Quarterly Report • Aug 1, 2019
Quarterly Report
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Martin Sallenhag, CEO Arvid Ladega, CFO
RoodMicrotec N.V. Zutphenseweg 29 D1 NL‐7418 AH Deventer
RoodMicrotec reports a positive net result of EUR 5,000 for the first half of 2019 with a gross profit margin that is maintained at a consistent high level of 79%. Due to a softer market, geopolitical uncertainties and drops in demand of production burn‐in, the total sales decreased by 7% to EUR 6.4 million compared to the first half of 2018. The second quarter showed a revenue increase of 12% compared to the first quarter. Significant growth in Supply Chain Management (SCM) partially compensated the decline in Qualifications & Failure Analyses. Within the end application markets, RoodMicrotec raised its sales in the industrial sector by 5%, whereas the automotive sector decreased by 17%. The strongest leading indicator, the book‐to‐bill ratio, is maintained at a level higher than one. These main leading indicators support a continuing improvement in the net result.
RoodMicrotec has continued to invest in new equipment, such as the automated optical inspection (AOI) system for wafer inspection to detect failures and damages of incoming wafers and to ensure the quality of outgoing wafers. The company will continue to invest and thus meet the demand of the industry in general and the automotive industry in particular.
Personnel expenses are maintained at the same level as last year, even though we are in the development phase for new SCM projects. This requires additional resources in test engineering, but thanks to the flexible setup of the company, personnel expenses in other areas could be adjusted. The operating expenses (without one‐time costs) are also well under control, with reduction compared to 2018. Depreciation and financial costs are in line with the first half of 2018.
| Unaudited | Unaudited | |
|---|---|---|
| (x EUR 1,000) | HY1 2019 | HY1 2018 |
| Net Sales | 6,393 | 6,843 |
| Gross profit | 5,049 | 5,686 |
| Gross profit margin of net sales | 79% | 83% |
| EBITDA | 807 | 913 |
| EBITDA in % of net sales | 13% | 13% |
| EBIT | 108 | 398 |
| EBIT in % of net sales | 2% | 6% |
| Net result | 5 | 276 |
| Net result in % of net sales | 0% | 4% |
"We are pleased with our performance so far and proud to report a positive net result for the first half of 2019, even though the market situation is challenging. This demonstrates that RoodMicrotec's strategy as well as the commitment of our employees continue to drive the company's future growth."
| Unaudited HY1 2019 |
Unaudited HY1 2018 |
Change | |
|---|---|---|---|
| (x EUR 1,000) | |||
| Result | |||
| Net sales | 6,393 | 6,843 | -450 |
| Gross profit | 5,049 | 5,686 | -637 |
| EBITDA | 807 | 913 | -106 |
| EBIT | 108 | 398 | -290 |
| Net result | 5 | 276 | -271 |
| Net cash flow | -1,016 | 602 | -1,618 |
| Operating cash flow | 187 | -245 | 432 |
| Capital, debt & liquidity ratios | |||
| Total assets | 14,508 | 13,775 | 733 |
| Group equity | 5,661 | 6,330 | -669 |
| Net debt | 2,763 | 1,415 | 1,348 |
| Capital (net debt + group equity) | 8,424 | 7,745 | 680 |
| Gearing ratio (net debt/capital) | 33% | 18% | -15% |
| Solvency (group equity/ total assets) | 39% | 46% | -7% |
| Net working capital | 1,458 | 1,992 | -536 |
| ROCE | 1.2% | 4.4% | -3.2% |
| Assets | |||
| Tangible and intangible fixed assets | 9,522 | 7,838 | 1,684 |
| Investment in (in)tangible fixed assets | 1,346 | 228 | 625 |
| Depreciation of (in)tangible fixed assets | 699 | 515 | 184 |
| Nominal shares issued (x 1,000) | 74,896 | 72,587 | 2,309 |
| Data per share (x EUR 1) | |||
| Group equity | 0.08 | 0.09 | 0.01 |
| EBIT | 0.00 | 0.01 | 0.01 |
| Net cash flow | -0.01 | 0.01 | 0.02 |
| Net result | 0.00 | 0.00 | 0.00 |
| Number of FTEs (Permanent) | |||
| At end of month | 95 | 95 | 0 |
| Average | 94 | 94 | 0 |
| Sales / Average FTEs (Permanent) | 136 | 146 | -10 |
RoodMicrotec's focus is on 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 that 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 to realize their ideas with high reliability and in a short timeframe. RoodMicrotec brings its clients together with design houses and assists in the physical realization 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 realizing turnkey projects. RoodMicrotec has excellent cooperation agreements with assembly houses and wafer foundries in Asia as well as in Europe that ensure 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 realization of turnkey projects.
By bringing together these key stakeholders, RoodMicrotec is in a unique position to offer SCM turnkey solutions to the industrial and automotive markets, thus ensuring a successful business venture for all partners involved.
We also continue to promote our other offerings to the market, especially our well renowned Failure Analysis capabilities and our well‐equipped laboratory for Qualification & Reliability Investigations. There is also an increase in demand for pure Test Operations with development of SW and HW in combination with testing of devices in our 24/7 test operations floor.
Our strategy to move more into long‐term engagements with our customers has shown to be successful, with significant increase in Supply Chain Management.
RoodMicrotec's half year sales decreased by 7% due to a weak start of the year based on difficult market conditions and especially in the area Qualification & Failure Analysis due to the customer initiated phase out of production burn‐in. Within the end application markets, RoodMicrotec raised its sales in the industrial sector by 5% whereas the automotive sector decreased by 17% after one of our customers had lost a major project resulting in a drop in demand. The order backlog continues to be strong.
| (x EUR 1,000) | HY1 2019 | HY1 2018 | Change |
|---|---|---|---|
| Test Operations | 3,142 | 3,316 | ‐5% |
| Supply Chain Management | 1,596 | 1,460 | +9% |
| Qualification & Failure & Analysis | 1,655 | 2,067 | ‐20% |
| Total | 6,393 | 6,843 | ‐7% |
During the first half of 2019, RoodMicrotec has continued to invest in new equipment to be able to serve the demanding automotive and industrial markets. The main addition is a new automatic optical inspection system for semiconductor wafers. The industry's requirements are quickly developing towards a full automation of processes. With this new capability, RoodMicrotec has a solution that fits the needs of the customers. The system is able to automatically handle 6, 8 and 12‐inch wafers from cassette to cassette.
RoodMicrotec has also invested in a new test system from National Instruments to handle lower volume testing at a more cost efficient level. This system will enable RoodMicrotec to quickly develop test solutions for products that are not demanding the full support of an automatic test unit.
Upgrades to the existing test systems as well as additional external high frequency test units have been added to the portfolio of equipment in the test operations unit. These new acquisitions enable us to handle more complex products and they are already in full operation.
Three SCM projects have been booked during the period and the first stage, which is the engineering stage, has been started. This includes test program and hardware development as well as preparations for qualification. After this stage, the industrialization will be done, which includes test time reduction as well as yield optimization. Once these milestones have been done, the full volume production will be started.
RoodMicrotec is expanding its SCM services into the Application Specific Standard Product (ASSP) market through a production and marketing cooperation with Fraunhofer IIS and EBV Elektronik, where a Memorandum of Understanding has been signed. An ASSP is a device that can be used by many customers for similar applications. This will enable RoodMicrotec to supply customer with devices in smaller volume by having a higher total volume.
CoreHW, a Finnish fabless company, has been added as a partner for SCM projects. This long‐term supply chain partnership will use the capabilities and services of RoodMicrotec for back‐end manufacturing of full custom RF, analog and mixed‐signal IC as well as catalog IC products, designed and marketed by CoreHW. RoodMicrotec, on the other hand, will develop the test solutions, including test software and interface hardware, execute product qualification as per desired industry standard and run mass production, including wafer sort, package assembly, final test and end‐of‐line services. In addition, RoodMicrotec will include CoreHW as partner in their design partner network for ASIC turnkey business, specifically for advanced wireless applications.
The number of full time employees (FTE) in the company is stable at 94, even though the composition is changing due to business needs. During the first half of 2019, we have strengthened the test engineering team with experienced employees to meet the need for the booked SCM projects. In other areas we have made adjustments to reflect the actual needs.
The various risks the company is exposed to are listed in RoodMicrotec's 2018 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 a 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 currently not foresee any material changes in its risks in 2019.
We are ISO9001:2015 certified since April 2016 which is risk management focused.
Sales in the first half of 2019 were EUR 6.4 million, which is EUR 0.4 million lower compared to the first half of 2018 (HY1 2018: EUR 6.8 million). The gross profit margin was with 79%, below the level of the first half year of 2018 but expected due to the increase in supply chain management business.
EBITDA was EUR 0.8 million (HY1 2018: EUR 0.9 million). EBIT was EUR 0.1 million (HY1 2018: EUR 0.4 million). The decrease of EBITDA and EBIT is mainly the result of a lower sales revenue.
The total operating expenses were EUR 4.2 million against EUR 4.8 million in first half of 2018. Personnel expenses are stable with EUR 3.4 million compared to first half of 2018. The other operating expenses were EUR 0.8 million and decreased by EUR 0.7 million compared to the same period last year. The first half 2018 included one‐off expenses related to the legal case of EUR 130,000 and bank charges of EUR 50,000 for the share issuance where in the first half year of 2019 based on a final verdict EUR 125,000 is released from the accruals and the provision for a tax audit started in 2018 could be released based on outcome of the inspection and had a positive effect of EUR 175,000. With a continued focus on further cost efficiency the other operating expenses are further reduced.
Net financing costs maintained at a same level of EUR 112,000.
In the first half of 2019, net cash flow position reduced by EUR 1.0 million (HY1 2018: EUR +0.6 million). Cash generated from operating activities showed a further improvement and was positive by EUR 0.2 million (HY1 2018: EUR ‐0.2 million). The net cash flow from investing activities was EUR ‐ 1.3 million and includes EUR 0.7 million for an automatic optical inspection system ordered in 2018, delivered in 2019. Cash generated from financing activities was EUR 62,000. The debt position is further reduced by payment of a final instalment of EUR 0.2 million. Furthermore, the proceeds from issuance of share capital of EUR 0.4 million contributed to the cash position, the balance of EUR 0.13 million relates to payments for lease terms (IFRS 16).
On July 9th, 2019 the articles of association were amended consisting of change of corporate seat to Deventer.
Based on several new engagements as well as an increasing number of ASIC supply chain projects in the pipeline, RoodMicrotec expects a continuing revenue increase over the next years and the company expects to report yearly improving positive net results. With a softer market and geopolitical uncertainties, revenue for 2020 is expected to be in the range of EUR 16 million to EUR 18 million.
| August 1st, 2019 | Conference call for press and analysts |
|---|---|
| October 17th, 2019 | Trading update quarter 3‐2019 |
| January 23rd, 2020 | Publication annual revenue 2019 (preliminary) |
| March 12th, 2020 | Publication annual figures 2019 (preliminary) |
| March 12th, 2020 | Conference call for press and analysts |
| April 9th, 2020 | Publication annual report 2019 |
| April 9th, 2020 | Trading update quarter 1‐2020 |
| May 28th, 2020 | Annual general meeting of shareholders |
| May 29th, 2020 | Annual bondholders meeting |
| July 30th, 2020 | Publication interim report 2020 |
| July 30th, 2020 | Conference call for press and analysts |
| October 15th, 2020 | Trading update quarter 3‐2020 |
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 materialize. Furthermore, RoodMicrotec does not accept any obligation to update the statements made in this interim report.
RoodMicrotec is a leading independent company for semiconductor supply and quality services. With 50 years of experience in the semiconductor and electronics industry, RoodMicrotec is well‐established as a highly valued partner for many companies worldwide. The company provides full‐turnkey ASIC services for complex microchips that are customized to handle specific applications for individual customers. In cooperation with strong partners, RoodMicrotec manages the entire development and production flow of ASICs in the target volume, ranging from low quantities up to multiple millions per year. The turnkey solution includes project management, wafer test, assembly, final test, qualification, failure analysis and logistics. All services comply with the industrial and quality requirements of the high reliability, aerospace, automotive, healthcare and industrial sectors. RoodMicrotec's headquarter is located in Deventer, Netherlands, with operational units in Nördlingen and Stuttgart, Germany.
For more information visit https://www.roodmicrotec.com
Martin Sallenhag ‐ CEO, Arvid Ladega ‐ CFO Telephone: +31 570 745623 Email: investor‐[email protected] Web: www.roodmicrotec.com
| 1 | Consolidated Statement of Profit or Loss | 9 |
|---|---|---|
| 2 | Consolidated Statement of Comprehensive Income | 9 |
| 3 | Consolidated Statement of Financial Position | 10 |
| 4 | Consolidated Statement of Changes in Equity | 11 |
| 5 | Consolidated Cash Flow Statement | 12 |
| 6 | Notes to the Consolidated Financial Statements | 13 |
| 7 | Statement from the Board of Management | 19 |
Page
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| (x EUR 1,000) | HY1 20191 | HY1 2018 | 2018 |
| 6,393 | 6,843 | 13,425 | |
| NET SALES Cost of sales GROSS PROFIT Personnel expenses Other operating expenses TOTAL OPERATING EXPENSES EBITDA Depreciation and amortisation EBIT Financial expenses RESULT BEFORE TAX Taxation NET RESULT |
‐1,344 | ‐1,157 | ‐2,545 |
| 5,049 | 5,686 | 10,880 | |
| ‐3,437 | ‐3,316 | ‐6,555 | |
| ‐805 | ‐1,457 | ‐2,942 | |
| ‐4,242 | ‐4,773 | ‐9,497 | |
| 807 | 913 | 1,383 | |
| ‐699 | ‐515 | ‐1,018 | |
| 108 | 398 | 365 | |
| ‐103 | ‐122 | ‐241 | |
| 5 | 276 | 124 | |
| – | – | 1 | |
| 5 | 276 | 125 |
| EARNINGS PER SHARE | |||
|---|---|---|---|
| Basic | 0.00 | 0.00 | 0.00 |
| Diluted | 0.00 | 0.00 | 0.00 |
1 IFRS 16 Leases (IFRS 16) was adopted with effect from January 1, 2019. See 6 Notes "Adoption of IFRS 16 Leases".
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| (x EUR 1,000) | HY1 20191 | HY1 2018 | 2018 |
| Net profit (loss) | 5 | 276 | 125 |
| Remeasurement of defined benefit obligations | – | – | ‐1,055 |
| Remeasurement of defined benefit obligations – DTL | – | – | 32 |
| Sale of revalued land ‐ DTL | – | 69 | 71 |
| Comprehensive income | 5 | 345 | ‐827 |
1 IFRS 16 Leases (IFRS 16) was adopted with effect from January 1, 2019. See 6 Notes "Adoption of IFRS 16 Leases".
| Unaudited | Unaudited | Audited | |
|---|---|---|---|
| (x EUR 1,000) | HY1 20191 | HY1 2018 | 2018 |
| ASSETS | |||
| Property, plant and equipment | 6,150 | 5,471 | 5,303 |
| Right‐of‐use assets | 1,039 | – | – |
| Intangible assets | 2,333 | 2,367 | 2,379 |
| Deferred tax assets | 1,420 | 1,353 | 1,420 |
| Financial assets | – | 503 | 81 |
| Non‐current assets | 10,942 | 9,694 | 9,183 |
| Inventories | 432 | 488 | 593 |
| Trade and other receivables | 2,412 | 2,374 | 2,092 |
| Cash and cash equivalents | 722 | 1,219 | 1,738 |
| Current assets | 3,566 | 4,081 | 4,423 |
| TOTAL ASSETS | 14,508 | 13,775 | 13,606 |
| EQUITY AND LIABILITIES | |||
| Issued capital | 8,239 | 7,985 | 8,006 |
| Share premium | 20,736 | 20,478 | 20,517 |
| Revaluation reserve | 1,943 | 2,033 | 1,943 |
| Retained earnings | ‐27,751 | ‐26,660 | ‐27,751 |
| Equity attributable to equity holders | 3,167 | 3,836 | 2,715 |
| Non‐controlling interests | 2,494 | 2,494 | 2,494 |
| Total equity | 5,661 | 6,330 | 5,209 |
| Loans and borrowings | 2,449 | 2,403 | 2,426 |
| Lease liabilities | 745 | – | – |
| Retirement benefit obligation | 3,441 | 2,849 | 3,374 |
| Provisions | 104 | 105 | 107 |
| Non‐current liabilities | 6,739 | 5,357 | 5,907 |
| Loans and borrowings | – | 231 | 227 |
| Lease liabilities | 291 | – | – |
| Trade and other payables | 1,759 | 1,799 | 2,205 |
| Current tax liabilities | 58 | 58 | 58 |
| Current liabilities | 2,108 | 2,088 | 2,490 |
| TOTAL EQUITY AND LIABILITIES | 14,508 | 13,775 | 13,606 |
1 IFRS 16 Leases (IFRS 16) was adopted with effect from January 1st, 2019. See 6 Notes "Adoption of IFRS 16 Leases".
| Number | Issued | Equity | Non | |||||
|---|---|---|---|---|---|---|---|---|
| of shares | share | Share | Revaluation | Retained | attribut. to | controlling | Total | |
| (x EUR 1,000) | x1,000 | capital | premium | reserve | earnings | parent | interests | Equity |
| Accounting policy changes - IFRS 9 | -9 | -9 | -9 | |||||
| Balance at 1 January 2018 | 66,716 | 7,339 | 19,906 | 2,216 | -27,197 | 2,264 | 2,494 | 4,758 |
| Issuance of ordinary shares | 5,871 | 646 | 572 | - | - | 1,218 | - | 1,218 |
| Value of employee options granted | - | - | - | - | - | - | - | - |
| Net profit (loss)* | - | - | - | - | 276 | 276 | - | 276 |
| Sale of revalued land | - | - | - | -183 | 252 | 69 | - | 69 |
| Balance at 30 June 2018 | 72,587 | 7,958 | 20,478 | 2,033 | -26,660 | 3,836 | 2,494 | 6,330 |
| Issuance of ordinary shares | 192 | 21 | 19 | - | - | 40 | - | 40 |
| Value of employee options granted | - | - | 20 | - | - | 20 | - | 20 |
| Net profit (loss) | - | - | - | - | -151 | -151 | - | -151 |
| Other comprehensive income: | ||||||||
| Remeasurement of defined benefit | - | - | - | - | -1,023 | -1,023 | - | -1,023 |
| obligation | ||||||||
| Sale of revalued land | - | - | - | -1 | 3 | 2 | - | 2 |
| Revaluation of land and buildings | - | - | - | -89 | 89 | - | - | - |
| Balance at 31 December 2018 | 72,779 | 8,006 | 20,517 | 1,943 | -27,751 | 2,715 | 2,494 | 5,209 |
| Accounting policy changes - IFRS 161 | -5 | -5 | -5 | |||||
| Balance at 1 January 2019 | 72,779 | 8,006 | 20,517 | 1,943 | -27,756 | 2,710 | 2,494 | 5,204 |
| Issuance of ordinary shares | 2,117 | 233 | 212 | - | - | 445 | - | 445 |
| Value of employee options granted | - | - | 7 | - | - | 7 | - | 7 |
| Net profit (loss)* | - | - | - | - | 5 | 5 | - | 5 |
| Balance at 30 June 2019 | 74,896 | 8,239 | 20,736 | 1,943 | -27,751 | 3,167 | 2,494 | 5,661 |
1 IFRS 16 Leases (IFRS 16) was adopted with effect from January 1th, 2019. See 6 Notes "Adoption of IFRS 16 Leases".
At June 30th, 2019 the authorised share capital comprised 100,000,000 ordinary shares (June 30th, 2018: 80,000,000). The shares have a nominal value of EUR 0.11 each. At June 30th, 2019, 74,896,267 ordinary shares were in issue (June30th, 2018: 72,587,399).
* 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.
| (x EUR 1,000) | Unaudited | Unaudited | Audited |
|---|---|---|---|
| HY1 20191 | HY1 2018 | 2018 | |
| EBITDA | 807 | 913 | 1,383 |
| Adjustments for: | |||
| ‐ Share‐based payments | 7 | – | 20 |
| ‐ Movements in retirement benefit obligation and | 64 | ‐50 | ‐303 |
| provisions | |||
| ‐ Accrued interest | – | ‐3 | ‐8 |
| Changes in working capital: | |||
| ‐ Inventories | 161 | 93 | ‐12 |
| ‐ Trade and other receivables | ‐320 | ‐394 | ‐121 |
| ‐ Trade and other payables | ‐460 | ‐720 | ‐236 |
| Cash flow from operating activities | 259 | ‐161 | 723 |
| Interest paid | ‐72 | ‐84 | ‐160 |
| Net cash flow from operating activities | 187 | ‐245 | 563 |
| Cash flow from investing activities | |||
| Investments in property, plant and equipment | ‐1,286 | ‐203 | ‐446 |
| Disposals of property, plant and equipment | – | 326 | 326 |
| Investments in intangible assets | ‐60 | ‐25 | ‐130 |
| Net investments in financial assets | 81 | – | – |
| Net cash flow from investing activities | ‐1,265 | 98 | ‐250 |
| Cash flow from financing activities | |||
| Proceeds from issuance of share capital | 445 | 1,218 | 1,258 |
| Payment of lease terms | ‐158 | – | – |
| Repayment of borrowings | ‐225 | ‐469 | ‐450 |
| Net cash flow from financing activities | 62 | 749 | 808 |
| Net cash flow | ‐1,016 | 602 | 1,121 |
| Cash ‐/‐ bank overdrafts at beginning of period | 1,738 | 617 | 617 |
| Cash ‐/‐ bank overdrafts at end of period | 722 | 1,219 | 1,738 |
| Net cash flow | ‐1,016 | 602 | 1,121 |
1 IFRS 16 Leases (IFRS 16) was adopted with effect from January 1, 2019. See 6 Notes "Adoption of IFRS 16 Leases".
RoodMicrotec N.V. is a public limited liability company with its registered office in Deventer, 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 June 30th, 2019 comprise the company and its subsidiaries (jointly referred to as 'RoodMicrotec'). RoodMicrotec includes the wholly‐owned subsidiaries RoodMicrotec GmbH (Nördlingen, Germany) and RoodMicrotec International B.V. (Zwolle, The Netherlands).
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 RoodMicrotec as of and for the year ended December 31st, 2018 included in the 2018 annual report.
The accounting policies applied in these consolidated interim financial statements are the same as those applied in its consolidated financial statements as of and for the year ended December 31st, 2018, except for the adoption of IFRS 16 Leases on January 1st, 2019.
Under IFRS 16, all lease contracts, with limited exceptions, are recognised in financial statements by way of right‐of‐use assets and corresponding lease liabilities. RoodMicrotec applied the modified retrospective method without restating comparative information. Further information in respect of the implementation of IFRS 16 is included in the notes.
The consolidated interim financial statements and the reconciliations included in this report and its enclosures have not been audited nor been reviewed by external auditors.
This note explains the impact of the adoption of IFRS 16 Leases on the interim financial statements and discloses the new accounting policies that have been applied from January 1st, 2019.
The company has adopted IFRS 16 using the modified retrospective transition approach, with the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of equity on January 1st, 2019. The company will therefore not restate comparative information prior to first adoption.
The company's leases various offices and cars. Rental contracts are typically made for fixed periods and may have extension options. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants.
Until the 2018 financial year, leases were classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight‐line basis over the period of the lease.
From January 1st, 2019, leases are recognised as a right‐of‐use asset and a corresponding lease liability at the date at which the leased asset is available for use. Each lease payment is allocated between the liability and financial expenses. The financial expenses are charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right‐of‐use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight‐line basis.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
The lease payments are discounted using the incremental borrowing rate (hereafter: IBR) is used, being the rate that the company would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. The IBR used to discount the lease liabilities on January 1st. 2019 varies between 0% and 2.1%.
Right‐of‐use assets are measured at cost comprising the following:
Payments associated with short‐term leases and leases of low‐value assets are recognised on a straight‐line basis as an expense in profit or loss. Short‐term leases are leases with a lease term of 12 months or less. Low‐value assets comprise IT‐equipment and small items of office furniture.
In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the company.
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
Furthermore, the company has also elected not to reassess whether a contract is, or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the company relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.
Due to the adoption of IFRS 16 in the first half year of 2019 other operational expenses decreased by EUR 161,000 and depreciation and financial expenses increased by EUR 155,000 respectively EUR 3,000.
| Unaudited | IFRS 16 | Excl. | |
|---|---|---|---|
| (x EUR 1,000) | HY1 2019 | impact | IFRS 16 |
| NET SALES | 6,393 | – | 6,393 |
| Cost of sales | ‐1,344 | – | ‐1,344 |
| GROSS MARGIN | 5,049 | – | 5,049 |
| Personnel expenses | ‐3,437 | – | ‐3,437 |
| Other operating expenses | ‐805 | 161 | ‐966 |
| TOTAL OPERATING EXPENSES | ‐4,242 | 161 | ‐4,403 |
| EBITDA | 807 | 161 | 646 |
| Depreciation and amortisation | ‐699 | ‐155 | ‐544 |
| EBIT | 108 | 6 | 102 |
| Financial expenses | ‐103 | ‐3 | ‐100 |
| RESULT BEFORE TAX | 5 | 3 | 2 |
| Taxation | – | – | – |
| NET RESULT | 5 | 3 | 2 |
The adoption of the new standard had a limited accumulated impact of EUR ‐5,000 in equity following the recognition of lease liabilities of EUR 1,074,000 and additional right‐of‐use assets of EUR 1,079,000. The detailed impact on the balance sheet at January 1st, 2019, is as follows:
| (x EUR 1,000) | Audited | IFRS 16 | Unaudited |
|---|---|---|---|
| 31 December | impact | 01 January | |
| 2018 | 2019 | ||
| ASSETS | |||
| Property, plant and equipment | 5,303 | – | 5,303 |
| Right‐of‐use assets | – | 1,079 | 1,079 |
| Intangible assets | 2,379 | – | 2,379 |
| Deferred tax assets | 1,420 | – | 1,420 |
| Financial assets | 81 | – | 81 |
| Non‐current assets | 9,183 | 1,079 | 10,262 |
| Inventories | 593 | – | 593 |
| Trade and other receivables | 2,092 | – | 2,092 |
| Cash and cash equivalents | 1,738 | – | 1,738 |
| Current assets | 4,423 | – | 4,423 |
| TOTAL ASSETS | 13,606 | 1,079 | 14,685 |
| EQUITY AND LIABILITIES | |||
| Issued capital | 8,006 | – | 8,006 |
| Share premium | 20,517 | – | 20,517 |
| Revaluation reserve | 1,943 | – | 1,943 |
| Retained earnings | ‐27,751 | ‐5 | ‐27,756 |
| Equity attributable to equity holders | 2,715 | ‐5 | 2,710 |
| Non‐controlling interests | 2,494 | – | 2,494 |
| Total equity | 5,209 | ‐5 | 5,204 |
| Loans and borrowings | 2,426 | – | 2,426 |
| Lease liabilities | – | 809 | 809 |
| Retirement benefit obligation | 3,374 | – | 3,374 |
| Provisions | 107 | – | 107 |
| Non‐current liabilities | 5,907 | 809 | 6,716 |
| Loans and borrowings | 227 | – | 227 |
| Lease liabilities | – | 275 | 275 |
| Trade and other payables | 2,205 | – | 2,205 |
| Current tax liabilities | 58 | – | 58 |
| Current liabilities | 2,490 | 275 | 2,765 |
| TOTAL EQUITY AND LIABILITIES | 13,606 | 1,079 | 14,685 |
There were no onerous lease contracts that would have required an adjustment to the right‐of‐use assets at the date of initial application.
The recognised right‐of‐use assets relate to the following types of assets:
| (x EUR 1,000) | Unaudited | Unaudited | |
|---|---|---|---|
| HY1 2019 | 01 January 2019 | ||
| Properties/Office | 867 | 938 | |
| Cars | 172 | 141 | |
| Total | 1,039 | 1,079 |
The table below provides explanation for the differences between operating lease commitments disclosed applying IAS 17 at the end of the annual reporting period and the openings balance of lease liabilities at January 1st, 2019:
| (x EUR 1,000) | Unaudited 01 January 2019 |
|---|---|
| Reported operating lease commitments at December 31, 2018 | 1,123 |
| Less: short‐term leases and low‐value leases | ‐20 |
| Operating lease commitments at December 31, 2018 under IFRS 16 | 1,103 |
| Less: effects of discounting | ‐19 |
| Add: renewal options | – |
| Total lease liability at January 1, 2019 | 1,084 |
Due to the adoption of IFRS 16, cash payments for the principal portion of the lease liability are presented as part of cash flow from financing activities. Cash payments for the interest portion of the lease liabilities, short‐term leases and low‐ value leases are presented as part of cash flow from operating activities.
Net cash flow from operating activities increased due to certain lease expenses no longer being presented as operating cash outflows and shifted to cash flows from financing activities. Therefore, net cash flow will remain unchanged.
| Unaudited | |
|---|---|
| (x EUR 1,000) | HY1 2019 |
| EBITDA | 161 |
| Cash flow from operating activities | 161 |
| Interest paid | ‐3 |
| Net cash flow from operating activities | 158 |
| Cash flow from financing activities | |
| Repayment of lease terms | ‐158 |
| Net cash flow from financing activities | ‐158 |
| Net cash flow | ‐ |
RoodMicrotec does not have separate segments as referred to in IFRS 8. IFRS 8 requires the financial statements to present segment information that is in accordance with the internal information used by management of RoodMicrotec (chief operating decision maker) to assess performance and allocate resources.
RoodMicrotec focuses on a single operating segment considering the nature of its services and the type of class of customer for these services. This operating segment consist of three operational units, namely: Test Operations, Supply Chain Management and Qualification & Failure Analysis; to help the development of business level strategies. Management uses the consolidated results of operations to come up with informed business decisions.
Consequently, the disclosures for segment information are limited to net sales and non‐current assets per country. In accordance to management reporting, net sales for the operational units Test Operations, Supply Chain Management and Qualification & Failure Analysis are also disclosed.
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate credit facility. Management monitors rolling forecasts of RoodMicrotec's liquidity reserve and cash and cash equivalents. Furthermore, liquidity planning is one of the major elements in RoodMicrotec's budget cycle. Management has tight monitoring procedures in place regarding direct cash flows. Both the cash position and sales forecasts are frequently reviewed. Managing the working capital position is important in managing our liquidity risk.
Within RoodMicrotec's customer portfolio, RoodMicrotec 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 RoodMicrotec's contracts. The average credit rating of RoodMicrotec's customers is comparable to the industry.
| (x EUR 1,000) | Unaudited HY1 2019 |
Unaudited HY1 2018 |
Audited 2018 |
|---|---|---|---|
| Test Operations | 3,142 | 3,316 | 6,060 |
| Supply Chain Management | 1,596 | 1,460 | 3,283 |
| Qualification & Failure Analysis | 1,655 | 2,067 | 4,082 |
| Total | 6,393 | 6,843 | 13,425 |
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 give a true and fair view of the situation as per balance sheet date and of the developments during the first half year of 2019 of RoodMicrotec N.V. and the group companies for which the financial information is recognized in its financial statements. Otherwise, the risks are not expected to change materially in the second half of 2019.
Deventer, August 1st, 2019
Martin Sallenhag, Chief Executive Officer Arvid Ladega, Chief Financial Officer
This report is published in English only.
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