TIDMCML
RNS Number : 2424G
CML Microsystems PLC
24 November 2020
24 November 2020
CML Microsystems Plc
("CML" or the "Group")
Half Year Results
CML Microsystems Plc, which designs, manufactures and markets
semiconductors, primarily for global communication and solid state
storage markets, announces its unaudited results for the six months
ended 30 September 2020.
Financial Highlights
-- Group revenues of GBP12.90m (H1 FY20 GBP13.06m)
-- Gross profit of GBP9.28m (H1 FY20: GBP9.73m)
-- Profit before tax of GBP0.77m (H1 FY20: GBP0.91m)
-- Adjusted EBITDA improved to GBP4.42m (H1 FY20: GBP4.36m)
-- Basic EPS of 4.74p (H1 FY20: 6.00p)
-- Net cash of GBP7.35m (31 March 2020: GBP8.48m)
-- Interim dividend maintained at 2.0 per ordinary share
(H1 FY20: 2.0p)
Operational Highlights
-- Storage revenues up 25%
-- Enhancement to Communications strategy
-- Sales opportunity pipeline growth
-- Continued high level of R&D investment
-- Strong improvement in operating cash flow to GBP5.20m
(H1 FY20: GBP3.56m)
-- PRFI successfully integrated
Chris Gurry, Group Managing Director of CML Microsystems
commented on the results :
"The timing of the resumption to a normalised trading
environment remains difficult to predict, although activity within
Storage is encouraging and order intake from Communications
customers in the last weeks of the half was promising.
The acquisition of PRFI, with its associated capabilities,
coupled with enhancements made to the Group's business strategy,
highlight an ongoing focus on increasing the size of the available
market and improving the return on R&D investment levels. We
have a growing world class customer base and our global investment
in sales and marketing over recent periods will enable us to take
our wider range of highly technical products to a larger audience.
As conditions improve, either related to COVID or China/US trade,
and ideally both, we are very well placed to benefit."
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Director Tel: +44 (0)1621 875 500
Nigel Clark, Group Chairman & Financial
Director
Shore Capital Tel: +44(0)20 7408 4090
Edward Mansfield
James Thomas
Fiona Conroy - Corporate Broking
SP Angel Corporate Finance LLP Tel: +44(0)203 463 2260
Jeff Keating
Alma PR Tel: +44 (0)20 3405 0205
Josh Royston
Caroline Forde
Robyn Fisher
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 a net cash position and is
dividend paying.
Chairman's Statement
Introduction
The first half of the year has been dominated by the global
COVID pandemic. From a business point of view, it has served to
create further disruption within some of our end markets,
particularly voice-centric radio manufacturers. As a result, it
delayed the return to normalised trading conditions following
previously notified headwinds related to our industry, as well as
the ongoing trade dispute between China and the US.
Against this backdrop, the performance of the business from both
a trading and operational standpoint has been encouragingly
resilient. This reflects the strong management focus on maximising
all aspects within our control and the investments and structural
changes implemented over prior periods.
Results and Dividend
The financial performance for the six months to 30 September
2020 highlights the financial discipline of the business. Revenue
for the six months decreased slightly to GBP12.90m compared to the
prior year (H1 FY20: GBP13.06m), largely as a result of the COVID
pandemic. Profit before taxation declined 15% to GBP0.77m (H1 FY20:
GBP0.91m), although adjusted EBITDA improved to GBP4.44m (H1 FY20:
GBP4.36m), with basic EPS of 4.74p (H1 FY20: 6.0p). Net cash at the
period end of GBP7.35m (March 30 2020: GBP8.50m) represented a good
result following payment of a dividend (GBP0.34m), a share buyback
(GBP1.59m) and continued strong investment in R&D (GBP3.97m). A
strong operational cash flow improvement was recorded to GBP5.20m
(H1 FY20: GBP3.56m).
The Board is recommending a half year dividend of 2.0p per share
(H1 FY20: 2.0p per share) payable on 18 December 2020 to
shareholders on the Register on 4 December 2020.
Employees
It is hard to envisage more testing conditions for a workforce
to endure. As well as health and wellbeing concerns, our employees
have also had to contend with restrictions on travel and other
demands which have made their roles more difficult. The
professionalism that they have shown is a great credit to them and,
on behalf of the Board, I sincerely thank them.
Prospects and Outlook
In recent years, the Group has moved forward with a clear and
stable long-term strategic vision, backed by a hardworking team
amid a changing and challenging global environment. To complement
that, the Board is always on the lookout for beneficial situations
which present themselves, such as the acquisition of Plextek RFI
Ltd ("PRFI"). The Board continues to explore options to supplement
its operational strategy with corporate strategy.
There are exciting business opportunities being pursued and the
investment decisions taken in prior years will undoubtedly lead to
more arising. With the extended management team executing well on
identifying and securing expansion paths, the Board continues to
believe that the Group will experience a sustainable return to
greater profitability once prevailing headwinds subside.
Nigel Clark
Group Non-Executive Chairman
24 November 2020
Operational and Financial Review
Introduction
As a Board, we are pleased with the progress that has been made,
given the difficult trading conditions which have persisted
throughout the first half of the year. We have endured significant
headwinds for the past two years and therefore concentrated heavily
on optimising our business, enhancing our strategic focus and
positioning ourselves to take full advantage once a more favourable
environment presents itself.
There are many signs which demonstrate we are on the right path,
including the growing number of new customer opportunities being
addressed and the improvement in sequential period profitability
despite a decrease in revenues.
Conditions within Storage have improved over the prior year and
both sales and new order intake have been at healthy levels.
Communications markets deteriorated against last year's first half,
largely driven by a reduction in demand from voice-centric radio
manufacturers which was mostly related to the COVID pandemic and
exacerbated by the China/US trade dispute. Data driven
communications has been less impacted.
The Group's focus on R&D has resulted in a number of newer
products now being available and ready for adoption, whilst PRFI
has been integrated well despite the acquisition completing in
March just prior to the national lockdown.
Financial Review
Total revenues for the opening six-months of the financial year
were GBP12.90m, a decline of 1% against the comparable half-year
period (H1 FY20: GBP13.06m). On a constant currency basis, revenues
were broadly flat with the product mix weighted towards lower
margin Storage semiconductors, a reversal of the mix associated
with the comparable six month period last year. As a result, gross
profit declined 5% to GBP9.28m (H1 FY20: GBP9.73m).
Distribution and administration costs were reduced to GBP8.74m
(H1 FY20: GBP9.08m), partially due to the global reorganisation
that took place during the previous financial year following an
assessment of the Group's resources and capabilities. These lower
overall costs also include higher depreciation and amortisation
charges, reflecting tight management control of spending through
what continued to be challenging times.
Notwithstanding the reduction in expenses, the drop in gross
profitability guided profit from operations lower at GBP0.86m (H1
FY20: GBP0.99m). This figure included a contribution of GBP0.32m
(H1 FY20: GBP0.34m) from 'other income'; principally commercial
property rental receipts, government grants and the sale of
specific third party technologies.
At the pre-tax level, the Group recorded a profit of GBP0.77m
for the period, being approximately 18% lower than the prior year
(H1 FY20: GBP0.91m). That said, on a sequential six-month basis,
pre-tax profits were ahead over 65% despite a reduction in
revenues. Taxation was GBP0.1m higher leading to diluted earnings
per share of 4.73p (H1 FY20: 5.98p). Adjusted EBITDA amounted to
GBP4.42m (H1 FY20: GBP4.36m).
Inventories at 30 September 2020 were more normalised at
GBP2.77m compared to the start of the financial year (31 March 2020
GBP2.39m) and reflect the need to ensure continuity of supply
amidst mixed market conditions.
Net cash balances at 30 September 2020 totalled GBP7.35m (31
March 2020: GBP8.48m) after tight control of working capital
following an increase in inventory levels, payment of a GBP0.34m
dividend in respect of the previous year (H1 FY20: GBP0.99m) and an
ongoing steady level of R&D expenditure at GBP3.97m (H1 FY20:
GBP3.90m). In addition, during September 2020, the Company made the
final GBP0.1m retention payment relating to the acquisition of PRFI
and also conducted a share buy-back of 615,000 ordinary shares of
5p ("Shares") each in the Company at a cost of GBP1.59m (H1 FY20:
Nil). These Shares are currently held in treasury.
Strategy Overview
The Group's overall strategy remains unchanged, yet has
undoubtedly been enhanced and accelerated through the release to
market of our newer products and the acquisition of PRFI in March
of this year. The business today addresses two important market
areas, namely industrial Communications and industrial Storage,
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 markets and continue to supply a
growing world class customer base.
Growth in both markets is being driven by the persistent demand
for increasing amounts of data to be delivered faster and stored
more reliably and securely. We remain committed to generating a
diverse revenue stream across a broad range of customers. We are a
single-source supplier to our customers, meaning that once designed
in, the displacement of our chips would require our customers to
undertake a significant element of product redesign.
R&D is a key tenet of our growth strategy. Our focus is on
developing products which will lead to design wins with new and
existing customers that we believe have the potential to develop
into long-term, significant revenue generators. Throughout the
difficult trading conditions, we have continued our investment into
R&D as we have no doubt that this approach will serve us best
in the long run and deliver superior, sustainable returns for our
shareholders. PRFI, and the enhanced capabilities and experience
they provide, brings a new dynamic. This should deliver advantages
in opportunity capture and new product time to market that will
enhance the return on investment in future years.
The financial commitment that has been made in prior periods,
including sales and marketing resources as well as engineering,
positions us well to take our enlarged product set to a greater
addressable market.
Communications
Our strategy for the Communications markets has been to invest
strongly in R&D to grow customer share and expand the customer
base through the introduction of new semiconductor products that
build upon our very extensive intellectual property library and
widen the addressable market.
Revenues from the sale of semiconductor solutions into
voice-centric Communications applications were heavily impacted by
the COVID crisis, with all of the leading customers for commercial
and industrial radio equipment reporting significant declines in
demand. Shipments into wireless public safety customers were
particularly affected while the situation across a wide range of
data-centric IIoT customers was mixed and continued to be biased
towards mission critical applications. Overall, Communications
revenues were down 20% to GBP6.17m (H1 FY20: GBP7.68m) and included
a lower than normal contribution from a collection of mature
wireline communications products.
Whilst first half shipments have been disappointing, the
underlying operational progression was pleasing. The product
portfolio has expanded over the last three years, with the main
additions being semiconductor solutions that operate at the lower
end of the radio spectrum and, in particular, "narrowband"
applications utilising data rates measured in the tens or low
hundreds of kilobits per second. Across the first six months of
this financial year, that strategy has been significantly enhanced
to include products that operate on microwave and millimetre-wave
frequencies, including wide band applications. This enhancement has
been achieved through a combination of resource blend and new
customer engagements. Progress has been swift with the first
products emanating from this enhanced capability scheduled to be
launched through the first half of the next calendar year.
The Communications market continues to exhibit 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 and reliability requirements from
terrestrial and satellite communications applications. The
enhancements made will expand the addressable market to include
true 5G applications across a variety of industrial, mission
critical and military applications.
Storage
Our strategy within Storage has evolved to the stage where the
product range has been expanded to include most major interface
standards used within the application areas being targeted, thereby
increasing the size of the available market. Furthermore, more
recent products enable customers to benefit from bill-of-materials
cost efficiencies associated with new flash memory technologies
while maintaining the class-leading levels of reliability and
durability for which the Group's Hyperstone brand has become
globally recognised.
The sale of Storage semiconductors across the opening six-months
increased by 25% against the comparable period to GBP6.73m (H1
FY20: GBP5.38m), representing slightly over 50% of Group revenues.
This is a continuation of the improving demand seen in the closing
months of the prior full financial year. Restrictions associated
with US-China trade continued to have an influence but healthy
regional demand from telecoms infrastructure customers along with
robust sales into industrial applications drove revenues
higher.
Released during the prior year, the controller product targeted
at the SATA3 interface standard has seen a steady increase in
adoption with several customers now moving into production and a
number of others at advanced stages of end-product development. A
new SD controller has been developed and is expected to be launched
to market during the first half of the next calendar year. This
product will be another key contributor to growth and builds upon
many years of intellectual property development, incorporating
advanced functionality for mission critical applications. A
selection of mature products manufactured at a silicon foundry in
Japan were moved to end-of-life status and the resulting additional
new order intake is expected to satisfy the customer base while
they transition across to newer products from our portfolio.
The industrial data storage market continues to have several
specific areas which represent attractive growth opportunities,
playing to the core strengths of the business. These include
applications within industrial automation, the telecoms/network
infrastructure market and an increasing number of
security-conscious sub-markets where the Group's proprietary
technology and bespoke programming capabilities offer customers
enhanced levels of security compared to competitor products.
R&D activities have commenced on new Storage solutions that
customers will require in the future and will expand the available
market size further still.
Operational Developments
The Group continues to perform well at an operational level and
our employees globally have responded to the difficulties presented
by the COVID pandemic with great determination and professionalism.
We have been able to maintain high levels of business continuity
throughout whilst also ensuring the safety and protection of our
people.
It has been a pleasure to welcome the team that joined us from
PRFI in March. As highlighted earlier, the speed to market of
future products emanating from the combined teams should drive a
faster return on R&D investment and is scheduled to commence
with the launch of initial products expected towards the back end
of the current financial year.
Summary & Outlook
The timing of the resumption to a normalised trading environment
remains difficult to predict, although activity within Storage is
encouraging and order intake from Communications customers in the
last weeks of the half was promising.
As market conditions improve, either related to COVID or
China/US trade, and ideally both, we are very well placed to
benefit. We have a growing world class customer base and a product
portfolio enabling a greater total market opportunity. The
Company's cost base has remained stable and our global investment
in sales and marketing over recent periods will enable us to take
the wider range of highly technical products to a growing
audience.
Back in June, we stated that the current environment was
delaying realisation of the benefits of the hard work taking place
behind the scenes. Enhancements made to the Group's business
strategy highlight the ongoing focus for increasing the size of the
available market and improving the return on R&D investment
levels.
The Board maintains its belief that the business will capitalise
on the opportunities it sees and deliver the shareholder benefits
expected over the medium to longer term.
Chris Gurry
Group Managing Director
24 November 2020
CONDENSED CONSOLIDATED INCOME STATEMENT
for the six months ended 30 September 2020
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- --------
Continuing operations
Revenue 12,901 13,056 26,420
Cost of sales (3,626) (3,326) (6,855)
---------------------------------------------- --------- --------- --------
Gross profit 9,275 9,730 19,565
Distribution and administration costs (8,741) (9,079) (18,762)
---------------------------------------------- --------- --------- --------
534 651 803
Other operating income 321 338 689
---------------------------------------------- --------- --------- --------
Profit from operations 855 989 1,492
Share-based payments (80) (86) (139)
---------------------------------------------- --------- --------- --------
Profit after share-based payments 775 903 1,353
Profit on disposal of property, plant and
equipment - - 11
Finance income 40 54 106
Finance expense (44) (50) (96)
---------------------------------------------- --------- --------- --------
Profit before taxation 771 907 1,374
Income tax credit 20 119 162
---------------------------------------------- --------- --------- --------
Profit after taxation for period attributable
to equity owners of the parent 791 1,026 1,536
---------------------------------------------- --------- --------- --------
Basic earnings per share
From profit for the period 4.74p 6.00p 8.98p
---------------------------------------------- --------- --------- --------
Diluted earnings per share
From profit for the period 4.73p 5.98p 8.94p
---------------------------------------------- --------- --------- --------
Adjusted EBITDA(1) 4,415 4,357 8,276
---------------------------------------------- --------- --------- --------
1. See note 12 for definition and reconciliation.
CONDENSED CONSOLIDATED STATEMENT OF TOTAL COMPREHENSIVE
INCOME
for the six months ended 30 September 2020
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- --------- --------
Profit for the period 791 1,026 1,536
Other comprehensive income/(expense):
Items that will not be reclassified subsequently
to profit or loss:
Actuarial loss on retirement benefit obligations - - (995)
Deferred tax on actuarial loss - - 187
------------------------------------------------- --------- --------- --------
Items reclassified subsequently to profit
or loss upon derecognition:
Foreign exchange differences 123 275 308
------------------------------------------------- --------- --------- --------
Other comprehensive income/(expense) for
the period net of taxation
attributable to the equity holders of the
parent 123 275 (500)
------------------------------------------------- --------- --------- --------
Total comprehensive income for the period
attributable
to the equity holders of the parent 914 1,301 1,036
------------------------------------------------- --------- --------- --------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 September 2020
Unaudited Unaudited Audited
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
-------------------------------------------- --------- --------- --------
Assets
Non-current assets
Goodwill 10,735 9,209 10,741
Other intangible assets 1,679 1,676 1,823
Development costs 17,999 15,578 16,930
Property, plant and equipment 4,903 5,129 4,976
Right-of-use assets 779 973 1,184
Investment properties 3,192 3,170 3,170
Investment 83 83 83
Deferred tax assets 1,188 973 1,343
-------------------------------------------- --------- --------- --------
40,558 36,791 40,250
-------------------------------------------- --------- --------- --------
Current assets
Inventories 2,768 2,858 2,390
Trade receivables and prepayments 5,043 3,407 5,075
Current tax assets 787 1,152 1,044
Cash and cash equivalents 9,014 11,197 8,479
-------------------------------------------- --------- --------- --------
17,612 18,614 16,988
-------------------------------------------- --------- --------- --------
Total assets 58,170 55,405 57,238
-------------------------------------------- --------- --------- --------
Liabilities
Current liabilities
Bank loans 1,661 - -
Trade and other payables 4,277 3,573 4,036
Lease liabilities 333 415 502
Current tax liabilities 224 61 85
6,495 4,049 4,623
-------------------------------------------- --------- --------- --------
Non-current liabilities
Deferred tax liabilities 5,145 4,559 4,960
Lease liabilities 382 560 568
Retirement benefit obligation 4,697 3,548 4,697
10,224 8,667 10,225
-------------------------------------------- --------- --------- --------
Total liabilities 16,719 12,716 14,848
-------------------------------------------- --------- --------- --------
Net assets 41,451 42,689 42,390
-------------------------------------------- --------- --------- --------
Capital and reserves attributable to equity
owners of the parent
Share capital 859 859 859
Share premium 9,286 9,279 9,286
Capital redemption reserve 9 9 9
Treasury shares - own share reserve (1,670) (328) (80)
Share-based payments reserve 662 577 582
Foreign exchange reserve 1,837 1,681 1,714
Accumulated profits reserve 30,468 30,612 30,020
-------------------------------------------- --------- --------- --------
Total shareholders' equity 41,451 42,689 42,390
-------------------------------------------- --------- --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 September 2020
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
------------------------------------------------- --------- --------- --------
Operating activities
Profit for the period before taxation 771 907 1,374
Adjustments for:
Depreciation - on property, plant and equipment 192 205 397
Depreciation - on right-of-use assets 263 234 456
Amortisation of development costs 2,988 2,826 5,708
Amortisation of intangibles recognised on
acquisition and purchased 117 103 212
Profit on disposal of property, plant and
equipment - (4) (5)
Movement in non-cash items (pension) 90 - 154
Share-based payments 80 86 139
Movement in provision - (70) -
Finance income (40) (54) (106)
Finance expense 44 50 96
Movement in working capital 695 (722) (1,868)
------------------------------------------------- --------- --------- --------
Cash flows from operating activities 5,200 3,561 6,557
Income tax received 509 137 526
------------------------------------------------- --------- --------- --------
Net cash flows from operating activities 5,709 3,698 7,083
------------------------------------------------- --------- --------- --------
Investing activities
Acquisition of subsidiary, net of cash acquired (100) - (1,295)
Purchase of property, plant and equipment (127) (24) (57)
Investment in development costs (3,834) (3,659) (7,936)
Lease liability repayments (302) (265) (682)
Proceeds from disposal of property, plant
and equipment - 11 11
Investment in intangibles 25 (11) (28)
Investment in loan note - (325) (323)
Finance income 40 54 106
Finance expense (16) (50) (34)
Net cash flows used in investing activities (4,314) (4,269) (10,238)
------------------------------------------------- --------- --------- --------
Financing activities
Proceeds from borrowings 1,661 - -
Issue of ordinary shares - - 7
Purchase of own shares for treasury (1,590) - -
Dividends paid to shareholders (343) (990) (1,332)
------------------------------------------------- --------- --------- --------
Net cash flows used in financing activities (272) (990) (1,325)
------------------------------------------------- --------- --------- --------
Increase/(decrease) in cash and cash equivalents 1,123 (1,561) (4,480)
------------------------------------------------- --------- --------- --------
Movement in cash and cash equivalents:
At start of period/year 8,479 12,809 12,809
Increase/(decrease) in cash and cash equivalents 1,123 (1,561) (4,480)
Effects of exchange rate changes (588) (51) 150
------------------------------------------------- --------- --------- --------
At end of period 9,014 11,197 8,479
------------------------------------------------- --------- --------- --------
Cash flows presented exclude sales taxes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2020
Capital Share- Foreign Accumulated
Share Share redemption Treasury based exchange profits
capital premium reserve shares payments reserve reserve Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
At 31 March 2019 859 9,279 9 (342) 507 1,406 30,574 42,292
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Profit for period 1,026 1,026
Other comprehensive
income net of taxes
Foreign exchange differences 275 275
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Total comprehensive
income for the period - - - - - 275 1,026 1,301
Transactions with
owners in their capacity
as owners
Dividend paid (990) (990)
Use of own shares
for treasury 14 (14) -
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Total of transactions
with owners in their
capacity as owners - - - 14 - - (1,004) (990)
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Share-based payments 86 86
Cancellation/exercise
of share-based payments (16) 16 -
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
At 30 September 2019 859 9,279 9 (328) 577 1,681 30,612 42,689
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Profit for period 510 510
Other comprehensive
income net of taxes
Foreign exchange differences 33 33
Net actuarial loss
on retirement benefit
obligation (995) (995)
Deferred tax movement
on actuarial loss 187 187
Total comprehensive
income for the period - - - - - 33 (298) (265)
Transactions with
owners in their capacity
as owners
Issue of ordinary
shares 7 7
Issue of own shares
for treasury 248 248
Dividend paid (342) (342)
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Total of transactions
with owners in their
capacity as owners - 7 - 248 - - (342) (87)
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Share-based payments 53 53
Cancellation/exercise
of share-based payments (48) 48 -
At 31 March 2020 859 9,286 9 (80) 582 1,714 30,020 42,390
----------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Capital Share- Foreign Accumulated
Share Share redemption Treasury based exchange profits
capital premium reserve shares payments reserve reserve Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
At 31 March 2020 859 9,286 9 (80) 582 1,714 30,020 42,390
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Profit for period 791 791
Other comprehensive
income net of taxes
Foreign exchange
differences 123 123
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Total comprehensive
income for the period - - - - - 123 791 914
Transactions with
owners in their capacity
as owners
Dividend paid (343) (343)
Purchase of own shares
for treasury (1,590) - (1,590)
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Total of transactions
with owners in their
capacity as owners - - - (1,590) - - (343) (1,933)
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
Share-based payments 80 80
At 30 September 2020 859 9,286 9 (1,670) 662 1,837 30,468 41,451
-------------------------- ------- ------- ---------- -------- -------- -------- ----------- -------
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 September 2020
1 Segmental analysis
Information about revenue, profit/loss, assets and
liabilities
Unaudited Unaudited Audited
6 months end 30/09/20 6 months end 30/09/19 year end 31/03/20
Semiconductor Semiconductor Semiconductor
components Group components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------------- ------- --------------- ------- ------------- -------
Total segmental revenue 12,901 12,901 13,056 13,056 26,420 26,420
------------------------- --------------- ------- --------------- ------- ------------- -------
Profit
Segmental result 775 775 903 903 1,353 1,353
------------------------- --------------- ------- --------------- ------- ------------- -------
Finance income 40 54 106
Finance expense (44) (50) (96)
Profit on disposal
of property, plant
and equipment - - 11
Income tax credit 20 119 162
------------------------- --------------- ------- --------------- ------- ------------- -------
Profit after taxation 791 1,026 1,536
------------------------- --------------- ------- --------------- ------- ------------- -------
Assets and liabilities
Segmental assets 53,003 53,003 50,110 50,110 51,681 51,681
------------------------- --------------- ------- --------------- ------- ------------- -------
Unallocated corporate
assets
Investment properties 3,192 3,170 3,170
Deferred tax assets 1,188 973 1,343
Current tax assets 787 1,152 1,044
------------------------- --------------- ------- --------------- ------- ------------- -------
Consolidated total
assets 58,170 55,405 57,238
------------------------- --------------- ------- --------------- ------- ------------- -------
Segmental liabilities 6,653 6,653 4,548 4,548 5,106 5,106
------------------------- --------------- ------- --------------- ------- ------------- -------
Unallocated corporate
liabilities
Deferred tax liabilities 5,145 4,559 4,960
Current tax liabilities 224 61 85
Retirement benefit
obligation 4,697 3,548 4,697
------------------------- --------------- ------- --------------- ------- ------------- -------
Consolidated total
liabilities 16,719 12,716 14,848
------------------------- --------------- ------- --------------- ------- ------------- -------
Other segmental information
Unaudited Unaudited Audited
6 months end 30/09/20 6 months end 30/09/19 year end 31/03/20
Semiconductor Semiconductor Semiconductor
components Group components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------------- ------- --------------- ------- ------------- -------
Property, plant and
equipment additions 127 127 24 24 57 57
Right-of-use assets
additions 70 70 - - 86 86
Development cost additions 3,834 3,834 3,659 3,659 7,936 7,936
Intangible additions - - 11 11 28 28
Depreciation 192 192 205 205 397 397
Depreciation - right-of-use
assets 263 263 234 234 456 456
Amortisation of development
costs 2,988 2,988 2,826 2,826 5,708 5,708
Amortisation of acquired
and purchased intangibles 117 117 103 103 212 212
Other non-cash expenditure
(pension) 90 90 - - 154 154
---------------------------- --------------- ------- --------------- ------- ------------- -------
Geographical segments
Rest
UK of Europe Americas Far East Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- --------- -------- -------- -------
Six months ended 30 September
2020
Revenue to third parties -
by origin 3,100 3,097 2,057 4,647 12,901
Property, plant and equipment 4,662 175 - 66 4,903
Right-of-use assets 108 174 357 140 779
Investment properties 3,192 - - - 3,192
Development costs 6,629 10,298 - 1,072 17,999
Intangible assets - software
and intellectual property 550 - - - 550
Goodwill 1,51 3,512 - 5,692 10,735
Other intangible assets arising
on acquisition - - - 1,129 1,129
-------------------------------- ------- --------- -------- -------- -------
Total assets 24,443 17,831 2,127 13,769 58,170
-------------------------------- ------- --------- -------- -------- -------
Rest
UK of Europe Americas Far East Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- --------- -------- -------- -------
Six months ended 30 September
2019
Revenue to third parties -
by origin 3,965 2,521 2,671 3,899 13,056
Property, plant and equipment 4,813 223 59 34 5,129
Right-of-use assets 144 87 582 160 973
Investment properties 3,170 - - - 3,170
Development costs 6,152 9,426 - - 15,578
Intangible assets - software
and intellectual property 601 - - - 601
Goodwill - 3,512 - 5,697 9,209
Other intangible assets arising
on acquisition - - - 1,075 1,075
-------------------------------- ------- --------- -------- -------- -------
Total assets 24,137 16,100 2,423 12,745 55,405
-------------------------------- ------- --------- -------- -------- -------
Rest
UK of Europe Americas Far East Total
Audited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- --------- -------- -------- -------
Year ended 31 March 2020
Revenue to third parties -
by origin 6,793 5,903 4,856 8,868 26,420
Property, plant and equipment 4,724 182 30 40 4,976
Right-of-use assets 164 244 547 229 1,184
Investment properties 3,170 - - - 3,170
Development costs 6,161 9,793 - 976 16,930
Intangible assets - software
and intellectual property 596 - - - 596
Goodwill 1,531 3,512 - 5,698 10,741
Other intangible assets arising
on acquisition 235 - - 874 1,109
-------------------------------- ------- --------- -------- -------- -------
Total assets 24,606 16,984 2,203 13,445 57,238
-------------------------------- ------- --------- -------- -------- -------
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 (Chris
Gurry). The measurement policies the Group uses for segmental
reporting under IFRS 8 are the same as those used in its financial
statements.
The Group is focused for management purposes on one primary
reporting segment, being the semiconductor segment, with similar
economic characteristics, risks and returns and the Directors
therefore consider there to be one business segment
classification.
Revenue
The geographical classification of business turnover (by
destination) is as follows:
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
--------- --------- --------- --------
Europe 4,356 3,984 7,844
Far East 6,156 6,187 13,182
Americas 2,154 2,682 4,907
Other 235 203 487
--------- --------- --------- --------
12,901 13,056 26,420
--------- --------- --------- --------
2 Dividend paid and interim dividend
The Board is declaring an interim dividend of 2.0p per ordinary
share of 5p for the half year ended 30 September 2020, payable on
18 December 2020 to shareholders on the Register on 4 December
2020.
A final dividend of 2.0p per ordinary share of 5p was paid on 7
August 2020 and an interim dividend of 2.0p per ordinary share of
5p was paid on 13 December 2019, totalling 4.0p per ordinary share
of 5p paid for the year ended 31 March 2020 (2019: 7.8p per
ordinary share of 5p in respect of the year ended 31 March
2019).
3 Income tax (credit)/expense
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
------------------------------------ --------- --------- --------
UK income tax credit (495) (256) (588)
Overseas income tax charge/(credit) 147 (83) 246
------------------------------------ --------- --------- --------
Total current tax credit (348) (339) (342)
Deferred tax charge 328 220 180
------------------------------------ --------- --------- --------
Reported income tax credit (20) (119) (162)
------------------------------------ --------- --------- --------
The Directors consider that tax will be payable at varying rates
according to the country of incorporation of its subsidiary
undertakings and have provided on that basis.
4 Earnings per share
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
--------------------------- --------- --------- --------
Basic earnings per share
From profit for the period 4.74p 6.00p 8.98p
--------------------------- --------- --------- --------
Diluted earnings per share
From profit for the period 4.73p 5.98p 8.94p
--------------------------- --------- --------- --------
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
explained below:
Ordinary 5p shares
----------------------
Weighted
average Diluted
number number
----------------------------------- ---------- ----------
Six months ended 30 September 2020 16,692,935 16,718,813
Six months ended 30 September 2019 17,075,166 17,152,397
Year ended 31 March 2020 17,099,216 17,187,571
----------------------------------- ---------- ----------
5 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. No formal market valuation was
conducted in the half year.
6 Cash and cash equivalents
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
---------------- --------- --------- --------
Cash on deposit 4,183 6,784 3,591
Cash at bank 4,831 4,413 4,888
9,014 11,197 8,479
---------------- --------- --------- --------
7 Bank loans
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
---------- --------- --------- --------
Bank loan 1,661 - -
1,661 - -
---------- --------- --------- --------
8 Retirement benefit obligations
The Directors have not obtained an actuarial IAS 19 Employee
Benefits report in respect of the defined benefit pension scheme
for the purpose of this Half Yearly Report.
9 Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with
foreign currencies and customer dependency. With the majority of
the Group's earnings being linked to the US Dollar, a decline in
this currency 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. 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, 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.
COVID-19
The unprecedented global crisis has challenged the current
economic conditions and affected some of the markets in which the
business operates, the Group has remained resilient and is well
placed in the market to move positively forward. This belief is
underpinned by a strong balance sheet, along with a product
portfolio that addresses markets that have a positive outlook.
The Group has given due consideration as to the impact of
uncertainty arising from COVID related factors on the production of
the interim financial statements. This included a going concern
assessment, reviewing its current and projected financial
performance and position, including current assets and liabilities,
debt maturity profile, future commitments and forecasted cash
flows. The downside scenarios tested outline the impact of adverse
cases and show that there is sufficient headroom for liquidity.
10 Directors' statement pursuant to the Disclosure and
Transparency Rules
The Directors confirm that, to the best of their knowledge:
-- the condensed set of financial statements have been prepared
on a consistent basis with the financial statements for the year
ended 31 March 2020 and should be read in conjunction with the FY20
Annual Report and Accounts. The annual consolidated financial
statements of the Group are prepared in accordance with IFRS and
IFRIC pronouncements as adopted by the EU;
-- the condensed set of financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU; and
-- the Chairman's Statement and Group Managing Director's
Operational and Financial Review include a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole together with a description of the principal risks and
uncertainties that they face.
The Directors are also responsible for the maintenance and
integrity of the CML Microsystems Plc website. Legislation in the
UK governing the preparation and dissemination of the financial
statements may differ from legislation in other jurisdictions.
11 Basis of preparation
The basis of preparation and accounting policies used in
preparation of this Half Year Report have been prepared in
accordance with the same accounting policies set out in the year
ended 31 March 2020 financial statements.
12 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 three periods
presented:
Unaudited Unaudited Audited
6 months 6 months
end end year end
30/09/20 30/09/19 31/03/20
GBP'000 GBP'000 GBP'000
----------------------------------------- --------- --------- --------
Profit after taxation (earnings) 791 1,026 1,536
Adjustments for:
Finance income (40) (54) (106)
Finance expense 44 50 96
Income tax credit (20) (119) (162)
Depreciation 192 205 397
Depreciation - right-of-use assets 263 234 456
Amortisation of development costs 2,988 2,826 5,708
Amortisation of intangibles of purchased
and acquired
intangibles recognised on acquisition 117 103 212
Share-based payments 80 86 139
----------------------------------------- --------- --------- --------
Adjusted EBITDA 4,415 4,357 8,276
----------------------------------------- --------- --------- --------
13 General
Other than already stated within the Chairman's Statement and
Group Managing Director's Operational and Financial Review, there
have been no important events during the first six months of the
financial year that have impacted this Half Yearly Report.
There have been no related party transactions or changes in
related party transactions described in the latest Annual Report
that could have a material effect on the financial position or
performance of the Group in the first six months of the financial
year.
The principal risks and uncertainties within the business are
contained within this report in note 9 above.
This Half Yearly Report includes a fair review of the
information required by DTR 4.2.7/8 (indication of important events
and their impact, and description of principal risks and
uncertainties for the remaining six months of the financial
year).
This Half Yearly Report does not include all the information and
disclosures required in the Annual Report, and should be read in
conjunction with the consolidated Annual Report for the year ended
31 March 2020.
The financial information contained in this Half Yearly Report
has been prepared on a basis which is consistent with International
Financial Reporting Standards as adopted by the European Union.
This Half Yearly Report does not constitute statutory accounts as
defined by Section 434 of the Companies Act 2006. The financial
information for the year ended 31 March 2020 is based on the
statutory accounts for the financial year ended 31 March 2020 that
have been filed with the Registrar of Companies and on which the
auditor gave an unqualified audit opinion.
The auditor's report on those accounts did not contain a
statement under Section 498(2) or (3) of the Companies Act 2006.
This Half Yearly Report has not been audited or reviewed by the
Group auditor.
A copy of this Half Yearly Report can be viewed on the Company
website: www.cmlmicroplc.com .
14 Approvals
The Directors approved this Half Yearly Report on 24 November
2020.
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