ROODMICROTEC : EBITDA recovery to 9% and debt position reduced

Zwolle - 27 February 2014

2013 HIGHLIGHTS

Commercial/operational

• Strengthened our position in outsourcing (Atlas project).
   
• Secured an outsourcing contract from a Siemens AG, Drive Technologies Division company in Germany, including takeover of equipment; issued shares and warrants.
   
• Strengthened our Supply Chain Management organisation with additional engineers.
   
• Strengthened our position in the United Kingdom.
   
• Optimised our critical installed equipment base.
   
• Increased number of applications and orders in SCM.
   
• Organised highly successful seminars.
   
• Extended mechanical qualification with new test equipment.
   
• Integration of EIB (Elektrostatik Institut Berlin) in Failure & Technology Analysis.

Financials

• Sales in 2013 of EUR 11.2 million fell by 7 % compared to 2012 (EUR 12.0 million).
   
• Net-debt position decreased by 41% to EUR 1.6 million (2012: 2.7 million)
   
• EBITDA: EUR 1.0 million, or 9% of sales (2012: EUR 0.7 million)*.
   
• EBIT (operating result) EUR 0.1 million, or 1% of sales (2012: EUR 0.2 million negative)*.
   
• Net income: EUR 0.2 million negative (2012: nil)*.
   
• Solvency increased to 45%.

* Adjusted for comparative purposes in connection with change in accounting rules for pensions (IAS 19R, see note at the end of the announcement).

Key figures
(EUR x1,000 unless stated otherwise)

* Adjusted for comparative purposes in connection with change in accounting rules for pensions (IAS 19R, see note at the end of the announcement).

Sales and result

In 2013, RoodMicrotec's sales decreased compared to 2012.
Net sales are presented below, broken down by customer category/sector (market segment).

The decrease in the automotive market was mainly due to the loss of testing products for an IDM. These products had reached the end of their life cycle. This caused the results in this sector to fall temporarily in 2013, but the outlook for the sector remains positive. The industrial/medical en hi-rel/space markets increased in 2013 as expected. We will continue to focus on the more complex chip markets, such as automotive, industrial/medical and hi-rel/space and telecommunication.

The sales results of the business units were as follows:

In 2013 we were hit hard by cutbacks among a number of our customers. This impacted Failure & Technology Analysis in particular. Both Test Engineering and Qualification & Reliability are strongly dependent on new product development. Many projects were postponed due to financing problems, which had a major negative impact on these two business units mentioned.

Sales by market segment in the second half of 2013 vs. first half of 2013

The recovery in the second half of 2013 was driven by both the industrial/medical and the automotive market segments. The increase in the automotive market was caused mainly by the increasing prevalence of electronics in cars, while the car production output as far as relevant for us did not show any increase.

Sales by business unit in the second half of 2013 vs. first half of 2013

** The half-year figures have not been audited.

Developments
Expectations for 2013 were high, as many forecasts had predicted strong growth. But over time sales growth proved disappointing. Forecasts were adjusted downwards in the course of the year due to uncertainty in the market, especially in the financial market. This resulted in a mixed picture. The number of applications remained high and even increased, but actual order placement was often elusive. Also, projects were frequently postponed. Normally, postponed contracts tend to be offset by new opportunities, but this was less the case in 2013. In total, projects representing over EUR 2 million in sales were postponed.

In 2013 we succeeded in scaling back our debt position significantly, which strongly reduced our dependence on banks. In 2014, too, our focus will be on strengthening our financial position.

We improved our focus on the British, Israeli and Indian markets. The number of applications both for (eXtended) Supply Chain Management and for individual services rose significantly. Our presence in the United Kingdom was also strengthened by our prominent role in the NMI (National Microelectronics Institute).

The seminars we organised were very successful: applications stretched capacity. Our sector clearly craves a platform to exchange views on cutting-edge technology.

Trends 2013
Outsourcing
Medium-sized companies are increasingly working together in order to raise their joint services to a higher level so as to best combat competition from Asian countries. OEMs who still develop ASICs or other chips in-house will increasingly outsource this work to independent service providers like RoodMicrotec.
This outsourcing trend is expected to continue. Partly due to its infrastructure, RoodMicrotec is in an excellent position to profit from this optimally. We are highly experienced in a wide range of services, such as test engineering, failure & technology analysis and qualification & reliability. With shock proofing, thermal load and electrostatic discharge tests, we are uniquely able to investigate whether products will function under all conditions and predict their expected life. Another benefit is that we as an independent service provider are never in competition with the IP (intellectual property) of other companies, in fact we can protect our customers' IP.

Major projects outsourced to RoodMicrotec are grouped in project 'Atlas'. In the second half of 2013 we secured a first major order from an OEM, followed by outsourcing of activities to RoodMicrotec, including the takeover of a complete test cell, by a Siemens AG, Drive Technologies Division company in Germany. This creates a win-win situation for both parties. By transferring ASIC development and production to us, OEMs can focus on their core activities: application and sales of mechanical and electrotechnical products. For OEMs, outsourcing also means considerable cost savings, quality improvements and shorter time-to-market. The projects outsourced to us will run several years, providing us with a solid base and predictable sales.
Equipment taken over from this OEM can also be used for other customers in the RF market, which will further boost sales.

Co-financing
Due to the lending restraint mentioned earlier, healthy Fabless Companies (FCs) with proven track records are held back in their development.
In order to force a breakthrough, RoodMicrotec has set up schemes with partners to facilitate raising financing for healthy projects, in particular for FCs. With this approach, RoodMicrotec aims to boost the development of FCs and also to improve its sales and market position.

Personnel and organisation
The average number of full-time employees (FTE) decreased by approx. 4% from 103 FTE in 2012 to 99 FTE in 2013.
Sales per full-time employee decreased by approx. 3% from EUR 116,000 in 2012 to EUR 113,000 in 2013. Our policy is to continue to strive for growth of sales per FTE.

'Looking back, 2013 was a challenging year, but by responding to the trends described above and our strong focus on OEMs and Fabless Companies RoodMicrotec's position has by fundamentally improved. This is reflected in our average growth of 17.5% in these sectors over the past eight years. Partly due to our new Agilent/Verigy 93000 platform, we expect our sales to get additional momentum,' said Philip Nijenhuis, RoodMicrotec CEO.

Mission and strategy
We have set ourselves the following mission:

·          to position our company as the party of choice that offers OEMs and FCs solutions to operate successfully in their market; to position our company as the party of choice to support OEMs in their outsourcing strategies with our (eXtended) SCM and/or individual service provision;

§   to position ourselves as a first-class one-stop-shop supply chain service provider to OEMs and FCs;

§   to offer the highest quality individual Qualification & Reliability, Failure & Technology Analysis, Test Engineering, Supply Chain Management and Test & End-of-Line services;

§   to develop into a major player in the semiconductor supply chain from Asia (China) to Europe (and vice versa);

§   to develop into a major player in the electronics services market from wafer to board;

§   to position ourselves as a leading innovative testhouse in Europe.

Strategic analysis
Characterisation of our market
The semiconductor industry can be characterised as follows:

• continuous high market growth: average annual growth of 9.1% over the past 40 year;
• rapid technological innovation;
• capital intensive, to support this growth and technological innovation.

Strategy
The semiconductor market fell in 2009, then recovered in the second half of 2010 and the first half of 2011, but slumped again in 2012. The long-term trend remains very positive, with an average annual growth of approximately 6% since 2000. The market is expected to see strong growth of between 3% and 6% over the next few years. We will continue to focus on the fastest growing segments within the semiconductor market in order to grow at least at the same rate as the market as a whole.       

OEMs are becoming ever leaner. To achieve their goal, they contract out non-core activities, including semiconductor manufacturing facilities. It is vital for OEMs to have a supply of reliable highly qualified chips. Production continuity is of the essence. But they also often require tailored solutions. We are one of the very few players qualified to provide these solutions in collaboration with our partners. Protection of specific features of these products may play an important role in this.
FCs are even more motivated than the other categories to protect their know-how. IP protection is their priority. As a service provider, we are never in competition with FCs, so their IP is maximally protected.
Also, FCs have shown double digit growth over the past few years. There are between 300 and 400 of these FCs in Europe, many of which are active in the more complex mixed-signal chips.

In short:

1. expanding our sales force;
2. strengthening and expanding engineering capacity;
3. strengthening the internal organisation;
4. strengthening our position in the market by organising seminars on qualification, failure analysis and engineering and possibly on outsourcing;
5. acquisition and/or partnering.

Outlook for 2014
After disappointing market developments in the first half of 2013, but a recovery later in the second half of the year, especially in the USA, the global market is expected to grow by 4.1% in 2014 and 3.4% in 2015, according to forecasts from the World Semiconductor Trade Statistics (WSTS). However, these figures are still below the multi-year average since 2000 of 6%. Analogous to the forecasts of the WSTS for 2014 and beyond, RoodMicrotec anticipates a recovery of its operating result and the realisation of its growth objectives. We aim, as we did before the crisis, to grow at least at a faster rate than the global market.
The record number of applications confirms our confidence that in 2014 RoodMicrotec's growth can exceed the total market growth in 2014. However, in view of the delicate macro-economic recovery, we remain cautious and refrain from making concrete predictions for 2014.

Financial agenda

About RoodMicrotec
With 40 years' experience as an independent value-added service provider in the area of micro and optoelectronics, RoodMicrotec offers fabless companies, OEMs and other companies a one-stop shopping proposition. With its powerful solutions RoodMicrotec 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.

'Certified by RoodMicrotec' concerns inter alia testing 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.

The value-added services comprise inter alia (eXtended) supply chain management, 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 and total manufacturing solutions with partners.

RoodMicrotec has branches in Germany (Dresden, Nördlingen, Stuttgart), the UK (Bath) and the Netherlands (Zwolle).

Further information:
Philip Nijenhuis, CEO
Telephone              +31 (0) 38 4215216
E-mail:                  investor-relations@roodmicrotec.com:
mailto:investor-relations@roodmicrotec.com
Website:                www.roodmicrotec.com:
http://www.roodmicrotec.com

Consolidated statement of profit or loss

Consolidated statement of other comprehensive income

* Certain amounts shown here do not correspond to the 2012 financial statements and reflect adjustments made due to IAS 19R, see note at the end of the announcement

Consolidated statement of financial position (after appropriation of net result)

* Certain amounts shown here do not correspond to the 2012 financial statements and reflect adjustments made due to IAS 19R, see note at the end of the announcement

Accounting policies used in the preparation of the annual accounts
The accounting policies for financial reporting which RoodMicrotec has applied in this report, are identical to the policies used in the consolidated annual accounts for the 2012 financial year, except those resulting from changes to IAS 19R, Personnel Benefits, as also stated in the 2012 annual report. This has caused the pension costs in respect of defined benefit plans in the comparative figures for 2012 (relative to the reported figures for 2012) to increase by EUR 0.9 million. After deducting tax, the annual effect for 2012 was EUR 0.8 million. This additional charge reduces the total result for 2012.