Result of AGM

PURE WAFER PLC

(AIM: PUR)

Result of AGM

Pure Wafer plc ("Pure Wafer" or "the Group"), the provider of high quality silicon wafer reclaim services for many of the world's leading semiconductor manufacturers as an integral part of their cost control programmes, confirms that at its AGM held today all resolutions were duly passed.

CHAIRMAN'S REPORT

Introduction

The year to 30 June 2010 started with the industry still struggling to recover from the worst downturn ever experienced in the semiconductor industry and the lasting effects of the worldwide economic recession. Whilst we saw some encouraging signs of recovery of volumes during our first half we were still experiencing price pressure from our customers, as competitors sought to gain volume sales.

During our second half, as the industry shook off the shackles of the downturn and confidence returned to the industry, volume recovery became stronger and downward price pressure stopped, albeit with pricing remaining at the level inherited from our first half.

During the period sterling maintained its relatively weak position against the US dollar (USD) which at least mitigated the effects of the depressed selling prices, when converted to sterling.

As the industry currency is USD and therefore the majority of our revenues and a large proportion of our costs are now denominated in USD, we have decided to switch our reporting currency away from sterling to USD. This now matches our functional currency and allows us to produce accounts that are clearer and more transparent without the need for the large and numerous adjustments required where the functional and reporting currencies are different.

Financial results

·; Turnover $24.8m (2009: $27.8m)

·; EBITDA pre restructuring costs $1.0m (2009: $1.5m)

·; Significant increase in EBITDA from first half to second half (H1: ($0.2m) H2: $1.2m)

·; Operating loss $6.8m (2009: $6.4m)

·; Pre-tax loss $8.0m (2009: $7.8m)

·; Pre-tax loss before restructuring costs and other losses $7.2m (2009: $7.3m)

·; Basic loss per share 5.1c (2009: loss per share 29.4c)

Whilst the results are disappointing, the board is encouraged by the actions of the management team during the period to reduce the impact of the market conditions by significantly reducing costs across all sectors of the business as well as maximising revenue during a difficult trading period. The significant increase in EBITDA in the second half is a reflection of a recovery of volume sales together with the positive impact of our cost reduction activities.

Group Funding

During the year we successfully completed negotiations with our bank and asset funders of a financial restructuring package. The financial agreements comprised of rescheduling all the Company's existing debt over a six year period which includes up to two years of capital repayment holiday together with an overdraft facility of up to £1.4million.

As a condition of the financial restructuring, and to demonstrate their commitment and confidence in the business, certain directors and senior management invested £0.3 million of cash into the business by way of a placement of shares. The open offer to shareholders, which was circulated during August 2009, was well subscribed, raising £1.16 million of funds. This together with the placing of excess shares, which raised £0.53 million, resulted in a total of £1.99 million of funds, before costs, being raised.

The financial restructuring and take up of the open offer and placement, demonstrates the commitment that the bank, asset funders, shareholders and management have to Pure Wafer and shows a confidence in the recovery of the business, and I would like to thank them for their support.

Management

In November 2009, we announced the appointment of Jerry Winters to the board as an executive director, responsible for our US operations. Jerry, aged 51, has a Bachelor of Science Degree from the University of San Francisco and has 31 years experience in the Semiconductor Materials and Integrated Chip industry. I am pleased to welcome Jerry to the Board of Pure Wafer plc. He has many years' experience of manufacturing in the semiconductor industry and more specifically in the wafer reclaim sector. We see this as a strengthening of the Board and a reflection of the growing importance of the US market to the Pure Wafer group and look forward to Pure Wafer receiving the benefits of his experience.

I would like to thank the entire team for their support and effort during what has been a turbulent and challenging year.

Outlook

The current year has commenced strongly with a continuation of volume growth, from all geographical regions. The recent news that one of our major competitors has announced that they will be exiting the wafer reclaim market, the seventh competitor since early 2009 to leave the industry, should redress the balance between supply and demand, and therefore help selling prices recover over time to a more normalised position.

The launch of our solar products is a very exciting time for Pure Wafer, as we believe that the renewable energy market has a massive potential growth both globally but significantly here in the UK being underpinned by the introduction of the government backed feed-in-tariff in April 2010. Pure Wafer's products include solar cells manufactured in the Swansea facility without the conventional heat process, which enables Pure Wafer to convert scrap from one industry into an energy producing product for another industry, with the lowest carbon footprint. We have now added to this with the manufacturing of solar panels which means that we are positioned as the only manufacturer of solar cells and solar panels in the UK.

The aforementioned developments when taken together with our additional funding, gives Pure Wafer a strong foundation on which to move forward.

Stephen Boyd

Non Executive Chairman

28 October 2010

CHIEF EXECUTIVE'S REPORT

Operational review

The financial year to June 2010 proved to be a period of recovery as the semiconductor industry shook off the burden of the deepest decline in its history, as the world economic turmoil eased.

Volume sales recovered during the year with 300mm wafer reclaim up by 20% when compared to the prior year, and 200mm wafer reclaim up 11%. Whilst we were encouraged by the start to the year, the second half of the year saw an even stronger recovery with increases in both 300mm and 200mm volumes, compared to the first half, of 21% and 16% respectively.

We commenced the year with all employees on short time working for the first quarter, but volumes recovered sufficiently for full time and pay to be reinstated during the second quarter.

I would like to thank all our employees for agreeing to support the short time working initiative, enabling Pure Wafer to continue to trade competitively throughout this difficult year, whilst retaining our staff.

Despite selling prices stabilising and downward pressure evaporating in the second half of the year, the brutal price reductions that we experienced during 2008 and 2009 meant that the year concluded with stable but low selling prices, which necessitated the Company continuing to concentrate on reducing its cost base. As volumes recovered we have absorbed these without increasing headcount, thus benefiting from cost efficiencies through higher productivity. Our ongoing engineering led cost reduction activities have enabled us to reduce the consumable costs per wafer and certain fixed costs, all without affecting the quality of the Group's product offering. These activities have resulted in an overall reduction in the unit cost per wafer of 20% compared with the prior year.

Highlights

·; Sales Volumes have recovered

- 300mm up by 20% and 200mm up by 11% when compared to prior year

- Strong increases in volumes second half over first half.

·; No downward pressure on selling prices in second half

·; Cost reductions continued leading to 20% reduction in cost per unit compared to prior year

·; Development and launch of our UK manufactured, lowest carbon footprint solar products.

·; Group banking arrangements have been restructured

- existing debt rescheduled over a six year period including up to two year capital moratorium

- overdraft facilities of £1.4 million agreed

·; Successful placing and open offer of shares raised £1.99 million, before costs, for working capital

·; Business now stabilised with low cost of manufacture, in a recovering market, with significant installed capacity.

Market

We have made significant progress in increasing our 300mm wafer reclaim market share in the US, from our Prescott, Arizona facility, where we are actively engaged with every major 300mm integrated chip manufacturer which has a manufacturing presence in the US. The Prescott facility is now fully equipped for large scale 300mm production, with the quality of offering equal to the stringent requirements of our blue chip customer base and we envisage further significant market gains.

There have been some significant corporate failures within the competitive landscape, with competitors either voluntarily leaving the wafer reclaim market or through chapter 11 arrangements. The effect of these changes, which have resulted in Pure Wafer having the only wafer reclaim facilities in both Europe and US with the capacity and capability to service the high end blue chip customers, will certainly have a significant effect on the supply and demand balance worldwide. As customer specification requirements tighten, the capacity of high quality reclaim services is restricted still further to wafer reclaim companies who have both the technical know how and the relevant measurement equipment to produce an offering to the quality required.

With the Group's current installed capacity for 300mm and smaller diameter wafers at Pure Wafer's high quality facilities in Swansea and Prescott, Arizona, together with the reduced cost per wafer, the Board believe that the Company is well placed for future growth.

New products

The development of our solar products and the establishment of the manufacturing lines are progressing well, with a great deal of interest for our lowest carbon, UK manufactured products. We have recently received confirmation that our products have performed well in the stringent testing requirements which are needed for Microgeneration Certification Scheme (MCS) certification, which is required for installations to qualify for the government backed feed-in-tariff. We see this as a exciting addition to our portfolio of products and are confident that it will provide significant revenue and profitability to the group.

Peter Harrington

Chief Executive

28 October 2010

FINANCIAL REVIEW

Reporting currency

The currency of the industry we are in is USD and therefore the majority of our revenues and a large proportion of our costs are now denominated in USD, we have therefore decided to switch our reporting currency away from sterling to USD. This now matches our functional currency and allows us to produce accounts that are clearer and more transparent without the need for the large and numerous adjustments required at the year end to deal with the difference between functional and reporting currencies.

Volumes and Revenue

The volume of 300mm equivalent wafers processed at 958,000 (2009: 844,000) was an increase of 14% in the year Revenue for the year was $24.8m, a decrease of 11% on last year (2009: $27.8m); reflecting the impact of price pressures. An analysis of turnover by origin and destination can be found in note 5.

Gross profit

Gross profit at $5.2m (2009: $6.5m), a reduction of 20%, was impacted by the reduction in average 300mm selling prices in the marketplace despite the increase in volumes, together with the reduction in scrap sales of $2.2m compared to prior year, as the value of scrap material fell dramatically The low pricing for silicon scrap bodes well for our solar cell manufacturing division. The gross profit margin reduced accordingly to 21% (2009: 23%).

Operating loss

The operating loss of $6.8m (2009: loss of $6.2m) was achieved after incurring $0.8m (2009: $0.6m) of restructuring costs.

Administrative expenses

Administrative expenses of $11.2m (2009: $12.0m) for the group show a decrease on the prior year.

Loss before tax

The loss before tax was $8.0m (2009: $7.8m).

Foreign exchange

As over 95% of group revenue is in US Dollars, revenue and margins are impacted by the movement in the currency. We continue to convert as much of the cost base as possible to US Dollars in order to provide a natural hedge against the US Dollar revenue streams.

Cash flow and capital expenditure

Cash flow from operations this year showed a net outflow of $0.3m (2009: inflow $7.5m). The deterioration in cash flow stems from the normalisation of the company's creditors after the refinancing of the business in the year.

Taxation

There is no current tax charge across the group. During the year the group submitted claims in respect of qualifying Research and Development: the amounts recoverable are disclosed within debtors at year end and were received in full after the year end. Due to the losses incurred during the year, the board has taken the prudent decision not to recognise the deferred tax asset of $10.0m (2009: $9.6m) pertaining to accumulated losses, in the balance sheet, as it not expected to be utilised within the foreseeable future.

LPS and dividend

Basic loss per share for the year was 5.1c (2009: 29.4c ), based on 126 million shares (2009: 26m)

Due to the current economic climate, the cash constraints faced by the group moving forward and the lack of available distributable reserves the board is not able to recommend the payment of a dividend for this financial year.

Capital

At 30 June 2009 the company was in negotiations with its existing lenders to restructure the capital repayment terms of bank loans, hire purchase and finance leases. Although these negotiations were very well advanced at 30 June 2009 they were not completely finalised until shortly after the year end.

On 20 August 2009, the group reached an agreement with its lenders to restructure the capital repayment terms of bank loans, hire purchase and finance leases.

In September 2009 the refinancing was completed. As a condition of the financial restructuring, and to demonstrate their commitment and confidence in the business, certain directors and senior management invested £0.3 million of cash into the business by way of a placement of shares. The open offer to shareholders, which was circulated during August 2009, was well subscribed, raising £1.16 million of funds. This, together with the placing of excess shares, which raised £0.53 million resulted in a total of £1.99million of funds, before costs, being raised.

Tim Lowe

Group Finance Director

28 October 2010

Consolidated income statement

Year ended 30 June 2010

All activities derive from continuing operations

The loss for the parent company for the year was $1,170,000 (2009: loss of $2,137,000)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 30 June 2010

STATEMENT OF CHANGES IN EQUITY

Year ended 30 June 2010

CONSOLIDATED BALANCE SHEET

30 June 2010

CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 June 2010

NOTES TO THE PRELIMINARY RESULTS

Year ended 30 June 2010

1. Publication of Non-Statutory Accounts

The financial information set out in this announcement does not comprise the Group`s statutory accounts for the years ended 30 June 2010 or 30 June 2009.

The financial information has been extracted from the statutory accounts of the Company for the year ended 30 June 2009 which have been delivered to the Registrar of Companies. The auditors` opinion on those accounts was unqualified and did not contain a statement under section 498 (2) or section 498 (3) Companies Act 2006 and did not include references to any matters to which the auditor drew attention by the way of emphasis.

The statutory accounts for the year ended 30 June 2010 will be finalised on the basis of the financial information presented by the directors in this announcement and will be delivered to the Registrar of Companies following the Company`s Annual General Meeting.

2. GENERAL INFORMATION

Pure Wafer plc is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is Pure Wafer plc, Central Business Park, Swansea Vale, Swansea SA7 0AB.

ADOPTION OF NEW AND REVISED STANDARDS

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as they apply to financial statements of the group for the year ended 30 June 2010 and applied in accordance with the Companies Act 2006. The financial statements have been prepared in accordance with the historical cost convention.

In the current year, the following new standards and amendments are effective. These are: IFRS 3 (revised) 'Accounting for Business Combinations'; IAS 31 'Interests in Joint Ventures' and IAS 27 (revised) 'Transactions with non controlling interests'. The adoption of these new standards and amendments has not led to any changes in the group's accounting policies.

IFRS 2 (amended), IFRS 5 (amended), IFRS 9 (revised), IAS 24 (amended), IAS 32 (amended), and IFRIC Interpretations 12, 15, 16, 17, 18 and 19 were in issue but not yet effective as at the year end, and have not been applied in the preparation of the financial statements. The directors do not anticipate that the adoption in future periods of these standards and interpretations will have a material impact on the financial statements of the Group.

3. business and geographical segments

The group's activities and turnover primarily consist of the reclamation and reprocessing of silicon test wafers, in the UK and the US, for external customers

For management purposes, the group is organised into two operating divisions based on the geographical territory of origin. These divisions are the basis on which the group reports its primary segment information.

Segment information is presented below:

Analysis by product

The revenue by product variant was as follows:

Analysis by destination

The revenue by destination was as follows:

4. LOSS per share 

The calculation of the basic and diluted loss per share is based on the following data:

5. Interest-bearing loans and borrowings

Overdrafts are repayable on demand. Bank loans, hire purchase and finance lease obligations are repayable as follows:

Obligations under finance lease and hire purchase contracts are secured on the related assets. See note 20 for further detail on finance lease contracts. The bank loans are secured on the assets and undertakings of the group.

On 20 August 2009 the group reached an agreement with its lenders to restructure the capital repayment terms of bank loans, hire purchase and finance leases. At 30 June 2009 all loans were shown as immediately repayable on demand reflecting the fact that the banking covenants that existed at that time had been breached. The covenants pertaining to these borrowings were removed as part of the refinancing.

The fair value of the group's loan, finance leases and hire purchase obligations approximates to their carrying amount.

6. Obligations under finance leases

It is the group's policy to lease certain plant and machinery under finance leases.

The contractual payments in respect of finance leases based on the undiscounted cash flows and the earliest date on which the group and company can be required to pay are shown above.

For the year ended 30 June 2010, the average effective borrowing rate was 7.4% (2009 - 7.4%). Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The carrying amount of the borrowings approximates their fair value.

All lease obligations are denominated in US Dollars. The fair value of the group's lease obligations approximates to their carrying amount. The group's obligations under finance leases are secured by the lessors' rights over the leased assets.

7. notes to the consolidated cash flow statement

8. Annual Report and Annual General Meeting

The Annual Report will be will be posted to shareholders on or around 28 October 2010 and will be available from the Company`s website, www.purewafer.com, shortly thereafter. The Annual Report contains notice of the Annual General Meeting of the Company which will be held at 11.00am on 22 November 2010 at Pure Wafer plc, Central Business Park , Swansea Vale, Swansea SA7 0AB.