ASPOCOMP’S FINANCIAL STATEMENTS 2010

Aspocomp Group Plc
Financial Statement Release

ASPOCOMP'S FINANCIAL STATEMENTS 2010

Espoo, Finland, 2011-02-18 08:00 CET (GLOBE NEWSWIRE) —
Aspocomp Group Plc., Financial statements release, February 18, 2011 at 9:00 AM

ASPOCOMP’S FINANCIAL STATEMENTS 2010

Key figures in brief

– Net sales: EUR 18.8 million (EUR 13.2 million 1-12/2009)
– Operating result before depreciation (EBITDA): EUR 3.1 million (-0.5)
– Operating result (EBIT): EUR 1.8 million (-1.7)
– Earnings per share (EPS): EUR 0.01 (-0.05)
– Cash flow from operations: EUR 4.1 million (0.9)

Key figures for 10-12/2010 in brief

– Net sales: EUR 4.5 million (EUR 4.2 million 10-12/2009)
– Operating profit before depreciation (EBITDA): EUR 0.0 million (0.7)
– Operating profit (EBIT): EUR -0.3 million (0.4)
– Earnings per share (EPS) from continuing operations: EUR -0.01 (EUR 0.00)

CEO’S REVIEW

A good year finished with a weak fourth quarter. Demand stayed at a reasonable level, but a lower share of high margin quick-turn deliveries and a rise in material costs weakened profitability. Capacity overload caused by strong demand during the first half of the year resulted in higher than expected maintenance and service expenses in the last quarter. In addition, one-time ramp-up costs related to a new client weakened profit.

However, 2010 was satisfactory overall. Net sales improved by over 40 percent to nearly EUR 19 million and operating profit was clearly in the black. Impressively, cash flow stayed over EUR 2 million positive even though investments were greater than in an average year.

After a minor dip, demand seems to be recovering again. Our short-term challenges include passing the increased raw material costs to the end product prices and the optimization of the production capacity for increasingly complicated products. We are going forward into 2011 with confidence.

NET SALES AND EARNINGS 2010

Net sales for the financial year amounted to EUR 18.8 million, up 43 percent on 1-12/2009. During the second and the third quarters of the year – especially the second – demand for quick-turn and emergency deliveries was very strong. This was caused by the fast recovery of global PCB demand at the beginning of 2010, which took the volume manufacturers and their raw material suppliers by surprise.

The five largest customers accounted for 77 percent of net sales (72%). In geographical terms, 95 percent of net sales were generated in Europe (81%) and 5 percent in Asia (14%).

The operating result was EUR 1.8 million (-1.7 Me 1-12/2009). Earnings saw strong improvement thanks to better demand and the cost structure adjustments implemented in 2009.

The Group’s net financial expenses amounted to EUR -1.2 million (-1.0).

The result for the financial year was EUR 0.7 million (-2.5) and earnings per share were EUR 0.01 (-0.05).

NET SALES AND EARNINGS IN OCTOBER-DECEMBER

Fourth-quarter net sales amounted to EUR 4.5 million, up 5 percent on 10-12/2009. The five largest customers accounted for 80 percent of net sales (71% 10-12/2009). In geographical terms, 96 percent of net sales were generated in Europe (88%) and 4 percent in Asia (12%).

The operating result was EUR -0.3 million (0.4 Me 10-12/2009). The result was weakened by one-time ramp-up costs related to a new client. In addition, the strong demand during the first half of the year was reflected in increased maintenance and service expenses in the fourth quarter. Increased raw-material prices impacted negative on profitability. Consequently, the company has taken actions to transfer the increased raw material prices, especially gold prices, to the end products. Fixed expenses include one-time advisory costs.

The Group’s net financial expenses amounted to EUR -0.3 million (-0.3).

The result for the review period was EUR -0.6 million (0.1) and earnings per share were EUR -0.01 (0.00).

INVESTMENTS AND R&D

Investments amounted to EUR 1.8 million (EUR 0.8 million 1-12/2009).

Majority of the investments were related to the implementation of a new image transfer process on the outer-layer process of PCB manufacturing. Other investments were related to the outer-layer plating, high precision routing and deposition of solder mask. All the investments improve Oulu plant’s technical capability.

R&D costs consist of general production development costs. These costs do not fulfill the IAS 38 definition of either development or research and are therefore booked into overhead costs.

FINANCING

The Group’s financial position remained challenging, but stable. Cash assets amounted to EUR 4.7 million at the end of the period (EUR 3.0 million 12/2009).

Cash flow from operations during the financial year was EUR 4.1 million (EUR 0.9 million 1-12/2009). In August the company made EUR 0.5 million repayment of interest bearing debts under the voluntary debt restructuring.

The nominal value of interest-bearing liabilities was EUR 23.5 million (EUR 24.3 million 12/2009). Gearing decrease to 481.9 percent (607.1%). Non-interest-bearing liabilities amounted to EUR 8.2 million (6.1).

The Group’s equity ratio at the end of the period stood at 10.6 percent (10.0%).

RECEIVABLE FROM TTM TECHNOLOGIES INC.

Aspocomp has booked a receivable from TTM Technologies Inc. (TTM) in its balance sheet. The receivable is related to Aspocomp’s ownership arrangements in 2007, where Aspocomp’s production facilities in China and India were transferred to Meadville Aspocomp (BVI) Holdings Ltd. (MAH), a company established together with Meadville Holdings Limited. Meadville originally bought an 80 percent stake in MAH, and a put and call option deed was signed for the remaining 20 percent. According to IFRS this arrangement is considered a hundred-percent sale and therefore Aspocomp’s 20 percent holding under the option agreement is presented in other receivables.

In 2010, the PCB operations of Meadville Holdings Ltd. were acquired by TTM. The rights and responsibilities of MAH were transferred by agreements to TTM and Aspocomp.

The receivable is booked under non-current receivables at the minimum value specified in the put and call option deed. The minimum value was EUR 16.6 million at the end of the period. The other two valuation scenarios presented in the option deed are considered non-substantive due to the challenging current and expected future operations of MAH. See also TTM’s report (page 9): http://www.ttmtechnologies.com/investors/documents/quarterly/q3_2010.pdf.

Aspocomp did not receive any dividend or other income from MAH in 2010.

GROUP STRUCTURE

Aspocomp Oulu Oy – in which Aspocomp has a 90 percent holding – manufactures and sells PCBs for telecom, industrial, and automotive electronics applications. Its service portfolio includes prototype and quick-turn deliveries, fulfillment of urgent PCB needs in high-volume operations as well as development and commercialization of new technologies. Aspocomp Oulu Oy’s primary technologies are HDI (High Density Interconnection), multilayer and special material PCBs.

In addition, Aspocomp holds a 13.2 percent share in PCB Center, a Thai company. PCB Center’s production is currently stopped due to a fire at the plant in June 2010. It is likely that the operations of the company are ceased. However, this has no financial impact on Aspocomp, as the related holding has no value in Aspocomp’s balance sheet and Aspocomp has no outstanding receivables from PCB Center.

Aspocomp also has a 5.3 percent shareholding in Imbera Electronics Inc., which provides state-of-the-art embedding solutions for the electronics industry. The holding does not have any value in Aspocomp Group’s balance sheet.

SHAREHOLDERS’ EQUITY OF THE PARENT COMPANY

In accordance with the requirements of the Companies Act, the Trade Register has been notified of the loss of share capital on May 14, 2008. The shareholders’ equity of Aspocomp Group’s parent company, Aspocomp Group Plc., was EUR 3.4 million negative at the end of the fourth period. However, the shareholders’ equity of Aspocomp Group was EUR 3.6 million positive.

SHARES AND SHARE CAPITAL

The total number of Aspocomp’s shares at December 31, 2010 was 49 905 130 and the share capital stood at EUR 20 082 052. The parent company held 200 000 treasury shares, which have a nominal value of approximately EUR 758 thousand. This represents 0.4 percent of the number of and the aggregate votes conferred by all the shares. Aspocomp’s subsidiaries do not hold any shares in the parent company.

A total of 50 199 199 Aspocomp Group Plc. shares were traded on NASDAQ OMX Helsinki during the period from January 1 to December 31, 2010. The aggregate value of the shares exchanged was EUR 8 115 860. The shares traded at a low of EUR 0.12 and a high of EUR 0.21. The average share price was EUR 0.16. The closing price at December 30, 2010 was EUR 0.18, which translates into market capitalization of EUR 8 982 923.

Nominee-registered shares accounted for 3.3 percent of the total shares.

PERSONNEL

During the period, Aspocomp had an average of 98 employees (101). The personnel count on December 31, 2010 was 98 (96). Of them, 67 (67) were non-salaried and 31 (29) salaried employees.

DECISIONS OF THE ANNUAL GENERAL MEETING

The Annual General Meeting of Aspocomp Group Plc. held on April 13, 2010 re-elected the current Board and decided that the remunerations of the members of the Board will remain the same as in 2009. The General Meeting also decided to amend the company’s Articles of Association. Furthermore, the Meeting decided not to pay dividend for the period.

The Annual General Meeting decided to set the number of Board members at three (3) and re-elected the current members of the Board: Johan Hammarén, Tuomo Lähdesmäki, and Kari Vuorialho. The Meeting re-elected PricewaterhouseCoopers Oy as the company’s auditor for the 2010 financial year.

Annual remuneration of EUR 24 000 will be paid to the chairman of the Board and EUR 12 000 to the other Board members. 60 percent of the annual remuneration will be paid in cash and 40 percent in company shares, which will be acquired and distributed to Board members. EUR 1 000 per meeting will be paid to the chairman and EUR 500 per meeting to the other members. The members of the Board residing outside of the Greater Helsinki Area are reimbursed for reasonable travel and lodging expenses. The auditor will be paid according to invoice.

The Annual General Meeting decided to amend the Articles of Association so that a following sentence was added at the end of the Article 10 (notice of meeting): “However, the notice to the Annual General Meeting must be conveyed no later than nine (9) days before the record date of the Annual General Meeting.” The amendment is based on the recent amendment of Companies Act.

THE BOARD OF ASPOCOMP GROUP PLC., AUTHORIZATIONS GIVEN TO THE BOARD

In its organization meeting, the Board of Directors of Aspocomp Group Plc. re-elected Tuomo Lähdesmäki as chairman of the Board. As the Board only comprises three (3) members, Board committees were not established.

The Annual General Meeting 2008 of Aspocomp Group Plc. authorized the Board to decide on issuing new shares and conveying the Aspocomp shares held by the company. A maximum of 55 000 000 new shares can be issued and/or granted on the basis of special rights. The authorization is valid five years from the respective Annual General Meeting.

The Annual General Meeting 2008 also decided about issuing stock options to the CEO. The Board of Directors has not granted the said stock options.

Details of the authorizations can be found on pages 10-11 of the Annual Report 2008 (www.aspocomp.com/linked/investor/ar_2008.pdf).

ASSESSMENT OF SHORT-TERM BUSINESS RISKS

Significant indebtedness

The Aspocomp Group’s interest-bearing liabilities at December 31, 2010 had a nominal value of about EUR 23.5 million and amounted to about EUR 22.0 million under IFRS.

Liquidity and financial risks

Because of the agreement on debt restructuring, management of the Group’s liquidity risk is based on the cash assets of the parent company and the cash flow generated by the Oulu plant. If Aspocomp Group Plc. does not obtain financing from Aspocomp Oulu Oy or other ways of financing, the company may ultimately become insolvent.

Litigations

In 2007, the French Supreme Court ordered the company to pay approximately EUR 11 million to 388 former employees of Aspocomp S.A.S. The company made the payment in 2007.

In January 2009, the Labor Court of Evreux, France ruled that the company has to pay approximately EUR 0.5 million in compensation, with interest, to a further 13 former employees. Aspocomp appealed, but the Court of Appeal of Rouen confirmed the decision in May 2010. The payment has not been made, but Aspocomp made a related provision in its 2007 financial statements.

In October 2010, Aspocomp was informed that six former employees reasserted their suspended claims in a French Court. In addition, one new claim has been made. These hearings will be held in May 2011. The total amount of the claims is EUR 0.3 million.

The aforementioned compensations and claims do not have a profit impact during the financial year, because Aspocomp has made a reservation in its financial statements 2007. The claims are related to the notice time salaries of the closed, heavily loss-making Evreux plant. The closure took place in 2002.

There is a risk that the remaining approximately 90 employees may also institute proceedings. Under legislation that came into effect in June 2008, the statute of limitations for filing a suit is five years after the law came into effect.

Increased material cost and lack of capacity

Strong global PCB demand and higher raw material prices have raised the prices of laminates and chemicals used in PCB production. If Aspocomp fails to transfer the increased raw material cost to its products, profitability will weaken.

Increasingly complicated PCB designs add load to certain parts of the PCB production process. If the company fails to add capacity to these sub-processes, the total production volume will suffer, and the potential demand will not materialize as net sales growth.

OUTLOOK FOR THE FUTURE

As Aspocomp’s operations focus on prototypes and quick-turn deliveries, it is difficult to forecast full-year net sales. In 2011 net sales is expected to grow, and operating results will be positive but lower than in 2010.

In addition to developing the continuing operations of the company, the Board of Directors is looking into various structural development solutions, including carrying out company reorganization in the future.

ACCOUNTING POLICIES

The reported operations include Aspocomp Oulu Oy and the Group’s parent company, Aspocomp Group Plc. These operations comprise a single business segment.

All figures are unaudited. The financial statements bulletin has been prepared in accordance with IAS 34, Interim Financial Reporting. The accounting principles that were applied in the preparation of the financial statements of December 31, 2009 have been applied in the preparation of this report. However, as of January 1, 2010 the company has applied the following new or modified standards:

– IFRS 3 (revised), Business Combinations
– IAS 27 (revised), Consolidated and Separate Financial Statements

The application of the aforementioned standards did not have significant impact on the reported figures.

SUMMARY OF FINANCIAL STATEMENTS AND NOTES
 

All figures are unaudited.

Espoo, February 18, 2011

Aspocomp Group Plc.
Board of Directors

For further information, please contact Sami Holopainen, CEO, tel. +358 9 591 81.

www.aspocomp.com

Some statements in this stock exchange release are forecasts and actual results may differ materially from those stated. Statements in this stock exchange release relating to matters that are not historical facts are forecasts. All forecasts involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performances or achievements of the Aspocomp Group to be materially different from any future results, performances or achievements expressed or implied by such forecasts. Such factors include general economic and business conditions, fluctuations in currency exchange rates, increases and changes in PCB industry capacity and competition, and the ability of the company to implement its investment program.