REG - CML Microsystems PLC - Half-year Report
22/11/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20221122:nRSV1261Ha&default-theme=true
RNS Number : 1261H CML Microsystems PLC 22 November 2022
22 November 2022
CML Microsystems Plc
("CML", the "Company" or the "Group")
Half Year Results
CML Microsystems Plc which develops mixed-signal, RF and microwave
semiconductors for global communications markets, today announces its
unaudited results for the six months ended 30 September 2022.
Financial Highlights
· Revenue increased by 22% to £10.05m (H1 FY22: £8.26m)
· Profit from operations increased to £1.75m (H1 FY22: £0.53m)
· Profit before taxation improved by 81% to £1.83m (H1 FY22: £1.01m)
· Diluted EPS increased to 11.58p (H1 FY22: 4.80p)
· Cash balances at period end of £22.67m (31 March 2022: net cash of £25.04m)
following significant share buyback, investments in R&D and dividend
payments, together totalling £6.84m
· Recommended half year dividend of 5p per share (H1 FY22: 4.0p per share)
Operational Highlights
· Revenues ahead of both management and market expectations
· Fourth consecutive six-month period of revenue growth for continuing business
· Recovery in existing markets, driving growth
· Strong order book stretching beyond 12 months
· Expanding product range significantly increases total addressable market
· New product developments show early signs of success
Chris Gurry, Managing Director of CML Microsystems Plc, commented on the
results:
"The results achieved for the opening six months have been strong in absolute
terms with the Board now expecting trading for the full year to be ahead of
market expectations.
"This positive performance has been made possible through a clear strategy for
growth which has built upon the strong foundations laid during previous years.
Achieving these results in the current macroeconomic environment validates our
strategy and business model whilst highlighting the dedication and
determination of our staff.
"The strong progress made in the six months to 30 September 2022, coupled with
the increasing opportunities within the market for organic and acquisitive
growth, gives the Board a great deal of confidence as we continue to deliver
value to our shareholders."
Enquiries:
CML Microsystems Plc www.cmlmicroplc.com (http://www.cmlmicroplc.com/)
Tel: +44 (0) 1621 875 500
Chris Gurry, Group Managing Director
Nigel Clark, Executive Chairman
Shore Capital (Nominated Adviser and Broker) Tel: +44 (0) 20 7408 4090
Toby Gibbs
James Thomas
John More
Alma PR Tel: +44 (0)20 3405 0205
Josh Royston
Andy Bryant
Robyn Fisher
Matthew Young
About CML Microsystems PLC
CML develops mixed-signal, RF and microwave semiconductors for global
communications markets. The Group utilises a combination of outsourced
manufacturing and in-house testing with trading operations in the UK, Asia and
USA. CML targets sub-segments within Communication markets with strong growth
profiles and high barriers to entry. It has secured a diverse, blue chip
customer base, including some of the world's leading commercial and industrial
product manufacturers.
The spread of its customers and diversity of the product range largely
protects the business from the cyclicality usually associated with the
semiconductor industry. Growth in its end markets is being driven by factors
such as the appetite for data to be transmitted faster and more securely, the
upgrading of telecoms infrastructure around the world and the growing
prevalence of private commercial wireless networks for voice and/or data
communications linked to the industrial internet of things (IIoT).
The Group is cash-generative, has no debt and is dividend paying.
Chairman's statement
Introduction
Given the current macroeconomic environment, I can only say how pleased I am
with the exceptionally strong first half results that we have reported. CML
continues to execute on our defined strategy which has proven to be successful
despite the general economic conditions. However, a degree of prudence and
caution needs to be followed as it may be some time before the global
situation improves.
Against this backdrop, we continue to see opportunities both for growing
organically and by selective acquisition. We are maintaining a strong focus on
R&D in order to capitalise on existing and new market opportunities that
we can see. The prospects are good but the headwinds strong.
Results and trading
The reported comparative figures for H1 FY22 have been restated to reflect the
presentational changes made in the year end 31 March 2022 Annual Report,
although these changes do not alter the profit before taxation, profit after
taxation or the net asset values and are purely changes to the presentation of
the financials.
Although growth at the pre-tax level is very important, this does capture the
benefits from one-off gains and does not reflect the underlying performance of
the business. Our long-term focus has been to grow profitability at the
operational level and this is now beginning to show through.
The financial performance for the six months to 30 September 2022 was very
strong and is well ahead of the comparative period (April to September 2021).
Even though good growth was expected this year, revenues were driven further
ahead of management's original expectations due to the strength of the US
Dollar. This has had a positive effect through the income statement but to a
much lesser extent below the revenue line as we incur significant costs
denominated in other currencies.
Revenue for the six months increased by just under 22% to £10.05m compared to
the prior year (H1 FY22: £8.26m). This increase in revenues coupled with a
slight improvement in margins and tight cost control led to the significant
improvement in profit from operations of 230% to £1.75m (H1 FY22: £0.53m).
With no material one-off non-recurring items the profit before tax improved by
81% to £1.83m (H1 FY22: £1.01m) which, after an income tax credit, results
in a 131% increase in profit after tax to £1.87m (H1 FY22: £0.81m). EBITDA
improved 54% to £3.25m (H1 FY22: £2.12m) and diluted EPS increased 141% to
11.58p (H1 FY22: 4.80p). Cash balances at the end of the period stood at
£22.67m (31 March 22: £25.04m) following significant share buyback and
dividend payments.
The share buyback programme that resulted in £3m of shares being purchased at
the start of the year was re-introduced at the start of October to a lesser
extent and has resulted in a small number of shares being repurchased on a
regular basis since the half year end.
Dividend
The Board is recommending a half year dividend of 5.0p per share (H1 FY22:
4.0p per share), payable on 16 December 2022 to shareholders on the Register
on 2 December 2022.
Property
As I stated at the time of the year end results and further enlarged upon
within the RNS announcement made on 26 September 2022, we have applied to
commercially develop the excess land at Oval Park with contracts signed to
sell some of this land to third parties, subject to a successful planning
application. This is progressing, but slowly, and I now believe the
application will be considered by Maldon District Council during the first
calendar half of 2023. The Group also has one further property in Hampshire
that it no longer trades from and so is held for sale. Discussions are
progressing with relevant parties but again, until contracts are exchanged
uncertainty exists. The disposal of the Group's property interests will be
cash generative and will assist our growth objectives. That said, I must
stress they are one-off transactions and below the operating profit line.
Employees
The key to any successful business is the employees and without them the Group
cannot achieve the success it strives for. We are very lucky in having a
dedicated, highly talented and hardworking team at multiple locations
throughout the world, and on behalf of the Board I wish to thank them all.
Prospects and outlook
We are expecting a further improvement in revenues for the second half year
although with inflationary pressures the distribution and administration
expenses are expected to increase. That said, a meaningful full year uplift in
both operating and pre-tax profitability is expected meaning that current
market expectations should be surpassed.
For the longer term, exciting opportunities continue to be worked in all of
the market areas being addressed and they are expected to provide strong
organic growth along with potential inorganic additions to the Group's
existing capabilities.
In summary, despite the challenging times, I feel your Company is well placed
to make significant progress forward over the remainder of the year.
Nigel Clark
Executive Chairman
22 November 2022
Operational and financial review
Introduction
The Group entered the current financial year on a positive footing, backed by
a recovery in the traditional end markets for wireless voice and data
communications along with a strong order book stretching beyond twelve months.
Our established markets have continued to recover whilst the expansion into
wider application areas through higher frequency semiconductor developments is
gathering pace.
In conjunction with the operational advances being made, it is pleasing to
report revenues ahead of original management and market expectations at the
halfway stage, despite a backdrop of selected raw material supply chain
issues, particularly within China, which continues to suffer from pandemic
related rolling lockdowns.
Investments made over recent years into new product developments and related
activities are bearing fruit and are expected to drive meaningful growth in
the future. Coupled with the now entrenched strategy being followed, this
positions the Group well to take advantage of the increasing number of
opportunities being presented.
Strategy
The Group's vision is to be the first-choice semiconductor partner to
technology innovators, together transforming how the world communicates.
We are focused on our customers' success by delivering advantages through the
improved functionality and performance of class leading Integrated Circuit
("IC") solutions. R&D activity is targeted at developing the product
portfolio to support emerging and evolving customer requirements for size,
cost and performance whilst striving to remain each customer's first choice
supplier within their advanced communication platforms.
A more connected world is fuelling the insatiable appetite for data
consumption - driving growth across communications markets globally. As a
result of focused market and customer intelligence activities, our new product
development teams are supporting the expansion of our total addressable market
to include applications within 5G, Satellite and the Industrial Internet of
Things ("IIoT"). This complements the existing markets of public safety,
maritime and mission critical wireless voice and data communications,
leveraging our systems knowledge, semiconductor engineering capabilities and
routes to market.
Markets and operations
For the comparable prior year period (April to September 2021 inclusive),
revenues from voice-centric wireless applications had started to improve, with
the situation across a wide range of data-centric IIoT customers faring
somewhat better. Fast forward to the end of September 2022 and the progress
has been more pronounced, with the level of new order bookings and product
shipments delivering a fourth consecutive six-month period of revenue growth
for the continuing business (excluding revenues from the sale of the Storage
Division in March 2021).
This improved performance was driven by our disciplined execution of a clearly
defined strategy to take market share and widen the addressable market. Sales
grew 22% on a year-over-year basis and 15% sequentially. Geographically, sales
into Asia grew by 21% whilst revenue from the Americas almost doubled.
Conditions within Europe were a little tougher due to the impact of lower
demand from one of the Group's significant voice communications customers. At
the period end, our total order book had advanced once again, despite demand
fluctuations that typically occur following the supply chain disruptions that
have been a feature of the semiconductor industry over the last 18-24 months.
The global communications markets addressed by the Group are exhibiting a
number of growth areas. Within the Land Mobile Radio/Private Mobile Radio
arena (LMR/PMR), systems are constantly evolving from analogue to digital with
some customers focusing on new products to integrate with LTE technology.
Public safety agencies prefer the spectrum efficiency associated with digital
networks and the ease with which communications can be encrypted for security
purposes. Interoperability has become a key success factor, with P25 the
dominant standard in North America and TETRA the leading standard in Europe
and some other regions. DMR is a global private industry version of a digital
standard where the radios of multiple suppliers designed using the DMR
standard can be used in conjunction with each other. The Group is an
established supplier to a number of the major equipment manufacturers
throughout the world and continues to take market share through product
evolution and function integration.
For data-centric markets, 'smart everything' is driving data throughput
increases within industry verticals such as agriculture, construction and
smart grid/city. The use of established geostationary satellite networks and
more recently deployed low-earth orbit networks is another important wireless
medium being used to satisfy the requirement to connect to everything from
anywhere. Whether the transmission technology is terrestrial, via space or a
combination of both, semiconductor needs vary according to frequency range,
channel bandwidth, power requirements and other key technical performance
characteristics. CML is positioning itself to be a significant player in each
of the chosen end-application areas and possesses the people and the know-how
to succeed.
More recently, the Group has been releasing products to market that are
intended to capture share of the enormous revenue opportunities within end
applications that utilise microwave and millimetre wave radio frequencies.
Some of these market areas blur the line between the Group's traditional
"industrial" markets focus and other more commercially oriented applications
but the technical requirements and quality demands to be successful play to
our strengths. These markets are many times larger than the Group's already
established markets within the sub 1GHz RF arena. In support of this, an
intensive product development roadmap and associated release schedule is well
underway. Through the first six months of the financial year new IC's were
released to market including a 28GHz Power Amplifier product along with
Positive Gain Slope Amplifiers designed to compensate for frequency related
gain losses that occur when designing wide band wireless products. Further new
products are scheduled for release across the second half of the year. All
products operating above the frequency range of 1GHz are marketed under the
SuRF brand.
Prior to the disposal of the Storage Division in March 2021, the Group was
addressing an annual serviceable market of close to $360 million, split almost
50/50 between communication and storage application areas. Post the disposal,
under our enhanced strategy, the addressable market has expanded to include a
number of key growth areas, including critical infrastructure, 5G and
satellite communications. As a result, the Group's annual addressable market
has increased substantially and now easily exceeds $1 billion.
For some of the newer markets we are at the early stages of a journey to drive
the business forward strongly but across the whole product portfolio we
continue to gain market share and achieve meaningful design wins.
CML has excellent routes to market and over recent years has invested
significant effort in ensuring sales channels globally are appropriate for the
direction of travel that the business is taking. The process is one of
evolution and refinement, with ongoing adjustments needed and, in that regard,
two new representatives were appointed, one to cover Southeast USA and one to
support our activities in South Africa.
Our people represent our single biggest asset and without them we could not
achieve the results being delivered. Our average length of service is 19
years, with 40% of our team having worked for our businesses for over 10
years. Importantly, we remain focused on attracting new talent into the
Company to ensure both continuity and expansion of our capabilities over time.
It is therefore pleasing to see we are being successful with our recruitment
programmes across the business in several areas including engineering,
operations and sales.
Outlook
The financial year commenced with the business positioned nicely to grow well,
despite the various macroeconomic headwinds that have been a feature of the
last two years. The results achieved for the opening six months have been
strong in absolute terms, delivered through a clear strategy for growth and
backed by a disciplined and determined workforce.
The effort being expended towards capturing the organic growth opportunities
in front of us is delivering tangible results, both operationally and
financially. Opportunities exist to accelerate delivery of our objectives via
complementary acquisitions and management continue to devote an appropriate
amount of time towards exploring them.
The good progress being made is built upon strong foundations laid during
previous years. This, coupled with the energy and enthusiasm to succeed and a
clear strategy for growth, enables the Board to have confidence that
continuing progress will be made through the second half year period,
delivering a very positive outcome for the year as a whole.
Financial review
Total revenues for the first six months of the financial year increased by a
very healthy 22% over the comparative half year period, totalling £10.05m (H1
FY22: £8.26m). The improvement was broad-based across the customer base and
driven by strong growth in Asia and the Americas from a regional perspective.
The higher revenue drove a 24% uplift in gross profitability to £7.62m (H1
FY22: £6.15m). Gross margin as a percentage improved slightly due to product
mix and the Group's prior decision to increase inventory levels against an
extended order book. Having said that, cost of sale pressures remain due to
ongoing raw material price increases from a selection of our third-party
suppliers.
Distribution and administration expenses were slightly up at £5.77m (H1 FY22:
£5.61m) although it is noteworthy that the prior year comparison included
one-off costs associated with the move to an AIM listing (£0.25m).
Profit from operations improved threefold to £1.75m (H1 FY22: £0.53m) and,
after accounting for net finance income, the Group recorded a profit before
tax of £1.83m, against £1.01m for the prior year first half.
A marginal income tax credit of £0.04m was recorded compared to a charge of
£0.20m for the comparable period, leading to a diluted earnings per share
figure of 11.58p against 4.80p for the prior year.
Adjusted EBITDA came in at £3.25m (H1 FY22: £2.12m).
In line with the previously communicated policy, inventory levels increased
significantly. This strategy continues to help minimise the impact our
customers feel from ongoing supply issues within the global semiconductor
supply chain. Delays do remain and capacity constraints are expected to start
to ease over the next six-months. At 30 September 2022 inventory levels were
£2.30m (H1FY22: £1.53m).
The Group has no debt and cash balances stood at £22.67m at 30 September 2022
(31 March 2022: net cash of £25.04m). The cash levels are particularly
pleasing given the Company had a net spend of £3.30m on share buybacks,
invested £2.74m in research and development activities and paid a dividend of
£0.80m during August.
Chris Gurry
Group Managing Director
22 November 2022
Condensed consolidated income statement
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Continuing operations
Revenue 10,045 8,256 16,964
Cost of sales (2,423) (2,107) (4,169)
Gross profit 7,622 6,149 12,795
Distribution and administration costs (5,765) (5,611) (11,562)
Share-based payments (137) (45) (98)
1,720 493 1,135
Other operating income 30 37 79
Profit from operations 1,750 530 1,214
Other income 4 437 500
Loss on sale of investment property - - (50)
Finance income 97 57 106
Finance expense (21) (13) (33)
Profit before taxation 1,830 1,011 1,737
Income tax credit/(charge) 35 (202) (499)
Profit after taxation for period attributable to equity owners of the parent 1,865 809 1,238
The condensed consolidated income statement has been restated for unaudited
six months ended 30 September 2021. See note 13 for further details.
Earnings per share from total operations attributable to the ordinary equity
holders of the Company:
Basic earnings per share 11.72p 4.87p 7.45p
Diluted earnings per share 11.58p 4.80p 7.35p
The following measure is considered an alternative performance measure, not a
generally accepted accounting principle. This ratio is useful to ensure that
the level of borrowings in the business can be supported by the cash flow in
the business. For definition and reconciliation see note 10.
Adjusted EBITDA 3,252 2,118 4,308
Condensed consolidated statement of total comprehensive income
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Profit for the period 1,865 809 1,238
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of benefit obligation - - 3,307
Deferred tax on actuarial loss - - (827)
Change in deferred tax rate on defined benefit obligation - - 345
Items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences 829 410 880
Other comprehensive income for the period
net of taxation attributable to the equity holders of the parent 829 410 3,705
Total comprehensive income for the period
attributable to the equity holders of the parent 2,694 1,219 4,943
Condensed consolidated statement of financial position
as at 30 September 2022
Unaudited
Unaudited 30/09/21 Audited
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 7,861 7,282 7,531
Other intangible assets 1,107 1,198 1,119
Development costs 12,738 10,727 11,197
Property, plant and equipment 5,479 5,576 5,593
Right-of-use assets 338 524 458
Investment properties - 3,775 -
Deferred tax assets 2,605 1,822 1,550
30,128 30,904 27,448
Current assets
Investment properties - held for sale 1,975 - 1,975
Inventories 2,302 1,532 2,258
Trade receivables and prepayments 2,156 2,433 2,199
Current tax assets - 1,479 409
Cash and cash equivalents 20,005 11,227 19,084
Short term cash deposits 2,663 11,360 5,958
29,101 28,031 31,883
Total assets 59,229 58,935 59,331
Liabilities
Current liabilities
Trade and other payables 3,665 3,122 2,827
Lease liabilities 133 174 230
Current tax liabilities 96 42 42
3,894 3,338 3,099
Non-current liabilities
Deferred tax liabilities 4,103 3,207 3,702
Lease liabilities 229 220 238
Retirement benefit obligation 2,439 5,570 2,439
6,771 8,997 6,379
Total liabilities 10,665 12,335 9,478
Net assets 48,564 46,600 49,853
Capital and reserves attributable to equity owners of the parent
Share capital 796 863 865
Share premium 2,462 1,222 1,362
Capital redemption reserve 8,372 8,285 8,285
Treasury shares - own share reserve - (1,670) (1,670)
Share-based payments reserve 395 497 490
Foreign exchange reserve 2,011 712 1,182
Retained earnings 34,528 36,691 39,339
Total shareholders' equity 48,564 46,600 49,853
Condensed consolidated cash flow statement
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Operating activities
Profit for the period before taxation - continuing operations 1,830 1,011 1,737
Adjustments for:
Depreciation - on property, plant and equipment 219 171 375
Depreciation - on right-of-use assets 142 126 258
Impairment of development costs - - 123
Amortisation of development costs 831 673 1,507
Amortisation of intangibles recognised on acquisition and purchased 169 136 283
Loss on disposal of investment properties - - 50
Rental income - (157) (215)
Forgiveness US PPP loan _ _ (284)
Employee Retention Credit US 109 - -
Movement in non-cash items (retirement benefit
obligation) 90 (190) 176
Share-based payments 137 45 98
Finance income (97) (57) (106)
Finance expense 21 13 33
Movement in working capital 32 (286) (1,025)
Cash flows from operating activities 3,483 1,485 3,010
Income tax (paid)/received (75) (118) 905
Net cash flows from operating activities 3,408 1,367 3,915
Investing activities
Proceeds from sale of investment properties - - 1,750
Purchase of property, plant and equipment (88) (882) (1,105)
Investment in development costs (2,291) (2,161) (3,532)
Investment in intangibles (67) - -
Repayment/(Investment) in fixed term deposits (net) 3,295 (1,210) 4,192
Repayment of investment loan note - _ 293
Rental income - 157 215
Finance income 97 57 106
Net cash inflow/(outflow) investing activities 946 (4,039) 1,919
Financing activities
Lease liability repayments (153) (142) (287)
Issue of ordinary shares (net of expenses) 1,118 186 329
Purchase of own shares for treasury (4,442) - -
Dividends paid to shareholders (796) (8,298) (8,964)
Finance expense - 3 -
Net cash outflow from financing activities (4,273) (8,251) (8,922)
Increase/(decrease) in cash, cash equivalents and short-term cash deposits 81 (10,923) (3,088)
Movement in cash and cash equivalents:
At start of period/year 19,084 22,046 22,046
Increase/(decrease) in cash, cash equivalents and short-term cash deposits 81 (10,923) (3,088)
Effects of exchange rate changes 840 104 126
At end of period 20,005 11,227 19,084
The Consolidated cash flow statements have been restated for unaudited six
months ended 30 September 2021. See note 13 for further details.
Cash flows presented exclude sales taxes. Further cash-related disclosure
details are provided in note 6.
Changes in liabilities arising from financing activities relate to lease
liabilities only.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2022
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
Unaudited £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2021 (restated) 859 1,039 8,285 (1,670) 570 302 44,062 53,447
Profit for period 809 809
Other comprehensive income
net of taxes
Foreign exchange differences 410 410
Total comprehensive income
for the period - - - - - 410 809 1,219
859 1,039 8,285 (1,670) 570 712 44,871 54,666
Transactions with owners in
their capacity as owners
Issue of ordinary shares
- exercise of share options 4 183 187
Dividend paid (8,298) (8,298)
Total of transactions with owners in their capacity as owners 4 183 - - - - (8,298) (8,111)
Share-based payment charge 45 45
Cancellation/transfer of
share-based payments (118) 118 -
At 30 September 2021 (unaudited) 863 1,222 8,285 (1,670) 497 712 36,691 46,600
Profit for period 429 429
Other comprehensive income
net of taxes
Foreign exchange differences 470 470
Re-measurement of defined
benefit obligations 3,307 3,307
Deferred tax on actuarial loss (827) (827)
Change in deferred tax rate on defined benefit obligation
345 345
Total comprehensive
income for the period - - - - - 470 3,254 3,724
863 1,222 8,285 (1,670) 497 1,182 39,945 50,324
Transactions with owners in
their capacity as owners
Issue of ordinary shares
- exercise of share options 2 140 142
Dividend paid (666) (666)
Total of transactions with owners
in their capacity as owners 2 140 - - - - (666) (524)
Share-based payment charge 53 53
Cancellation/transfer of
share-based payments (60) 60 -
At 31 March 2022 865 1,362 8,285 (1,670) 490 1,182 39,339 49,853
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31 March 2022 865 1,362 8,285 (1,670) 490 1,182 39,339 49,853
Profit for period 1,865 1,865
Other comprehensive
income net of taxes
Foreign exchange differences 829 829
Total comprehensive
income for the period - - - - - 829 1,865 2,694
865 1,362 8,285 (1,670) 490 2,011 41,204 52,547
Transactions with owners in
their capacity as owners
Issue of ordinary shares
- exercise of share options 18 1,100 1,118
Purchase of own shares - treasury (4,442) (4,442)
Treasury share cancellation (87) 87 6,112 (6,112) -
Dividend paid (796) (796)
Total of transactions
with owners in their
capacity as owners (69) 1,100 87 1,670 - - (6,908) (4,120)
Share-based payments 137 137
Cancellation/transfer of
share-based payments (232) 232 -
At 30 September 2022 796 2,462 8,372 - 395 2,011 34,528 48,564
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2022
1 Segmental analysis
Reported segments and their results, in accordance with IFRS 8, are based on
internal management reporting information that is regularly reviewed by the
Chief Operating Decision Maker (Chris Gurry). The measurement policies the
Group uses for segmental reporting under IFRS 8 are the same as those used in
its financial statements.
The Group is focused for management purposes on one primary reporting segment,
being the semiconductor segment, with similar economic characteristics, risks
and returns and the Directors therefore consider there to be one single
segment, being semiconductor components for the communications industry.
Geographical segments (by origin)
UK Americas Far East Total
Unaudited £'000 £'000 £'000 £'000
Six months ended 30 September 2022
Revenue to third parties - by origin 2,167 1,622 6,256 10,045
Property, plant and equipment 5,375 13 91 5,479
Right-of-use assets 176 17 145 338
Investment properties - held for sale 1,975 - - 1,975
Development costs 11,318 - 1,420 12,738
Intangible assets - software and intellectual property 298 - 2 300
Goodwill 1,531 - 6,330 7,861
Other intangible assets arising on acquisition 171 - 636 807
Total assets 44,315 1,043 13,871 59,229
UK Americas Far East Total
Unaudited £'000 £'000 £'000 £'000
Six months ended 30 September 2021
Revenue to third parties - by origin 1,837 916 5,503 8,256
Property, plant and equipment 5,475 17 84 5,576
Right-of-use assets 100 226 198 524
Investment properties 3,775 - - 3,775
Development costs 9,175 - 1,552 10,727
Intangible assets - software and intellectual property 254 - 98 352
Goodwill 1,531 - 5,751 7,282
Other intangible assets arising on acquisition 197 - 649 846
Total assets 46,109 1,606 11,220 58,935
UK Americas Far East Total
Audited £'000 £'000 £'000 £'000
Year ended 31 March 2022
Revenue to third parties - by origin 4,569 2,572 9,823 16,964
Property, plant and equipment 5,504 12-2 77 5,593
Right-of-use assets 227 60 171 458
Investment properties - held for sale 1,975 - - 1,975
Development costs 9,714 - 1,483 11,197
Intangible assets - software and intellectual property 243 - 96 339
Goodwill 1,531 - 6,000 7,531
Other intangible assets arising on acquisition 184 - 596 780
Total assets 46,024 1,163 12,144 59,331
Revenue
The geographical classification of business turnover (by destination) is as
follows:
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Europe 1,634 1,927 3,705
Far East 6,194 5,092 9,603
Americas 1,943 986 2,901
Other 274 251 755
10,045 8,256 16,964
The operational classification of business turnover (by market) is as follows:
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Semiconductor 9,595 7,907 15,909
Design and development 450 349 1,055
10,045 8,256 16,964
Semiconductor products, goods and services are transferred at a point in time,
design and development over the period of the contract on a percentage basis
of contract completion, as detailed in the Group's revenue recognition policy
within its published Annual Report.
The Group does not have any contract assets at 30 September 2022 (£Nil at 31
March 2022) from semiconductors as it does not fulfil any of its performance
obligations in advance of invoicing to its customer. The Group has contract
assets of £476,000 as at 30 September 2022 (£157,000 at 31 March 2022) from
design and development. The Group, however, does have contractual balances in
the form of trade receivables. See note 21 for disclosure of this in the
Annual Report and Accounts for the year ended 31 March 2022. The Group does
not have any contractual liabilities at 30 September 2022 (£Nil at 31 March
2022).
The Group expects all contractual costs capitalised or any outstanding
performance obligations will be completed within the next twelve months.
2 Dividend paid and interim dividend
The Board is declaring an interim dividend of 5p per ordinary share of 5p for
the half year ended 30 September 2022, payable on 16 December 2022 to
shareholders on the Register on 2 December 2022.
A final dividend of 5p per ordinary share of 5p was paid on 19 August 2022 and
an interim dividend of 4p per ordinary share of 5p was paid on 17 December
2021, totalling 9p per ordinary share of 5p paid for the year ended 31 March
2022 (2021: 52.0p per ordinary share of 5p paid for the year ended 31 March
2021).
3 Income tax (credit)/expense
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Current tax
UK corporation tax on results of the year (23) (469) (415)
Adjustment in respect of previous years 366 8 (6)
343 (461) (421)
Foreign tax on results of the year 192 89 121
Total current tax 535 (372) (300)
Deferred tax
Deferred tax - origination and reversal of temporary differences (99) 500 6
Change in deferred tax rate - 114 833
Adjustments to deferred tax charge in respect of previous years (471) (40) (40)
Total deferred tax (570) 574 799
Tax (credit)/expense on profit on ordinary activities (35) 202 499
The Directors consider that tax will be payable at varying rates according to
the country of incorporation of its subsidiary undertakings and have provided
on that basis.
The tax charge for the six months ended 30 September 2022 has been calculated
by applying the effective tax rate which is expected to apply to the Group for
the year ended 31 March 2023, using rates substantially enacted by 30
September 2022 as required by IAS 34 - Interim Financial Reporting.
4 Earnings per share
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Earnings per share from total operations attributable
to the ordinary equity holders of the Company
(comparatives include discontinued operations):
Basic earnings per share 11.72p 4.87p 7.45p
Diluted earnings per share 11.58p 4.80p 7.35p
The calculation of basic and diluted earnings per share is based on the profit
attributable to ordinary shareholders divided by the weighted average number
of shares in issue during the year, as explained below:
Ordinary 5p shares
Weighted
average Diluted
number number
Six months ended 30 September 2022 15,912,744 16,111,674
Six months ended 30 September 2021 16,692,935 16,718,813
Year ended 31 March 2022 16,628,301 16,848,252
5 Investment properties
Investment properties were measured at current market valuation. No
depreciation is provided on freehold investment properties or on long
leasehold investment properties. In accordance with IAS 40, gains and losses
arising on revaluation of investment properties are shown in the income
statement. The open market valuation of investment properties recognised is
£Nil (2022: £Nil). Investment properties held for sale is £1,975,000
(£1,975,000 at 31 March 2022).
The investment property was reclassified on 31 March 2022 as held for sale as
the property became vacant with no prospective tenant in place and is held
based upon the current market valuation methodology. The property is currently
expected to sell within the next twelve months.
6 Cash, cash equivalents and short-term deposits
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year ended
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Cash on deposit 14,157 5,509 10,275
Cash at bank 5,848 5,718 8,809
20,005 11,227 19,084
Short-term cash deposits 2,663 11,360 5,958
22,668 22,587 25,042
7 Retirement benefit obligations
The Directors have not obtained an actuarial IAS 19 Employee Benefits Report
in respect of the defined benefit pension scheme for the purpose of this Half
Yearly Report.
8 Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with foreign
currencies and customer dependency. With the majority of the Group's earnings
being linked to the US Dollar, a decline in this currency will have a direct
effect on revenue, although since the majority of the cost of sales are also
linked to the US Dollar, this risk is reduced at the gross profit line.
Additionally, though the Group has a very diverse customer base in certain
market sectors, key customers can represent a significant amount of revenue.
Key customer relationships are closely monitored; however, changes in buying
patterns of a key customer could have an adverse effect on the Group's
performance.
Key risks of a non‑financial nature
The Group is a small player operating in a highly competitive global market
that is undergoing continual and geographical change. The Group's ability to
respond to many competitive factors including, but not limited to, pricing,
technological innovations, product quality, customer service, raw material
availabilities, manufacturing capabilities and employment of qualified
personnel will be key in the achievement of its objectives. The Group's
ultimate success will depend on the demand for its customers' products, since
the Group is a component supplier.
A substantial proportion of the Group's revenue and earnings are derived from
outside the UK and so the Group's ability to achieve its financial objectives
could be impacted by risks and uncertainties associated with local legal
requirements (including the UK's withdrawal from the European Union, or
"Brexit"), political risk, the enforceability of laws and contracts, changes
in the tax laws, terrorist activities, natural disasters or health epidemics.
COVID-19
Following the effect of the COVID-19 pandemic, the Group followed the guidance
of the World Health Organization and other government health agencies in
safeguarding the health and wellbeing of its employees and continue to operate
a hybrid working policy. The Group did not make use of the government's staff
retention schemes in the UK, nor make any redundancies. In the United States,
the government provided support in the form of a loan under the Paycheck
Protection Program ($388,400) which was forgiven on 23 May 2021.
There continues to be localised COVID-19 outbreaks, and the Board closely
monitors the impact taking prudent steps to mitigate any potential impacts on
our employees, customers, suppliers and other stakeholders. The Group remains
prepared to implement appropriate mitigating strategies to minimise any
potential business disruption.
Given the nature of the markets we operate within, we anticipate our end
customers being insulated from a consumer downturn to some extent, although
the roll-out of some of the new products may be delayed, dampening demand for
our semiconductors. Even in these difficult times, we still maintain the
belief that the Group is well placed to move positively forward in the medium
to long term. This belief is underpinned by a strong balance sheet and no
debt, along with a product portfolio that addresses markets that have a
positive outlook.
Russia and Ukraine conflict
Following Russia's invasion of Ukraine, the Group took the decision to cease
all supplies to customers based in Russia, resulting in the non-payment of a
debt totalling £16,000 ($20,000) which has been fully provided for.
9 Directors' statement pursuant to the Disclosure and Transparency Rules
The Directors confirm that, to the best of their knowledge:
· the condensed set of financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting; and
· the Chairman's Statement and Group Managing Director's
Operational and Financial Review include a fair review of the development and
performance of the business and the position of the Company, and the
undertakings included in the consolidation taken as a whole together with a
description of the principal risks and uncertainties that they face.
The Directors are also responsible for the maintenance and integrity of the
CML Microsystems Plc website. Legislation in the UK governing the preparation
and dissemination of the financial statements may differ from legislation in
other jurisdictions.
The basis of preparation and accounting policies used in preparation of this
Half Year Report have been prepared in accordance with the same accounting
policies set out in the year ended 31 March 2022 financial statements.
10 Adjusted EBITDA
Adjusted earnings before interest, tax, depreciation and amortisation
("Adjusted EBITDA") is defined as profit from operations before all interest,
tax, depreciation and amortisation charges and before share-based payments.
The following is a reconciliation of the Adjusted EBITDA for the three periods
presented:
Unaudited
Unaudited 6 months end Audited
6 months end 30/09/21 year end
30/09/22 Restated 31/03/22
£'000 £'000 £'000
Profit before taxation (earnings) 1,830 1,011 1,737
Adjustments for:
Finance income (97) (57) (106)
Finance expense 21 13 33
Depreciation 219 171 375
Depreciation - right-of-use assets 142 126 258
Impairment of development costs - - 123
Amortisation of development costs 831 673 1,507
Amortisation of intangibles of purchased and
acquired intangibles recognised on acquisition 169 136 283
Share-based payments 137 45 98
Adjusted EBITDA 3,252 2,118 4,308
11 Disposal of the Storage Division
On 10 December 2020, the Group announced it had entered into a definitive
agreement to divest its Storage Division, Hyperstone.
Hyperstone was sold on 4 February 2021 and is reported in the prior period as
a discontinued operation. For financial information relating to the
discontinued operations. See note 13 for disclosure of this in the Annual
Report and Accounts for the year ended 31 March 2022.
12 General
Other than already stated within the Chairman's Statement and Group Managing
Director's Operational and Financial Review, there have been no important
events during the first six months of the financial year that have impacted
this Half Yearly Report.
There have been no related party transactions or changes in related party
transactions described in the latest Annual Report that could have a material
effect on the financial position or performance of the Group in the first six
months of the financial year.
The principal risks and uncertainties within the business are contained within
this report in note 8 above.
The financial information contained in this Half Yearly Report has been
prepared in accordance with UK adopted International Accounting Standards.
This Half Yearly Report does not constitute statutory accounts as defined by
Section 434 of the Companies Act 2006. The financial information for the year
ended 31 March 2022 is based on the statutory accounts for the financial year
ended 31 March 2022 that have been filed with the Registrar of Companies and
on which the auditor gave an unqualified audit opinion.
The auditor's report on those accounts did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006. This Half Yearly Report has
not been audited or reviewed by the Group auditor.
A copy of this Half Yearly Report can be viewed on the Company website:
www.cmlmicroplc.com (http://www.cmlmicroplc.com) .
13 Unaudited six months ended 30 September 2021 restatement
The Consolidated Statement of Comprehensive Income
Third-party product re-sales have been reclassified from other operating
income to revenue and presented on a gross basis to correctly reflect the
Group's role as principal in a revenue arrangement. In the prior year, Revenue
of £255,000 and Cost of sales of £174,000 were presented net as other
operating income. This has now been correctly classified as Revenue and Cost
of sales respectively on a gross basis in the restated statement of
comprehensive income. The reclassification of these items has had no effect on
the profit before taxation or net assets.
Rental income and government grants have been reclassified as other income to
be included within profit/(loss) from operations, having previously been
incorrectly classified as other operating income after profit/(loss) from
operations. The reclassification has resulted in a decrease in the loss on
operations of £437,000.
Share-based payment expense was incorrectly presented below profit/(loss) from
operations. They have been reclassified to be included within profit/(loss)
from operations to properly reflect the nature of the expense. This has
resulted in an increase in the loss from operations of £45,000.
The reclassification of the rental income, government grants income and
share-based payment expenditure provides a better measure of operating
profit/(loss) in the consolidated statement of comprehensive income. The
reclassification of these items has had no effect on the profit before
taxation or net assets.
The Consolidated statement of financial position
An omission of a transfer within the statement of changes in equity in
relation to the B shares that were issued, redeemed, and subsequently
cancelled has been corrected. The adjustment recognises a transfer of
£8,276,000 from retained earnings to the capital redemption reserve as
required by the Companies Act 2006 and has had no effect on the profit before
taxation or net assets.
Short-term cash deposits with initial maturity of more than 3 months were
incorrectly included within cash and cash equivalents. Therefore, the
short-term cash deposits of £11,360,000 have been reclassified as financial
assets.
The Consolidated cash flow statements
Short term cash deposits totalling £11,360,000 with initial maturity of more
than 3 months were incorrectly included within cash and cash equivalents. Cash
flows from investing activities have therefore been corrected to reflect the
movements in the short-term cash deposits instead of reflecting these in cash
and cash equivalents. Cash flows from rental income have been reclassified as
investing activities from operating activities within the Consolidated and
Company cash flow statements to ensure consistent presentation with rental
income within the Consolidated Statement of Comprehensive Income. The
reclassification of these items has had no effect on the profit before
taxation or net assets.
The Consolidated statement of changes in equity
An omission of a transfer within the statement of changes in equity in
relation to the B shares that were issued, redeemed, and subsequently
cancelled has been corrected. The adjustment recognises a transfer of
£8,276,000 from retained earnings to the capital redemption reserve as
required by the Companies Act 2006 and has had no effect on the profit before
taxation or net assets.
14 Approvals
The Directors approved this Half Yearly Report on 22 November 2022.
( )
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BIBDBLBDDGDBRecent news on CML Microsystems
See all newsREG - CML Microsystems PLC - Director/PDMR Shareholding
AnnouncementREG - CML Microsystems PLC - Trading Update
AnnouncementREG - CML Microsystems PLC - BLOCK LISTING INTERIM RETURN
AnnouncementREG - CML Microsystems PLC - Exercise of Options and Total Voting Rights
AnnouncementREG - CML Microsystems PLC - Director/PDMR Dealing
Announcement