TIDMHIW
RNS Number : 3680E
Hiwave Technologies PLC
30 May 2012
For Immediate Release
30 May 2012
HIWAVE TECHNOLOGIES PLC
INTERIM RESULTS FOR THE SIX MONTHS
ENDED 31 MARCH 2012
HiWave Technologies plc ("HiWave" or the "Company") today
announces its unaudited results for its six-month period ended 31
March 2012. HiWave develops and sells electronic components,
sub-assemblies and devices which utilise innovative sound and touch
technologies to product manufacturers worldwide.
Financial Overview:
-- HiWave achieved 17 design wins in 2012 (2011:3) giving
greater visibility of future revenue streams
-- Turnover of GBP0.6m (2011: GBP1.0m), decline due in large
part to transition to component sales business model
-- Component sales GBP0.27m (2011: GBP0.31m)
-- Orders taken GBP0.20m (2011: GBP0.33m)
-- Cash reserves of GBP2.1m (2011: GBP4.9m) increased use of
cash relates to IP activity, and development projects
Operational Overview:
-- David Calderwood has been appointed as Chairman with
immediate effect
-- Significant milestone achieved of gaining control of HiWave's
IP, unwinding of restrictive licensing agreements
-- 10 patents filed for Haptics, Touch and Personal Audio
business
-- First phase of restructuring and repositioning of the
business largely completed
James Lewis, Chief Executive Officer of HiWave said:
"HiWave has made good progress in the period achieving a
significant number of design wins, by strengthening the IP
portfolio through new filings and regaining rights to fully exploit
our technology - a major milestone for the business. Looking ahead,
we recognise that in the current economic climate, many potential
customers, particularly larger ones, are lengthening their
development cycles and taking longer to make budgetary and
technical decisions. While this does not lessen the opportunity, it
presents additional challenges for our sales team who therefore
should be congratulated on the number of design wins they have
achieved.
"Our current pipeline is strong and we are awaiting go/no-go
decisions on development contracts from two blue-chip companies
with whom HiWave is currently in negotiation. If neither of these
is awarded before the end of the financial year, our full year
results and the cash position will fall below our
expectations."
"As a consequence of this uncertainty and the growth
opportunities available to the Group, the Board has assessed the
Group's finances and is considering options for the future
financing of the Group."
"In all sectors that HiWave is targeting, our technology can
deliver significant value to our customers with highly innovative
sound and touch solutions with the added benefit of often reducing
production costs for the customer and speeding up time to market.
Our Audio Business is expected to deliver continued growth in
design wins, supported by a strong pipeline of opportunities, with
investment in new and updated products enabling it to service the
needs of sector-leading customers into the future."
"To take advantage of the window of opportunity for haptics in
consumer products, an increase in R&D and product engineering
resources are required. The company operates in a competitive
environment but engagements are under negotiation with some of the
world's most significant players in consumer and automotive sectors
due in a large part to previous industry experience of the
executive team."
"I am delighted that, after two months in office as a
Non-Executive Director, David Calderwood has agreed to become
Chairman, with immediate effect. David strengthens the Board in
this role, and it allows me to concentrate on driving the business
forward as Chief Executive Officer."
FOR FURTHER INFORMATION PLEASE CONTACT:
HiWave Technologies plc +44 (0)1223 598 490
James Lewis, Chief Executive
Officer
Kate Barnes, Chief Financial
Officer
Singer Capital Markets Ltd +44(0)20 3205 7500
Claes Spang
Media Enquiries
FTI Consulting
Sophie McMillan
Clare Thomas +44(0)20 7831 3113
HiWave Technologies plc
Business Review
BUSINESS HIGHLIGHTS
During the period, HiWave has continued to move itself into a
position which takes away barriers to becoming a leading solution
provider in next generation consumer devices with highly innovative
technology derived from its fundamental bending wave technology.
HiWave operates two business units - (i) Audio and (ii)
Haptics/Touch/Personal Audio - each at different stages in their
market positioning and development, and requiring different
strategies for key customer engagement, with the associated
resource demands.
The Company continues to strengthen its Intellectual Property
(IP) portfolio through new patent filings, and by regaining the
rights to fully exploit its technology, which was not possible
previously where exclusive licenses had been granted under the
business model. Following extensive work carried out by the
management team over the past 18 months, the Company believes that
at present there are no restrictions on HiWave's use of its IP in
any application, field of use or chosen territory. This is a highly
significant milestone in the restructuring of the business, and
enables HiWave to create and sell components into its target
markets.
AUDIO BUSINESS
Revenue in the Audio business unit is driven by design wins into
all manufacturers of audio products - principally consumer audio,
hi-fi, commercial and industrial applications. A prerequisite to
engagement with the largest prospective customers in the target
consumer audio market is promoting HiWave as a secure long-term
supplier. To this end the Company has carried out extensive and
ongoing work to proliferate its audio components in smaller
early-adopter customers; increased its range of audio products,
backed up by effective reference designs and demonstrators; and
invested in brand promotion through trade show attendance and
marketing activities. It is noteworthy that a significant number of
major audio companies have been restructuring their businesses to
adapt to the changing economic conditions, consumer spending
behaviour, and the impact of new technologies - particularly the
move from computer-centric audio to home network environments. This
has presented us with opportunities as well as frustrations with
customers seemingly making change of direction the norm rather than
the exception.
HiWave is pleased to note that new audio design wins are
increasing - management tactics to address early on those customers
seeking first mover advantage, and then follow up with longer
design cycle larger customers where the track record of smaller
company design wins is recognised as beneficial, is paying off. The
Company can report that 17 new design wins were achieved during the
first half of this financial year, with 6 customers placing initial
production orders. Additionally 5 new customers have placed repeat
orders during the period.
Equally important to larger customers with broader product
portfolios is the ability to offer a range of products that suit
the objectives of such products, which includes a range of physical
size, power outputs and performance characteristics. To that end
HiWave has introduced new audio components to the market.
Recently introduced audio products include transducers (exciters
and BMRs) and audio amplifier chips. Exciters are relatively quick
to put into production with modest tooling costs. By comparison
BMRs are more exacting to design and therefore expensive and take
6-9 months from product definition to first samples, and up to a
further 3 months to bring to mass production status. New amplifier
chips are more expensive to develop and demand significant
additional resources, taking the development team in the region of
2 years or more for design and prototyping. HiWave has therefore
focused on extending the capabilities of its current Audium
amplifier chip rather than commencing brand new designs, but the
company recognises that to keep up with evolving market
requirements and to retain competitive positioning, it must look
forward and plan for further chip developments.
During the period, HiWave has focused on reference design
developments that allow customers to short cut their development
cycles and gain maximum advantage from our Audium amplifier
technology. New reference designs for Bluetooth streamed audio into
the Audium amplifier and BMR speaker drivers have been introduced
to capture the growing opportunity for portable wireless speakers.
In these applications HiWave's technology still delivers best in
class power efficiency enabling long battery life in portable audio
players and wireless docks.
HiWave's Audio business unit commands approximately 50% of the
company's human resources including most of the sales team's time,
much of the operations and finance teams, one third of the employed
engineering team plus additional contract engineers. It is also
responsible for a proportionate amount of overheads, mainly office
space and travel. However, compared to the Haptics/Touch/Personal
Audio business unit, the project costs for new component
development have been modest, as are the ongoing IP costs with only
one recent BMR-related patent application in addition to the core
intellectual property.
The pipeline of business opportunity for the Audio business is
strong and includes well-known brands who are actively evaluating
HiWave's components for use in their future products. HiWave
anticipates further growth in design wins with larger companies
committing to the technology in the near future.
As a result of this, HiWave's Audio business unit could become
self-sustaining within the 2012/13 financial year with break-even
months. As the visibility of revenue generation from increasingly
significant design wins emerges, the Company will consider timing
for the next phase of semiconductor development, which would
require additional investment. Acceleration of new product
introduction to capture key customer opportunities may also impact
the future cash position, as it will demand an increase in the size
of the engineering team, as well as increased project costs. In
summary, HiWave's Audio business unit is expected to deliver
continued growth in design wins leading to increased revenue, with
investment in new and updated products enabling it to service the
needs of sector-leading customers into the future.
HAPTICS, TOUCH AND PERSONAL AUDIO BUSINESS
HiWave's Haptics business unit is now the Haptics, Touch and
Personal Audio business unit, and is targeting the considerable
opportunity that HiWave has identified and assessed in the
consumer, automotive and other sectors where products could benefit
through the deployment of its technology in components. HiWave
believes that there is a window of opportunity opening to take
advantage of the need for user-enhancing human interface in
smartphones, tablet and ultrabook computers, as well as other
markets where the user interface is transitioning from mechanical
to touch. An example of this is the automotive market where tactile
interfacing that enables a driver not to avert his eyes from the
road is considered a key safety factor.
'Haptics' relates to the use of bending wave technology to
create the sensation of movement in a fixed rigid panel, and to
convey a meaningful feeling to the user. 'Touch' refers to the fact
that all aspects of touch sensation relate to the 'degree of touch'
- pressure, speed, etc with which the surface is touched. 'Personal
Audio' recognises that touch panels can also be configured to emit
sound using the same solution as for haptics, and is extended into
HiWave's unique ability to directly excite the human ear to create
the function of headsets or earphones without blocking the ear
canal. This is a major benefit for safety and is also highly
relevant to immersive applications where the user needs to be aware
of his environment, yet connected into streamed audio.
The convergence of haptics, touch and audio is seen as a crucial
factor in HiWave's potential to open up its revenue generating
prospects in the key portable consumer electronics markets. It is
essential that the Company drives this business unit forward and
minimises the risk of missing key windows of opportunity, or
allowing competitor solutions to be adopted instead of HiWave's
solutions.
There are significant differences from the Audio Business, as
the market is likely to be opened and dominated by today's largest
players in each sector. Thus HiWave has adopted a strategy of
protecting key IP developments such that it is able to make early
engagements with prospective major customers, and gain input that
guides product development direction. While there will be a range
of off-the-shelf transducers offered for haptics/touch/personal
audio, including controller semiconductors and different types of
transducer, it must be noted that almost every application
implementation will have certain customised content, whether it be
the tactile signal software or the form factor and material
characteristics of the touch panel. While design cycles will be
lengthy and complex, HiWave is likely to enter into a series of
collaborative agreements with major companies to customise or
optimise its technology for their specific applications, which will
be beneficial to HiWave. Such agreements are likely to be capable
of generating revenue during the lead-in time to component sales.
There will be expenditure requirements if HiWave is to participate
in this exciting market development, and in order to ensure that
the Company's small development team has the working-space to
capitalise on its innovations, substantial protection of IP is
essential due to the highly competitive nature of this sector. Key
milestones achieved during this reporting period for this business
unit include:
-- In-depth assessment of competitive IP landscape completed
-- 2 patents re-assigned to HiWave covering HiWave's standard
territories
-- 8 patents filed for haptics/touch
-- 2 patents filed for personal audio
Presently HiWave's haptic/touch/personal audio division
contributes to over half of the Company's costs, including
substantial strategic input from the CEO and executive team, two
thirds of the internal engineering team, and substantial
third-party consultation for intellectual property prosecution and
legal agreement construction. Additionally, the cost of performing
R&D experimentation and building proof of concept demonstrators
is high, with items of precision engineering needed in addition to
HiWave's components to properly show the benefits of this
technology.
In order to fulfill the Company's vision to become a world class
provider of solutions in this arena it is necessary to increase the
number of engineering and science staff, to continue to protect the
Company's inventions through patents, and to put in place a
business development team in key locations for market proximity.
New transducer technologies are in development due to the ever
present requirement for smaller and thinner end products with
better haptic and audio performance. There will also be the need to
commence semiconductor developments to create drive/controller
chips for the specialised transducers with minimal power
consumption, and delivering signals, algorithms, and equalisation
for product form factor.
An increase in R&D and product engineering resources are
required if HiWave is to be able to take advantage of the market
window for haptics in consumer products. The Company operates in a
competitive environment but engagements are underway with some of
the world's most significant players in consumer and automotive
sectors due in a large part to previous industry experience of the
executive team.
HiWave's executive team has analysed the relevance of its
technology and solutions for this market. Customers and end-users
are waking up to the potential benefits of haptics - it must be
productive and enhance the user experience; it cannot be a gimmick.
Ultra-slim profile consumer products demand new low-profile
transducer developments for audio, and haptics. HiWave's technology
embraces new options for touch that potentially reduce the cost of
touch position detection in display and non-display applications
for consumer and other applications. The automotive sector needs to
reduce the cost of switch gear in cars and wants to transition to
touch panels for both display and switching. Haptics and degree of
touch detection is essential for automotive switching applications
to ensure the driver doesn't have to take his eyes off the road,
bringing vital safety benefits. Personal audio solutions that
deliver audio without potential damage to hearing and which enable
the user to engage with the environment, offer health and safety
benefits in the consumer and automotive space. HiWave's personal
audio solutions can also enable enhanced user experience in
immersive sensory environments such as 3D TV, films and gaming, as
well as up-and-coming virtual- and augmented-reality
applications.
In summary, in all market sectors that HiWave is targeting, its
solutions can deliver enhanced value to the user with the potential
added benefit of lowering the system cost for the customer. Each
market sector has very large potential, and HiWave is currently
engaged with a number of key prospective customers.
LICENSING AND ROYALTIES REVIEW
The Company continues to benefit from royalty income from a
small number of licensees. These instances are primarily companies
that were able to develop customised transducers, and where they
continue to take responsibility for the supply chain and quality
control. HiWave anticipates that some licenses will continue, while
other customers will switch to standard components and become
customers.
OVERALL OPPORTUNITY - CHIEF EXECUTIVE OFFICER COMMENT
I believe that we have steered the Company through a complex
restructure not only of the business model, but also its entire
long-term value proposition based on the clarity of vision of the
board of directors. HiWave is now in a position to consider an
array of options for the widespread or focused application of its
technology. Our ability to deliver shareholder value will depend on
having resources on hand to realise this vision within the window
of opportunity and the continued delivery of results in terms of
design wins for revenue growth.
We have a team which is very experienced in hi-tech consumer
markets and capable of connecting HiWave's technology to the
commercial potential. HiWave excels at bending wave technology, and
focuses its application to solving real-world challenges. The
fundamentals of our technology are protected by long-standing and
layered patents with new inventions being patented before any
discussions are conducted with prospective customers. It is our
belief that the technology has long-term scalability into new
deliverables to meet the ever present "smaller, louder, cheaper"
demands of the markets we are targeting.
Since I became CEO, the Company has achieved its near-term
objectives of restructuring and repositioning the business. If we
chose to focus solely on growth in the audio business sector and
not invest in the haptics/touch/personal audio business, I would
anticipate seeing first break-even months occurring in the next
full financial year. However, the new team was brought together to
plan and implement the best course of action to deliver returns on
the company's intellectual capital and science, and has created an
opportunity for the business to become a major contributor to next
generation consumer electronics technology. Key to the realisation
of this vision is for the Company to achieve critical mass in its
R&D, product engineering and business development capabilities.
The next phase is a critical one for HiWave if it is to capture the
window of opportunity for optimal exploitation of the technology
and science that it has built up and protected over the past few
years.
The means by which HiWave has been able to move its technology
forward so quickly is due to integrating semiconductor technology -
the electronic control - with the transducer technology. This means
that our development engineers are highly focused on the solution,
rather than producing generic components. The Company has leveraged
its acquisition of Audium's audio amplifier technology into a
number of its design wins, most effectively in conjunction with its
BMR speaker drive units. It now needs to plan and execute on the
next generation in order to remain competitive and broaden the
applications for the devices.
In addition, the Company needs to develop next-generation
amplifier and signal processing technology that can be applied not
only to audio, but also to haptics and personal audio applications
which will use a different type of transducer. Such developments
require cash for the in-house engineering resource, third party
engineering service providers, and non-recurring engineering
(tooling) costs with the selected silicon manufacturer. HiWave's
assessment of the commercial exploitation of future semiconductor
components will determine the expenditure plan and its impact on
cash requirements. Semiconductor developments typically take 2
years or more from design start to mass production, so the
Company's engagements with key prospective customers are an
essential part of the equation.
OUTLOOK
HiWave has made good progress in the period achieving a
significant number of design wins, by strengthening the IP
portfolio through new filings and regaining the rights to fully
exploit our technology in our chosen territories - a major
milestone for the business. Looking ahead, we recognise that in the
current economic climate, many potential customers, particularly
larger ones, are lengthening their development cycles and taking
longer to make budgetary and technical decisions. While this does
not lessen the opportunity, it presents additional challenges for
our sales team who therefore should be congratulated on the number
of design wins they have achieved.
Our current pipeline is strong and we are awaiting go/no-go
decisions on development contracts from two blue-chip companies
with whom HiWave is currently in negotiation. If neither of these
is awarded before the end of the financial year, our full year
results and the cash position will fall below our expectations.
As a consequence of this uncertainty and the growth
opportunities available to the Group, the Board has assessed the
Group's finances and is considering options for the future
financing of the Group
HiWave Technologies plc
Financial Performance
Since August 2010, HiWave has been executing a turnaround plan
commencing with an emergency fund raising to change its business
model from one where IP is licensed to third parties to one where
the Company's IP is used to create and sell components. To achieve
the implementation of the plan the Company has focused its
engineering and intellectual property resources into product
development to provide a range of semiconductor and transducer
components spanning its target market sector, and build commercial
relationships with major global companies. The next phase of growth
demands that these relationships are exploited to generate revenue,
and this activity needs to be properly resourced.
The timing of the turnaround plan was a factor of the Company's
financial position in 2010 and the assessment of the historic
performance of licensing its complex patents, where licensees were
expected to learn the technology, use it to develop their own
components, take responsibility for manufacture and quality
assurance of the implementations, and eventually use those
components in their products. The economic climate at the time was
causing licensees to be unable to resource such developments,
despite the attractiveness of the technology in their products. The
same economic climate makes for a tough environment in which to
embark on a company turnaround and continues to challenge small
businesses like HiWave.
HiWave has won 17 design wins in the period for its audio
components. The company defines a design win as the point at which
it receives the first production order for components, but the
progression in a small number of these to follow-on purchase orders
has been delayed due to our customers' sales channel caution in
holding no more than a small amount of inventory.
The Company performed well against most of its financial key
performance indicators. Gross profit margin during the period rose
to 35%, compared with 15% a year ago and our target is to reach
40%. While the operating loss widened to GBP1.7m from GBP1.3m in
the comparable period of 2011, due to lower royalties and licence
fees in the period, coupled with increased costs from intellectual
property spend, our target remains to reach breakeven in the period
to 30 September 2013. Due to the widening operating loss, our cash
position was GBP2.1m compared to GBP4.9m a year ago. At present we
are still on target to be cashflow positive in the full year to
September 30 2013.
HiWave is now in a position where its emerging haptics and touch
technologies, whilst still early stage, are becoming compelling and
are attracting interest from some of the world's largest technology
companies. HiWave's management has recognised that there is an
opportunity to engage with a small number of prospective companies
at an early stage to customise haptics/touch components for their
specific applications, and has been in long-term negotiations with
several such companies on commercial collaboration on component
specification. The Company is awaiting a decision by the end of the
financial year on two of these and further new opportunities for
collaborative projects are likely to emerge in the future.
The global economy is affecting consumer spending behaviour and
HiWave's management recognises that this introduces uncertainty for
the Company's revenues, underlining the importance of broadening
our customer base and product offering. The human resource
requirement for this, coupled with the increased expenditure on
product engineering and intellectual property has put the Company's
cash resources under pressure. While it is possible to manage costs
in many areas of the business, management is reluctant to take
cost-reducing actions that could adversely impact upon the
Company's core expertise at this critical stage in the Company's
growth. As a consequence of this uncertainty and the growth
opportunities available to the Group, the Board has assessed the
Group's finances and is considering options for the future
financing of the Group
Results for the 6 months to 31 March 2012
Underlying Operating
Revenue Gross profit Loss*
---------- -------------- ----------------------
2012 2011 2012 2011 2012 2011
GBPm GBPm GBPm GBPm GBPm GBPm
Group Total 0.6 1.0 0.4 0.7 1.7 1.3
==== ==== ====== ====== ========== ==========
* Underlying operating loss is loss before depreciation,
amortisation, interest and restructuring costs, as shown below.
GBP'000 2012 2011
Loss before financing
income (1,779) (1,828)
Restructuring costs 4 432
Depreciation 36 71
Amortisation 71 32
Stock option costs - 35
------- -------
Underlying operating
loss (1,672) (1,258)
------- -------
Revenue
Group revenue for the six-month period to 31 March 2012 was
GBP0.6m, compared to GBP1.0m in the same period in 2011.
It is difficult to compare the two periods, as the period to
March 2011 saw shipments to HiWave's first significant customer
totalling GBP310,000. The remaining income derived from the
licensing and royalty model, accounting for 69% of revenue.
6 months
6 months to to 3 months to 6 months
31 December 30 June 30 September to 31 March
GBP'000 2010 2011 2011 2012
---------- ------------ -------- ------------- ------------
Component
Sales 205 241 428 267
HiWave is continuing to focus predominantly on component sales,
or related development agreements that will lead to increased sales
at a future date. Customers have indicated that 70% of their
business is transacted in the second half of the year. As a
supplier into these customers, and therefore earlier in the supply
chain, this means that HiWave's largest sales period should be the
quarter to September, shipping for the Christmas market.
Component sales account for 45% of sales in the period, and
continue to grow compared to comparable periods.
The increase in design wins to 17 in the period is a true
reflection of business growth. Whilst this is not expected to
influence short-term revenue, as design cycles usually take between
6 months and two years, the future revenue flow is becoming easier
to forecast.
Underlying operating loss
The underlying operating loss for the period was GBP1.6m (2011 -
GBP1.3m). This represented a slow trading half coupled with
increased activity in intellectual property.
Cost control
As at September 2011, HiWave indicated that the employee base as
well as office space was increasing and therefore annualised costs
were approximately GBP3.5m.
The costs for the year to September 2012 will be approximately
GBP4.0m. The uplift in cost base relates predominantly to increased
activity in the Intellectual Property area. 24 patents have been
granted in the past 6 months, and 10 patents were filed during the
period. Patent filing is continuing as two emerging technologies
(on-ear audio and haptics) are moving towards commercial
realisation and the Company needs to protect its IP.
Cash management
Cash and short term investments at 31 March 2012 was GBP2.1m.
The use of funds has accelerated over the past 6 months due to the
intellectual property activity, and increased resources being
allocated to projects. The decision to accelerate the use of funds
has resulted in GBP1m of fixed rate bond being taken off deposit
early (end of May 2012).
Research, development, and product development remain the core
of the business, with GBP0.35m being applied in the period (GBP0.9m
in the 15 months to September 2011).
Key performance indicators
Below are the key performance indicators for the business.
March 2012 March 2011 Target
Financial KPI's
Gross Profit Margin
on component sales 35% 15% 40%
Underlying operating
loss (six month Breakeven in period
period) (GBP1.7m) (GBP1.3m) to September 2013
Cashflow positive
Cash at bank and in period to September
in hand and investments GBP2.1m GBP4.9m 2013
Non-financial KPI's
Product launches
and new reference 20 new products by
designs 14 4 2013
Customers repeat 24 customers reordering
ordering 11 6 by September 2013
Going concern basis
The directors have considered the adoption of the going concern
basis of preparation of these financial statements with
consideration to the Group position and its business model.
The directors have prepared a business plan and cash flow
forecast covering the period to 30 September 2013. The forecast
contains certain assumptions about the level of future sales and
the level of gross margins. These assumptions are the directors'
best estimate of the future development of the business.
The directors acknowledge that the Company is trading in a
difficult economic environment. In addition, the Company is still
at an early stage of implementing its new business model which,
within itself, presents a high degree of inherent risk. These
factors could impact the Company's ability to achieve sales or
gross margin at the forecast level and, therefore, to generate
positive cash flows and to operate within its current working
capital levels. The directors have considered the impact on the
business if sales or margin fall substantially below forecast by
completing a range of reasonably possible sensitivity scenarios.
Under certain of these scenarios, cost saving measures would need
to be implemented and/or additional funding required. The ability
of the Company to achieve the forecast level of sales and to raise
additional funding, should it be needed, therefore constitute
material uncertainties.
The directors have a reasonable expectation that the business
plan and cash flow forecast are achievable and, on this basis, they
have prepared the financial statements on the going concern
basis.
There is a material uncertainty related to the assumptions
described above which may cast significant doubt on the Group's
ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include
the adjustments that would result if the Group was unable to
continue as a going concern. In the event the Group ceased to be a
going concern, the adjustments would include writing down the
carrying value of assets, including inventories, to their
recoverable amount and providing for any further liabilities that
might arise.
Unaudited Consolidated Statement of Comprehensive Income
For the six months ended 31 March 2012
Unaudited Unaudited
Results for Results for Audited results
the six months the six months for the fifteen
ended ended months ended
31 March 30 September
31 March 2012 2011 2011
GBP'000 GBP'000 GBP'000
Continuing Operations
Revenue 594 962 1,994
Cost of goods sold (173) (264) (607)
======================================== ================= ================= ==================
Gross profit 421 698 1,387
======================================== ================= ================= ==================
Other operating expenses (2,196) (2,094) (4,685)
Restructuring costs (4) (432) (597)
---------------------------------------- ----------------- ----------------- ------------------
(2,200) (2,526) (5,282)
---------------------------------------- ----------------- ----------------- ------------------
Loss before financing costs (1,779) (1,828) (3,895)
Financing income 22 - 13
Financing costs (1) (3) (6)
---------------------------------------- ----------------- ----------------- ------------------
Loss before taxation (1,758) (1,831) (3,888)
Taxation 100 101 207
======================================== ================= ================= ==================
Loss for the period (1,658) (1,730) (3,681)
Currency translation differences 1 (16) 26
---------------------------------------- ----------------- ----------------- ------------------
Total comprehensive income attributable
to the equity holders of the Company (1,657) (1,746) (3,655)
---------------------------------------- ----------------- ----------------- ------------------
Basic and fully diluted loss per
share (0.4)p (0.4)p (0.9)p
---------------------------------------- ----------------- ----------------- ------------------
Unaudited Condensed Consolidated Balance Sheet
As at 31 March 2012
Audited balance
sheet at
Unaudited 30 September
balance sheet Unaudited
at 31 March balance sheet
2 at 31 March
012 2011 2011
GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 204 100 140
Other intangible assets 561 432 555
Long-term debtors 28 28 28
------------------------------ ---------------- ---------------- -----------------
793 560 723
------------------------------ ---------------- ---------------- -----------------
Current assets
Inventories 292 290 267
Trade and other receivables 639 484 970
Short term invetsments 2,000 - 2,000
Current tax recoverable 300 101 200
Cash and cash equivalents 114 4,895 1,092
------------------------------ ---------------- ---------------- -----------------
3,345 5,770 4,529
------------------------------ ---------------- ---------------- -----------------
Total assets 4,138 6,330 5,252
------------------------------ ---------------- ---------------- -----------------
Equity and liabilities
Share capital 4,269 4,267 4,269
Deferred share capital 22,682 22,682 22,682
Share premium account 92,408 92,410 92,408
Shares to be issued 82 282 82
Stock option reserve 789 850 789
Accumulated deficit (117,295) (114,763) (115,638)
------------------------------ ---------------- ---------------- -----------------
2,935 5,728 4,592
------------------------------ ---------------- ---------------- -----------------
Current liabilities
Trade and other payables 842 602 647
Borrowings 361 - -
Short-term provisions - - 13
------------------------------ ---------------- ---------------- -----------------
1,203 602 660
------------------------------ ---------------- ---------------- -----------------
Total liabilities 1,203 602 660
------------------------------ ---------------- ---------------- -----------------
Total equity and liabilities 4,138 6,330 5,252
------------------------------ ---------------- ---------------- -----------------
The interim financial statements of HiWave Technologies plc,
registered number 514718, were approved by the Board of Directors
and authorised for issue on 30 May 2012.
Unaudited Condensed Consolidated Statement of Changes in
Equity
As at 31 March 2012
Total Total
Equity Equity
Deferred Shares Stock as at 31 as at 31
Share share Share to be Option Accumulated March March
Capital capital Premium issued Reserve Deficit 2012 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 September 4,269 22,682 92,408 82 789 (115,638) 4,592 452
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
Retained loss
for the financial
period - - - - - (1,658) (1,658) (1,730)
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
Other
comprehensive
income - - - - - 1 1 (16)
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
Issue of shares
(net of expenses) - - - - - - - 7,032
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
Fair value
of stock options - - - - - - - (10)
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
At 31 March 4,269 22,682 92,408 82 789 (117,295) 2,935 5,728
------------------ ---------- ---------- ---------- ---------- ---------- ------------- ---------- -----------
Unaudited Condensed Consolidated Cash Flow Statement
For the six months ended 31 March 2012
Unaudited cash Unaudited cash
flow for the flow for the
six months ended six months ended
31 March 2012 31 March 2011
GBP'000 GBP'000
Cash flows from operating activities
Loss before finance costs (1,779) (1,828)
Adjustments for:
Depreciation, amortisation and impairment 103 103
Fair value of share-based payments - 35
Foreign exchange translation 1 6
======================================================= =================== ===================
(1,675) (1,684)
Increase in stock (25) (240)
Decrease / (increase) in trade and other receivables 352 (108)
Increase / (decrease) in trade and other payables 195 (123)
Utilisation of provisions (13) -
Cash outflow from operations (1,166) (2,155)
Taxation received - 195
------------------------------------------------------- ------------------- -------------------
Net cash outflow from operating activities (1,166) (1,960)
======================================================= =================== ===================
Cash flows from investing activities
Purchase of intangible assets (72) (10)
Purchase of property, plant and equipment (Note
A) (101) (26)
Proceeds from sale of property, plant and equipment - 8
Decrease in long term debtor - 13
Net cash used in investing activities (173) (15)
======================================================= =================== ===================
Cash flows from financing activities
Increase / (decrease) in borrowings 361 (203)
Proceeds from the issue of share capital - 7,032
Interest paid - (3)
------------------------------------------------------- ------------------- -------------------
Net cash raised in financing activities 361 6,826
======================================================= =================== ===================
Net (decrease) / increase in cash and cash equivalents (978) 4,851
Cash and cash equivalents at the beginning of
period (Note B) 1,092 44
------------------------------------------------------- ------------------- -------------------
Cash and cash equivalents at the end of period
(Note B) 114 4,895
------------------------------------------------------- ------------------- -------------------
Notes to the cash flow statement
A. Property, plant and equipment
During the period the Group acquired property, plant and
equipment of GBP101,000 by way of cash payment.
B. Cash and cash equivalents
All cash balances consist of cash on hand with banks or in a
guaranteed fixed interest deposit account for a maximum of three
months.
Notes to the Unaudited Condensed Consolidated Interim Financial
Information
1. Basis of preparation and accounting policies
Basis of preparation
These condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standards
(IAS) and International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board. They do not
include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group for the 15 months ended 30
September 2011, which is available at www.hi-wave.com. These
interim financial statements have not been audited.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the interim management report. The interim
management report also includes a summary of the group's financial
position and its cash flows.
The directors believe that the Group is well placed to manage
its business risks successfully despite the current uncertain
economic outlook.
Going concern
The directors have considered the adoption of the going concern
basis of preparation of these financial statements with
consideration to the Group position and its business model.
The directors have prepared a business plan and cash flow
forecast covering the period to 30 September 2013. The forecast
contains certain assumptions about the level of future sales and
the level of gross margins. These assumptions are the directors'
best estimate of the future development of the business.
The directors acknowledge that the Company is trading in a
difficult economic environment. In addition, the Company is still
at an early stage of implementing its new business model which,
within itself, presents a high degree of inherent risk. These
factors could impact the Company's ability to achieve sales or
gross margin at the forecast level and, therefore, to generate
positive cash flows and to operate within its current working
capital levels. The directors have considered the impact on the
business if sales or margin fall substantially below forecast by
completing a range of reasonably possible sensitivity scenarios.
Under certain of these scenarios, cost saving measures would need
to be implemented and/or additional funding required. The ability
of the company to achieve the forecast level of sales and to raise
additional funding, should it be needed, therefore constitute
material uncertainties.
The directors have a reasonable expectation that the business
plan and cash flow forecast are achievable and, on this basis, they
have prepared the financial statements on the going concern
basis.
There is a material uncertainty related to the assumptions
described above which may cast significant doubt on the Group's
ability to continue as a going concern and, therefore, it may be
unable to realise its assets and discharge its liabilities in the
normal course of business. The financial statements do not include
the adjustments that would result if the Group was unable to
continue as a going concern. In the event the Group ceased to be a
going concern, the adjustments would include writing down the
carrying value of assets, including inventories, to their
recoverable amount and providing for any further liabilities that
might arise.
Nature of financial information
The financial information contained in this document does not
constitute the Group's audited statutory accounts as defined in
Section 435 of the Companies Act 2006. The financial information
for the 15 months ended 30 September 2011 has been extracted from
the audited financial statements for that year on which the
auditors gave an unqualified report and which did not contain a
statement under Sections 498(2) or 237(3) of the Companies Act
2006. A copy of those financial statements has been filed with the
Registrar of Companies.
Significant accounting policies
The accounting policies applied by the Group in the preparation
of the condensed consolidated interim financial statements are
consistent with those previously applied by the Group in its
consolidated financial statements for the year ended 30 September
2011.
2. Earnings per share
Basic earnings per share has been calculated on the Group loss
for the financial period and on the weighted average number of
ordinary shares in issue for the relevant period, which in the six
months to 31 March 2012 was 426,818,261 ordinary shares (six months
to 31 March 2011: 426,818,261). Whilst unexercised share options in
the Company would increase the weighted average number of potential
shares in the period, due to the losses of the Group in the period
they are not considered to be dilutive.
3. Segmental analysis
The Group operates in a single reportable business segment,
being the development, licensing and sale of audit and touch
products and technologies.
Information presented to the Chief Operating Decision Maker
(CODM) shows revenues split between component, royalties, and
licence and these revenues are presented for the Group's single
reportable segment, that being the development and licensing of
audio and touch technologies.
The Group's revenue originates in the UK. The customers are
located in the following geographical areas:
Fifteen months
Six months to September
Six months to to March 2011 2011
March 2012 GBP'000 GBP'000 GBP'000
UK 41 38 101
Rest of Europe 53 142 241
Asia Pacific 295 487 989
USA and Canada 205 295 663
--------------- --------------------- ---------------- ----------------
Total revenue 594 962 1,994
--------------- --------------------- ---------------- ----------------
Six months to March 2012
GBP'000 UK HK Japan US Total
--------------------------------- -------- ------ ------ --- --------
Revenue:
Component sales 267 - - - 267
Royalties 291 - - - 291
Licences and other 36 - - - 36
--------------------------------- -------- ------ ------ --- --------
Costs (2,217) (152) (4) - (2,373)
--------------------------------- -------- ------ ------ --- --------
Loss before financing
costs (1,623) (152) (4) - (1,779)
Financing income - - - - 22
Financing costs - - - - (1)
--------------------------------- -------- ------ ------ --- --------
Loss before tax - - - - (1,758)
Tax - - - - 100
--------------------------------- -------- ------ ------ --- --------
Loss for the period attributable
to equity shareholders - - - - (1,658)
--------------------------------- -------- ------ ------ --- --------
Depreciation and amortisation 100 3 - - 103
Non-current assets 775 16 - 2 793
Current assets 3,316 27 2 - 3,345
Current liabilities 1,196 7 - - 1,203
--------------------------------- -------- ------ ------ --- --------
Six months to March 2011
GBP'000 UK HK Japan US Total
--------------------------------- -------- ------ ------ ------ --------
Revenue:
Component sales 308 - - - 308
Royalties 528 - - - 528
Licences and other 126 - - - 126
--------------------------------- -------- ------ ------ ------ --------
Costs (2,186) (323) (93) (188) (2,790)
--------------------------------- -------- ------ ------ ------ --------
Loss before financing
costs (1,224) (323) (93) (188) (1,828)
Financing income -
Financing costs (3)
--------------------------------- -------- ------ ------ ------ --------
Loss before tax (1,831)
Tax 101
--------------------------------- -------- ------ ------ ------ --------
Loss for the period attributable
to equity shareholders (1,730)
--------------------------------- -------- ------ ------ ------ --------
Depreciation and amortisation 92 5 - - 97
Non-current assets 541 16 - 3 560
Current assets 5,678 66 15 11 5,770
Current liabilities 581 15 - 6 602
--------------------------------- -------- ------ ------ ------ --------
Fifteen months to September
2011
GBP'000 UK HK Japan US Total
--------------------------------- -------- ------ ------ ------ --------
Revenue:
Component sales 874 - - - 874
Royalties 945 - - - 945
Licences and other 175 - - - 175
--------------------------------- -------- ------ ------ ------ --------
Costs (4,534) (787) (268) (300) (5,889)
--------------------------------- -------- ------ ------ ------ --------
Loss before financing
costs (2,540) (787) (268) (300) (3,895)
Financing income 13
Financing costs (6)
--------------------------------- -------- ------ ------ ------ --------
Loss before tax (3,888)
Tax 207
--------------------------------- -------- ------ ------ ------ --------
Loss for the period attributable
to equity shareholders (3,681)
--------------------------------- -------- ------ ------ ------ --------
Depreciation and amortisation 243 13 - - 256
Non-current assets 710 13 - - 723
Current assets 4,401 100 24 4 4,529
Current liabilities 624 36 - - 660
--------------------------------- -------- ------ ------ ------ --------
The results above exclude management recharges.
Capital Additions: In the six months to March 2012 there were
GBP6,000 of capital additions in Hong Kong and GBP95,000 of capital
additions in the UK. In the six months to March 2011 there were
GBP1,000 capital additions in Hong Kong and GBP25,000 of capital
additions in the UK.
4. Tax
The Tax rebate of GBP100,000 relating to Research and
Development activities has been recognised for the six month
period, representing the best estimate of the amount
refundable.
5. Dividends
The directors do not recommend the payment of an interim
dividend.
6. Share Capital
Share capital as at 31 March 2012 was GBP4.269 million. The
total number of shares in issue at 31 March 2012 was
426,818,261.
7. Principal Risks and Uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
next six months and could cause actual results to differ materially
from expected and historical results. Other than the reduced
reliance on licensing and licensees, the increased reliance on the
sale of components and the increase in rare earth metal prices, the
directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the 15 months ended 30 September 2011. A detailed
explanation of the risks can be found on pages 8 and 9 of the
annual report which is available at www.hi-wave.com.
8. Statement of Directors' Responsibilities
We confirm to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial reporting';
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during
the first six months and description of principal risks and uncertainties
for the next six months); and
(c) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions
and changes therein).
By order of the Board,
James Lewis Chief Executive Officer
Kate Barnes Chief Financial Officer
9. Availability of Interim Statements
HiWave Technologies plc will not be sending hard copies of these
Interim Financial Statements to individual shareholders. They will
be available on the Company's website, www.hiwave.com. However, if
you would like to receive a hard copy, please put your request in
writing to HiWave Technologies plc, Regus House, 1010 Cambourne
Business Park, Cambourne, Cambridgeshire, CB23 6DP.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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