REG - CML Microsystems PLC - Half Yearly Report <Origin Href="QuoteRef">CML.L</Origin>

CML MicrosystemsAnnouncement

18/11/2014 08:00

RNS Number : 2518X
CML Microsystems PLC
18 November 2014
CML Microsystems Plc
INTERIM RESULTS
CML Microsystems Plc ("CML"), which designs, manufactures and markets a broad range ofsemiconductor products, primarily for the global communication and data storage markets,announces Interim Results for the six months ended 30 September 2014.
Financial Highlights
 First half results in-line with management budgets and market expectations
 Group revenues down 21% to 10.21m (H1 2013: 12.99m)
 Underlying profit before tax down 62% to 1.24m (H1 2013: 3.21m)
 Basic EPS down 62% to 5.92p (H1 2013: 15.73p)
 Cash reserves of 11.59m (31 March 2014: 11.37m) - after 1.01m dividend payment
Operational Highlights
 Promising H2 order book meaningfully ahead of prior half year
 Storage sales weaker but improved as the half year progressed
 Sales of Flash memory controllers for the automotive infotainment market grew strongly 
 Encouraging early interest in new industrial class USB controller
 Wireless sales improved towards the end of the half
 Orders from two new customers for machine-to-machine applications
 Sales into analogue telephony applications were lower across all major regions
Chris Gurry, Chairman and Chief Executive of CML, said:
"The Group continues to make good progress with its numerous engineering, selling and market-related activities that are directed at widening the product range, the customer base and the addressable market areas. Whilst these activities are not expected to contribute meaningfully to the current year, I am confident that the product and management strategies being followed should allow the Group to return to growth beyond this financial year."
CML Microsystems Plc
www.cmlmicroplc.com
Chris Gurry, Chairman and Chief Executive
Tel: 01621 875 500
Nigel Clark, Financial Director
Cenkos Securities Plc
Tel: 020 7397 8900
Jeremy Warner Allen (Sales)
Max Hartley (Corporate Finance)
SP Angel Corporate Finance LLP
Tel: 020 3463 2260
Jeff Keating
Walbrook PR Ltd
Tel: 020 7933 8780 or cml@walbrookpr.com
Paul McManus
 Mob: 07980 541 893
Helen Cresswell
Mob: 07841 917 679

Chairman and Chief Executive's statement and operational and financial review
Overview
As anticipated, the results for the opening six months of the financial year saw revenue from continuing operations down 21% to 10.21m (2013: 12.99m), underlying profit before tax reduce by 62% to 1.24m (2013: 3.21m) and basic earnings per share fall 62% to 5.92p (2013: 15.73p). This performance arises from the combined effects of previously communicated prior-year events within our storage market along with some cyclical volatility within wireless centred on regional government spending.
The results were in line with management budgets and, notably, the outstanding order book at the end of September 2014 was meaningfully ahead of the prior half year, supporting expectations for a firmer second half performance.
The sale of semiconductors into industrial solid state storage and removable card applications improved as the half year progressed. Good advances were made with expanding future revenue potential through a combination of new customer growth and a broader product portfolio. Shipments of flash memory controller integrated circuits ("ICs") for use within the automotive infotainment market grew strongly and early interest shown in the Group's new industrial class USB controller has been encouraging.
The shipment of ICs into Wireless voice and data application areas also improved towards the period end after commencing the year at a relatively low level. The number of customers designing end products that contain Group chip-set solutions increased and it was particularly pleasing that initial orders were received from two new customers who each serve differing machine-to-machine ("M2M") application areas.
Revenue from the sale of Telecom ICs into traditional analogue telephony applications was lower and reflected a general weakness across all of the major regions served.
Financial summary
Revenue of 10.21m combined with stable gross margin delivered gross profit of 7.22m (2013: 9.21m). Distribution and administration costs were flat at 6.17m (2013: 6.16m) with an operating profit of 1.06m being recorded (2013: 3.06m). The Group benefited from other operating income of 221k (2013: 192k), principally EU grants and the rental income on group-owned industrial properties. Finance income fell to 22k (2013: 35k) as a result of lower interest rates on cash reserves. Profit before tax amounted to 1.24m (2013: 3.21m).
At the period end, cash reserves stood at 11.59m (31 March 2014: 11.37m) after payment of a 1.01m dividend in respect of the prior year. Working capital was better controlled and further enhanced by the receipt of a conditional customer-prepayment of US$600k against a key new product development. The Group has no borrowings.
Summary and outlook
Whilst it is disappointing to report interim results that interrupt the Group's sustained growth record over recent years, operating performance through the opening six-month period has progressively improved and the results delivered meet both management and market expectations.
In addition to a promising order book at 30 September 2014, new order bookings since that date serve to reinforce expectations that second half revenue should exceed the first.
The Group continues to make good progress with its numerous engineering, selling and market-related activities that are directed at widening the product range, the customer base and the addressable market areas. Whilst these activities are not expected to contribute meaningfully to the current year, I am confident that the product and management strategies being followed should allow the Group to return to growth beyond this financial year.
C. A. Gurry
Chairman and Chief Executive
17 November 2014

Condensed consolidated income statement
for the six months ended 30 September 2014

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end

30/09/14
30/09/13
31/03/14

'000
'000
'000
Continuing operations



Revenue
10,209
12,989
24,393 
Cost of sales
(2,986)
(3,777)
(6,511) 
Gross profit
7,223
9,212
17,882 
Distribution and administration costs
(6,168)
(6,156)
(12,470) 

1,055
3,056
5,412
Other operating income
221
192
474 
Profit before share-based payments
1,276
3,248
5,886
Share-based payments
(61)
(69)
(156)
Profit after share-based payments
1,215
3,179
5,730 
Finance costs
-
-
-
Finance income
22
35
62 
Profit before taxation
1,237
3,214
5,792 
Income tax expense
(281)
(710)
(1,024) 
Profit after taxation from continuing operations
956
2,504
4,768 
Profit/(loss) from discontinued operations (see note 4)
-
-
- 
Profit for period attributable to equity owners of
the parent
956
2,504
4,768 
Basic earnings per share



From continuing operations
5.92p
15.73p
29.96p 
From profit for the year
5.92p
15.73p
29.96p 
From discontinued operations
-
-
- 
Diluted earnings per share 



From continuing operations
5.84p
15.73p
29.20p
From profit for the year
5.84p
15.73p
29.20p 
From discontinued operations
-
-
- 
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2014

Unaudited
 Unaudited
Audited

6 months end
6 months end
Year end

30/09/14
30/09/13
31/03/14

'000
'000
'000
Profit for the period 
956
2,504
4,768 
Other comprehensive income:



Foreign exchange differences
(258)
(214)
(302) 
Actuarial loss on retirement benefit obligations
-
-
3,393 
Income tax on actuarial loss
-
-
(678) 
Other comprehensive income for the period net of tax
(258)
(214)
2,413 
Total comprehensive income for the period net of tax attributable to equity owners of the business
698
2,290
7,181 

Condensed consolidated statement of financial position
as at 30 September 2014

Unaudited
Unaudited
Audited
30/09/14
30/09/13
31/03/14
'000
'000
'000
Assets



Non-current assets



Property, plant and equipment
5,040
5,025
4,937 
Investment properties
3,450
3,450
3,450 
Development costs
7,258
5,611
6,188 
Goodwill 
3,512
3,512
3,512 
Deferred tax asset
1,238
2,242
1,271 

20,498
19,840
19,358 
Current assets



Inventories
1,456
1,536
1,129 
Trade receivables and prepayments
2,777
4,187
3,388 
Current tax assets
191
-
283 
Cash and cash equivalents
11,586
9,737
11,373 

16,010
15,460
16,173
Non-current assets classified as held for sale - properties
-
103
100
Total assets
36,508
35,403
35,631
Liabilities



Current liabilities



Trade and other payables
2,845
3,863
2,509 
Current tax liabilities
446
422
274

3,291
4,285
2,783 
Non-current liabilities



Deferred tax liabilities
2,291
2,058
2,224 
Retirement benefit obligation
2,698
6,122
2,698 

4,989
8,180
4,922
Total liabilities
8,280
12,465
7,705
Net assets
28,228
22,938
27,926
Capital and reserves attributable to equity owners of
the parent



Share capital
811
798
798 
Share premium
5,614
5,060
5,070
Share-based payments reserve
388
240
327 
Foreign exchange reserve
(47)
299
211
Accumulated profits
21,462
16,541
21,520 
Shareholders' equity
28,228
22,938
27,926

Condensed consolidated cash flow statements
for the 6 months ended 30 September 2014

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end 

30/09/14
30/09/13
31/03/14 

'000
'000
'000
Continuing operations
Operating activities



Net profit for the period before income taxes 
1,237
3,217
5,792 
Adjustments for:



Depreciation
110
124
255
Amortisation of development costs
1,408
1,109
2,588
Movement in pensions deficit
-
-
31
Share-based payments
61
69
156
Finance income
(22)
(35)
(62)
Decrease/(Increase) in working capital
608
(959)
(1,109)
Cash flows from operating activities
3,402
3,525
7,651 
Income tax refunded/(paid)
151
65
(202) 
Net cash flows from operating activities
3,553
3,590
7,449
Investing activities



Purchase of property, plant and equipment
(256)
(58)
(103)
Investment in development costs
(2,672)
(2,067)
(4,139) 
Disposals of property, plant and equipment
52
4
5
Finance income
22
35
62
Net cash flows from investing activities
(2,854)
(2,086)
(4,175)
Financing activities



Issue of ordinary shares
557
87
97
Decrease in bank loans and short-term borrowings
-
(338)
(338)
Dividend paid to Group shareholders
(1,014)
(873)
(873)
Net cash flows from financing activities
(457)
(1,124)
(1,114)
Increase in cash and cash equivalents
242
380
2,160
Movement in cash and cash equivalents:



At start of period/year
11,373
9,323
9,323 
Increase in cash and cash equivalents
242
380
2,160
Effects of exchange rate changes
(29)
34
(110) 
At end of period/year
11,586
9,737
11,373 

Condensed consolidated statement of changes in equity
as at 30 September 2014




Foreign



Share
Share
Share-based
exchange
Accumulated


capital
premium
payments
reserve
profits
Total 
Unaudited
'000
'000
'000
'000
'000
'000
At 31 March 2013
794
4,977
171
513
14,910
21,365
Profit for period




2,504
2,504
Other comprehensive income:






Foreign exchange differences



(214)

(214)
Total comprehensive income for the period
-
-
-
(214)
2,504
2,290
Transactions with owners in their capacity as owners:






Dividend paid




(873)
(873)
Issue of ordinary shares
4
83



87
Total of transactions with owners in their capacity as owners
4
83
-
-
(873)
(786)
Share-based payments 


69


69
At 30 September 2013
798
5,060
240
299
16,541
22,938
Profit for period




2,264
2,264
Other comprehensive income:






Foreign exchange differences



(88)

(88)
Actuarial loss on retirement benefit obligation




3,393
3,393
Deferred tax on actuarial losses




(678)
(678)
Total comprehensive income for the period
-
-
-
(88)
4,979
4,891
Transactions with owners in their capacity as owners






Issue of ordinary shares

10



10
Total of transactions with owners in their capacity as owners:
-
10
-
-
-
10
Share-based payments 


87


87
At 31 March 2014
798
5,070
327
211
21,520
27,926
Profit for period




956
956
Other comprehensive income:






Foreign exchange differences



(258)

(258)
Total comprehensive income for the period
-
-
-
(258)
956
698
Transactions with owners in their capacity as owners:






Dividend paid




(1,014)
(1,014)
Issue of ordinary shares
13
544



557
Total of transactions with owners in their capacity as owners
13
544
-
-
(1,014)
(457)
Share-based payments 


61


61
At 30 September 2014
811
5,614
388
(47)
21,462
28,228

Notes to the condensed consolidated financial statements
1 Segmental analysis
Business segments


Unaudited


Unaudited


Audited 


6 months end
6 months end

Year end 



30/09/14


30/09/13


31/03/14



Semi-


Semi-


 Semi-


Discontinued
conductor

Discontinued
conductor

Discontinued
conductor


Equipment
components
Group
Equipment
components
Group
Equipment
components
Group

'000
'000
'000
'000
'000
'000
'000
'000
'000
Revenue









By origination
-
15,842
15,842
282
21,497
21,779
282
39,758
40,040
Inter-segmental revenue
-
(5,633)
(5,633)
-
(8,508)
(8,508)
-
(15,365)
(15,365)
Segmental revenue
-
10,209
10,209
282
12,989
13,271
282
24,393
24,675
Profit/(loss)









Segmental result
-
1,215
1,215
3
3,179
3,182
3
5,729
5,732
Net financial income


22


35


62
Income tax


(281)


(713)


(1,026)
Profit after taxation


956


2,504


4,768
Assets and liabilities









Segmental assets
-
31,629
31,629
-
29,608
29,608
-
30,527
30,527
Unallocated corporate assets









Investment property (including held for sale)


3,450


3,553


3,550
Deferred taxation


1,238


2,242


1,271
Current tax receivable


191


-


283
Consolidated total assets


36,508


35,403


35,631
Segmental liabilities
-
2,845
2,845
-
3,863
3,863
-
2,509
2,509
Unallocated corporate liabilities









Deferred taxation


2,291


2,058


2,224
Current tax liability


446


422


274
Retirement benefit obligation


2,698


6,122


2,698
Consolidated total liabilities


8,280


12,465


7,705
Other segmental information









Property, plant and equipment additions
-
256
256
-
58
58
-
103
103
Development cost additions
-
2,672
2,672
-
2,067
2,067
-
4,139
4,139
Depreciation
-
110
110
-
124
124
-
255
255
Amortisation
-
1,408
1,408
-
1,109
1,109
-
2,588
2,588
Other significant non-cash income
-
-
-
-
-
-
-
31
31

Geographical segments

UK
Germany
Americas
Far East
Total 

'000
'000
'000
'000
'000
Unaudited





Six months ended 30 September 2014





Revenue by origination
4,865
5,282
2,001
3,694
15,842
Inter geographical segmental revenue
(2,170)
(3,463)
-
-
(5,633)
Revenue to third parties
2,695
1,819
2,001
3,694
10,209
Property, plant and equipment
4,909
114
14
3
5,040
Investment properties including held for sale
3,450
-
-
-
3,450
Goodwill
-
3,512
-
-
3,512
Development cost 
2,655
4,603
-
-
7,258
Total assets
24,991
8,131
1,473
1,913
36,508
Unaudited





Six months ended 30 September 2013





Revenue by origination
6,610
6,956
2,981
5,232
21,779
Inter geographical segmental revenue
(2,870)
(5,638)
-
-
(8,508)
Revenue to third parties
3,740
1,318
2,981
5,232
13,271
Property, plant and equipment
4,826
70
123
6
5,025
Investment properties including held for sale
3,450
-
103
-
3,553
Goodwill
-
3,512
-
-
3,512
Development cost 
2,148
3,463
-
-
5,611
Total assets
23,918
7,134
1,930
2,421
35,403
Audited





Year ended 31 March 2014





Revenue by origination
12,574 
11,930 
5,856 
9,680 
40,040
Inter geographical segmental revenue
(5,827) 
(9,538) 
- 
- 
(15,365)
Revenue to third parties
6,747 
2,392 
5,856 
9,680 
24,675
Property, plant and equipment
4,752 
68 
115 
2 
4,937
Investment properties including held for sale
3,450
-
100
-
3,550
Goodwill
- 
3,512 
-
- 
3,512
Development cost 
2,376
3,812
- 
- 
6,188
Total assets
25,273 
6,926
1,491 
1,941 
35,631
On 13 August 2013 Radio Data Technology Limited which represents 100% of the equipment segment went into liquidation and consequently after that date the Group only has one segment.
Reported segments and their results in accordance with IFRS 8, is based on internal management reporting information that is regularly reviewed by 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.
Revenue
Geographical classification of continuing business turnover (by destination)

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end 

30/09/14
30/09/13
31/03/14 

'000
'000
'000
United Kingdom
473
357
823
Rest of Europe
2,640
2,197
4,325
Far East
4,538
6,732
12,386
Americas
2,336
3,396
6,263
Others
222
307
596

10,209
12,989
24,393



2 Dividend paid and proposed
A dividend of 6.25p per 5p ordinary share in respect of the year ended 31 March 2014 was paid on 1 August 2014 (2013: 5.5p per ordinary share of 5p in respect of the year ended 31 March 2013). No dividend is proposed in respect of the six months period ended 30September 2014 (2013: Nil per ordinary share of 5p in respect of the period ended 30 September 2013).
3 Income tax
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.

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end 

30/09/14
30/09/13
31/03/14 

'000
'000
'000
UK income tax credit
(160)
-
(300)
Overseas income tax charge
285
174
364
Total current tax charge
125
174
64
Deferred tax charge
156
536
960
Reported income tax charge
281
710
1,024
4 Discontinued operations
On 13 August 2013 Radio Data Technology Limited went into liquidation and consequently qualifies as a discontinued operation. The results of the discontinued operation which have been included in the consolidated income statement are presented below: 

Unaudited
6 months end
Unaudited
6 months end
Audited
Year end 

30/09/14
30/09/13
31/03/14 

'000
'000
'000
Revenue
-
282
282
Cost of sales
-
(171)
(171)
Gross profit
-
111
111
Distribution and administration costs
-
(108)
(108)
Profit before taxation
-
3
3
Taxation
-
(3)
(3)
Profit from discontinued operations
-
-
-
5 Earnings per share
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.

Ordinary 5p shares

Weighted


average
Diluted 

number
number
Six months ended 30 September 2014
16,152,635
16,376,911
Six months ended 30 September 2013
15,915,946
16,296,334
Year end 31 March 2014
15,917,895
16,332,587
6 Investment properties
Investment properties are revalued at each discrete period end by the Directors and every third year by independent Chartered Surveyorson an open market basis. No depreciation is provided on freehold investment properties or on leasehold investment properties. Inaccordance with IAS 40, gains and losses arising on revaluation of investment properties are shown in the income statement. At31March 2012 the investment properties were professionally valued by Everett Newlyn, Chartered Surveyors and Commercial Property Consultants on an open market basis.
7 Analysis of cash flow movement in net cash

Net cash at 
6 months end
Net cash at
6 months end
Net cash at
6 months end
Net cash at 

01/04/13
30/09/13
30/09/13
31/03/14
31/03/14
30/09/14
30/09/14 


Cash flow

Cash flow

Cash flow


'000
'000
'000
'000
'000
'000
'000
Cash and cash equivalents
9,323
414
9,737
1,636
11,373
213
11,586
Bank loans and overdrafts
(338)
338
-
-
-
-
-

8,985
752
9,737
1,636
11,373
213
11,586
The cash flow above is a combination of the actual cash flow and the exchange movement.
8 Retirement benefit obligations
The Directors have not obtained an actuarial report in respect of the defined benefit pension scheme for the purpose of this Half YearlyReport.
9 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 would 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 segments, 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, which is undergoing continual geographical change. TheGroup's ability to respond to many competitive factors including, but not limited to pricing, technological innovations, product quality, customer service, manufacturing capabilities and employment of qualified personnel will be key in the achievement of its objectives, but its 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, the enforceability of laws and contracts, changes in the tax laws, terrorist activities, natural disasters or health epidemics.
10 Directors' statement pursuant to the Disclosure and Transparency Rules
The Directors confirm that, to the best of their knowledge:
a) the condensed financial statements, prepared in accordance with IFRS as adopted by the EU give a true and fair view of the assets, liabilities, financial position and profit of the Group and the undertakings included in the consolidation taken as a whole; and
b) the condensed set of financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting"; and
c) the Chairman and Chief Executive's statement and 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.
11 Basis of preparation
The basis of preparation and accounting policies used in preparation of the Half Yearly Financial Report are the same accounting policies set out in the year ended 31 March 2014 financial statements.
12 General
Other than already stated within the Chairman and Chief Executive's statement and 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 Financial 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 9 above.
In the segmental analysis (note 1) inter-segmental transfers or transactions are entered into under commercial terms and conditions appropriate to the location of the entity whilst considering that the parties are related.
This Half Yearly Financial Report includes a fair review of the information required by DTR 4.2.7/8 (indication of important events and their impact, and description of principal risks and uncertainties for the remaining six months of the financial year).
This Half Yearly Financial Report does not include all the information and disclosures required in the Annual Report, and should be read in conjunction with the consolidated Annual Report for the year ended 31 March 2014.
The financial information contained in this Half Yearly Financial Report has been prepared using International Financial Reporting Standards as adopted by the European Union. This Half Yearly Financial 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 2014 is based on the statutory accounts for the financial year ended 31 March 2014 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 Financial Report has not been audited or reviewed by the Group Auditor.
A copy of this Half Yearly Financial Report can be viewed on the Company website www.cmlmicroplc.com
13 Approvals
The Directors approved this Half Yearly Report on 17 November 2014.

This information is provided by RNS
The company news service from the London Stock Exchange
  END
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