Andor Technology reports 2009 preliminary results

Andor Technology plc (AND.L), the leading developer and manufacturer of high performance digital cameras and solutions for academic, industrial and government applications globally, today announces preliminary results for the year ended 30 September 2009.

Financial Highlights - Turnover up 34% to GBP33.1m (2008: GBP24.7m) - *Operating profit up 63% to GBP3.4m (2008: GBP2.1m) - *PBT up 67% to GBP3.5m (2008: GBP2.1m) - *EPS up 79.4% to 11.57 pence (2008: 6.45 pence) - Cash generation up 411% to GBP5.8m (2008: GBP1.1m) - Strong cash position - net funds of GBP7.9m *Pre exceptional items Operational Highlights - White paper launch of scientific CMOS image sensor technology - 30% year-on-year growth in opening order book for 2010 - Continued growth in China and investment in sales channel -

Delivering against USD2.1m design contract Commenting on the results Conor Walsh, Chief Executive, said:"Andor has charted a path through the uncertainty of the past 12 months and delivered a strong set of results. As we look forward to 2010 we remain cautious about the economic outlook, the exposure we have as a global business to currency volatility, and the ever-increasing competition for business. But we are also optimistic, buoyed by the strength of our brand and our business, the technology we offer and will deliver over the coming year, and most of all the skill and diligence of our staff."

Enquires: Andor Technology plc Conor Walsh +44 (0) 28 9023 7126 Chief Executive Arden Partners plc Fred Walsh +44 (0) 20 7398 1651 Director, Corporate Finance Notes to Editors: Andor Technology plc (www.andor.com) is at the forefront of developing and manufacturing instruments for the global scientific imaging and spectroscopy markets.

The company's range of CCD and intensified CCD camera systems are used throughout the world for academic, industrial and government research across a wide range of fields such as biotechnology, physics and chemistry. Using Andor products these customers can break new ground by performing experiments that were previously considered impossible. Independently conducted customer research confirms that Andor's low light solutions are considered world beating.

Established in 1989, Andor's corporate headquarters are in Belfast, Northern Ireland. Operating in a global market, Andor's US headquarters opened in Connecticut in 1997. Andor has regional sales offices in Europe, the US, Japan and China. The company is listed on the London Stock Exchange's AIM market and commenced dealings in its ordinary shares in December 2004 (AND.L).

Overview: This year we have reached a number of new milestones at Andor. We celebrate 20 years in business and, for the 12th year in succession we have increased our turnover, growing sales by 34% to GBP33.1m. We have recorded our largest ever full year growth in operating profit (before exceptional items) up 63%, and over the past two years operating profits (before exceptional items) have more than doubled from GBP1.4m to GBP3.4m. Finally, we have recorded the largest ever cash generation achieved in a 12 month period, delivering cash conversion from operating profit of 176% and actual cash generation of GBP5.8m in the 12 months to 30 September 2009.

These are challenging and volatile times in the global market and Andor is a global business. We export more than 90% of our product and in the year just finished we have benefited from the weakening of sterling against the other major currencies. We forward contract a significant proportion of our currency exposure, but as with all global businesses, we remain exposed to the volatility of the exchange rates going forward and specifically to a strengthening of sterling. It is also worth recording that one third of the year was spent in an offer period. It is testament to the management team and the employees of Andor that they did not lose focus on the primary responsibility of running the business and executing the strategic plan. These results are achieved through their hard work, ability and dedication. Geographic Review For the 12th year in succession we have achieved record turnover of GBP33.1m, up 34% on the previous year. We said during 2008 that we were implementing a strategy to grow OEM sales in the US to counter the effects of reduced research funding available to our scientific customers.

At the end of 2008 we said we were seeing the benefit of this with significant growth in order intake. We are therefore pleased to report at the end of 2009, that the biggest growth across all regions has been achieved in the US, growing sales by 58%. We continue to see China as a significant growth opportunity for Andor and during the year we invested further in our direct and indirect channels. Sales grew 54% in the 12 month period and we have plans for further investment during 2010 to capitalise on this opportunity. In Japan sales grew by 53% however this performance, more than others, has benefited from the fluctuations in the exchange rate. Europe has been one of our strongest growth markets over the past three years, especially due to the explosive performance of our systems division in this region. It is therefore no surprise that sales in Europe have grown 12% this year representing a consolidation on a number of years of strong growth. Segment Review - Scientific Research Scientific research customers are core to our business and directly represent 60% of revenue.

Our traditional product offering has been a portfolio of cameras at the very highest end of the performance range. We continue to invest in these products and sales to this segment during the year grew by 44% to GBP19.7m. While this remains core to our business going forward, we are implementing a strategy of increasing our addressable market by extending our product offering into the mid-range market. We launched this strategy in December 2007 and since then we have released three cameras - the Luca, the iVac and the Clara - all targeted at this mid-range market. In June 2009 we made our most significant announcement as part of this expansion strategy. At the Laser Conference and Exhibition in Munich we announced, together with our partners, a breakthrough in scientific CMOS image sensor technology.

This sensor technology is capable of outperforming most scientific imaging devices on the market today and has the potential to become the global detection platform of choice for demanding scientific photonics applications. This is still in the development phase and there remain risks associated with the delivery, however, the level of interest in this technology among the scientific community is extremely high and we are very optimistic about the medium term revenue potential. Segment Review - OEM OEM growth has been another focus for the business since December 2007 and I am pleased to report a reversal of the sales decline of 2008. During the year ended 30 September 2009 sales grew by 24% to GBP7.0m. This has been largely driven by a focused plan in the US which, over the last two years, has delivered two engineering and design contracts worth USD1.3m and USD2.1m each and also an order for a key US account for a custom designed product currently delivering USD3.0m per annum.

Over the coming years the delivery of the mid-range portfolio of cameras for the scientific research segment will create further opportunity in the OEM segment. Many of our existing customers have demand for product that we have not been able to satisfy historically. Our strategy in scientific research to expand our product portfolio into the mid-range market will also greatly increase our addressable market in OEM. The products, complemented by our investment in purpose built facilities and engineering capabilities, leave us well positioned to meet the needs of existing and new OEM accounts. Segment Review - Systems Division The systems division was created to provide a more complete solution to the customer and complements our other segments which tend to be more component based.

Currently we offer the Andor Revolution® which is the complete solution for live cell microscopy. Last year we recorded growth of 109% and said our plan for 2009 was to consolidate on market share achieved. I am pleased to report sales for the full year grew by 20% to GBP6.4m (2008: GBP5.3m). In the summer of 2009 we announced a new product to add to the portfolio and we expect this to be formally launched in the first half of the new financial year, a little later than planned.

This product will target existing technology in the live cell field and will leverage our existing investment in channel to market and application knowledge. We are continuing to grow our geographic reach for this segment and I am pleased to report that following very strong performance in Europe last year, our biggest growth region this year was the US where we almost doubled sales in local currency. We are adding to our channel infrastructure in Asia Pacific and expect to see further growth in these regions over the coming years. Financial Review Turnover grew by 34% to GBP33.1m (2008: GBP24.7m). Europe is our largest geographic market with sales of GBP13.9m, up 12% on the previous year. Sales to the US grew by 58% to GBP11.7m while Asia Pacific in total grew by 53% to GBP7.5m.

Europe now represents 42% of revenue, with the US at 35% and Asia Pacific totalling 23%. Gross margin increased by 340 basis points to 51%. The market remains extremely competitive, but with the benefit of superior technology and helped by favourable currency movements our margins before production costs have improved by 380 basis points. Changes to duty classifications and a prudent view on stock provisioning have increased production costs relative to turnover by 40 basis points. We continue to invest for growth and during the period operating costs (before exceptional items) grew from GBP9.6m to GBP13.4m. We increased our headcount by 33 (18%) with nearly all of those additions coming in operations and engineering. This investment considerably strengthens our ability to design and manufacture new product as well as continuously improve quality and meet market output demands. R&D expenditure grew to GBP3.2m representing 9.7% of turnover. Operating profit (before exceptional items) grew by 63% from GBP2.1m to GBP3.4m and pre-exceptional operating margins grew by 180 basis points from 8.6% to 10.4%. We incurred GBP124,000 exceptional costs in the year relating to the offer period, which terminated in January 2009 (2008: GBP600,000).

Net interest receivable was GBP72,000 (2008: GBP5,000 payable). Profit before tax increased by 124% to GBP3.4m and pre-exceptional profit before tax increased 67% from GBP2.1m to GBP3.5m. The taxation charge for the period was GBP400,000 (2008: GBP379,000). Of this amount, GBP500,000 related to corporation tax payable with the balance being a deferred tax credit. This increase is due to the improvement in profit on ordinary activities before tax. The underlying effective tax rate is 14.2% before exceptional items, benefiting from the R&D tax credits and also a prior year provision reversal. Basic earnings per share have increased from 4.22 pence per share in 2008 to 11.11 pence per share in 2009. Pre-exceptional basic earnings per share have increased from 6.45 pence per share in 2008 to 11.57 pence per share in 2009. On 30 September 2009 Andor had had cash at bank and in hand of GBP10.0m and long term borrowings of GBP2.0m. In addition, we have available facilities of GBP1.3m secured against debtor balances and overdraft facilities of GBP0.3m. Cash generation increased fourfold from GBP1.1m to GBP5.8m driven by improved profitability and better working capital management. Working capital to sales fell from 30% to 15%, a record low for the business. It is likely that due to the timing of sales and the funding required for growth, this will reverse slightly in 2010 but not to the level of previous years.

Capital expenditure fell back to GBP0.5m (2008: GBP0.9m). This is a typical level when we are not making one-off strategic investments for growth. The business now has net assets of GBP16.4m. Research and development expenditure was 9.7% of sales in 2009 (2008: 10.5%). This amount includes an impairment provision of GBP0.4m against capitalised development expenditure. Board Developments During the year we said goodbye to Jack Doherty who resigned having given sterling service to Andor since 2005. We also announced that our Chairman, Bryan Keating would be stepping down after the upcoming AGM to be succeeded by Colin Walsh.

Bryan has been with Andor for nearly 10 years and his contribution to the growth and development of the business over that time has been immense. We wish both Jack and Bryan good luck in their future activities and thank them for their service. A search for an additional non-executive board member is also underway. Outlook Our strategy is clear. We want to grow through investment and innovation, achieving superior advantage in our technology and our cost structures. We want to develop our core business as the springboard to fund further growth by expanding our addressable market but staying within our area of expertise. We want to leverage our facilities and our resources to drive volume and increase capacity utilisation. And finally, we want to use the dual assets of our listing and our cash generation to deliver accelerated growth by seeking out acquisition opportunities that complement our existing business. This has truly been an extraordinary year.

Unprecedented economic conditions, massive uncertainty across all business sectors and extreme volatility in the currency markets will mean 2009 will be remembered for some time. Andor has charted a path through the uncertainty of the past 12 months and delivered a strong set of results. As we look forward to 2010 we remain cautious about the economic outlook, the exposure we have as a global business to currency volatility, and the ever increasing competition for business. But we are also optimistic, buoyed by the strength of our brand and our business, by the technology we offer and will deliver over the coming year, and, most of all, by the skill and diligence of our staff.