investments for the period were 11.981(10.410), of which the greater part refers to investments in intangible assets as stated above.
Research and development – Second quarter
Sales for the quarter were charged with costs totalling 9.368 (7.423) in respect of research and development (excluding R&D related depreciation according to plan). Investments in the form of capitalised expenditure for development and patents amounted to 3.724 (5.371).
Compared with the corresponding period the previous year, the total research and development efforts increased, primarily in connection with further development of the HVM machines.
January - June
Sales for the period comprise a total of 17.435 (15.712) pertaining to research and development (excluding R&D related depreciation according to plan). Investments in the form of capitalised expenditure for development and patents were 10.948 (10.487).
Patents
For Obducat’s business, robust patent protection of utmost importance. The purpose of patents is to create exclusiveness, which is an important part of the basis for future income.
When submitting this report, Obducat’s patent portfolio totalled 278 active patent applications, pertaining to a total of 50 inventions. The number of patents granted was 159.
Transactions with closely associated persons
No transactions with closely associated persons took place in the first six months of 2010.
Organisation
At the close of the period the Group had a total of 66 (69) full-time employees, of which 11 (10) women. Obducat continuously and actively works to adapt the organisation to the prevailing market conditions.
External factors
Obducat estimates that currency fluctuations will continue to impact the company to a minor degree seeing that in all situations possible, currency flows are hedged.
The Obducat share and Ownerships structure
On 30 June 2010 the number of shareholders was 15.130. On the same day the total number of shares was 693.535.261, of which 19.561.696 series A shares (each representing ten votes), and the remainder series B shares (each representing one vote). During the first six months of 2010 an approximate total of 199.4 (72.5) million B shares were traded, equivalent to an average volume per trading day of 1.6 (0.6) million shares. During the second quarter an approximate total of 81.8 (45.5) million B shares were traded, equivalent to an average volume per trading day of approximately 1.4 (0.8) million shares.
(For full report including tables, see attached file)