YEAR-END REPORT OBDUCAT AB (PUBL) JANUARY – DECEMBER 2007
(NGM: OBDU B)
Increased order intake in Q4
Fourth quarter
· Sales for the period were SEK 6.6 (12.7) million
· Pre-tax profits were SEK –12.2 (–9.4) million and earnings per share before dilution were SEK –0.04 (–0.03)
· Gross margin was 40% (60%)
· Cash flow for the period was SEK –17.1 (–9.0) million
· Q4 order intake was SEK 12.9 (7.6) million
January - December
· Order valued at about SEK 7 million for a SindreTM 60 system from world-leading Epistar
· Sales for the period were SEK 32.7 (36.8) million
· Gross margin was 52% (60%)
· Pre-tax profits were SEK –48.1 (–41.6) million and earnings per share before dilution SEK –0.15 (–0.15)
· Order backlog was SEK 14.2 (5.7) million
· 85% of the convertible debenture loan was converted to shares and 74% of the warrants were exercised
· Obducat signs an exclusive distribution agreement with Canon Marketing Japan
(All amounts below in SEK 000 unless otherwise stated)
Significant events after the close of the report period
New orders after the close of the period valued at SEK 3.5 million were received, comprising a Nano Imprint Lithography (NIL) system and two Scanning Electron Microscope (SEM) systems.
Liquid assets at the close of the report period were SEK 20.5 million. Present liquid assets are, based on the Company’s estimate, not sufficient to cover working expenses during the next twelve months and to execute the Group’s expansion plans. In view of this the Board will give notice of an extraordinary general meeting of shareholders on 18 February 2008, for the purpose of making a decision to implement a new convertible issue.
Sales/Market – fourth quarter
At the close of the period the order stock amounted to SEK 14.2 (5.7) million. The order intake in Q4 comprises several Apollo systems (SEM) and NIL systems. The delivery of these orders is estimated to take place mostly in Q1 of 2008.
The Company’s assets have been used mainly in the present industrial customer projects, which are in varying stages of the decision and buying processes. The common purpose of these projects is to start industrial mass production. Obducat is of the opinion that its market and development potential has improved further, first and foremost in the optoelectronics and the hard disk application areas, on which the Company is presently focusing all its activities.
January - December
With the order for a SindreTM 60 system in June, an important milestone was passed. The customer is Epistar, the Taiwan-based optoelectronics company that is the world-leading LED manufacturer (Light Emitting Diodes). The system was delivered and began being used in the third quarter. During this period yet another important milestone was passed when the order for a NIL system for research and development purposes was placed by STMicroelectronics, Europe’s leading manufacturer of semiconductors.
Obducat during the period signed an exclusive distribution agreement with Canon Marketing Japan (Canon MJ), under which Canon MJ is responsible for sales and service of all Obducat products on the Japanese market.
Activities in Obducat Camscan Ltd. continue to emphasise on development and production of electron beam columns for Obducat’s electron beam recorders (EBR) and scanning electron microscopes (SEM). In 2006 a new electron beam column was launched, reinforcing the product platform for both EBR and SEM. During 2007 Obducat CamScan received a number of orders for Apollo systems as well as an order for the SEM X500 product, a system optimised for microscopy at high temperatures. With the X500 system, Obducat CamScan has a unique solution and method for analyses at high temperatures. This method has the potential to become the standard method, which in turn may result in a global market penetration of this product.
Sales and Result – fourth quarter
Group sales for the period amounted to 6,636 (12,694) and generated a gross profit of 2,675 (7,576), corresponding to a gross margin of 40 (60) per cent. Lower sales compared to the same quarter previous year were balanced by an order backlog increase. The changed margin is attributable to a bigger share of sales of SEM related products in Q4 of 2007.
Operating loss for the period was –12,070 (–8,210) and was charged with depreciation according to plan of
–1,567 (–3,899). The lower depreciations in Q4 of 2007 are primarily attributable to an examination of the remaining period of use of all intangible fixed assets. The adjustment has been made on the basis of the Group’s unchanged accounting principles (see Notes below).
Loss for the period after taxes was –12,151 (–9,369), where the difference compared with the same period the previous year is found primarily in the gross profit, with lower sales and a lower gross profit margin (see first paragraph above).
Cash flow from operating activities was –11,681 (–2,705). Total cash flow after investment activities was –19,781 (–8,795). See further comments on cash flow in Financing and Liquidity below.
January - December
Group sales for the period was 32,657 (36,757), with a gross profit of 16,882 (22,028), corresponding to a gross margin of 52 (60) per cent. Operating loss for the period was –47,741 (–36,872), which was charged with depreciation according to plan of –14,409 (-15,126). The difference compared with 2006 is explained by lower sales and thus lower gross profit as well as the increased headcount primarily in the research and development and market and sales departments.
The Administrative Court of Appeal’s ruling pertaining to the tax audit in 2002 in respect of social security contributions, for which provisions were made in 2004, has now been finalised and was settled at the beginning of 2007 – minimally affecting income.
Loss for the period after taxes was –48,054 (–41,580).The financial net improved by SEK 4.4 million, mainly owing to conversion of the subordinated debentures, see Financing and Liquidity.
Cash flow from operating activities for the period amounted to –41,102 (–22,816). Total cash flow after investment activities was –57,078 (–48,340). With the exception of the changes derived from the income statement, a significant part of the change compared with 2006 is explained by the restricted working capital – mainly stock – as a result of the order intake during the second half of 2007.
Financing and Liquidity – fourth quarter
At the close of the reported period equity amounted to 85,791 – compared with 98,851 at the beginning of the quarter and 42,977 at the beginning of the year – whereby equity/assets ratio on 31 December was 73 per cent, compared with 78 per cent in the previous quarterly accounts, and 34 per cent at the beginning of the year. Remaining interest-bearing liabilities consist mainly of property credits and lease debts, see also the Accounting principles below.
Liquid assets, including current investments of surplus liquidity in an interest-based money market instrument amounted at the close of the report period to 20,531, compared with 37,662 at the start of the quarter. As far as liquidity is concerned, the fourth quarter was charged with larger investments in the development portfolio as well as building up stock for delivery of orders mostly during the first quarter of 2008. Present liquid assets are, according to the Company’s estimate, not sufficient to cover working expenses during the next twelve months and to execute the Group’s expansion plans. On account of this, the Board will give notice of an extraordinary general meeting of shareholders on 18 February 2008, for the purpose of making a decision to implement a new convertible issue.
January - December
The profit derived from financing activities in 2007 amounted to SEK 40.1 (37.4) million.
During the period, Obducat’s equity was boosted by SEK 91.9 million by exercising the right to convert convertible debentures as well as exercising the right to subscribe for shares supported by options. The capital contribution amounted to 324 per cent of the equity prior to the change.
Obducat’s Convertible Debenture Loan 2004/2007 and the Options 2004/2007 matured on 31 March 2007. The last day to require conversion of convertibles and exchange of options into new shares was on 28 February 2007. Redemption payment at the subscription of options was SEK 47.1 million. 83 per cent of the subordinated debentures, equivalent to SEK 44.8 million, was converted into shares, resulting in repayment of the remainder of the loan in the sum of SEK 9.3 million. Final settlement of Obducat’s convertible debenture loan resulted in annual interest costs being reduced by SEK 2.8 million.
As a result of the required conversion and new subscription for shares supported by options, 835,006 new series A shares and 42,952,329 new series B shares were issued and registered during the period. On 31 December 2007 there were no outstanding convertible debenture loans and/or options.
At the Annual General Meeting on 21 June 2007 it was unanimously resolved to authorise the Board of Directors, during the time prior to the AGM 2008, to decide to issue a maximum of 80 million new series B shares.
Investments – fourth quarter
The Group’s net investments totalled 8,100 (6,090). In addition to investments in intangible assets in the form of capitalised development costs, balanced in accordance with IAS 38 (International Accounting Standards,) and patents, the item consists mainly of investments in the production plant in Malmö. These investments were funded primarily through leasing. In the fourth quarter a number of the new 2007 lease contracts were classified as financial lease agreements, see detailed account of this in the consolidated accounts according to the accounting principles below. Reclassification of lease contracts to financial leasing resulted in a positive effect of 60 on the result.
January - December
The Group’s net investments for the period amounted to 15,976 (25,524). There were no property investments in 2007, compared to 10,734 in 2006. Net investments in 2007 consist mainly of investments in intangible assets in the form of capitalised development costs and patents, balanced in accordance with the above-mentioned accounting principles, as well as lease financed machinery related investments in the production plant in Malmö, accounted for in the consolidated accounts as described in the previous paragraph.
Research and Development – fourth quarter
Sales for the period were charged with costs for research and development (excluding R&D related depreciation according to plan) totalling 6,903 (5,275). Investments in the form of capitalised development costs and patents amounted to 2,942 (2,556).
One of Obducat’s cornerstones is research and development. For that reason Obducat has chosen to collaborate with strategically selected players in order to increase its competitiveness and to enable faster parallel development of the required infrastructure needed for the industrialisation of NIL. In that way Obducat can achieve cost-effective development at the same time as minimising risks and reducing development lead times.
January - December
Research and development costs (excluding R&D related depreciation according to plan) for the period totalled 22,403 (19,482). Investments made in the form of capitalised development costs and patents totalled 10,519 (10,802).
Patents
Robust patent protection is of the essence for the business of Obducat. The purpose of patents is to create exclusiveness, which is an important part of providing future sources of income.
At the time of submitting this report, Obducat’s patent portfolio totalled 222 active patent applications, pertaining to a total of 44 inventions. The number of granted patents was 112.
Transactions with closely associated persons
During 1999 and 2000 Obducat acquired the right to certain inventions pertaining to NIL from, among others, Lars Montelius, member of the board, and from Babak Heidari, the Chief Technical Officer. In addition to a limited initial purchase-sum, the compensation for these acquisitions consists mainly of royalty based on the net realisable value of the products, accessories, other equipment and services sold by Obducat, and to the extent that these relate to the transferred inventions. Royalty shall, in accordance with the agreement, be paid until and including 2007.
Income for January-December was charged with royalty to closely associated persons totalling 435 (725). The transaction was made in accordance with conditions on the market.
Organisation
At the end of the period the Group had a total of 51 (43) full time employees, of which 7 (6) women. The Group continues its efforts to expand headcount, primarily focusing on development and sales.
External factors
Obducat is of the opinion that currency and interest fluctuations will continue to have marginal effect on the business from an order intake point of view. The price trend is still down for certain NIL products in the academy/institute market segment.
The Obducat share and Ownership Structure
On 31 December 2007, Obducat had 15,787 shareholders. On the same date the total number of shares amounted to 335,925,202, of which 6,205,294 series A shares (each representing ten votes), and the remainder series B shares (each representing one vote). During Q4 a total of about 66.1 (79.0) million B shares were traded, equivalent to an average volume per trading day of a little more than 1.07 (1.23) million shares. For the full year a total of 316.1 (374.0) million shares were traded, equivalent to an average volume per trading day of 1.27 (1.49) million shares.
(for complete report see attached file)