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

CML MicrosystemsAnnouncement

24/11/2015 07:01

RNS Number : 6814G
CML Microsystems PLC
24 November 2015
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 2015.
Financial Highlights
 Group revenues up 8% to 11.00m (H1 2014: 10.21m)
 Gross profit up 10% to 7.98m (H1 2014: 7.22m)
 Underlying profit before tax up 22% to 1.51m (H1 2014: 1.24m)
 Basic EPS up 30% to 7.69p (H1 2014: 5.92p)
 Cash reserves of 12.26m (31 March 2015: 13.19m) - after 1.12m dividend payment
Operational Highlights
 Release of two new RF ICs suitable for the global industrial wireless markets
 SD and USB flash memory controller products continue to win "design-ins"
 Strengthened marketing, sales and support resources
 Higher investment in new product development
Chris Gurry, Group Managing Director of CML, said: "The first six months of the current trading year produced a meaningful advance in revenue and profitability against the comparable period.
"Whilst the recent signals from some market areas necessitate an air of caution, the Board's current expectations are for a sequential revenue improvement and for a full year advance in profitability."
CML Microsystems Plc
www.cmlmicroplc.com
Chris Gurry, Group Managing Director
Tel: 01621 875 500
Neil Pritchard, Group 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's statement
I am pleased to state that as expected the Group has moved forward, increasing both sales revenue and profitability when compared to the same period last year. Results reported are broadly in line with expectations despite current global market conditions becoming more difficult.
In the first six month period to 30 September 2015, sales revenues increased 8% to 11.00m (2014: 10.21m) and pre-tax profits increased by 22% to 1.51m (2014: 1.24m). Cash at the period end reduced compared to the March year end mainly as a result of payment of the dividend, the planned increase in development expenditure and the purchase of our own shares to be held in treasury.
Recently, one or two of the market areas addressed are showing signs of softness and a small number of customers have delayed the launch of their new products, albeit only by a few months. This appears to be a short-term problem that has reduced the Board's expected growth rate for the second half. Despite this caveat, the Board remains confident that the Group will move forward for the financial year as a whole.
The Group's visible growth opportunities provide me with clear evidence that the execution of the Board's strategy is driving progress, regardless of the short-term headwinds in some market areas. I am confident of a more significant improvement in the results over the medium and longer term.
As always the progress of any business is dependent upon the quality and dedication of its employees. The Board wishes to thank its employees worldwide for the performance and commitment they have shown throughout this period.
Nigel Clark
Group Non-Executive Chairman
24 November 2015
Group Managing Director's statement and operational and financial review
Operational and Financial Review
The first six months of the current trading year produced a meaningful advance in revenue and profitability against the comparable period. Total sales reported to 30 September 2015 were 11.00m representing an increase of 8% (2014: 10.21m). 
The overall rise was a result of improved trading from each of the three major market areas addressed; namely Storage, Wireless and Wireline Telecoms. Geographically, shipments into the Far East recorded the largest gain whilst across the customer base, the majority of the Group's current top customers increased their spend.
Gross margin remained robust and drove gross profit 10% higher to 7.98m (2014: 7.22m). As previously communicated, the Group continued to invest in marketing, sales and support resources whilst simultaneously maintaining high levels of R&D investment. Distribution and administration costs increased to 6.62m (2014: 6.17m), delivering an operational profit (before share-based payments and finance income) of 1.54m (2014: 1.28m).
Other operating income, principally rental proceeds from commercial properties and regional engineering development grants, fell to 0.19m (2014: 0.22m).
Profit before taxation advanced by over 22% to 1.51m (2014: 1.24m) delivering a diluted earnings per share of 7.65p (2014: 5.84p).
Cash balances at 30 September 2015 stood at 12.26m which is a reduction on the 31 March 2015 position of 13.19m due mainly to the payment of a 1.12m dividend and the increased investment in development costs.
Summary
The trading performance through the first half of the current financial year was ahead of the comparable period and reflected the Group's multifaceted approach to delivering growth.
Advances were made with strengthening our marketing, sales and support resources and new product development activities continue to receive high levels of investment. 
In recent months, the Group has released two new RF ICs suitable for global industrial wireless applications along with a focused baseband processing solution for Digital Mobile Radio (DMR). 
For the industrial storage markets, our SD and USB flash memory controller products continue to gain acceptance at the design-in and qualification level, although the sale of SATA interface controllers has been slower than expected. Ongoing activities are directed towards those market sub-segments that we believe will deliver on our multi-year growth objectives.
Outlook
Despite the improvement in first half results, it is important to convey that a number of the end markets the Group addresses are going through technological change with respective Group customers at varying stages of adoption, market introduction and manufacturing ramp. Predicting the timing of some of these end market transitions is challenging.
Whilst the recent signals from some market areas necessitate an air of caution, the Board's current expectations are for a sequential revenue improvement and for a full year advance in profitability.
Chris Gurry
Group Managing Director
24 November 2015
Condensed consolidated income statement
for the six months ended 30 September 2015

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end

30/09/15
30/09/14
31/03/15

'000
'000
'000
Continuing operations



Revenue
11,003
10,209
21,804
Cost of sales
(3,027)
(2,986)
(6,339)
Gross profit
7,976
7,223
15,465
Distribution and administration costs
(6,623)
(6,168)
(12,777)

1,353
1,055
2,688
Other operating income
190
221
419
Profit before share-based payments
1,543
1,276
3,107
Share-based payments
(49)
(61)
(95)
Profit after share-based payments
1,494
1,215
3,012
Revaluation of investment properties
-
-
100
Finance income
20
22
66
Profit before taxation
1,514
1,237
3,178
Income tax expense
(266)
(281)
(476)
Profit after taxation from continuing operations
1,248
956
2,702
Profit for period attributable to equity owners of
the parent
1,248
956
2,702
Basic earnings per share



From continuing operations
7.69p
5.92p
16.71p
From profit for the year
7.69p
5.92p
16.71p
Diluted earnings per share 



From continuing operations
7.65p
5.84p
16.51p
From profit for the year
7.65p
5.84p
16.51p
Condensed consolidated statement of comprehensive income
for the six months ended 30 September 2015

Unaudited
 Unaudited
Audited

6 months end
6 months end
Year end

30/09/15
30/09/14
31/03/15

'000
'000
'000
Profit for the period 
1,248
956
2,702
Other comprehensive income:



Foreign exchange differences
65
(258)
(477) 
Actuarial loss on retirement benefit obligations
-
-
(1,133)
Deferred tax on actuarial loss
-
-
227
Other comprehensive income/(expense) for the period net of tax attributable to equity holders of the parent
65
(258)
(1,383)
Total comprehensive income for the period net of tax attributable to equity holders of the parent
1,313
698
1,319

Condensed consolidated statement of financial position
as at 30 September 2015
 

Unaudited
Unaudited
Audited
30/09/15
30/09/14
31/03/15
'000
'000
'000
Assets



Non-current assets



Property, plant and equipment
5,146
5,040
4,976
Investment properties
3,550
3,450
3,550
Development costs
8,289
7,258
6,984
Goodwill 
3,512
3,512
3,512
Deferred tax asset
1,301
1,238
1,310

21,798
20,498
20,332
Current assets



Inventories
1,779
1,456
1,763
Trade receivables and prepayments
2,525
2,777
2,864
Current tax assets
767
191
628
Cash and cash equivalents
12,263
11,586
13,188

17,334
16,010
18,443
Total assets
39,132
36,508
38,775
Liabilities



Current liabilities



Trade and other payables
3,583
2,845
3,471
Current tax liabilities
246
446
196

3,829
3,291
3,667
Non-current liabilities



Deferred tax liabilities
2,654
2,291
2,513
Retirement benefit obligation
3,624
2,698
3,624

6,278
4,989
6,137
Total liabilities
10,107
8,280
9,804
Net assets
29,025
28,228
28,971
Capital and reserves attributable to equity owners of
the parent



Share capital
813
811
813
Share premium
5,700
5,614
5,700
Treasury shares - own share reserve
(190)
-
-
Share-based payments reserve
336
388
287
Foreign exchange reserve
(201)
(47)
(266)
Accumulated profits
22,567
21,462
22,437
Total shareholders' equity
29,025
28,228
28,971
Condensed consolidated cash flow statement
for the six months ended 30 September 2015

Unaudited
Unaudited
Audited 

6 months end
6 months end
Year end 

30/09/15
30/09/14
31/03/15 

'000
'000
'000
Operating activities



Net profit for the period before taxation 
1,514
1,237
3,178
Adjustments for:



Depreciation
121
110
267
Amortisation of development costs
1,661
1,408
3,224
Revaluation of investment properties
-
-
(100)
Movement in pension net costs
-
-
(207)
Share-based payments
49
61
95
Profit on sale of plant and equipment
-
-
(4)
Finance income
(20)
(22)
(66)
Movement in working capital
435
608
852
Cash flows from operating activities
3,760
3,402
7,239
Income tax (paid)/refunded
(174)
151
(270)
Net cash flows from operating activities
3,586
3,553
6,969
Investing activities



Purchase of property, plant and equipment
(290)
(256)
(318)
Investment in development costs
(2,905)
(2,672)
(4,363)
Disposals of property, plant and equipment
-
52
12
Finance income
20
22
66
Net cash flows from investing activities
(3,175)
(2,854)
(4,603)
Financing activities



Issue of ordinary shares
-
557
645
Purchase of treasury shares
(190)
-
-
Dividend paid to Group shareholders
(1,118)
(1,014)
(1,013)
Net cash flows from financing activities
(1,308)
(457)
(368)
(Decrease)/increase in cash and cash equivalents
(897)
242
1,998
Movement in cash and cash equivalents:



At start of period/year
13,188
11,373
11,373
(Decrease)/increase in cash and cash equivalents
(897)
242
1,998
Effects of exchange rate changes
(28)
(29)
(183)
At end of period/year
12,263
11,586
13,188
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2015

Share
Share
Treasury
Share-based
Foreign exchange
 Accumulated


capital
premium
shares
payments
reserve
profits
Total 
Unaudited
'000
'000
'000
'000
'000
'000
'000
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
Profit for period





1,746
1,746
Other comprehensive income:







Foreign exchange differences




(219)

(219)
Actuarial loss on retirement benefit obligation





(1,133)
(1,133)
Deferred tax on actuarial losses





227
227
Total comprehensive income for the period
-
-
-
-
(219)
840
621
Transactions with owners in their capacity as owners:







Issue of ordinary shares
2
86




88
Total of transactions with owners in their capacity as owners:
2
86
-
-
-
-
88
Share-based payments 



34


34
Cancellation/transfer of share-based payments



(135)

135
-
At 31 March 2015
813
5,700
-
287
(266)
22,437
28,971
Profit for period





1,248
1,248
Other comprehensive income:







Foreign exchange differences




65

65
Total comprehensive income for the period
-
-
-
-
65
1,248
1,313
Transactions with owners in their capacity as owners:







Dividend paid





(1,118)
(1,118)
Purchase of treasury shares


(190)



(190)
Total of transactions with owners in their capacity as owners:
-
-
(190)
-
-
(1,118)
(1,308)
Share-based payments 



49


49
At 30 September 2015
813
5,700
(190)
336
(201)
22,567
29,025
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2015
1 Segmental analysis
Business segment


Unaudited


Unaudited


Audited 


6 months end
6 months end

Year end 



30/09/15


30/09/14


31/03/15



Semi-


Semi-


 Semi-



conductor


conductor


conductor



components
Group

components
Group

components
Group


'000
'000

'000
'000

'000
'000
Revenue









By origination

17,423
17,423

15,842
15,842

34,031
34,031
Inter-segmental revenue

(6,420)
(6,420)

(5,633)
(5,633)

(12,227)
(12,227)
Segmental revenue

11,003
11,003

10,209
10,209

21,804
21,804
Profit/(loss)









Segmental result

1,494
1,494

1,215
1,215

3,012
3,012
Revaluation of investment properties


-


-


100
Net financial income


20


22


66
Income tax


(266)


(281)


(476)
Profit after taxation


1,248


956


2,702
Assets and liabilities









Segmental assets

33,514
33,514

31,629
31,629

33,287
33,287
Unallocated corporate assets









Investment properties


3,550


3,450


3,550
Deferred tax assets


1,301


1,238


1,310
Current tax receivable


767


191


628
Consolidated total assets


39,132


36,508


38,775
Segmental liabilities

3,583
3,583

2,845
2,845

3,471
3,471
Unallocated corporate liabilities









Deferred tax liabilities


2,654


2,291


2,513
Current tax liabilities


246


446


196
Retirement benefit obligation


3,624


2,698


3,624
Consolidated total liabilities


10,107


8,280


9,804
Other segmental information









Property, plant and equipment additions

290
290

256
256

318
318
Development cost additions

2,905
2,905

2,672
2,672

4,363
4,363
Depreciation

121
121

110
110

267
267
Amortisation

1,661
1,661

1,408
1,408

3,224
3,224
Other significant non-cash income

-
-

-
-

307
307

Geographical segments

UK
Rest of Europe
Americas
Far East
Total 

'000
'000
'000
'000
'000
Unaudited





Six months ended 30 September 2015





Revenue by origination
5,101
5,577
2,562
4,183
17,423
Inter-segmental revenue
(2,518)
(3,902)
-
-
(6,420)
Revenue to third parties
2,583
1,675
2,562
4,183
11,003
Property, plant and equipment
5,022
97
11
16
5,146
Investment properties 
3,550
-
-
-
3,550
Goodwill
-
3,512
-
-
3,512
Development costs 
2,906
5,383
-
-
8,289
Total assets
25,538
10,162
1,325
2,107
39,132
Unaudited





Six months ended 30 September 2014





Revenue by origination
4,865
5,282
2,001
3,694
15,842
Inter-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 
3,450
-
-
-
3,450
Goodwill
-
3,512
-
-
3,512
Development costs 
2,655
4,603
-
-
7,258
Total assets
24,991
8,131
1,473
1,913
36,508
Audited





Year ended 31 March 2015





Revenue by origination
10,134
10,627
4,688
8,582
34,031
Inter-segmental revenue
(5,036)
(7,190)
- 
(1)
(12,227)
Revenue to third parties
5,098
3,437
4,688
8,581
21,804
Property, plant and equipment
4,849
104
14
9
4,976
Investment properties 
3,550
-
-
-
3,550
Goodwill
-
3,512
-
- 
3,512
Development costs 
2,440
4,544
- 
- 
6,984
Total assets
27,060
8,388
1,370
1,957
38,775
Segmental reporting is 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 full year financial statements.
Revenue
The geographical classification of business turnover (by destination) is as follows:
Unaudited
Unaudited
Audited
6 months end
6 months end
Year end
30/9/15
30/9/14
31/3/15
'000
'000
'000
United Kingdom
495
473
853
Rest of Europe
2,379
2,640
5,220
Far East
5,205
4,538
10,438
Americas
2,745
2,336
4,804
Other
179
222
489
11,003
10,209
21,804
2 Dividend paid and proposed
A dividend of 6.9p per 5p ordinary share in respect of the year ended 31 March 2015 was paid on 3 August 2015 (2014: 6.25p per ordinary share of 5p in respect of the year ended 31 March 2014). No dividend is proposed in respect of the six months period ended 30September 2015 (2014: Nil per ordinary share of 5p in respect of the period ended 30 September 2014).
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 

30/09/15
30/09/14
31/03/15 

'000
'000
'000
UK income tax credit
(167)
(160)
(598)
Overseas income tax charge
283
285
430
Total current tax charge/(credit)
116
125
(168)
Deferred tax charge
150
156
644
Reported income tax charge
266
281
476
4 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, as explained below:

Ordinary 5p shares

Weighted


average
Diluted 

number
number
Six months ended 30 September 2015
16,219,037
16,295,008
Six months ended 30 September 2014
16,152,635
16,376,911
Year end 31 March 2015
16,167,635
16,367,735
On 10 June 2015, the Company purchased 50,000 ordinary shares of 5p each in the Company at a price of 376.5p per ordinary share. These shares are held in treasury for the benefit of various employee share plans and are excluded from the denominators listed above for the purposes of earnings per share calculations.
5 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 2015 the investment properties were professionally valued by Everett Newlyn, Chartered Surveyors and Commercial Property Consultants, on an open market basis.
6 Analysis of cash flow movement in net cash
The cash flow below is a combination of the actual cash flow and the exchange movement:

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

01/04/14
30/09/14
30/09/14
31/03/15
31/03/15
30/09/15
30/09/15 


Cash flow

Cash flow

Cash flow


'000
'000
'000
'000
'000
'000
'000
Cash and cash equivalents
11,373
213
11,586
1,602
13,188
(925)
12,263

11,373
213
11,586
1,602
13,188
(925)
12,263
7 Retirement benefit obligations
The Directors have not obtained an actuarial IAS19 Employee Benefits report in respect of the defined benefit pension scheme for the purpose of this Half YearlyReport.
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 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.
9 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's statement and Group Managing Director'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.
10 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 2015 financial statements.
11 General
Other than already stated within the Chairman's statement and Group Managing Director'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 8 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 2015.
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 2015 is based on the statutory accounts for the financial year ended 31 March 2015 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.
12 Approvals
The Directors approved this Half Yearly Report on 24 November 2015.

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