RoodMicrotec N.V. — Interim / Quarterly Report 2017

Aug 3, 2017

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INTERIM REPORT 2017

RoodMicrotec saw a 19 percent increase in year-on-year sales for the first-half 2017 with positive EBITDA and EBIT. The net result improved significantly over 2016 and shows the progress in strategy change. The high quote portfolio and projected forward order income in the pipeline are expected to be the main drivers of expansion in coming months, following strong sales growth in the Supply Chain Management (SCM) and Test Engineering units. The strongest leading indicator, the consistently positive book-to-bill ratio, is maintained at a level higher than one. These main leading indicators support a continuing improvement in the net result.

Gross margin as % of net sales remained stable compared to 2016. We have continued to invest in new equipment to be able to follow the demands in the industry. These new investments are already translating into projects that are currently in the final industrial phase before being ramped up to production. Two of the major SCM projects within the Automotive and Healthcare sectors have also been moved into the production phase over the last months.

New and promising orders from the rapidly expanding Electric Automotive, Industrial and Healthcare sectors establish RoodMicrotec in pole position in their integration with the breakthrough market for the Internet of Things. We expect to strengthen this position further.

Summary HY1 2017

(x EUR 1,000)	Unaudited HY1 2017	Unaudited HY1 2016
Net Sales	5,832	4,919
Gross margin	4,817	4,159
Gross margin as % of net sales	83%	85%
EBITDA	534	95
EBITDA as % of net sales	9%	2%
EBIT	44	-429
EBIT as % of net sales	1%	-9%
Net result	-85	-541
Net result as % of net sales	-1%	-11%

Highlights HY1 2017

• RoodMicrotec signed a Supply Chain Management framework agreement with leading test equipment manufacturer Rohde & Schwarz
• RoodMicrotec in cooperation with ams and Fraunhofer IIS, announced a further expansion of its Foundry Ecosystem where these three partners now open an additional reliable and comprehensive path towards ASIC solutions by offering IC development, assembly, test and qualification services to OEMs (Original Equipment Manufacturers), system integrators and innovative start-ups.
• RoodMicrotec ramped up two major SCM projects in the Automotive and Healthcare sectors for production. The healthcare project was extended 15 years by the client.
• Strong sales in the Supply Chain Management and Test Engineering units in the first-half of 2017 have set a stable base for the company’s expansion in recurring businesses.
• The newest generation of testing equipment for high-grade more complex chips that we purchased last and this year, are already used for production quantities.
• The cash situation in the company is continuing to improve with no foreseeable need for additional cash to finance the future investments.
• The net result was € -85,000 in the first half of 2017 (HY1 2016: € -541,000).
• Our solvency ratio is at 30% (HY1 2016: 32%).

Martin Sallenhag, RoodMicrotec CEO:

“The significant improvement in the net result as well as a positive EBIT for the first half of 2017 show that we are on the right track to turn around the company. Strong performance in the Supply Chain Management and Test Engineering units in the first half shows that the base for future recurring business is in place. We have signed a number of very promising contracts with major players which will set the stage for the future of the company. I´m also very pleased with the fact that all business units are showing increases and this again shows that RoodMicrotec is a well-established player in the market.”

Financial Performance Indicators

(x EUR 1,000)	Unaudited HY1 2017	Unaudited HY1 2016	Change
Result
Net sales	5,832	4,919	913
Gross margin	4,817	4,159	658
EBITDA	534	95	439
EBIT	44	-429	473
Net result	-85	-541	456
Net cash flow	231	199	32
Operating cash flow	520	-103	623
Capital, debt & liquidity ratios
Total assets	15,070	14,814	256
Group equity	4,508	4,689	-181
Net debt	2,135	2,204	-69
Capital (net debt + group equity)	6,643	6,893	-250
Gearing ratio (net debt/capital)	32%	32%	0
Solvency (group equity/ liabilities)	30%	32%	-2%
Debt ratio (net debt / EBITDA)	4.0	23.2	-19.2
Net working capital	599	716	-117
Assets
Tangible and intangible fixed assets	7,915	7,743	172
Investment in (in)tangible fixed assets	721	1,357	-636
Depreciation of (in)tangible fixed assets	490	524	-34
Nominal shares issued	66,325	59,110	7,215
Data per share (x EUR 1)
Group equity	0.07	0.08	-0.01
EBIT	0.00	-0.01	0.01
Net cash flow	0.00	0.00	0.00
Net result	-0.00	-0.01	0.01
Number of FTEs (Permanent)
At end of month	93	90	3
Average	94	90	4
Sales/ Average FTEs (Permanent)	124	109	15

Report of the board of management

General

RoodMicrotec’s focus is on eXtended Supply Chain Management (SCM), offering ASIC turnkey solutions for the industrial and automotive markets, where it is vital to collaborate closely with design houses, suppliers, foundries, institutes, customers and other related parties. In this process, in which the partners are to some extent interdependent, RoodMicrotec’s SCM ensures the weakest link is as strong as possible - this is exactly what turnkey solutions are all about.

Our customer base consists of major industrial and automotive companies throughout Europe where the role of fabless (lacking fabrication capacity) design houses is growing rapidly. These companies help our clients realising their ideas with high reliability and in a short timeframe. RoodMicrotec brings together its clients with design houses, and assists in the physical realisation of their projects, which is why we actively build and maintain relationships with the major players in Europe and Asia.

Moreover, our relationships with suppliers and institutes are also paramount in realising turnkey projects. RoodMicrotec has excellent cooperation agreements with assembly houses and wafer foundries in Asia as well as in Europe, ensuring swift and high quality supplies for our business. Through institutes, we remain at the forefront of research and technology and have access to innovative resources and ideas in the realisation of turnkey projects.

By bringing together these key stakeholders, RoodMicrotec is in a unique position to offer eXtended SCM turnkey solutions to the Industrial and Automotive markets, ensuring a successful business venture for all partners involved.

The financing arrangement from 2016, which allowed us to do the necessary investments to be competitive in the market, has been finalized. No additional external financing is foreseen at the moment as the cash situation is good.

The increase in sales in all business units in the first half of 2017 over last year is a very positive signal that the company is well established in the market. Especially the strong increase in Supply Chain Management and Test Engineering shows that the big projects are moving forward towards production.

Developments by business unit (product /service group)

RoodMicrotec net sales HY1 2017 vs. HY1 2016

RoodMicrotec increased its half year sales by 19 percent year‐on‐year due to its good order situation at a maintained high book-to-bill ratio well above one. Especially the areas Supply Chain Management (SCM) and Test Engineering registered high economic growth rates. Within the markets, RoodMicrotec scored especially in the Automotive sector with an economic growth of 35 percent year-over-year and 15 percent growth in the Industrial sector.

(x EUR 1,000)	HY1 2017	HY1 2016	Change
Test Operations	1,767	1,702	+4%
Supply Chain Management	1,162	926	+25%
Failure & Technology Analysis	891	751	+19%
Test Engineering	435	230	+89%
Qualification & Reliability Investigation	1,577	1,310	+20%
Total	5,832	4,919	+19%

Personnel

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 is 94 FTEs and the sales per FTE continues to increase.

Risk management

The various risks the company is exposed to are listed in RoodMicrotec's 2016 annual report. We strive to limit the risks, inter alia by periodical and systematic risk reviews of selected aspects. These reviews are conducted approximately eight times every year. If 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 its risk in 2017.

We are ISO9001:2015 certified since April 2016 which is risk management focused.

NOTES TO THE FINANCIAL RESULTS

Sales and result

Sales in the first half of 2017 were € 5.8 million, which is € 0.9 million higher compared to the first half of 2016 (HY1 2016: € 4.9 million).

EBITDA was € 534,000 (HY1 2016: € 95,000). EBIT was € 44,000 (HY1 2016: € -429,000). Improvements of EBITDA and EBIT is mainly the result of a higher gross margin.

Net financing costs were € 129,000, slightly higher than in the first half of 2016, due to a new loan of € 750,000 which was concluded as per 31 March 2016.

Cash flow

In the first half of 2017, net cash flow from operating expenses was € 520,000 (HY1 2016: € -103,000). Cash flow from financing activities was € 432,000 consisting of proceeds from issuance of share capital of € 527,000 and repayment of borrowing of € 95,000. These cash flows were used to invest in machines (€631,000 million) and investments in development expenditure of € 90,000.

Events after balance sheet date

On 13 July 2017, 127,224 warrants Series III (exercise price: € 0.21) were exercised that resulted in an increase of 127,224 shares.

Outlook for 2017

The company’s financial outlook for 2017 remains in line with the company’s projections in the 2016 Annual Report.

Financial agenda

03 August 2017, 09:30 a.m.	Conference call for press and analysts – Interim Report
11 January 2018	Publication (preliminary) annual sales figures 2017
08 March 2018	Publication (preliminary) annual figures 2017
08 March 2018	Conference call for press and analysts
28 March 2018	Publication annual report 2017
17 May 2018	Annual general meeting of shareholders
18 May 2018	Annual bondholders meeting
05 July 2018	Publication sales figures first half 2018
02 August 2018	Publication interim report 2018
02 August 2018	Conference call for press and analysts

Forward-looking statements

This interim report contains a number of forward-looking statements. These statements are based on current expectations, estimates and prognoses of the board of management and on the information currently available to the company. The statements are subject to certain risks and uncertainties which are hard to evaluate, such as the general economic conditions, interest rates, exchange rates and amendments to statutory laws and regulations. The board of management of RoodMicrotec cannot guarantee that its expectations will materialise. Furthermore, RoodMicrotec does not accept any obligation to update the statements made in this interim report.

About RoodMicrotec

With more than 45 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 shop 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, industrial and electronics sectors.

Our integrated quality management system is based on international DIN EN ISO 9001:2015 standards. In addition, our quality management is broadly consistent with the Automotive Specification ISO/TS 16949. The company also has an accredited laboratory for test activities and qualification to the ISO/IEC 17025 standard.

Its value-added services include (eXtended) supply chain management and total manufacturing solutions with partners, failure & technology analysis, qualification & burn-in, test & product engineering, production test (including device programming and end-of-line service), ESD/ESDFOS assessment & training and quality & reliability consulting.

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

For more information visit http://www.roodmicrotec.com

Financial statements interim report 2017

				Page
1	Consolidated income statement			8
2	Consolidated statement of comprehensive income			8
3	Consolidated balance sheet			9
4	Statement of changes in equity			10
5	Consolidated cash flow statement			11
6	Notes to the consolidated financial statements			12
7	Statement from the board of management			14

1. Consolidated income statement

2. Consolidated statement of comprehensive income

	Net profit (loss)	-85		-541		-1,578
	Remeasurement of defined benefit obligations	–	–		-459
	Remeasurement of defined benefit obligations – DTL	–	–		126
	Comprehensive income	-85		-541		-1,911

3. Consolidated balance sheet

	(x EUR 1,000)		Unaudited HY1 2017	Unaudited HY1 2016	Audited 2016
	ASSETS
	Property, plant and equipment		5,433	5,451	5,283
	Intangible assets		2,482	2,292	2,401
	Deferred tax assets		1,151	1,016	1,151
	Financial assets		3,001	3,002	3,001
	Non-current assets		12,067	11,761	11,836
	Inventories		354	433	474
	Trade and other receivables		1,729	1,754	1,712
	Cash and cash equivalents		920	866	689
	Current assets		3,003	3,053	2,875
	TOTAL ASSETS		15,070	14,814	14,711
	EQUITY AND LIABILITIES
	Issued capital		7,296	6,503	6,979
	Share premium		19,882	19,401	19,659
	Revaluation reserve		1,763	1,822	1,763
	Retained earnings		-26,927	-25,531	-26,842
	Equity attributable to equity holders		2,014	2,195	1,559
	Non-controlling interests		2,494	2,494	2,494
	Total equity		4,508	4,689	4,053
	Loans and borrowings		2,867	2,995	3,004
	Retirement benefit obligation		5,215	4,721	5,247
	Provisions		76	72	72
	Non-current liabilities		8,158	7,788	8,323
	Loans and borrowings		188	75	113
	Trade and other payables		2,158	2,204	2,159
	Current tax liabilities		58	58	63
	Current liabilities		2,404	2,337	2,335
	TOTAL EQUITY AND LIABILITIES		15,070	14,814	14,711

4. Statement of changes in equity

	(x EUR 1,000)	Number of shares (x 1,000)	Share capital	Share premium	Re- valuation reserve	Retained earnings	Non- controlling interests	Total Equity
	Balance at 1 January 2016	54,411	5,986	19,009	1,822	-24,990	2,494	4,321
	Issuance of ordinary shares	4,699	517	392	–	–	–	909
	Earnings for the period *	–	–	–	–	-541	–	-541
	Balance at 30 June 2016	59,110	6,503	19,401	1,822	-25,531	2,494	4,689
	Balance at 1 July 2016
	Issuance of ordinary shares	4,331	476	245	–	–	–	721
	Earnings for the period	–	–	–	–	-1,037		-1,037
	Re-measurement of defined benefit obligation	–	–	–	–	-333	–	-333
	Depreciation of building	–	–	–	-59	59	–	-
	Value of employee options granted	–	–	13	–	–	–	13
	Balance at 31 December 2016	63,441	6,979	19,659	1,763	-26,842	2,494	4,053
	Balance at 1 January 2017	63,441	6,979	19,659	1,763	-26,842	2,494	4,053
	Issuance of ordinary shares	2,884	317	210	–	–	–	527
	Value of employee options granted			13				13
	Earnings for the period *	–	–	–	–	-85	–	-85
	Balance at 30 June 201 6	66,325	7,296	19,882	1,763	-26,927	2,494	4,508

At 30 June 2017 the authorised share capital comprised 80,000,000 ordinary shares (30 June 2016: 80,000,000). The shares have a nominal value of € 0.11 each. At 30 June 2017, 66,325,343 ordinary shares were in issue (30 June 2016: 59,109,788).

* In the half year figures, profits/losses have been accounted as if added to or deducted from the retained earnings. However, in accordance with a resolution of the AGM, the actual addition to or deduction from the retained earnings is made at year-end.

5. Consolidated cash flow statement

	(x EUR 1,000)	Unaudited HY1 2017	Unaudited HY1 2016	Audited 2016
	EBITDA	534	95	-310
	Adjustments for:
	- Share-based payments	-27	-143	-76
	- Change in retirement benefit obligation and assets	13	–	13
	- Accrued interest	-8	–	-28
	Changes in working capital:
	- Inventories	120	-154	-194
	- Trade and other receivables	-17	-95	-53
	- Trade and other payables	26	306	361
	Cash flow from operating activities	641	9	-287
	Interest paid	-121	-112	-165
	Income tax paid	–	–	–
	Net cash flow from operating activities	520	-103	-452
	Cash flow from investing activities
	Investments in property, plant and equipment	-631	-1,187	-1,590
	Disposals of property, plant and equipment	–	–	–
	Investments in intangible assets	-90	-170	-289
	Returns in financial assets	-	-	1
	Net cash flow from investing activities	-721	-1,357	-1,878
	Cash flow from financing activities
	Proceeds from issuance of share capital	527	909	1,629
	Proceeds from borrowings	–	750	723
	Repayment of borrowings	-95	–	–
	Net cash flow from financing activities	432	1,659	2,352
	Net cash flow	231	199	22
	Cash -/- bank overdrafts at beginning of period	689	667	667
	Cash -/- bank overdrafts at end of period	920	866	689
	Net cash flow	231	199	22

6. Notes to the consolidated interim financial statements

General information

RoodMicrotec N.V. is a public limited liability company with its registered office in Zwolle, the Netherlands and publicly listed on the Euronext Amsterdam Stock Exchange since 1986. The consolidated interim financial statements of the company for the period ended 30 June 2017 comprise the company and its subsidiaries (jointly referred to as the ‘Group’). The Group includes the wholly-owned subsidiaries RoodMicrotec GmbH (Nördlingen, Germany), RoodMicrotec Dresden GmbH (Dresden, Germany) and RoodMicrotec International B.V. (Zwolle, The Netherlands).

Summary of significant accounting policies

These consolidated interim 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 2016.

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 2016.

The consolidated interim financial statements and the reconciliations included in this report and its enclosures have not been audited nor been reviewed by the external auditors.

Changes in presentation

In the consolidated statements provisions are classified as non-current liabilities. Before this provisions were classified as trade and other payables. Reference is made to the notes to the consolidated financial statements on page 64 of the annual report 2016.

Consequently, the consolidated balance sheet as per 30 June 2016 has been adjusted to reflect these adjustments.

Segment reporting

The Group is active in one operating segment, due to the limited size of the company and the internal reporting structure. Sales are reported in various product/service groups. Every month a consolidated profit & loss statement is prepared, based on which an analysis and management report is communicated.

Financing arrangement

As per 30 June 2016, the company has a standby equity facility of maximum EUR 750,000 available. This facility consisted of 8 monthly tranches of EUR 93,750 and has been fully utilised.

Liquidity risk

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.

Statement of trade and other receivables

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:

(x EUR 1,000)	Unaudited HY1 2017	Unaudited HY1 2016	Audited 2016
Not overdue	1,164	1,094	1,140
< 30 days outstanding	51	155	291
30 – 60 days outstanding	43	49	22
> 60 days outstanding	211	154	106
Provisions bad debtors	-117	-99	-117
Trade account receivables	1,352	1,353	1,442
Other receivables	377	401	270
Total	1,729	1,754	1,712

Net sales of HY1 2017 compared to HY1 2016

(x EUR 1,000)	Unaudited HY1 2017	Unaudited HY1 2016	Audited 2016
Test Operations	1,767	1,702	3,727
Supply Chain Management	1,162	926	2,077
Failure & Technology Analysis	891	751	1,494
Test Engineering	435	230	471
Qualification & Reliability Investigations	1,577	1.310	2,696
Total	5,832	4,919	10,465

7. Statement from the Board of Management

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 RoodMicrotec 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 2017 of RoodMicrotec N.V. and the group companies for which the financial information is recognised in its financial statements. Otherwise the risks are not expected to change materially in the second half of 2017.

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, 03 August 2017

Board of Management

Martin Sallenhag, Chief Executive Officer

Reinhard Pusch, Chief Operating Officer

Arvid Ladega, Chief Financial Officer

This report is published in English only.