ABINGDON, U.K., May 5, 2004 (PRIMEZONE) -- Bookham Technology plc ("Bookham") (LSE:BHM) (Nasdaq:BKHM), a leading provider of optical and RF components, modules and subsystems used in various applications and industries, including telecommunications, today announced results for the first quarter ended April 4, 2004.
Key points for the first quarter ended April 4, 2004
* Revenues in the first quarter 2004 in US Dollars, the principal currency in which the company receives orders, were $41.3 million, up 2% from fourth quarter 2003 revenues of $40.5 million and up 25% from first quarter 2003, in line with management expectations. In Sterling, the revenues were 22.5 million Pounds, slightly down from fourth quarter 2003 revenues of 24.0 million Pounds, and up 7% from first quarter 2003. The average US Dollar to Sterling exchange rate declined 8% from the fourth quarter 2003, again in line with management expectations.
* Gross margin was negative 4% of revenues under UK GAAP, and negative 2% of revenues, under US GAAP, down from the fourth quarter 2003, but ahead of management expectations, principally due to the decline in the US Dollar relative to Sterling.
* Cash burn excluding the impact of the acquisition of New Focus, Inc. ("New Focus") was 11.1 million Pounds ($20.4 million) up from 8.9 million Pounds ($15.0 million) in the fourth quarter 2003, and in line with management expectations.
* The net loss under UK GAAP was 16.0 million Pounds ($29.4 million), an increased loss of 9.0 million Pounds from the fourth quarter 2003 results which benefited from 4.3 million Pounds of exceptional income compared with 2.8 million Pounds in first quarter 2004. Under US GAAP, the net loss was 17.5 million Pounds ($32.1 million).
* The acquisition of New Focus was completed on March 8, 2004. The integration plans are proceeding well and all major organizational changes are now complete.
* In March, the company announced the opening of an advanced manufacturing facility in Shenzhen, China. The factory in Shenzhen, which is expected to substantially reduce the cost of assembling the company's products, was obtained through Bookham's recent acquisition of New Focus and the company has commenced staffing for this facility on a rapid timescale.
Commenting on the results, Giorgio Anania, Chief Executive Officer, said: "The major event this quarter was the completion of our acquisition of New Focus, which brings us additional revenues and new customers, a significant strengthening of our cash position and a cost-reduction route through the large assembly facility in Shenzhen, China. Growth in revenues to customers other than Nortel has continued, as in previous quarters, increasing 5% sequentially. We have started to see traction with the thin-film passive products and subsystems, through our acquisitions of Cierra Photonics and Ignis Optics in 2003. In addition we have commenced the first pre-production shipments of our high-power lasers into industrial markets.
"With the continuing negative impact of a weak US Dollar, we continue to move aggressively with further cost reduction initiatives in the business, including the rapid commissioning of the China manufacturing facility. Our intention is to reduce overhead costs by approximately 25% from current levels over the next 12 months."
Operating review
Operations The acquisition of New Focus was completed on March 8, 2004. This acquisition is expected to increase the critical mass of the company's non-telecom business, enabling the company to diversify its customer base, as well as providing significant additional cash resources. To date, the integration process is proceeding well. New Focus provides photonics and microwave solutions to diversified markets, including the semiconductor, defence, research, industrial, biotech/medical and telecom test and measurement industries. Important product solutions include opto-electronics, photonics subsystems, photonic tools, tunable lasers, and microwave radio-frequency amplifiers.
In March, the company announced the opening of an advanced manufacturing facility in Shenzhen, China as part of its wider strategy for the Asia Pacific region, where it has seen revenue growth in the last two years. The factory in Shenzhen was obtained through Bookham's acquisition of New Focus and the company has commenced recruitment with a goal to rapidly staff this facility. A management team has been put in place covering all the key functions (manufacturing, information systems, purchasing, finance, HR, quality, facilities and logistics). The initial products to be transferred to the Shenzhen facility have been identified and include transmitter and receiver optical assemblies, along with mini amplifiers. The Shenzhen facility is currently being prepared to receive the first transfers of equipment from the Paignton, UK, facility where these products are currently manufactured.
Customers Key customers for the quarter included Nortel Networks and Marconi Communications, representing respectively 48% and 12% of total revenues. Nortel Networks represented 58% in the fourth quarter 2003. Revenues from customers other than Nortel Networks and Marconi increased 5% sequentially in US Dollar terms, excluding the impact of the acquisition of New Focus.
In April, the company announced it had received the Gold Supplier of the Year Award from Huawei, China's leading telecommunications company and one of the larger optical networks manufacturing companies in the world. The award recognizes the company's service and support to Huawei during 2003 and was the only Gold award presented to a component supplier. The award is an important step in building a long-term relationship with Huawei, as one of the company's key customers, and recognizes the strength of the relationship which Bookham hopes to build upon and strengthen further in the future.
Change of domicile Following the substantial transformation in the company's business activities, customer base and shareholder ownership in the four years since its initial public offering, the company believes that it may be in the best interests of Bookham to effect a change the corporate domicile and primary listing of Bookham Technology plc to the United States. No firm decision has been taken regarding the definitive timing of such a move which would, in any event, require shareholder approval.
Other developments Professor David Simpson, Vice Chairman and non-executive director of the board has decided to retire at the conclusion of the Annual General Meeting on June 2, 2004. David joined the company in 1995 and the Board would like to thank him for his support over the years.
Financial commentary All US dollar numbers have been translated at 1 = $1.835 Pounds (P&L and cashflow) and 1 = $1.855 (Balance Sheet) Pounds, for the convenience of the reader.
First quarter ended April 4, 2004
Revenues: Revenues in the first quarter 2004 in US Dollars, the principal currency in which the company receives orders, were $41.3 million, up 2% from fourth quarter 2003 revenues of $40.5 million. In Sterling, revenues were 22.5 million Pounds, slightly down from fourth quarter 2003 of 24.0 million Pounds, and in line with management expectations. The average US Dollar to Sterling exchange rate declined 9% from the fourth quarter 2003, again in line with management expectations. Compared with the first quarter 2003, revenues were up 25% in US Dollars and 7% in Sterling.
The first quarter 2004 included revenues from New Focus for the period from the acquisition of New Focus on March 8, through to the quarter end, amounting to 1.5 million Pounds ($2.8 million). Excluding revenues from New Focus, US Dollar revenues in the first quarter 2004 of $38.5 million were down 5% sequentially from the fourth quarter 2003 and up 17% from the first quarter 2003, in line with management expectations. The sequential decline between the fourth quarter 2003 and the first quarter 2004 was a result of the reduction in sales to Nortel Networks, partially offset by an increase in revenues to other customers.
As part of the acquisition of Nortel Networks' optical components business in November 2002, Bookham entered into a three-year supply agreement with Nortel Networks expiring in November 2005. The agreement consists of two elements: a commitment to purchase a minimum percentage of Nortel Networks' demands for certain component categories for the three years, as well as a minimum purchase amount of $20 million of product from Bookham on a quarterly basis for six quarters. The minimum purchase amount commitment expired at the end of the first quarter 2004.
Operating loss: The gross loss (loss at the gross margin level) under UK GAAP was 0.9 million Pounds ($1.7 million), declining from a pre-exceptional profit of 1.5 million Pounds ($2.5 million) in the fourth quarter 2003 and improved from a pre-exceptional loss of 5.0 million Pounds in the first quarter 2003. The gross margin profit has declined from 6.3% in the fourth quarter 2003, to (4%) of revenues in the first quarter 2004, but improved from a loss of (24%) in the first quarter 2003. The decline in the gross margin between quarters is principally due to the adverse impact of the US Dollar offset by reduced depreciation and lower equipment maintenance costs.
Under US GAAP, gross margin declined to (2%) and the gross loss was 0.4 million Pounds ($0.8 million). The primary difference between US and UK GAAP relates to lower depreciation under US GAAP.
Operating expenses under UK GAAP in the first quarter 2004 were 18.9 million Pounds ($34.6 million), an increase of 3.5 million Pounds ($6.4 million) from fourth quarter 2003. This was principally due to increased exchange losses on US Dollars, amortization charges, the consolidation of New Focus for the acquisition period and higher costs associated with corporate filings. Under US GAAP, the operating expenses were 15.9 million Pounds ($29.2 million). The difference to the UK GAAP based costs relates principally to the differing treatment of exchange differences and depreciation and amortization charges.
Restructuring and other charges (charges for US GAAP): In the first quarter 2004, there were no material exceptional items under UK GAAP. Under US GAAP, charges amounted to a loss of 3.1 million Pounds ($5.7 million) arising from an IPR&D write-off following the New Focus acquisition.
Interest, asset sales and other income: Asset sales comprised profits of 2.8 million Pounds ($5.2 million) of fixed asset sales (UK GAAP), which arose from equipment sales of assets from the Milton and Ottawa facilities. Net interest, under UK GAAP, for the first quarter was 1.0 million Pounds income compared with 1.6 million Pounds expense in the fourth quarter 2003. Net interest includes a net gain amounting to 1.2 million Pounds ($2.2 million) arising from weakness in the US Dollar as compared to Sterling.
Under US GAAP, other income includes the fixed asset sales of 2.8 million Pounds ($5.2 million), foreign exchange losses of 1.8 million Pounds ($3.3 million) and net interest income of 1.0 million Pounds ($1.8 million).
Net loss: The net loss under UK GAAP amounted to 16.0 million Pounds ($29.4 million) or 0.07 Pounds per share, and under US GAAP were 17.5 million Pounds ($32.1 million) or $0.07 per share.
Cash and cash equivalents: Cash and cash equivalents as of April 4, 2004 were 76.6 million Pounds ($142.1 million) compared with 39.0 million Pounds ($65.8 million) as at December 31, 2003.
The increase in cash and cash equivalents is due to the net 52.4 million Pounds ($97.2 million) cash which has been consolidated following the acquisition of New Focus.
New Focus acquisition: Under UK GAAP, goodwill amounting to 50.9 million Pounds ($94.4 million) arose from consideration of 107.1 million Pounds ($198.7 million) and fair value of net assets acquired was 56.3 million Pounds ($104.4 million).
Under US GAAP, goodwill amounting to 44.6 million Pounds ($82.7 million) arose from consideration of 114.0 million Pounds ($211.5 million) and fair value of net assets acquired was 69.4 million Pounds ($128.7 million). See the basis of preparation, on page 17, for further details of the fair value adjustments.
Cash flow: Total cash burn for the first quarter 2004, excluding the acquisition of New Focus, was 11.1 million Pounds ($20.4 million).
Capital expenditure in the period amounted to 1.5 million Pounds ($2.8 million); working capital improved by 1.4 million Pounds ($2.6 million) under UK and US GAAP, principally due to a reduction in stock, debtors and increased creditors.
Outlook In the second quarter 2004, the company anticipates revenues, denominated in US Dollars, to be down between 3% and 12% from the first quarter 2004, principally due to the anticipated lower demand in the quarter from Nortel Networks. Assuming an exchange rate of 1 = $1.80 Pounds, the company anticipates revenues to be in the range of 20 million Pounds to 22 million Pounds ($36 million to $40 million) for the quarter.
The company estimates that gross margin will be in the range of negative 6% to negative 12% for the second quarter 2004, as a result of lower revenues and the continuing negative foreign exchange impact.
Going forward, the company will continue to implement cost reduction initiatives, including the transfer of production costs which are expected to deliver results later in the year. The company anticipates cash burn to be between 12 million Pounds and 15 million Pounds ($22 million to $28 million) in the second quarter 2004, principally due to lower revenues and the impact of foreign exchange.
For further information, please contact:
Bookham Technology: +44 (0) 1235 837000 Giorgio Anania -Chief Executive Officer Steve Abely - Chief Financial Officer Sharon Ostaszewska - Director Communications For media interviews - please contact: Emma Deegan - +44 (0) 1235 837573 Brian Dolby/Helen Lyman-Smith - GBCS PR - +44 115 950 8399
The company will be hosting a conference call to discuss this set of results on Wednesday May 5, 2004 at 13.30 (BST), 08.30 (EST). Dial in numbers are as follows:
UK/European participants +44 (0) 20 7162 0184 US participants +1 888 222 0364
A taped recording will be available for 30 days. Dial in numbers are as follows:
UK/European participants +44 (0) 20 8288 4459 (access code: 702772)
US participants +1 334 323 6222 (access code: 702772)
The call can also be accessed on the company's web site, www.bookham.com. In addition, a presentation which will be used during the call, will be available on the web site, through the webcast link on the home page.
Bookham Technology (LSE: BHM; NASDAQ: BKHM) is a global leader in the design, manufacture and marketing of optical and RF components, modules and subsystems. Bookham's disruptive technologies and broad product range allow it to deliver an extensive range of cost effective optical functionality and solutions to customers, which offer higher performance, lower cost and provide greater subsystems capability to meet their customers' needs. The company's optical and RF components, modules and subsystems are used in various applications and industries, including telecommunications, data communications, aerospace, industrial and military. In 2002, Bookham acquired the optical components businesses from Nortel Networks and Marconi. In 2003, the company acquired Ignis Optics, Inc. and the business of Cierra Photonics Inc. In March 2004, the company completed the acquisition of New Focus, Inc. The company, whose securities are traded on NASDAQ and the London Stock Exchange, is headquartered in the UK, with manufacturing facilities in the UK, US, Canada, and Switzerland; offices in the UK, US, France, Italy, and China; and employs approximately 1750 people worldwide. More information on Bookham Technology is available at www.bookham.com
Statements made in this press release that are not historical facts include forward-looking statements that involve risks and uncertainties. Important factors that could cause actual results to differ from those indicated by such forward-looking statements include, among others, recovery of industry demand, the need to manage manufacturing capacity, production equipment and personnel to anticipated levels of demand for products, the ability to integrate the operations of New Focus, reductions in demand for optical components, expansion of our business operations, quarterly variations in results, currency exchange rate fluctuations, manufacturing capacity yields and inventory, intellectual property issues and other uncertainties that are discussed in the "Risk Factors" sections of our Annual Report on Form 20-F for the year ended December 31, 2003. Forward-looking statements represent our estimates as of today, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements in the future, we disclaim any obligation to do so.
The full release with financial tables can be found at the following links: