Strong Overall Results For the Financial Year 2005-2006
• Positive operating leverage from sales growth confirmed
• Return to significant net profitability
• Powerful financial structure
• Positive outlook for sales and profitability validates strategic investment plan
Bernin France, 9th May, 2006 – Soitec (Euronext Paris), the world’s leading supplier of silicon-on-insulator (SOI) wafers and other engineered substrates, today announced its consolidated results for the financial year ended 31 March 2006. For the first time the Group’s full-year accounts for both the current and the prior year are published in full accordance with International Financial Reporting Standards (IFRS). Backed by the accelerating adoption of SOI in mass consumer markets and reflecting the success of its main customers, sales grew by 89.2% over the year resulting in improved performance at every level of the income statement. Gross profit hit 70.0 million Euros or 26.6% of sales compared to 15.7% in the prior year. The full year operating margin attained 13.7% of sales equal to 36.0 million Euros, which with lower interest charges
provided net income of 22.5 million Euros. This is a significant improvement from the prior year’s loss of
18.4 million Euros. This performance generated operating cash flow of 68.1 million Euros helping to
provide an extremely strong balance sheet at the end of the year, which also benefited from continuing 2004-
2009 bond conversions and the successful capital increase in March 2006.
| (Euros millions) | FY 2004-2005 | FY 2005-2006 |
| Sales | 138.9 | 262.8 |
| Gross profit | 21,8 | 70,0 |
| Research & development | 9.6 | 16.4 |
| SG&A | 9.7 | 17.6 |
| Operating income | 2.6 | 36.0 |
| Net interest | (19.9) | (12.3) |
| Group share of net income/(loss) | (18.4) | 22.5 |
| EPS** in Euros | (0.33) | 0.37 |
**Undiluted
Group delivers record total sales of 262.8 million Euros
SOI wafer sales amounted to 251.5 Million Euros equal to full year growth of 90%, or 85% at constant exchange rates, predominately driven by very strong 300mm volumes. Full year 300mm wafer sales increased 256% over the previous year to represent 60% of total wafer sales. Other wafer sizes, notably 200mm, also provided robust volume growth of 12.5%. Picogiga’s traditional market for RF applications also contributed to sales growth with a very strong year-on-year increase of 94.8% to 8.2 million Euros. Licensing revenue rose by 32.8% to 3.1 million Euros for the year, confirming Smart Cut TM as the industry’s standard technology for the SOI market.
Positive results across the board combined with a strongly improved financial structure
Higher revenues, firm prices, favourable exchange rates and further production efficiencies all contributed to a strong improvement in gross margin, which rose to 26.6% of sales versus 15.7% one year ago. Anticipated operating leverage from controlled expense increases resulted in operating income of 36.0 million Euros or 13.7% of sales for the full year compared to a pro forma loss of 0.7 million last year (excluding the one-time benefit received of 3.3 million Euros of court awarded damages). As guided, higher sales in the second half of the year produced a very satisfactory improvement in second half operating income both in absolute terms and as a per-cent of sales. It is to be noted that two factors impact the second half income as a result of the change to reporting in accordance with IFRS. On the one hand R & D expenditure benefits from the full year research tax credit of 3.0 million Euros (previously considered to be part of the tax charge) whilst on the other hand costs suffer from the inclusion of non-cash share based payment expenditure of 3.7 million Euros.
By year-end, 72.4% of the 2004-2009 Convertible Bond had been converted into ordinary shares and this contributed to a reduction in net interest expenses to 12.3 million Euros from 19.9 million Euros in the prior year. The Group tax charge amounts to 1.3 million Euros leaving net income of 22.5 million Euros, which is an undiluted earnings per share of 0,37 cents. This is a significant change from the total loss of 18.4 million Euros in the prior year.
The Group, helped by strict control over working capital, generated 68.1 million Euros of operating cash flow that was sufficient to cover net cash required for capital expenditure, loan repayments and interest charges. As a result of the successful capital increase in March the Group starts the new financial year on a powerful financial footing that includes over 316 million Euros of cash resources.
Strongly Positive outlook backed up by good visibility
The Group confidently believes that the industry transition to SOI will continue to gain momentum and that the success of SOI-enabled applications will stimulate new demand for its products and technologies. For example from foundries in line with the inevitable move to tomorrow’s technology nodes of 65 and 45 nm.
Multi annual purchase agreements signed with existing customers backed up by significant minimum purchase orders for 12 month periods provide good visibility and back up the Group’s initial guidance, based on April 2006 exchange rates, for sales around the 400 million Euros mark for the financial year 2006-2007. The Group remains strongly committed to improving financial results. The Group’s strategy of opening new markets through lower prices for higher volumes combined with operating leverage should continue to offset price impacts and benefit profit margins. The continued sales growth will require further capital expenditure in Bernin mainly for additional 300mm production capacity in the year. Meanwhile the strategic project for Fab 3 is advancing well and the Group anticipates being in a position to announce the location by mid July.
“ The early strategic decision to invest in Bernin II has clearly enabled us to achieve these excellent results and strongly reinforce our leadership position. Our recent decision to invest in a new plant should put us in the best position to continue supporting our customer’s transition to mass consumer markets.” stated André-Jacques Auberton-Hervé, chief executive officer and president of Soitec. “ We shall continue to drive our financial performance to bring value to our shareholders.”
Reporting Calendar
Sales for the first quarter of the financial year 2006-2007 will be published on Monday 17th July 2006 after the Paris Stock Exchange closes.
About The Soitec Group: The Soitec Group is the world’s leading innovator and provider of the engineered substrates that serve as the foundation for today’s most advanced electronic products and nanotechnologies. Headquartered in Bernin, France, the company manufactures its comprehensive portfolio of engineered substrates, including silicon-on-insulator (SOI) and strained SOI (sSOI), using Soitec’s proprietary Smart Cut™ technology—the de facto industry standard. With its strong global presence, patented technology and industry-leading production capacity, Soitec is helping to drive the performance and power advantages that are key to the smaller, more power efficient, and increasingly mobile electronic products favoured by consumers worldwide. Both shares and convertible bonds are listed on Euronext Paris.
Soitec, Smart Cut and UNIBOND are trademarks of S.O.I.TEC Silicon On Insulator Technologies
For further information, please contact:
Iain Murray
Chief Financial Officer
Tel: +33 4 76 92 75 14
Email: investors@soitec.fr
Olivier Brice
Investor Relations – Financial Communication
Tel: +33 4 76 92 93 80
Email: olivier.brice@soitec.fr