REG - CML Microsystems PLC - Preliminary Results <Origin Href="QuoteRef">CML.L</Origin>
06/09/2014 02:05
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CML Microsystems PLC
10 June 2014
10 June 2014
CML Microsystems Plc
PRELIMINARY RESULTS
CML Microsystems Plc ("CML"), which designs, manufactures and markets a broad
range of semiconductor products, primarily for the global communication and
data storage markets, announces Preliminary Results for the year ended 31
March 2014.
Financial Highlights
· Group revenues of £24.39m (2013: £24.65m)*
· Gross profit up 3% to £17.88m (2013: £17.34m)*
· Profit before tax up 6% to £5.79m (2013: £5.45m)*
· Basic EPS up 7% to 29.96p (2013: 28.01p)*
· Debt free and net cash of £11.37m (2013: £8.98m)
· Final dividend increased 14% to 6.25p (2013: 5.5p)
*continuing operations
Operational Highlights
· Storage: 48% of group revenue
- Revenues from solid state storage market up 2% to £11.80m (2013:
£11.55m)
- Design win with a tier one European automotive infotainment
manufacturer
· Wireless: 37% of group revenues
- Product revenues of £9.12m (2013: £9.80m)
- Digital baseband products and RF semiconductor sales both saw a double
digit growth
- Contribution from recent product introductions represented over 80% of
wireless revenues
· Wireline telecom: 12% of group revenues
- Product revenues up 8% to £2.92m (2013: £2.68m)
- Healthy levels of customer design-in activity
- New customer projects for low-speed modem ICs continue to be discovered
Chris Gurry, Managing Director of CML, said: "The Company was able to deliver
on market expectations for a firm full year improvement in profitability
although, as evidenced through the period under review, it was record first
half revenues and profits that drove performance. Second half sales were
affected by the previously explained and unforeseen customer events within
storage markets and this, coupled with the cyclical volatility from wireless,
created a headwind for revenues that will also impact the current year. In
reporting on a year when we have delivered record profits, it is disappointing
to now convey short-term caution but, beyond this year, the board is confident
of delivering a return to revenue growth."
CML Microsystems plc www.cmlmicroplc.com
Chris Gurry, Managing Director 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/ cml@walbrookpr.com
Paul McManus Mob: 07980 541 893
Helen Cresswell Mob: 07841 917 679
Chairman and Managing Director's statement and operating and financial review
Introduction
It is pleasing to report that trading through the year to 31 March 2014
resulted in the Group producing a firm improvement in profitability, as
expected, driven by a strong first six-month period.
The exit of the equipment segment during August 2013 benefitted gross margins
and, as previously reported, the Group now has only one reportable operating
segment; semiconductors. This strategic report refers to the results of the
continuing operations. The consolidated income statement highlights the
performance of discontinued operations and the consolidated financial
statements contain further detailed breakdowns.
The Group increased profits before tax by 6% to an all-time record of £5.79m
(2013: £5.45m) on revenues that were slightly lower at £24.39m (2013:
£24.65m). The resultant net margin rose to 24% (2013: 22%).
Basic earnings per share increased 7% to 29.96p (2013: 28.01p).
The Group repaid all outstanding loans and overdrafts through the period and
finished with zero debt and a net cash position of £11.37m (2013: £8.98m).
As a result, and aided by a significant reduction in the retirement benefit
obligation, net assets increased by 31% to £27.93m (2013: £21.37m).
Dividend
Since reinstating a dividend payment three years ago, the Group has
consistently delivered earnings growth whilst simultaneously making material
investments in developing the underlying business prospects. Having considered
these results along with the ongoing level of investment required and the most
recent outlook, the Board is recommending a dividend payment of 6.25p per
ordinary share (2013: 5.5p). Subject to shareholder approval, this will be
paid on 1 August 2014 to all shareholders whose names appear on the register
at close of business on 4 July 2014.
Board and management
We reported at the interim stage on the sad loss of our founder and Chairman,
George Gurry, along with one of the Group's longest serving employees,
non-executive director George Bates. The Directors have given due
consideration to the Board's current composition, the corporate strategy being
followed and the future needs of the business. As a result, it has decided to
expand and enhance the present structure while at the same time recognising
the need for an appropriate level of continuity.
For personal reasons, Nigel Clark, Group Finance Director, will relinquish his
current position by the end of the financial year. The formal search for a
suitable replacement has commenced and the Board will report on that process
in due course. Once a suitable successor has been appointed, Nigel will
transition to the role of non-executive Chairman.
The significant investment in research and development being made is
delivering a growing product range that will broaden the Group's addressable
market areas. In order to fully capitalise on the opportunities that lie
ahead, the Board has decided to appoint a sales and marketing director with
primary responsibility for global selling-related activities. The recruitment
process is at an advanced stage and the Board expects to make an announcement
shortly.
At an operational management level, a revised organisational structure was
implemented in relation to the Group's UK engineering resources. The new
structure took effect from 1 April 2014 and involved two senior management
appointments along with the formal transition of our Somerset-based systems
engineering group into the UK semiconductor operating company.
Results
Group revenues for the year were £24.39m (2013: £24.65m) representing a 1%
decline against the comparative 12 month period. Sales into the storage and
telecom sectors moved ahead of the prior year with wireless revenues somewhat
lower reflecting the periodic volatility that characterises certain
sub-markets. In comparison to last year, the influence of currency exchange
movements had a negligible effect on reported sales levels.
In gross profit terms, the Group gained a useful benefit from exiting the
equipment segment which had typical gross margins well below the ongoing
business. On a continuing basis, the product mix coupled with a higher level
of customer non-refundable engineering (NRE) income contributed to an
improvement in gross profit to £17.88m (2013: £17.34m) and a corresponding
gross margin of 73% (2013: 70%).
Distribution and administration costs increased to £12.47m (2013: £12.13m) due
mostly to a general increase in direct staff costs.
As well as the revenues generated from the sale of semiconductor products, the
Company owns the freehold on a number of commercial property assets that are
now surplus to requirements. These properties are rented to third parties on a
commercial industry standard basis. Income from this activity along with
proceeds from any development grants obtained through the year is classified
as 'other operating income' within the consolidated income statement. The
amount recorded against this category for the year under review was £474k
(2013: £296k) with the majority of the increase being attributable to the
expiry of tenant rent free periods.
The combined positive effects of the margin improvement and higher other
operating income served to offset the rise in distribution and administration
costs. This culminated in profit from operations rising 7% to £5.89m (2013:
£5.50m).
We began the financial year with an outstanding bank overdraft of £338k. This
was paid down in the first six months, and for the full year, finance income
of £62k (2013: £55k) was recorded.
Profit before taxation amounted to £5.79m (2013: £5.45m) which is an increase
of 6% against the prior year.
The Company is able to benefit from UK tax credits applicable to qualifying
research and development activities. This helped the Group achieve an
effective tax rate of 18% that was unchanged at £1.02m (2013: £1.02m).
Profit after tax advanced by 7% to £4.77m (2013: £4.44m)
Following payment of an £873k dividend in respect of the previous year and the
£338k repayment of bank borrowings, net cash reserves advanced by 27% and
ended the year at £11.37m (2013: £8.98m).
Inventory levels fell to £1.13m (2013: £1.69m) largely as a result of exiting
the equipment segment.
At the beginning of the year we increased our engineering resources through
the establishment of an office in Sheffield, UK. We also launched new
integrated circuits (IC's) for storage and wireless markets while continuing
to develop strategic technologies that are focussed on growing medium term
revenues. Associated research and development expenditure for the year was
£4.80m (2013: £3.75m) with an amount of £662k being written off through the
income statement (2013: £698k).
The Group has a retirement benefit obligation in respect of its UK final
salary pension scheme that has been closed to new members and future accruals
for some years. A general improvement in the economic climate was reflected in
the actuarial assumptions used in calculating the scheme deficit. At the year
end the reported deficit was £2.70m (2013: £6.12m) which had a material
influence on the balance sheet, increasing the Group's reported net assets to
£27.93m (2013: £21.37m).
Accounting for pensions under IAS19 resulted in a benefit to the income
statement of £31k (2013: £188k).
Property
At last year's AGM, the Board communicated that its planning appeal relating
to a residential development on excess land at its Oval Park headquarters had
been rejected. Following appropriate consultation and a review of next steps,
a smaller scale revised application is expected to be submitted in the coming
weeks.
Operational Review
STORAGE
The sale of semiconductors into solid state storage applications increased by
2% against the prior year to £11.80m (2013: £11.55m), comprising 48% (2013:
46%) of overall Group revenues. Geographically, sales from the European
customer base delivered solid growth while shipments into the Americas region
were softer. Average selling prices (ASPs) were fractionally ahead of the
prior year due to product mix.
In explaining the performance of the storage sector across the year, it is
important to highlight the strategy being employed and the stage of growth
that we are at.
Up to the present time, the majority of our direct customers within the
storage market have utilised our semiconductors to develop, manufacture and
market a range of removable media solid state drives (SSDs) in varying formats
but predominantly in the Compact Flash form factor (CF). Those customers then
typically market the completed SSD to the major Networking, Telecom and
Automation companies around the globe. We have been very focussed on the
stringent requirements of these industrial class end-customers and, in doing
so, have achieved a dominant, key supplier position.
As the use of SSDs within industrial applications is increasing, so is the
need to widen our product range to embrace a greater selection of
industry-standard interface technologies. Our research and development teams
have been addressing this over recent years and through the last 12 months the
product range has visibly evolved.
During the early part of calendar 2013 we began production shipments of our
first SATA controller solution targeted for use alongside flash memory
technology for high reliability applications. Customer adoption of that
solution continued through the year under review, although revenue recognition
so far has been at a slower pace than we originally expected.
Within the February 2014 interim management statement (IMS), we conveyed that
tangible progress was being made with a number of customer opportunities for
our new SD/MMC controller, launched to market at the end of the first half.
Since that time progress has been pleasing and I can report that a design win
has been recorded at a tier one European automotive infotainment manufacturer
and we expect that project to start contributing to revenues through the year
ahead.
In the last two weeks, we announced early sampling of an industrial USB
controller designed to address end-customer requirements for reliability that
have been lacking from commonly available USB products. This is a world first
for the application areas served.
So, to summarise, over the last few years we have made excellent progress
within the industrial/embedded solid state storage arena. Shipments to-date
comprised largely of CF controller ICs for use alongside the durable flash
memories that have dominated target end markets. More recent product
introductions permit embedded SD/MMC and USB connectivity, provide
compatibility with an extensive array of flash memory technologies and serve
to increase the total available market significantly.
To assist in understanding the typical route to market for our storage
controller products, it is appropriate to highlight that although the Group's
direct customers can cause periodic fluctuations in demand, these direct
customers each serve a wide customer base themselves. It is the end-customers
that ultimately dictate Group revenues.
In this context, the Group has three direct storage customers that each
account for 10% or more of overall revenues. Of these customers, one decided
to conduct a controlled exit from the embedded storage space in the second
half of the year. This, coupled with customer M&A activity, disrupted trading
in the final months of the year although we anticipate the situation will
normalise through the year ahead.
WIRELESS
For the year as a whole, wireless sales totalled £9.12m (2013: £9.80m) and
accounted for approximately 37% of Group revenues (2013: 39%). Proceeds from
product sales into the Americas were ahead year-on-year while sales from
Europe and the Far East were at lower levels. The overall annual reduction
reflected a combination of the volatility within end markets that rely on
governmental spend, along with weaker demand for certain higher priced legacy
products. The underlying trend remains one of steady growth.
The Group's wireless product sales can generally be divided into voice centric
and data centric end-application areas. For voice sectors, our semiconductors
provide baseband processing and signalling functionality for standards-based
two-way radio systems. The global installed base is currently dominated by
equipment that communicates using traditional analogue techniques however, the
process of transition to newer digital standards is underway and through the
year under review our digital baseband product sales experienced double digit
percentage growth.
Group products offering high-performance wireless data functionality are used
within narrowband radio terminals across a whole host of proprietary machine
to machine (M2M) applications within our target industrial end-markets. One
growth driver within these markets is the need to transfer relatively high
data rates across bandwidth-limited RF channels. Through the year a number of
important customer projects continued progressing towards production status,
some of which are with key new customers in accordance with our strategy to
align with the major players in our chosen markets areas.
Another solid year of growth was recorded from the sale of RF semiconductors.
Sales advanced by a double digit percentage and contributed over 20% to total
wireless revenues. The product range is developing such that each new product
release forms a compelling chip-set solution when used in conjunction with our
baseband or data modem ICs. This simplifies the design-in process for the
customer, lowers his overall bill of material cost and increases Group revenue
from each customer design.
As stated earlier, part of the contribution to weaker wireless revenues this
year can be attributed to a reduction in the sale of certain legacy parts. It
is noteworthy to report that contribution from more recent product
introductions, internally referred to as 'focus products', represented over
80% of wireless revenues. The proportionate contribution from focus products
has risen each year since 2010, at which time a figure of 60% was recorded.
Following the expansion and enhancement of our engineering capabilities in the
UK, and the operational management changes that followed, the integration of
the teams has progressed well. The enlarged resources are focussed on key new
product activities that will allow us to capitalise on a number of
opportunities that have traditionally been closed to us.
Customer dependency from wireless revenues remains low. No single wireless
customer accounts for more than 5% of Group revenues.
TELECOM
Sales revenues from wireline telecom end markets were at the higher end of
expectations and finished the year at £2.92m, posting an 8% improvement
against the comparative period (2013: £2.68m). The majority of the increase
came from customers located in Europe.
This advance in sales follows the healthy levels of customer design-in
activity that were reported one year ago. At that time, annual revenues were
reported as being slightly down due to saturation within the Chinese point of
payment terminal market but the remaining customer projects have proven to be
more resilient. At the same time, new customer projects for low-speed modem
ICs continue to be discovered, and additional benefit is being derived from
the fact that one or two larger competitors withdrew support for a selection
of their legacy modem products in the wireline sub-markets we address. The
Group as a whole has a long-standing reputation for product longevity.
Our established IC range for the traditional analogue telecom market remains
price and function competitive within the application areas being targeted.
While the sector does not have the compelling growth opportunities associated
with the storage and wireless markets, it remains an important focus area
contributing 12% to overall Group sales revenues.
Customer dependency in this sector is very low with all customers well below
2% of Group revenues.
Summary and Outlook
The year began with expectations that shareholder value would be driven by an
increase in revenues and profits on the back of growing adoption of Group
products for the storage and wireless market areas, with telecom IC shipments
providing stable revenues across a diversified end customer base.
Ultimately, the Company was able to deliver on market expectations for a firm
full year improvement in profitability although, as evidenced through the
period under review, it was record first half revenues and profits that drove
performance. Second half sales were affected by the previously explained and
unforeseen customer events within storage markets and this, coupled with the
cyclical volatility from wireless, created a headwind for revenues that will
also impact the current year.
The key end markets for storage and wireless each exhibit exciting growth
opportunities. Within storage, the gradual increase in adoption for the SATA
interface products will be augmented this year by the addition of SD
controller sales taking us into complementary market areas, such as automotive
infotainment and media card security. Sampling of the USB controller will
commence during the first half and should serve to provide a further growth
platform.
In the wireless sub-markets addressed, multiple growth drivers exist,
including the transition from analogue to digital radio technology, the need
for higher data rates within narrowband data application areas and the
catalyst of our RF IC solutions increasing the adoption of Group chip-set
solutions.
Longer term we intend to introduce new products with price and performance
characteristics that will enhance and supplement the existing product range
across all key markets. With our engineering resources and capabilities
stronger than ever, we intend to capitalise on the growing number of
opportunities we see to drive shareholder value over the medium term.
In reporting on a year when we have delivered record profits, it is
disappointing to now convey short-term caution but, beyond this year, the
board is confident of delivering a return to revenue growth. Our underlying
strategy remains valid and we obtained a number of important design wins
through the year, some of which are contractual and some of which take us into
new sub-market areas. Those design wins are expected to generate meaningful
additional revenues over a number of years commencing in calendar year 2015.
The progress of the business depends upon the quality and dedication of the
people it employs. On behalf of the Board, I would like to acknowledge the
crucial role our employees play and convey sincere thanks for their efforts
and commitment to the success of the Group.
C. A. Gurry
Chairman and
Managing Director
Consolidated income statement
for the year ended 31 March 2014
Unaudited2014 Restated Audited2013
£ £
Continuing operations
Revenue 24,393,659 24,648,020
Cost of sales (6,511,437) (7,312,786)
Gross profit 17,882,222 17,335,234
Distribution and administration costs (12,469,963) (12,130,157)
5,412,259 5,205,077
Other operating income 473,613 296,097
Profit from operations 5,885,872 5,501,174
Share-based payments (155,931) (101,525)
Profit after share-based payments 5,729,941 5,399,649
Finance costs - (34)
Finance income 61,764 54,594
Profit before taxation from continuing operations 5,791,705 5,454,209
Income tax expense (1,023,069) (1,018,246)
Profit after taxation from continuing operations 4,768,636 4,435,963
Profit/(loss) after taxation from discontinued operations 2 (381,782)
Profit after taxation attributable to equity owners of the parent 4,768,638 4,054,181
Basic Earnings per share
From continuing operations 29.96p 28.01p
From profit for year 29.96p 25.59p
From discontinued operations - (2.42p)
Diluted Earnings per share
From continuing operations 29.20p 27.56p
From profit for year 29.20p 25.18p
From discontinued operations - (2.38p)
Consolidated statement of comprehensive income
for the year ended 31 March 2014
Unaudited2014 Unaudited2014 Audited2013 Audited2013
£ £ £ £
Profit for the year 4,768,638 4,054,181
Other comprehensive income, net of tax
Foreign exchange differences (301,900) 180,620
Actuarial profit/(loss) on retirement benefit obligations 3,393,000 (1,768,000)
Deferred tax on actuarial (profits)/losses (678,600) 406,640
Other comprehensive income for the year net of taxation attributable to equity owners of the parent 2,412,500 (1,180,740)
Total comprehensive income for the year 7,181,138 2,873,441
Consolidated statement of financial position
for the year ended 31 March 2014
Unaudited2014 Unaudited2014 Audited2013 Audited2013
£ £ £ £
Assets
Non-current assets
Property, plant and equipment 4,936,710 5,094,035
Investment properties 3,450,000 3,450,000
Development costs 6,188,255 4,674,421
Goodwill 3,512,305 3,512,305
Deferred tax asset 1,270,976 2,737,409
19,358,246 19,468,170
Current assets
Inventories 1,129,051 1,692,599
Trade receivables and prepayments 3,388,003 2,522,168
Current tax assets 282,667 138,720
Cash and cash equivalents 11,373,483 9,322,957
16,173,204 13,676,444
Non-current assets classified as held for sale properties 100,168 109,977
Total assets 35,631,618 33,254,591
Liabilities
Current liabilities
Bank loans and overdrafts - 338,267
Trade and other payables 2,508,599 3,308,282
Current tax liabilities 274,129 56,851
2,782,728 3,703,400
Non-current liabilities
Deferred tax liabilities 2,224,517 2,063,299
Retirement benefit obligation 2,698,000 6,122,000
4,922,517 8,185,299
Total liabilities 7,705,245 11,888,699
Net assets 27,926,373 21,365,892
Capital and reserves attributable to equity owners of the parent
Share capital 798,046 793,630
Share premium 5,069,921 4,977,531
Share-based payments reserve 327,130 171,199
Foreign exchange reserve 211,632 513,532
Accumulated profits 21,519,644 14,910,000
Total shareholders' equity 27,926,373 21,365,892
Consolidated cash flow statement
for the year ended 31 March 2014 Unaudited2014 Restated Audited2013
£ £
Operating activities
Net profit before taxation (continuing operations) 5,791,705 5,454,209
Net profit/(loss) before taxation (discontinued operations) 2,787 (383,133)
Net profit for the year before taxation 5,794,492 5,071,076
Adjustments for:
Depreciation 255,358 241,546
Amortisation of development costs 2,588,063 2,517,374
Movement in pensions deficit 31,000 (188,000)
Share-based payments 155,931 101,525
Finance costs - 34
Finance income (61,773) (24,668)
Decrease in working capital (1,109,739) (163,686)
Cash flows from operating activities 7,653,332 7,555,201
Income tax paid (204,593) (70,620)
Net cash flows from operating activities 7,448,739 7,484,581
Investing activities
Purchase of property, plant and equipment (102,995) (179,448)
Investment in development costs (4,139,040) (3,048,481)
Disposal of property, plant and equipment 5,990 450
Finance income 61,773 24,668
Net cash flows from investing activities (4,174,272) (3,202,811)
Financing activities
Issue of ordinary shares 96,806 110,457
Dividend paid to shareholders (873,394) (630,584)
Finance costs - (34)
Decrease in bank loans and short-term borrowings (338,267) (2,162,164)
Net cash flows from financing activities (1,114,855) (2,682,325)
Increase/(decrease) in cash and cash equivalents 2,159,612 1,599,445
Movement in cash and cash equivalents:
At start of year 9,322,957 7,742,038
Increase in cash and cash equivalents 2,159,612 1,599,445
Effects of exchange rate changes (109,086) (18,526)
At end of year 11,373,483 9,322,957
Consolidated statement of changes in equity
for the year ended 31 March 2014
Foreign
Share Share Share-based exchange Accumulated
capital premium payments reserve profits Total
£ £ £ £ £ £
At 31 March 2012 788,117 4,872,587 108,085 332,912 12,809,352 18,911,053
Profit for year 4,054,181 4,054,181
Other comprehensive income net of taxes
Foreign exchange differences 180,620 180,620
Net actuarial loss recognised directly to equity (1,768,000) (1,768,000)
Deferred tax on actuarial losses 406,640 406,640
Total comprehensive income for year - - - 180,620 (1,361,360) (1,180,740)
788,117 4,872,587 108,085 513,532 15,502,173 21,784,494
Transactions with owners in their capacity as owners
Issue of ordinary shares 5,513 104,944 110,457
Dividend paid (630,584) (630,584)
Total transactions with owners in their capacity as owners 5,513 104,944 - - (630,584) (520,127)
Share-based payments in year 101,525 101,525
Cancellation/transfer of share-based payments (38,411) 38,411 -
At 31 March 2013 793,630 4,977,531 171,199 513,532 14,910,000 21,365,892
Profit for year 4,768,638 4,768,638
Other comprehensive income net of taxes
Foreign exchange differences (301,900) (301,900)
Net actuarial profit recognised directly to equity 3,393,000 3,393,000
Deferred tax on actuarial profit (678,600) (678,600)
Total comprehensive income for year - - - (301,900) 7,483,038 7,181,138
793,630 4,977,531 171,199 211,632 22,393,038 28,547,030
Transactions with owners in their capacity as owners
Issue of ordinary shares 4,416 92,390 96,806
Dividend paid (873,394) (873,394)
Total transactions with owners in their capacity as owners 4,416 92,390 - - (873,394) (776,588)
Share-based payments in year 155,931 155,931
At 31 March 2014 798,046 5,069,921 327,130 211,632 21,519,644 27,926,373
Notes to the financial statements
1. Segmental analysis
Reported segments and their results in accordance with IFRS 8, are based on
internal management reporting information that is regularly reviewed by the
chief operating decision maker (C. A. Gurry). The measurement policies the
Group uses for segmental reporting under IFRS 8 are the same as those used in
its financial statements.
Information about revenue, profit/loss, assets and liabilities
Unaudited2014 Audited2013
Semiconductor Semiconductor
Equipment components Group Equipment components Group
£ £ £ £ £ £
Revenue
By origination 282,275 39,757,907 40,040,182 589,919 40,493,752 41,083,671
Inter-segmental revenue - (15,364,248) (15,364,248) - (15,845,732) (15,845,732)
Total segmental revenue 282,275 24,393,659 24,675,934 589,919 24,648,020 25,237,939
Segmental result 2,778 5,729,941 5,732,719 (383,207) 5,399,649 5,016,442
Finance expense - (34)
Finance income 61,773 54,668
Income tax (1,025,854) (1,016,895)
Profit after taxation 4,768,638 4,054,181
Assets and liabilities
Segmental assets - 30,527,807 30,527,807 273,128 26,545,357 26,818,485
Unallocated corporate assets
Investment properties 3,450,000 3,450,000
Properties held for sale 100,168 109,977
Deferred taxation 1,270,976 2,737,409
Current tax receivable 282,667 138,720
Consolidated total assets 35,631,618 33,254,591
Segmental liabilities - 2,508,599 2,508,599 228,325 3,079,957 3,308,282
Unallocated corporate liabilities
Deferred taxation 2,224,517 2,063,299
Current tax liability 274,129 56,851
Bank loans and overdrafts - 338,267
Retirement benefit obligation 2,698,000 6,122,000
Consolidated total liabilities 7,705,245 11,888,699
Other segmental information
Unaudited2014 Audited2013
Semiconductor Semiconductor
Equipment components Group Equipment components Group
£ £ £ £ £ £
Property, plant and equipment additions - 102,995 102,995 - 179,448 179,448
Development cost additions - 4,139,040 4,139,040 58,964 2,989,517 3,048,481
Depreciation 254 255,104 255,358 1,120 240,426 241,546
Amortisation - 2,588,063 2,588,063 171,073 2,346,301 2,517,374
Other non-cash income - 31,000 31,000 - 188,000 188,000
Inter-segmental transfers or transactions are entered into under commercial
terms and conditions appropriate to the location of the business entity whilst
considering that the parties are related. On 13 August 2013 Radio Data
Technology Limited which represents 100% of the equipment segment went into
voluntary liquidation and consequently after that date the Group has only one
segment.
Geographical information
UK Germany Americas Far East Total
£ £ £ £ £
Year ended 31 March 2014 - unaudited
Revenue by origination 12,573,992 11,929,768 5,856,202 9,680,220 40,040,182
Inter-segmental revenue (5,826,088) (9,538,160) - - (15,364,248)
Revenue to third parties 6,747,904 2,391,608 5,856,202 9,680,220 24,675,934
Property, plant and equipment 4,751,764 67,876 114,550 2,520 4,936,710
Investment properties - 3,450,000 - - 3,450,000
Property held for sale - - 100,168 - 100,168
Goodwill - 3,512,305 - - 3,512,305
Development cost 2,376,561 3,811,694 - - 6,188,255
Total assets 25,273,155 6,926,066 1,491,191 1,941,206 35,631,618
Year ended 31 March 2013 - audited
Revenue by origination 13,383,113 11,402,649 6,258,588 10,039,321 41,083,671
Inter-segmental revenue (6,244,716) (9,601,016) - - (15,845,732)
Revenue to third parties 7,138,397 1,801,633 6,258,588 10,039,321 25,237,939
Property, plant and equipment 4,887,586 60,187 136,348 9,914 5,094,035
Investment properties 3,450,000 - - - 3,450,000
Property held for sale - - 109,977 - 109,977
Goodwill - 3,512,305 - - 3,512,305
Development cost 1,960,306 2,714,115 - - 4,674,421
Total assets 25,088,461 5,135,191 1,404,040 1,626,891 33,254,591
2. Revenue(continuing operations) Unaudited2014 Audited2013
£ £
Geographical classification of turnover (by destination):
United Kingdom 823,860 803,143
Rest of Europe 4,325,112 3,762,365
Far East 12,386,107 12,932,301
Americas 6,263,037 6,383,848
Others 595,543 766,363
24,393,659 24,648,020
3. Dividend paid and proposed
It is proposed to pay a dividend of 6.25p per Ordinary Share of 5p in respect
of the year end 31 March 2014 (2013: 5.5p per Ordinary Share of 5p).
4. Income tax (continuing operations)
The Directors consider that tax will be payable at varying rates according to
the country of incorporation of a subsidiary and have provided on that basis.
Unaudited2014 Audited2013
£ £
Current tax
UK corporation tax on results of the period (255,646) (127,203)
Adjustment in respect of previous periods (44,945) (15,346)
(300,591) (142,549)
Foreign tax on results of the period 369,860 391,332
Foreign tax - adjustment in respect of previous periods (6,372) (8,783)
Total current tax 62,897 240,000
Deferred tax
Current period movement 965,352 734,138
Adjustments to deferred tax charge in respect of previous periods (5,180) 44,108
Total deferred tax 960,172 778,246
Tax charge on profit on ordinary activities 1,023,069 1,018,246
5. Earnings per ordinary 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.
Unaudited
Audited
Weighted Weighted
average average
number Profit per number Profit per
Profit of shares share Profit of shares share
2014 2014 2014 2013 2013 2013
£ Number p £ Number p
Basic earnings per share 4,768,638 15,917,895 29.96 4,054,181 15,841,435 25.59
Diluted profit per share
Basic earnings per share 4,768,638 15,917,895 29.96 4,054,181 15,841,435 25.59
Dilutive effect of share options - 414,692 (0.76) - 256,941 (0.41)
Diluted earnings per share 4,768,638 16,332,587 29.20 4,054,181 16,098,376 25.18
6. Investment properties
Investment properties are revalued at each discrete period end by the
directors and every third year by independent Chartered Surveyors on an open
market basis. No depreciation is provided on freehold investment properties or
on leasehold investment properties. In accordance with IAS 40, gains and
losses arising on revaluation of investment properties are shown in the income
statement. At 31 March 2012 the investment properties were professionally
valued by Everett Newlyn, Chartered Surveyors and Commercial Property
Consultants. The directors do not consider that the properties require a
change in valuation at 31 March 2014 having considered their fair value.
7. Analysis of cash flow movement in net debt
The cash flow below is a combination of the actual cash flow and the exchange
movement.
AuditedNet cash at Exchange UnauditedNet cash at
1 April 2013 Cash flow movement 31 March 2014
£ £ £ £
Cash and cash equivalents 9,322,957 2,159,612 (109,086) 11,373,483
Bank loans and overdrafts (338,267) 338,267 - -
8,984,690 2,497,879 (109,086) 11,373,483
8. Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with foreign
currencies and customer dependency. With the majority of the Group's earnings
being linked to the US Dollar a decline in this currency will have a direct
effect on revenue, although since the majority of the cost of sales are also
linked to the US Dollar, this risk is reduced at the gross profit line.
Additionally, though the Group has a very diverse customer base in certain
market 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 and geographical change. The Group's ability to
respond to many competitive factors including, but not limited to pricing,
technological innovations, product quality, customer service, 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 consolidated financial statements, prepared in accordance
with IFRS as adopted by the EU give a true and fair view of the assets,
liabilities, financial position of the company and the undertakings included
in the consolidation taken as a whole; and
b. the Chairman and Managing Director's statement and operating and
financial review includes 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. Significant accounting policies
The accounting policies used in preparation of the annual results announcement
are the same accounting policies set out in the year ended 31 March 2013
financial statements.
11. Discontinued operations
On 13 August 2013 Radio Data Technology Ltd went into voluntary 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:
Unaudited2014 Audited2013
£ £
Revenue 282,275 589,919
Cost of sales (171,239) (361,066)
Gross profit 111,036 228,853
Distribution and administration costs (113,978) (612,510)
(2,942) (383,657)
Other income 5,720 450
2,778 (383,207)
Finance Income 9 74
Profit/(loss) before taxation 2,787 (383,133)
Taxation (2,785) 1,351
Profit/(loss) from discontinued operations 2 (381,782)
12. General
The results for the year have been prepared using the recognition and
measurement principles of international financial reporting standards as
adopted by the EU.
The audited financial information for the year ended 31 March 2013 is based on
the statutory accounts for the financial year ended 31 March 2013 that have
been filed with the Registrar of Companies. The auditor reported on those
accounts: their report was (i) unqualified, (ii) did not include references to
any matters to which the auditor drew attention by way of emphasis without
qualifying the reports and (iii) did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2014 are expected to be
finalised and signed following approval by the board of directors on 20 June
2014 and delivered to the Registrar of Companies following the Company's
annual general meeting on 30 July 2014.
The financial information contained in this announcement does not constitute
statutory accounts for the year ended 31 March 2014 or 2013 as defined by
Section 434 of the Companies Act 2006.
A copy of this announcement can be viewed on the company website
http://www.cmlmicroplc.com.
13. Approval
The Directors approved this annual results announcement on 09 June 2014.
This information is provided by RNS
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