ProPhotonix Limited ProPhotonix annouces results for December 31, 2014 (8404H)

TIDMPPIX TIDMPPIR

RNS Number : 8404H

ProPhotonix Limited

19 March 2015

March 19, 2015

ProPhotonix Limited

("ProPhotonix" or "the Company")

PRELIMINARY RESULTS FOR THE YEAR ENDED DECEMBER 31, 2014

Annual General Meeting Date

ProPhotonix Limited (London Stock Exchange - AIM: PPIX and PPIR, OTC: STKR), a designer and manufacturer of LED illumination systems and laser diode modules with operations in Ireland and the United Kingdom, today announces its unaudited preliminary results for the year ended December 31, 2014.

Annual General Meeting

The Company will hold the Annual General Meeting of the Shareholders on May 14, 2015 at

2:00 PM British Summer Time at the offices of K&L Gates LLP, One New Change, London

EC4M 9AF. The Record date is set at March 20, 2015 for all shareholders of record.

Financial Highlights

   --     Revenue increased 5.3% to $16.4 million 
   --     Gross profit increased 7.6% to $6.4 million 
   --     Gross profit margin improved to 39.1% 
   --     Operating profit of $0.1 million versus operating loss of $1.2 million in 2013(1) 
   --     EBITDA profit of $0.6 million versus loss in 2013 of $0.7 million(1) 

-- Percentage revenue by market sectors: industrial 73%, medical 16%, and homeland security & defense 11%

   --     Percentage revenue by geography: 52% Europe, 31% North America and 17% Rest of World 
   --     Available borrowing capacity of $1.9 million from its loan facilities at December 31, 2014. 
   (1)   Includes $582,000 non-recurring charges 

Tim Losik, President & CEO, Commented:

"Our financial performance has dramatically improved during 2014. Revenue grew a modest 5% while operating income improved by $1.3 million ($0.7 million adjusted for 2013 one- time charges) and EBITDA improved similarly by $1.3 million ($0.7 million adjusted for the 2013 one-time charges of $0.6 million). Growth in revenue, improvement in the gross margin rate, and elimination of costs, all factor into the continued financial improvement of ProPhotonix. I am pleased with the revenue growth in 2014, but more importantly, the improvement in operating income and EBITDA. 2014 has been a landmark year in a number of respects - we have achieved three consecutive half-yearly periods of positive EBITDA, our first full year of positive operating income in nearly two decades and our first full year of positive EBITDA in fourteen years.

"Order bookings in 2014 declined 9% from 2013 to $16.1million and the book-to-bill ratio ended at 0.98 (2013: 1.13). Our order backlog at December 31, 2014 was down 20% from 2013 to $5.6 million. Several factors contributed to the decline in bookings and backlog, including: (1) customers' reluctance to place large blanket orders opting instead for smaller short-cycle orders, (2) business softness and delays in several industrial customers (3) foreign currency exchange rate changes from the end of 2013 to the end of 2014, and (4) as compared to 2013, several large non-recurring engineering (NRE) orders received in 2013 and completed in 2014 for which we now await production orders from these customers based on their go-forward schedules. The Euro to USD and GBP to USD exchange rates, as of March 18, 2015, have eroded by 20% and 10% respectively from the 2014 average and 13% and 5% respectively since the beginning of the year. The effect of the strengthening dollar may negatively impact 2015 revenue growth on a comparative basis when Euro and GBP denominated revenue is translated into USD.Putting this in perspective, 2014 revenue would be $14.5 million using the March 18, 2015 exchange rates. EBITDA will likely be less impacted due to the translation of costs at lower exchange rates, our natural operating hedges in the locations we operate within and the supply chain we utilize."

Full Year 2014 Financial Results

Revenue for the year ended December 31, 2014 was $16.4 million, an increase of 5.3% compared with $15.6 million in 2013. Gross profit was $6.4 million compared to $6.0 million in 2013. Gross profit margin increased to 39.1% from 38.3% in 2013 due to a shift in product mix and an increase in volume.

Operating expenses, excluding intangible amortization charges, totaled $6.2 million versus $7.0 million in 2013. Sales and marketing expenses were flat to the same period last year, while general and administrative and research and development expenses were reduced by approximately $0.8 million, or 17% over the same period with 2013 including restructuring and one-time charges of $0.6 million. The Company achieved an operating profit of $0.1 million, as compared to a $1.2 million loss in 2013 and EBITDA profitability of $0.6 million versus a loss of $0.7 million in 2013, including the $0.6 million restructuring and one-time charges. Net loss was $1.3 million compared to the 2013 net loss of $1.2 million, mainly due to non cash foreign currency translation charges.

The balance sheet continues to strengthen. Term debt was reduced by $293,000 in accordance with the various loan facilities. Total net available credit from the Company's various loan facilities was $1.9 million as of December 31, 2014. The Directors are comfortable with the funds flow of the business considering its plans and available credit facilities.

Strategy and Markets

ProPhotonix consists of two business units: an LED systems manufacturing business based in Ireland (Cork), and a laser modules production and laser diode distribution business located in the United Kingdom (Hatfield Broad Oak). Corporate headquarters and the North American sales activities are based in Salem, New Hampshire, USA. The fundamental strategy of the Company is growth in revenue through its existing customers, new customer activity, and new product and market expansion. ProPhotonix' short-term strategy is to reach sustained positive EBITDA, cash flow, and net income as soon as possible. These goals will be accomplished through a relentless focus on cost management and most importantly through revenue growth.

ProPhotonix growth in the medium-term will be accomplished with new customer wins and the conversion of development orders into long run production orders. Prophotonix is also focused on expansion into new markets and new products. The Company continuously evaluates new product development and additions to the sales offering in an effort to increase customer satisfaction and provide solutions. During 2014 and early 2015, the Company introduced nine new products/capabilities and added eight new laser diodes to its product offering.

ProPhotonix sells its products principally into three markets: industrial (primarily machine vision illumination), medical, and homeland security and defense. The Company foresees growth opportunities in all three markets it serves which are briefly described below:

Industrial (Machine Vision)

Within the industrial market, machine vision is the term used to describe computerized analysis for controlling manufacturing processes, for example automated inspection. In terms of quality and speed, lighting is often a critical component in machine vision and the Company manufactures both LED systems and lasers designed specifically for this market. The recently enhanced 3D Pro Laser line generators and improved LED line light family specifically address this market.

Medical

The Company has experienced successes in the medical (including dental) market and has gained a foothold in the sector, supplying a variety of applications with current customers, including the world leader in stationary imaging equipment, a portable x-ray equipment manufacturer, a dental imaging manufacturer and also a pioneer in the manufacturing of devices offering eye tracking capability utilizing ProPhotonix's custom infrared LED arrays. The Company intends to broaden its product marketing effort in the medical field since it offers significant long-term revenue growth opportunities.

Homeland Security & Defense

LED systems, laser modules and laser diodes are used in a wide variety of applications in the security and defense fields. The Company currently supplies several defense sighting manufacturers in the US and Europe, as well as leading manufacturers of Auto Number Plate Recognition systems. This market offers significant growth opportunities for ProPhotonix over the next several years and the Company is currently marketing its laser and LED capabilities to additional security and optical character recognition systems companies in this market space.

Outlook

ProPhotonix begins 2015 in a strong position, having completed many of the development projects that were in process at the beginning of 2014, and we are now well positioned to start receiving production orders to increase our overall revenue. Potential high volume OEM (custom) applications include illuminators for the semiconductor, optical sorting, 3D printing, and UV curing markets. Recent booking trends, the macroeconomic environment and foreign exchange rate impacts cause us to be cautious for the first half of 2015, but we remain very positive about our business pipeline and confident in our ability to achieve continued positive momentum toward our profitability objectives.

Enquiries:

 
 ProPhotonix Limited             Tel: [phone] 
  Tim Losik, President and CEO    [e-mail] 
 N+1 Singer                      Tel: [phone] 
  Ben Wright, Richard Salmond     3000 
 Nominated Adviser and Broker 
 

About ProPhotonix