Elettronica
RoodMicrotec - INTERIM REPORT 2015
Zwolle, Thursday 27 August 2015
Our strategy aims to realise increasing amounts of recurring sales by means of Extended Supply Chain Management. This is different from before, when Rood Microtec was far more focused on offering individual services that were unconnected and tended to be one-off projects. Now, we are increasingly offering integrated services in the form of a complete product for the entire lifetime of the product/chip. This leads to longer-term projects with more stable, more predictable and less cyclic sales. However, these projects have longer lead times, because we first perform engineering work and make investments before we start generating significant sales. This means that the anticipated sales growth will materialise up to the second quarter of 2016.
Our new strategy involves that we co-invest in new promising projects and also invest in additional sales capacity, the latter mainly in order to compensate for the decline in sales with our 'traditional' product portfolio. By co-investing in promising projects, we aim to try to break through the continuing lending restraint in the financial markets, which often frustrates our customers in their development, many of which are Fabless Companies (FCs) or design houses. With our approach, we aim both to boost the development of FCs/design houses and also increase our sales and our position in this market segment.
The successful issue of bonds with mortgage cover and the strengthening of our equity have had a very positive impact on our balance sheet ratios and on our financial position in general. This improved position enables us to contribute more actively to the development of new products, generating recurring sales.
In the first half year (as in 2014) we have made significant investments in projects that offer attractive future perspectives. These investments resulted into the big 10-year order of EUR 25 million as published in the press release of 2 July 2015.
Of the more than 20 interesting new projects, currently over seven projects are highly promising. We expect these projects will result in a major boost of our sales over the next few years.
The strategy change mentioned above has obviously impacted the organisation, leading to a different composition and management of our staff.
The number of permanent employees decreased to 91 FTEs, a decrease of approximately 6% compared to June 2014 (97 FTEs).
High on the agenda for this year and the next few years is intensifying communication with our shareholders and bondholders. This is partly in view of our bond loan issue in June 2014 which has significantly raised the number of stakeholders in Rood Microtec. In this context, we organised the first bondholders meeting on 21 August 2015. We invited our shareholders, bondholders, analysts and journalists for a visit to our facilities in Germany on 25 August 2015.
The various risks the company is exposed to are listed in Rood Microtec's 2014 annual report. We strive to limit the risks, inter alia by periodical and systematic risk reviews of selected aspects. These reviews are conducted approx. 8 times every year. Where necessary, corrective measures are taken. In view of the negative developments in the financial markets, the management is devoting additional attention to cash management. Otherwise, the management does not currently foresee any material changes in the risks in 2015.
Sales in the first half of 2015 were EUR 4.912 million, an increase of 3% compared to the first half of 2014 (HY1 2014: EUR 4.770 million).
EBITDA was EUR -0.033 million (HY1 2014: EUR -0.112 million), or -1% of sales.
EBIT was EUR -0.404 million (HY1 2014 EUR -0.526 million), which equates to -8% of sales.
Net financing costs were EUR 0.093 million, a 40% increase on the first half of 2014. This mainly comprises the interest on the bond loan.
In the first half year of 2015, the cash flow realised from operating activities was EUR-537,000 (HY1 2014: EUR 551,000).
On 2 July 2015 Rood Microtec concluded a share issue agreement for 5 years. In which Rood Microtec has the option to issue shares of EUR 2.0 million in total. Share issues will executed in monthly trenches of between EUR 100,000 - 200,000.
The costs invoiced by Grant Thornton exceed the estimated costs of approximately EUR 64k as agreed in the engagement letters (signed in November and December 2014) by about EUR 200,000, totalling approximately EUR 264K. To date, Rood Microtec has paid an amount of EUR 142K and denies any further liability for audit costs relating to the financial year 2014. Accordingly, it has not made any provisions in this respect.
The Supervisory Board has the intention of appointing Baker Tilly Berk as company auditor for the 2015 financial year. The Supervisory Board was authorised to appoint the auditor by the Annual General Meeting of 25 April 2013.
In view of the high hitrate, the rising quote portfolio and new orders booked, Rood Microtec now expects to realise at least clear sales growth in the second half of 2015 and significant sales growth in 2016 and beyond.
We have reached the invoicing stage of a start-up or are already investing in the preparation phase of over 50% of new projects. These relate to our core segments Automotive (50%) and Industrial/Medical (30%), but also high-end consumer business (20%). Automotive and Industrial/Medical are fast growing market segments.
There is now strong ground for maintaining our previously stated long-term objective of annual autonomous growth of between 3% and 13% at an average growth of the semiconductor market of 6% and thus improve the operating result and the net result.
With more than 40 years ' experience as an independent value-added service provider in the area of micro and optoelectronics, Rood Microtec offers Fabless Companies, OEMs and other companies a one-stop shop proposition. With its Rood Microtec has built up a strong position in Europe.
Our services comply with the industrial and quality requirements of the high reliability/space, automotive, telecommunications, medical, IT and electronics sectors.
concerns inter alia certification of products to the stringent ISO/TS 16949 standard that applies to suppliers to the automotive industry. The company also has an accredited laboratory for test activities and calibration to the ISO/IEC 17025 standard.
Its value-added services include failure & technology analysis, qualification & burn-in, test & product engineering, production test (including device programming and end-of-line service), ESD/ESDFOS assessment & training, quality & reliability consulting, supply chain management and total manufacturing solutions with partners.
Rood Microtec has branches in Germany (Dresden, Nördlingen, Stuttgart), United Kingdom (Bath) and the Netherlands (Zwolle).
Philip Nijenhuis, CEO Telephone: +31 38 4215216
Postal address:
Rood Microtec N.V., PO Box 1042, 8001 BA Zwolle
Email: investor-relations@roodmicrotec.com
Website: www.roodmicrotec.com
Rood Microtec N.V. is a company with its registered office in Zwolle, the Netherlands. The consolidated interim financial statements of the company for the period ended 30 June 2015 comprise the company and its subsidiaries (jointly referred to as the 'Group'). The Group includes the wholly-owned subsidiaries Rood Microtec GmbH (Nördlingen, Germany), Rood Microtec Dresden GmbH (Dresden, Germany) and Rood Microtec International B.V. (Zwolle, The Netherlands).
These consolidated financial statements have been prepared in accordance with IAS 34 (interim financial reporting). They do not include all the information required for full annual financial statements, and should therefore be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2014.
The accounting policies applied in these consolidated interim financial statements are the same as those applied in its consolidated financial statements as at and for the year ended
31 December 2014.
The consolidated interim financial statements and the reconciliations included in this report and its enclosures have not been audited by the external auditors.
As of December 31, 2013, the Group applied for the first time IAS 19 revision that required restatement of its previous financial statements.
The Group operates in one business segment. Sales are reported in various product/service groups, and sales are fundamental to Rood Microtec's decision-making. A consolidated income statement is prepared every month based on which an analysis and a management report are communicated. If necessary, specific consolidated reports are prepared ad-hoc per product/service group; these are not part of the internal management reports.
The activities are exposed to a variety of financial risks: market risks (including currency risk and interest rate risk), credit risks and liquidity risks. The overall risk management programme focuses on the unpredictability of markets (debtor management) and tries to minimise potential adverse effects on the Group's financial performance by intensifying cash management. Derivative financial instruments are used to a limited extent. These financial instruments include US dollar hedges and interest swaps.
This note provides information about the contractual terms of the interest-bearing loans and borrowings.
On June 30, 2014, the Group issued EUR 2,500,000 bond loan with mortgage cover. The bond loan is composed of 2,500 bonds with EUR 1,000 nominal value at an issue price of 94% payable in six years. The annual coupon rate is 6% and the effective interest rate is 7.44%. The bondholders will receive 1,000 warrants per bond on Rood Microtec's shares, amounting to EUR 0. 13 per warrant. These warrants are valid for 14 months from 1 November 2014 up to and including 31 December 2015.
The nominal interest rate of the bond loan is 6%. The fair values of the finance lease do not materially differ from the book value. The interest rates of the interest-bearing loans and borrowings are fixed during the term of the contracts.
As of 30 June 2015, the bond loans are secured by a mortgage amounting to EUR 2,500,000 on land and buildings. As of 30 June 2015, there are no guarantees or security issued to banks or credit institutions.
All of the Group's long-term borrowings have a fixed interest rate. Generally, the Group raises new long-term borrowings at fixed rates.
The average interest rates are as follows:
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate credit facility. Management monitors rolling forecasts of the Group's liquidity reserve and cash and cash equivalents. Furthermore, liquidity planning is one of the major elements in the Group's budget cycle. Due to company's working capital ratio and market conditions, management has tight monitoring procedures in place regarding direct cash flows. Both the cash position and sales forecasts are frequently reviewed.
Within the Group's customer portfolio, the Group is exposed to credit risk and currency risk. The management has set up credit control policies to reduce the credit risk and foreign exchange risk as much as possible. The foreign exchange risk is mitigated by exchange rate clauses in most of the Group's contracts. The average credit rating of the Group's customers is comparable to the industry.
The table below shows the Group's outstanding trade receivables positions:
Due to the Group's international activities, currency risks cannot be excluded. However, the value of the customer orders that are concluded in other currencies than euros are negligible.
This statement is based on Article 5:25c, paragraph 2C of the Financial Supervision Act. The statements following this law are obliged as a ruling for the interim financial statements.
Our opinion of the interim financial statements is that it gives a true and fair view of the assets, liabilities, financial position and the result of Rood Microtec N.V. and the companies included in the consolidation.
The interim financial statements gives a true and fair view of the situation on balance sheet date and the developments during the first half year of 2015 of Rood Microtec N.V. and the group companies for which the financial information is recognised in its financial statements. Due to the negative developments in the financial markets, the board of management is devoting extra attention on cash management. Otherwise the risks are not expected to change materially in the second half of 2015.
The members of the board of management have signed the annual report and financial statements in fulfilment of their legal obligations on the grounds of Article 5:25c, paragraph 2C of the Financial Supervision Act.
Zwolle, 27 August 2015
Board of management
Philip M.G. Nijenhuis, Chief Executive Officer
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