TIDMCML
RNS Number : 0386R
CML Microsystems PLC
12 June 2018
12 June 2018
CML Microsystems Plc
("CML" or the "Group")
Full Year Results
CML Microsystems Plc, which designs, manufactures and markets
mixed-signal and RF semiconductors, primarily for global
communication and solid state storage markets, announces its Full
Year Results for the year ended 31 March 2018.
Financial Highlights
-- Group revenues increased 14% to GBP31.67m (2017: GBP27.74m)
-- Gross profit up 12% to GBP22.24m (2017: GBP19.82m)
-- Profit before tax up 9% to GBP4.58m (2017: GBP4.21m)
-- Basic EPS up 6% to 24.52p (2017: 23.09p)
-- Total cash balances were a record GBP13.82m (2017: GBP12.45m)
after dividend payments of GBP1.58m (2017: GBP1.13m)
-- Recommended final dividend of 5.8p equates to 7.8p for the year (2017: 7.4p)
Operational Highlights
-- Storage 49% of Group revenue
o Revenue up 22% to GBP15.43m (2017: GBP12.69m)
o Full market launch of new class-leading CompactFlash
controller
o Enlarged product range now includes CompactFlash, SD, MMC, USB
and SATA host interface standards
-- Communications 51% of Group revenue
o Revenue up 10% to GBP16.17m (2017: GBP14.64m)
o Enlarged RF product range now encompasses operation at
frequencies up to 3.6GHz
o DMR, M2M/IIoT recorded strong gains against the prior year
o RF semiconductors posted a revenue gain of over 30%
o Released 5 new products
Chris Gurry, Group Managing Director of CML Microsystems
commented on the results: "I am pleased to report on another year
of continued progress across the Group. Our revenue and EBITDA
performances are at all-time highs, as is the year end cash
position. These results, achieved whilst continuing to invest in
the business, are further validation of the continuing success of
our strategy."
"The revenue growth we are seeing today is the result of the
continuous research and development investments that we make to
deliver the products our customers need. Group products released
three to four years ago are now entering the growth phase amongst
the customer base and we envisage a repeat of this cycle with our
recently released products and those under development, providing
us with a long and sustainable sales opportunity pipeline."
"Whilst we cannot predict any issues that may arise in the wider
market, the Board believes that CML is well positioned to deliver
steady, sustained and profitable growth."
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Director Tel: +44 (0)1621 875 500
Neil Pritchard, Group Financial
Director
Cenkos Securities plc Tel: +44 (0)20 7397 8900
Max Hartley (Corporate Finance)
Russell Kerr (Sales)
SP Angel Corporate Finance LLP Tel: +44 (0)20 3470 0470
Jeff Keating
Alma PR
Josh Royston Tel: +44 (0)7780 901979
Caroline Forde Tel: +44 (0)7779 664584
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
I am delighted to report on another year of positive progress,
delivering against many of our strategic and financial objectives.
Pleasingly, the year has seen the business deliver a number of
record financial metrics, with the growth in revenue and profit
providing us with the means to continue to invest in the business
to ensure we have the right structure and product suite to maintain
long-term, sustainable growth. While profit growth in the year has
been dampened due to the planned increase in overheads, it is this
investment that will ensure CML has the capability to drive through
to the next stage of growth.
Results and Dividend
Results for the year were positive, with revenues increasing by
14% to a record GBP31.67m (2017: GBP27.74m), profit before taxation
rising by 9% and basic EPS by 6%. Operating cash generation, always
considered of high importance, continues to be very healthy. Total
cash balances at 31 March 2018 were a record GBP13.82m (2017:
GBP12.45m) after dividend payments of GBP1.58m (2017: GBP1.13m)
relating to the prior financial year and a maiden interim dividend
introduced at the half year. The cash generation is particularly
pleasing given the levels of ongoing investment in the Group, with
another record investment in research and development being made
during the year.
The Board is pleased to recommend an increased total dividend
payment for the year, with a final dividend of 5.8p raising the
total dividend for the year to 7.8p (2017: 7.4p). If approved, this
will be paid on 6 August 2018 to shareholders whose names appear on
the register at the close of business on 6 July 2018 with an
ex-dividend date of 5 July 2018. 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.
Employees
Following the successful integration of Sicomm, we now have over
220 employees around the world. It is their skill and commitment
which forms the basis of the continued success of CML and, on
behalf of the Board, I would like to thank them for their ongoing
dedication and commitment to excellence.
Prospects and Outlook
Our strategy continues to be to invest in the development of
products within areas that we know and understand and where the
quality of our products and our competitive advantages enable us to
achieve acceptable gross margins. The growth achieved in the year
demonstrates the success of this strategy and with new product
launches feeding into the pipeline we are confident in our ability
to deliver long-term sustainable growth. Following the acquisition
and integration of Sicomm, 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.
The Company has long held an outstanding reputation for the
quality of its engineering and development teams, and this is now
supported by a clear strategy, depth of management and a
strengthened global sales team. With record net assets of over
GBP41m and net cash of almost GBP14m we have a strong balance sheet
on which to drive the Company forward.
In what is CML's 50(th) year as a business, we are confident
that the Company is in good shape to deliver our objective of
long-term, sustainable growth.
Nigel Clark
Group Non-Executive Chairman
OPERATIONAL AND FINANCIAL REVIEW
Introduction
I am pleased to be able to report on another year of continued
progress across the Group. Our revenue and adjusted EBITDA
performances are at all-time highs, as is the year end cash
position. These results, achieved whilst continuing to invest in
the business, are further validation of our strong commitment to
research and development and the success of working closely with
our customers to design and deliver the products that they need to
meet commercial requirements.
Particularly pleasing is that this steady growth remains in line
with the expectations that we set out three years ago when the
current strategy was communicated and we embarked upon a number of
investment and organisational initiatives to position the Company
for long-term success. The Group has experienced top line growth of
45% through that period although we are yet to see the full
operational benefits given the time it takes for early stage
customer engagements to become revenue generating.
We have been delighted by the increase in orders across our
customer base and product range. The growth in revenues has been
derived largely through improved sales to our existing customers,
with the majority of our top 40 customers posting a year on year
increase. Importantly, we have also seen a selection of relatively
new customers reach a meaningful level of sales, indicating their
products have passed through the often lengthy qualification period
and gained market acceptance.
During the course of the year, we continued our planned resource
investment programme into the business and this is now largely
complete. While we will carry on our high level of research and
development spend, we now have an appropriate operational structure
to manage our business and deliver growth over the medium term.
Pleasingly, we are already seeing the impact made by these
investments into extra resources, particularly in sales and
marketing, with our potential sales pipeline growing well, and a
healthy level of new design wins being secured. We are experiencing
an underlying uplift in our sales opportunity metrics, which bodes
well for further sustainable growth.
Financial Review
Group turnover for the year to 31 March 2018 was GBP31.67m
representing an increase of 14% against the prior full year (2017:
GBP27.74m). Revenues were higher across both of the main market
areas addressed, namely Communications and Storage, with the
shipment of products into Asian and European countries being the
driver behind that growth. That said, it is important to note that
annual revenue comparisons by region can be misleading as some
customers can and do alter their manufacturing locations
periodically. A fuller revenue analysis at the market application
area level is covered later in this report.
Sales in the second half of the year were slightly lower than
the first six-months, with extended raw material lead times and
currency headwinds being contributing factors. Revenues in the
second half were ahead 7% on the comparable period.
Gross profit improved by 12% to GBP22.24m (2017: GBP19.82m) with
margins slightly reduced due to product mix.
The year under review represents the first full year of trading
following the acquisition of Sicomm in August 2016. As a result of
the high levels of investment in research and development and
personnel that have been made in the intervening period,
distribution and administration costs increased by 15% to GBP18.52m
(2017: GBP16.12m). It is noteworthy to report that within these
costs, the Group recorded a GBP0.4m foreign exchange loss which,
when compared to the gains made in the prior financial year
represents a GBP1.2m negative swing. The overall increase in
distribution and administration expenditure was also impacted by
higher amortisation of development costs at GBP4.75m (2017:
GBP4.10m).
As expected, research and development costs for the year
remained at elevated levels, totaling GBP6.87m (2017: GBP6.82m). Of
this amount, GBP1.19m was expensed (2017: GBP1.06m) and GBP5.68m
was capitalised under the Group's research and development policy
(2017: GBP5.76m).
Other income consists of three main elements; amounts received
from the commercial rental of Group-owned property assets that are
now surplus to operational requirements; regional grant income
associated with specific engineering development activities and an
element of royalty income associated with the sale of third party
technology. The amount recorded this year was GBP0.83m (2017:
GBP0.61m).
Profit from operations increased by 6% to GBP4.55m compared to a
figure of GBP4.31m for the prior year. After accounting for
share-based payments, net finance income and a small uplift in the
value of the Group's investment property assets of GBP0.14m, a
profit before tax of GBP4.58m was recorded (2017: GBP4.21m),
equating to growth of 9%.
Customer dependency for the year reflected some movement against
the prior year. Contribution from the top two customers fell
slightly to a combined contribution of approximately 28%, although
only one of these customers was above the 10% threshold. All other
customers remained below the 6% level.
The Group continued to benefit from UK tax credits associated
with some of its research and development activities and that is
the primary driver behind the lower than average rate of taxation
achieved. An income tax expense of GBP0.44m was posted against a
prior year figure of GBP0.34m.
Profit after tax amounted to GBP4.14m (2017: GBP3.87m), an
improvement of 7%, with Basic EPS rising 6% to 24.52p (2017:
23.09p) despite a higher number of ordinary shares in issue.
The Group's cash reserves at 31 March 2018 stood at GBP13.82m,
delivering an increase of GBP1.37m when compared to the same
cut-off date one year earlier (31 March 2017: GBP12.45m). The
balance reported follows a research and development spend of
GBP6.87m, dividend payments totaling GBP1.58m and the payment of a
warranty retention associated with the Sicomm acquisition of
GBP0.32m. Included in the cash balance is a conditional customer
prepayment of GBP1.15m made against future product purchases.
The semiconductor industry as a whole has been experiencing
extended lead times for raw materials due to capacity constraints.
The Group communicated a general tone of caution around the issue
at the interim stage and continues to act appropriately to minimize
the effects on the business. Against this backdrop, inventory
levels at the year-end totaled GBP2.35m (2017: GBP2.15m), with all
of the increase attributable to raw materials and work in progress.
Finished goods stock levels were lower year on year.
The Group has a historic final salary pension scheme that has
been closed to both new members and future accruals for many years.
Along with the Company, the trustees and their professional
advisers have worked diligently in recent years towards achieving
the right balance between adequate scheme funding and business
growth objectives. As a result, the scheme funding position has
improved and for the year under review a deficit of GBP2.07m has
been recorded under accounting rule IAS19 (2017: GBP3.08m).
Separately, the most recent triennial actuarial valuation carried
out by an independent professionally qualified actuary, as at 31
March 2017, resulted in a net pension surplus of GBP1.89m (1 April
2014: net deficit of GBP1.54m). This actuarial valuation showed
that the scheme assets were sufficient to cover 111% of the
benefits accrued to members, after allowing for future increases in
these benefits.
Strategy Overview
The Group's strategy today remains consistent with that
previously communicated. Our semiconductor business continues to be
focused on two important niche market areas, industrial storage and
industrial communications, 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 a strong and growing reputation in each of these market areas
and have a world-class customer base as well as an established
sales network which has been improved further through adding
resources and the appointment of complementary distributors and
representatives in specific regions.
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 have succeeded in generating a
diverse revenue stream across a broad range of customers and
products and will continue to expand this further. We are, to our
customers, a single-source supplier, meaning that once designed in,
the displacement of our chips would require some element of
end-product redesign.
Ongoing investment in research and development remains a key
pillar of our growth strategy and the benefits continue to be 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 deliver significant, profitable revenue generation. We
continue to seek acquisition opportunities which meet our strict
criteria to complement our ongoing organic growth.
Storage
Our strategy for the Storage market continues to be investment
into the expansion of the product range towards increasing our
share of existing customer product portfolios whilst simultaneously
widening the customer base. Our focus continues to be on
strengthening our product portfolio to include all major interface
standards used within our intended end-markets and interoperation
with all relevant third-party NAND Flash devices from top tier
global memory suppliers.
Our enlarged flash memory controller product range now includes
CompactFlash, SD, MMC, USB and SATA host interface standards,
complemented by an Application Programmers Interface ("API") that
our customers are using to develop their own proprietary security
or IIoT solutions. A pleasing number of customers have adopted our
API through the year and we started to see the resulting
end-products launched to market.
Storage revenue for the year amounted to GBP15.43m (2017:
GBP12.69m) representing an increase of 22% with the main
contributors being increased shipments into the automotive,
industrial automation and telecom infrastructure markets. The gain
made is evidence that our focus on sustainable growth opportunities
has traction. Product mix differed from expectations at the
beginning of the year with a higher contribution from products
shipped in silicon wafer form, resulting in a negative skew to
average selling prices. As has been the case for some time, a
number of customers reported being affected by continually tight
levels of NAND flash supply coupled with elevated pricing although
it is not possible to judge the overall impact on the numbers being
reported.
It was a busy year in terms of operational progress. In August
2017 the full market launch of a new class-leading CompactFlash
controller took place, enabling customers to use more recently
available flash memory technologies within their CompactFlash-based
storage products and benefit from the advantages they offer. A
raised level of promotional activities occurred around
industry-specific exhibitions in the US, China and Europe,
supplemented by white papers and conference presentations designed
to raise awareness of the technical superiority and reliability of
our semiconductor solutions. Customer facing resources were
enhanced further and a new EU-based distribution agreement was
announced.
Encouragingly, the level of interest being generated through
promotion of the enlarged product portfolio increased and a number
of customer designs from prior years passed through the
qualification phase and have begun shipping in production
quantities. It was pleasing to record a design win for one of the
world's largest server manufacturers. With servers typically
containing a number of storage devices, each with a different host
interface, the server market represents an additional growth area
for the Group.
Overall, our progress with Storage activities was pleasing and
the underlying sales opportunity pipeline grew well.
Communications
Our strategy within Communications is to grow customer share and
expand the customer base through the development and marketing of
products that offer increased functionality within the customers'
end product. This includes expanding the product portfolio to
include semiconductors with performance characteristics that are
expected to widen the addressable market.
The enlarged product range now offers the ability for a single
customer product to incorporate up to five separate CML devices.
This has the added benefit of generating increased efficiency
across our sales and marketing activities and, with the aid of
focused demonstration platforms, helps our customers get to market
faster and at lower overall cost.
The encouraging progress made in the first six months is
reflected in a solid full year performance, with revenues rising
10% to GBP16.17m (2017: GBP14.64m). This figure is even more
satisfying given the need to navigate through selected third-party
raw material supplier delays as the year progressed. This increase
is delivered as a growing number of individual customer projects
reach production status and is against a particularly strong
performance in the prior year.
In terms of products categories, strong increases were made with
the sale of baseband processors for use within voice-centric
digital radios, particularly those that operate to the DMR global
standard. The Group's Data Modems for "Machine-to-Machine ("M2M") /
"Industrial Internet of Things" ("IIoT") applications also recorded
strong gains against the prior year, as did the sale of RF
semiconductors, posting a revenue gain of over 30%.
In total we released five new products across the year targeted
at end markets including marine AIS and VDES, where a technology
partnership led to release of a module for a new high-speed data
exchange system targeting industry adoption over the coming years.
Expansion of the RF product range to field products that operate at
frequencies >1GHz has been a well communicated focus and the
first two products were released to market. These IC's are suitable
for use in satellite communications and other more general
applications. A second RF power amplifier IC capable of higher
output power was also launched.
The various organisational reporting changes and resource level
improvements made in the prior year along with the first full year
contribution from the acquisition of Sicomm, all collectively
served to drive business forward within what is now a scalable
operating structure. A new sales channel agreement was signed in
the USA during the year and our manufacturer's representative
network was bolstered.
As reported at the interim stage, we experienced strong growth
across the focus product groups and a high proportion of the
opportunities being worked are for multiple CML IC's within each
customer end-product. All things considered, it has been another
pleasing year.
Market Developments
The long-term trends that we have consistently highlighted
within our two niche industrial application areas remain as strong
today as ever. The principal factor for both remains the persistent
demand for increasing amounts of data to be transmitted and stored
more quickly and securely.
Performance for the full year could have been stronger but for
well publicised global constraints in the supply of silicon. The
semiconductor market as a whole is in a growth phase at the moment
and the knock-on effect of that is for a general tone of caution
around raw material lead times. We continue to monitor the
situation and act appropriately to minimise any effect this might
have on the business. It is particularly pleasing to note that the
business delivered against expectations, despite this issue and a
negative impact from currency movements in the year, demonstrating
the strength of our business model.
Within industrial data storage there are several exciting
opportunities in which we are securing a growing number of design
wins following successful product qualifications. The automotive
sector has performed well again this year and continues to present
opportunities for continued growth. Again, it is pleasing to note
that progression is in keeping with the dynamics that we had
foreseen some years ago. Other areas include industrial automation,
the telecoms/network infrastructure market and various security
related applications. A number of the major original equipment
manufacturers ("OEMs") or tier one suppliers to those OEMs are our
customers, meaning we are well positioned to benefit from the
ever-growing demand.
The Communications market is exhibiting a number of growth areas
including the transition to higher-capacity digital networks within
voice-centric markets and, in data-centric markets, the increasing
data throughput requirements from terrestrial and satellite
communications applications. The latter is required to meet the
needs of the growing M2M and IIoT sectors. Ancillary markets
continue to develop which serves to maintain the very fragmented
nature of the Group's communications markets. New product releases
over the last few of years should serve to capture a higher share
of a growing market over time.
Again, we are already suppliers to, or working with, many of the
leading OEMs in these areas and the Board believes we are well
placed for future growth.
Operational Developments
The investment made in senior people towards the end of the
prior year and early into this year has created the necessary
capacity and skill set to facilitate the Group's continued growth.
This process is now largely complete. Whilst our fixed cost base
has increased, the benefits are already being seen with the
additions in sales, marketing and customer support functions
leading to an improved sales opportunity pipeline.
The other significant investment in the year has been in a new
enterprise research planning ("ERP") system which is on track to
go-live in the second half of this current financial year. Given
the increasing scale and global nature of the business, the ERP
system will unify our operating systems across different
geographies, which will not only create efficiencies but also
improve decision making.
Outlook
The business has continued to perform in line with expectations,
which gives us confidence in the future. The lead times and sales
cycles on our products are long and the revenue growth we are
seeing today is the result of the continuous research and
development investments that we make to deliver the products our
customers need. Group products released three to four years ago are
now entering the growth phase amongst the customer base and we
envisage a repeat of this cycle with our recently released products
and those under development, providing us with a long and
sustainable pipeline of sales opportunities
Both market areas addressed are delivering a satisfying
performance and continue to be well placed for future growth. Our
focus on research and development investment will remain, whilst
other spending initiatives will benefit the business in future
years.
Clearly it is not possible to predict issues that may arise in
the wider market, but a note of caution needs to be conveyed given
one or two raw material supplier issues that were a feature of the
latter part of the year to 31 March 2018. These events have the
potential to affect customer purchasing patterns and, as a result,
we currently expect revenue and profit progress for the year ahead
to be weighted towards the second half.
The Board believes that CML is well positioned to deliver
steady, sustained growth and expectations are for a further advance
in profitability for the year to 31 March 2019.
Chris Gurry
Group Managing Director
Consolidated income statement for the year ended 31 March
2018
Unaudited Audited
2018 2017
Notes GBP'000 GBP'000
--------------------------------------------- ----- -------------------- --------------------
Continuing operations
Revenue 1,2 31,674 27,737
Cost of sales (9,438) (7,922)
--------------------------------------------- ----- -------------------- --------------------
Gross profit 22,236 19,815
Distribution and administration costs (18,518) (16,116)
--------------------------------------------- ----- -------------------- --------------------
3,718 3,699
Other operating income 829 614
--------------------------------------------- ----- -------------------- --------------------
Profit from operations 4,547 4,313
Share--based payments (143) (139)
--------------------------------------------- ----- -------------------- --------------------
Profit after share--based payments 4,404 4,174
Revaluation of investment properties 7 140 -
Finance income 39 34
--------------------------------------------- ----- -------------------- --------------------
Profit before taxation 4,583 4,208
--------------------------------------------- ----- -------------------- --------------------
Income tax expense 4 (444) (341)
--------------------------------------------- ----- -------------------- --------------------
Profit after taxation 4,139 3,867
--------------------------------------------- ----- -------------------- --------------------
Profit after taxation attributable to equity
owners of the parent 4,139 3,867
--------------------------------------------- ----- -------------------- --------------------
Basic earnings per share
From profit for year 5 24.52p 23.09p
--------------------------------------------- ----- -------------------- --------------------
Diluted earnings per share
From profit for year 5 23.95p 22.84p
--------------------------------------------- ----- -------------------- --------------------
Adjusted EBITDA
Adjusted EBITDA for year 69,998 8,840
------------------------- ----- -----
Consolidated statement of total comprehensive income for the
year ended 31 March 2018
Unaudited Unaudited Audited Audited
2018 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- --------- --------- ------- -------
Profit for the year 4,139 3,867
Other comprehensive income,
net of tax:
Items that will not be reclassified
subsequently to profit or
loss:
Actuarial gain/(loss) on retirement
benefit obligations 911 (1,048)
Deferred tax on actuarial
(gain)/loss (155) 178
---------------------------------------- --------- --------- ------- -------
Items reclassified subsequently
to profit or loss upon derecognition:
Foreign exchange differences (84) 1,068
---------------------------------------- --------- --------- ------- -------
Other comprehensive income
for the year net of taxation
attributable to equity owners
of the parent 672 198
---------------------------------------- --------- --------- ------- -------
Total comprehensive income
for the year attributable
to the equity holders of the
parent 4,811 4,065
---------------------------------------- --------- --------- ------- -------
Consolidated statement of financial position as at 31 March
2018
Unaudited Unaudited Audited Audited
2018 2018 2017 2017
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- ------- -------
Assets
Non--current assets
Goodwill 9,190 9,306
Other intangible assets 1,570 1,339
Property, plant and equipment 5,410 5,330
Investment properties 3,690 3,550
Investments 83 85
Development costs 12,542 11,401
Deferred tax assets 1,068 1,419
----------------------------------- --------- --------- ------- -------
33,553 32,430
Current assets
Inventories 2,351 2,154
Trade receivables and prepayments 3,112 2,697
Current tax assets 675 971
Cash and cash equivalents 13,816 12,447
----------------------------------- --------- --------- ------- -------
19,954 18,269
---------------------------------- --------- --------- ------- -------
Total assets 53,507 50,699
----------------------------------- --------- --------- ------- -------
Liabilities
Current liabilities
Trade and other payables 5,292 5,757
Current tax liabilities 48 57
Provision - current 181 51
----------------------------------- --------- --------- ------- -------
5,521 5,865
Non--current liabilities
Deferred tax liabilities 3,950 3,692
Retirement benefit obligation 2,070 3,084
Provision - non current 196 423
----------------------------------- --------- --------- ------- -------
6,216 7,199
---------------------------------- --------- --------- ------- -------
Total liabilities 11,737 13,064
----------------------------------- --------- --------- ------- -------
Net assets 41,770 37,635
----------------------------------- --------- --------- ------- -------
Capital and reserves attributable to equity owners
of the parent
Share capital 856 843
Share premium 9,068 8,319
Capital redemption reserve 9 9
Treasury shares - own share
reserve (190) (190)
Share--based payments reserve 443 504
Foreign exchange reserve 1,302 1,386
Accumulated profits 30,282 26,764
----------------------------------- --------- --------- ------- -------
Total shareholders' equity 41,770 37,635
----------------------------------- --------- --------- ------- -------
Consolidated cash flow statement for the year ended 31 March
2018
Unaudited Audited
2018 2017
GBP'000 GBP'000
--------------------------------- --------- -------
Operating activities
Profit for the year before
taxation 4,583 4,208
Adjustments for:
Depreciation 411 325
Amortisation of development
costs 4,745 4,100
Amortisation of intangibles
recognised on acquisition 155 102
Revaluation of investment
properties (140) -
Movement in non-cash items
(pension) (103) (31)
Share--based payments 143 139
Movement in provisions (48) 474
Finance income (39) (34)
Movement in working capital (874) 1,745
---------------------------------- --------- -------
Cash flows from operating
activities 8,833 11,028
Income tax received/(paid) 309 (224)
---------------------------------- --------- -------
Net cash flows from operating
activities 9,142 10,804
---------------------------------- --------- -------
Investing activities
Purchase of acquisition, net
of cash acquired - (3,576)
Payment of warranty retention (320) -
Receipt of escrow cash deposit - 385
Purchase of property, plant
and equipment (488) (450)
Investment in development
costs (5,680) (5,763)
Investment in intangibles (392) -
Disposal of property, plant
and equipment - 17
Finance income 39 34
---------------------------------- --------- -------
Net cash flows from investing
activities (6,841) (9,353)
---------------------------------- --------- -------
Financing activities
Issue of ordinary shares 762 25
Purchase of own shares for
cancellation - (669)
Dividends paid to shareholders (1,581) (1,134)
---------------------------------- --------- -------
Net cash flows from financing
activities (819) (1,778)
---------------------------------- --------- -------
Increase/(decrease) in cash
and cash equivalents 1,482 (327)
---------------------------------- --------- -------
Movement in cash and cash
equivalents:
At start of year 12,447 13,596
Increase/(decrease) in cash
and cash equivalents 1,482 (327)
Effects of exchange rate changes (113) (822)
---------------------------------- --------- -------
At end of year 13,816 12,447
---------------------------------- --------- -------
Consolidated statement of changes in equity for the year ended
31 March 2018
Share Share Capital Treasury Share--based Foreign Accumulated
capital premium redemption Shares Payments exchange profits
reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
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 gain
recognised directly
to equity (1,048) (1,048)
Deferred tax on
actuarial gain 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 -
audited 843 8,319 9 (190) 504 1,386 26,764 37,635
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
Profit for year 4,139 4,139
Other comprehensive
income net of taxes
Foreign exchange
differences (84) (84)
Net actuarial gain
recognised directly
to equity 911 911
Deferred tax on
actuarial gain (155) (155)
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
Total comprehensive
income for year - - - - - (84) 4,895 4,811
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
843 8,319 9 (190) 504 1,302 31,659 42,446
Transactions with owners
in their capacity as owners
Issue of ordinary
shares 13 749 762
Dividend paid (1,581) (1,581)
Total transactions
with owners in their
capacity as owners 13 749 - - - - (1,581) (819)
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
Share--based payments
in year 143 143
Cancellation/transfer
of share--based
payments (204) 204 -
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
At 31 March 2018 -
unaudited 856 9,068 9 (190) 443 1,302 30,282 41,770
---------------------- ------- ------- ---------- --------- ------------- -------- --------------- --------
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 2018 Audited 2017
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ------- ------------- -------
Total segmental revenue 31,674 31,674 27,737 27,737
------------------------------------- ------------- ------- ------------- -------
Profit
Segmental result 4,404 4,404 4,174 4,174
------------------------------------- ------------- ------- ------------- -------
Finance income 39 34
Revaluation of investment properties 140 -
Income tax expense (444) (341)
------------------------------------- ------------- ------- ------------- -------
Profit after taxation 4,139 3,867
------------------------------------- ------------- ------- ------------- -------
Assets and liabilities
Segmental assets 48,074 44,759
------------- -------------
Unallocated corporate assets 48,074 44,759
Investment properties 3,690 3,550
Deferred tax assets 1,068 1,419
Current tax assets 675 971
------------------------------------- ------------- ------- ------------- -------
Consolidated total assets 53,507 50,699
------------------------------------- ------------- ------- ------------- -------
Segmental liabilities 5,669 6,231
------------- -------------
Unallocated corporate liabilities 5,669 6,231
Deferred tax liabilities 3,950 3,692
Current tax liabilities 48 57
Retirement benefit obligation 2,070 3,084
------------------------------------- ------------- ------- ------------- -------
Consolidated total liabilities 11,737 13,064
------------------------------------- ------------- ------- ------------- -------
Other segmental information
Unaudited 2018 Audited 2017
---------------------- ----------------------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------- ------------- -------
Property, plant and equipment additions 488 488 450 450
---------------------------------------- ------------- ------- ------------- -------
Development cost additions 5,680 5,680 5,763 5,763
---------------------------------------- ------------- ------- ------------- -------
Intangible additions 392 392 - -
---------------------------------------- ------------- ------- ------------- -------
Depreciation 411 411 325 325
---------------------------------------- ------------- ------- ------------- -------
Amortisation of development costs 4,745 4,745 4,100 4,100
---------------------------------------- ------------- ------- ------------- -------
Amortisation of acquired intangibles 155 155 102 102
---------------------------------------- ------------- ------- ------------- -------
Other non--cash income 103 103 31 31
---------------------------------------- ------------- ------- ------------- -------
Geographical information (by origin)
Rest of
UK Europe Americas Far East Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ------- ------- -------- -------- -------
Year ended 31 March 2018
- unaudited
------------------------------ ------- ------- -------- -------- -------
Revenue to third parties
- by origin 5,073 7,355 5,848 13,398 31,674
------------------------------ ------- ------- -------- -------- -------
Property, plant and equipment 5,024 290 65 31 5,410
------------------------------ ------- ------- -------- -------- -------
Investment properties 3,690 - - - 3,690
------------------------------ ------- ------- -------- -------- -------
Development costs 4,424 8,118 - - 12,542
------------------------------ ------- ------- -------- -------- -------
Intangibles - software 392 - - - 392
------------------------------ ------- ------- -------- -------- -------
Goodwill - 3,512 - 5,678 9,190
------------------------------ ------- ------- -------- -------- -------
Other intangible assets
arising on acquisition - - - 1,178 1,178
------------------------------ ------- ------- -------- -------- -------
Total assets 23,915 15,556 2,582 11,454 53,507
------------------------------ ------- ------- -------- -------- -------
Year ended 31 March 2017
- audited
Revenue to third parties
- by origin 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
------------------------------ ------- ------- -------- -------- -------
2 Revenue
The geographical classification of business turnover
(by destination) is as follows:
Unaudited Audited
2018 2017
Continuing business GBP'000 GBP'000
----------------------------------------------------- --------- -------
Europe 9,477 7,600
Far East 15,764 13,460
Americas 5,919 6,117
Others 514 560
----------------------------------------------------- --------- -------
31,674 27,737
----------------------------------------------------- --------- -------
3 Dividend - paid and proposed
During the year a final dividend of 7.4p per ordinary share of
5p was paid in respect of the year ended 31 March 2017. A maiden
interim dividend of 2.0p per ordinary was paid on 15 December 2017
to shareholders on the Register on 1 December 2017.
It is proposed to pay a final dividend of 5.8p per ordinary
share of 5p, taking the total dividend amount in respect of the
year ended 31 March 2018 to 7.8p. It is proposed to pay the final
dividend of 5.8p, if approved, on 6 August 2018 to shareholders
registered on 6 July 2018 (2017: 7 August 2017 to shareholders
registered on 7 July 2017).
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
2018 2017
GBP'000 GBP'000
------------------------------------------------ --------- -------
Current tax
UK corporation tax on results of the year (595) (419)
Adjustment in respect of previous years 44 (1)
------------------------------------------------ --------- -------
(551) (420)
Foreign tax on results of the year 626 511
Foreign tax - adjustment in respect of previous
years (12) -
------------------------------------------------ --------- -------
Total current tax 63 91
------------------------------------------------ --------- -------
Deferred tax
Current period movement 387 272
Adjustments to deferred tax charge in respect
of previous years (6) (22)
------------------------------------------------ --------- -------
Total deferred tax 381 250
------------------------------------------------ --------- -------
Tax charge on profit on ordinary activities 444 341
------------------------------------------------ --------- -------
5 Earnings per share
Unaudited Audited
2018 2017
Basic earnings per share
From profit for year 24.52p 23.09p
Diluted earnings per share
From profit for year 23.95p 22.84p
--------------------------- --------- -------
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 2018 Audited 2017
--------------------------------- ---------------------------------
Weighted Weighted
average average Earnings
number Earnings number per
Profit of shares per 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 4,139 16,876,684 24.52 3,867 16,745,457 23.09
---------------------------- ------- ------------ ---------- ------- ------------ ----------
Diluted earnings per
share
---------------------------- ------- ------------ ---------- ------- ------------ ----------
Basic earnings per
share 4,139 16,876,684 24.52 3,867 16,745,457 23.09
Dilutive effect of
share options - 402,348 (0.57) - 183,699 (0.25)
---------------------------- ------- ------------ ---------- ------- ------------ ----------
Diluted earnings per
share
* from profit for year 4,139 17,279,032 23.95 3,867 16,929,156 22.84
---------------------------- ------- ------------ ---------- ------- ------------ ----------
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
2018 2017
GBP'000 GBP'000
------------------------------------------------------ --------- -------
Profit after taxation (earnings) 4,139 3,867
Adjustments for:
Finance income (39) (34)
Income tax expense 444 341
Depreciation 411 325
Amortisation of development costs 4,745 4,100
Amortisation of intangibles recognised on acquisition 155 102
Share-based payments 143 139
------------------------------------------------------ --------- -------
Adjusted EBITDA 9,998 8,840
------------------------------------------------------ --------- -------
7 Investment properties
Investment properties are measured at fair value and are
revalued annually by the Directors and in 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 2018, for which the valuation of GBP3,690,000 has been
advised (2017: GBP3,550,000).
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 though their end-customers may be a diversified
portfolio. 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, raw material availabilities,
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 (including
the UK's withdrawal from the European Union, or 'Brexit'),
political risk, 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 2017 financial statements.
10 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
2017 is based on the statutory accounts for the financial year
ended 31 March 2017 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 2018 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 22 June 2018
and delivered to the Registrar of Companies following the Company's
Annual General Meeting on 1 August 2018.
The financial information contained in this announcement does
not constitute statutory accounts for the year ended 31 March 2018
or 2017 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.
11 Approval
The Directors approved this annual results announcement on 11
June 2018.
Glossary
AIS Automatic Identification System
API Application Programmers Interface
EBITDA Earnings before interest, tax, depreciation and amortisation
EU European Union
DMR Digital Mobile Radio
IAS International Accounting Standard
IC Integrated Circuit
IFRS International Financial Reporting Standards
IIoT Industrial Internet of Things
IP Intellectual Property
M2M Machine--to--machine
MMC Multimedia Card
NAND Not And
OEM Original Equipment Manufacturer
R&D Research and Development
RF Radio Frequency
SATA Serial ATA interface
SD Secure Digital
USB Universal Serial Bus
VDES VHF Data Exchange System
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FMGMVRMKGRZM
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