annual report and accounts 2005
INSPIRING YOUR PRODUCTS AND MANUFACTURING 
SPI Lasers plc
3 Wellington Park 
Tollbar Way 
Hedge End 
Southampton 
SO30 2QU 
Tel: +44 (0)1489 779696  
Fax: +44 (0)1489 779698 
Email: investors@spilasers.com
Web: www.spilasers.com
SPI Lasers plc  annual report and accounts 2005 OUR STRATEGY 
Our goal is to be a leader in the optical
ﬁ bre-based laser market. 
QUARTER 1QUARTER 2
  Released product roadmap for MICRO 
and MARKING at Laser 2005 
 Cell-based manufacturing introduced
  Capital injection of £2.2m net from 
venture investors
 Venture finance loan received of £2.0m
  Industrial interfaces added to 
first MICRO laser combined with 
regulatory compliance 
  First lasers sold into production 
stent environment
  Capital injection of £1.6m net from 
venture investors
SPI’s current business was established in 
2000 to exploit technology developed by the 
renowned Optoelectronics Research Centre 
at the University of Southampton. Initially, 
SPI focused on the manufacture of optical 
components for the long-distance, high-speed 
telecommunications industry. In doing so, SPI 
gained expertise in the design and manufacture 
of specialty optical ﬁ bre and Bragg gratings, 
a form of mirror or ﬁ lter contained in optical 
ﬁ bre, for use in optical processing. These skills 
are transportable into other markets. 
In 2003, the Company re-launched as a ﬁ bre 
supplier and developed its ﬁ rst portfolio for the 
industrial laser market place during 2004.
  OUR STRATEGY
  OUR HISTORY
 1 AT A GLANCE
 2 OUR TECHNOLOGY
 2 CURRENT PRODUCTS
 3 OUR MARKETS
 4 CHAIRMAN’S STATEMENT
 6 CHIEF EXECUTIVE’S REVIEW
 8 FINANCIAL REVIEW
 12 BOARD OF DIRECTORS
 14 DIRECTORS’ REPORT
 18  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 19 INDEPENDENT AUDITORS’ REPORT
 20 GROUP PROFIT AND LOSS ACCOUNT
 20  GROUP STATEMENT OF TOTAL RECOGNISED 
GAINS AND LOSSES
 21 GROUP BALANCE SHEET
 22 COMPANY BALANCE SHEET
 23 GROUP CASH FLOW STATEMENT
 24 NOTES TO THE FINANCIAL STATEMENTS
 36 OFFICERS AND PROFESSIONAL ADVISERS
CONTENTS
OUR HISTORY
T HE D ESIGN P OR TFOLIO
a member of the flathill communications group plc
www.flathillplc.com
designed & produced by QUARTER 3QUARTER 4
  Floated on AIM raising £10.5m net
   Two supply agreements signed for 
pulsed MARKING laser
   Fibre platform proven to scale in power 
to encompass majority of MICRO market
   Customers use SPI product for 
demanding new stent material (nitinol)
   Opened up ten market verticals and 
applications with increasing numbers 
of repeat purchases
   Peter Schultz joins the Board as 
non-executive director
  Annual review confirms continued 
ISO9001
   Group sales for year to date exceed total 
sales in 2004 
   SPI Lasers plc and Group structure 
established
   Graham Meek joins the Board as 
non-executive chairman
AT A GLANCE 
SPI is now a recognised leader in the design and manufacture of ﬁ bre lasers. 
The Company’s technology is rapidly becoming an integral part of producing 
many end-user products by improving, and in some cases enabling, its 
customers’ manufacturing processes. SPI continues to expand the applications 
space for ﬁ bre lasers, with powers from mWs to kWs. 
MARKING
The production of equipment 
to produce permanent marking 
on a wide range of products. 
Examples include consumer, 
electronics, semi-conductor, 
automotive and aerospace. 
MICRO
A term for a diverse set of 
applications that require ﬁ ne or 
precise cutting or welding. These 
include medical components 
(e.g. stents), electronic assembly, 
printing etc. 
MACRO 
Cutting and welding of larger 
parts in industries such as 
automotive, white goods, etc.
www.spilasers.com 
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SPI Lasers plc 
annual report and accounts 2005 2
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com 
OUR TECHNOLOGY 
The ﬁ bre laser requires the same basic elements as any other laser systems.
In the case of the ﬁ bre laser, all of the elements are contained within the optical 
ﬁ bre, thus leading to an integrated solution which avoids the need for complex 
precision assemblies found in conventional lasers. The ﬂ exible nature of the 
optical ﬁ bre allows for a compact format which is signiﬁ cantly smaller than 
its industrial counterparts. The properties of the optical ﬁ bre lead to superior 
performance in many parameters. 
The entire laser unit is contained in a standard, 19 inch rack or compact OEM 
unit. One product can serve many markets and they are software conﬁ gurable. 
SPI Lasers enjoys a wide range of intellectual property and know-how, most 
notably our GTWave
™
 technology, which allows robust and simple assembly 
without the use of complex or expensive sub-components. This is deployed as 
a standard technology platform throughout the product set. 
CURRENT PRODUCTS 
50–100W
AIR COOLED 
This laser is used in the MICRO 
market for ﬁ ne feature cutting. The 
air cooling aids installation where 
machine mobility is required. 
2–20W
CW & PULSED
This product has been designed 
to meet the needs of the 
MARKING market. It operates 
at high speed which translates 
into faster throughput for 
end-users.
50–200W
WATER COOLED 
Our water cooler product is 
designed to offer industry 
leading stability, hence 
increasing cut and weld 
quality for end-users in its 
MICRO market.  SPI lasers participate in the $2.0 billion 
annual global market for laser sources. 
The market is set to grow strongly over 
the next three years. The majority of our 
business falls into the overall category of 
industrial materials processing.
Within this market, the ﬁ bre laser is 
set to continue as the fastest growing 
sub-segment. 
OUR MARKETS 
The rapid growth of ﬁ bre laser sales is due to the widely recognised 
advantages offered by the product:
PERFORMANCE  
Small, highly intense output beams with industry leading stability
SIZE  
Compact and easy to integrate
EFFICIENCY  
Signiﬁ cant improvements in efﬁ ciency compared to conventional lasers
MAINTENANCE  
Little or no replacement parts or post-installation maintenance 
www.spilasers.com 
3
SPI Lasers plc 
annual report and accounts 2005
                                                                  Source: ﬁ bre laser market penetration per LaserFocusWorld Lasers & Photonics Marketplace Seminar 2006 www.spilasers.com 
CHAIRMAN’S STATEMENT 
4
SPI Lasers plc 
annual report and accounts 2005
SUMMARY 
●  SUCCESSFUL FLOTATION 
●  TURNOVER DOUBLES
●  STRONG GROWTH IN PRODUCT SALES 
●  BOARD ESTABLISHED AND FUNCTIONING 
INTRODUCTION
I am pleased to present my ﬁ rst report as Chairman of SPI Lasers plc 
for the year ended 31 December 2005. The Company achieved 
a successful ﬂ otation on the AIM market on 26 October 2005, 
raising £10.5 million net of expenses to help ﬁ nance the 
Company’s development. Signiﬁ cantly, all the private equity 
investors who ﬁ nanced the early years of SPI have retained 
their investment, and have been joined by a broad spread of 
institutional and individual shareholders.
The ﬂ otation has also marked the end of the transitional period 
for the business in which it refocused away from communications 
towards the fast growing ﬁ bre laser arena. Having released its 
ﬁ rst products and achieved sales, the Company is using the capital 
raised to expand its product portfolio and channels to market.
PERFORMANCE DURING 2005
The Company achieved a number of signiﬁ cant milestones during 
2005. Turnover doubled over the previous year’s outcome, with 
both product sales and contract revenues growing strongly. 
The Company currently derives a considerable amount, though 
minor proportion, of its revenues from contract development 
and bespoke products, though this proportion will decline as 
the range and market penetration of SPI’s standard products 
grow. Customer evaluations of SPI products increased, over thirty 
accounts were opened and increasingly our revenues are being 
generated from repeat business from established purchasers.
THE BOARD
During the second half of 2005 we have established a Board 
appropriate for the needs of an AIM listed company. Amongst 
the non-executive directors, there is a blend of continuity and new 
faces. Dave Cheesman and Dave Shrigley have been joined by 
Dr Peter Schultz and me as Chairman. The Board is developing 
quickly into an effective team, responding well to the challenges 
demanded of a quoted company. A good start has been made in 
addressing the issues arising in today’s Corporate Governance 
environment. Further progress will be made in this area in 2006.
EMPLOYEES
On behalf of the Board I would like to thank all our employees 
for their contribution and support during the past year. My thanks 
also go to my fellow Board members and the senior management 
for all their efforts.
“ SPI LASERS IS A YOUNG COMPANY. 
IN 2005, WE DEMONSTRATED THAT 
WE COULD ACHIEVE TRACTION IN THE 
RAPIDLY GROWING FIBRE LASER ARENA. 
THE EXCITING CHALLENGE FOR 2006 
AND BEYOND IS TO SUSTAIN THAT 
MOMENTUM WITH A BROADER RANGE 
OF PRODUCTS AND ACROSS A WIDER 
RANGE OF APPLICATIONS.” www.spilasers.com 
STRATEGY
The overall strategy for the Company has developed further 
during the year. In the near term we will continue to broaden our 
addressed sectors in the MICRO market aided by the introduction 
of the 200W laser and the release of our ﬁ rst product for the 
fast growing laser MARKING market. In the medium term we 
continue to investigate entry strategies into the MACRO market.
SPI Lasers is a young company. In 2005 we demonstrated that 
we could achieve traction in the rapidly growing ﬁ bre laser 
arena. The exciting challenge for 2006 and beyond is to sustain 
that momentum with a broader range of products and across a 
wider range of applications.
GRAHAM MEEK
NON-EXECUTIVE CHAIRMAN
23 MARCH 2006
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SPI Lasers plc 
annual report and accounts 2005
CUTTING
With a strong ethos of product innovation, technology 
leadership and customer focus, SPI Lasers is enabling 
the resolution of some of today’s most challenging and 
commercially sensitive manufacturing issues. 
Where existing technology has previously limited the 
precision cutting of miniature parts, the ﬁ bre laser has 
enabled manufacturers to produce ground breaking 
microscopic cut detail in some of the world’s smallest 
coronary stents.
The highly competitive electronics sector continues to 
leverage the enormous beneﬁ ts of SPI’s technology, for 
example, superior cut quality of solder mask stencils for 
circuit boards.  www.spilasers.com 
CHIEF EXECUTIVE’S REVIEW 
6
SPI Lasers plc 
annual report and accounts 2005
INTRODUCTION
I am pleased to report that 2005 was a year of signiﬁ cant 
progress in all aspects of our business. In summary, we 
completed our transition into becoming a manufacturer of ﬁ bre 
laser sources, released the ﬁ rst wave of products for industrial 
material processing and engaged with a diverse customer base. 
This has led to a solid set of maiden operating results; a key 
element of which is our top line growth of 100%. It is signiﬁ cant 
that in this regard we exceeded market expectations, but more 
importantly, we created momentum in the sales channel that 
bodes well for sustained growth in 2006 and beyond.
There are a number of areas I would highlight as particularly signiﬁ cant:
MARKETS, CUSTOMERS AND CHANNEL
The laser industry is a large and established market. During 
2005 the ﬁ bre laser became recognised not only as an interesting 
technology, but as a tool that delivers real advantages for many 
end-users. I believe that SPI Lasers joining the market as the 
second supplier to IPG Photonics of industrial grade products 
has been a factor in this maturing process.
SPI’s customers are system integrators. That is to say that they build 
the end-user system that incorporates our lasers as the optical 
source. In some cases these integrators are part of the end-user 
entity, but in the majority of cases they are an intermediary. 
Consequently we have invested heavily in creating awareness of 
the many advantages of ﬁ bre lasers in the end-user community to 
create “pull through” in the sales channel. I am pleased to report 
that this approach is proving to be successful.
In 2005 we concentrated on the MICRO sector. Of note within 
this was the progress we made in penetrating the medical device 
manufacturing market, where the ﬁ bre laser’s ability to cut and 
weld ﬁ ne feature size items rapidly and with high quality has 
been a differentiator. Initial success was in cutting stents (a stent 
is a spring-like structure expanded within veins and arteries) with 
a number of industry leaders now deploying SPI product. Having 
established ourselves in this sub-sector we are now engaged with 
a number of other customers and working on new applications.
This is typical of our approach to the market: namely to excel at 
an application and then to drive penetration. In parallel with this 
success, we have succeeded in adding further market verticals 
such as stencil cutting, printing and micro welding. To support 
this, we have added to our channel resource, both direct and 
through specialist distribution partners, and established an 
applications and support capability in the UK and the USA.
Towards the end of 2005, we announced a family of products 
designed for the rapidly growing MARKING sector. Two supply 
contracts were signed and a number of customer relationships 
established that should lead to sales in 2006.
All of this activity is consistent with our strategy of utilising our 
specialised optical ﬁ bre capability to establish a technology 
platform that can be sold into multiple markets. We continue to 
strive for products that deliver the advantages in performance 
and cost of ownership that industry watchers believe will fuel 
rapid growth in this sector.
SUMMARY 
  SOLID MAIDEN RESULTS EXCEEDING MARKET 
EXPECTATIONS FOR TOP LINE GROWTH
  INCREASED SALES IN MICRO 
  EXPANDED GLOBAL REACH AND 
MARKET VERTICALS 
  SET THE SCENE FOR GROWTH IN 2006
“ 2005 WAS A YEAR OF SIGNIFICANT 
PROGRESS IN ALL ASPECTS OF OUR 
BUSINESS. WE COMPLETED OUR 
TRANSITION INTO BECOMING A 
MANUFACTURER OF FIBRE LASER 
SOURCES, RELEASED THE FIRST WAVE 
OF PRODUCTS FOR INDUSTRIAL 
MATERIAL PROCESSING AND ENGAGED 
WITH A DIVERSE CUSTOMER BASE.” www.spilasers.com 
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SPI Lasers plc 
annual report and accounts 2005
OPERATIONAL
Evidence of the emphasis on the operational functions of the 
business in 2005 was the development and manufacturing transfer 
of our initial product set. We successfully introduced a range of 
products from 10W to 150W, consistent with the needs of the 
MICRO sector. This, along with execution of our awarded contracts, 
was pivotal in achieving our revenue objectives for the year.
In parallel with this, we achieved signiﬁ cant progress in the 
design of a novel pulsed laser for the MARKING sector which 
is designed to operate faster than the competitive offering.
As evidenced by the signing of the two signiﬁ cant supply 
contracts and the acquisition of several other customers, our 
pulsed product has generated a larger amount of business than 
we anticipated for a pre-release product. Whilst this is clearly 
positive for the future, it will result in SPI needing to accelerate 
manufacture of the product faster than our planned cost reduction 
activity, with an associated shorter term pressure on gross 
margins. This is primarily due to the cost of some bought in 
components and will be resolved by working with our suppliers 
during 2006. We consider this to be a justiﬁ able investment that 
should result in greater market share than originally foreseen over 
the medium term.
Progress was also made in scaling the power of our technology 
platform to address other areas of MICRO and future MACRO 
products. In the latter case the results obtained have been so 
encouraging that we will increase investment in this area in 2006 
to position the Company to enter this large market sector in 2007.
As regards organisational development, we established a 
manufacturing organisation, and made improvements in our 
operating business and quality systems. Again, the emphasis 
here was in preparation for continued strong growth in 2006.
OUTLOOK AND KEY EVENTS
In 2006 we expect to sustain the momentum built last year. 
We will expand our sales channel, R&D and manufacturing 
resources to enable us to address multiple new market verticals. 
The new 200W product will broaden our offering in the MICRO 
sector. This, combined with the general release of our MARKING 
laser, will more than double the available market for SPI Lasers. 
We also expect that by leveraging our contract R&D and through 
organic investment we will make signiﬁ cant strides towards the 
commercialisation of our technology in MACRO. These initiatives, 
along with investment in physical infrastructure, are occurring 
earlier and at a faster pace than we would have anticipated last 
year. We believe that they are essential to prepare the Company 
for the forecast growth in this sector which has also increased.
The exciting challenge for 2006 and beyond is therefore to 
deliver on the increasing number of opportunities by developing 
new products and accelerating those already introduced to take 
advantage of this expanding market.
DAVID PARKER
CHIEF EXECUTIVE OFFICER
23 MARCH 2006
MATERIALS PROCESSING
SPI ﬁ bre laser technology has also made a signiﬁ cant 
impact in material processing. Pushing beyond the limits of 
traditional manufacturing, ﬁ bre laser technology from SPI 
has enabled advances in techniques used in the production 
of many end-user products.
SPI technology has facilitated major productivity advances 
in manufacturing processes that require small spot welding, 
sintering and even the production of complex shapes using 
the emerging process of 3D rapid prototyping. www.spilasers.com 
FINANCIAL REVIEW 
OVERVIEW
2005 was a year of change for the SPI Group, structurally, 
commercially and operationally. We started the year as a 
Delaware registered private company, Southampton Photonics, Inc. 
and ended the year as a UK public company, SPI Lasers plc. 
Commercially, we saw very strong growth in the Company’s 
sales of ﬁ bre laser products in all of our geographic markets. 
Our investment in manufacturing expansion, product development 
and particularly in sales and marketing were all important factors 
in achieving strong top-line growth and led to an increased need 
for working capital. This ﬁ nancing need lies behind the decision 
to take the Company public, thereby raising the necessary funds 
to drive the Company forward so as to better address the 
opportunities for success open to us.
STRUCTURAL CHANGES
The Company started the year as Southampton Photonics, Inc., 
a Delaware registered company with Southampton Photonics Ltd 
as its 100% owned UK subsidiary. Through a process of Group 
restructuring SPI Lasers plc, a newly incorporated company, 
became the parent of the Group with two subsidiaries: SPI Lasers 
UK Ltd and SPI Lasers LLC.
In order to provide meaningful information to shareholders, 
this restructuring is reﬂ ected in the accounts of the Company, as 
a merger in accordance with the requirements of FRS 6 regarding 
Group restructures. Accordingly the prior year comparatives have 
been presented as if the Group had existed in its present form 
during that period.
COMMERCIAL CHANGES
Sales
Total sales grew by 100% over 2004 to £3.5 million with an 
underlying product sales growth of 58%. Product sales have 
grown from £0.2 million in 2002 to £2.0 million in 2005.
Contract sales, which relate to our US and UK defence and 
aerospace development contracts, grew by over 200% in the 
year, building on an initial US contract award in 2002 that 
generated revenues from late 2002 through to early 2004.
The USA remains our biggest market with £2.1 million of total 
sales, an increase of 79% on the prior year’s sales of £1.2 million. 
However, SPI’s dependency upon sales to the US has continued 
to reduce: 60% of sales in 2005, down from 67% in 2004, as 
other market areas were further expanded: Asia up from 7% 
to 10% and Europe (excluding the UK) up from 6% to 17%. 
8
SPI Lasers plc 
annual report and accounts 2005
SUMMARY 
  GROUP RESTRUCTURING COMPLETED 
  SALES GREW BY 100% TO £3.5 MILLION
  INVESTMENT IN R&D INCREASED BY 24%
  IPO RAISED £10.5 MILLION (NET)
  BALANCE SHEET STRENGTHENED
“ 2005 WAS A YEAR OF CHANGE 
FOR THE SPI GROUP, STRUCTURALLY, 
COMMERCIALLY AND OPERATIONALLY. 
COMMERCIALLY, WE SAW VERY STRONG 
GROWTH IN THE COMPANY’S SALES OF 
FIBRE LASER PRODUCTS IN ALL OF OUR 
GEOGRAPHIC MARKETS.” www.spilasers.com 
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SPI Lasers plc 
annual report and accounts 2005
The balance of sales was in the UK, which while increasing in 
absolute terms by almost a third, reduced in proportional terms 
from 20% to 13% of the total.
OPERATIONAL CHANGES
Gross loss
The gross loss of £1.4 million was 59% lower than in 2004; 
a 43% reduction ignoring the prior year’s exceptional impairment 
charge. This reduction in the gross loss is a reﬂ ection of the 
improving cost structure of the business, whereby SPI has been 
able to leverage off its predominantly ﬁ xed-cost manufacturing 
base as volumes have increased. This trend will continue as 
volumes continue to grow.
Administrative expenses
Administrative expenses include £3.0 million of Company funded 
product research and development (R&D). In addition, and 
charged against cost of sales, SPI spent £1.1 million on customer 
funded R&D. The total incurred investment in R&D was therefore 
£4.1 million, 117% of 2005 sales, which compares with £3.3 
million in 2004. The balance of the administrative expenses 
relates to sales and marketing and general administration costs.
Administrative expenses before exceptional costs in total were 
£1.6 million higher than in 2004, an increase of 28%. This 
reﬂ ects, in the main, the increased investment in sales and 
marketing that was necessary to achieve the growth in sales.
The exceptional items charge of £0.3 million relates to costs 
associated with the ﬂ otation of the Company that are not 
chargeable to the share premium account.
Taxation
SPI has an unrecognised potential deferred tax asset of £10.0 million, 
which has primarily arisen from the losses incurred to date. In 2005, 
an R&D tax credit of £0.5 million (£0.5 million in 2004) was 
recognised; the associated cash payment from HM Revenues & 
Customs is expected to be received in the second half of 2006 
(the 2004 related tax credit was received in September 2005).
Loss after taxation
The loss after taxation for 2005 was £8.4 million (2004 £8.5 million). 
Before exceptional charges, the loss increased by £0.6 million 
(9%) over the equivalent loss in 2004. This is due to the ramp-up 
of resources within operations and sales and marketing.
Dividend 
The directors do not propose to pay a dividend (2004: nil).
                      10
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com 
FINANCIAL REVIEW 
OPERATIONAL CHANGES (CONTINUED)
Headcount
Average headcount increased from 73 in 2004 to 88 in 2005. 
Sales increased from £24,000 per head in 2004 to £39,000 
per head in 2005 and the loss after tax for 2004 and 2005 reduced 
from £116,000 per head to £96,000 per head respectively.
Fixed assets
Gross ﬁ xed assets grew by £0.5 million during 2005, an increase of 
4% on the balance as at 31 December 2004. This comparatively 
low level is a reﬂ ection of the signiﬁ cant investment in ﬁ xed assets 
in earlier years, particularly pre-2004, which created the inherent 
capability to produce ﬁ bre lasers in volume. SPI’s investment in 
ﬁ xed assets is now mostly related to some further increase in 
capacity rather than the underlying capability.
Depreciation for 2005 was £0.5 million (2004: £1.2 million). 
The reduction in the charge from the 2004 level is primarily 
due to the exceptional asset impairment that took place as at 
31 December 2004, which, as a result, has reduced the ongoing 
annual depreciation charge. Depreciation at 31 December 2005 
stands at 81% of the gross cost of the assets.
Working capital
Net current assets, excluding cash and short term investments 
(working capital), increased from £0.5 million at 31 December 2004 
to £1.7 million at 31 December 2005. Stocks increased by 
£1.5 million and debtors by £1.4 million, offset by an increase 
in creditors of £1.7 million. The net increase in working capital of 
£1.2 million was primarily as a result of the strong sales volume 
growth experienced by SPI during 2005. Actions are already 
in place to improve our business processes and systems during 
2006 that will improve our logistics efﬁ ciency 
and so help increase the working capital turns.
Loans
A venture loan was provided in June 2005 by ETV Capital SA 
(Luxembourg) to provide working capital for the Company in 
advance of it being able to access ﬁ nance from the IPO in 
October 2005. The loan is secured on the ﬁ xed assets of the 
Company and is repayable over 36 months at an interest rate 
of 12.65% per annum.
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SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com 
Equity raised
Pre-IPO: the Group received £3.8 million of equity investment from 
its existing Venture Capital investors during the ﬁ rst half of 2005.
AIM listing: the listing on AIM in October 2005 raised £12.0 million 
gross. This, after transaction costs of £1.5 million was reduced to 
a net injection of £10.5 million into the Company. Of these costs, 
£1.2 million were direct costs of the share issue and have been 
set off against the share premium account; the remaining costs 
are shown as exceptional costs within the proﬁ t and loss account. 
The cash balance at 31 December 2005 was £8.1 million, in 
line with expectations. 
STEVE BERG
CHIEF FINANCIAL OFFICER
23 MARCH 2006
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GRAHAM MEEK *
¹ § ¥1
NON-EXECUTIVE CHAIRMAN
Graham Meek, age 58, joined the Group in 2005. He is currently chairman of ICM 
Computer Group plc (having served as senior independent director from 2002-2004), 
a non-executive director of Filtronic plc and a non-executive director of Capital Gearing 
Trust plc. He has had a long career in investment banking and stockbroking, with 
particular experience of the information technology and telecommunications sectors. 
Graham was previously head of corporate ﬁ nance at Beeson Gregory plc, a managing 
director of Merrill Lynch Capital Markets and an executive director of Smith New 
Court plc.
DAVID PARKER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
David Parker, age 43, joined the Group in 2002 and has been the chief executive 
ofﬁ cer since this time. He is the former president and chief executive ofﬁ cer of Marconi 
Optical Components (“MOC”). Under his leadership, MOC was sold to Bookham 
Technology in February 2002. Prior to this, he was vice president general manager of 
Agilent Technologies’ Ipswich components operation and a corporate vice president of 
Agilent. During his tenure, this business unit became the market leader in the supply of 
high performance networking components. In previous roles, he has gained experience 
in manufacturing, research and development and business development. He serves as a 
non-executive director on the board of Zinwave, Inc. and was formerly a member of the 
supervisory board of Xignal Technologies AG. He was elected a Fellow of the Institute 
of Physics in 1997. David has a PhD from Imperial College, University of London and 
a BSc from the University of Leeds.
BOARD OF DIRECTORS 
12
SPI Lasers plc 
annual report and accounts 2005
STEVE BERG
CHIEF FINANCIAL OFFICER AND COMPANY SECRETARY
Steve Berg, age 51, has been chief ﬁ nancial ofﬁ cer of the Group since February 
2003. Prior to joining the Company, he was the chief ﬁ nancial ofﬁ cer of Marconi 
Optical Components until it was sold to Bookham Technology in 2002. Steve joined 
Marconi in 1988, ﬁ rst in the GEC-Marconi defence division before moving to GEC’s 
telecommunications subsidiary, GPT (GEC-Plessey Telecommunications), in 1991 
and was appointed GPT’s chief ﬁ nancial ofﬁ cer in 1997. He moved to Marconi 
Capital in 1999 as a director of corporate ﬁ nance, where he was involved in various 
investment activities in North America, Europe, the Middle East and Asia. Prior to joining 
GEC, He gained further experience with NORTEL and Invensys. Steve is a Chartered 
Management Accountant (Fellow) with a postgraduate diploma in management from 
Coventry University.
DAVID PAYNE 
¥
PART TIME EXECUTIVE DIRECTOR
David Payne, age 61, co-founded SPI Inc in 1997. He heads the Optoelectronics 
Research Centre at the University of Southampton (ORC), a facility containing over 
60 research laboratories and more than 150 full time researchers. He led the team 
that invented the erbium-doped ﬁ bre ampliﬁ er, the enabling technology for dense 
wavelength division, multiplexing and the growth of the Internet. In 1998, the Franklin 
Institute recognised this achievement and awarded David Payne with its prestigious 
Benjamin Franklin Medal for the invention. David is a Fellow of the Royal Society 
and the Royal Academy of Engineering and was awarded the CBE in 2004.
*
1 
Chairman of Audit Committee
* Member of Audit Committee
§1  
Chairman of Remuneration Committee
§  
Remuneration Committee
 
¥1  
Chairman of Nominations Committee
¥  
Nominations Committee www.spilasers.com 
PETER SCHULTZ * 
§1
 
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NON-EXECUTIVE DIRECTOR
Peter Schultz, age 63, joined the Group in 2005. He is retired president of Heraeus 
Tenevo Inc., a technical glass manufacturer specialising in ﬁ bre optics and semi-conductor 
markets, and chief technical ofﬁ cer North America for Heraeus Holding GmbH. Following 
graduation from Rutgers University (BSc 1964, PhD 1967), he co-developed the world’s 
ﬁ rst practical glass optical ﬁ bre for communications in 1970 as a scientist at Corning, Inc. 
He is co-inventor of the ﬁ bre optics now used worldwide for telecommunications. In 1993, 
he was inducted into the National Inventors Hall of Fame and in 2000 received the 
National Medal of Technology from President Clinton for this accomplishment. Peter is 
the recipient of numerous awards, including the International Glass Science Award 
(1977), SPIE Technology Achievement Award (1981), ASM Engineering Materials 
Achievement Award (1983) and the First American Innovators Award (US Department 
of Commerce 1995).
DAVID CHEESMAN*
NON-EXECUTIVE DIRECTOR
David Cheesman, age 63, joined the Group in 2003. He worked in the computer 
industry for over twenty years, becoming chief engineer at Computer and Systems 
Engineering Limited and Univac’s director of technical operations for Europe. In 1978, 
he set up Prime Computer Inc’s research and development operations in the UK, before 
becoming managing director of Dowty Information Systems Limited. In 1988, he left 
industry to join the venture capital community, becoming a Director of 3i’s high-tech unit. 
Subsequently, he was a founding partner in TriTech Investment Managers and, in 1997, 
became a partner at Advent Venture Partners, specialising in IT investment. David has 
invested in over 40 high-tech companies and been active on the boards of 32 of these. 
He has an Honours degree in Electrical Engineering and is a Chartered Engineer and a 
Fellow of the Institute of Electrical Engineers.
13
SPI Lasers plc 
annual report and accounts 2005
DAVID SHRIGLEY 
§
NON-EXECUTIVE DIRECTOR
David Shrigley, age 57, joined the Group in 2000. He was a Sevin Rosen Funds general 
partner from 1999 until November 2005. Prior to joining Sevin Rosen Funds he worked 
at Bay Networks as executive vice president responsible for marketing, sales and service. 
Prior to Bay Networks, he spent 18 years at Intel. From 1989 to 1995 he was vice 
president and general manager for Intel’s Asia-Paciﬁ c region and from 1995 to 1996 
co-managed the company’s entire corporate marketing operation. David sits on the boards 
of Everypath Inc., UltraCell Corporation and nTag Interactive Corporation. David Shrigley 
holds a BSc degree in Business Administration from Franklin University.
FREDERICK LEONBERGER
TECHNICAL ADVISOR / SPECIAL ADVISOR TO THE BOARD 
Dr Leonberger joined the Group as a technical adviser in 2005. Frederick served as 
senior vice president and chief technology ofﬁ cer of JDS Uniphase Corporation, a leading 
optical components supplier from 1999 until his retirement in June 2003. He previously 
held a similar position at Uniphase Corporation prior to its merger with JDS Fitel in 1999. 
He joined Uniphase in 1995 upon its acquisition of UTP, a company he co-founded 
and served as general manager. He has been active in photonics for over 25 years 
and has also held a variety of staff and management positions at MIT Lincoln Laboratory 
and United Technologies Research Center. He is presently the principal of EOvation 
Technologies LLC, a technology advisory ﬁ rm he founded in July 2003. He serves on the 
board of directors of RF MicroDevices, Agility Communications and Alphion, and is a 
member of the National Academy of Engineering. 14
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
The directors present their annual report and audited Group financial statements for the year ended 31 December 2005.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Group is a leader in the design, development, engineering and manufacture of optical fibre-based laser sources for a range 
of markets and applications. The Company’s products are based on the innovative and proprietary fibre technology platform which 
enables high performance together with a substantial reduction in the size of the product and the total cost to the end-user compared 
to more traditional lasers.
Further details of the Group’s performance during the year and expected future developments are contained in the chairman’s statement and 
the financial review.
BASIS OF PREPARATION
The Company was incorporated on 25 August 2005 under the name of Wilmerhale 1 plc and changed its name to SPI Lasers plc on 
30 August 2005. On 26 October 2005, the Company was registered as a public limited company.
Although there is no statutory requirement to prepare audited financial accounts for the Company until the period ended 
31 December 2006, the directors believe that it is in the shareholders’ interests that audited consolidated accounts are prepared 
for the period ended 31 December 2005.
As part of the process to enable a placing with institutional investors of ordinary shares on the Alternative Investment Market (‘AIM’), 
the Group underwent a restructuring. This has been accounted for using merger accounting principles, whereby following the creation 
of SPI Lasers plc and SPI Lasers LLC, SPI Lasers LLC merged with Southampton Photonics, Inc. For the consolidated accounts, the 
adoption of merger accounting presents SPI Lasers plc as if it always had been the parent undertaking of the Group. Consequently 
the consolidated accounts include a profit and loss covering the year to 31 December 2005 with comparative figures for the prior 
year, both of which have been prepared as if SPI Lasers plc had been the parent undertaking throughout that period. Equally, Group 
balance sheets and statements of cash flows have been included to complement the profit and loss accounts.
RESULTS AND DIVIDENDS
The loss for the financial year of £8,436,000 (2004: loss £8,482,000) has been taken to the reserves. 
The directors do not recommend the payment of a dividend (2004: £nil).
CORPORATE GOVERNANCE
Introduction
SPI Lasers plc was listed on AIM on 26 October 2005. Although the AIM Rules do not require the Group to comply with the 
Combined Code on Corporate Governance (‘the Code’), the Group supports the principles set out in the Code and will attempt to 
comply wherever possible, given both the size and resources available to the Group. Details are provided below of how the Group 
applies the Code.
The Board
The Board of directors comprises three executive directors (one of whom is part-time), and four non-executive directors, one of whom 
is the Chairman.
The Board meets each month and receives a Board pack comprising reports from each of the executive directors together with any 
other material deemed necessary for the Board to discharge its duties. It is the Board’s responsibility for formulating, reviewing and 
approving the Group’s strategy, budgets, major items of expenditure and acquisitions.
Board Committees
The Board has established three committees: the Audit Committee, the Remuneration Committee and the Nominations Committee, 
each of which has written terms of delegated responsibilities.
Audit Committee
The Audit Committee, chaired by Graham Meek, comprises three non-executive directors and is scheduled to meet three times a 
year with the Chief Executive and the Chief Financial Officer in attendance. It is the Audit Committee’s role to provide formal and 
transparent arrangements for considering how to apply the financial reporting and internal control requirements of the Code, whilst 
maintaining an appropriate relationship with the independent auditors of the Group. The Audit Committee assists the Board in the 
discharge of its duties concerning the announcements of results, the Annual Report and Accounts and the maintenance of proper 
internal controls. It reviews the scope and planning of the audit and the auditor’s findings and considers Group accounting policies 
and the compliance of those policies with applicable legal and accounting standards. The Audit Committee meets at least twice a 
year with the auditors without the executive directors being present.
DIRECTORS’ REPORT 15
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
Remuneration Committee
The Remuneration Committee, chaired by Peter Schultz, comprises three non-executive directors and meets at least twice a year. 
It is the Remuneration Committee’s role to establish a formal and transparent policy on executive remuneration and to set remuneration 
packages for individual executive directors, within agreed terms of reference. No director may participate in discussions relating to 
their own terms and conditions of service or remuneration.
Nominations Committee
The Nominations Committee, chaired by Graham Meek, comprises three non-executive directors, and meets at least twice a year to 
consider the size, structure and composition of the Board, to formulate and review proposals for the appointment and retirement of 
directors and make recommendations thereon to the Board.
Internal control and risk management
The Board is responsible for the system of internal control and for reviewing its effectiveness. The Group maintains a system of internal 
control consistent with a Group at its stage of development and as it grows, the Board intends to continue to enhance its processes to 
identify risks facing the business and implement procedures to eliminate, mitigate and monitor those risks.
The Group does not currently have an internal audit function due to the small size of the administrative function and the high level 
of director review and authorisation of transactions.
A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results, 
as compared against budget, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board.
The Group maintains appropriate insurance cover in respect of legal actions against the directors as well as against material loss 
or claims against the Group and reviews the adequacy of the cover regularly.
Rotation of directors
At the first Annual General Meeting, all directors will retire and will then be eligible for reappointment. In subsequent years, one third 
of the directors who are subject to retirement by rotation shall retire from office. Initially, a few directors may be put forward for 
re-election earlier than three years so that a smooth process results.
A statement of the directors’ responsibilities in respect of the financial statements is set out on page 18.
RESEARCH AND DEVELOPMENT
During the year the Group spent £2,962,000 (2004: £2,929,000) on research and development, representing 85% of turnover 
(2004: 169%). It is anticipated that the Group will continue to increase research and development expenditure in order to accelerate 
the development of the product portfolio.
DIRECTORS AND THEIR INTERESTS
The directors in office during the year, their interests in shares in the Company and their emoluments were as follows:
 Ordinary shares
     25 August
      2005 
     (or date of Total
    31 December appointment emoluments 
    2005 if later) 2005
    Number Number £000
D Payne    169,844 162,900 33
D Parker    322,682 315,738 288
S Berg    3,472 — 187
G Meek    34,722 — 6
P Schultz    9,792 — 15
D Cheesman    — — —
D Shrigley    — — —
There have been no changes to shareholdings between the end of the financial year and the date of this report. 16
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
DIRECTORS AND THEIR INTERESTS (CONTINUED)
At the year end and the date of this report, the directors had the following share options:
     At 31 December  Date from 
 At 25 August 2005 Granted Exercised  2005 Exercise price which exercisable Expiry date
D Parker* — 675 — 675 £122.37 April 2003 September 2012
D Parker** — 299 — 299 £122.37 April 2003 September 2012
D Parker** — 148,599 — 148,599 £0.07 September 2005 September 2012
S Berg* — 180 — 180 £181.28 February 2004 March 2013
S Berg* — 54,700 — 54,700 £0.03 February 2004 October 2013
S Berg* — 26,229 — 26,229 £0.05 February 2004 August 2014
S Berg* — 67,563 — 67,563 £0.07 September 2005 September 2015
* Award granted under EMI scheme
** Award granted under Unapproved scheme
All the share options in the above scheme were granted on 25 October 2005 following the surrender of a proportional number of share 
options in the share option scheme of the previous ultimate parent undertaking, Southampton Photonics, Inc., which has been closed.
The Group has indemnified the directors of the Company against liability in respect of proceedings brought by third parties subject to 
the conditions set out in the Companies Act 1985. Such qualifying third party indemnity provision was in force during the year and 
continues to be in force as at the date of this report. The Group has purchased directors and officers’ liability insurance with 
an indemnity limit of £5.0 million in order to minimise the potential impact of such proceedings.
PRINCIPAL SHAREHOLDERS
The Company is aware of the following shareholders holding interests of 3% or more of the Company’s issued ordinary share capital 
as at 22 March 2006.
     Ordinary  % of issued 
     2.5p shares share capital
HSBC Global Custody Nominee (UK)     3,787,185 21.34
Sevin Rosen     2,244,749 12.65
Interwest Partners     2,244,749 12.65
Advent Venture Partners     1,803,211 10.16
Amadeus Capital Partners     1,726,729 9.73
Bank of New York (Nominees)     1,401,050 7.89
BNY (OCS) Nominees Ltd     833,275 4.69
Mellon Nominees (UK) Ltd     658,000 3.71
CHARITABLE CONTRIBUTIONS
During the year, the Company made various charitable contributions totalling £300 (2004: £100).
There were no political donations.
EMPLOYEE INVOLVEMENT
Details of the number of employees and related costs can be found in note 5 to the financial statements on page 27.
The Group is proactive in providing employees with information about the Group.
It operates equal opportunities in recruitment, training and promotion regardless of gender, ethnic origin, nationality, disability or 
sexual orientation.
ENVIRONMENT
The Group recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and 
implements policies to reduce any damage that might be caused by the Group’s activities. 
DIRECTORS’ REPORT 17
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
CREDITOR PAYMENT POLICY AND PRACTICE
It is the Company’s policy to abide by the payment terms agreed between the Group and its suppliers whenever it is satisfied that the 
supplier has provided goods and services in accordance with agreed terms and conditions. At 31 December 2005, the Group had 
35 days purchases outstanding in trade creditors (2004: 35 days).
FINANCIAL RISK MANAGEMENT OBJECTIVES
Details of the Group’s financial risk management objectives are discussed in the financial review. The Group does not hedge 
forecast transactions. 
AUDITORS 
Deloitte & Touche LLP were appointed as first auditors of the Company. Deloitte & Touche LLP have indicated that they are willing to 
continue in office and a resolution proposing their reappointment will be put to the shareholders at the Annual General Meeting.
STEVE BERG
COMPANY SECRETARY 
23 MARCH 2006 18
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
STATEMENT OF DIRECTORS’ RESPONSIBILITIES in respect of the ﬁ nancial statements
United Kingdom company law requires the directors to prepare financial statements for each financial year which give a true and fair 
view of the state of affairs of the Company and of the Group and of the profit or loss of the Group for that period. In preparing those 
financial statements, the directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates that are reasonable and prudent; 
●  state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained 
in the financial statements; and
●  prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue 
in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial 
position of the Group and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also 
responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud 
and other irregularities. 19
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
INDEPENDENT AUDITORS’ REPORT to the members of SPI Lasers plc 
We have audited the Group and individual Company financial statements (the “financial statements”) of SPI Lasers plc for the year 
ended 31 December 2005 which comprise the Group profit and loss account, the Group statement of total recognised gains and 
losses, the Group and individual Company balance sheets, the Group cash flow statement and the related notes 1 to 26. 
These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. 
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them 
in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to 
anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we 
have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the Annual Report and the Financial Statements in accordance with applicable law and 
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the statement of 
directors’ responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant United Kingdom legal and regulatory requirements 
and International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view in accordance with the relevant 
financial reporting framework and are properly prepared in accordance with the Companies Act 1985. We also report to you on the 
consistency of the directors’ report with the financial statements, if the Company has not kept proper accounting records, if we have 
not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ 
remuneration and other transactions is not disclosed.
We read the other information contained in the annual report for the above year as described in the contents section and consider the 
implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. 
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices 
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. 
It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial 
statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently 
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order 
to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, 
whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the 
presentation of information in the financial statements.
OPINION
In our opinion:
●  the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, 
of the state of the Group’s and the individual Company’s affairs as at 31 December 2005 and of the Group’s loss for the year 
then ended; 
● the financial statements have been properly prepared in accordance with the Companies Act 1985; and 
● the directors’ report is consistent with the financial statements.
DELOITTE & TOUCHE LLP
CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
SOUTHAMPTON, UNITED KINGDOM
23 MARCH 2006 20
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
     2005 2004
    Notes £000 £000
Turnover    2 3,468 1,730
Cost of sales:
 Excluding exceptional items     (4,872) (4,179)
 Exceptional items    4 —  (1,006)
Total cost of sales     (4,872)  (5,185)
Gross loss     (1,404) (3,455)
Administrative expenses     (7,354) (5,750)
Exceptional items    4 (315) —
Total administrative expenses     (7,669) (5,750)
Other net operating income     131 161
     (7,538) (5,589)
Operating loss    3 (8,942) (9,044)
Interest receivable and similar income     161 85
Interest payable and similar charges    6 (190) —
Loss on ordinary activities before taxation     (8,971) (8,959)
Tax credit on loss on ordinary activities    7 535 477
Loss on ordinary activities after taxation     (8,436) (8,482)
Retained loss for the financial year    21 (8,436) (8,482)
Loss per ordinary share
Basic and diluted    9 (47.7)p (47.9)p
All amounts are derived from continuing activities.
     2005 2004
     £000 £000
Loss for the financial year     (8,436) (8,482)
Foreign exchange differences on retranslation of net assets of subsidiary undertakings   25 380
Total recognised gains and losses relating to the year    (8,411) (8,102)
GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December 2005 
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2005  21
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
     2005 2004
    Notes £000 £000
Fixed assets
Tangible assets    10 2,424 2,505
Current assets
Stocks    12 2,084 576
Debtors    13 2,686 1,299
Short term investment     — 256
Cash at bank and in hand     8,126 1,638
     12,896 3,769
Creditors: amounts falling due within one year    14 (3,074) (1,372)
Net current assets     9,822 2,397
Total assets less current liabilities     12,246 4,902
Creditors: amounts falling due after more than one year    15 (1,039) —
Provisions for liabilities and charges    18 (165) (103)
Net assets     11,042 4,799
Capital and reserves
Called up share capital    20 442 
Share premium account    21 10,605 
Merger reserve    21 50,389 
Profit and loss account    21 (50,394) 
Total equity shareholders’ funds     11,042 
Net investment      4,799
GRAHAM MEEK
CHAIRMAN
23 MARCH 2006
GROUP BALANCE SHEET at 31 December 2005  22
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
      2005
     Notes £000
Fixed assets 
Investments     11 12,989
Current assets
Debtors     13 2,894
Cash at bank and in hand      7,221
      10,115
Creditors: amounts falling due within one year     14 (249)
Net current assets      9,866
Total assets less current liabilities      22,855
Creditors: amounts falling due after more than one year     15 (12,192)
Net assets      10,663
Capital and reserves
Called up share capital      20 442
Share premium account     21 10,605
Profit and loss account     21 (384)
Total equity shareholders’ funds       10,663
GRAHAM MEEK
CHAIRMAN
23 MARCH 2006
COMPANY BALANCE SHEET at 31 December 2005  23
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
     2005 2004
    Notes £000 £000
Net cash outflow from operating activities    23 (9,997) (6,818)
Returns on investments and servicing of finance
Interest received     161 85
Interest paid     (190) —
Net cash (outflow)/inflow from returns on investments and servicing of finance  (29) 85
Taxation 
UK tax credit received     451 440
Net cash inflow from taxation     451 440
Capital expenditure and financial investment
Payments to acquire tangible fixed assets     (453) (251)
Receipts from sales of tangible fixed assets     — 1
Net cash outflow from capital expenditure and financial investment   (453) (250)
Management of liquid resources
Decrease/(increase) in current asset investments     256 (127)
Net cash inflow/(outflow) from management of liquid resources    256 (127)
Net cash outflow before financing     (9,772) (6,670)
Financing
Issue of share capital     12,003 —
Issue of share capital prior to Group reconstruction     3,841 4,775
Payments of expenses on issue of equity shares     (1,190) —
New borrowings     2,565 —
Repayment of borrowings     (898) —
Net cash inflow from financing     16,321 4,775
Increase/(decrease) in cash in period     6,549  (1,895)
GROUP CASH FLOW STATEMENT for the year ended 31 December 2005 24
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
1. ACCOUNTING POLICIES 
Basis of preparation 
The financial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom. 
Generally Accepted Accounting Practice. The particular accounting policies adopted are described below.
Basis of consolidation
The Group financial statements consolidate the financial statements of SPI Lasers plc and all its subsidiary undertakings drawn up to 
31 December each year. 
In accordance with Financial Reporting Standards 6 “Acquisitions and Mergers” (FRS 6) the accounts have been prepared using 
merger accounting and are presented as if the Group had been in exisitence throughout both the current and prior periods. 
Consequently the consolidated accounts include a profit and loss covering the year to 31 December 2005 with comparative figures 
for the prior year, both of which have been prepared as if SPI Lasers plc had existed throughout that period. Equally, Group balance 
sheets and statements of cash flows have been included to complement the profit and loss accounts.
Further information on the reconstruction is given below.
SPI Lasers plc Group restructuring 
SPI Lasers plc was incorporated on 25 August 2005 under the name of Wilmerhale 1 plc and changed its name to SPI Lasers plc on 
30 August 2005. On 26 October 2005 its ordinary shares were listed on the Alternative Investment Market.
SPI Lasers plc became the ultimate parent company to SPI Lasers LLC under the ‘Merger Agreement’ which became effective on 
26 October 2005.
Under the terms of the ‘Merger Agreement’, shares in the Company were offered to existing shareholders of Southampton Photonics, Inc. 
The details of the ‘Merger Agreement’ were as follows:
●  each share of issued common stock in Southampton Photonics, Inc. of $0.001 (30,851,938) was exchanged for one ordinary 
share in SPI Lasers plc of £0.001;
●  each share of issued Series A preferred stock in Southampton Photonics, Inc. of $0.001 (49,448,366) was exchanged for 
1.4016 fully paid ordinary shares in SPI Lasers plc of £0.001; and
●  each share of issued Series B preferred stock in Southampton Photonics, Inc. (153,769,332) of $0.001 was exchanged for 
0.8709 fully paid ordinary shares in SPI Lasers plc of £0.001.
The ordinary shares in SPI Lasers plc were consolidated on a ratio of 1:25 pre-IPO, reducing the number of ordinary shares in the 
Company but making no change to the share capital.
The Group reconstruction has been accounted for using merger accounting.
Sale of SPI Lasers UK (as part of the Group reconstruction)
Subsequent to the ‘Merger agreement’ as outlined above, SPI Lasers LLC sold its 100% shareholding in SPI Lasers UK Ltd to SPI Lasers plc 
for the principal amount of $23.0 million, payable on demand as a loan note. This is accounted for in the Company’s solus accounts 
as an acquisition, but has no impact on the consolidated accounts.
Company
The Company balance sheet of SPI Lasers plc is presented at 31 December 2005 only, as this is the first period of accounts of 
the Company.
No profit and loss account is presented for SPI Lasers plc as permitted by section 230 of the Companies Act 1985.
Turnover
Turnover represents amounts derived from the provision of goods and services which fall within the Company’s ordinary activity 
after deduction of trade discounts and value added tax. The turnover and operating loss is attributable to the principal activity of the 
Company. Income is recognised on delivery of related goods and services. 
Profit is recognised on long term contracts, if the final outcome can be assessed with reasonable certainty, by including in the profit 
and loss account both turnover and related costs as contract activity progresses. Turnover is calculated by reference to the value of 
work performed to date as a proportion of the total contract value.
Fixed assets
Tangible fixed assets are included at their original historic cost.
Depreciation of tangible fixed assets is calculated on a straight line basis at rates estimated to write down the cost of each asset to its 
estimated residual value over its useful life.
Expected useful lives are as follows:
Leasehold improvements – ten years from commencement of lease
Plant and machinery – five years
Computer equipment – three years
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  25
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the 
carrying value may not be recoverable. Any impairment in the value is charged to the profit and loss account. Profits or losses on 
disposal of fixed assets reflect the difference between net selling price and net book value at the date of disposal. 
Investments
Investments in subsidiary undertakings are stated in the parent company’s accounts at cost, less provisions for any impairment 
in value.
Short term investments
Short term investment balances comprise cash held at banks which are not readily accessible.
Stocks
Stocks are stated at the lower of cost and net realisable value with due allowance for any obsolete or slow moving items. 
Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.
Stocks held for demonstration purposes are held at original cost and amortised over a period of no more than twelve months.
Provisions for liabilities and charges
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an 
outflow of economic benefits will be required to settle the obligation. 
Provision for product warranty
This relates to estimated warranty costs which are expected to be incurred under the Company’s terms and conditions of sale. 
The costs are expected to arise between one and two years of the balance sheet date.
Taxation
The charge for taxation is based on the loss for the year and takes into account taxation deferred because of timing differences 
between the treatment of certain items for taxation and accounting purposes.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where 
transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, 
tax, with the following exceptions:
●  deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be 
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. 
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing 
differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. 
Foreign currencies
Company
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities 
denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are 
taken to the profit and loss account.
Group
The financial statements of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. 
The exchange difference arising on the translation of the opening net assets is taken directly to reserves. All other translation 
differences are taken to the profit and loss account.
Research and development
Research and development expenditure is charged to the profit and loss account as incurred.
Leasing commitments
Rentals payable under operating leases are charged in the profit and loss account on a straight line basis over the lease term.
Pensions and other post-retirement beneﬁ ts
The Group makes defined contributions to employee personal pension plans. The pension cost charged to the profit and loss account 
represents the contributions payable to the pension plans in respect of the accounting year.
Long term contracts
Amounts recoverable on long term contracts, which are included in debtors, are stated at the net sales value of the work done less 
amounts received as progress payments on account. Excess progress payments are included in creditors as payments on account.  26
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
2. TURNOVER AND SEGMENTAL ANALYSIS
In the opinion of the directors, the Group has only one class of business and turnover and losses were generated predominantly in the 
United Kingdom. 
     2005 2004
Geographical analysis of turnover by destination:      £000 £000
North America     2,077 1,161
United Kingdom     452 346
Rest of Europe     589 107
Asia     350 116
     3,468 1,730
     2005 2004
Geographical analysis of net assets by location:      £000 £000
North America     775 316
United Kingdom     10,267 4,483
     11,042 4,799
3. OPERATING LOSS
This is stated after charging/(crediting):
     2005 2004
      £000 £000
Auditors’ remuneration – audit services
†
     59 47
 – non-audit services       161 19
Depreciation and impairment of fixed assets     534 1,180
Rentals received under operating leases     (131) (161)
Operating lease rentals  – land and buildings     357 429
Foreign exchange charge     86 140
Research and development     2,962 2,929
Loss on disposal of plant and machinery     — 10
†  
Auditors’ remuneration noted above includes £12,000 (2004: £nil) related to the audit of the parent company. Non-audit fees relate 
to general taxation advice totalling £13,000 and taxation advice relating to the Group restructuring totalling £148,000. In addition 
to the above amounts, the auditors also received £207,000 in respect of audit and non-audit services relating to the listing. These 
costs have been booked against the share premium account in line with FRS 4.
4. EXCEPTIONAL ITEMS
     2005 2004
      £000 £000
Recognised in arriving at operating loss:
Impairment of tangible fixed assets     — 1,006
Transaction costs     315 —
     315 1,006
In 2004 the directors performed a review of the carrying value of fixed assets and, based upon their forecast of the Company’s future 
operating cashflows, determined that an impairment charge of £1,005,595 was warranted.
In 2005 there is an exceptinal item of £315,000 that relates to costs associated with the flotation of the Company but which are not 
considered to be direct costs of the share issue.
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  27
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
5. STAFF COSTS
(a) Staff costs
     2005 2004
      £000 £000
Wages and salaries     3,989 3,316
Social security costs     450 382
Other pension costs      364 335
     4,803 4,033
The average monthly number of employees during the year was made up as follows:
     2005 2004
     Number Number
Production and customer support     40 33
Research and development     26 22
Sales and marketing     12 8
Administration     10 10
     88 73
(b) Directors’ emoluments
     2005 2004
      £000 £000
Directors’ emoluments     529 300
Company contributions paid to the defined contribution scheme    37 26
Aggregate gains made by directors on the exercise of options    — —
Number of directors accruing benefits under defined contribution schemes    3 5
The amounts in respect of the highest paid director are as follows:
     2005 2004
      £000 £000
Emoluments     288 266
Company contributions paid to the defined contribution scheme    21 23
6. INTEREST PAYABLE AND SIMILAR CHARGES
     2005 2004
      £000 £000
Other loans     190 —
7. TAX 
(a) Tax credit on ordinary activities
The tax credit is made up as follows:
     2005 2004
      £000 £000
Current tax:
UK corporation tax credit     — —
R&D tax credits for the year     484 400
Adjustment in respect of prior years     51 77
Total current tax credit     535 477 28
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
7. TAX  (CONTINUED)
(b) Factors affecting current tax credit
The tax credit on the loss of ordinary activities for the year is lower (2004: lower) than the standard rate of corporation tax in the UK 
of 30% (2004: 30%). The differences are reconciled below:
     2005 2004
      £000 £000
Loss on ordinary activities before tax     (8,971) (8,959)
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2004: 30%)  (2,691) (2,688)
Expenses not deductible for tax purposes     114 76
Decelerated capital allowances     155 244
Losses arising in the year not utilised     2,819 1,176
Movement in short term timing differences     35 2
Unrealised exchange movement     (1,037) 690
Losses surrendered for R&D tax credit     121 100
Adjustments in respect of previous years     (51) (77)
Total current tax (note 7(a))     (535) (477)
(c) Factors that may affect future tax charges
A deferred tax asset has not been recognised in respect of differences relating primarily to tax losses as there is insufficient evidence 
that the asset will be recovered, due to the uncertainty regarding the timing of relief and in the US, the quantum of losses that will be 
available to set against profits arising in the future. The amount of the asset not recognised is £10.0 million (2004: £7.7 million). 
The unrecognised deferred tax asset is comprised of the following elements.
     2005 2004
     £000 £000
Tax losses     9,077 6,898
Decelerated capital allowances     908 747
Other timing differences     52 55
     10,037 7,700
8. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 
The loss on ordinary activities after taxation includes a loss of £384,000 attributable to the parent company.
9. LOSS PER ORDINARY SHARE
Basic loss per share for the year ended 31 December 2005 of 47.7p per ordinary share is calculated using 17,699,035 shares, 
being the weighted average number of shares that would have been in issue had the shares been issued on 1 January 2005.
For the year ended 31 December 2005, the loss attributable to ordinary shareholders and weighted average number of shares for the 
purpose of calculating the diluted loss per share are identical to those used for the basic loss per ordinary share. This is because the 
potential diluting effect of reducing the loss per ordinary share is not dilutive under the terms of FRS 22 Earnings per share.
10. TANGIBLE FIXED ASSETS
Group
   Leasehold Plant and
   improvements machinery Computers Total
   £000 £000 £000 £000
Cost
At 1 January 2005    2,973 7,946 1,185 12,104
Additions   121 324 8 453
At 31 December 2005   3,094 8,270 1,193 12,557
Depreciation
At 1 January 2005   1,284 7,209 1,106 9,599
Charge for the year   286 199 49 534
At 31 December 2005    1,570 7,408 1,155 10,133
Net book value at 31 December 2005   1,524 862 38 2,424
Net book value at 31 December 2004   1,689 737 79 2,505
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  29
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
11. INVESTMENTS
Company
      £000
Shares in Group undertakings:
Additions      12,989
At 31 December 2005       12,989
The increase in investments represents the transfer within the Group of the investment in SPI Lasers UK Ltd from Southampton Photonics, Inc. 
during the year.
Shares in Group undertakings represent the Company’s investment in the following entities:
   Proportion of voting 
Name of company Holding rights and shares held Country of incorporation Nature of business
SPI Lasers UK Limited Ordinary shares 100% England Optical fibre-based lasers
SPI Lasers LLC Declared 100% interest 100% United States Optical fibre-based lasers
Southampton Photonics, Inc. was liquidated during the year.
12. STOCKS
Group
     2005 2004
     £000 £000
Raw materials and component parts     789 322
Work in progress     508 141
Finished goods     787 113
     2,084 576
The difference between purchase price or production cost of stocks and their replacement cost is not material. 
13. DEBTORS
 Group  Company
    2005 2004 2005
    £000 £000 £000
Trade debtors    1,280 176 —
Amounts owed by Group undertakings    — — 2,883
Other debtors    532 201 3
Prepayments and accrued income    390 522 8
Corporation tax recoverable    484  400 —
    2,686 1,299 2,894
14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
 Group  Company
    2005 2004 2005
    £000 £000 £000
Loans (note 16)    628 — —
Payments received on account    95 137 —
Trade creditors    997 558 10
Other creditors including taxation and social security    353 163 25
Accruals and deferred income    1,001 514 214
    3,074 1,372 249
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
 Group  Company
    2005 2004 2005
    £000 £000 £000
Loans (note 16)    1,039 — —
Amounts owed to Group undertakings    — — 12,192
    1,039 — 12,192 30
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
16. LOANS 
 Group  Company
    2005 2004 2005
    £000 £000 £000
Amounts falling due: in one year or less or on demand    628 — —
In more than one year but not more than two years    714 — —
In more than two years but not more than five years    325 — —
    1,667 — —
Less: included in creditors: amounts falling due within one year   628 — —
    1,039 — —
The loan was provided in June 2005 by ETV Capital SA (Luxemburg). The loan amount was £2,000,000, repayable by 36 equal 
monthly instalments at an interest rate of 12.65%. It is secured on the fixed assets of the Company.
ETV Capital SA has been granted a warrant to purchase, at its discretion, 201,388 ordinary shares at the IPO price of 144p per share. 
The warrant is exercisable for the greater of ten years from the date of issue or five years after the initial public offering of the 
company’s ordinary shares. The warrant may be exchanged without the payment of any additional consideration for the company’s 
shares based upon the value of the warrant and the shares at the time of the exchange.
17. OBLIGATIONS UNDER LEASES 
Annual commitments under non-cancellable operating leases are as follows:
Group
      Land and 
      buildings
     2005 2004 
     £000 £000
Operating leases which expire:
Within one year     — 27
In two to five years     — —
In over five years     325 325
     325 352
18. PROVISIONS FOR LIABILITIES AND CHARGES 
Group
     Product
    Dilapidations  warranty Total
    £’000 £’000 £000
At 1 January 2005    70 33 103
Arising during the year    25 75 100
Amounts utilised during the year    (18) (20) (38)
At 31 December 2005    77 88 165
Dilapidations
Provision is made for potential dilapidations to a building for which the lease has expired. The Company vacated the building in 
September 2005. The provision is expected to be utilised during 2006.
Product warranty
Provision is made for estimated warranty costs which are expected to be incurred under the Company’s terms and conditions of sale. 
These costs are expected to arise between one and two years of the balance sheet date. 
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  31
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
19. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
An explanation of the Group’s objectives, policies and strategies for the role of derivatives and other financial instruments in creating and 
changing the risks of the Group in is activities is discussed in this note. The disclosures below exclude short term debtors and creditors. 
Interest rate risk proﬁ le of ﬁ nancial liabilities
The interest rate profile of the financial liabilities of the Group as at 31 December is as follows:
      Fixed rate
      Financial
     Total liabilities
     £000 £000
2005
Sterling – borrowings     1,667 1,667
2004
Sterling     — —
      Weighted 
      average 
     Weighted period
     average for which 
     interest rate rate is fixed
     % Years
2005
Sterling – borrowings     12.65 2.4
2004
Sterling     — —
Interest rate risk proﬁ le of ﬁ nancial assets
The interest rate profile of the financial assets of the Group as at 31 December is as follows:
      Financial
    Fixed rate Floating rate assets on which
    financial financial no interest
   Total assets assets is earned
   £000 £000 £000 £000
2005
Sterling   7,887 — 7,887 —
US dollar   239 — 239 —
Total   8,126 — 8,126 —
2004
Sterling   965 — 965 —
US dollar   929 — 929 —
   1,894 — 1,894 —
Floating rate financial assets comprise cash deposits on money market deposit at call. 
Currency exposures
The Group does not hedge the currency exposures arising from its net investment overseas (in other words, its structural currency exposures). 
Gains and losses from these structural currency exposures are recognised in the statement of total recognised gains and losses.
The table below shows the Group’s currency exposures; in other words, those transactional exposures that give rise to the net currency 
gains and losses recognised in the profit and loss account. Such exposures comprise the monetary assets and monetary liabilities of 
the Group that are not denominated in the operating (or ‘functional’) currency of the operating unit involved.
Net foreign currency monetary assets/(liabilities)
    Total Euros US dollar
Functional currency of Group operations    £000 £000 £000
2005
Sterling    99 50 49
2004
Sterling    581 (18) 599 32
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
19. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)
Maturity of ﬁ nancial liabilities
The maturity profile of the Group’s financial liabilities at 31 December is as follows:
     2005 2004 
     £000 £000
In one year or less, or on demand     628 —
In more than one year but not more than two     714 —
In more than two years, but not more than five     325 —
     1,667 —
Borrowing facilities
The Group has no further borrowing facilities available to it, other than the loan with ETV Captial SA (Luxemburg). 
Fair values of ﬁ nancial assets and ﬁ nancial liabilities
Set out below is a comparison by category of book values and fair values of the Group’s financial assets financial liabilities as at 
31 December:
   Book value Fair value Book value Fair value
   2005 2005 2004 2004
   £000 £000 £000 £000
Primary financial instruments
Short term borrowings and current portion of long term borrowings  628 628 — —
Current asset investment   — — 256 256
Long term borrowings   1,039 1,039 — —
Cash and short term deposits   8,126 8,126 1,638 1,638
Market price risk
The Group accepts a degree of interest rate risk and currency risk as long as the effects of various changes in rates remain within 
certain prescribed ranges. 
20. SHARE CAPITAL
The authorised and issued share capital of the Company as at 31 December 2005 is as follows:
     2005 2005
Authorised     Number £000
Ordinary shares of £0.025 each     100,000,000 2,500
     2005 2005
Allotted, called up and fully paid     Number £000
Ordinary shares of £0.025 each     17,699,035 442
On incorporation on 25 August 2005, the authorised share capital was 100,000 ordinary shares at £0.001 each. On 20 October 2005,
the Company passed the following resolutions:
i) the share capital of the Company was increased from £100,000 to £2,500,000 by the creation of a further 2,400,000,000  
 ordinary shares of £0.001 each.
(ii) the Company consolidated its share capital on a 25:1 basis, consolidating 25 ordinary shares of £0.001 each into one   
 ordinary share of £0.025 each
On 20 October 2005, the former shareholders of Southampton Photonics, Inc. exchanged their shares for ordinary shares in 
SPI Lasers plc. As a result, 9,362,994 ordinary shares of £0.025 each with an aggregate nominal value of £234,075 were 
issued at par.
On 20 October 2005, 8,336,041 ordinary shares of £0.025 each with an aggregate nominal value of £208,401 were issued 
at £1.44 per share with total gross consideration amounting to £12,003,899. Share issue costs netted against the share premium 
account total £1,190,000.
Share options
The number of options outstanding under the Company’s share option scheme is disclosed in the directors’ report. There are no 
additional options granted to employees, other than directors as at 31 December 2005.
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  33
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
21. RESERVES 
Group
  Share  Share     
  capital premium Merger Profit 
  reserve account reserve and loss Total 
  £000 £000 £000  £000 £000
On incorporation  50 — — — 50
Repurchase of initial shares issued  (50) — — — (50)
Merger accounting  234 — 50,389 (41,983) 8,640
Arising on share issues  208 11,795 — — 12,003
Share issue costs  — (1,190) — — (1,190)
Retained loss for the year  — — — (8,436) (8,436)
Exchange differences on retranslation of net 
assets of subsidiary undertakings  — — — 25 25
At 31 December 2005   442 10,605 50,389 (50,394) 11,042
Company
     Profit 
   Share Share and loss  
   capital premium account Total
   £000 £000 £000 £000
On incorporation   50 — — 50
Repurchase of initial shares issued   (50) — — (50)
Arising on share issues   442 11,795 — 12,237
Share issue costs   — (1,190) — (1,190)
Retained loss for the year   — — (384) (384)
At 31 December 2005   442 10,605 (384) 10,663
SPI Lasers plc Group restructuring
SPI Lasers plc was incorporated on 25 August 2005 under the name of Wilmerhale 1 plc and changed its name to SPI Lasers plc on 
30 August 2005. It became the ultimate parent company to SPI Lasers LLC under the ‘Merger Agreement’ which became effective on 
26 October 2005.
Under the terms of the Merger Agreement, shares in the Company were offered to existing shareholders of Southampton Photonics, Inc. 
The details of the Merger Agreement were as follows:
●  each share of issued common stock in Southampton Photonics, Inc. of $0.001 (30,851,938) was exchanged for one ordinary 
share in SPI Lasers plc of £0.001;
●  each share of issued Series A preferred stock in Southampton Photonics, Inc. of $0.001 (49,448,336) was exchanged for 
1.4016 fully paid ordinary shares in SPI Lasers plc of £0.001; and
●  each share of issued Series B preferred stock in Southampton Photonics, Inc. of $0.001 (153,769,332) was exchanged for 
0.8709 fully paid ordinary shares in SPI Lasers plc of £0.001.
The ordinary shares in SPI Lasers plc were consolidated on a ratio of 1:25 pre-IPO, reducing the number of ordinary shares in the 
Company but making no change to the share capital. 34
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
22. RELATED PARTY TRANSACTIONS
The University of Southampton is a related party under FRS 8 as David Payne, a director of SPI Lasers plc, is an employee of the 
University. Included within the profit and loss account are costs of £172,000 (2004: £107,000) in respect of a series of technology 
development contracts with the University. Purchases of goods and services made from the University of Southampton amounted to 
£66,000 (2004: £17,000). Royalties of £23,000 (2004: £30,000) were due to the University under licence agreements. The year 
end balance with the University totalled £83,000 (2004: £61,000) and is included within accruals. All transactions were conducted 
on an arm’s length basis.
23. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of operating loss to net cash outﬂ ow from operating activities
     2005 2004 
     £000 £000
Operating loss     (8,942) (9,044)
Depreciation charges     534 1,180
Fixed asset impairment charges     — 1,006
Loss on disposal of fixed assets     — 10
(Increase)/decrease in debtors     (1,303) 288
Increase in stocks     (1,508) (436)
Increase in creditors     1,136 44
Exchange difference     86 134
Net cash outflow from operating activities     (9,997) (6,818)
(b) Reconciliation of net cash ﬂ ow to movement in net funds
     2005 2004 
     £000 £000
Increase/(decrease) in cash in the year     6,549 (1,895)
Cash inflow from increase in debt finance     (2,565) —
Cash outflow from decrease in debt     898 —
(Decrease)/increase in liquid resources     (256) 127
Change in net debt resulting from cash flows     4,626 (1,768)
Exchange differences     (61) 245
Movement in net debt in the year     4,565 (1,523)
Opening net funds     1,894 3,417
Closing net funds     6,459 1,894
(c) Analysis of net debt
   At   At
   1 January Cash Exchange 31 December
   2005 flow differences 2005
   £000 £000 £000 £000
Cash at bank and in hand   1,638 6,549 (61) 8,126
Liquid resources   256 (256) — —
Loans – short term   — (628) — (628)
Loans – long term   — (1,039) — (1,039)
   1,894 4,626 (61) 6,459
(d) Major non-cash transactions
There were no major non-cash transactions in the year.
(e) Exceptional items
Cash flows relating to operating exceptional items
There were cash flows of £315,000 relating to operating exceptional items in the year (2004: £nil) 
NOTES TO THE FINANCIAL STATEMENTS at 31 December 2005  35
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
24. PENSION SCHEMES
The Group pays contributions to personal pension plans for directors and employees. These contributions are charged to the profit 
and loss account as they arise. Contributions made during the year amounted to £359,000 (2004: £334,000).
The Group pays contributions to a 401k pension plan for US employees. These contributions are charged to the profit and loss 
account as they arise. Contributions made during the year amounted to £5,000 (2004: £1,000).
25. CAPITAL COMMITMENTS
Amounts contracted for but not provided in the financial statements amounted to £nil (2004: £43,054) for the Group and £nil for the 
Company (2004: £nil).
26. CONTINGENT LIABILITIES
The directors are not aware of any contingent liabilities. 36
SPI Lasers plc 
annual report and accounts 2005 www.spilasers.com
DIRECTORS
S Berg
D Cheesman
G Meek
D Parker
D Payne
P Schultz
D Shrigley
SECRETARY
S Berg
AUDITORS
Deloitte & Touche LLP
Southampton
BANKERS
HSBC Bank plc
165 High Street
Southampton SO14 2NZ
Anglo Irish Bank Corporation plc
10 Old Jewry 
London EC2R 8DN
California Bank & Trust 
20,541 Stevens Creek Boulevard
Cupertino CA 95014
USA
Merrill Lynch
50 West San Fernando Street
San Jose CA 95113
USA
SOLICITORS
Wilmer Cutler Pickering Hale & Dorr LLP
Alder Castle
10 Noble Street
London EC2V 7QJ
Blake Lapthorn Linnell
Kings Court
21 Brunswick Place
Southampton
Hampshire SO15 2AQ
REGISTRARS
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield HD8 0LA
Brokers
Panmure Gordon & Co.
155 Moorgate
London EC2M 6XB
REGISTERED OFFICE
Alder Castle 
10 Noble Street
London EC2V 7QJ
OFFICERS AND PROFESSIONAL ADVISERS OUR STRATEGY 
Our goal is to be a leader in the optical
ﬁ bre-based laser market. 
QUARTER 1QUARTER 2
  Released product roadmap for MICRO 
and MARKING at Laser 2005 
 Cell-based manufacturing introduced
  Capital injection of £2.2m net from 
venture investors
 Venture finance loan received of £2.0m
  Industrial interfaces added to 
first MICRO laser combined with 
regulatory compliance 
  First lasers sold into production 
stent environment
  Capital injection of £1.6m net from 
venture investors
SPI’s current business was established in 
2000 to exploit technology developed by the 
renowned Optoelectronics Research Centre 
at the University of Southampton. Initially, 
SPI focused on the manufacture of optical 
components for the long-distance, high-speed 
telecommunications industry. In doing so, SPI 
gained expertise in the design and manufacture 
of specialty optical ﬁ bre and Bragg gratings, 
a form of mirror or ﬁ lter contained in optical 
ﬁ bre, for use in optical processing. These skills 
are transportable into other markets. 
In 2003, the Company re-launched as a ﬁ bre 
supplier and developed its ﬁ rst portfolio for the 
industrial laser market place during 2004.
  OUR STRATEGY
  OUR HISTORY
 1 AT A GLANCE
 2 OUR TECHNOLOGY
 2 CURRENT PRODUCTS
 3 OUR MARKETS
 4 CHAIRMAN’S STATEMENT
 6 CHIEF EXECUTIVE’S REVIEW
 8 FINANCIAL REVIEW
 12 BOARD OF DIRECTORS
 14 DIRECTORS’ REPORT
 18  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 19 INDEPENDENT AUDITORS’ REPORT
 20 GROUP PROFIT AND LOSS ACCOUNT
 20  GROUP STATEMENT OF TOTAL RECOGNISED 
GAINS AND LOSSES
 21 GROUP BALANCE SHEET
 22 COMPANY BALANCE SHEET
 23 GROUP CASH FLOW STATEMENT
 24 NOTES TO THE FINANCIAL STATEMENTS
 36 OFFICERS AND PROFESSIONAL ADVISERS
CONTENTS
OUR HISTORY
T HE D ESIGN P OR TFOLIO
a member of the flathill communications group plc
www.flathillplc.com
designed & produced by annual report and accounts 2005
INSPIRING YOUR PRODUCTS AND MANUFACTURING 
SPI Lasers plc
3 Wellington Park 
Tollbar Way 
Hedge End 
Southampton 
SO30 2QU 
Tel: +44 (0)1489 779696  
Fax: +44 (0)1489 779698 
Email: investors@spilasers.com
Web: www.spilasers.com
SPI Lasers plc  annual report and accounts 2005