INTERIM REPORT OBDUCAT AB (PUBL) JANUARY - MARCH 2010
(NGM:OBDU B)
At least 78% of the convertible loan converted
First quarter
• First quarter sales were SEK 12.8 M (15.4)
• Pre-tax profits were SEK –12.6 M (–11.7) and earnings per share before dilution were SEK –0,02 (–0,03)
• Gross margin was 53 (46) per cent
• Cash flow before financing activities was SEK –15.8 M (–15.9)
• Order intake reached SEK 12.5 M (3.9), resulting in a backlog of SEK 16.9 M (51.0) at the close of the period
(All amounts below in SEK 000 unless otherwise stated)
Significant event after the close of the period
At the Extraordinary General meeting in Obducat AB (publ.) on 7 April 2010, it was unanimously resolved, in accordance with the Board’s proposal, to change the conditions for Obducat’s 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 shall be SEK 0.27. Such a conversion shall be executed at the earliest possible date. The Board of Directors further proposed that, in accordance with the Board’s proposal, the conditions for Obducat’s warrants 2009/2011: A and B, and 2009/2012: A och B be changed, meaning that a stipulation is added regarding the recalculation of the subscription price and the number of shares that each warrant entitles the holder to subscribe for, 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. Recalculation of the warrant conditions will take place as soon as the outcome of the conversion during the period 19 April 2010 up to and including 30 April 2010 have been calculated. The preliminary outcome of the time-limited offer to convert shows that the entire convertible loan has been converted to at least 78%. Final information on the result of the time-limited conversion offer will be issued in a separate press release.
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, which is the biggest innovation centre for micro and nanotechnology in Europe. Obducat’s flexible and user-friendly machine will be used together with other technical equipment at PTA for leading-edge research in nanotechnology, magnetism, spintronics, and photonics at MINATEC.
Sales/Market – first quarter
Order intake in the first quarter was SEK 12.5 M (3.9), resulting in a total backlog of orders at the close of the reporting period of SEK 16.9 M (51.0).
With regard to order intake, a recovery can be seen, however in the first quarter it is still lower than expected which is largely attributable to the SEM market. The LED market continues to gain strength and as a result Obducat is now involved in several customer projects jointly with companies supplying everything from patterned substrates to electronics companies aiming to secure their own supply of components for their consumer products.
Obducat received UniLite’s formal approval (Site Acceptance Test) of the fully automated Sindre 400® machine, which was delivered in 2009. UniLite is one of the world’s leading manufacturers of LEDs. The Sindre 400® is an essential requirement for UniLite’s increasing production volumes.
The display market is another application area seeing a positive development and where Obducat has intensified collaboration with several major customers. As for R&D systems, Obducat has during the period secured orders from Hamamatsu Photonics and has also received orders for Eitre systems from both China and France, as outlined above.
As previously communicated, the technical requirements specification pertaining to the order for a Sindre HDD system has been changed. Currently there are discussions with the customer on exactly which modules to supply, in order to in the most flexible way, address the customer’s various requirements in several application areas, in which Bit Pattern Media (BPM) is one. The need for BPM systems for production will however arise later than DTR on which the HDD industry has been concentrated on up to now. Therefore the order has been postponed and has for the time being been removed from the backlog.
Sales and result– first quarter
Group sales for the quarter amounted to 12.848 (15.427). The Group generated a gross profit of 6.837 (7.106), corresponding to a gross margin of 53 per cent (46).
Operating loss for the quarter was -10.911 (–10.206), which was charged with depreciation according to plan of –2.748 (–2.465). Loss for Q1 was –12.571 (–11.709), with the divergence compared with last year primarily attributable to a lower gross profit and somewhat higher operating costs.
Financing and Liquidity – first quarter
At the close of the period, equity amounted to 55.044, compared with 68.722 at the start of the year. Equity/assets ratio on 31 March was 37 per cent, compared with 42 per cent at the beginning of the year. Interest-bearing liabilities are composed mainly of a convertible subordinated loan, property credits and lease debts.
Liquid assets, including current investments of surplus liquidity in an interest-based money market instrument, amounted at the close of the period to 33.449, compared with 51.816 at the start of the year. With regard to liquidity, the first quarter was charged on the one hand with the result for the period, and on the other with further investments in development projects principally related to HVM machines.
Cash flow from financing activities during the period amounted to –8.294 (–10.513). Total cash flow after investment activities was –15.800 (–15.857).
Obducat’s liquidity development will predominantly depend on the rate and scope of the quotation backlog on hand turning into orders. Should the need for further funds arise, the Board and Management will inform Obducat’s shareholders.
Investments – first quarter
Total net investments amounted to 7.506 (5.344) and consisted mostly of intangible assets in the form of capitalised expenditure for development and patents, brought forward in compliance with IAS 38 (International Accounting Standards).
Research and development – first quarter
Sales for the quarter were charged with costs for research and development, (excluding R&D related depreciation according to plan) totalling 8.067 (8.289). Investments in the form of capitalised expenditure for development and patents were 7.224 (5.116).
Research and developments activities increased in the first quarter compared with the same period the previous year, which is related to further investments in development projects in connection with HVM machines.
Patents
Robust patent protection is of utmost importance to Obducat and its business. The purpose of the patents is to protect the right to our own proprietary technology, which is a significant part in generating future sources of income. The patents also offer our clients an element of security in order for their products to be sold without running the risk of infringing on other technology areas, and thereby jeopardising their sales.
Strong IPR protection is becoming increasingly important when more players are now entering the NIL market.
When this report was submitted, Obducat’s patent portfolio comprised a total of 275 active patent applications pertaining to a total of 50 inventions. The number of granted patents was 159.
Transactions with closely associated parties
No transactions with closely associated parties took place in the first quarter 2010.
Organisation
At the close of the period the Group had a total of 66 (72) full time employees, of which 11 (9) women. Obducat continuously and actively works to adapt the organisation to the prevailing market conditions.
External factors
Seeing that Obducat if possible hedges outstanding currency flows, it is estimated that currency fluctuations will continue to have a relatively small impact on the business.
(For full report, including tables, see attached file)