• Home
• Investor Relations
• Latest Results

Latest Results

Interim Results for the six months to 30 June 2008

SPI Lasers plc (AIM:SPIL), a leader in the design, development, engineering, and manufacture of optical fibre-based lasers, today releases its Interim Results for the six months to 30 June 2008.

Highlights

• Turnover of £6.1 million (H2 2007: £5.9 million, H1 2007: £7.2 million)
• Gross loss of £0.4 million (H2 2007: £1.2 million, H1 2007: £0.7million)
• Loss after taxation £4.6 million (H2 2007: £7.0 million, H1 2007: £5.3million).
• Cash on hand at the half year £5.7 million (H2: 2007: £11.2 million, H1 2007: £6.8million)
• Introduction in the period of new platforms for MICRO, MARKING and MEDICAL becoming established and shipping to customers in volume
• New platforms yielding anticipated improvements in gross margin

On 9 September 2008, TRUMPF International Beteiligungs-GmbH, a 100% subsidiary of TRUMPF GmbH + Co. KG ("TRUMPF"), announced a recommended offer to acquire 100% of the issued and to be issued share capital of SPI.  Under the terms of the acquisition, SPI shareholders will receive 40 pence in cash for each SPI share (the "Offer").  For further details please refer to the announcement made on 9 September 2008.

David Parker, Chief Executive of SPI, said:  "We are proud of our achievements to date, and in particular during 2008.  However, there is no doubt that with the support of the TRUMPF organisation we can take the business to a higher level and be a major player in this exciting sector. We see many opportunities to leverage our world class technology position into new products and markets and look forward to working within the TRUMPF group to achieve this."

Chairman's Statement

At first glance, the interim results for the half year ending 30 June 2008 may not fully reflect the accomplishments which have been made in driving SPI towards profitability from operations. However, the two new platforms introduced at the start of the year are making SPI more competitive in the MICRO and MARKING/MEDICAL markets on both price and product quality. Our confidence in these new platforms has been confirmed by customer acceptance of our products following testing and field trials, and by a growing order book.

We have also significantly lowered the manufacturing cost for these new products, despite the need to utilise legacy stock purchased at higher prices during the first few months of 2008.  This trend, combined with management action to curb overheads and improve stock turns is consistent with achieving the Board's goal of operating profitability in one or more months of the final quarter of 2008.

The Board and management continue to believe the fibre laser sector is an exciting growth area. Our belief seems to be shared by our competitors, many of whom have now announced significant fibre laser development programmes and notable acquisitions. Many of these competitors have greater financial resources, larger sales and customer support operations and a substantial installed base of customers.  Against this shifting strategic background, the Board decided to explore ways in which the Group could protect the interests of shareholders, customers, employees and our other constituencies.

On 9 September 2008, TRUMPF International Beteiligungs-GmbH, a 100% subsidiary of TRUMPF GmbH + Co. KG ("TRUMPF"), announced an Offer to acquire 100% of the issued and to be issued share capital of SPI at an offer price of 40 pence per share (the "Offer").  TRUMPF is one of the world's leading companies in production technology offering high-quality laser-based products and solutions for materials processing applications, and generated revenues of more than €2 billion in the year to 30 June 2008.  The Board of SPI intends unanimously to recommend, that SPI shareholders accept the Offer as the Board believes the Offer delivers attractive value and certainty to SPI shareholders.  Moreover, the Group will be in a stronger position to develop its business within the TRUMPF organisation.

The management and employees of SPI have, since 2000, made tremendous progress in the development of leading fibre laser technology and overcome substantial technical challenges to produce industrial-quality fibre-lasers.  The Board wishes to extend its thanks for the immense effort and dedication shown by the worldwide team and looks forward to further successes for the team within the TRUMPF organisation.

Graham Meek
Chairman
11 September 2008

Chief Executive's Review

Introduction

SPI's business performance in the first half of 2008 has improved over the second half of 2007, as reflected in the loss for the period from continuing operations reducing from £7 million to £4.6 million respectively.  At the time of our October 2007 share placing we discussed the need for, and progress towards, two major new product platforms: a new system laser, the "R4" targeted at our MICRO business, and a new OEM module, the "G3", focused on MARKING and MEDICAL applications.  These new platforms were intended to significantly reduce both variable and fixed costs and improve product quality.

I am pleased to report significant progress with both platforms.  The impact on our financial performance is already clear with our first half operating loss reduced by some £2.3 million compared to the second half of 2007 on similar revenue levels.

Markets, Customers and Channel

Revenue in the first half of the year had only modest growth compared to the second half of 2007.  This metric, however, belies the progress made in securing design wins and customer acquisitions that will lead to revenue growth in the second half of the year, albeit at a lower rate than we had hoped for.  This is particularly true with our pulsed laser where we have secured a number of large contracts and established more than 30 new trading relationships in the MARKING sector.  Whilst we had to overcome many technical challenges in bringing this product to market, we are now seeing the impact of our product performance on customer perception.  Further to this we believe the "G3" is an ideal platform to address new and exciting markets including the energy-related SOLAR sector.

Progress in MICRO has been slower.  Demand from manufacturers of medical products, and from the US market in general, has been subdued in the first half.  We are now pursuing major initiatives to broaden the product offering and application space for these products in the second half of the year.

Finally, our MEDICAL business has reached a comparative plateau during the period to date, which is understandable, given the strong growth in 2007.  We are aware of new application trials utilising SPI's laser platform for 2009 introduction which may offer further scope for SPI business.

Operational

The impact of the new platforms on direct costs has moved the Group to a position where at the end of the first half we generated positive gross margin.  Further cost reductions, which are well underway, combine with the projected increased volumes will move us towards achieving profitability from operations.  We are also confident in our ability to further improve product quality with the ambition to move SPI into a "best in class" position in the foreseeable future.

Outlook and Key Events

Whilst cost and quality remain the major focus areas, we are now able to return to deploying resources to enhance the product portfolio.  We have two major new product introductions planned for the second half of the year: a higher power OEM module targeted at new application in electronics; and a higher power system product which will be key if we are to move into the welding arena. 

In summary, the task for the second half of the year is to build upon the momentum we have generated across the business as we strive for our key objective of becoming profitable in one or more months of Q4 2008, notwithstanding the current economic climate and on revenues lower that previously expected, and this objective remains in place irrespective of our ownership.

David Parker
Chief Executive Officer
11 September 2008

Financial Review

Sales

Total sales for the first half of 2008 were £6.1 million compared with £7.2 million in the same period last year, the reduction was largely accounted for by a major one-off order in the Medical sector last year. Contract sales, which relate to SPI's USA and UK defence and aerospace development contracts, were 67% of equivalent revenues in the same period in 2007 due to contract phasing and resources being re-deployed to support the investment in product development.

Asia remains SPI's biggest market with 45% of total sales and 49% of product sales in the first half of 2008, down from 48% and 54% respectively in the first half of 2007.  Total sales in the UK grew to 14% of total sales, up from 10% for the first half of 2007 due to an increase in both product and contract sales.

Operational Performance

Gross losses reduced by £0.3 million from £0.7 million in the first half of 2007 to £0.4 million in the first half of 2008 as a result of improved product design and performance. New product platforms established from the start of the year offer significant cost reduction from our previous product designs.

The reduction in gross losses was complemented by an increase in other income (£0.2 million) due to DTI funding for several R&D Projects. The net result was a decrease in the loss before taxation of £0.7 million to £4.8 million from £5.5 million in 2007.

Group funded product research and development was £1.4 million while the Group spent £0.3 million on customer funded R&D which was charged to cost of sales. The total incurred investment in R&D was therefore £1.7 million, a decrease of 19% over the £2.1 million equivalent spend in 2007. These values are shown after the capitalisation of £0.1 million for the period, which is in addition to £0.3 million capitalised during 2007.

Taxation

SPI has an unrecognised deferred tax asset of £16.1 million, which has primarily arisen from the losses incurred to date.  In the first half of 2008, an R&D Tax Credit of £0.2 million (£0.2 million in 2007) was recognised; the associated cash receipt from HM Revenues and Customs is expected to be received in the first half of 2009 (the 2007 related tax credit is expected to be received in the second half of 2008).

Loss after Taxation

The loss after taxation for the first half of 2008 was £4.6 million, a decrease of £0.7 million over the first half of 2007 of £5.3 million.  This is primarily due to the issues referred to above in operational performance.

Dividend

The directors do not propose to pay an interim dividend (2007: nil).

Headcount

Average heads increased from 167 in the first half of 2007 to 172 in the first half of 2008 due to investment in manufacturing, logistics, engineering and sales.  Annualised sales decreased from £86,000 per head in the first half of 2007 to £70,000 per head in the first half of 2008, as explained above due to the exceptional nature of 2007 medical sales.  The annualised loss after tax for 2007 and 2008 reduced from £64,000 per head to £54,000 per head respectively.

Fixed Assets

Gross fixed assets grew by £0.1 million during the first half of 2008, an increase of 1% on the balance as at 31 December 2007.  This expenditure mainly related to the expansion of manufacturing capacity.  The Group's investment in fixed assets is now mostly related to further increases in capacity rather than the underlying capability.

Depreciation for the first half of 2008 was £0.4 million (2007: £0.3 million).  Accumulated depreciation at 30 June 2008 stands at 84% of the gross cost of the assets.

Working Capital

Net current assets, excluding cash, loans and short term investments (working capital), increased from £2.4 million at 31 December 2007 to £2.6 million at 30 June 2008.  Stock decreased by £0.5 million and the receivable debt relating to the R&D tax credit reduced by £0.2 million following payment received in the first quarter from HM Revenues & Customs. These decreases in working capital were more than offset by an increase in trade debtors of £0.4 million and a reduction in trade creditors of £0.6 million, the latter related to the stock reduction as improvements in working capital were being sought. Cash at 30 June 2008 was £5.7 million a reduction of £5.5 million since December 2007.  Outstanding loans and convertible loan notes both current and non-current, at 30 June 2008 were £1.0 million and £0.6 million respectively, having being reduced by repayments since December 2007 by £0.5 million and £0.4 million respectively.

David Holloway
Chief Financial Officer
11 September 2008

Condensed Consolidated Income statements
Six months ended 30 June 2008

Continuing operations

Condensed Consolidated Statement Of Recognised Income And Expense

Continuing Operations

Condensed consolidated balance sheet
Six months ended 30 June 2008

Condensed consolidated cash flow statement
Six months ended 30 June 2008

Notes

The notes to are available in the PDF download

Page last up-dated: 11 September 2008