Andor Peliminary Results

Posted in Andor Technology Plc

Andor Technology Plc – Preliminary Results for Year Ended 30th September 2006

Andor Technology plc (AND.L) one of the world’s leading developers and manufacturers of high performance digital cameras, today announces preliminaryresults for the year ended 30 September 2006. Investment delivers improved financial performance

Financial Highlights

  • Turnover up 22% to a record £19.2m (2005: £15.7m)
  • EBITDA increased 57% to £2.0m (2005: £1.3m)
  • EBITDA margin rose to 11% (2005: 8%)
  • Operating profit up 85% to £1.45m (2005: £0.78m
  • Operating margin rose to 7.5% (2005: 5.0%)
  • Diluted earnings per share up 79% to a record 6.30p (2005: 3.51p)
  • Healthy order book with over £4m in pipeline
  • Positive free cash flow of £0.26m (2005: negative flow of £3.4m)
  • Operational Highlights
  • Successful launch of new mid range low light products, Luca and Shamrock 163i
  • Significant investment in sales and distribution infrastructure across all regions, including:
  • Launched first global sales catalogue to over 18,000 customers
  • Opened first representative office in Beijing, China
  • Camera manufacturing volumes increased 24%, delivering over 1,500 units (2005: 1,200)
  • Average lead time fell to 15 days (2005: 45 days)
  • Production costs dropped to 7.6% of sales (2005: 9.6%)
  • Recommended for OHSAS 18001 compliance, demonstrates group’s quality assurance and best practice
  • Scored 88.4% with overall customer satisfaction in biennial global customer survey

Commenting on the results Executive Chairman, Bryan Keating, said:
“These results demonstrate that Andor Technology is benefiting from thesignificant investment made by the Company over the last year. With thefoundations now in place, combined with our expanded product offering and focuson sales and distribution, this should enable Andor to generate further profitgrowth both organically and via acquisition and deliver enhanced share holdervalue. We are satisfied with trading since the start of the new financial year and withorders worth over £4m in the pipeline we look to the future with confidence.”

For further information, please contact:
Andor Technology plc
Tel. +44 (0) 28 9023 7126

Bryan Keating,Executive Chairman

Conor Walsh,Finance Director
Smithfield Consultants
Tel. +44 (0) 20 7360 4900

George Hudson
Anne Howalt

Notes to Editors:
Andor Technology is one of the world’s leading developers and the fastest growing manufacturer of high performance light measuring solutions (digitalcameras). Andor was established in 1989 as a spin out from Queen’s University Belfast and was listed on AIM in December 2004. Products are sold to three target markets: Scientific Research, Space & Security and Instrumentation / OEM.
Andor’s mission is to develop the best solutions to light measuring problems andit is at the forefront of innovation, pioneering the following ground breakingb technologies:
• Non controller based Scientific Cameras
• Permanent Vacuum Sealed Cameras
• Fully integrated ICCD (Intensified Charged Coupled Device)
• EMCCD (Electron Multiplying Charged Coupled Device) Andor Technology has over 18,000 customers in 40 countries worldwide.
For further information, visit: www.andor.com

Chairman’s Statement
Financial Overview
In 2005, Andor Technology took the strategic decision to invest in the foundations for future growthThe investment covered all areas of the businessand was primarily focused on establishing the new head quarters building in Belfast. As a result, the company has seen significant improvements in both its operational performance and its sales, marketing, research and development capacity. Moreover, as is evidenced in these record financial results, the Board firmly believes that the company now has the ability to deliver sustained growth and long term shareholder value.
I am pleased to be able to report another year of record sales, up 22% to £19.2m(2005: £15.7m). This achievement is particularly satisfying as it represents our ninth consecutive year of continual growth which has also been delivered against a backdrop of great change for the company and its employees. The performance isa clear testament to the skill, dedication and determination of Andor’s staff.
Operating profit rose 85% to £1.45m (2005: £0.78m) and EBITDA margin increased to 11% up from 8%. Diluted earnings per share was a record 6.30p, up 79% year-on-year (2005: 3.51p). The profit for the year was impacted by exceptional earnings, largely accounted by the successful disposal of Avalon Instruments to Perkin Elmer Corporation. The underlying earnings per share (pre-exceptionals) increased 75% to 5.08p (2005: 2.90p). It is pleasing to note that the company generated positive free cash flow of £0.26m (2005: negative free cash flow of£3.4m) which has reduced net debt to zero.
Operational Overview
The group made substantial progress during the year, including:
• Launch of important new mid range low light products: ‘Luca’, the world’s first interline EMCCD imaging camera, the ‘Shamrock 163i’, an imaging spectrograph system and the ‘Ixon+’ which is used in high-end markets.
• Enhanced our market brand and distribution capability with the launch of a new product catalogue which has been distributed to over 18,000 customers worldwide.
• Significant investment in sales infrastructure across all regions, including the recent opening of a new representative office in Beijing, China.

• Major production improvements including bringing average lead times down to 15 days from 45 days in 2005.

Ensured we are at the leading edge for Quality, Environmental, Health and Safety practice with recommendation for OHSAS 18001 compliance.• We continue to develop our research and development scope and capability and have initiated a research program with Queens University, Belfast to develop new vacuum processing technologies for sensors. The program is being supported by the local development organisation Invest Northern Ireland to the value of £0.68m.

Over the last financial year, Andor Technology achieved sales growth in each of its core markets and continues to identify and exploit new opportunities.
Scientific Research
Andor continued to experience robust growth in the Scientific Research sector, with sales up by an impressive 33% over the year, which accounts for nearly 73%of total sales. Sales growth in the Confocal Microscopy and Spectroscopy niches were particularly pleasing. With the launch of the new mid range products, we expect further strong demand from this key market.
There is no better validation of our products than by our customers, and we were delighted to hear of our cameras being used by a consortium of 8 European astronomical institutions including Cambridge University, the Instituto de Astrofisica de Canarias, the Isaac Newton Group of telescopes, Keele University,Leicester University, the Open University, Queen’s University Belfast and St. Andrew’s University who discovered two new Jupiter sized planets around stars inthe constellations of Andromeda and Delphinus in September of this year (www.superwasp.org).

Instrumentation / OEM
Despite tough market conditions with customers seeking to reduce their inventory exposure levels and achieve cost reductions, we managed to maintain our sales momentum in the key Instrumentation / OEM sector. Sales increased 2.2% to £5.1m,representing 26% of total turnover. In response to customer demands, we are increasingly modifying our products to match their exacting requirements. The launch of products in the mid range is expected to help drive growth in the sector.

Space & Security
This is a new and exciting sector for Andor and sales into this market using prototype instruments designed to detect toxic substances are expected to commence in the second half of 2007. In addition, we have developed Surcam, a prototype surveillance camera which is the world’s first colour EMCCD low light camera and initial sales of this product have been encouraging.

The Board
The Board of Andor has continued with the same strength and depth as last year although there has been a change in the executive team with Hugh Cormican moving from Managing Director to Director of Strategic Development. As a result, in the interim period I have been acting as Executive Chairman. The Board is currently engaged in a very thorough process of selecting a new CEO and expects to announce the appointment in early 2007.

Outlook
We are satisfied with trading since the start of the new financial year and the company has over £4m worth of orders in the customer pipeline. We are focused on maintaining our impressive track record of growth and profitability via organic development and strategic acquisitions. The Board’s commitment to customer focus, innovation and teamwork should ensure that Andor Technology continues to deliver long term shareholder value.
Dr Bryan Keating
Executive Chairman
4 December 2006

Financial Review
Turnover grew by 22% to £19.2m (2005: £15.7m), with increases achieved in each of our three reporting regions. The US is now our largest single market with sales increasing by 31% to £8.0m, Europe increased by 15% to £7.5m and Asia Pacific increased by 21% to £3.7m.

Full year gross margins remained constant at 50.8%. External factors such asadverse exchange rate movements and competitive forces in the market were off set by the benefits of increased productivity. The investment in infrastructure and production processes has resulted in production costs falling from 9.6% of sales in 2005 to 7.6% of sales in 2006.

Operating expenses grew by 16% to £8.3m. We continue to invest in research and development with total costs increasing by 13% to £2.0m. Most of this spend is eligible for UK research and development tax relief resulting in a reduction of approximately £0.3m in the UK corporation tax charge for the year.
EBITDA increased by 57% to £2.0m from £1.3m in 2005. EBITDA margin is now 11% compared with 8% in 2005. The investment in facilities meant the depreciation charge significantly increased in 2005 from £0.2m to £0.5m and there has been a further modest increase to £0.6m in 2006. Operating profit for the year was £1.4m, up 85% on the previous year and operating margins are now 7.5% up from 5.0% in 2005.

In September 2006, we completed the sale of a minority holding in Avalon Instruments Limited to Perkin Elmer Inc. for £0.4m. This generated a profit ondisposal of £0.3m and cash of £0.3m with a further £0.1m held in escrow for aperiod of 18 months. After recording this sale, profit on ordinary activities before tax was £1.7m, up from £0.8m in 2005.

Andor has a taxation credit for the period of £0.04m (2004: credit £0.08m). This is mainly due to the investment in research and development, which attracts relief of up to 150% of allowable expenditure, and share options exercised in the period which are also available for relief on the difference between the option price and the market value on the date of exercise. In addition, the exceptional profit on the sale of investments is also non-taxable as the company satisfies the criteria for substantial shareholdings exemption.

Diluted earnings per share increased by 79% to 6.30 pence, up from 3.51 pence in 2005. Pre-exceptional diluted EPS rose 75% to 5.08 pence, up from 2.90 pence.

Dividends
In light of the opportunities which are open for the company to invest in, the directors do not recommend that a dividend on ordinary shares be declared for the year ended 30 September 2006.

Balance sheet
On 30 September 2006 net debt was zero (2005: £0.4m). We had cash at bank and in hand of £2.5m and long term borrowings of £2.5m. In addition, we had available facilities of £1.5m secured against debtor balances. Fixed assets reduced from £6.9m to £6.5m due to the excess depreciation over capital expenditure, amortisation of goodwill and the disposal of the investment. Following the investment in facilities in 2005 capital expenditure fell to £0.3m in 2006(2005: £4.0m).

Cash flow from operating activities increased by £0.3m to £0.4m. Stock grew by £1.3m to £4.6m, of which £1.4m was demonstration stock. The largest growth was in finished goods stock of certain items held to deliver short lead times on key products. Debtors days at 30 September 2006 were 48 days (2005: 47 days). The net cash inflow before financing was £0.3m up £3.6m on 2005. The net cash impact of financing during the year was zero with debt repayment being largely off set by cash inflows from the exercise of share options resulting in a total increase in cash of £0.3m.

Treasury policies
The company’s treasury policies are designed to manage financial risks that arise from operating in a number of foreign currencies and to maximize interest income on cash deposits. The global nature of Andor’s business means that we are exposed to fluctuations in exchange rates on trading transactions and on the translation of foreign currency denominated net assets. The company’s policy is firstly to maximise the source of product supplies in these currencies and then to hedge the balance of foreign currency inflows using forward contracts. All Sterling and foreign currency balances not immediately required for company operations are placed on short-term deposit with leading international highly rated financial institutions.