REG - CML Microsystems PLC - Half Year Results
05/12/2023 07:00
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RNS Number : 6302V CML Microsystems PLC 05 December 2023
5 December 2023
CML Microsystems Plc
("CML", the "Company" or the "Group")
Half Year Results
Trading in line with expectations, Acquired MwT business and amalgamation
progressing well
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 2023.
Financial Highlights
· Revenue increased by 5% to £10.58m (H1 FY22: £10.05m)
· Profit from operations, excluding the £0.30m of external costs incurred in
this half relating to the MwT acquisition, increased by 9% to £1.90m (H1
FY23: £1.75m)
· Diluted EPS decreased to 9.31p (H1 FY22: 11.58p) on higher tax charge
· Strong cash balances at period end of £20.95m (31 March 2023: net cash of
£22.26m), a reduction of £1.31m after a £1.75m spend on share buybacks and
£0.9m on dividend payments
· Recommended half year dividend of 5p per share (H1 FY23: 5p per share)
Operational Highlights
· Post period end, successful completion of MwT acquisition on 2 October 2023,
significantly expanding the Group's product portfolio and complementing
existing R&D capabilities
· Increasing presence in new and emerging growth sectors driving growth
· Board and senior management evolution, with appointment of Mark McCabe as
Chief Operating Officer, Michelle Jones as Director of Finance and Nathan
Zommer soon to be joining as Non-Executive Director.
Chris Gurry, Managing Director of CML Microsystems Plc, commented on the
results:
"The results achieved for the six months to 30 September 2023 have been robust
and the Board expects trading for the full year to be in line with
expectations. CML's sustained revenue growth during the period, despite the
macroenvironment headwinds facing the sector as a whole, is pleasing and
serves to both validate our strategy and highlight the resilience of our
business.
The successful acquisition of MwT in October 2023 marked a significant
milestone for the Group. The resulting expansion of our product portfolio, and
the complementary R&D capabilities that this acquisition brings, positions
CML well to fully capitalise on the opportunities available in the new and
expanding markets in which we operate.
The future addition of Nathan Zommer as Non-Executive Director, alongside the
promotion of Mark McCabe to the Board as Chief Operating Officer and Michelle
Jones to Director of Finance, significantly enhances the expertise and
experience on the CML Board while adding notable impetus as we continue on our
growth journey.
The financial and operational progress made during the period has been
pleasing and gives the Board a great deal of confidence as we continue to
deliver value to our shareholders."
Enquiries:
CML Microsystems Plc www.cmlmicroplc.com
(https://url.avanan.click/v2/___http:/www.cmlmicroplc.com/___.YXAxZTpzaG9yZWNhcDphOm86ZDc0MjJmZTRmNDNlZmJhZTdjOWRkOTUzZmQ5YTRlNzY6NjpjNjNkOmRjMmQ0ZjgzMzUzZDBmNzY5YTM2NWFjM2ZjZDY0MzcwNWQyZTE1NDk1ZjI2YjllZWQ3OGQzZDU4ZmIzZmM3NmQ6cDpU)
Chris Gurry, Group Managing Director
Tel: +44 (0) 1621 875 500
Nigel Clark, Executive Chairman
Shore Capital (Nominated Adviser and Broker) Tel: +44 (0) 20 7408 4090
Toby Gibbs
James Thomas
Lucy Bowden
Fiona Conroy (Corporate Broking)
Alma Strategic Communications 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
Our relatively recent strategy of concentrating efforts on the communications
semiconductor market and expanding the sub-sectors addressed continues to
serve us well, despite the challenging macroeconomic conditions. We were very
pleased to finally announce on 2 October 2023 the closing of the acquisition
of Microwave Technology Inc ("MwT") but the unexpected delays in completing
the transaction, due to the associated regulatory processes, means that
amalgamation activities that we hoped to have well underway by now have only
just started.
We are confident the assimilation work will be achieved successfully but
realisation of the benefits will correspondingly move out beyond our initial
expectations. That said, MwT substantially enlarges the Group's product
portfolio, complements our existing R&D capabilities and expands our
system level understanding, allowing us to better capitalise on the market
opportunities we see.
Results and trading
Despite the global macroeconomic backdrop, the Group's financial performance
for the six months to 30 September 2023 was positive and generally in line
with our expectations. In a reverse of the comparative period of the prior
year, revenue growth was tempered by the weakening of the average US Dollar
rate against Sterling. The movement in currencies becomes less material at the
profit level since costs below the revenue line are primarily denominated in
other currencies.
Revenue for the first six months increased by 5% to £10.58m (H1 FY22:
£10.05m). Gross profit increased 4% to £7.94m (H1 FY22: £7.62m) and profit
from operations increased by 9%, before the £0.30m of external costs incurred
in this half relating to the acquisition of MwT. Profit before taxation only
marginally increased to £1.87m (H1 FY22: £1.83). The tax charge of 22% is
higher than expected but reflects the changes in rules relating to R&D tax
credits and a higher corporation tax rate. The result is that profit after
taxation fell to £1.47m (H1 FY22: £1.87m), EBITDA was broadly flat at
£3.23m (H1 FY23: £3.25m) and diluted EPS was 9.31p (H1 FY23: 11.58p). Cash
balances at the end of the period stood at £20.95m (31 March 2023: £22.26m),
a reduction of £1.31m after a £1.75m spend on share buybacks and £932k on
dividend payments.
Dividend
The Board is recommending an unchanged half year dividend of 5.0p per share
(H1 FY23: 5.0p per share), payable on 12 January 2024 to shareholders on the
Register on 22 December 2023, with an ex-dividend date of 21 December 2023.
Property
Following the sale of the first parcel of land just prior to commencing the
current financial year, building work has commenced at the Group's Essex
Headquarters site, Oval Park, including relocating the car parks to the rear
of the buildings and is scheduled to be completed before the current year end.
The remaining excess land, circa 15 acres, which was granted planning
permissions in February 2023 was placed on the market early October.
Further interest in the Group's excess commercial property in Fareham,
Hampshire is currently being explored, following cessation of the negotiations
referenced in the Group's annual report.
Board and senior management
At the time of the Annual General Meeting ("AGM") in August, I announced my
intention to revert to the role of Non-Executive Chairman once the MwT
acquisition had been completed and for this to coincide with additional
appointments. In the last week we have strengthened the Board with the
promotion of Mark McCabe to the position of Chief Operating Officer and the
promotion of Michelle Jones to the senior management position of Director of
Finance. These actions enhance the Board and leadership team bringing a
diverse set of skills, expertise and experience whilst adding impetus. With
these enhancements in place, I am stepping back to the position of
Non-Executive Chairman with immediate effect.
The formalities of appointing Nathan Zommer as a Non-Executive Director are
expected to be completed in the next couple of weeks following which an
announcement will be made.
Employees
As I indicated at the start of my statement, this is a very demanding year and
we clearly need the support of all employees to succeed with our ambitions.
Throughout our operations globally, we are fortunate to have a great team of
talented, hard-working, and dedicated employees and the Board thanks them all
sincerely.
Prospects and outlook
The business continues to make good progress and has the appropriate blend of
experience, enthusiasm and skills to continue to achieve its medium-term
objectives.
Despite the challenges brought by multiple headwinds facing businesses in all
sectors, we currently expect full year revenues to be slightly ahead of
current market expectations, with the majority of the growth attributable to
the addition of MwT. Profitability is expected to be in line with current
market expectations, with anticipated costs relating to the incorporation of
MwT likely to temper further growth this year.
Notwithstanding the macroeconomic environment, the Board has confidence in the
strategy being followed and believes the robustness of our business model and
a continued focus on sustainable growth will deliver a meaningful uplift in
performance beyond the current year.
Nigel Clark
Non-Executive Chairman
5 December 2023
Operational and financial review
Introduction
The Group began the current financial year focused on growth, supported by
relatively resilient end markets, a healthy order book and an evolving
presence in new and emerging growth sectors.
Amidst an inflationary environment, global economic uncertainty and a backdrop
of several industry commentators predicting the semiconductor market will
shrink by double-digit percentage points in 2023, the delivery of revenue
growth through the first six-month period is a pleasing outcome and serves to
highlight the resilience of our business.
Equally welcome was the completion of the acquisition of Microwave Technology,
Inc ("MwT") on 2 October 2023, ending what was a protracted process due to US
government national security considerations relating to the technology and
skillset the business possesses. Work is now underway to unlock the global
potential of the MwT product portfolio and to exploit the synergies that
exist.
First half progress has been positive at the revenue level, although larger
than anticipated acquisition costs affected the underlying growth in operating
profitability. Excluding these one-off costs, profit from operations increased
by 9%. Nevertheless, prior investments in people and products coupled with the
strategy being followed positions CML well to capture meaningful growth as the
enlarged Group moves forward.
Strategy
The Group's vision is to be the first-choice semiconductor partner to
technology innovators, together transforming how the world communicates.
Our focus is on the definition, development and marketing of standard
semiconductor products that deliver compelling technical and commercial
benefits to our customers. In turn, our customers utilise these solutions to
develop and subsequently market end-products that are essential for the
efficient and reliable transportation of voice and/or data across a
predominantly wireless medium.
The global communications market is huge, with a myriad of end-application
areas ranging from mobile/cellular networks to precise positioning systems to
short-range remote-control devices. Within this vast landscape of opportunity,
CML is actively participating in a number of sub-markets that leverage our
strengths and have excellent growth potential on a sustainable basis. These
markets include mission critical communications, wireless networks and
satellite, Industrial Internet of Things ("IIoT") and more recently, broadcast
radio. The addressable market in terms of semiconductor content easily exceeds
$1billion.
Continued investment in research and development is essential to enable CML to
take full advantage of the large market opportunity available. Various new
product programmes are underway comprising mixed-signal complex SoC projects
with multi-year engineering cycles along with more rapid micro/millimetre wave
developments. The blended result is delivering more products to market each
year against what is a relatively stable absolute R&D spend.
Markets and operations
Across the prior full financial year to 31 March 2023, revenues from Group
customers producing voice-centric wireless communications equipment delivered
good growth, with the contribution from data centric applications slightly
weaker due to some customers having procured inventory in excess of their
end-market needs.
In the first half of the current financial year, across most of the major
customers, the voice equipment manufacturers once again achieved a solid
advance in revenues whereas sales increases from data applications, such as
IIoT, M2M, AMR were more moderate. We have seen early indications that order
intake from this sector is set to improve but across the next few months, we
are nonetheless taking a cautious stance.
Geographically, performance across the first six months within Asia was good,
with a 7.5% increase in sales revenue. However, the economic and geo-political
situation in parts of the region, including China and Korea, has the potential
to temper growth prospects. Within China, those customers that are producing
end-products for local consumption have better forecast visibility than those
reliant on exports. We therefore remain mindful of the backdrop globally and
have moderated our expectations for the second half year period.
The global voice communications markets addressed by the Group include the
Land Mobile Radio/Private Mobile Radio (LMR/PMR) sector, encompassing high
performance mission critical end-applications through to low-cost digital
radio standards for use in the leisure and retail sector. For data-centric
markets, "smart everything" is driving data throughput increases within
industry verticals such as agriculture, construction, smart grid/city and
marine safety. CML has been a significant player in these end-application
areas for many years and continues to invest appropriately in growth
opportunities.
In recent years, building upon substantial markets knowledge and "design for
manufacturing" capabilities for silicon devices, CML commenced the development
of high-performance Radio Frequency ICs ("RFICs") and Monolithic Microwave ICs
("MMICs") using compound semiconductor technologies, including GaAs and GaN.
The twelve-month period to 31 March 2023 represented the first full financial
year with availability of a number of new products that are marketed under
CML's SµRF brand and, over time, the flow of revenue from this expanding
portfolio of IC's is expected to constitute a very sizeable proportion of the
Group's total revenues.
One key R&D initiative outlined at the time of announcing the FY23 full
year results in June 2023, was a low-power radio receiver solution for Digital
Radio Mondiale ("DRM"). DRM is a digital radio broadcast standard that has
been adopted for wide area broadcasting in China, India and Pakistan and is
expected to be deployed in several other nations. The DRM service provides
high quality stereo audio across long distances and wide areas using low-cost,
low-power infrastructure.
The DRM module was formally announced at the International Broadcasting
Convention (IBC) in Amsterdam in September and is a complete "antenna to
speaker" module, containing all hardware, software, IP and patent licences
required for a radio equipment manufacturer to easily realise a dual mode
(digital and analogue) DRM capable receiver. The module offers a 60% cost
reduction and 80% power reduction over existing DRM technologies in the
market. At IBC, it was announced that the DRM module has been adopted by
leading manufacturer Gospell Digital Radio Technology Co, Ltd for two new
portable radio families.
In support of the broadening product portfolio and expansion into new
sub-markets, we exhibited at a number of trade shows through the period,
including IMS Microwave Week in San Diego, European Microwave Week in Berlin
and the International Broadcasting Convention (IBC) in Amsterdam.
The multi-year investments in people, products and equipment have positioned
us well to continue to expand the business. The traditional voice and data
centric markets have provided strong foundations on which to expand into the
micro/millimetre wave and, more latterly, broadcast radio arenas. Within these
newer markets we are at the early stages of a journey to drive the business
forward strongly and sustainably.
Acquisition of Microwave Technology, Inc
On 2 October 2023, immediately following the half year end, we completed the
acquisition of Silicon Valley based semiconductor company Microwave
Technology, Inc. ("MwT"). Founded in 1982, MwT is a recognised leader in the
design, manufacturing and marketing of GaAs and GaN based MMICs, Discrete
Devices, and Hybrid Amplifier Products for commercial wireless communication,
defence, space, and medical (MRI) applications.
The acquisition expands upon the Group's growing product portfolio and
complements its existing capabilities, providing essential knowhow and
experience in high-frequency system level understanding, product manufacturing
and packaging techniques.
Work is now underway to ensure maximum market exposure for the product range
acquired and investment areas have been identified that will improve USA-based
production capacity and efficiency positioning the enlarged Group for growth
in the years that follow.
As a Group, CML now has internal final testing capabilities in the UK, Asia
and the Americas, providing the flexibility required to address regional
customer demands as they evolve.
Financial review
Sales revenues for the opening six-month trading period increased by 5% to
£10.58m (H1 FY23: £10.05m) and include a currency headwind against the
comparable period one year ago. Re-stated on a constant currency basis,
revenues increased by 9%. Regionally, the improvements came from greater sales
into Europe and the Far East, with the Americas territory posting a decline.
Excess inventory across a handful of customers tempered further growth
following the supply chain dynamics that have been a feature of the last two
years.
Higher sales levels combined with a slight reduction in gross margin delivered
a gross profit of £7.94m (H1 FY23: £7.62m) representing an increase of 4%.
Given cost of sale pressures, in part due to supplier raw material price
increases that were experienced across multiple years, maintenance of the
gross margin is a pleasing outcome at this interim stage.
Distribution and administration (D&A) expenses were higher at £6.32m (H1
FY23: £5.77m) and whilst an increase over the previous year was expected, the
prolonged process associated with and leading up to completion of the MwT
transaction resulted in additional costs of £0.30m being incurred.
Excluding third-party one-off costs associated with the MwT acquisition,
profit from operations improved by 9% to £1.90m (H1 FY23 £1.75m). This is a
key measure of the Group's performance over the period under review although
under international accounting standards, the income statement does not
highlight these costs as exceptional, hence the reported figure was lower at
£1.61m.
Finance income was noticeably up at £0.24m (H1 FY23: £0.10m) and reflected
the improved deposit rates being achieved on the Group's strong cash balances.
Finance expenses were negligible.
Adjusted EBITDA came in at £3.23m (H1 FY23: £3.25m).
Profit before tax was flat at £1.87m against £1.83m for the prior year first
half.
An income tax charge of £0.41m was recorded compared to a credit of £0.04m
for the comparable period with the main contributing factors being lower UK
R&D tax credits following changes to government policy and an increase in
the corporation tax rate from 19% to 25%. The tax charge led to a diluted
earnings per share figure of 9.31p against 11.58p for the prior year.
For some time, the Group has deliberately operated with a raised level of
inventory in keeping with its strategy to help minimise the impact customers
feel from the supply chain dynamics over recent years. This year is no
different and despite the slight drop in inventory levels to £2.19m (H1 FY23:
£2.30m), expectations are for this to climb to a higher level over the next
12-18 months due to an expanded product range along with growth expectations.
The Group continues to be debt free and had cash balances amounting to
£20.95m at 30 September 2023 (31 March 2023: net cash of £22.26m). This
follows investments of £2.01m in R&D activities, £0.60m in property,
plant and equipment and shareholder returns of £2.57m by way of share
repurchases (net of shares issued) and dividend payments. The strong balance
sheet gives us a range of options as we look to win new clients and grow
organically as well as the potential for future acquisitions in the
medium-term.
Chris Gurry
Group Managing Director
5 December 2023
Condensed consolidated income statement
for the six months ended 30 September 2023
Unaudited 6 months end Unaudited 6 months end Audited year end
Before Before Before
exceptional items Exceptional items 30/09/23 exceptional items Exceptional items 30/09/22 exceptional items Exceptional items 31/03/23
Total Total Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Revenue 10,575 - 10,575 10,045 - 10,045 20,643 - 20,643
Cost of sales (2,631) - (2,631) (2,423) - (2,423) (5,032) - (5,032)
Gross profit 7,944 - 7,944 7,622 - 7,622 15,611 - 15,611
Distribution and administration costs (6,318) - (6,318) (5,765) - (5,765) (12,644) - (12,644)
Share-based payments (103) - (103) (137) - (137) (234) - (234)
1,523 - 1,523 1,720 - 1,720 2,733 - 2,733
Profit on sale of fixed asset - - - - - - - 2,058 2,058
Other operating income 85 - 85 30 - 30 199 - 199
Profit from operations 1,608 - 1,608 1,750 - 1,750 2,932 2,058 4,990
Other income 50 - 50 4 - 4 18 - 18
Finance income 235 - 235 97 - 97 255 - 255
Finance expense (20) - (20) (21) - (21) (47) - (47)
Profit before taxation 1,873 - 1,873 1,830 - 1,830 3,158 2,058 5,216
Income tax (charge)/credit (406) - (406) 35 - 35 (71) (335) (406)
Profit after taxation for period attributable to equity owners of the parent 1,467 - 1,467 1,865 - 1,865 3,087 1,723 4,810
All financial information presented relates to continuing activities.
Earnings per share from total operations attributable to the ordinary equity
holders of the Company:
Basic earnings per share 9.44p 11.72p 30.29p
Diluted earnings per share 9.31p 11.58p 29.93p
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 3,230 3,252 5,901
Condensed consolidated statement of total comprehensive income
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Profit for the period 1,467 1,865 4,810
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of benefit obligation - - 1,393
Deferred tax on actuarial gain - - (348)
Items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences (493) 829 (140)
Other comprehensive income for the period net of taxation attributable to the (493) 829 905
equity holders of the parent
Total comprehensive income for the period attributable to the equity holders 974 2,694 5,715
of the parent
Condensed consolidated statement of financial position
as at 30 September 2023
Unaudited Unaudited Audited
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Assets
Non-current assets
Goodwill 7,152 7,861 7,429
Other intangible assets 885 1,107 984
Development costs 14,391 12,738 13,801
Property, plant and equipment 6,087 5,479 5,249
Right-of-use assets 910 338 1,022
Deferred tax assets 618 2,605 766
30,043 30,128 29,251
Current assets
Property, plant and equipment - held for sale - - 485
Investment properties - held for sale 1,975 1,975 1,975
Inventories 2,187 2,302 2,425
Trade receivables and prepayments 2,881 2,156 2,413
Current tax assets 71 - 1,659
Cash and cash equivalents 14,300 20,005 21,041
Short-term cash deposits 6,646 2,663 1,218
28,060 29,101 31,216
Total assets 58,103 59,229 60,467
Liabilities
Current liabilities
Trade and other payables 2,230 3,665 3,036
Lease liabilities 198 133 210
Current tax liabilities 4 96 78
2,432 3,894 3,324
Non-current liabilities
Deferred tax liabilities 4,450 4,103 4,343
Lease liabilities 751 229 842
Retirement benefit obligation 1,204 2,439 1,204
6,405 6,771 6,389
Total liabilities 8,837 10,665 9,713
Net assets 49,266 48,564 50,754
Capital and reserves attributable to equity owners of the parent
Share capital 796 796 796
Share premium 2,327 2,462 2,462
Capital redemption reserve 8,372 8,372 8,372
Treasury shares - own share reserve (1,822) - (324)
Share-based payments reserve 566 395 488
Foreign exchange reserve 549 2,011 1,042
Retained earnings 38,478 34,528 37,918
Total shareholders' equity 49,266 48,564 50,754
Condensed consolidated cash flow statement
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Operating activities
Profit for the period before taxation 1,873 1,830 5,216
Adjustments for:
Depreciation - on property, plant and equipment 239 219 367
Depreciation - on right-of-use assets 111 142 300
Amortisation of development costs 1,020 831 1,826
Amortisation of intangibles recognised on acquisition and purchased 99 169 224
Profit on disposal of fixed assets - - (2,058)
Employee Retention Credit US - 109 110
Movement in non-cash items (retirement benefit
obligation) 90 90 158
Share-based payments 103 137 234
Finance income (235) (97) (255)
Finance expense 20 21 47
Movement in working capital (1,381) 32 (653)
Cash flows from operating activities 1,939 3,483 5,516
Income tax received/(paid) 1,483 (75) (104)
Net cash flows from operating activities 3,422 3,408 5,412
Investing activities
Proceeds from sale of fixed assets - - 2,500
Purchase of property, plant and equipment (597) (88) (932)
Investment in development costs (1,666) (2,291) (4,455)
Investment in intangibles (32) (67) (98)
Repayment/(investment) in fixed term deposits (net) (5,428) 3,295 4,740
Finance income 235 97 255
Net cash (outflow)/inflow investing activities (7,488) 946 2,010
Financing activities
Lease liability repayments (122) (153) (321)
Issue of ordinary shares (net of expenses) 117 1,118 1,118
Purchase of own shares for treasury (1,750) (4,442) (4,767)
Dividends paid to shareholders (932) (796) (1,589)
Net cash outflow from financing activities (2,687) (4,273) (5,559)
(Decrease)/increase in cash, cash equivalents and short-term cash deposits (6,753) 81 1,863
Movement in cash and cash equivalents:
At start of period/year 21,041 19,084 19,084
(Decrease)/increase in cash, cash equivalents and short-term cash deposits (6,753) 81 1,863
Effects of exchange rate changes 12 840 94
At end of period 14,300 20,005 21,041
Cash flows presented exclude sales taxes. Further cash-related disclosure
details are provided in note 7.
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 2023
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 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 payment charge 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
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 30 September 2022 796 2,462 8,372 - 395 2,011 34,528 48,564
Profit for period 2,945 2,945
Other comprehensive income net of taxes
Foreign exchange differences (969) (969)
Re-measurement of defined benefit obligations 1,393 1,393
Deferred tax on actuarial loss (348) (348)
Total comprehensive income for the period - - - - - (969) 3,990 3,021
796 2,462 8,372 - 395 1,042 38,518 51,585
Transactions with owners in their capacity as owners
Purchase of own shares - treasury (325) (325)
Treasury share cancellation 1 (1) -
Dividend paid (793) (793)
Total of transactions with owners in their capacity as owners - - - (324) - - (794) (1,118)
Share-based payment charge 97 97
Deferred tax on share-based payments 190 190
Cancellation/transfer of share-based payments (4) 4 -
At 31 March 2023 796 2,462 8,372 (324) 488 1,042 37,918 50,754
Condensed consolidated statement of changes in equity continued
for the six months ended 30 September 2023
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 2023 796 2,462 8,372 (324) 488 1,042 37,918 50,754
Profit for period 1,467 1,467
Other comprehensive income net of taxes
Foreign exchange differences (493) (493)
Total comprehensive income for the period - - - - - (493) 1,467 974
796 2,462 8,372 (324) 488 549 39,385 51,728
Transactions with owners in their capacity as owners
Issue of treasury shares - exercise of share options (135) 252 117
Purchase of own shares - treasury (1,750) (1,750)
Dividend paid (932) (932)
Total of transactions with owners in their capacity as owners - (135) - (1,498) - - (932) (2,565)
Share-based payments 103 103
Cancellation/transfer of share-based payments (25) 25 -
At 30 September 2023 796 2,327 8,372 (1,822) 566 549 38,478 49,266
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2023
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
Group Managing Director who is the Chief Operating Decision Maker. 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 2023
Revenue to third parties - by origin 2,613 1,243 6,719 10,575
Total assets 44,942 1,512 11,649 58,103
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
Total assets 44,315 1,043 13,871 59,229
UK Americas Far East Total
Audited £'000 £'000 £'000 £'000
Year ended 31 March 2023
Revenue to third parties - by origin 5,024 3,413 12,206 20,643
Total assets 47,151 1,575 11,741 60,467
2 Revenue
The geographical classification of business turnover (by destination) is as
follows
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Europe 2,115 1,634 4,009
Far East 6,660 6,194 12,036
Americas 1,471 1,943 3,910
Other 329 274 688
10,575 10,045 20,643
The operational classification of business turnover (by market) is as follows:
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000s
Semiconductor 10,166 9,595 19,551
Design and development 409 450 1,092
10,575 10,045 20,643
Semiconductor products, goods and services are transferred at a point in time
whereas design and development revenue is transferred 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 or liabilities at 30 September
2023 (£Nil at 31 March 2023) 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 £242,000 as at 30 September 2023 (£363,000 at 31
March 2023) from design and development and contract liabilities of £4,000 as
at 30 September 2023 (£17,000 at 31 March 2023) from design and development.
The Group has contractual balances in the form of trade receivables. See note
20 for disclosure of this in the Annual Report and Accounts for the year ended
31 March 2023.
The Group expects all contractual costs capitalised or any outstanding
performance obligations will be completed within the next twelve months.
3 Dividend paid and interim dividend
The Board is declaring an interim dividend of 5p per ordinary share for the
half year ended 30 September 2023, payable on 12 January 2024 to shareholders
on the Register on 22 December 2023.
A final dividend of 6p per ordinary share was paid on 18 August 2023 and an
interim dividend of 5p per ordinary share was paid on 16 December 2022,
totalling 11p per ordinary share paid for the year ended 31 March 2023
(2022: 9.0p per ordinary share paid for the year ended 31 March 2022).
4 Income tax expense/(credit)
Unaudited Unaudited
6 months end 6 months Audited
end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Current tax
UK corporation tax on results of the year (9) (23) (809)
Adjustment in respect of previous years 101 366 (372)
92 343 (1,183)
Foreign tax on results of the year 139 192 319
Total current tax 231 535 (864)
Deferred tax
Deferred tax - origination and reversal of temporary differences 153 (99) 683
Change in deferred tax rate - - 103
Adjustments to deferred tax charge in respect of previous years 22 (471) 484
Total deferred tax 175 (570) 1,270
Tax expense/(credit) on profit on ordinary activities 406 (35) 406
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 2023 has been calculated
by applying the effective tax rate which is expected to apply to the Group for
the year ending 31 March 2024, using rates substantially enacted by 30
September 2023.
5 Earnings per share
Unaudited Unaudited
6 months end 6 months end Audited
year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Earnings per share from total operations attributable
to the ordinary equity holders of the Company
Basic earnings per share 9.44p 11.72p 30.29p
Diluted earnings per share 9.31p 11.58p 29.93p
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 2023 15,546,906 15,765,610
Six months ended 30 September 2022 15,912,744 16,111,674
Year ended 31 March 2023 15,878,401 16,072,444
6 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 (2023: £Nil). Investment properties held for sale is £1,975,000
(£1,975,000 at 31 March 2023).
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.
7 Cash, cash equivalents and short-term deposits
Unaudited Unaudited
6 months end 6 months end Audited
30/09/23 30/09/22 year end
31/03/23
£'000 £'000 £'000
Cash on deposit 3,016 14,157 13
Cash at bank 11,284 5,848 21,628
14,300 20,005 21,041
Short-term cash deposits 6,646 2,663 1,218
20,946 22,668 22,259
8 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.
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. Full
disclosures can be found in Annual Report and Accounts for year ended 31 March
2023 within Strategic Report.
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 2023 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 6 months Audited
end year end
30/09/23 30/09/22 31/03/23
£'000 £'000 £'000
Profit before taxation (earnings) 1,873 1,830 5,216
Adjustments for:
Finance income (235) (97) (255)
Finance expense 20 21 47
Depreciation 239 219 367
Depreciation - right-of-use assets 111 142 300
Amortisation of development costs 1,020 831 1,826
Amortisation of intangibles of purchased and
acquired intangibles recognised on acquisition 99 169 224
Share-based payments 103 137 234
Profit on sale of fixed asset - - (2,058)
Adjusted EBITDA 3,230 3,252 5,901
11 Events occurring after the reporting period
Acquisition of Microwave Technology, Inc.
Following the announcement on 17 January 2023 that a definitive agreement had
been signed to acquire a Silicon Valley based semiconductor company Microwave
Technology, Inc (MwT) and having obtained US regulatory clearance, the
acquisition completed on 2 October 2023. The Group acquired 100% of the issued
share capital for a total consideration of $13.18m, of which $7.65m is payable
in cash and $5.53m is payable in shares.
Founded in 1982, MwT is a Silicon Valley based company involved in the design,
manufacturing and marketing of GaAs and GaN based MMICs, Discrete Devices and
Hybrid Amplifier Products for Commercial Wireless Communication, Defence,
Space and Medical (MRI) applications
The financial effects of the transaction have not been included in the results
to 30 September 2023. The operating results and assets and liabilities of the
company will be included from 2 October 2023.
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 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 2023 is based on the statutory accounts for the financial year
ended 31 March 2023 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
(https://url.avanan.click/v2/___http:/www.cmlmicroplc.com___.YXAxZTpzaG9yZWNhcDphOm86ZDc0MjJmZTRmNDNlZmJhZTdjOWRkOTUzZmQ5YTRlNzY6Njo4NDg1OmM1NTgyYTA1NmJhOTdkNTQzOGY5NjE4Y2ZhYzNmOTAxM2YzMzU3NGI2Y2FkNjczMjJhNWQxMmVkNDFjZGEwZDE6cDpU)
.
13 Approvals
The Directors approved this Half Yearly Report on 5 December 2023.
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