insp ir ing your products and manufactur ing 
annual r eport and accounts 2007
spi lasers plc
3 wellington park 
tollbar way 
hedge end 
southampton 
so30 2qu 
tel 44 01489 779696 
fax 44 01489 779698 
email investorsspilaserscom
web wwwspilaserscom
spi lasers plc annual r eport and accounts 2007  corporate statement
our goal is to be a leader in the optical  
fibrebased laser market 
spi is now a recognised leader in the design and 
manufacture of fibre lasers the group’s technology 
is rapidly becoming an integral part of producing 
many enduser products by improving and in some 
cases enabling its customers’ manufacturing 
processes spi continues to expand the applications 
space for fibre lasers with powers from mws to kws
ifc corporate statement
01 highlights
01 what we do at a glance 
02 our market
02 our technology
02 current products 
04 chairman’s statement
06 chief executive’s review
08 financial review
10 board of directors
12 financial contents
13 directors’ report
17 directors’ remuneration report
18 statement of directors’ responsibilities
19 independent auditors’ report to the members of spi lasers plc
20 consolidated income statement
21 consolidated statement of recognised income and expense
22 consolidated balance sheet
23 company balance sheet
24 company statement of changes in equity
25 consolidated cash flow statement
26 company cash flow statement
27 notes to the financial statements
48 five year summary
ibc officers and professional advisors
officers and professional advisors
directors
d holloway 
g meek 
d parker 
d payne 
p schultz
secretary
d holloway
auditors
deloitte  t ouche llp
southampton united kingdom
bankers
hsbc bank plc
165 high street 
southampton so14 2nz
angl o irish bank corporation plc
10 old jewry 
l ondon ec2r 8dn
california bank  trust
20541 stevens creek boulevard 
cupertino ca 95014 
usa
solicitors
heller ehrman europe llp
condor house 
10 st pauls churchyard 
l ondon ec4m 8al
blake lapthorn t arl o lyons
kings court 
21 brunswick place 
southampton 
hampshire so15 2aq registrars
capita registrars
northern house 
w oodsome park 
f enay bridge 
huddersfield hd8 0la
brokers
panmure gordon uk limited
moorgate hall 
155 moorgate 
l ondon ec2m 6xb
registered office
3 w ellington park 
tollbar w ay 
hedge end 
southampton so30 2qu 01
spi lasers plc 
annual report and accounts 2007 
highlights
	 	 	 turnover almost doubled to £13 million 
2006 £71 million
	 	 product sales of £117 million 
2006 £47 million
	 	 strong growth in all product areas
	 	 50 new accounts in last six months
	 	 new product platforms delivered ahead 
of schedule
	 	 strong increase in activity in asia 
	 	 strengthened balance sheet following 
october 2007 placing raising  
£105 million net
what we do at a glance 
macro 
cutting and welding of larger parts in industries such as automotive 
white goods etc
micro
a term for a diverse set of applications that require fine or precise cutting 
or welding these include medical components eg stents electronic 
assembly printing etc
medical 
a growing range of aesthetic laser applications such as skin resurfacing 
and rejuvenation
marking 
the production of equipment to produce permanent marking on 
a wide range of products examples include consumer electronics  
semiconductor automotive and aerospace 02
spi lasers plc 
annual report and accounts 2007 
our market
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 w ithin this 
market the fibre laser is set to continue as the fastest 
growing subsegment 
our technology and current products 
the fibre laser requires the same basic elements as any other laser system
in the case of the fibre laser all of the elements are contained within the optical 
fibre thus leading to an integrated solution which avoids the need for complex 
precision assemblies found in conventional lasers the flexible nature of the optical 
fibre allows for a compact format which is significantly smaller than its industrial 
counterparts the properties of the optical fibre 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 serves many markets and they are software configurable 
spi l asers enjoys a wide range of intellectual property and knowhow most notably 
our gtw ave™ technology which allows robust and simple assembly without the 
use of complex or expensive subcomponents this is deployed as a standard 
technology platform throughout the product set 
during 2007 we consolidated our build standards into two new platforms yielding 
dramatically lower costs improved relativity and enhanced features 03
spi lasers plc 
annual report and accounts 2007 
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 endusers
10–20w cw l ong w avelength the wavelength of these lasers has been 
matched to maximise their effectiveness 
for aesthetic medical applications
50–200w systems these lasers are used in the micro market 
for fine feature cutting and welding
the rapid growth of fibre 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
significant improvements in efficiency compared to conventional lasers
maintenance
little or no replacement parts or postinstallation maintenance
source fibre laser market penetration per laserfocusworld lasers  photonics marketplace seminar 2006 and 2006 actuals
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spi lasers plc 
annual report and accounts 2007 
overview
i am pleased to report that the group has made 
considerable strides in its development during 
2007 and i believe is now well placed to meet 
the challenges of the rapidly changing 
market environment
fibre laser revenue is growing at a rate several 
times greater than the general laser market by 
both an increasing range of applications which 
exploit the inherent capability of the technology 
and also by the replacement of more 
mature technologies
the attractiveness of the market has led to several 
companies declaring an intention to join the existing 
industrial scale players where spi is now established 
as the clear number two the companies seeking 
to join the market are however potentially a long 
way from achieving the delivery of an effective 
product based on sound innovative technology 
that does not infringe the intellectual property 
of the more established players 
in contrast spi has made significant technological 
progress during the year culminating in the successful 
launch of its g3 and r4 product ranges ahead 
of schedule these platforms have addressed the 
previously reported quality issues that slowed our 
progress in the middle of the year and are beginning 
to deliver a marked improvement in gross margin 
which should allow the group to make continued 
progress in 2008
spi’s performance during 2007
in spite of the difficulties encountered in the 
middle of 2007 revenue continued to almost 
double again this year and perhaps more 
importantly we continued to expand our share 
of each of our three main market areas namely 
micro  medical and marking  the rate 
of new account wins and repeat business from 
established customers was encouraging particularly 
at the end of the year based on acceptance 
of the new platforms the market dynamics led 
to significant and deliberate competitive pricing 
pressure during the first half of the year whilst this 
has had the positive effect of reducing the price 
premium hurdle of fibre lasers compared with 
more traditional technologies so increasing the 
accessible market the effect in the short term on 
spi’s profitability was sufficient spur to accelerate 
our planned investment to develop and deliver 
our new lower cost product platform which in 
turn led to the group’s refinancing in october 2007
i am pleased to report that the new product 
platforms are being delivered ahead of schedule 
and also at cost and performance levels which 
are consistent with the plan to transform the 
profitability of the business during 2008
financing
as referred to in last year’s annual r eport during 
february 2007 spi completed a £10 million net 
equity fundraising from existing shareholders and 
a number of new supporters
chairman’s statement
summary of chairman’s statement
	 	 turnover almost doubled for third successive year
	 	 expansion in all sectors
	 	 launch of new products g3 and r4 ahead of schedule
“ the board expects strong revenue growth in 2008 
and remains committed to achieving profitability 
in q4 this year” 05
spi lasers plc 
annual report and accounts 2007 
during october 2007 however the changes 
in the competitive market environment the cost 
of developing a lower cost platform and resolving 
the quality issues necessitated the group raising 
a further £105 million net in equity the fundraising 
comprised not only the placing of new shares with 
institutional investors but also a strategic investment 
by the furukawa electric co ltd of £20 million 
the board
t he composition of spi’s board has changed 
during the year david c heesman on his retirement 
from advent venture partners is reducing his 
commitments and has retired from the board 
david had served spi since 2003 when advent 
became one of the group’s leading investors 
prior to flotation we thank him for his wise 
counsel over the past five years
after the interim results steve berg our 
chief financial officer also left the group in 
order to concentrate on his family interests in 
nottinghamshire steve was appointed cfo 
in february 2003 and in over five years made 
a considerable contribution to the development 
of spi
in o ctober 2007 we welcomed d avid holloway 
as our new chief financial officer he has already 
made a significant impact both to the board and 
to the financial and operational efficiency of 
the business
employees
the design and production of fibre lasers is not 
a trivial engineering challenge as new entrants 
to this market may now be discovering 
the combined and successful achievements of 
our workforce in 2007 should be seen against 
that demanding background the board wishes 
to extend its thanks for the immense effort and 
dedication shown by the worldwide team
prospects
as well as prospective new entrants into the market 
last year also saw new alliances being forged 
in the fibre laser technology world for example 
t rumpf and jenoptik announced a joint venture 
in midyear rofin acquired a leading merchant 
supplier of specialist optical fibre nufern in 
december while furukawa became a small but 
strategic shareholder in spi in october the pace 
of change in the market place is increasing it seems 
unlikely that the manoeuvring for advantage 
amongst the players is yet complete
spi has begun the current year with renewed 
confidence in our ability to produce competitive 
products o ur new product platforms are 
transforming margins and are attracting increasing 
customer interest field reliability and functional 
performance have been most encouraging 
activity in the area of development contracts 
tends to be cyclical and driven by investment 
programmes after a low ebb in 2007 the 
outlook for 2008 looks more promising with at 
least one major award close to final adjudication
the worldwide fibre laser market continues to grow 
rapidly despite the wellpublicised softness in the 
us economy which has had an effect on our micro 
business in the first quarter nevertheless our overall 
order pipeline remains strong our new platforms 
are demonstrating good performance and high 
reliability with a widening group of repeat customers 
margins have begun to improve with further gains 
expected through 2008 action is being taken 
to control overheads t he board expects strong 
revenue growth in 2008 and remains committed 
to achieving profitability in q4 this year
graham meek
chairman
1 april 2008
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 fibre 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 benefits of spi’s technology for example superior cut 
quality of solder mask stencils for circuit boards 
welding
most people when they think lasers think welding and this is true of 
the fibre laser from spi however due to spi’s innovative approach 
it is now possible to weld various materials including ones that are 
dissimilar to one another at incredibly small dimensions
previous welding tools including traditional lasers simply could 
not achieve the diminutive yet robust bond that the fibre laser 
produces not only is the fibre laser playing an integral part in the 
miniaturisation of consumer products the technology is making a 
massive contribution to the quest for sustainable energy sources 06
spi lasers plc 
annual report and accounts 2007 
overview
2007 was a year of considerable challenge for 
the business and i am pleased to report that the 
organisation in surmounting these challenges is 
i believe in a much stronger position than last 
year to exploit the current opportunities in the 
market place
revenue of £13 million was broadly in line with 
latest market expectations almost continuing the 
historic pattern we have established of doubling 
year on year which we believe is an indicator that 
we have now reached critical market share in our 
selected sectors such that future growth can be 
directed to those areas producing the best return 
the ability to make these choices predicated on 
the new product platforms introduced towards the 
end of 2007 will be crucial if we are to navigate 
through the uncertain global market environment 
of 2008 and secure our primary objective of 
transforming the group from an investment 
phase company to a profitable enterprise
having secured a number of significant contract 
wins in d ecember 2007 with a combined revenue 
potential of over us10 million and a rapid 
acquisition of new customers based on our new 
product platforms we finished the year with cash 
resources at £113 million ahead of expectation 
continued focus on cash management remains 
a fundamental objective of the business
the first half of the year experienced strong 
volume growth in line with market expectations 
the industry market leader however introduced 
a radical competitive pricing strategy in midyear 
this had the benefit of widening the accessible 
market through the removal of the fibre laser price 
premium compared with the more established 
technology alternatives however it also had the 
downside of eroding the economic return of our 
then product offering this was compounded by 
the previously reported quality issues this resulted 
in spi’s management team focusing on accelerating 
the development of new product platforms which 
could not only offer enhanced performance and 
reliability but should also positively transform 
margin performance
the new product platforms have been launched 
ahead of schedule have been well received by 
customers and should lead to strong growth again 
in 2008 the ‘onceoff’ competitive pricing action 
in the first half of the year has created a new price 
reference level in the market which has remained 
relatively stable and it appears to have achieved 
its objective of widening the accessible market 
the price of surmounting the above challenges 
was a further equity fundraising in october 2007 
which raised £105 million net including 
a £20 million strategic investment by furukawa 
furukawa’s investment was particularly significant 
for spi both in terms of spi’s technological 
credentials and also its commercial standing 
within the fast developing far eastern markets
products and markets
in previous years spi’s business was dominated 
by one area micro  as we have grown this is 
no longer the case and therefore we will treat 
each sector in turn
medical  our revenue has been historically 
dominated by oem module supply to leading 
machine integrators operating in the aesthetic 
and cosmetic arena w e expect to build on this 
success but also to add more diversification in the 
future the spi product is a module operating at 
a wavelength of 1550nm and leverages our core 
competencies in special fibre design and production 
w e began the year with two customers who had 
high initial demand which then reached a plateau 
w e ended the year with increased demand 
potential for significant contract wins a new 
higherpower product business spread across 
four key accounts and the ability to migrate this 
product to our new lower cost standard platform
micro  this market is a diverse set of cutting 
and welding applications in industries such as 
medical component manufacture automotive 
consumer electronics and semiconductors 
this has been the longeststanding market sector 
for spi during the year the product line continued 
to grow steadily but suffered the most price erosion 
in 2007 w e responded with dramatic improvements 
in our costs which were achieved by completely 
redesigning the product with much improved 
active fibre not only do these new platforms have 
lower material costs but they allow significant 
consolidation of historic platforms which yields 
a paradigm shift in business simplification and 
therefore fixed costs
chief executive’s review
summary of chief executive’s review
	market share growing in each sector micro  medical and marking
	50 new customers added in the last six months
	new product platforms received well b y customers
	growth in asia almost 400
“ spi achieved many of its goals in 2007 and 
particularly at the end of the year further 
contract wins successfully created positive 
business momentum on which to build” 07
spi lasers plc 
annual report and accounts 2007 
marking  spi has developed a leading 
pulsed laser product based on a different 
architecture to its leading competitor whilst the 
issues encountered during 2007 delayed its general 
availability in the market i am pleased to report 
a successful new platform introduction took place 
towards the end of the year again ahead of schedule 
this new platform introduction not only addressed 
the quality issues but significantly lowered the cost 
of production in d ecember we announced 
several large contract wins for this product family 
success in marking has been allied with the 
penetration of new and diverse markets such 
as solar cell production utilising the advanced 
performance attributes of the standard product 
some of these sectors will take time to develop 
into volume and may require some modest product 
customisation to secure significant design wins for 
the second half of 2008
a note on technology
at the heart of our products and indeed our 
business lie our core competencies of optical 
fibre production and laser engineering a highlight 
of 2007 was the improvement in the raw efficiency 
of our fibre and associated optical subassemblies 
t his has enabled novel architectures and 
end product designs to be deployed it is these 
improvements along with the support of our 
strategic suppliers which have enabled such 
dramatic shifts in the production costs of our 
whole portfolio in developing the new building 
blocks we have also kept an eye to the future 
ensuring that the new platforms are fully scalable 
to higher powers which will enable future entry 
into new markets
looking ahead
w e see opportunities for improved top line 
performance across our sectors and geographic 
markets the rate of new customer wins 
in marking is particularly pleasing with over 
50 new customers added in the last six months 
and we have already announced the continued 
expansion of existing verticals for example 
securing a further contract win in the medical 
sector like many other companies in our sector 
however the uncertain capital equipment market 
notably in the us  could disproportionately affect 
our micro business 
t he fundamental objective for the g roup 
in the year ahead is to achieve profitability before 
we exit the year and to maintain a positive cash 
position in order to underpin this we will 
concentrate on three fundamentals
  prioritising new business consistent with 
our margin objectives
  continued variable cost reductions enabled 
by our new platforms and
  reducing our infrastructure costs consistent 
with the demands of the business
spi achieved many of its goals in 2007 and 
particularly at the end of the year further contract 
wins successfully created positive business momentum 
on which we continue to build the whole group 
has developed considerably and i am looking 
forward with renewed confidence to dealing 
with the future challenges of growth and business 
maturity and to achieving our objective of profitability 
in the last quarter
dr da vid p arker
chief executive officer
1 april 2008
medical aesthetics
fibre laser technology from spi has more to offer than just  
industrial applications 
there has been significant growth in the use of lasers in the area 
of medical aesthetics techniques such as thermal skin rejuvenation 
and wrinkle removal are becoming widely available enabled in 
part by fibre lasers
where previous technologies were limited by cost unpleasant side 
effects and long recovery times the spi laser when incorporated 
into our customers’ systems revolutionises the way we think about 
and deal with scarring and facial skin ageing
marking
spi lasers’ technology leadership is helping to transform the way 
companies identify and track their products previously placing 
unique marks on products or components was greatly limited by 
the type of marks and a potential for a lack of permanence in a 
world where counterfeit products could endanger the commercial 
viability of an organisation the ability to costeffectively make 
unique complex permanent and inert identification marks is 
quite literally changing the face of products
the fibre laser from spi is also playing a key role in the development 
of many consumer products w here complex layer combinations such 
as metal and plastic require material removal in order for example 
to produced keypads – the unique properties of spi’s technology 
enables increased processing accuracy precision and speed  08
spi lasers plc 
annual report and accounts 2007 
overview
2007 saw the continued rapid and significant 
development of the g roup fuelled by the expansion 
of the fibre laser market bringing the year to 
a close broadly in line with market expectations 
the year’s highlights included 
  the continued trend of almost double year 
on year revenue growth including the rise 
of our asian business to overtake the usa 
as our lead market 
  competitive pricing pressure from the market 
leader causing the realignment of sales price 
reference levels
  the resolution of a number of technical issues
  a year of unfavourable exchange rate 
movements and
  the rapid development and launch ahead 
of schedule of new product platforms with 
enhanced performance and reliability and 
with improved cost profile which should 
increase product margins in 2008
the year closed with an additional equity fundraising 
£105 million net and the announcement of 
significant new customer and vertical wins which 
will account for approximately us10 million 
of fibre laser product revenue in 2008
revenue
total revenue grew by 84 compared with last 
year from £71 million to £131 million of which 
product revenue were £118 million having 
grown by 150 from £47 million last year
c ontract revenue which relate to us and uk 
defence and aerospace projects were down 45 
to £13 million reflecting the cyclical nature 
of the development contracting market
asian revenue was £63 million having grown 
very strongly in the year 390 and overtaking 
the us to become spi’s lead market asia now 
accounts for approximately half of spi’s worldwide 
product revenue more than double last 
year’s proportion
c onversely our product sales performance in the 
us market £25 million has remained at almost 
the same level and the proportion of sales has 
slipped from first place to third with sales to 
europe increasing to £28 million
sales in the u k market £15 million during 
the year were 11 of the total worldwide sales 
operational performance
gross loss
the gross loss during the year was £19 million 
which was a significant improvement on last 
year’s performance £31 million loss and 
particularly after taking into account the major 
volume increase and the dislocation inherent 
in the development of new product platforms 
the business has demonstrated that its 
predominantly fixed cost manufacturing base 
can leverage significant increased volume 
throughput with beneficial effect on margin 
performance for the future and particularly with 
the improved cost profile of the new product 
platforms leading into 2008
administrative expenses
administrative expenses were £107 million in 
the year some £23 million higher than last year 
an increase of 27 due to both increased rd 
costs associated with developing the new product 
platforms and also due to the expansion in sales
administrative expenses include £30 million 
2006 £24 million of group funded product 
rd costs of which £28 million was charged 
against the profit and loss account and the balance 
capitalised in addition and charged against 
cost of sales the group invested £11 million 
on customer funded rd 2006 £21 million
administrative expenses also include sales and 
marketing costs provisions for royalties warranty 
and also general administration costs these costs 
increased by some 14 during the year consistent 
with increasing the worldwide sales presence and 
scale of the business
taxation
spi has an unrecognised deferred tax asset of 
£149 million 2006 £128 million which has 
primarily arisen from losses incurred to date
in 2007 an rd tax credit of £04 million 
£04 million in 2006 was recognised the 
associated cash receipt from hm revenue  customs 
 excise is expected to be received in the second 
half of 2008 the 2006 related tax credit was 
received in february 2008
financial review
summary of finance director ’s review
	 	 continued trend of almost double year on year revenue growth
	 	 continued growth in geographical markets especially asia
	 	 additional equity of £105 million net raised in october 2007 
restores balance sheet
“ 2007 saw the continued rapid and significant 
development of the group  fuelled b y the expansion 
of the fibre laser market bringing the year to 
a close broadly in line with market expectations ” 09
spi lasers plc 
annual report and accounts 2007 
loss after taxation
the loss after taxation for 2007 was £123 million 
2006 £110 million an increase of £13 million 
12 due primarily to the issues referred to above 
under gross l oss and administrative expenses
dividend
the directors do not propose to pay a dividend 
2006 £nil spi’s current policy which is kept 
under regular review is to retain future earnings 
for the development and expansion of the business
headcount
average heads increased from 126 in 2006 to 
183 in 2007 associated with the increasing scale 
and geographic spread of the business
sales increased from £56000 per head in 2006 
to £71000 per head in 2007 an increase of 
27 whilst the loss after tax per head decreased 
from £87000 to £67000 a decrease of 23 
during the same period
fixed assets 
gross fixed assets increased by £08 million 
during 2007 comprising £05 million of property 
plant and equipment and £03 million of intangible 
assets the latter associated with the capitalisation 
of development costs for the first time consistent 
with ias 38
depreciation for 2007 was £07 million 2006 
£06 million accumulated depreciation as at 
31 december 2007 stands at £114 million some 
81 of the gross cost of the assets
working capital
w orking capital namely net current assets 
excluding cash and loans decreased from 
£31 million to £27 million compared with 
the previous year which was a creditable 
performance in the light of the significant increase 
in the scale of the business increased inventories 
£09 million were more than offset by increased 
creditors £12 million whilst debtors remained 
flat having benefited from focused collections 
management during the fourth quarter
loans 
the total of loans both long and short term 
outstanding as at 31 d ecember 2007 was 
£25 million a decrease of £03 million compared 
with the previous year n o new loans were taken 
out during the year
equity fundraising
the group raised a total of £214 million gross 
£206 million net after expenses during the year 
in order to fund the expansion of the business and 
the development of new products and working 
capital demands of expansion and resolution of 
the technical and market challenges encountered 
during the year
the placing during february 2007 raised 
£105 million gross £101 million net after 
transaction costs of £04 million the costs were 
the direct costs of the share issue and have been 
set off against the share premium account
t he placing during o ctober 2007 raised 
£109 million gross £105 million net after 
transaction costs of £04 million the costs were 
the direct costs of the share issue and have 
been set off against the share premium account 
t he cash balance as at 31 d ecember 2007 was 
£113 million considerably ahead of market 
expectations due primarily to more efficient 
resource management
international financial reporting 
standards
the international financial reporting standards 
ifrs came into effect for aim listed companies 
on 1 january 2007 and accordingly these accounts 
as at 31 december 2007 are the first accounts for 
the group which comply with these standards
david hollow ay
chief financial officer
1 april 2008
2005 2006 2007
0
3000
6000
9000
12000
15000
spi lasers product sales £’000
2005 2006 2007
0
3000
6000
9000
12000
15000
spi lasers contract sales £’000
2007 sales
us 19
europe 22
uk 11
asia 48
2006 sales
us 36
europe 18
uk 23
asia 23 10
spi lasers plc 
annual report and accounts 2007 
graham meek ¹ 
§
 
¥
¹ 
nonexecutive chairman
graham meek age 60 joined the group in 
2005 he is currently chairman of icm computer 
group plc having served as senior independent 
director from 2002–2004 a nonexecutive director 
of filtronic plc and a nonexecutive director 
of capital gearing t rust plc he has had a long 
career in investment banking and stock broking 
with particular experience of the information 
technology and telecommunications sectors 
graham was previously head of corporate finance 
at beeson gregory plc a managing director of 
merrill l ynch capital markets and an executive 
director of smith new court plc
david parker 
¥
chief executive officer
david parker age 45 joined the group in 2002 
as chief executive officer he is the former president 
and ceo of marconi optical components and 
prior to that he was vice president of agilent and 
general manager of uk components operation 
in previous roles he has gained experience in 
manufacturing research and development and 
business development david has a phd from 
imperial c ollege u niversity of l ondon and a bsc 
from the u niversity of l eeds he was elected 
a fellow of the institute of physics in 1997
steve berg
chief financial officer and company 
secretary resigned 30 september 2007
on 10 july 2007 it was announced that steve berg 
would be resigning at the end of september 2007 
steve had been with spi l asers since 2003 and 
the board would like to acknowledge and thank 
steve for his considerable contribution to spi 
during his time with the group
david hollow ay
chief financial officer and company 
secretary appointed 1 october 2007
david holloway age 57 joined spi in 
september 2007 as the chief financial officer 
and c ompany secretary prior to joining the 
group his career included senior finance positions 
in multinational manufacturing and engineering 
businesses including imi plc w illiams holdings 
plc and bf goodrich inc having qualified with 
pwc david is a graduate bsc econ and a 
fellow of the institute of chartered accountants
board of directors 11
spi lasers plc 
annual report and accounts 2007 
david payne 
part time executive director
david payne age 63 cofounded spi inc in 
1997 and was its first chairman he heads the 
optoelectronics r esearch centre at the university 
of southampton orc from which today’s fibre laser 
first emerged recognised by the franklin institute 
he led the team that invented the erbiumdoped 
fibre amplifier the enabling technology for dense 
wavelengthdivisionmultiplexing and the growth 
of the internet david is a fellow of the royal 
society and the r oyal academy of engineering 
and was awarded the cbe in 2004
peter schultz  
§
¹ 
¥
nonexecutive director
peter schultz age 65 joined the group in 2005 
he is the retired president of heraeus tenevo inc 
and chief technical officer north america for 
heraeus holding g mbh in 1970 he codeveloped 
the world’s first practical glass optical fibre for 
communications and in 1993 he was inducted 
into the national inventors hall of fame in 2000 
he received the national medal of t echnology 
from president c linton for his accomplishment 
and he was elected member of the us national 
academy of engineering in 2001 peter is a graduate 
of rutgers university bsc 1964 phd 1967
david cheesman
nonexecutive director 
resigned 9 november 2007
d avid c heesman joined the board as a 
nonexecutive director in 2003 david who is a 
partner at advent venture partners announced his 
resignation in november 2007 as he wanted to 
reduce his outside commitments t he board would 
like to thank david for his commitment and his 
contribution to the group over the past four years
1 chairman of audit committee 
 member of audit committee 
§1  chairman of r emuneration committee 
§  r emuneration committee 
¥1  chairman of nominations committee 
¥  nominations committee 13 directors’ report
17 directors’ remuneration report
18 statement of directors’ responsibilities
19 independent auditors’ report to the members of spi lasers plc
20 consolid ated income statement
21 consolid ated statement of recognised income and expense
22 consolid ated balance sheet
23 company balance sheet
24 company statement of changes in equity
25 consolid ated cash flow statement
26 company cash flow statement
27 notes to the financial statements
48 five year summary financial contents
12
spi lasers plc 
annual report and accounts 2007  the directors present their annual report on the affairs of the group together with the financial statements and auditors’ report for the year ended 
31 december 2007
principal a ctivities
the group is a leader in the design development engineering and manufacture of optical fibrebased laser sources for a range of markets and applications 
the group’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 enduser compared to more traditional lasers
business review
the company is required by the companies act to set out in this report a fair review of the business of the group during the financial year ended 
31 december 2007 and of the position of the group at the end of the year and a description of the principal risks and uncertainties facing the group 
the directors report should be read in conjunction with the chairman and chief executive statements and the financial review which give details of the 
group’s performance during the year and expected future developments 
key performance indica tors kpi s 
financial kpi’s are addressed in the financial review and include sales growth sales by region sales by product and contract development rd spend 
gross profit operating profit and profit after tax
the group uses a number of nonfinancial kpis to monitor its performance in a number of areas on a regular basis these areas include order success 
order acknowledgement on time delivery field failures warranty returns milestones achievement on development programmes days holding and age 
of inventory debtor days creditor days health and safety related incidents and lost days and staff turnover days these kpis are reviewed by management 
and the board as a minimum on a monthly basis
the directors have in place a process of regularly reviewing risks to the business and monitoring associated controls actions and contingency plans 
the group’s financial risk management policies are set out in note 39 together with details of financial instruments
opera ting and financial review
the board regularly monitor the business’ progress on meeting its strategic objectives by reference to performance indicators which include the income 
statement balance sheet cash flow statements and the above key performance indicators as set out in the financial statements
dividends
the loss for the financial year of £12300000 2006 loss £10985000 has been taken to reserves the directors do not recommend the payment of 
a dividend 2006 £nil the company’s current policy which is kept under regular review is to retain future earnings that may occur for the development 
and expansion of the business
corpora te 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’ that was issued in 2006 by the financial reporting council the group attempts to support the principles set out in the code and 
complies in some areas where it considers appropriate to do so given both the size and resources available to the group details are provided below of 
how the group applies the principles of the code but we do not state where we do not apply the principles of the code
the bo ard
the board comprises three executive directors one of whom is parttime and two nonexecutive directors one of whom is the chairman on 9 november 2007 
david cheesman resigned as a nonexecutive director during the year he had served on the audit committee and remuneration committee on 30 september 2007 
steve berg resigned as an executive director
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
bo ard 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 the identities of each of the chairmen of the committees referred to below will be reviewed on an annual basis the membership 
of these committees and their terms of reference is kept under review
audit committee
the audit committee is chaired by graham meek and its other member is peter schultz only nonexecutive directors may serve on the audit committee 
it will normally meet not less than three times in each financial year and will meet the auditors at least twice a year the audit committee is responsible for 
making recommendations to the board on the appointment of the external auditors and their remuneration the audit committee will consider the nature 
scope and results of the auditors’ work and will review and reserves the right to approve any nonaudit services that are to be provided by the external 
auditors it receives and reviews reports from management and the group’s auditors relating to the group’s annual report and accounts the audit committee 
focuses particularly on compliance with legal requirements and accounting standards ensuring that an effective system of internal financial and nonfinancial 
controls is maintained the ultimate responsibility for reviewing and approving the annual report and accounts remains with the board
remunera tion committee
the remuneration committee is chaired by peter schultz and its other member is graham meek only nonexecutive directors may serve on this committee 
the remuneration committee which will normally meet at least twice in each financial year is responsible for making recommendations to the board on 
the company’s policy on the remuneration of executive directors and senior management for reviewing the performance of executive directors and senior 
management and for determining within agreed terms of reference specific remuneration packages for each of the executive directors and members of 
senior management including pension rights any compensation payments and the implementation of executive incentive schemes in accordance with the 
remuneration committee’s terms of reference no director may participate in discussions relating to their own terms and conditions of service or remuneration
directors’ report
13
spi lasers plc 
annual report and accounts 2007  14
spi lasers plc 
annual report and accounts 2007
corpora te governance continued
nomina tions committee
the nominations committee chaired by graham meek and its other members are peter schultz and david parker a majority of the members of this committee 
are nonexecutive directors and the chairman of the nominations committee is a nonexecutive director the nominations committee which will normally 
meet not less than twice in each financial year has responsibility for considering the size structure and composition of the board retirements and appointments 
of additional and replacement directors and will make appropriate recommendations to the board
internal control and risk mana gement
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
rot ation of directors
at the annual general meeting two directors one executive david parker and one nonexecutive peter schultz will retire and will then be eligible to stand 
for reelection in subsequent years one third of the directors who are subject to retirement by rotation shall retire from office and will be then similarly eligible 
to stand for reelection each director is thereby subject to stand for reelection at least once every three years
david holloway was appointed to the board as an executive director on 1 october 2007 and will retire at the forthcoming annual general meeting and 
being eligible will offer himself for election
a statement of the directors’ responsibilities in respect of the financial statements is set out on page 18
research and devel opment ‘rd ’
during the year the group spent £30 million 2006 £24 million on rd representing 22 of turnover 2006 34 of this figure £27 million was 
charged to the profit and loss in addition and charged against cost of sales the group spent £11 million on customer funded rd 2006 £21 million 
in the year the group adopted ias 38 intangible assets and under the rules of the standard the group capitalised £250000 of product development costs in 
the year of which £42000 was amortised in the profit and loss account a schedule of the intangible assets is included in note 15 to the financial statements 
o verseas presence
the group has offices in the us and china for sales representation and product application activities the primary management control and finance 
functions for the overseas activities are carried out in the uk
risks and uncert ainties
there are a number of potential risks and uncertainties which could have a material impact on the group’s longterm performance and could cause actual 
results to differ materially from expected and historical results further information on these risks can be found in note 38 and 39 to the financial statements
financial risk
the group’s sales are predominantly us dollar usd denominated or if in other currencies are generally based upon the equivalent usd price this leaves 
the group exposed to adverse movements in the usd to gb pound gbp exchange rate however the group’s purchases of components and its us operational 
costs are similarly usd based and so there is a degree of internal hedging of the exchange rate exposure it is for this reason that the group does not enter 
into currency hedging contracts this policy will be under regular review as the group’s sales and geographic presence expand in the coming years 
there is a potential funding risk if trading does not achieve the expected levels of performance the management of this potential risk is a prime business 
objective which is covered in detail in the chief executive’s review
devel opment risk
a key focus for the group in 2008 will be continuing the product cost reduction programmes which commenced in 2007 there is a potential risk of not 
achieving expected gross profit levels if such programmes were to fall behind schedule and the directors have contingency plans to ensure that the impact 
of such potential risk is mitigated
competitive risk
in 2006 there were only two industrial scale fibre laser manufactures ourselves and ipg photonics there are significant barriers to entry into the fibre laser 
market namely intellectual property rights manufacturing knowhow and investment in physical infrastructure however 2008 may see new entrants into the 
market attracted by the growth opportunities therein such a widening of the competitive landscape could threaten the growth ambitions of the group but the 
directors consider that such risk is mitigated by the considerable technical barrier which such potential newcomers to the market would have to overcome in 
order to become a significant threat additionally the directors’ consider that continuous investment in rd in its core technology will preserve its technical 
strength against the potential threat posed by such newcomers
directors’ report 15
spi lasers plc 
annual report and accounts 2007 
commercial risk
as the group enters new market sectors or new market verticals the customer buying cycle may adversely differ from that experienced to date this could 
lead to a lower than expected rate of growth the directors consider that the breadth of the company’s portfolio is sufficiently broad to mitigate the potential 
impact from such a development
financial review 
details of the financial review can be found on pages 8 to 9
directors and directors’ interests 
the directors who held office throughout the year and to date are noted on pages 10 to 11 the directors who held office at 31 december 2007 had the 
following interests in the ordinary shares of company
     31 december 1 january 
      2007 2007 
name of director     number number
g meek     118056 34722
d parker     358645 325312
d holloway     33333 —
d payne     179844 169844
p schultz     19792 9792
 mr holloway was appointed as director on 1 october 2007
no changes took place in the interests of directors between 31 december 2007 and 1 april 2008 
directors’ indemnities
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 £50 million 2006 £20 million in order to minimise 
the potential impact of such proceedings
subst antial shareholdings
on 18 march 2008 the company had been notified in accordance with chapter 5 of the disclosure and transparency rules of the following interests in the 
ordinary share capital of the company
      percentage 
name of holder     number held
gartmore investment management     14830942 2140
the furukawa electric co ltd     6666667 1065
invesco plc     4270000 616
aviva plc and its subsidiaries     4168310 665
axa sa and its group companies     3455780 499
advent venture partners llp     2884292 5
fmr llc     3461200 552
majedie asset management ltd      1563900 749
schroders plc     1375000 498
herald investment trust plc     799400 450
artemis investment management ltd      2462341 393
invesco perpetual aim vct trust     1058333 342
charit able and political contributions
during the year the group made charitable contributions totalling £200 2006 £400 there were no political donations
disabled empl oyees
applications for employment by disabled persons are always fully considered bearing in mind the aptitudes of the applicant concerned in the event of members 
of staff becoming disabled every effort is made to ensure that their employment with the group continues and that appropriate training is arranged it is the 
policy of the group that the training career development and promotion of disabled persons should as far as possible be identical to that of other employees
empl oyee consul tation
the group places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees 
and on the various factors affecting the performance of the group this is achieved through formal and informal meetings employee representatives are 
consulted regularly on a wide range of matters affecting their current and future interests the employee share scheme has been running successfully since 
its inception in september 2002 the group has six share option schemes for all employees of the group the vesting period ranges from one to four years 
options are forfeited if the employee leaves the group before the options vest 16
spi lasers plc 
annual report and accounts 2007
supplier payment policy
it is the group’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 this policy is made known to appropriate staff and suppliers at 31 december 2007 
the group had 52 days purchases outstanding in trade creditors based on the average daily amount invoiced by suppliers during the year 2006 52 days
going concern basis
after making enquiries the directors have formed a judgement at the time of approving the financial statements that there is a reasonable expectation that 
the group has adequate resources to continue in operational existence for the foreseeable future for this reason the directors continue to adopt the going 
concern basis in preparing the financial statements 
events subsequent to balance sheet d ate
these are covered in the chief executive’s report
auditors
each of the persons who is a director at the date of approval of this annual report confirms that
 so far as the director is aware there is no relevant audit information of which the company’s auditors are unaware and
  the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and 
to establish that the company’s auditors are aware of that information
this confirmation is given and should be interpreted in accordance with the provisions of section 234za of the companies act 1985 
deloitte  touche llp have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming 
annual general meeting
by order of the board
david holl ow ay company secretary 1 april 2008
directors’ report 17
spi lasers plc 
annual report and accounts 2007 
the group is not required to prepare a directors’ remuneration report accordingly the report is not prepared in accordance with schedule 7a of the 
companies act 1985 this directors’ remuneration report has been included on a voluntary basis and remains unaudited
directors’ emol uments 
   compensation 
 basic  benefits for loss pension 2007 2006 
 salaryfee in kind of office costs total total 
name of director £‘000 £‘000 £‘000 £’000 £’000 £’000
g meek 39 — — — 39 35
d parker 247 1 — 10 258 231
s berg 127 1 87 3 218 162
d holloway 36 — — 2 38 —
d payne 32 1 — 2 35 33
p schultz 37 — — — 37 25
d cheesman — — — — — —
d shrigley — — — — — 19
  mr cheesman resigned as a director on 9 november 2007 mr cheesman did not receive any remuneration for his services 
 mr berg resigned as a director on 30 september 2007 
 mr holloway was appointed as director on 1 october 2007 
  mr shrigley resigned as a director on 1 november 2006
the directors are members of the company’s defined contribution pension scheme members of the scheme have the option to pay additional voluntary 
contributions neither the contributions nor the resulting benefits are included in the above tables 
directors’ share options
at the year end the directors had the following share options
 at     at  date from 
 31 december     31 december exercise which expiry 
 2006 granted exercised forfeited 2007  price exercisable date
d parker
¥
 675 — — — 675 £12237 apr 2003 sept 2012
d parker
¥
 299 — — — 299 £12237 apr 2003 sept 2012
d parker 148599 — — — 148599 £007 sept 2005 sept 2012
d parker 67600 — — — 67600 £0025 jan 2008 sept 2018
d parker 2867 — — — 2867 £120 jan 2009 jan 2009
s berg 180 — — 180 — £18128 feb 2004 mar 2013
s berg 54700 — 54200 500 — £003 feb 2004 oct 2013
s berg 26229 — 26229 — — £005 feb 2004 aug 2014
s berg 67563 — 16891 50672 — £007 sept 2005 sept 2015
s berg 13866 — — — 13866 £0025 jan 2008 sept 2018
s berg 2867 — — 2867 — £120 jan 2009 jan 2009
d payne 25884 — — — 25884 £0025 jan 2008 sept 2018
d holloway
¥
 — 50000 — — 50000 £0574 sept 2007 aug 2016
 award granted under emi scheme 
 award granted under unapproved scheme 
 award granted under salary and benefits sacrifice scheme 
 award granted under sharesave scheme 
¥  50000 options at £0574 granted to d holloway in september 2007 were cancelled in january 2008 675 and 299 options at £12237 granted to d parker in april 2003 
were cancelled in january 2008
s berg resigned as director on 30 september 2007 the gain on the shares exercised by s berg was £9642 d holloway was appointed on 1 october 2007 
after the year end but at the date of this report directors had the following options granted
  grant date granted
¥
 exercise price expiry date
d parker  january 2008 255800 £030 january 2012
d parker  january 2008 1094200 £030 january 2012
d holloway  january 2008 255800 £030 january 2012
d holloway  january 2008 144200 £030 january 2012
  award granted under emi scheme 
 award granted under unapproved scheme 
¥  the options vest in three equal tranches over three years subject i in the first year to the share price achieving 50 pence for 25 consecutive trading days and 50 trading days 
in the period ii in the second year to the share price achieving 75 pence for 25 consecutive trading days and 50 trading days in the period and iii in the third year to the 
share price achieving 100 pence for 25 consecutive trading days and 50 trading days in the period the closing share price at 31 december 2007 was 38 pence
directors’ remuneration report 18
spi lasers plc 
annual report and accounts 2007
the directors are responsible for preparing the annual report directors’ remuneration report and the financial statements in accordance with applicable law 
and regulations
company law requires the directors to prepare financial statements for each financial year the directors are required by the ias regulation to prepare the 
group financial statements under ifrs ifrs as adopted by the european union and have also elected to prepare the parent company financial statements 
in accordance with ifrs as adopted by the european union the financial statements are also required by law to be properly prepared in accordance with 
the companies act 1985 and article 4 of the ias regulation 
international accounting standard 1 requires that financial statements present fairly for each financial year the company’s financial position financial 
performance and cash flows this requires the faithful representation of the effects of transactions other events and conditions in accordance with the 
definitions and recognition criteria for assets liabilities income and expenses set out in the international accounting standards board’s ‘framework for the 
preparation and presentation of financial statements’ in virtually all circumstances a fair presentation will be achieved by compliance with all applicable 
ifrs however directors are also required to
 properly select and apply accounting policies
 present information including accounting policies in a manner that provides relevant reliable comparable and understandable information and 
  provide additional disclosures when compliance with the specific requirements in ifrs are insufficient to enable users to understand the impact of 
particular transactions other events and conditions on the entity’s financial position and financial performance
the directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the company 
and enable them to ensure that the financial statements comply with the companies act 1985 they are also responsible for safeguarding the assets of the 
company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities
statement of directors’ responsibilities
in respect of the financial statements 19
spi lasers plc 
annual report and accounts 2007 
we have audited the group and parent company financial statements the ‘financial statements’ of spi lasers plc for the year ended 31 december 2007 
which comprise the consolidated income statement the consolidated and individual company balance sheets the consolidated and individual company’s 
cash flow statements the consolidated statement of recognised income and expense the individual company statement of changes in equity and the related 
notes 1 to 44 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 a uditors
the directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable law and international financial 
reporting standards as adopted by the european union are set out in the statement of directors’ responsibilities
our responsibility is to audit the financial statements in accordance with relevant 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 and whether the financial statements have been properly prepared 
in accordance with the companies act 1985 and as regards the group financial statements article 4 of the ias regulation we also report to you whether 
in our opinion the information given in the directors’ report is consistent with the financial statements 
in addition we report to you if in our opinion 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 other information contained in the annual report and consider whether it is consistent with the audited financial statements the other information 
comprises only the directors’ report and the five year summary we consider the implications for our report if we become aware of any apparent misstatements 
or material inconsistencies with the financial statements our responsibilities do not extend to any other information
basis of a udit 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 judgements made by the directors in the preparation of the financial statements and of whether the accounting policies are appropriate to the 
group’s and company’s circumstances 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 and the part of the directors’ remuneration report to be audited 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 group financial statements give a true and fair view in accordance with ifrs as adopted by the european union of the state of the group’s affairs 
as at 31 december 2007 and of its loss for the year then ended 
  the parent company financial statements give a true and fair view in accordance with ifrs as adopted by the european union as applied in accordance 
with the provisions of the companies act 1985 of the state of the parent company’s affairs as at 31 december 2007 and
 the information given in the directors’ report is consistent with the financial statements
deloitte  t ouche llp
chartered a ccountants and registered a uditors
southampton united kingdom
1 april 2008
independent auditors’ report to the members of spi lasers plc 
to the members of spi lasers plc 20
spi lasers plc 
annual report and accounts 2007
     year y ear 
     ended ended 
     2007 2006 
    note £’000 £’000
continuing operations      
revenue    5 13047 7065
cost of sales     14954 10115
gross loss     1907 3050
other operating income     209 199
other operating expenses     207 52
administrative expenses     10695 8394
operating loss     12600 11297
investment revenue    11 281 140
finance costs    12 371 183
loss before tax     12690 11340
tax credit    13 390 355
loss for the year    7 12300 10985
loss per share      
from continuing operations      
basic and diluted    14 379p 581p
consolid ated income statement
for the year ended 31 december 2007  21
spi lasers plc 
annual report and accounts 2007 
     year y ear 
     ended ended 
     2007 2006 
    note £’000 £’000
exchange differences on translation of foreign operations    31 21 126
net expense recognised directly in equity      21 126
loss for the year     12300 10985
total recognised income and expense for the year     12521 11111
consolid ated statement of recognised income and expense
for the year ended 31 december 2007 22
spi lasers plc 
annual report and accounts 2007
     2007 2006 
    note £’000 £’000
noncurrent assets      
intangible assets    15 208 —
property plant and equipment    16 2475 2596
     2683 2596
current assets      
inventories    18 2916 1991
trade and other receivables    20 4325 4371
cash and cash equivalents    21 11225 2113
total current assets     18466 8475
total assets     21149 11071
current liabilities      
trade and other payables    22 4450 3277
loans and convertible loan notes     25 1460 894
provisions    26 440 51
     6350 4222
net current assets     12116 4253
noncurrent liabilities      
loans and convertible loan notes    25 1035 1950
provisions    26 100 53
total noncurrent liabilities     1135 2003
total liabilities     7485 6225
net assets     13664 4846
equity      
share capital    27 1566 522
share premium account    28 34861 15330
merger reserve    30 50389 50389
equity reserve    29 726 162
translation reserves    31 147 126
retained deficit    32a 73731 61431
total equity     13664 4846
the financial statements were approved by the board of directors and authorised for issue on 1 april 2008 they were signed on its behalf by
graham meek
chairman
1 april 2008
consolid ated balance sheet
at 31 december 2007 23
spi lasers plc 
annual report and accounts 2007 
company balance sheet 
at 31 december 2007
     2007 2006 
    note £’000 £’000
noncurrent assets      
investment in subsidiaries     13365 13076
     13365 13076
current assets      
trade and other receivables    20 95 13465
cash and cash equivalents    21b 10041 1230
     10136 14695
total assets     23501 27771
current liabilities      
trade and other payables    22 194 147
     194 147
noncurrent liabilities      
trade and other payables    23 12994 12994
     12994 12994
total liabilities     13188 13141
net assets      10313 14630
equity      
share capital    27 1566 522
share premium account    28 34861 15330
equity reserve    29b 726 162
retained deficit    32b 26840 1384
     10313 14630
the financial statements were approved by the board of directors and authorised for issue on 1 april 2008 they were signed on its behalf by
graham meek 
chairman
1 april 2008 24
spi lasers plc 
annual report and accounts 2007
     2007 2006 
     £’000 £’000
balance at 1 january     14630 10681
net loss for the year     1006 966
increase in share capital     1044 80
premium arising on issue of equity shares     20356 4934
expenses of issue of equity shares     825 209
credit for equitysettled sharebased payments      564 110
balance at 31 december     34763 14630
equity comprises share capital share premium equity reserves and retained earnings
company statement of changes in equity 
at 31 december 2007 25
spi lasers plc 
annual report and accounts 2007 
consolid ated cash flow statement
for the year ended 31 december 2007
     year y ear 
     ended ended 
     2007 2006 
    note £’000 £’000
net cash outflow from operating activities    33a 10621 11359
investing activities      
interest received     281 140
purchases of property plant and equipment     507 747
expenditure on product development     250 —
net cash used in investing activities     476 607
financing activities      
repayments of borrowings     349 573
proceeds on issue of shares     21391 5014
payments of expenses on issue of equity shares     825 209
new borrowings     — 1750
net cash from financing activities     20217 5982
net increasedecrease in cash and cash equivalents     9120 5984
cash and cash equivalents at beginning of year     2113 8126
effect of foreign exchange rate changes     8 29
cash and cash equivalents at end of year     11225 2113 26
spi lasers plc 
annual report and accounts 2007
     year y ear 
     ended ended 
     2007 2006 
    note £’000 £’000
net cash outflow from operating activities    33d 11740 10849
investing activities      
interest received     265 122
net cash used in investing activities     265 122
financing activities      
investments     289 69
proceeds on issue of shares     21400 5014
payments of expenses on issue of equity shares     825 209
net cash from financing activities     20286 4736
net increasedecrease in cash and cash equivalents     8811 5991
cash and cash equivalents at beginning of year     1230 7221
cash and cash equivalents at end of year     10041 1230
company cash flow statement
for the year ended 31 december 2007 27
spi lasers plc 
annual report and accounts 2007 
notes to the financial statements
at 31 december 2007
1 general informa tion
spi lasers plc is a company incorporated in the united kingdom under the companies act 1985 the address of the registered office is shown on the inside 
back cover the nature of the group’s operations and its principal activities are set out in the directors’ report
these financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the group operates 
foreign operations are included in accordance with the policies set out in note 3
2 adoption of new and revised st and ards
in the current year the group has adopted ifrs 7 financial instruments disclosures which is effective for annual reporting periods beginning on or after 
1 january 2007 and the related amendment to ias 1 presentation of financial statements the impact of the adoption of ifrs 7 and the changes to  
ias 1 has been to expand the disclosures provided in these financial statements regarding the group’s financial instruments and management of capital 
see note 24 and note 39
at the date of authorisation of these financial statements the following standards and interpretations which have not been applied in these financial 
statements were in issue but not yet effective
ifric 11 ifrs 2 – group and treasury share transactions 
ifric 12  service concession arrangements 
ifric 13 customer loyalty programmes 
ifric 14 ias 19 – the limit on a defined benefit asset minimum funding requirements and their interaction 
ias 23 borrowing costs 
ifrs 8 operating segments
the directors anticipate that the adoption of these standards and interpretations in future periods will have no material impact on the financial statements 
of the group because spi lasers plc has adopted all the latest uk generally accepted accounting principles ‘uk gaap’ standards in prior period accounts 
there are minimal changes in the ifrs conversion process see note 43
3 significant a ccounting policies
basis of prepara tion
this is the first time the group has prepared full year financial statements under ifrs an explanation of how the transition to ifrs has affected the reported 
financial results is provided in notes 42 and 43 the accounting policies have been applied consistently to the current year’s results and the prior year’s results
basis of a ccounting
the financial statements have been prepared in accordance with international financial reporting standards ifrs the financial statements have also been 
prepared in accordance with ifrs adopted by the european union and therefore the group financial statements comply with article 4 of the eu ias regulation 
the financial statements have been prepared on amortised cost basis except for certain financial instruments which are carried at fair value the principal 
accounting policies adopted are set out below
basis of consolid ation
the group financial statements consolidate the financial statements of spi lasers plc and all its subsidiary undertakings drawn up to 31 december each year 
all intragroup transactions balances income and expenses are eliminated on consolidation
investments
investments in subsidiary undertakings are stated in the parent company’s accounts at cost less provisions for any impairment
revenue recognition
revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the 
normal course of business net of trade discounts vat and other sales related taxes revenue from goods is recognised when title passes or the right to 
consideration in exchange for performance has been completed 
revenue is recognised on longterm contracts by including in the income statement revenue calculated by reference to the value of work performed to date 
as a proportion of the total contract value on cost plus contracts this is by reference to the costs incurred to date whereas on fixed price contracts this is 
by reference to the achieved contract milestones
interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable
longterm contra cts
where the outcome of a contract can be estimated reliably revenue and costs are recognised by reference to the stage of completion of the contract activity 
at the balance sheet date this is normally measured by the proportion that contract costs incurred for work performed to date bear to the estimated total 
contract costs except where this would not be representative of the stage of completion variations in contract work claims and incentive payments are 
included to the extent that they have been agreed with the customer
where the outcome of a contract cannot be estimated reliably contract revenue is recognised to the extent of contract costs incurred where it is probable 
they will be recoverable contract costs are recognised as expenses in the period in which they are incurred
when it is probable that total contract costs will exceed total contract revenue the expected loss is recognised as an expense immediately
leasing
rentals payable under operating leases are charged to income on a straightline basis over the term of the lease 28
spi lasers plc 
annual report and accounts 2007
3 significant a ccounting policies continued
foreign currencies 
the individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates 
its functional currency for the purpose of the consolidated financial statements the results and financial position of each group company are expressed 
in pounds sterling which is the functional currency of the group and the presentation currency for the consolidated financial statements
foreign currencies company
transactions in foreign currencies are recorded at the rate ruling at the date of the transactions monetary assets and liabilities denominated in foreign 
currencies are retranslated at the rate of exchange ruling at the balance sheet date exchange differences arising on the settlement of monetary items and 
on the retranslation of monetary items are included in the income statement for the period
foreign currencies group
for the purpose of presenting consolidated financial statements the assets and liabilities of the group’s foreign operations are translated at exchange rates 
ruling at the balance sheet date income and expense items are translated at the average exchange rates for the period exchange differences arising if any 
are classified as equity and transferred to the group’s translation reserve
borrowing costs
all borrowing costs are recognised in the income statement in the period in which they are incurred
opera ting l oss
operating loss is stated before investment revenue and finance costs
retirement benefit costs 
the group makes defined contributions to employee personal pension plans the pension cost charged as an expense represents the contributions payable 
to the pension plans in respect of the accounting year
taxa tion
current tax including uk corporation tax and foreign tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have 
been enacted or substantively enacted by the balance sheet date
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 
that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date timing differences 
are differences between the group’s taxable profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in 
tax assessments in periods different from those in which they are recognised in the financial statements
a net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that on the basis of all available evidence it can be regarded 
as 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 at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based 
on tax rates and laws that have been enacted or substantively enacted by the balance sheet date deferred tax is measured on a nondiscounted basis
government grants
government grants towards staff retraining costs are recognised as income over the periods necessary to match them with the related costs and are 
deducted in reporting the related expense
government grants relating to property plant and equipment are treated as deferred income and released to profit or loss over the expected useful lives 
of the assets concerned
property plant and equipment
tangible fixed assets are included at cost less any subsequent accumulated depreciation and subsequent accumulated impairment losses assets in the course 
of construction are carried at cost less any recognised impairment loss
depreciation on assets in the course of construction commences when the assets are ready for their intended use
depreciation is charged so as to write off the cost of assets other than assets under construction down to their residual value over their estimated useful lives 
using the straightline method on the following basis
leasehold improvements – the shorter of ten years or remainder of lease 
fixtures and equipment – five years 
computer equipment – three years
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 income the gain or loss arising on the disposal or retirement of an asset is determined as 
the difference between the sales proceeds and the carrying amount of the asset and is recognised in income
research and devel opment expenditure
expenditure on research activities is recognised as an expense in the period in which it is incurred
an internallygenerated intangible asset arising from the group’s development projects is recognised only if the following conditions are met 
 an asset is created that can be identified
 it is probable that the asset created will generate future economic benefits and 
 the development cost of the asset can be measured reliably
internallygenerated intangible assets are amortised on a straightline basis over their useful lives where no internallygenerated intangible asset can 
be recognised development expenditure is recognised as an expense in the period in which it is incurred
notes to the financial statements
at 31 december 2007 29
spi lasers plc 
annual report and accounts 2007 
3 significant a ccounting policies continued
impairment of t angible and int angible assets excl uding goodwill
at each balance sheet date the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that 
those assets have suffered an impairment loss if any such indication exists the recoverable amount of the asset is estimated in order to determine the extent 
of the impairment loss if any where the asset does not generate cash flows that are independent from other assets the group estimates the recoverable 
amount of the cashgenerating unit to which the asset belongs an intangible asset with an indefinite useful life is tested for impairment annually and 
whenever there is an indication that the asset may be impaired
recoverable amount is the higher of fair value less costs to sell and value in use in assessing value in use the estimated future cash flows are discounted 
to their present value using a pretax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for 
which the estimates of future cash flows have not been adjusted
if the recoverable amount of an asset or cashgenerating unit is estimated to be less than its carrying amount the carrying amount of the asset cashgenerating unit 
is reduced to its recoverable amount an impairment loss is recognised as an expense immediately unless the relevant asset is carried at a revalued amount 
in which case the impairment loss is treated as a revaluation decrease
where an impairment loss subsequently reverses the carrying amount of the asset cashgenerating unit is increased to the revised estimate of its recoverable 
amount but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised 
for the asset cashgenerating unit in prior years a reversal of an impairment loss is recognised as income immediately unless the relevant asset is carried 
at a revalued amount in which case the reversal of the impairment loss is treated as a revaluation increase
inventories
inventories are stated at the lower of cost and net realisable value with due allowance for any obsolete or slowmoving items cost includes materials and an 
attributable proportion of manufacturing overheads that have been incurred to bring inventories to their present locations and condition net realisable value 
is based on estimated selling price less any further costs expected to be incurred to completion and disposal inventories held for demonstration purposes are 
held at original cost and amortised over a period of twelve months
financial instruments
financial assets and financial liabilities are recognised in the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument
trade receiv ables
trade receivables in the normal course of trade do not carry any interest and are stated at their amortised cost as reduced by appropriate allowance for 
irrecoverable amounts
cash and cash equiv alents
cash and cash equivalents comprise cash in hand and demand deposits and other shortterm highly liquid investments that are readily convertible to a known 
amount of cash and are subject to an insignificant risk of changes in value
financial liabilities and equity
financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into an equity instrument is any 
contract that evidences a residual interest in the assets of the group after deducting all of its liabilities equity instruments issued by the group are recorded 
at the proceeds received net of direct issue costs
borrowings
interestbearing loans and bank overdrafts are recorded at the proceeds received net of direct issue costs finance charges including premiums payable on 
settlement or redemption and direct issue costs are accounted for on an accrual basis in the income statement using the effective interest rate method and 
are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise
convertible lo an notes
convertible loan notes are regarded as compound instrument consisting of a liability component and an equity component at the date of issue the fair value 
of the liability component is estimated using the prevailing market interest rate for nonconvertible debt the difference between the proceeds of issue of the 
convertible loan and the fair value assigned to the liability element representing the embedded option to convert the liability into equity of the group is 
included in equity
trade pa y ables
trade payables in the normal course of trade are not interest bearing and are stated at their amortised cost
provisions for liabilities and charges
provisions are recognised when the group has a present obligation as a result of a past event and it is probable that the group will be required to settle that 
obligation provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date and are discounted 
to present value where the effect is material
sharebased pa yments
the group has applied the requirements of ifrs 2 ‘sharebased payment’ in accordance with the transitional provisions ifrs 2 has been applied to all grants 
of equity instruments after 7 november 2002 that had not vested as of 1 january 2006 the group issues equitysettled sharebased payments to employees
equitysettled sharebased payments are measured at fair value at the date of grant the fair value determined at the grant date of the equitysettled sharebased 
payments is expensed on a straightline basis over the vesting period based on the group’s estimate of shares that will eventually vest
fair value is measured by use of the blackscholes model the expected life used in the model has been adjusted based on management’s best estimate 
for the effects of nontransferability exercise restrictions and behavioural considerations
a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each balance sheet date for cashsettled 
sharebased payments 30
spi lasers plc 
annual report and accounts 2007
3 significant a ccounting policies continued
provisions for roy alties and product w arranty
the royalty provisions relate to patent licenses entered into by spi lasers uk ltd and third parties under these license agreements certain royalty payments 
and patent fees are accrued and become payable at a later date 
the warranty provision relates to estimated warranty costs which are expected to be incurred under the group’s terms and conditions of sale the costs are 
expected to arise between one and two years of the balance sheet date
4 critical a ccounting judgements and key sources of estima tion uncert ainty
in the application of the group’s accounting policies which are described in note 3 the directors are required to make judgements estimates and assumptions 
about the carrying amounts of assets and liabilities that are not readily apparent from other sources these estimates and associated assumptions are based 
on historical experience and other factors that are considered to be relevant actual results may differ from these estimates
the estimates and underlying assumptions are reviewed on an ongoing basis revisions to accounting estimates are recognised in the period in which the 
estimate is revised if the revision affects both current and future periods 
critical judgements in appl ying the group ’s accounting policies
in the process of applying the group’s accounting policies which are described in note 3 management has made the following judgements that have the 
most significant effect on the amounts recognised in the financial statements apart from those involving estimations which are dealt with below
revenue recognition
in making its judgment management considered the detailed criteria for the recognition of revenue from the sale of goods set out in ias 18 ‘revenue’ and 
in particular whether the group had transferred to the buyer the significant risks and rewards of ownership of the goods in accordance with the terms and 
conditions agreed with customers on exworks orders ownership of the product passes to the customer when notification is made that the product is ready 
for collection by the customer’s carrier management have controls in place to ensure that revenue is only recognised on these products collected within five 
working days of the end of the financial year following the detailed quantification of the group’s liability in respect of rectification work and the agreed 
limitation on the customer’s ability to require further work or to require replacement of goods the directors are satisfied that the significant risks and rewards 
have been transferred and that recognition of the revenue in the current year is appropriate in conjunction with recognition of an appropriate provision for 
the rectification costs an estimate of the rectification costs is included with the warranty provision see provisions for royalty and product warranty below
key sources of estima tion uncert ainty
the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing 
a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below
recoverability of internall ygenera ted int angible asset
during the year management reconsidered the recoverability of its internallygenerated intangible asset which is included in its balance sheet at £208400 
the project continues to progress in a very satisfactory manner and customer reaction has reconfirmed management’s previous estimates of anticipated revenues 
from the project however increased competitor activity has caused management to reconsider its assumptions regarding future market shares and anticipated 
margins on these products detailed sensitivity analysis has been carried out and management is confident that the carrying amount of the asset will be recovered 
in full even if returns are reduced this situation will be closely monitored and adjustments made in future periods if future market activity indicates that such 
adjustments are appropriate
provisions for roy alties and product w arranty
the royalty provisions relate to patent licenses entered into by spi lasers uk ltd and third parties under these license agreements certain royalty payments 
and patent fees are accrued and become payable at a later date 
the warranty provision relates to estimated warranty costs which are expected to be incurred under the group’s terms and conditions of sale the costs are 
expected to arise between one and two years of the balance sheet date
5 revenue
an analysis of the group’s revenue is as follows
     year  y ear 
     ended ended 
     2007 2006 
     £’000 £’000
continuing operations      
revenue from goods     11761 4707
revenue from contracts     1286 2358
     13047 7065
other operating income     209 199
     13256 7264
notes to the financial statements
at 31 december 2007 31
spi lasers plc 
annual report and accounts 2007 
6 business and geographical segments
in the opinion of the directors the group has two main classes of business being sales of goods and contract revenue as per ias 14 the group is not 
required to produce the segmental analysis as the contract revenue accounts for less than 10 of the income of the group an analysis of the group’s 
revenue within this class of business is shown in note 5 
the following table provides an analysis of the group’s sales by geographical market 
 sales revenue by  
 geographical market
     year  y ear 
     ended ended 
     2007 2006 
     £’000 £’000
usa     2500 2574
europe     2807 1275
united kingdom     1499 1613
asia     6241 1603
total revenue     13047 7065
the following is an analysis of the carrying amount of its noncurrent assets under ias 14 and additions to intangible and tangible assets analysed by area 
in which the assets are located
    additions to  additions to 
  carrying amount of carrying amount of intangible assets intangible assets 
   segment assets segment assets and fixed assets  and fixed assets 
  year ended  year ended year ended year ended 
  2007 2006 2007 2006 
   £’000 £’000 £’000 £’000
usa  734 916 34 11
united kingdom  20415 10155 723 736
total  21149 11071 757 747
7 loss for the year
loss for the year has been arrived at after chargingcrediting
     2007 2006 
     £’000 £’000
depreciation of fixed assets     662 575
amortisation of intangible assets     42 —
government grants towards research     12 —
rentals received under operating leases     197 199
cost of inventories recognised as an expense     7227 3823
write down of inventories recognised as an expense     1233 1153
operating lease rentals – land and buildings     383 304
net foreign exchange losses     120 57
rd     2798 2404
staff costs     8356 6261
8 auditors’ remunera tion
the analysis of auditors’ remuneration is as follows
     2007 2006 
     £’000 £’000
fees payable to the company’s auditors for the audit of the company’s annual accounts     12 12
fees payable to the company’s auditors and their associates for other services to the group     
– the audit of the company’s subsidiaries pursuant to legislation     48 38
– other audit services fees     16 15
total audit fees     76 65
other services pursuant to legislation   
– tax services     21 30
– other services     — 2
total nonaudit fees     21 32
fees payable to deloitte and touche llp and their associates for nonaudit services to the company are not required to be disclosed because the 
consolidated financial statements are required to disclose such fees on a consolidated basis 32
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
9 staff costs
the average monthly number of employees including executive directors was
     2007 2006 
     number number
production and production support     112 67
rd     34 31
sales and marketing     21 16
administration     16 12
     183 126
     2007 2006 
      £’000  £’000
their aggregate remuneration comprised      
wages and salaries     6752 5125
social security costs     719 563
other pension costs see note 37     321 463
sharebased payments expense see note 36     564 110
     8356 6261
10 directors’ emol uments
     2007 2006 
     £’000 £’000
directors’ emoluments     626 505
company contributions to money purchase schemes     17 77
number of directors who exercised options over shares in the company     1 —
number of directors accruing benefits under defined contribution schemes     4 3
the amounts in respect of the highest paid director are as follows      
emoluments     258 231
company contributions paid to money purchase schemes     10 61
11 investment revenue
     2007 2006 
     £’000 £’000
interest on bank deposits     281 140
all investment revenue for 2007 and 2006 is earned on cash and bank balances
12 finance costs
     2007 2006 
     £’000 £’000
interest on bank overdrafts and loans     133 183
interest on convertible loan notes     238 —
total interest expense     371 183
interest payable on bank overdrafts loans and convertible loan notes held at amortised cost
13 tax 
     2007 2006 
     £’000 £’000
current tax      
rd tax credits for the year     367 352
adjustment in respect of prior years     23 3
     390 355
corporation tax is calculated at 30 2006 30 of the estimated assessable loss for the year
taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions 33
spi lasers plc 
annual report and accounts 2007 
13 tax continued
the credit for the year can be reconciled to the profit per the income statement as follows
     year y ear 
     ended ended 
     2007 2006 
     £’000 £’000
loss before tax     12690 11340
tax at the current tax rate of 30 2006 30     3807 3402
tax effect of expenses that are not deductible in determining taxable profit     22 273
depreciation in excess of capital allowances     86 104
losses arising in the year not utilised     2768 2786
movement in shortterm timing differences     377 83
unrealised exchange movement  
50 uplift for rd tax credit     230 220
losses surrendered for rd tax credit     689 661
adjustments in respect of previous years     24 3
rd tax credit receivable     367 352
tax relief on exercise of share options     — 285
ias 2 sharebased payment chargeschedule 23     96 —
tax credit for the year     390 355
deferred t ax consolid ated
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 and 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 £149 million 2006 £128 million
the following are the major deferred tax liabilities and assets not recognised by the group and movements thereon during the current and prior reporting period
      2007  2006 
      £’000 £’000
tax losses     13585 11706
depreciation in excess of capital allowances     1029 954
other timing differences     316 158
as 31 december      14930 12818
14 earnings per share
from continuing opera tions
basic and diluted loss per share for the year ended 31 december 2007 of 379p 2006 581p per ordinary share is calculated using 32430311 shares 
200618921668 being the weighted average number of shares for 2007 
   2007 2006
loss for year   £12300000 £10985000
weighted average number of shares   32430311 18921668
basic and diluted loss per share   379p 581p
15 o ther int angible assets
      development  
      costs 
      2007 
      £’000
cost      
at 1 january 2006 and 1 january 2007      —
additions      250
at 31 december 2007      250
amortisation      
at 1 january 2006 and 1 january 2007      —
charge for the year      42
at 31 december 2007      42
carrying amount       
at 31 december 2007      208
at 31 december 2006      — 34
spi lasers plc 
annual report and accounts 2007
16 property plant and equipment
  leasehold improvements plant and machinery computers total 
  £’000 £’000 £’000 £’000
cost     
at 1 january 2006  3094 8270 1193 12557
additions  404 254 89 747
at 1 january 2007  3498 8524 1282 13304
additions  — 461 80 541
at 31 december 2007  3498 8985 1362 13845
accumulated depreciation and impairment     
at 1 january 2006  1570 7408 1155 10133
charge for the year  230 286 59 575
at 1 january 2007  1800 7694 1214 10708
charge for the year  265 364 33 662
at 31 december 2007  2065 8058 1247 11370
carrying amount     
at 31 december 2007  1433 927 115 2475
at 31 december 2006  1698 830 68 2596
17 investments
a list of the significant investments in subsidiaries including the name country of incorporation proportion of ownership interest is given in note 41
18 inventories
     2007 2006 
     £’000 £’000
raw materials     853 982
workinprogress     784 543
finished goods     1279 466
     2916 1991
workinprogress includes £1000 relating to contracts
19 contra cts
     2007 2006 
     £’000 £’000
contracts in progress at the balance sheet date      
amounts due from contract customers included in trade and other receivables see note 20    450 983
amounts due to contract customers included in trade and other payables see note 22     — 52
contract costs incurred plus recognised profits less recognised losses to date see note 18     1 —
     451 931
at 31 december 2007 retentions held by customers for contract work amounted to £9000 2006 £nil 
20 o ther financial assets
trade and other receiv ables 
   group group company company 
   2007 2006 2007 2006 
   £’000 £’000 £’000 £’000
amount receivable for the sale of goods    2316 1991 — —
allowance for doubtful debts   132 178 — —
amounts due from construction contract customers note 18   450 983 — —
amounts owed by group undertakings   — — 24450 13441
allowance for doubtful debts   — — 24450 —
rd tax credit receivable   742 839 — —
other debtors   478 245 95 20
prepayments   471 491 — 4
   4325 4371 95 13465
an allowance has been made for estimated irrecoverable amounts from the sale of goods of £139588 2006 £178382 this allowance has been 
determined by reference to past default experience
the directors consider that the carrying amount of trade and other receivables approximates their fair value
notes to the financial statements
at 31 december 2007 35
spi lasers plc 
annual report and accounts 2007 
20 o ther financial assets continued
trade receiv ables older than a vera ge debtor d ays
the average credit period taken on sales of goods is 60 days trade receivables which are overdue are provided for based on estimated irrecoverable 
amounts from the sale of goods determined by reference to past default experience
before accepting any new customer the group uses an external credit scoring system to assess the potential customer’s credit quality and defines credit limits 
by customer of the trade receivables balance at the year end £685000 is due from a significant customer 31 2006 3 of the total trade receivables 
balance this balance has not been impaired there is one other customer representing more than 5 2006 5 of the total balance of trade receivables
ageing of past due but not impaired receivables
     2007 2006 
     £’000 £’000
60–90 days      139 451
90–120     223 4
120     74 168
     436 623
movement in allowance for doubtful debts group
     2007 2006 
     £’000 £’000
balance at the beginning of the period      178 116
impairment losses recognised     78 65
amounts written off as uncollectible     124 3
balance at the end of the period     132 178
in determining the recoverability of a trade receivable the group considers any changes in the credit quality of the trade receivable from the date credit was initially 
granted to the reporting date accordingly the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts
ageing of impaired receivables
     2007 2006 
     £’000 £’000
120     132 73
21
a cash and cash equiv alents – group
     2007 2006 
     £’000 £’000
cash and cash equivalents     11225 2113
b cash and cash equiv alents – company
     2007 2006 
     £’000 £’000
cash and cash equivalents     10041 1230
cash and cash equivalents comprise cash held by the group and shortterm bank deposits with an original maturity of three months or less the carrying 
amount of these assets approximates their fair value
22 trade and other pa y ables – current liability
   group group company company 
   2007 2006 2007 2006 
   £’000 £’000 £’000 £’000
trade creditors and accruals    4450 3225 194 147
amounts due to contract customers note 18   — 52 — —
   4450 3277 194 147
trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs the average credit period taken for trade 
purchases is 52 days 2006 52 days for all suppliers no interest is charged if the trade payable exceeds the credit period
the directors consider that the carrying amount of trade payables approximates to their fair value
23 trade and other pa y ables – noncurrent liabilities
   group group company company 
   2007 2006 2007 2006 
   £’000 £’000 £’000 £’000
amounts owed to group undertaking   — — 12994 12994 36
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
24 deriv ative financial instruments
currency deriv atives
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 recognised income and expenditure
interest ra te sw aps
the group does not use interest rate swaps to manage its exposure to interest rate movements on its bank borrowings
25 borrowings – group and company
     2007 2006 
     £’000 £’000
secured borrowings at amortised cost      
other loans     2495 2844
total borrowings     2495 2844
amount due for settlement within 12 months     1460 894
amount due for settlement after 12 months     1035 1950
     2495 2844
all borrowings are in sterling the group has no further borrowing facilities available to it other than with etv capital sa luxembourg
fair v alue
the other principal features of the group’s borrowings are as follows
the group has two principal loans provided by etv capital sa luxembourg ‘etv’
l oan 1
this loan was provided in june 2005 the loan amount was £2000000 repayable by 36 equal monthly instalments at an interest rate of 1265 it is 
secured on the fixed assets of the group in december 2006 the loan was restructured to be interest only for the period december 2006 to august 2007 
inclusive and thereafter repayable in twelve equal monthly instalments etv was granted a warrant to purchase at its discretion 201388 ordinary shares 
at the ipo price of 144p per share the warrant is exercisable until june 2015 the warrant may be exchanged without the payment of any additional 
consideration for the group’s shares based upon the value of the warrant and the shares at the time of the exchange
loan 2
this convertible loan was provided in december 2006 the loan amount was £1750000 on an interest only basis for the period december 2006 to 
december 2007 inclusive and thereafter repayable in 27 equal monthly instalments at an interest rate of 132 it is secured on all tangible and intangible 
assets of the group etv may convert part or the entire outstanding principal of the loan at its discretion at a price calculated by reference to the market 
price over the preceding two weeks prior to conversion subject to a maximum price of 24479p there is also a minimum price determined by a restriction 
on the post conversion shareholding of etv not exceeding 50 of the issued shares of the group
     2007 2006 
      
the weighted average interest rates paid were as follows      
bank overdrafts     — —
other loans     1270  1268
convertible l o an notes and w arrants
the net proceeds from the issue of the convertible loan and warrants have been split between the liability element and an equity element representing the 
fair value of the embedded option to convert the liability into equity and the fair value of the warrants the value of these options has been determined to 
be £nil 2006 £nil
26 provisions – group
    warranty  royalty 
    provision provision total 
    £’000 £’000 £’000
at 1 january 2007    104 20 124
additional provision in the year    1042 78 1120
utilisation of provision    660 44 704
at 31 december 2007    486 54 540
included in current liabilities      440
included in noncurrent liabilities      100
      540
the warranty provision represents management’s best estimate of the group’s liability under 24month warranties granted on its products based on past 
experience and industry averages for defective products provision is made quarterly based upon sales in the previous quarter the provision is generally 
utilised the quarter after the provision is made  37
spi lasers plc 
annual report and accounts 2007 
26 provisions – group continued
the royalty provisions relate to patent licenses entered into by spi lasers uk ltd and third parties under these license agreements certain royalty payments 
and patent fees are accrued and become payable within the following
     2007 2006 
     £’000 £’000
royalty provision recognised as current     23 19
royalty provision recognised as noncurrent     31 1
     54 20
27 share capit al
     2007 2006 
     £’000 £’000
authorised      
100000000 ordinary shares of £0025 each     2500 2500
issued and fully paid      
62629782 ordinary shares of £0025 each 2006 20885275 ordinary shares of £0025 each    1566 522
on 27 february 2007 5250000 ordinary shares at £0025 each with an aggregate nominal value of £131250 were issued at 200p per share with total 
gross proceeds amounting to £10500000 £10066781 net of costs
on 13 november 2007 a total of 36302082 ordinary shares at £0025 each with an aggregate nominal value of £907552 were issued at 30p per share 
with total gross proceeds amounting to £10890625 £10498870 net of costs 
during the year 192425 ordinary shares of £0025 each with an aggregate nominal value of £4810 were issued upon the exercising of vested share 
options by employees and were cash settled see note 36
28 share premium a ccount
      share 
      premium 
      £’000
balance as at 31 december 2006 and 1 january 2007      15330
premium arising on issue of equity shares see note 27      20356
expenses of issue of equity shares      825
balance at 31 december 2007      34861
29 equity reserve 
a group
      equity  
      reserve 
      £’000
balance as at 31 december 2006 and 1 january 2007      162
credit for equitysettled sharebased payments      564
balance at 31 december 2007      726
b company
      equity  
      reserve 
      £’000
balance as at 31 december 2006 and 1 january 2007      162
credit for equitysettled sharebased payments      564
balance at 31 december 2007      726
30 merger reserve – group
      merger  
      reserve 
      £’000
balance at 1 january 2007 and 31 december 2007      50389 38
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
31 transla tion reserves – group
      t ranslation 
      reserve 
      £’000
balance at 1 january 2006      —
exchange differences on translation of overseas operations      126
balance at 1 january 2007      126
exchange differences on translation of overseas operations      21
balance at 31 december 2007      147
under ifrs reporting the group has elected to take advantage of the exemption available to reset the cumulative exchange differences on net investment in 
foreign operations to zero at the date of transition accordingly the group has not disclosed the amount of cumulative translation differences for its overseas 
operation included within retained earnings at 1 january 2006 see note 43
32
a retained deficit – group
      £’000
balance at 1 january 2006      50394
loss for the year      11037
balance at 1 january 2007      61431
loss for the year      12300
balance at 31 december 2007      73731
b retained deficit – company
      £’000
balance at 1 january 2006      418
net loss for the year      966
balance at 1 january 2007      1384
net loss for the year      25456
balance at 31 december 2007      26840
33 notes to the cash fl ow st atement – group
a reconcilia tion of consolid ated opera ting l oss to net cash outfl ow from opera ting a ctivities
     2007 2006 
     £’000 £’000
operating loss for the year     12600 11297
adjustments for   
– depreciation of property plant and equipment     662 575
– amortisation of intangible assets     42 —
     704 575
operating cash flows before movements in working capital     11896 10722
– increasedecrease in inventories     925 93
– decreaseincrease in receivables     436 1330
– increase in payables     1148 831
– increasedecrease in provisions     436 61
– exchange difference     13 97
– sharebased payment expense     564 110
cash generated by operations     10250 11176
interest paid     371 183
net cash from operating activities     10621 11359
cash and cash equivalents which are presented as a single class of assets on the face of the balance sheet comprise cash at bank and other shortterm 
highly liquid investments with a maturity of three months or less
b reconcilia tion of net cash fl ow to movement in net funds – group
     2007 2006 
     £’000 £’000
increasedecrease in cash in the year     9120 5984
cash inflow from increase in debt finance     — 1750
cash outflow from decrease in debt     349 573
change in net debt resulting from cash flows     9469 7161
exchange differences     8 29
movement in net debt in the year     9461 7190
opening net deficitfunds     731 6459
closing net fundsdeficit     8730 731 39
spi lasers plc 
annual report and accounts 2007 
33 notes to the cash fl ow st atement – group continued
c anal ysis of net cash – group
  at     at 
  1 january  cash noncash exchange 31 december 
  2007 flow movement differences 2007 
  £’000 £’000 £’000 £’000 £’000
cash at bank and in hand  2113 9120 — 8 11225
loans – shortterm  894 349 915 — 1460
loans – longterm  1950 — 915 — 1035
  731 9469 — 8 8730
d reconcilia tion of company’s opera ting l oss to net cash outfl ow from opera ting a ctivities
     2007 2006 
     £’000 £’000
loss for the year     1274 1088
operating cash flows before movements in working capital     1274 1088
decreaseincrease in receivables     11080 10571
increasedecrease in payables     47 700
sharebased payment expense     567 110
cash generated by operations     11740 10849
net cash from operating activities     11740 10849
cash and cash equivalents which are presented as a single class of assets on the face of the balance sheet comprise cash at bank and other shortterm 
highly liquid investments with a maturity of three months or less
34 contingent liabilities
the directors are not aware of any contingent liabilities 2006 nil
35 opera ting lease arrangements
the group as lessee
     2007 2006 
     £’000 £’000
minimum lease payments under operating leases recognised as an expense in the year     380 344
at the balance sheet date the group had outstanding commitments for future minimum lease payments under noncancellable operating leases which fall 
due as follows
     2007 2006 
     £’000 £’000
in the second to fifth years inclusive     40 —
after five years     340 344
     380 344
operating lease payments represent rentals payable by the group for certain of its office properties leases are negotiated for an average term of 25 years 
with break clauses at 15 years and rentals are fixed for an average of 1 year
36 sharebased pa yments
equity settled share option scheme
the group has six share option schemes for all employees of the group the vesting period ranges from one to four years options are forfeited if the employee 
leaves the group before the options vest
share options
the number of options outstanding to directors under the group’s share option schemes is disclosed in the directors’ report the total number of shares 
under the option schemes is as follows
     2007 2006 
     number  number 
     of share of share 
     options options
outstanding at beginning of period     992407 1073079
granted during the period     106201 518103
forfeited during the period     71375 115319
exercise during the period     192425 483456
outstanding at end of period     834808 992407 40
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
36 sharebased pa yments continued
the analysis by scheme is as follows
uk emi scheme
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   365991 £0649 779725 £0273
granted during the period   67912 £1026 26668 £1875
forfeited during the period   56686 £0700 14331 £0820
exercised during the period   132968 £0093 426071 £0032
outstanding at the end of the period   244249 £1044 365991 £0649
exercisable at the end of the period   211562 £1055 262513 £0717
the total vesting period is four years with 25 of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months if the options remain unexercised after a period of ten years from the date of grant the options expire options are forfeited if the 
employee leaves the group before the options vest
uk approved scheme
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   40434 £1318 40449 £1497
granted during the period   — — — —
forfeited during the period   3 £484820 15 £484820
exercised during the period   39070 £0025 — —
outstanding at the end of the period   1361 £3736 40434 £1318
exercisable at the end of the period   1272 £39971 40228 £1324
the total vesting period is four years with 25 of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months if the options remain unexercised after a period of ten years from the date of grant the options expire options are forfeited if the 
employee leaves the group before the options vest
uk unapproved scheme
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   148898 £0333 148898 £0333
granted during the period   — — — —
forfeited during the period   — — — —
exercised during the period   — — — —
outstanding at the end of the period   148898 £0333 148898 £0333
exercisable at the end of the period   124050 £0385 86904 £0520
the total vesting period is four years with 25 of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months if the options remain unexercised after a period of ten years from the date of grant the options expire options are forfeited if the 
employee leaves the group before the options vest
share bonus plan
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   298096 £0025 — —
granted during the period   — — 396483 £0025
forfeited during the period   5075 £0025 98387 £0025
exercised during the period   500 £0025 — —
outstanding at the end of the period   292521 £0025 298096 £0025
exercisable at the end of the period   292196 £0025 22554 £0025
the vesting period is 13 months if the options remain unexercised after a period of ten years from the date of grant the options expire options are forfeited 
if the employee leaves the group before the options vest 41
spi lasers plc 
annual report and accounts 2007 
36 sharebased pa yments continued
us stock plan
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   46622 £0362 104007 £0176
granted during the period   38289 £0637 — —
forfeited during the period   2849 £0040 — —
exercised during the period   19887 £0187 57385 £0025
outstanding at the end of the period   62175 £0602 46622 £0362
exercisable at the end of the period   55498 £0611 24533 £0364
the total vesting period is four years with 25 of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months if the options remain unexercised after a period of ten years from the date of grant the options expire options are forfeited if the 
employee leaves the group before the options vest
sharesa ve scheme
 2007 2006
    
    weighted  weighted 
   number average  number average 
   of share exercise  of share exercise 
   options price options price
outstanding at beginning of period   92366 £1200 — —
granted during the period   — — 94952 £1200
forfeited during the period   6762 £1200 2586 £1200
exercised during the period   — — — —
outstanding at the end of the period   85604 £1200 92366 £1200
exercisable at the end of the period   85604 £1200 30701 £1200
the vesting period is three years if the options remain unexercised after a period of three years from the date of grant the options expire options are 
forfeited if the employee leaves the group before the options vest
the weighted average share price at the date of exercise for share options exercised during the period was £128 the options outstanding at 31 december 2007 
had a weighted average exercise price of £0602 and a weighted average remaining contractual life of 03 years in 2007 options were granted in april and 
october the aggregate of the estimated fair values of the options granted in those periods is £94000 in 2006 options were granted in january may 
november and december the aggregate of the estimated fair values of the options granted in those periods is £10 million
the inputs into the blackscholes model are as follows
     2007 2006
weighted average share price     £1058 £1079
weighted average exercise price     £0331 £0258
expected volatility     50 50
expected life     39 years 38 years
riskfree rate     425 425
expected dividend yields     0 0
expected volatility was estimated at 50 in the absence of meaningful historical data for volatility of the group’s share price since flotation in 2005 
the expected life used in the model has been adjusted based on management’s best estimate for the effects of nontransferability exercise restrictions 
and behavioural considerations
the group recognised total expenses excluding national insurance of £564000 and £110000 related to equitysettled sharebased payment transactions 
in 2007 and 2006 respectively
37 retirement benefit schemes
defined contribution schemes
the group pays contributions to personal 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 £321485 2006 £455000 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 for us employees amounted to £35000 
2006 £8000 at the year end amounts outstanding for all of the group’s pension schemes were £56000 2006 £80000 and these have been 
included within creditors 42
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
38 financial instruments – group
capit al risk mana gement
the group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising the return to stakeholders 
through the optimisation of the debt and equity balance the capital structure of the group consists of debt which includes the borrowings disclosed in note 
24 cash and cash equivalents and equity attributable to equity holders of the parent comprising issued capital reserves and retained earnings as disclosed 
in notes 27 to 32
gearing ra tio
the group’s risk management committee reviews the capital structure on a regular basis as part of this review the committee considers the cost of capital 
and the risks associated with each class of capital 
the gearing ratio for the year end is as follows
     2007 2006 
     £’000 £’000
debt     2495 2844
cash and cash equivalents     11225 2113
net cashdebt     8730 731
equity     13664 4846
net cashdebt to equity ratio     64 15
debt is defined as long and shortterm borrowings as detailed in note 23 equity includes all capital and reserves of the group attributable to equity holders 
of the parent
externall y imposed capit al requirement
the group is not subject to externally imposed capital requirements
significant a ccounting policies
details of the significant accounting policies and methods adopted including the criteria for recognition the basis of measurement and the basis on which 
income and expenses are recognised in respect of each class of financial assets financial liability and equity instrument are disclosed in note 3 to the 
financial statements
ca tegories of financial instruments
 carrying value
     2007 2006 
     £’000 £’000
financial assets      
cash and cash equivalents     11225 2113
trade receivables     4325 4371
financial liabilities      
trade payables     4450 3277
borrowings     2494 2844
all financial instruments are held at amortised cost
the group’s treasury function provides services to the business coordinates access to domestic and international financial markets monitors and manages 
financial risk relating to the operations of the group through internal risk reports which analyses exposures by degree and magnitude of risks 
these risks include market risk including currency risk fair value interest rate risk and price risk credit risk liquidity risk and cash flow interest rate risk
market risk
the group’s activities expose it primarily to the financial risk changes in foreign exchange rates and interest risk the foreign exchange risks are not material 
predominantly due to natural hedge between foreign currency assets and foreign currency liabilities the group’s financial exposure to changes in interest 
rates is noted under credit risk management below 
foreign currency risk mana gement
the group undertakes certain transactions denominated in foreign currencies and as a result is exposed to exchange rate fluctuations the group’s sales 
are predominantly us dollar ‘usd’ denominated or if in other currencies based upon the equivalent usd price this leaves the group exposed to adverse 
movements in the usd to gb pound ‘gbp’ exchange rate however the company purchases of components and its us operational costs are similarly 
usdbased and so there is a degree of internal hedging of the exchange rate exposure it is for this reason that the group does not enter into currency 
hedging contracts this policy will be under review as the group’s sales and geographic presence expand in the coming years 
gains and losses from these structural currency exposures are recognised in the statement of recognised income and expense  43
spi lasers plc 
annual report and accounts 2007 
38 financial instruments – group continued
foreign currency risk mana gement continued
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 income statement such exposures comprise the monetary assets and monetary liabilities of the group that are not denominated in the 
operating of ‘functional’ currency of the operating unit involved
      f inancial  
      assets 
      £’000
2007       
trade receivables      1790
2006      
trade receivables      1503
      f inancial  
      liabilities 
      £’000
2007 
trade payables      1314
2006      
trade payables      911
interest ra te risk mana gement
as the group has fixed interest rate borrowings the group’s financial exposure to changes in interest rates is set out below
the interest rate profile of the financial assets of the group as at 31 december is as follows
      floating  
      rate  
      financial  
      assets 
      £’000
2007       
sterling      9587
us dollar      1638
total      11225
2006      
sterling      1245
us dollar      868
total      2113
floating rate financial assets comprise cash deposits on money market deposit at call
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
2007 sterling borrowings     2495 2495
2006 sterling borrowings     2844 2844
      weighted 
     weighted  average 
     average period for 
     interest which rate  
     rate is fixed  
      years
2007 sterling borrowings     1270 18
2006 sterling borrowings     1268 25
credit risk mana gement 
the group’s credit risk is primarily attributable to its trade receivables the business has expanded its revenues rapidly and especially in the far east via 
appointed distributors with whom it has formal trading agreements a logical consequence of this situation is that at any point in time trade receivables may 
include significant amounts due from distributors the group manages the inherent potential credit risk by careful monitoring of the credit exposure and also 
operates a policy of title retention with such customers the amounts presented in the balance sheet are net of allowances for doubtful receivables an allowance 
for impairment is made where there is an identified loss event which based on previous experience is evidence of a reduction in the recoverability of the cash flows
the credit risk on liquid funds is limited because the counterparties are banks with high creditratings assigned by international creditrating agencies 44
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
38 financial instruments – group continued
liquidity risk mana gement 
ultimate responsibility for liquidity risk management rests with the board of directors which has built an appropriate liquidity risk management framework for 
the management of the group’s short medium and longterm funding and liquidity management requirements the group manages liquidity risk by maintaining 
adequate reserves banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity 
profiles of financial assets and liabilities 
liquidity and interest ra te risk t ables
the following tables detail the group’s remaining contractual maturity for its nonderivative financial liabilities the tables have been drawn up based on the 
undiscounted cash flows of financial liabilities based on the earliest date on which the group can be required to pay the table includes both interest and 
principal cash flows 
  weighted  
  average  
  effective  less than 1–3 3 months 1–5 5 
  interest rate  1 month months to 1 year years years total 
    £’000 £’000 £’000  £’000  £’000 £’000
2007        
fixed interest rate instruments  1270 172 348 846 1129 — 2495
trade payables  — 561 2557 1332 — — 4450
2006        
fixed interest rate instruments  1268 39 63 621 2121 — 2844
trade payables  — 679 1073 1525 — — 3277
  weighted  
  average  
  effective  less than 1–3 3 months 1–5 5 
  interest rate  1 month months to 1 year years years total 
    £’000 £’000 £’000  £’000  £’000 £’000
2007       
cash and cash equivalents — 5225 6000 — — — 11225
trade receivables — 1734 1189 1402 — — 4325
2006       
cash and cash equivalents — 2113 — — — — 2113
trade receivables — 1549 1682 1138 — — 4371
the above cash flows are contractual and the group does not expect the cash flows to occur in different periods to the above
fair v alues of financial assets and financial liabilities
set out below is a comparison by category of book values and fair values of the group’s financial assets and financial liabilities as at 31 december the shortterm 
borrowing are not an offtheshelf loan that would be obtained from a high street bank and therefore there is no real comparative accordingly the fair value 
is the directors’ valuation and is equivalent to the amortised cost that it is currently recorded at
   book value fair value book value fair value 
   2007 2007 2006 2006 
   £’000 £’000  £’000 £’000
primary financial instruments      
shortterm borrowings and current portion of longterm borrowings   1460 1460 894 894
trade receivables   4325 4325 4371 4371
trade payables   4450 4450 4171 4171
longterm borrowings   1035 1035 1950 1950
cash and shortterm borrowings   11225 11225 2113 2113
39 financial instruments – company
capit al risk mana gement
the company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the 
optimisation of the debt and equity balance the capital structure of the company consists of cash and cash equivalents and equity attributable to equity 
holders of the parent comprising issued capital reserves and retained earnings as disclosed in notes 27 to 32b 45
spi lasers plc 
annual report and accounts 2007 
39 financial instruments – company continued
gearing ra tio
the company’s risk management committee reviews the capital structure on a regular basis as part of this review the committee considers the cost of capital 
and the risks associated with each class of capital 
the gearing ratio for the year end is as follows
     2007 2006 
     £’000 £’000
cash and cash equivalents     10041 1230
net cash     10041 1230
equity     34763 14630
net cashdebt to equity ratio     29 8
equity includes all capital and reserves of the company attributable to equity holders
externall y imposed capit al requirement
the company is not subject to externally imposed capital requirements
significant a ccounting policies
details of the significant accounting policies and methods adopted including the criteria for recognition the basis of measurement and the basis on which 
income and expenses are recognised in respect of each class of financial assets financial liability and equity instrument are disclosed in note 3 to the 
financial statements
ca tegories of financial instruments
 carrying value
     2007 2006 
     £’000 £’000
financial assets      
cash and cash equivalents     10041 1230
trade receivables     95 13465
financial liabilities      
trade payables     194 147
all financial instruments are held at amortised cost
the company’s treasury function provides services to the business coordinates access to domestic and international financial markets monitors and 
manages financial risk relating to the operations of the company through internal risk reports which analyses exposures by degree and magnitude of risks 
these risks include market risk including currency risk fair value interest rate risk and liquidity risk and cash flow interest rate risk
market risk
the company’s activities expose it primarily to the financial risk changes in foreign exchange rates and interest risk the foreign exchange risks are not 
material predominantly due to natural hedge between foreign currency assets and foreign currency liabilities the company’s financial exposure to changes 
in interest rates is noted under credit risk management below 
foreign currency risk mana gement
the table below shows the company’s currency exposures in other words those transactional exposures that give rise to the net currency gains and losses 
recognised in the income statement such exposures comprise the monetary assets and monetary liabilities of the company that are not denominated in the 
operating of ‘functional’ currency of the operating unit involved
      f inancial  
      liabilities 
      £’000
2007       
trade payables      13188
2006      
trade payables      13141
interest ra te risk mana gement
the interest rate profile of the financial assets of the company as at 31 december is as follows
      floating rate 
      financial  
      assets 
      £’000
2007       
sterling      9086
us dollar      955
total      10041
2006      
sterling      1230
us dollar      —
total      1230
floating rate financial assets comprise cash deposits on money market deposit at call 46
spi lasers plc 
annual report and accounts 2007
notes to the financial statements
at 31 december 2007
39 financial instruments – company continued
liquidity risk mana gement 
ultimate responsibility for liquidity risk management rests with the board of directors which has built an appropriate liquidity risk management framework for 
the management of the company’s short medium and longterm funding and liquidity management requirements the company manages liquidity risk by 
maintaining adequate reserves banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the 
maturity profiles of financial assets and liabilities 
the following tables detail the company’s remaining contractual maturity for its nonderivative financial liabilities the tables have been drawn up based on 
the undiscounted cash flows of financial liabilities based on the earliest date on which the company can be required to pay the table includes both interest 
and principal cash flows 
  weighted  
  average  
  effective  less than 1–3 3 months 1–5 5 
  interest rate  1 month months to 1 year years years total 
    £’000 £’000 £’000  £’000  £’000 £’000
2007
trade payables  — — 194 — — — 194
2006
trade payables  — — 147 — — — 147
  weighted  
  average  
  effective  less than 1–3 3 months 1–5 5 
  interest rate  1 month months to 1 year years years total 
    £’000 £’000 £’000  £’000  £’000 £’000
2007
cash and cash equivalents 576 4041 6000 — — — 10041
trade receivables — — — 95 — — 95
2006
cash and cash equivalents 478 1230 — — — — 1230
trade receivables — 13441 — 24 — — 13465
amounts showing in less than 12 month relate to amounts owed by group undertakings
fair v alues of financial assets and financial liabilities
set out below is a comparison by category of book values and fair values of the company’s financial assets and financial liabilities as at 31 december
   book value fair value book value fair value 
   2007 2007 2006 2006 
   £’000 £’000  £’000 £’000
primary financial instruments      
trade receivables   24545 24545 13465 13465
trade payables   194 194 147 147
amounts owed by group undertakings   12994 12994 12994 12994
cash and shortterm borrowings   10041 10041 1230 1230
40 related party transa ctions
a spi lasers plc
transactions between the company and its subsidiaries have been eliminated on consolidation
b the university of southampton
the university of southampton is a related part under ias 24 as david payne a director of spi lasers plc is an employee of the university included within 
the income statement are costs of £374000 2006 £285000 in respect of a series of technology development contracts purchases of these goods and 
services from the university of southampton amounted to £94000 2006 £90000 royalties of £10000 2006 £90000 were due to the university 
under licence agreements the year end balance with the university totalled £231000 2006 £265000 and is included within trade creditors all transactions 
are conducted on an arm’s length basis the group has agreement with the university of southampton whereby the university of southampton has the use 
of certain facilities at the premises of the group the total amount charged in the year to the university of southampton for these facilities was £180000 
c furuka w a electric company
furukawa electric company ltd with its headquarters in tokyo is a significant shareholder of spi lasers plc as at 18 march 2008 furukawa held 
6666667 shares in spi lasers plc which is 107 of the shares in issue furukawa has a whollyowned subsidiary electrooptics technology inc which 
is a supplier to spi lasers plc during 2007 the electrooptics supplied £727000 of raw material stock to spi lasers plc the year end balance with 
electrooptics technology inc totalled £159000 and is included within trade creditors all transactions are conducted on an arm’s length basis 47
spi lasers plc 
annual report and accounts 2007 
41 subsidiaries
details of the company’s subsidiaries at 31 december 2007 are as follows
 place of incorporation proportion of 
  ownership or registration voting interest 
name and operation  nature of business
spi lasers uk limited england 100 optical fibrebased lasers
spi lasers llc united states 100 optical fibrebased lasers
42 ifrs 1 – first time adoption of interna tional reporting st and ards
the group has prepared full annual financial statements under ifrs the group has applied ifrs 1 firsttime adoption of international financial reporting 
standards as a starting point for reporting under ifrs the group’s date of transition to ifrs is 1 january 2006 and comparative information has been restated 
to reflect the group’s adoption of ifrs except where otherwise required or permitted by ifrs 1
ifrs 1 requires an entity to comply with each ifrs and ias effective at the reporting date for its first financial statements prepared under ifrs as a general 
rule ifrs 1 requires such standards to be applied retrospectively to determine the ifrs opening balance sheet at the date of transition 1 january 2006 ifrs 1 
provides a number of optional exemptions to this general principle the ones applicable to the group are set out below together with a description of the 
exemption adopted by the group
in accordance with ifrs 1 firsttime adoption of international financial reporting standards the group is required to present reconciliations of its equity at 
the date of transition 1 january 2006 and at the date of the in the last uk gaap financial statements 31 december 2006 together with its profit and loss 
for the same periods
the group has elected to take advantage of the exemption available to reset the cumulative exchange differences on net investment in foreign operations to 
zero at the date of transition accordingly the group has not separately disclosed the amount of cumulative translation differences for its overseas operation 
included within retained earnings at 1 january 2006
the group has applied the requirements of ifrs 2 sharebased payments in accordance with ifrs 1 ifrs 2 has been applied to all grants of equity 
instruments after 7 november that has not vested as of 1 january 2006
43 det ails on ifrs changes impa cting published resul ts for group and company
reconcilia tion of l oss for 2006
there was no effect on the income statements for the group and company for the period ended 31 december 2007 and year ended 31 december 2006 
following the transition to ifrs
reconcilia tion of ifrs adoption on cash fl ow st atement
under ias 38 intangible assets £250000 product development costs which would otherwise have been charged to the income statement were capitalised 
and an amortisation charge of £42000 was charged in the income statement for the group for the year ended 31 december 2007 there was no change to 
the profit and loss account for the group for the year ended 31 december 2006 in respect of ias 38 as no qualifying development expenditure was identified 
there were no other changes to the income statement for the years ended 31 december 2007 and 31 december 2006 following the transition to ifrs
reconcilia tion of equity
the transition to ifrs has not impacted on the net assets of the group at 1 january 2006 and 31 december 2006 it has increased the net assets of the 
group by £208000 as at 31 december 2007 following the adoption of ias 38 intangible assets no reconciliation of equity is required at 1 january 2006 
as the option under ifrs to reset the cumulative translation reserve to zero at that date has been taken the reconciliations of equity at 31 december 2006 
date of last uk gaap financial statements have been included below to enable a comparison of the 2007 figures with the corresponding period of the 
previous financial year
reconciliation of group equity as at 31 december 2006 date of last uk gaap financial statements
     effect of 
     transition  
    uk gaap to ifrs ifrs 
    £’000 £’000 £’000
equity      
share capital    522 — 522
share premium account    15330 — 15330
merger reserve    50389 — 50389
equity reserve    162 — 162
translation reserve    — 126 126
retained earnings    61557 126 61431
    4846 — 4846
44 events after the balance sheet d ate
recently tax changes were enacted which will affect the future tax position of the company most significantly from 1 april 2008 the company’s rate of 
corporation tax on profits will be reduced from 30 to 28 the rate of allowances for expenditure on plant and equipment will be reduced from 25 to 20 
per annum on a reducing balance basis and balancing adjustments on the sale of industrial buildings has been abolished with effect from 21 march 2007
these changes will both affect the amount of future cash tax payments to be made by the company and the size of the company’s balance sheet deferred tax asset
as these changes were substantively enacted at the balance sheet date the deferred tax asset is based on a corporation tax rate of 28 48
spi lasers plc 
annual report and accounts 2007
five year summary at 31 december 2007
  ifrs ifrs uk gaap uk gaap us gaap 
  2007 2006 2005 2004 2003 
  £’000  £’000 £’000  £’000 £’000
results     
revenue  13047 7065 3468 1730 1648
loss from operations  12600 11297 8982 9044 6023
loss before tax   12690 11340 9011 8959 6015
loss attributable to equity holders of spi lasers plc  12521 11163 8451 8102 5350
assets employed     
noncurrent assets  2683 2596 2424 2505 4004
current assets  18465 8475 12896 3769 4493
current liabilities  6349 4222 3239 1475 1288
noncurrent liabilities  1135 2003 1039 — —
net assets  13664 4846 11042 4799 7209
financed by      
equity  13664 4846 11042 4799 7209
  13664 4846 11042 4799 7209
key statistics      
l oss per share  378p 581p 477p 479p —
   the amounts for 2007 and 2006 are stated under ifrs 2006 figures have been restated from uk gaap  a reconciliation of differences arising from the conversion from 
uk gaap and ifrs are in note 43
 the amounts disclosed for 2005 and 2004 are stated on the basis of uk gaap because it is not practicable to restate amounts for periods prior to the date of transition to ifrs 
  the 2003 amounts are stated on the basis of us gaap due to structure of group at that date  corporate statement
our goal is to be a leader in the optical  
fibrebased laser market 
spi is now a recognised leader in the design and 
manufacture of fibre lasers the group’s technology 
is rapidly becoming an integral part of producing 
many enduser products by improving and in some 
cases enabling its customers’ manufacturing 
processes spi continues to expand the applications 
space for fibre lasers with powers from mws to kws
ifc corporate statement
01 highlights
01 what we do at a glance 
02 our market
02 our technology
02 current products 
04 chairman’s statement
06 chief executive’s review
08 financial review
10 board of directors
12 financial contents
13 directors’ report
17 directors’ remuneration report
18 statement of directors’ responsibilities
19 independent auditors’ report to the members of spi lasers plc
20 consolidated income statement
21 consolidated statement of recognised income and expense
22 consolidated balance sheet
23 company balance sheet
24 company statement of changes in equity
25 consolidated cash flow statement
26 company cash flow statement
27 notes to the financial statements
48 five year summary
ibc officers and professional advisors
officers and professional advisors
directors
d holloway 
g meek 
d parker 
d payne 
p schultz
secretary
d holloway
auditors
deloitte  t ouche llp
southampton united kingdom
bankers
hsbc bank plc
165 high street 
southampton so14 2nz
angl o irish bank corporation plc
10 old jewry 
l ondon ec2r 8dn
california bank  trust
20541 stevens creek boulevard 
cupertino ca 95014 
usa
solicitors
heller ehrman europe llp
condor house 
10 st pauls churchyard 
l ondon ec4m 8al
blake lapthorn t arl o lyons
kings court 
21 brunswick place 
southampton 
hampshire so15 2aq registrars
capita registrars
northern house 
w oodsome park 
f enay bridge 
huddersfield hd8 0la
brokers
panmure gordon uk limited
moorgate hall 
155 moorgate 
l ondon ec2m 6xb
registered office
3 w ellington park 
tollbar w ay 
hedge end 
southampton so30 2qu insp ir ing your products and manufactur ing 
annual r eport and accounts 2007
spi lasers plc
3 wellington park 
tollbar way 
hedge end 
southampton 
so30 2qu 
tel 44 01489 779696 
fax 44 01489 779698 
email investorsspilaserscom
web wwwspilaserscom
spi lasers plc annual r eport and accounts 2007 


Summary:
 04
spi lasers plc 
annual report and accounts 2007 
overview
i am pleased to report that the group has made 
considerable strides in its development during 
2007 and i believe is now well placed to meet 
the challenges of the rapidly changing 
market environment
fibre laser revenue is growing at a rate several 
times greater than the general laser market by 
both an increasing range of applications which 
exploit the inherent capability of the technology 
and also by the replacement of more 
mature technologies
the attractiveness of the market has led to several 
companies declaring an intention to join the existing 
industrial scale players where spi is now established 
as the clear number two the companies seeking 
to join the market are however potentially a long 
way from achieving the delivery of an effective 
product based on sound innovative technology 
that does not infringe the intellectual property 
of the more established players 
in contrast spi has made significant technological 
progress during the year culminating in the successful 
launch of its g3 and r4 product ranges ahead 
of schedule these platforms have addressed the 
previously reported quality issues that slowed our 
progress in the middle of the year and are beginning 
to deliver a marked improvement in gross margin 
which should allow the group to make continued 
progress in 2008
spi’s performance during 2007
in spite of the difficulties encountered in the 
middle of 2007 revenue continued to almost 
double again this year and perhaps more 
importantly we continued to expand our share 
of each of our three main market areas namely 
micro  medical and marking  the rate 
of new account wins and repeat business from 
established customers was encouraging particularly 
at the end of the year based on acceptance 
of the new platforms the market dynamics led 
to significant and deliberate competitive pricing 
pressure during the first half of the year whilst this 
has had the positive effect of reducing the price 
premium hurdle of fibre lasers compared with 
more traditional technologies so increasing the 
accessible market the effect in the short term on 
spi’s profitability was sufficient spur to accelerate 
our planned investment to develop and deliver 
our new lower cost product platform which in 
turn led to the group’s refinancing in october 2007
i am pleased to report that the new product 
platforms are being delivered ahead of schedule 
and also at cost and performance levels which 
are consistent with the plan to transform the 
profitability of the business during 2008
financing
as referred to in last year’s annual r eport during 
february 2007 spi completed a £10 million net 
equity fundraising from existing shareholders and 
a number of new supporters
chairman’s statement
summary of chairman’s statement
	 	 turnover almost doubled for third successive year
	 	 expansion in all sectors
	 	 launch of new products g3 and r4 ahead of schedule
“ the board expects strong revenue growth in 2008 
and remains committed to achieving profitability 
in q4 this year” 05
spi lasers plc 
annual report and accounts 2007 
during october 2007 however the changes 
in the competitive market environment the cost 
of developing a lower cost platform and resolving 
the quality issues necessitated the group raising 
a further £105 million net in equity the fundraising 
comprised not only the placing of new shares with 
institutional investors but also a strategic investment 
by the furukawa electric co ltd of £20 million 
the board
t he composition of spi’s board has changed 
during the year david c heesman on his retirement 
from advent venture partners is reducing his 
commitments and has retired from the board 
david had served spi since 2003 when advent 
became one of the group’s leading investors 
prior to flotation we thank him for his wise 
counsel over the past five years
after the interim results steve berg our 
chief financial officer also left the group in 
order to concentrate on his family interests in 
nottinghamshire steve was appointed cfo 
in february 2003 and in over five years made 
a considerable contribution to the development 
of spi
in o ctober 2007 we welcomed d avid holloway 
as our new chief financial officer he has already 
made a significant impact both to the board and 
to the financial and operational efficiency of 
the business
employees
the design and production of fibre lasers is not 
a trivial engineering challenge as new entrants 
to this market may now be discovering 
the combined and successful achievements of 
our workforce in 2007 should be seen against 
that demanding background the board wishes 
to extend its thanks for the immense effort and 
dedication shown by the worldwide team
prospects
as well as prospective new entrants into the market 
last year also saw new alliances being forged 
in the fibre laser technology world for example 
t rumpf and jenoptik announced a joint venture 
in midyear rofin acquired a leading merchant 
supplier of specialist optical fibre nufern in 
december while furukawa became a small but 
strategic shareholder in spi in october the pace 
of change in the market place is increasing it seems 
unlikely that the manoeuvring for advantage 
amongst the players is yet complete
spi has begun the current year with renewed 
confidence in our ability to produce competitive 
products o ur new product platforms are 
transforming margins and are attracting increasing 
customer interest field reliability and functional 
performance have been most encouraging 
activity in the area of development contracts 
tends to be cyclical and driven by investment 
programmes after a low ebb in 2007 the 
outlook for 2008 looks more promising with at 
least one major award close to final adjudication
the worldwide fibre laser market continues to grow 
rapidly despite the wellpublicised softness in the 
us economy which has had an effect on our micro 
business in the first quarter nevertheless our overall 
order pipeline remains strong our new platforms 
are demonstrating good performance and high 
reliability with a widening group of repeat customers 
margins have begun to improve with further gains 
expected through 2008 action is being taken 
to control overheads t he board expects strong 
revenue growth in 2008 and remains committed 
to achieving profitability in q4 this year
graham meek
chairman
1 april 2008
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 fibre 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 benefits of spi’s technology for example superior cut 
quality of solder mask stencils for circuit boards 
welding
most people when they think lasers think welding and this is true of 
the fibre laser from spi however due to spi’s innovative approach 
it is now possible to weld various materials including ones that are 
dissimilar to one another at incredibly small dimensions
previous welding tools including traditional lasers simply could 
not achieve the diminutive yet robust bond that the fibre laser 
produces not only is the fibre laser playing an integral part in the 
miniaturisation of consumer products the technology is making a 
massive contribution to the quest for sustainable energy sources