Interim / Quarterly Report • Aug 1, 2007
Interim / Quarterly Report
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Consolidated Financial Statements 2007 pursuant to IFRS – As of June 30, 2007 (unaudited)
In the past six months we were able to implement additional important intermediate steps in the course of our growth strategy at SINGULUS.
We were successful in achieving a positive result in our traditional work area, replication lines for optical discs, despite a continuing difficult market environment. Adjusting the half-year results for extraordinary effects in the same period one year ago, we were even able to significantly improve our profitability as of June 30, 2007. DVD equipment was the main contributor to sales. The market for the new formats, HD DVD and Blu-ray, has not yet shown the expected momentum. The activities with the new formats appear to develop only slowly in the beginning similar to the development during the time of the introduction of the DVD. However, according to IMS research analyst Paul Erickson, nearly 1,000 HD DVD titles should be available worldwide by the end of 2007 – similar figures are projected for Blu-ray. We expect the current restraint in capital expenditure for equipment to fade in the next couple of months and as a market leader to benefit disproportionately from the expected growth boost in the new formats.
Blu-ray Replication Line BLU-LINE on display at the MEDIA-TECH Expo/USA
In the meantime we used our financial and human resources to set-up new business areas. Accordingly, in the first two work areas beyond Optical Disc, the business divisions NANO DEPOSITION TECHNOLOGIES and Optical Coatings, we will generate double-digit million sales with positive earnings contributions for the first time this year. Compared with the overall sales, these contributions are still small but growing dynamically. Our target is to further expand these new work areas by means of a build & buy strategy.
In order to enable the access to the fast growing solar market, we decided to make an acquisition. With the STANGL Semiconductor Equipment AG, Eichenau, SINGULUS for the first time acquires a company beyond the traditional work area of optical disc equipment. STANGL is highly profitable while growing sales by up to 50 %. Moreover, this acquisition provides access to the major companies of the global solar industry. STANGL supplies production machines for crystalline solar cells and thin-film solar cells. SINGULUS will utilize its know-how in thin-film technology to more extensively cover the production chain for solar cells on a broader basis together with STANGL.
Hereby we realized our target announced at the beginning of the year to get involved in the growth market solar technology as fast as possible. SINGULUS has always been a growth company. We will continue to grow in all of our business activities through organic growth and selective acquisitions in the future as well.
Kahl am Main, August 1, 2007 Yours sincerely,
Stefan A. Baustert Dr.-Ing. Anton Pawlakowitsch [Chief Executive Officer] [Executive Board member]
The current economic data continue to indicate a positive assessment of the overall economic situation. The latest economic outlook published by the OECD on May 24, 2007, stated that the "central forecast remains positive". The OECD expects a strong and sustained recovery in Europe.
Although the market for the 2nd format generation, the DVD, continues to grow – from about 7.6 billion discs in 2007 to 9.6 billion in 2010 - the activities for SINGULUS' machines was subdued. The situation regarding the new formats HD DVD and Blu-ray also resulted in continuing uncertainties in our markets and to restrained capital expenditure. The unsolved format debate, the lack of inexpensive players as well as the lack of current movies on the market are the main impediments. It is expected that inexpensive players as well as an increasing number of blockbuster movies will be available in the new formats at the end of the year and that the major global media companies will start an extensive international market launch.
SINGULUS TECHNOLOGIES develops and manufactures machines and equipment for the production of optical discs as well as production machines for semiconductor components, coating machines for ophthalmic lens processing, production lines for decorative processing and cleaning equipment for photo masks. In the future, the product portfolio will include equipment for the production of solar cells.
In the period under review the activities for equipment for the production of optical discs focused on the market segments prerecorded CD and DVD. Until the end of March 2007 a large order for SKYLINE II lines were delivered: In the 2nd quarter the business activities for this machine type were quiet.
A US customer placed a major order for DVD machines. In the 2nd quarter SINGULUS received additional orders from smaller and medium-sized customers from Europe and the US. The current production line SPACELINE II for HD DVD and DVD was presented at the trade fair MEDIA-TECH Expo in Long Beach, USA, at the beginning of May in addition to the production line BLU-LINE for Blu-ray and the new mastering system CRYSTALLINE.
At the MEDIA-TECH Expo in Long Beach SINGULUS MASTERING presented to professional attendees at a separate workshop its newly developed inline mastering system with the brand name CRYSTALLINE. More than 100 professionals from the industry were present. Afterwards, the inline mastering system for all
Presentation of the CrystalLine in Long Beach/USA with over 100 attendees
TIMARIS Coatingsystem for Read-Write-Heads and MRAM wafer
Ophthalmic lens coating machine OPTICUS on display at MIDO/Milan,the world biggest optics exhibition
Processing system for photo mask cleaning for the semiconductor industry
DVD, HD DVD and Blu-ray formats was exhibited at the fair booth. In the meantime, two firm orders have been received. The signing of additional orders are expected shortly.
At the MEDIA-TECH Expo SINGULUS presented in speeches together with Sony DADC the further development of the production technology for the mass production of dual layer Blu-ray Discs with a storage capacity of 50 GB. The newly developed production line is currently being assembled and tested in Kahl.
As of July 1, 2007 SINGULUS found a subsidiary for the growth markets magnetic storage, MRAM and semi-conductor technology. The new 100 % subsidiary of the SINGULUS TECHNOLOGIES AG is called "SINGULUS NANO DEPOSITION TECHNOLOGIES GmbH" and located in Kahl. Managing Directors are the present division manager, Dr. Wolfram Maass, as well as the CEO of the parent company, Stefan A. Baustert.
All of SINGULUS' activities for this particularly sophisticated target market have already been combined under the name of "Nano Deposition Technologies". Following the break-through of the newly offered machine concept, the next logical strategic step was the focusing. With the SINGULUS NANO DEPOSITION TECHNOLOGIES GmbH SINGULUS intends to benefit even more from the growing volumes in these specialized markets.
SINGULUS had already been able to establish itself in the market with its innovative TIMARIS machine concept in the past year through several successful sales. Accordingly, Nano Deposition Technologies will for the first time generate doubledigit million sales in 2007. A US customer already ordered another TIMARIS coating machine for thin film heads (read/write heads) this year. The orders received for these thin film coating machines operating in the nano-dimension are currently exceeding € 4 million.
At the trade fair MIDO in Milan at the beginning of May the ophthalmic lens coating machine OPTICUS was presented in operation for the first time and received a high level of interest from the professional attendees. SINGULUS was able to sign another order for an OPTICUS machine during the MIDO. This European customer decided to invest in the inline technology to further automate its production and to reduce production costs.
Fortunately, a cooperation for the further development of eyeglass coating processes was agreed upon in June, which also included an additional order for an OPTICUS machine.
The Balda AG presented the production line for production and processing of threedimensional plastic surfaces developed in cooperation with SINGULUS at Balda's Innovation Days in Bad Oeynhausen at the beginning of June. The machine called DECOLINE is currently the only production line available on the market, which completely integrates the injection molding, the metallizing and the painting in one production cycle. More than 50 interested customers were able to exchange views with experts regarding innovative technologies and design developments at Balda's Innovation Days and to convince themselves of the efficiency of the equipment technology.
In October 2006 a cooperation with Balda for the development of a production line for the production and finishing of plastic surfaces was agreed. On the basis of the SINGULUS 3 DS metallization machine SINGULUS developed a product line which integrates in the production cycle several processing steps from the injection molding machine to the metallization and the application of anti-scratch finishes.
All production processes are completely automated. Amongst others, the line concept is also useful in the cosmetics packaging, toy and automobile industries. Accordingly, the different requirements of the process handling within the respective industrial sectors are considered.
The HamaTech APE GmbH & Co. KG (APE) was able to further stabilize its leading position for equipment for the cleaning of photo masks.
APE was able to generate new orders totaling € 6.2 million in the 2nd quarter (previous year: € 4.9 million). Several systems have already been delivered and are subject to technical acceptance by the customers. The good order backlog and the production progress indicate a significantly positive result for APE for the 2nd half of the year and also for the full-year 2007.
The order intake in the 2nd quarter of 2007 amounted to € 48.1 million and was thus below previous year's level of € 86.8 million. On the basis of the continuing operations at HamaTech (excluding Manufacturing Services and ETA-Optik) a comparable amount for the 2nd quarter 2007 comes to € 69.7 million in total.
The order backlog of € 77.7 million as of June 30, 2007 was below previous year's level of € 138.7 million. The prior-year level included an order backlog in the amount of € 18.8 million for the deconsolidated companies Manufacturing Services and ETA-Optik in the meantime. Therefore, an adjusted figure of € 119.9 million results for the previous year.
DECOLINE – Inline coating system for 3-dimensional plastic parts
Sales of € 62.5 million in the 2nd quarter 2007 were slightly below the previous year's level (previous year: € 67.6 million). The sales in the 1st half of 2007 totaling € 112.3 million were close to level achieved in the same period one year ago although SESS and ETA had contributed € 8.4 overall previous year: € 116.5 million).
The geographical breakdown of sales for the 2nd quarter 2007 was as follows: Europe 27.9 % (previous year: 31.5 %), Asia 25.1 % (previous year: 32.4 %), North and South America 43.5 % (previous year: 35.1 %), and Africa 3.5 % (previous year: 1.0 %). For the 1st half of 2007 the geographic sales breakdown was as follows: Europe 36.6 % (previous year: 36.3 %), Asia 24.4 % (previous year: 33.6 %), North and South America 35.8 % (previous year: 29.0 %), and Africa 3.2 % (previous year: 1.1 %).
The production and the sale of equipment for the production of optical disc contributed 68 % to SINGULUS' sales (previous year: 75 %) in the 2nd quarter and 64 % in the 1st half of 2007 (previous year: 68 %). The share of sales with other equipment, replacement parts, upgrades and services amounted to 32 % in the 2nd quarter (previous year: 25 %) as well as to 36 % in the 1st half of 2007 (previous year: 32 %).
The gross margin in the 2nd quarter stood at 27.0 % at prior-year's level (27.0 %). For the 1st half of 2007 the gross margin amounted to 28.0 % and was therefore significantly higher than the margin in the same period one year ago (24.8 %). This increase mainly results from the first-time sales generation in the segment Nano Deposition Technologies (NDT) and a general margin improvement in the segment Prerecorded CD and DVD.
The operating expenses totaled € 29.8 million in the first six months. Adjusted for restructuring charges in connection with the acquisition of HamaTech in the amount of € 20.1 million,
the comparable prior-year level amounts to € 36.6 million. Accordingly, the overhead was reduced by € 6.8 million compared with the same period one year ago. This decline mainly reflects the cost reduction measures initiated in the previous year as well as the deconsolidation of Manufacturing Services and ETA-Optik.
At a total amount of € 10.4 million in the 1st half of 2007 the R&D expenses were below prior-year's level (€ 12.5 million).
After the introduction of the inline mastering system CRYSTALLINE in the business area Optical Disc SINGULUS focuses on the optimization of the first systems. An additional focal point is the completion of the new production system for dual layer Blu-ray Discs. For the dual layer technology the necessary new components are integrated in the BLU-LINE and tested. The first dual layer Blu-ray production lines are still scheduled for delivery in the current year.
In the new work areas the delivered equipment is optimized together with the customers. The experience gained will be utilized for the further development of these products.
The earnings before interest and taxes (EBIT) were slightly positive at € 0.5 million in the 2nd quarter (previous year: € -1.8 million). The improvement in earnings compared with the same period last year results from a positive earnings contribution from HamaTech. For the 1st half of 2007 SINGULUS achieved a positive EBIT in the amount of € 0.7 million (previous year: € 5.2 million). However, the earnings before interest and taxes in the previous year included extraordinary effects in connection with the first time consolidation of HamaTech. On the one hand, the results of the 1st half of 2006 included one-off restructuring charges in the amount of € 20.1 million, on the other hand, extraordinary income totaling € 34.1 million (badwill) resulting from the purchase price accounting were recognized in the course of the HamaTech acquisition. Overall, the figure for the previous year included a positive extraordinary effect in the net amount of € 14.0 million. Adjusted for this extraordinary effect the operating earnings situation was significantly improved in particular due to the implemented cost reduction programs in the past two years.
The earnings after taxes came in at € 0.1 million in the 2nd quarter 2007, which was above previous year's level (€ -2.4 million). Compared with the previous year the earnings after taxes in the 1st half of 2007 declined by € 6.4 million to € 0.9 million due to the above-mentioned extraordinary effects.
The non-current assets amounted to € 136.4 million and thus remained around previous year's level (€ 136.2 million). The item Property, plant & equipment was reduced by € 2.3 million mainly due to the deconsolidation of ETA-Optik. In contrast, the capitalized development expenses rose by € 2.4 million compared with the level on December 31, 2006. Current assets were reduced by € 22.4 million during the period under review. Specifically, accounts receivable due within one year declined by € 7.2 million compared with the prior year. In the course of the deconsolidation of ETA-Optik "Assets of a disposal group held for sale" in the amount of € 5.2 million were charged off in the 1st half of 2007. Furthermore, compared with the previous year cash and cash equivalents declined by € 12.2 million.
The capital expenditure in fixed assets amounted to € 1.7 million in the 2nd quarter of 2007 (previous year: € 1.3 million). Replacement investments predominantly made up the expenditure.
Compared with the previous year the short-term liabilities declined by € 14.2 million. Decreases of € 6.1 million for prepayments received, € 2.4 million of other provisions, € 1.7 million of tax provisions as well as € 1.9 million of other short-term liabilities were responsible for this decline. Due to the repayment of a bank loan the short-term liabilities to banks were reduced by € 1.4 million. Compared with the
previous year the long-term liabilities declined by € 6.5 million. This mainly results from the reduction of long-term liabilities to banks in the amount of € 5.5 million.
The shareholders' equity of the Group remained at previous year's level and stood at € 274.7 million as June 30, 2007. Equity in the amount of € 268.7 million is attributable to the shareholders of the parent company and € 6.0 million to minorities. The equity ratio amounts to 73.2 % and is thus significantly above the prior-year level (69.1 %).
Compared with June 30, 2006, the headcount (excluding HamaTech) declined from 560 to 546 employees. HamaTech also adjusted its headcount continuously to the economic situation. The SINGULUS Group (including HamaTech) employed 674 people as of June 30, 2007. The average headcount in the Group (including HamaTech) amounted to 705 employees (previous year: 1,232) in the 1st half of 2007.
The operating cash of € 2.0 million in the 1st half of 2007 was lower than in the previous year (€ 7.3 million). The decline is mainly due to the € 6.4 million lower net profit compared with the same period one year ago.
During the period under review and also in July, the share price of SINGULUS did not develop to our satisfaction. Due to several downgrades by banks, the stock price dropped below € 10 in July.
During the first six months of the business year 2007 there were no changes with respect to the risks stated in the annual report for the year 2006.
The acquisition of the STANGL Semiconductor Equipment AG, Eichenau, is a first important step on the way to new, interesting markets with large growth potential. STANGL is the first acquisition beyond the traditional work area of optical disc equipment. SINGULUS has bought a highly profitable company with the STANGL Semiconductor Equipment AG, which enables us instant access to the strategically very important market of the booming solar industry.
Due to the continuing sustained demand in our core activities Optical Disc we realigned our targets and regard the diversification as our most important goal from a strategic point of view and the greatest challenge for our company in the coming years. We are currently realizing these targets gradually. Due to the current situation we will postpone the guidance for our financial results for the full year 2007 to the beginning of October. By then it will be determined from what point of time the new subsidiary will be consolidated.
With the affiliation to the SINGULUS Group the growth momentum of STANGL in the target market of global solar equipment will even be accelerated. Accordingly, SINGULUS' broad range of know-how in thin-film technology will be combined with STANGL's know-how of wet-chemical processes to further broaden the production chain for solar equipment together.
SINGULUS will consistently continue its strategic growth path in the next couple of months and focus on the following targets aligning its activities correspondingly:
Increase the market leadership in all work areas of Optical Disc with the goal to benefit disproportionately from the upcoming growth of the new format generation HD DVD and Blu-ray.
Establishing the OPTICUS machine in the eyeglass market as well as expansion and development of a broad customer base in Europe and the US
■ Decorative Coatings
Quick optimization of production technology and expansion of scope of application to create additional market potential
Following the first acquisition in new work areas we will further expand our activities consistently in the future and develop new work areas.
A large market potential as well as the proximity to the competencies of our company are the essential factors in examining expansion opportunities.
SINGULUS analyzes markets for interesting technologies and companies with significant growth potential. We are currently in talks with companies fitting into our growth strategy. This includes companies in the optical sector as well as additional application areas of coating technology.
By means of own development of new work areas and a complementing acquisition strategy we will bring our company back to its growth path and once again generate increasing sales and earnings contributions.
SINGULUS TECHNOLOGIES AG The Executive Board
| June 30, 2007 | Dec. 31, 2006 | ||
|---|---|---|---|
| ASSETS | [in K€] | [in K€] | |
| Cash and cash equivalents | 43,984 | 56,216 | |
| Trade receivables | 62,701 | 69,881 | |
| Other receivables and assets | 28,054 | 24,394 | |
| Total receivables | 90,755 | 94,275 | |
| Raw materials, consumables and supplies | 31,352 | 46,181 | |
| Work in process | 72,930 | 59,501 | |
| Total inventories | 104,282 | 105,682 | |
| Total current assets | 239,021 | 256,173 | |
| Non-current trade receivables | 10,713 | 11,031 | |
| Property, plant and equipment | 19,987 | 22,326 | |
| Investment property | 8,887 | 8,770 | |
| Capitalized development costs | 41,391 | 38,949 | |
| Goodwill | 31,249 | 31,249 | |
| Other intangible assets | 13,647 | 13,330 | |
| Deferred tax assets | 10,556 | 10,545 | |
| Total non-current assets | 136,430 | 136,200 | |
| Non-current assets classified | |||
| as held for sale | 0 | 5,224 | |
| Total assets | 375,451 | 397,597 | |
| June 30, 2007 | Dec. 31, 2006 | ||
| LIABILITIES | [in K€] | [in K€] | |
| Trade payables | 19,354 | 20,042 | |
| Current bank liabilities | 8,466 | 9,850 | |
| Other current liabilities | 21,017 | 22,940 | |
| Prepayments received | 15,435 | 21,493 | |
| Tax provisions | 1,913 | 3,645 | |
| Other provisions | 4,113 | 6,492 | |
| Total current liabilities | 70,298 | 84,462 | |
| Non-current bank liabilities | 4,891 | 10,352 | |
| Other non-current liabilities | 2,022 | 3,069 | |
| Pension provisions | 6,265 | 6,115 | |
| Deferred tax liabilities | 17,258 | 17,376 | |
| Total non-current liabilities | 30,436 | 36,912 | |
| Liabilities in connection with assets held for sale |
0 | 1,479 | |
| Total liabilities | 100,734 | 122,853 | |
| Subscribed capital | 34,942 | 34,942 | |
| Capital reserve | 30,233 | 29,879 | |
| Other reserves | -2,888 | -2,514 | |
| Accumulated profit | 206,409 | 205,538 | |
| Total equity related to the shareholder's | 268,696 | 267,845 | |
| of SINGULUS TECHOLOGIES AG | |||
| Minority interests | 6,021 | 6,899 | |
| Total equity | 274,717 | 274,744 | |
| Total liabilities and equity | 375,451 | 397,597 |
| 2. Quarter | First 6 Months | |||
|---|---|---|---|---|
| 2007 | 2006 | 2007 | 2006 | |
| K€ | K€ | K€ | K€ | |
| Revenues (gross) | 62,453 | 67,631 | 112,250 | 116,475 |
| Sales Deductions & Direct Distribution Costs | -1,931 | -2,551 | -3,217 | -4,503 |
| Net Revenues | 60,522 | 65,080 | 109,033 | 111,972 |
| Cost of Sales | -44,159 | -47,501 | -78,502 | -84,171 |
| Gross Sales | 16,364 | 17,579 | 30,531 | 27,801 |
| Research and Development | -4,087 | -6,420 | -7,893 | -11,008 |
| Sales and Customer Service | -5,270 | -5,530 | -10,035 | -12,380 |
| General Administration | -4,904 | -6,204 | -10,174 | -10,922 |
| Other Operating Income (+) / Expenses (-) | -1,572 | -1,231 | -1,690 | -2,249 |
| Restructuring Expenses | -20,092 | |||
| Negative Difference from the Acquisition of HamaTech | 34,081 | |||
| Total Operating Expenses | -15,833 | -19,385 | -29,792 | -22,570 |
| Operating Result (EBIT) | 530 | -1,806 | 739 | 5,231 |
| Interest Income (+) / Expenses (-) | 154 | 449 | 560 | 635 |
| Profit Before Tax | 684 | -1,357 | 1,299 | 5,866 |
| Tax Income (+) / Expenses (-) | -556 | -997 | -427 | 1,428 |
| Net Income | 128 | -2,354 | 872 | 7,294 |
| thereof | ||||
| Shareholders of the mother company | -369 | -2,007 | 273 | 8,503 |
| Minority interests | 497 | -347 | 599 | -1,209 |
| Net Income per share (basic), EUR | -0.01 | -0.07 | 0.01 | 0.21 |
| Net Income per share (diluted), EUR | -0.01 | -0.07 | 0.01 | 0.21 |
| Weighted average shares outstanding (basic) | 34,941,929 | 34,941,929 | 34,941,929 | 34,941,929 |
| Weighted average shares outstanding (diluted) | 35,321,929 | 34,941,929 | 35,321,929 | 34,941,929 |
| First 6 Months | |||
|---|---|---|---|
| 2007 | 2006 | ||
| K€ | K€ | ||
| Net Income | 872 | 7,294 | |
| Depreciation on amortization | 10,053 | 17,357 | |
| Change in pension accruals | 150 | 574 | |
| Change in deferred taxes | -129 | -3,998 | |
| Change in net working capital* | -8,926 | -13,930 | |
| Net cash flow from operating activities | 2,020 | 7,297 | |
| Change in property, plant & equipment | -1,917 | -18,623 | |
| Change in other financial assets | 3,627 | 4,647 | |
| Change in intangible assets | -8,556 | -16,706 | |
| Change in other long-term liabilities | -1,047 | 1,457 | |
| Long-term bank loans | -5,461 | 7,214 | |
| Change in minority interests | -878 | 8,044 | |
| Capital increase, capital reduction | 354 | 510 | |
| Currency translation | -374 | -1,354 | |
| Net change in cash & liquid funds | -12,232 | -7,514 | |
| Cash & cash equivalents at beginning of period | 56,216 | 67,719 | |
| Cash & cash equivalents at end of period | 43,984 | 60,205 | |
* including long-term accounts receivable
| Share | Capital | Other | Accumulated | Minority | |||
|---|---|---|---|---|---|---|---|
| capital | reserves | reserves | profit | interests | Equity | ||
| K€ | K€ | K€ | K€ | K€ | K€ | ||
| Balance on December 31, 2006 | 34,942 | 29,879 | -2,514 | 205,538 | 6,899 | 274,744 | |
| Minority interests | -878 | -878 | |||||
| Capital increase | 375 | 0 | |||||
| Repayment of share capital | 0 | ||||||
| Share-based compensation | 354 | 354 | |||||
| Exchange rate related differences | -374 | -374 | |||||
| Net income | 871 | 871 | |||||
| Balance on June 30, 2007 | 34,942 | 30,233 | -2,888 | 206,409 | 6,021 | 274,717 | |
| For comparison the figures of the same period the year before |
|||||||
| Balance on December 31, 2005 | 34,942 | 29,398 | -2,214 | 193,356 | 0 | 255,482 | |
| Purchase of Minority interests | 8,044 | 8,044 | |||||
| Capital increase | 375 | 375 | |||||
| Repayment of share capital | 0 | ||||||
| Share-based compensation | 135 | 135 | |||||
| Exchange rate related differences | -1,354 | -1,354 | |||||
| Net income | 7,294 | 7,294 | |||||
| Balance on June 30, 2006 | 34,942 | 29,908 | -3,568 | 200,650 | 8,044 | 269,976 |
The SINGULUS TECHNOLOGIES Aktiengesellschaft (hereinafter also "SINGULUS" or the "Company") is a stock-listed corporate entity headquartered in Germany. The presented consolidated statements for the interim reporting of the SINGULUS TECHNOLOGIES AG and its subsidiaries (the "Group") for the 2nd quarter and 1st half of the business year 2007 were approved for publication as per resolution of the Executive Board dated July 31, 2007.
The preparation of the abbreviated consolidated interim financial statements for the period from January 1 to June 30, 2007 was conducted in accordance with IAS 34 "Interim Financial Reporting".
The abbreviated consolidated interim statements do no include all of the notes and information required for the fullyear statements and should be read in connection with the consolidated financial statement as of December 31, 2006.
The preparation of the annual financial statements in accordance with IAS 34 requires estimates and assumptions by the management, which had an impact on the amounts of the stated assets, liabilities, income, expenses as well as contingent liabilities. These assumptions and estimates mainly concern the Group-uniform determination of expected useful lives, the write-offs of assets, the valuation of provisions, the realization of accounts receivable, the determination of realizable residual values of inventories as well as the determination of realizable future tax relieves. In individual cases, the actual values might differ from the assumptions and estimates made. Changes are recognized at the time of finding affecting the profit or loss.
The accounting and valuation methods applied to the consolidated financial statements for the interim reporting are in accordance with the methods applied to the consolidated financial statements for the business year 2006. A detailed description of the accounting principles was published in the Appendix to the consolidated financial statements of our annual report 2006.
From the business year 2007 onwards the following mandatory standards revised or newly adopted by the IASB were applied: IAS 1 "Presentation of financial statements" (changes with regards to additional information about equity) as well as IFRS 7 "Financial Instruments: Disclosures". These newly applicable standards include provisions regarding the information in the consolidated annual accounts. Accordingly, the application of these standards does not affect the reporting in the course of the interim financial statements of the business year 2007.
In addition to the SINGULUS TECHNOLOGIES AG, the consolidated financial statements include all companies under the legal of factual control of the company. In the interim financial statements as of June 30, 2007, in addition to the SINGULUS TECHNOLOGIES AG, in total 6 domestic and 18 international subsidiaries were included.
No other companies were included in the scope of consolidation after December 31, 2006.
One company was excluded from the scope of consolidation since December 31, 2006. Please refer the following chapter "Discontinued Operations".
At the beginning of February 2007, 100 % of the shares of the former subsidiary STEAG ETA-Optik GmbH (hereinafter "ETA-Optik), Heinsberg were sold. In the balance sheet the
assets of the company was reported as "Assets of a disposal group held for sale". The liabilities of the company are reported in the balance sheet under "Liabilities directly associated with assets held for sale". The earnings ontribution of this entity are not reported under discontinued operations in the consolidated profit-and-loss statement since the company does not meet the requirements of discontinued operations in the sense of IFRS 5. The disposal results in additional expenses in connection with the econ-solidation in the amount of K€ 1,059 in the business year 2007.
As of June 30, 2007 the accounts receivable were split as follows:
| June 30, 2007 | Dec. 31, 2006 | |
|---|---|---|
| K€ | K€ | |
| Accounts receivable | ||
| short-term | 64,507 | 86,246 |
| Accounts receivable | ||
| long-term | 19,684 | 11,531 |
| Less write-offs | -10,777 | -16,865 |
| 73,414 | 80,912 |
As of June 30, 2007, inventories are split as follows:
| June 30, 2007 K€ |
Dec. 31, 2006 K€ |
|
|---|---|---|
| Raw materials and supplies | 42,229 | 56,327 |
| Unfinished goods | 74,611 | 63,102 |
| Less write-offs | -12,558 | -13,747 |
| 104,282 | 105,682 |
Capitalized development expenses, goodwill as well as concessions, industrial property rights and other intangible assets are included as intangible assets. The capitalized development expenses amount to K€ 41,391 (December 31, 2006: K€ 38,949). In the 1st half of 2007 the investments in development expenses amounted to K€ 8,044 (1st half 2006: K€ 7,348). Scheduled amortization amounted to K€ 5,602 (1st half 2006: K€ 4,464).
In the first six months of 2007 K€ 1,917 was spent on property, plant & equipment (1st half 2006: K€ 1,623). During the same period depreciation amounted to K€ 4,256 (1st half 2006: K€ 3,890).
Pursuant to IAS 40 SINGULUS values investment properties at acquisition and production costs. The present values resulting from an inflation-adjusted projection mainly correspond to the acquisition and production costs. This mainly concerns industrial land and buildings, which are now being leased. As of June 30, 2007 book values in the amount of K€ 8,887 were reclassified from Property, plant & equipment to Investment properties. Straight-line depreciation is applied for a useful life ranging from 4 to 40 years. The income from leasing the property amounts to K€ 225 p.a..
As of June 30, 2007 liabilities to banks from the payment of three loans with a total amount of K€ 25,000 amounted to K€ 12,326 (December 31, 2006: K€ 16,797). As of June 30, 2007 the effective interest rate of the loans paid out in October 2004 amounted to 4.414 % p.a. (previous year: 3.876 % p.a.). As of June 30, 2007 the effective interest rate of the loan paid out in April 2006 amounted to 4.564 % p.a. (previous year: 4.026 % p.a.).
In addition, liabilities to banks resulting from discounting bills amounted to K€ 1,031 (December 31, 2006: K€ 3,405).
The contingent liabilities and other financial obligations not included in the consolidated financial statements amount to K€ 8,728 (previous year: K€ 12,928) and mainly concern obligations to take back lines sold to leasing companies. In case of these obligations materializing, the obligations to take back lines sold to leasing companies are set against the income from the sale of these lines taken back.
Management do not have any further information indicating a substantial adverse impact on business activities, the financial situation or the financial results of the company.
Selected information regarding sales is provided in the following.
| Gross sales by products | 1st half 2007 K€ |
1st half 2006 K€ |
|---|---|---|
| Prerecorded CDs/DVDs | 51,196 | 43,700 |
| Recordable CDs/DVDs | 17,407 | 26,463 |
| Mastering Systeme | 7,940 | 12,198 |
| APE | 7,944 | 8,111 |
| Manufacturing Service | 0 | 9,622 |
| Service and others | 27,763 | 16,381 |
112.250 116.475
| Geographic sales information | Germany | Remaining | North and | Asia | Africa | Australien |
|---|---|---|---|---|---|---|
| as of June 30, 2007 | Europe | South Amerika | ||||
| K€ | K€ | K€ | K€ | K€ | K€ | |
| Sales by | ||||||
| country of origin | 82,901 | 9,021 | 9,498 | 10,830 | 0 | 0 |
| country of destination | 6,256 | 34,892 | 40,169 | 27,348 | 3,584 | 0 |
| Geographic sales information | Germany | Remaining | North and | Asia | Africa | Australia |
| as of June 30, 2006 | Europe | South Amerika | ||||
| K€ | K€ | K€ | K€ | K€ | K€ | |
| Sales by | ||||||
| country of origin | 87,501 | 22,487 | 4,460 | 2,477 | 0 | 0 |
| country of destination | 9,480 | 32,941 | 33,742 | 39,081 | 1,230 | 0 |
Sales deductions include cash discounts granted. Individual selling expenses mainly include expenses for packaging, freight and commissions.
General administrative expenses include expenses for Management, Human Resources, the Finance department and the resulting office and car fleet expenses. Furthermore, it includes recurring IT expenses, legal and consulting fees, the Investor Relations department, the Annual General Meeting and the expenses for the annual financial statements.
In addition to the research expenses and the non-capitalized development expenses, the research and development expenses of the 1st half of 2007 also include scheduled amortization of capitalized development expenses in the amount of K€ 5,602 (previous year: K€ 4,464).
The restructuring charges in the 1st half of 2006 mainly include expenses relating to the shut-down of specific production line at the location in Kahl am Main and Sternenfels. In addition, the restructuring charges in the 1st half of 2006 include expenses for social compensation plans.
The other operating expenses mainly include expenses relating to write-offs of accounts receivable (K€ 1,004, previous year: K€ 690) as well as the loss stemming from the deconsolidation of ETA-Optik (K€ 1,059).
The interest income/expenses are composed as follows:
| 560 | 635 | |
|---|---|---|
| (Interest expenses) | -1,081 | -1,235 |
| Other interest income | 416 | 132 |
| and call money | 440 | 460 |
| Interest income from time deposits | ||
| accounts receivable from customers | 785 | 1.278 |
| Interest income from long-term | ||
| K€ | K€ | |
| 1st half 2007 | 1st half 2006 | |
As of the balance sheet date, the members of the Executive and Supervisory Board of the SINGULUS TECHNOLOGIES AG held the following number of shares, convertible bonds and stock options:
Shareholdings as of June 30, 2007: shares with a nominal value of € 1:
WG Roland Lacher GbR / Familie Roland
| Lacher Vermögensverwaltungs-GmbH | 394,472 shares |
|---|---|
| William Slee | 29,520 shares |
| Thomas Geitner | 1,500 shares |
Granted convertible bonds and stock options (€ 1 nominal value) as of June 30, 2007:
Stefan Baustert 200,000 shares
* additional 807,182 convertible bonds and stock options are held by other employees in the SINGULUS Group.
During the 1st half of 2007 705 permanent employees were employed on average. In the previous year the number of employees averaged 1,232 during the course of the year. As of June 30, 2007 the Group employed 674 people (previous year: 1,154).
The earnings per share were calculated on the basis of IAS 33. The average number of shares outstanding amounted to 34,941,929 million in 2007 (previous year: 34,941,929 million shares).
The earnings after taxes with respect to shareholders of the parent company amount to K€ 273 in the first half of the year (previous year: K€ 8,503). With respect to the second quarter 2007 the earnings after taxes with regards to the shareholders of the parent company amounted to K€ -369 (previous year: K€ -2,007).
Accordingly, the earnings per share (undiluted) amount to € 0.01 for the 1st half of 2007 (1st half of 2006: € 0.21), for the 2nd quarter 2007 the earnings come to € -0.01 per share (2nd quarter 2006: € -0.07).
In August 2006 stock options were issued to the members of the Executive Board and to senior management. In this connection, the earnings per share in the business year 2007 are diluted by 380.000 shares.
Accordingly, the earnings per share (diluted) amount to € 0.01 for the 1st half of 2007 (1st half of 2006: € 0.21), for the 2nd quarter 2007 the earnings come to € -0.01 per share (2nd quarter 2006: € -0.07).
The Böhm Fertigungstechnik – Slowakei s.r.o. (BFT), a subsidiary of the Böhm AG in Suhl, acquired the remaining 49 % of the shares of the Böhm Electronic Systems spol. s.r.o (BESS), Slovakia, with effect from July 1, 2007.
As of July 31, 2007, the SINGULUS TECHNOLOGIES AG, Kahl, acquires 51 % of the STANGL Semiconductor Equipment AG (STANGL), Eichenau near Munich.
Kahl am Main, July 31, 2007 The Executive Board
| 2005 IFRS |
2006 IFRS |
2007 IFRS |
||
|---|---|---|---|---|
| Sales | million € | 48.7 | 67.6 | 62.5 |
| Order intake | million € | 78.7 | 86.8 | 48.1 |
| EBIT | million € | 0.2 | -1.8 | 0.5 |
| Earnings before taxes | million € | 0.6 | -1.4 | 0.7 |
| Net profit | million € | 0.5 | -2.4 | 0.7 |
| Research & Development | million € | 3.8 | 7.5 | 5.6 |
| 2005 IFRS |
2006 IFRS |
2007 IFRS |
||
|---|---|---|---|---|
| Sales | million € | 99.1 | 116.5 | 112.3 |
| Order intake | million € | 113.0 | 194.3 | 108.5 |
| Order backlog (June 30) | million € | 70.7 | 138.7 | 77.7 |
| EBIT | million € | 1.2 | 5.2 | 0.7 |
| Earnings before taxes | million € | 1.9 | 5.9 | 1.3 |
| Net profit | million € | 1.3 | 7.3 | 0.9 |
| Operating cash flow | million € | -2.4 | 7.3 | 2.0 |
| Shareholders' equity | million € | 248.3 | 270.0 | 274.7 |
| Balance sheet total | million € | 359.8 | 430.0 | 375.5 |
| Research & Development | million € | 8.2 | 12.5 | 10.4 |
| Employees (June 30) | 638 | 1,154 | 674 | |
| Weighted average shares | 35,188,654 | 34,941,929 | 34,941,929 | |
| outstanding, basic | ||||
| Earnings per share, basic | € | 0.04 | 0.21 | 0.01 |
This report contains future-oriented statements based on the current expectations, assessments and forecasts of the Executive Board as well as on the currently available information to them. Known as well as unknown risks, uncertainties and impacts could cause the actual results, the financial situation or the development to differ from the statements made in this report. We assume no obligation to update the future-oriented statements made in this report.
November 6, 2007 Quarterly Report 03/2007
SINGULUS TECHNOLOGIES AG Mail: [email protected]
Hanauer Landstrasse 103 D-63796 Kahl Tel.: +49-6188-440-0 Fax : +49-6188-440-110 Investor Relations: Maren Schuster Tel.: +49-6188-440-612 Fax : +49-6188-440-110 Web: www.singulus.de
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