TIDMCML
RNS Number : 8727H
CML Microsystems PLC
13 June 2017
13 June 2017
CML Microsystems Plc
("CML" or "the Group")
Full Year Results
CML Microsystems Plc, which designs, manufactures and markets
mixed-signal and Radio Frequency (RF) semiconductors, primarily for
global communication and solid state storage markets, announces its
Full Year Results for the year ended 31 March 2017.
Financial Highlights
The full year results include eight months of contribution from
the Sicomm acquisition
-- Group revenues increased 22% to GBP27.74m (2016: GBP22.83m)
-- Gross profit up 22% to GBP19.82m (2016: GBP16.25m)
-- Profit before tax up 27% to GBP4.21m (2016: GBP3.32m)
-- Basic EPS up 28% to 23.09p (2016: 18.03p)
-- Strong operating cashflow. Net cash reduced to GBP12.45m (2016: GBP13.60m), following:
o Net cash spend of GBP3.58m on acquisition of Sicomm;
o Share buy back totalling GBP0.67m at a price of GBP3.70 per
share; and
o Dividend payment in respect of 2016 of GBP1.13m
-- Recommended final dividend increased to 7.4p (2016: 7.0p)
Operational Highlights
-- Storage 46% of group revenue
o Revenue up 9% to GBP12.69m (2016: GBP11.65m)
o Enlarged product range now includes USB, SD, SATA and MMC
interface technologies
o Developed an Applications Programmers Interface (API) enabling
customers to design their own proprietary security or IoT
solutions
o Added Micron Technology Inc., to the customer list
-- Communications 53% of group revenue
o Revenue up 36% to GBP14.64m (2016: GBP10.78m)
-- Sicomm contribution being GBP1.66m
o Growth exceeded internal expectations, led by organic growth
and the significant contribution from Sicomm
o New senior management and operational personnel recruited
o Global launch of first wireless power amplifier IC - opens new
application areas such as meter reading and RFID
Chris Gurry, Group Managing Director of CML Microsystems
commented on the results: "These financial results show the effects
of the Group's long term focus on research and development and the
strength of our customer relationships. The lead times on new
products reaching meaningful revenue generation are typically long
and the majority of revenues in this period relate to designs from
some years ago. Therefore, as more recent new product design-ins
start to reach production we would expect to see further revenue
advances.
"Bookings through the latter part of the financial year were
good and momentum into the new financial year is encouraging,
although we are starting with a higher cost base reflecting further
investments made in people and products for sustainable, long term
growth. With a strong balance sheet, healthy cash balances and a
clear and defined position in the markets in which we operate, we
look forward to the year ahead with confidence. Board expectations
are for a further advance in profitability to 31 March 2018."
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Tel: +44 (0)1621 875
Director 500
Neil Pritchard, Group
Financial Director
Cenkos Securities plc Tel: +44 (0)20 7397 8900
Alex Aylen (Sales)
Max Hartley (Corporate
Finance)
SP Angel Corporate Finance Tel: +44 (0)20 3463 2260
LLP
Jeff Keating
Alma PR
Josh Royston Tel: +44 (0)7780 901979
Robyn Fisher Tel: +44 (0)7540 706191
About CML Microsystems PLC
CML designs and develops semiconductors for the industrial
storage and communications markets. The Group utilises a
combination of in-house and outsourced manufacturing and has
trading operations in Europe, the Far East and USA. CML targets
niche 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 telecoms equipment providers and
industrial product manufacturers.
The spread of its customers and products 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 ever-increasing trend towards solid state
storage devices in the commercial and industrial sectors, the
upgrading of telecoms infrastructure around the world and the
growing prevalence of private commercial communications networks
for voice and/or data communications linked to the industrial
internet of things (IIoT).
The Group is cash-generative, has no borrowings and is dividend
paying.
CHAIRMAN'S STATEMENT
Introduction
Investment is a cornerstone of the CML Group's sustainable
growth strategy and has once again been a major theme for CML over
the past year. On the one hand the Group has benefited from prior
years' focus on Research & Development spend, operational
infrastructure including additional staff and from a part year
contribution from our largest single investment, the acquisition of
Sicomm. On the other hand, we have made further investments to
ensure that the Group's prosperity continues long into the future.
The platform for this investment lies in the Group's strategic
focus on niche markets that we know and understand and where the
quality of our products and our competitive advantages enable us to
achieve strong gross margins.
In last year's report I mentioned the intended acquisition of
Sicomm, which completed on 26 July 2016. I am pleased to inform
shareholders that the business has integrated successfully and the
benefits are already being seen. Sicomm has performed well this
year, and, as anticipated, it has given the Group greater access to
the Chinese market with strong local knowledge and customer
relationships. Further benefits will be seen in future years as the
opportunities increase for cross selling the Group's enlarged
product range. Acquisitions will continue to form part of our
strategy, coupled with a strong focus on organic growth, and the
Board remains alert to opportunities that meet our strict
criteria.
Results and Dividend
Results for the year were encouraging and include eight months
of the Sicomm business acquired in July. Revenues increased by 22%
to GBP27.74 million (2016: GBP22.83m), considerably ahead of the
expectations set at the start of the year. Profit before taxation
increased by 27% and basic EPS increased by 28%. Operating cash
generation, always considered of high importance, continues to be
very healthy. Total cash balances at 31 March 2017 were GBP12.45m
(2016: GBP13.60m) after a net cash spend of GBP3.58m on the
acquisition of Sicomm, GBP0.67m spent on a share buy back at a
price of GBP3.70 per share and a dividend payment relating to the
prior financial year of GBP1.13m. The cash generation is
particularly pleasing given the levels of ongoing investment in the
Group, with record investment in research and development being
made during the year.
The Board is pleased to recommend an improved final dividend of
7.4p (2016: 7.0p) which, if approved, will be paid on 7 August 2017
to shareholders whose names appear on the register at the close of
business on 7 July 2017 with an ex-dividend date of 6 July 2017.
The dividend is in line with the Company's progressive policy and
reflects the performance for the year, coupled with our confidence
for the future whilst retaining a strong balance sheet and
sufficient cash to take advantage of opportunities that may present
themselves.
Management
Throughout the course of the year further appointments were made
globally to strengthen the management team and to provide the
necessary infrastructure and support to enable the Group to achieve
its growth ambitions. I am pleased to report that the Board is
confident that we now have the majority of the team in place to
deliver those ambitions.
On behalf of the Board I would also like to thank Ron Shashoua
for his long and dedicated service to CML. Ron joined the Company
in 1996 as a non-executive Director and has been a very active and
dedicated contributor to the Group's progress right up to his
retirement at the end of March 2017. At the same time I would like
to welcome Geoff Barnes our new non-executive Director who joined
us on 1 April 2017. Geoff's experience and expertise should
strengthen the Board and assist in taking the Group forward.
Behind all of our successes are the highly skilled and talented
employees around the world that continue to strive to achieve our
goals. On behalf of the Board I would like to thank them for their
ongoing dedication and passion. I would also like to officially
welcome those employees who have joined us through Sicomm, thank
them for their contribution to date and let them know how much we
all look forward to a continued strong relationship.
Prospects and Outlook
The Board's strategy of investing for the future is bearing
fruit and we will continue along that path. As well as record
investment in research and development, CML has invested in further
headcount to create the right structure for further success.
Obviously this adds to the overheads in the short term but is
necessary to deliver long term sustainable growth.
Last year's acquisition of Sicomm has strengthened the product
range and solidified our position in the Communications market.
This I am sure will enhance our organic growth and we continue to
review acquisition opportunities that will complement our skills,
market knowledge and enlarged geographical reach.
CML has a strong position in its chosen markets with a clearly
defined strategy for growth and a highly capable management team.
Coupled with a strong balance sheet and underpinned by good levels
of order bookings through the second half of the year just
finished, this gives the Board confidence for the financial year
just started and beyond.
Nigel Clark
Group Non-Executive Chairman
OPERATIONAL AND FINANCIAL REVIEW
Introduction
I'm pleased to be able to report on another solid year, with
progress made across most aspects of the business and further
building blocks put in place for the future. The momentum
experienced in the first half of the year continued throughout and
we began to see the benefits of the ongoing operational and product
development investments made. We are well positioned in our chosen
niche markets, namely Communication and Storage, with the
Communications sector making a particularly pleasing impact. The
Sicomm acquisition which completed in July 2016 has improved our
footprint in China and added local expertise in an important
market. Integration has gone well and the contribution to the Group
for the eight months since acquisition has been encouraging, both
financially and culturally. Further senior management appointments
have been made within our UK and US business units and the Group's
geographic footprint expanded through the opening of a sales and
support office in Orange County, California. Coupled with the
operational changes made at the end of the prior financial year, we
believe we now have an enhanced structure in place to execute our
strategy.
Financial Review
The Group's financial performance includes an eight month
contribution from Sicomm, commencing August 2016. Total revenues
for the year amounted to GBP27.74m (2016: GBP22.83m) with the
contribution from Sicomm being GBP1.66m. Gross margins remained
consistent leading to a 22% increase in gross profit to GBP19.82m
(2016: GBP16.25m). The Group did benefit from currency movements
through the year although it continues to have a somewhat natural
hedge in respect of foreign currency exchange rate exposure.
The main driver for organic revenue growth was the continued
increase in shipments to existing long-term customers, with a
significant number of our top 40 customers increasing their spend.
This growth was augmented by the addition of Sicomm, a currency
tailwind and an element of revenue from the effects of a
last-time-buy programme relating to a number of legacy
Communications products.
Overall revenue grew across all major geographic regions
although the strongest advance was made in the Far East region
which includes predominantly China & Hong Kong, Japan, South
Korea, Singapore, Taiwan and Malaysia. Far East revenues grew by
26% and now account for approximately 49% of the Group total.
Revenue from the Americas grew by 19% with European revenues ahead
by 16%.
As anticipated, distribution and administration costs increased
to GBP16.12m (2016: GBP13.27m). The three main factors were higher
amortisation of R&D activities at GBP4.10m (2016: GBP3.33m),
higher direct staff costs resulting from investments made in new
personnel and associated restructuring activities and the addition
of Sicomm to the Group. Additionally, costs associated with onerous
lease provisioning were balanced by the positive effects of foreign
exchange. The total R&D spend for the year amounting to
GBP6.82m (2016: GBP6.09m) rose 12% and equates to 25% of Group
revenues.
Other operating income for the year amounted to GBP0.61m (2016:
GBP0.41m) and resulted from rental income obtained from
ex-operational property assets along with grant income received
from R&D activities. This increase drove profit from operations
up 27% to GBP4.31m (2016: GBP3.39m).
After adjusting for the combined effect of share-based payments
and finance income, a profit before taxation figure of GBP4.21m was
achieved (2016: GBP3.32m).
Adjusted EBITDA grew by 27% to GBP8.84m (2016: GBP6.97m).
The overall tax charge for the year was slightly lower at
GBP0.34m (2016: GBP0.40m) reflecting the continuing benefit of UK
R&D tax credits along with the additional effect of accumulated
tax losses within the acquired Sicomm business. Profit after tax
increased to GBP3.87m and represented an increase of 32% year on
year (2016: GBP2.93m).
Cash reserves at 31 March 2017 reduced to GBP12.45m (31 March
2016: GBP13.60m) representing a pleasing result following
significant cash outflows for the Sicomm acquisition, a dividend
payment of GBP1.13m for the prior financial year, GBP0.67m spent on
the purchase and cancellation of Company shares and a record
R&D investment of GBP6.82m. The cash balance includes a
conditional customer prepayment of GBP1.50m (2016: GBP1.39m)
against future product purchases.
Inventory levels were higher at GBP2.15m (2016: GBP1.57m) with
the increase mostly attributable to the Sicomm acquisition.
Basic earnings per share advanced 28% to 23.09p (2016:
18.03p).
Strategy Overview
Our semiconductor business continues to be focused on two
important niche market areas, industrial storage applications and
the industrial communications market, where our proprietary IP
along with the quality and reliability of our technology sets us
apart from our peers and makes us an integral part of our
customers' products. We have developed a strong reputation in each
of these sectors and have a world-class customer base and
established sales network which has been improved further through
the acquisition of Sicomm.
The on-going demand for increasing amounts of data to be
delivered faster and stored more reliably and securely continues to
drive demand for our products. We are committed to generating a
diverse revenue stream across a broad range of customers and
products. We are, to our customers, a single-source supplier,
meaning that once designed in, the displacement of our chips would
require end-product redesign.
Ongoing investment in R&D remains a key pillar of our growth
strategy and the benefits are already being seen. This focus on
developing new products should lead to design wins with both new
and existing customers. This will enable us to improve our market
share as well as increase our total addressable market and, we
believe, deliver significant revenue generation. We continue to
seek acquisition opportunities which meet our strict criteria to
complement our ongoing organic growth.
Storage
The main element of our strategy within Storage is to ensure
that the Group continues to increase business with our existing
customers whilst simultaneously adding new customers through
R&D investment. Our focus has been on expanding our product
portfolio to include all major interface standards used within our
target industrial end-markets and interoperation with all relevant
third-party Flash Memory devices from the global tier 1 flash
memory suppliers.
We have transitioned from a narrow "Controller" product
portfolio with only CompactFlash as the available interface, to an
enlarged product range that now also includes USB, SD, SATA &
MMC interface technologies. Additionally, we have developed an
Application Programmers Interface (API) and licensed it to a number
of new customers enabling them to design their own proprietary
security or IoT solutions in the knowledge they are built upon our
highly reliable standard Controller solutions.
Storage performed well through the year with revenue increasing
by 9% to GBP12.69m (2016: GBP11.65m). Management continued to focus
firmly on sustainable growth opportunities, occasionally at the
expense of a short-term gain. Separately, one or two customers
reported being affected by the tightening of their NAND flash
supply through the second half although it is not possible to judge
the overall impact, if any, on the numbers reported. Importantly,
from a new business opportunity perspective, the momentum
experienced in the first half of the year continued into the second
six months assisted by the enlarged and increasingly attractive
product portfolio. Particularly pleasing was the addition of Micron
Technology Inc., a world leader in innovative memory solutions, to
our customer list through our wholly owned subsidiary, Hyperstone,
which was announced in March 2017. Hyperstone's USB 3.1 Flash
Memory controller solution, U9, has been designed into Micron's new
eU500 embedded USB module, an embedded solid state storage solution
aimed at networking, telecoms and Industrial Internet of Things
(IIoT) markets. This followed on from the addition in the first
half of the year of our proprietary hyMap technology to the USB
product range which enables our industrial customers to use memory
that has a lower "cost per bit". The contribution from the USB
controller product line started to become meaningful, as
expected.
Evolution of the hyMap technology continued both in terms of
functionality offered and flash memory compatibility. Whilst the
objective is to expand the product portfolio and widen the
addressable market, a level of R&D spend is required to refresh
the product portfolio periodically. In that respect a new Compact
Flash controller solution was sampled to initial customers in
financial Q4 ahead of the full market launch planned for the first
half of the new financial year.
Encouragingly, order book visibility for Storage products
improved a little providing greater levels of comfort. However,
whether this is indicative of a long term trend or merely the
current state of the market remains unclear.
Communications
During the year under review we amalgamated the reporting of the
Wireless and Wireline market sectors under the single sector of
Communications. Our strategy within Communications is to grow
customer share and expand the customer base through R&D
investments that increase the functionality that our IC's deliver
within the customers' end product. This includes growing the
product portfolio to include IC's with performance characteristics
intended to widen the addressable market.
The enlarged organic product range has grown further through the
acquisition of Sicomm culminating in the ability for a single
customer radio design to potentially incorporate up to five
separate Group IC's. This has the added benefit of generating
increased efficiency across our sales and marketing activities and,
with the aid of focused demonstration platforms, will help our
customers get their own products to market faster.
Across the year, we delivered a pleasing performance and
strengthened our position in the end markets addressed. Building
further upon the performance reported at the interim stage,
revenues for the full year increased to GBP14.64m, representing a
gain of 36% against the comparable 12 month period (2016:
GBP10.78m). This growth exceeded internal expectations and was
possible through the combined effects of organic growth, a level of
"last time buy" activity and the significant contribution from
Sicomm whose revenues are wholly reported under the Communications
sector.
A number of organisational reporting adjustments and resource
level improvements were made throughout the year with a specific
focus on Communications activities. This resulted in new senior
management and operational personnel being recruited in the UK and
USA. These changes were a continuation of the operational
investments conveyed at the interim stage and have given the
business increased focus and a scalable operating structure.
In total we released three new products across the year
culminating in February 2017 with the global launch of our first
wireless power amplifier IC which has generated a good level of
interest and opens new application areas such as meter reading and
RFID. Two additional product releases that were planned for the
final quarter of the year experienced delays due to internal
qualification processes and extended engineering development
timescales. Whilst this is somewhat disappointing, these two
products are expected to be released to market during the first
half of the year to 31 March 2018.
For the year ahead we are anticipating continuing high levels of
R&D investment towards new roadmap products. At the same time,
we will be enhancing our silicon development methodologies to
ensure resources and activities are performance optimised for
evolving customer needs.
Market Developments
Solid long-term underlying growth trends exist within the two
main industrial application areas addressed with the principal
factor for both being the persistent demand for increasing amounts
of data, to be transmitted and stored more quickly and
securely.
The industrial data storage market has several specific areas
which are exhibiting exciting opportunities for which we have
either secured design wins or are at the somewhat earlier stage of
qualifying products with our customers. These areas include the
telecoms/network infrastructure market, industrial automation,
various security applications and the in-vehicle infotainment
market.
A number of the major original equipment manufacturers (OEMs) or
tier 1 suppliers to those OEMs in each of these markets are our
customers meaning we are well positioned to benefit from the
growing demand.
Within the Communications market, growth areas include: the
transition to higher-capacity digital networks within voice-centric
markets and, in data-centric markets, the increasing data
throughput requirements within terrestrial and satellite
communications applications. The latter is required to meet the
needs of the growing Machine to Machine (M2M) and the Industrial
Internet of Things sectors (IIoT).
Again, we are already suppliers to, or working with, many of the
leading OEMs in these areas and believe we are well placed for
future growth.
Customer dependency across the year as a whole was broadly
unchanged against the prior year. Two customers contributed greater
than 10% to Group revenues with a combined contribution of
approximately 25%. All other customers were below the 5%
threshold.
Operational Developments
Sicomm acquisition and integration
The acquisition of Sicomm which completed in July 2016 was a
significant milestone for the Group. Building on our existing
capability in the region, the addition of Sicomm greatly enhances
our footprint in China, providing us with a talented workforce with
an in-depth knowledge of the dynamics of a key market. The
integration has progressed well and we are particularly pleased
with the levels of interaction across our global teams. Sicomm has
delivered a good performance in line with our expectations. As the
opportunities for cross-selling of product lines increases and as
we collaborate further in both development and pipeline
opportunities we expect to see further benefits.
The Group remains alert to acquisition opportunities that can
complement our existing operations and which meet our strict
criteria. We believe that there is significant organic growth to be
achieved and can therefore afford to be selective.
Investment in People
We continued to enhance our operating structure through further
investment in people across our operations globally. Customer
service levels are extremely important to CML and we now have the
right teams in place to be able to support our increasing levels of
engagement as well as to support future growth initiatives.
These additional hires were across a range of skills, including
senior management, sales, marketing and engineering support. The
opening of an office in Orange County, California, during February
improved our geographic coverage and is expected to further improve
our service levels.
Outlook
These financial results show the effects of the Group's long
term focus on research and development and the strength of our
customer relationships. The lead times on new products reaching
meaningful revenue generation are typically long and the majority
of revenues in this period relate to designs from some years ago.
Therefore as more recent new product design-ins start to reach
production we would expect to see further revenue advances.
Bookings through the latter part of the financial year were good
and momentum into the new financial year is encouraging, although
we are starting with a higher cost base reflecting the investments
made in people and products. With a strong balance sheet, healthy
cash balances and a clear and defined position in the markets in
which we operate, we look forward to the year ahead with
confidence. Board expectations are for a further advance in
profitability to 31 March 2018.
Chris Gurry
Group Managing Director
Consolidated income statement for the year ended 31 March
2017
Unaudited Audited
2017 2016
Notes GBP'000 GBP'000
------------------------------------- ----- --------------------- --------
Continuing operations
Revenue 1,2 27,737 22,833
------------------------------------- ----- --------------------- --------
Consisting of:
Revenue - excluding acquisition 26,076 22,833
Revenue - acquisition 1,661 -
------------------------------------- ----- --------------------- --------
Cost of sales (7,922) (6,580)
------------------------------------- ----- --------------------- --------
Gross profit 19,815 16,253
Distribution and administration
costs (16,116) (13,272)
------------------------------------- ----- --------------------- --------
3,699 2,981
Other operating income 614 405
------------------------------------- ----- --------------------- --------
Profit from operations 4,313 3,386
Share--based payments (139) (117)
------------------------------------- ----- --------------------- --------
Profit after share--based payments 4,174 3,269
Finance income 34 55
------------------------------------- ----- --------------------- --------
Profit before taxation 4,208 3,324
------------------------------------- ----- --------------------- --------
Consisting of:
Profit before taxation - excluding
acquisition 3,728 3,324
Profit before taxation - acquisition 480 -
------------------------------------- ----- --------------------- --------
Income tax expense 4 (341) (399)
------------------------------------- ----- --------------------- --------
Profit after taxation 3,867 2,925
------------------------------------- ----- --------------------- --------
Profit after taxation attributable
to equity owners of the parent 3,867 2,925
------------------------------------- ----- --------------------- --------
Basic earnings per share
From profit for year 5 23.09p 18.03p
------------------------------------- ----- --------------------- --------
Diluted earnings per share
From profit for year 5 22.84p 17.94p
------------------------------------- ----- --------------------- --------
Adjusted EBITDA
Adjusted EBITDA for year 68,840 6,970
------------------------- ----- -----
Consisting of:
Adjusted EBITDA - excluding acquisition 6 8,247 6,970
Adjusted EBITDA - acquisition 6 593 -
---------------------------------------- -------------------- -----
Consolidated statement of total comprehensive income for the
year ended 31 March 2017
Unaudited Unaudited Audited Audited
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- ------- -------
Profit for the year 3,867 2,925
Other comprehensive income, net
of tax:
Items that will not be reclassified
subsequently to profit or loss:
Actuarial (loss)/gain on retirement
benefit obligations (1,048) 1,570
Deferred tax on actuarial loss/(gain) 178 (283)
---------------------------------------- --------- --------- ------- -------
Items reclassified subsequently
to profit or loss upon derecognition:
Foreign exchange differences 1,068 584
---------------------------------------- --------- --------- ------- -------
Other comprehensive income for
the year net of taxation attributable
to equity owners of the parent 198 1,871
---------------------------------------- --------- --------- ------- -------
Total comprehensive income for
the year attributable to the equity
holders of the parent 4,065 4,796
---------------------------------------- --------- --------- ------- -------
Consolidated statement of financial position as at 31 March
2017
Unaudited Unaudited Audited Audited
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- --------- ------- -------
Assets
Non--current assets
Goodwill 9,306 3,512
Other intangible assets arising
on acquisition 1,339 -
Property, plant and equipment 5,330 5,171
Investment properties 3,550 3,550
Investments 85 -
Development costs 11,401 9,292
Deferred tax assets 1,419 893
---------------------------------------- ---------- --------- ------- -------
32,430 22,418
Current assets
Inventories 2,154 1,571
Trade receivables and prepayments 2,697 3,458
Current tax assets 971 830
Cash and cash equivalents 12,447 13,596
---------------------------------------- ---------- --------- ------- -------
18,269 19,455
--------------------------------------- ---------- --------- ------- -------
Total assets 50,699 41,873
---------------------------------------- ---------- --------- ------- -------
Liabilities
Current liabilities
Trade and other payables 5,757 4,190
Current tax liabilities 57 39
Provision - current 51 -
---------------------------------------- ---------- --------- ------- -------
5,865 4,229
Non--current liabilities
Deferred tax liabilities 3,692 3,001
Retirement benefit obligation 3,084 2,067
Provision - non current 423 -
---------------------------------------- ---------- --------- ------- -------
7,199 5,068
--------------------------------------- ---------- --------- ------- -------
Total liabilities 13,064 9,297
---------------------------------------- ---------- --------- ------- -------
Net assets 37,635 32,576
---------------------------------------- ---------- --------- ------- -------
Capital and reserves attributable to equity owners of the
parent
Share capital 843 813
Share premium 8,319 5,700
Capital redemption reserve 9 -
Treasury shares - own share reserve (190) (190)
Share--based payments reserve 504 388
Foreign exchange reserve 1,386 318
Accumulated profits 26,764 25,547
---------------------------------------- ---------- --------- ------- -------
Total shareholders' equity 37,635 32,576
---------------------------------------- ---------- --------- ------- -------
Consolidated cash flow statement for the year ended 31 March
2017
Unaudited Audited
2017 2016
GBP'000 GBP'000
----------------------------------------- --------- -------
Operating activities
Profit for the year before taxation 4,208 3,324
Adjustments for:
Depreciation 325 254
Amortisation of development costs 4,100 3,330
Amortisation of intangibles recognised
on acquisition 102 -
Movement in non-cash items (31) 13
Share--based payments 139 117
Movement in provisions 474 -
Finance income (34) (55)
Movement in working capital 1,745 317
------------------------------------------ --------- -------
Cash flows from operating activities 11,028 7,300
Income tax (paid)/received (224) 279
------------------------------------------ --------- -------
Net cash flows from operating activities 10,804 7,579
------------------------------------------ --------- -------
Investing activities
Purchase of acquisition, net of
cash acquired (3,576) -
Purchase of property, plant and
equipment (450) (443)
Investment in development costs (5,763) (5,356)
Receipt/(payment) of escrow cash
deposit 385 (331)
Disposal of property, plant and
equipment 17 -
Finance income 34 55
------------------------------------------ --------- -------
Net cash flows from investing activities (9,353) (6,075)
------------------------------------------ --------- -------
Financing activities
Issue of ordinary shares 25 -
Purchase of treasury shares - (190)
Purchase of own shares for cancellation (669) -
Dividend paid to shareholders (1,134) (1,118)
------------------------------------------ --------- -------
Net cash flows from financing activities (1,778) (1,308)
------------------------------------------ --------- -------
(Decrease)/increase in cash and
cash equivalents (327) 196
------------------------------------------ --------- -------
Movement in cash and cash equivalents:
At start of year 13,596 13,188
(Decrease)/increase in cash and
cash equivalents (327) 196
Effects of exchange rate changes (822) 212
------------------------------------------ --------- -------
At end of year 12,447 13,596
------------------------------------------ --------- -------
Consolidated statement of changes in equity for the year ended
31 March 2017
Capital Foreign
Share Share redemption Treasury Share--based exchange Accumulated
capital premium reserve shares payments reserve profits Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2015 -
audited 813 5,700 - - 287 (266) 22,437 28,971
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Profit for year 2,925 2,925
Other comprehensive income
net of taxes
Foreign exchange
differences 584 584
Net actuarial gain
recognised directly
to equity 1,570 1,570
Deferred tax on
actuarial gain (283) (283)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total comprehensive
income for year - - - - - 584 4,212 4,796
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
813 5,700 - - 287 318 26,649 33,767
Transactions with owners
in
their capacity as owners
Dividend paid (1,118) (1,118)
Purchase of treasury
shares (190) (190)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total transactions
with owners in their
capacity as owners - - - (190) - - (1,118) (1,308)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Share--based payments
in year 117 117
Cancellation/transfer
of share--based
payments (16) 16 -
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2016 -
audited 813 5,700 - (190) 388 318 25,547 32,576
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Profit for year 3,867 3,867
Other comprehensive
income net of taxes
Foreign exchange
differences 1,068 1,068
Net actuarial loss
recognised directly
to equity (1,048) (1,048)
Deferred tax on
actuarial loss 178 178
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total comprehensive
income for year - - - - - 1,068 2,997 4,065
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
813 5,700 - (190) 388 1,386 28,544 36,641
Transactions with owners
in their capacity as owners
Issue of ordinary
shares re acquisition 39 2,594 2,633
Issue of ordinary
shares - 25 25
Dividend paid (1,134) (1,134)
Share purchase for
cancellation (9) 9 (669) (669)
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Total transactions
with owners in their
capacity as owners 30 2,619 9 - - - (1,803) 855
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
Share--based payments
in year 139 139
Cancellation/transfer
of share--based
payments (23) 23 -
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
At 31 March 2017 -
unaudited 843 8,319 9 (190) 504 1,386 26,764 37,635
---------------------- ------- ------- ----------- -------- ------------ -------------- ----------- --------
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
Unaudited 2017 Audited 2016
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ------------- ------- ------------- -------
Total segmental revenue 27,737 27,737 22,833 22,833
---------------------------------- ------------- ------- ------------- -------
Consisting of:
Segmental revenue - excluding
acquisition 26,076 26,076 22,833 22,833
Segmental revenue - acquisition 1,661 1,661 - -
---------------------------------- ------------- ------- ------------- -------
Profit
Segmental result 4,174 4,174 3,269 3,269
---------------------------------- ------------- ------- ------------- -------
Consisting of:
Segmental result - excluding
acquisition 3,694 3,694 3,269 3,269
Segmental result - acquisition 480 480 - -
---------------------------------- ------------- ------- ------------- -------
Finance income 34 55
Income tax expense (341) (399)
---------------------------------- ------------- ------- ------------- -------
Profit after taxation 3,867 2,925
---------------------------------- ------------- ------- ------------- -------
Assets and liabilities
Segmental assets 44,759 44,759 36,600 36,600
------------- -------------
Unallocated corporate assets
Investment properties 3,550 3,550
Deferred tax assets 1,419 893
Current tax assets 971 830
---------------------------------- ------------- ------- ------------- -------
Consolidated total assets 50,699 41,873
---------------------------------- ------------- ------- ------------- -------
Segmental liabilities 6,231 6,231 4,190 4,190
------------- -------------
Unallocated corporate liabilities
Deferred tax liabilities 3,692 3,001
Current tax liabilities 57 39
Retirement benefit obligation 3,084 2,067
---------------------------------- ------------- ------- ------------- -------
Consolidated total liabilities 13,064 9,297
---------------------------------- ------------- ------- ------------- -------
Other segmental information
Unaudited 2017 Audited 2016
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------------- ------- ------------- -------
Property, plant and equipment
additions 450 450 443 443
--------------------------------- ------------- ------- ------------- -------
Development cost additions 5,763 5,763 5,356 5,356
--------------------------------- ------------- ------- ------------- -------
Depreciation 325 325 254 254
--------------------------------- ------------- ------- ------------- -------
Amortisation of development
costs 4,100 4,100 3,330 3,330
--------------------------------- ------------- ------- ------------- -------
Amortisation of acquired
intangibles 102 102 - -
--------------------------------- ------------- ------- ------------- -------
Other non--cash income/(expense) 31 31 (13) (13)
--------------------------------- ------------- ------- ------------- -------
Geographical information
The acquired Sicomm Group of Companies are included within the
'Far East' classification below.
UK Rest of Europe Americas Far East Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- -------------- -------- -------- -------
Year ended 31 March
2017 - unaudited
---------------------- ------- -------------- -------- -------- -------
Revenue to third
parties 6,744 4,856 6,047 10,090 27,737
---------------------- ------- -------------- -------- -------- -------
Property, plant and
equipment 5,056 243 16 15 5,330
---------------------- ------- -------------- -------- -------- -------
Investment properties 3,550 - - - 3,550
---------------------- ------- -------------- -------- -------- -------
Development costs 3,827 7,574 - - 11,401
---------------------- ------- -------------- -------- -------- -------
Goodwill - 3,512 - 5,794 9,306
---------------------- ------- -------------- -------- -------- -------
Other intangible
assets arising on
acquisition - - - 1,339 1,339
---------------------- ------- -------------- -------- -------- -------
Total assets 35,192 11,482 1,969 2,056 50,699
---------------------- ------- -------------- -------- -------- -------
Year ended 31 March
2016 - audited
Revenue to third
parties 5,037 4,082 4,858 8,856 22,833
---------------------- ------- -------------- -------- -------- -------
Property, plant and
equipment 4,997 143 12 19 5,171
---------------------- ------- -------------- -------- -------- -------
Investment properties 3,550 - - - 3,550
---------------------- ------- -------------- -------- -------- -------
Development costs 3,121 6,171 - - 9,292
---------------------- ------- -------------- -------- -------- -------
Goodwill - 3,512 - - 3,512
---------------------- ------- -------------- -------- -------- -------
Total assets 28,281 10,100 1,412 2,080 41,873
---------------------- ------- -------------- -------- -------- -------
2 Revenue
The geographical classification of business turnover (by destination)
is as follows:
Unaudited Audited
2017 2016
Continuing business GBP'000 GBP'000
---------------------------------------------------------------------- --------- -------
Europe 7,600 6,571
Far East 13,460 10,704
Americas 6,117 5,122
Others 560 436
---------------------------------------------------------------------- --------- -------
27,737 22,833
---------------------------------------------------------------------- --------- -------
3 Dividend - paid and proposed
It is proposed to pay a dividend of 7.4p per ordinary share of
5p in respect of the year ended 31 March 2017. During the year a
dividend of 7.0p per ordinary share of 5p was paid in respect of
the year ended 31 March 2016. It is proposed to pay the dividend,
if approved, on 7 August 2017 to shareholders registered on 7 July
2017 (2016: 29 July 2016 to shareholders registered on 24 June
2016).
4 Income tax expense
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.
Unaudited Audited
2017 2016
GBP'000 GBP'000
-------------------------------------------- --------- -------
Current tax
UK corporation tax on results of the
period (419) (501)
Adjustment in respect of previous
periods (1) -
-------------------------------------------- --------- -------
(420) (501)
Foreign tax on results of the period 511 433
Foreign tax - adjustment in respect
of previous periods - (2)
-------------------------------------------- --------- -------
Total current tax 91 (70)
-------------------------------------------- --------- -------
Deferred tax
Current period movement 272 453
Adjustments to deferred tax charge
in respect of previous periods (22) 16
-------------------------------------------- --------- -------
Total deferred tax 250 469
-------------------------------------------- --------- -------
Tax charge on profit on ordinary activities 341 399
-------------------------------------------- --------- -------
5 Earnings per share
Unaudited Audited
2017 2016
Basic earnings per share
From profit for year 23.09p 18.03p
From operations excluding acquisition 20.17p 18.03p
-------------------------------------- --------- -------
Diluted earnings per share
From profit for year 22.84p 17.94p
From operations excluding acquisition 19.95p 17.94p
-------------------------------------- --------- -------
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
shown below:
Unaudited 2017 Audited 2016
---------------------------------- ------------------------------------
Weighted Earnings Weighted Earnings
average number per average number per
Profit of shares share Profit of shares share
Basic earnings
per share GBP'000 Number p GBP'000 Number p
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Basic earnings
per share
- from profit
for year 3,867 16,745,457 23.09 2,925 16,219,037 18.03
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Basic earnings
per share
- from operations
excluding acquisition 3,377 16,745,457 20.17 2,925 16,219,037 18.03
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Basic earnings
per share 3,867 16,745,457 23.09 2,925 16,219,037 18.03
Dilutive effect
of share options - 183,699 (0.25) - 86,877 (0.09)
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
* from profit for year 3,867 16,929,156 22.84 2,925 16,305,914 17.94
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
Diluted earnings
per share
* from operations excluding acquisition 3,377 16,929,156 19.95 2,925 16,305,914 17.94
-------------------------------------------- ------- --------------- -------- ------- --------------- ----------
6 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 years presented:
Unaudited Audited
2017 2016
GBP'000 GBP'000
--------------------------------------- --------- -------
Profit after taxation (earnings) 3,867 2,925
Adjustments for:
Finance income (34) (55)
Income tax expense 341 399
Depreciation 325 254
Amortisation of development costs 4,100 3,330
Amortisation of intangibles recognised
on acquisition 102 -
Share-based payments 139 117
--------------------------------------- --------- -------
Adjusted EBITDA 8,840 6,970
--------------------------------------- --------- -------
7 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. Everett Newlyn, Chartered Surveyors and Commercial
Property Consultants professionally valued the investment
properties on the basis of open market value as at 31 March 2015.
The Directors do not consider that the present valuation has
materially changed as at 31 March 2017 having considered the local
property market.
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. Furthermore, the
Group does however have significant Euro--denominated fixed costs.
Additionally, though the Group has a very diverse customer base in
certain market sectors, key customers can represent a significant
amount of revenue. Key customer relationships are closely
monitored, however changes in buying patterns of a key customer
could have an adverse effect on the Group's performance.
Key risks of a non-financial nature
The Group is a small player operating in a highly competitive
global market that is undergoing continual and geographical change.
The Group's ability to respond to many competitive factors
including, but not limited to, pricing, technological innovations,
product quality, customer service, 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.
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 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 2016 financial statements.
10 Acquisition of Sicomm group of companies
Following the definitive agreement to acquire all its shares
announced on 27 May 2016, and having satisfied the principal
regulatory conditions and other transaction closing conditions, the
Group took control (100% of voting rights) of the China--based Wuxi
Sicomm Technologies Ltd ("Sicomm") and affiliated companies on 3
August 2016. The total consideration was $11.05m (GBP8.01m),
payable in cash and in shares (see below). The 774,181 new shares
were admitted for trading by the London Stock Exchange in August
2016. The majority of the shares are subject to specific lock--in
restrictions over a three year period and were provided under
existing AGM resolution approval.
Founded in 2003, Sicomm is a fabless semiconductor company and
solutions provider specialising in the development of integrated
baseband processors and RF semiconductors for global wireless
communication markets. Sicomm has approximately 30 employees and is
headquartered in Wuxi, China, with offices in Shanghai and
Quanzhou. The company's product range, which partially competes
with existing CML solutions, is targeted for use within consumer,
industrial and professional radio products and focuses on the
customer need to achieve the right balance between cost,
functionality and technical performance.
This acquisition expands the Group's product portfolio,
strengthens its Far Eastern regional support resources and
reinforces CML's position as a leader in the professional and
industrial wireless communication semiconductor market.
For the above reasons, combined with the anticipated
profitability of Sicomm products in other Group markets, synergies
to arise from integrating the Sicomm business into existing Group
businesses, plus the ability to hire the workforce of the Sicomm
group of companies (including the founder and management team), the
Group paid a premium over the acquisition net assets, giving rise
to goodwill. All intangible assets in accordance with IFRS3
Business Combinations were recognised at their provisional fair
values on the date of acquisition, with the residual excess over
net assets being recognised as goodwill. Intangibles arising from
the acquisition consist of brand values, customer relationships and
intellectual property and have been independently valued by
professional advisors.
The following table summarises the consideration and provisional
fair values of assets acquired and liabilities assumed at the date
of acquisition:
Unaudited
GBP'000
----------------------------------- ----------
Property, plant and equipment 20
Long-term equity investment 84
Intangible fixed assets:
Brands 96
Customer relationships 934
Intellectual property 402
Deferred tax assets 191
Inventories 212
Trade receivables and prepayments 128
Cash and cash equivalents 1,456
Trade and other payables (1,028)
Deferred tax liabilities (154)
----------------------------------- ----------
Net assets acquired 2,341
----------------------------------- ----------
Goodwill 5,669
----------------------------------- ----------
Acquisition cost 8,010
----------------------------------- ----------
There are no non-controlling interests in relation to the Sicomm
acquisition. Fair values in the above table have only been
determined provisionally and may be subject to change in the light
of any subsequent new information becoming available in time. The
review of the fair value of assets and liabilities acquired will be
completed within twelve months of the acquisition date. Receivables
at the acquisition date are expected to be collected in accordance
with the gross contractual amounts.
The acquisition cost was satisfied by:
Unaudited GBP'000
--------------------- ------------------
Cash 5,377
Share consideration 2,633
--------------------- ------------------
Total consideration 8,010
--------------------- ------------------
Net cash outflow arising on acquisition:
Unaudited
GBP'000
------------------------------------------ ------------
Cash consideration paid (less cash
retention) 5,032
Cash returned under escrow due diligence
deposit (385)
Acquisition-related costs 281
Cash and cash equivalents within
the Sicomm business on acquisition (1,456)
------------------------------------------ ------------
Total net cash outflow on acquisition 3,472
------------------------------------------ ------------
The cash consideration excludes a GBP348,000 (RMB3m) retention
which is included in other payables. Other costs relating to the
acquisition have not been included in the consideration cost.
Directly attributable acquisition costs include external legal and
accounting costs incurred in compiling the acquisition legal
contracts and the performance of due diligence activity and amount
to GBP281,000. These costs have been charged in distribution and
administrative expenses in the consolidated income statement.
Sicomm, in common with other Chinese companies, has a 31
December calendar year end. In the eight months to 31 March 2017,
Sicomm contributed revenue of GBP1,661,000 and net profit before
taxation of GBP480,000. Had the acquisition taken place from the
start of the Group's financial year (from 1 April 2016), and based
on figures prior to CML control, management estimate that Sicomm
would have contributed revenue of GBP2,235,000 and net profit
before taxation of GBP569,000 to the Group results.
11 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. Whilst the financial
information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRSs), as
adopted for use in the EU, this announcement does not itself
contain sufficient information to comply with IFRSs.
The audited financial information for the year ended 31 March
2016 is based on the statutory accounts for the financial year
ended 31 March 2016 that has 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 2017 are
expected to be finalised on the basis of the financial information
presented by the directors in this preliminary announcement and
signed following approval by the Board of Directors on 23 June 2017
and delivered to the Registrar of Companies following the Company's
Annual General Meeting on 2 August 2017.
The financial information contained in this announcement does
not constitute statutory accounts for the year ended 31 March 2017
or 2016 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.
12 Approval
The Directors approved this annual results announcement on 12
June 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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