TIDMCML
RNS Number : 6302V
CML Microsystems PLC
05 December 2023
5 December 2023
CML Microsystems Plc
("CML", the "Company" or the "Group")
Half Year Results
Trading in line with expectations, Acquired MwT business and
amalgamation progressing well
CML Microsystems Plc, which develops mixed-signal, RF and
microwave semiconductors for global communications markets, today
announces its unaudited results for the six months ended 30
September 2023.
Financial Highlights
-- Revenue increased by 5% to GBP10.58m (H1 FY22: GBP10.05m)
-- Profit from operations, excluding the GBP0.30m of external
costs incurred in this half relating to the MwT acquisition,
increased by 9% to GBP1.90m (H1 FY23: GBP1.75m)
-- Diluted EPS decreased to 9.31p (H1 FY22: 11.58p) on higher
tax charge
-- Strong cash balances at period end of GBP20.95m (31 March
2023: net cash of GBP22.26m), a reduction of GBP1.31m after
a GBP1.75m spend on share buybacks and GBP0.9m on dividend
payments
-- Recommended half year dividend of 5p per share (H1 FY23: 5p
per share)
Operational Highlights
-- Post period end, successful completion of MwT acquisition
on 2 October 2023, significantly expanding the Group's product
portfolio and complementing existing R&D capabilities
-- Increasing presence in new and emerging growth sectors driving
growth
-- Board and senior management evolution, with appointment of
Mark McCabe as Chief Operating Officer, Michelle Jones as
Director of Finance and Nathan Zommer soon to be joining as
Non-Executive Director.
Chris Gurry, Managing Director of CML Microsystems Plc,
commented on the results:
"The results achieved for the six months to 30 September 2023
have been robust and the Board expects trading for the full year to
be in line with expectations. CML's sustained revenue growth during
the period, despite the macroenvironment headwinds facing the
sector as a whole, is pleasing and serves to both validate our
strategy and highlight the resilience of our business.
The successful acquisition of MwT in October 2023 marked a
significant milestone for the Group. The resulting expansion of our
product portfolio, and the complementary R&D capabilities that
this acquisition brings, positions CML well to fully capitalise on
the opportunities available in the new and expanding markets in
which we operate.
The future addition of Nathan Zommer as Non-Executive Director,
alongside the promotion of Mark McCabe to the Board as Chief
Operating Officer and Michelle Jones to Director of Finance,
significantly enhances the expertise and experience on the CML
Board while adding notable impetus as we continue on our growth
journey.
The financial and operational progress made during the period
has been pleasing and gives the Board a great deal of confidence as
we continue to deliver value to our shareholders."
Enquiries:
CML Microsystems Plc www.cmlmicroplc.com
Chris Gurry, Group Managing Director Tel: +44 (0) 1621 875 500
Nigel Clark, Executive Chairman
Shore Capital (Nominated Adviser Tel: +44 (0) 20 7408 4090
and Broker)
Toby Gibbs
James Thomas
Lucy Bowden
Fiona Conroy (Corporate Broking)
Alma Strategic Communications Tel: +44 (0)20 3405 0205
Josh Royston
Andy Bryant
Robyn Fisher
Matthew Young
About CML Microsystems PLC
CML develops mixed-signal, RF and microwave semiconductors for
global communications markets. The Group utilises a combination of
outsourced manufacturing and in-house testing with trading
operations in the UK, Asia and USA. CML targets sub-segments within
Communication 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 commercial and industrial
product manufacturers.
The spread of its customers and diversity of the product range
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 appetite for data to
be transmitted faster and more securely, the upgrading of telecoms
infrastructure around the world and the growing prevalence of
private commercial wireless networks for voice and/or data
communications linked to the industrial internet of things
(IIoT).
The Group is cash-generative, has no debt and is dividend
paying.
Chairman's statement
Introduction
Our relatively recent strategy of concentrating efforts on the
communications semiconductor market and expanding the sub-sectors
addressed continues to serve us well, despite the challenging
macroeconomic conditions. We were very pleased to finally announce
on 2 October 2023 the closing of the acquisition of Microwave
Technology Inc ("MwT") but the unexpected delays in completing the
transaction, due to the associated regulatory processes, means that
amalgamation activities that we hoped to have well underway by now
have only just started.
We are confident the assimilation work will be achieved
successfully but realisation of the benefits will correspondingly
move out beyond our initial expectations. That said, MwT
substantially enlarges the Group's product portfolio, complements
our existing R&D capabilities and expands our system level
understanding, allowing us to better capitalise on the market
opportunities we see.
Results and trading
Despite the global macroeconomic backdrop, the Group's financial
performance for the six months to 30 September 2023 was positive
and generally in line with our expectations. In a reverse of the
comparative period of the prior year, revenue growth was tempered
by the weakening of the average US Dollar rate against Sterling.
The movement in currencies becomes less material at the profit
level since costs below the revenue line are primarily denominated
in other currencies.
Revenue for the first six months increased by 5% to GBP10.58m
(H1 FY22: GBP10.05m). Gross profit increased 4% to GBP7.94m (H1
FY22: GBP7.62m) and profit from operations increased by 9%, before
the GBP0.30m of external costs incurred in this half relating to
the acquisition of MwT. Profit before taxation only marginally
increased to GBP1.87m (H1 FY22: GBP1.83). The tax charge of 22% is
higher than expected but reflects the changes in rules relating to
R&D tax credits and a higher corporation tax rate. The result
is that profit after taxation fell to GBP1.47m (H1 FY22: GBP1.87m),
EBITDA was broadly flat at GBP3.23m (H1 FY23: GBP3.25m) and diluted
EPS was 9.31p (H1 FY23: 11.58p). Cash balances at the end of the
period stood at GBP20.95m (31 March 2023: GBP22.26m), a reduction
of GBP1.31m after a GBP1.75m spend on share buybacks and GBP932k on
dividend payments.
Dividend
The Board is recommending an unchanged half year dividend of
5.0p per share (H1 FY23: 5.0p per share), payable on 12 January
2024 to shareholders on the Register on 22 December 2023, with an
ex-dividend date of 21 December 2023.
Property
Following the sale of the first parcel of land just prior to
commencing the current financial year, building work has commenced
at the Group's Essex Headquarters site, Oval Park, including
relocating the car parks to the rear of the buildings and is
scheduled to be completed before the current year end. The
remaining excess land, circa 15 acres, which was granted planning
permissions in February 2023 was placed on the market early
October.
Further interest in the Group's excess commercial property in
Fareham, Hampshire is currently being explored, following cessation
of the negotiations referenced in the Group's annual report.
Board and senior management
At the time of the Annual General Meeting ("AGM") in August, I
announced my intention to revert to the role of Non-Executive
Chairman once the MwT acquisition had been completed and for this
to coincide with additional appointments. In the last week we have
strengthened the Board with the promotion of Mark McCabe to the
position of Chief Operating Officer and the promotion of Michelle
Jones to the senior management position of Director of Finance.
These actions enhance the Board and leadership team bringing a
diverse set of skills, expertise and experience whilst adding
impetus. With these enhancements in place, I am stepping back to
the position of Non-Executive Chairman with immediate effect.
The formalities of appointing Nathan Zommer as a Non-Executive
Director are expected to be completed in the next couple of weeks
following which an announcement will be made.
Employees
As I indicated at the start of my statement, this is a very
demanding year and we clearly need the support of all employees to
succeed with our ambitions. Throughout our operations globally, we
are fortunate to have a great team of talented, hard-working, and
dedicated employees and the Board thanks them all sincerely.
Prospects and outlook
The business continues to make good progress and has the
appropriate blend of experience, enthusiasm and skills to continue
to achieve its medium-term objectives.
Despite the challenges brought by multiple headwinds facing
businesses in all sectors, we currently expect full year revenues
to be slightly ahead of current market expectations, with the
majority of the growth attributable to the addition of MwT.
Profitability is expected to be in line with current market
expectations, with anticipated costs relating to the incorporation
of MwT likely to temper further growth this year.
Notwithstanding the macroeconomic environment, the Board has
confidence in the strategy being followed and believes the
robustness of our business model and a continued focus on
sustainable growth will deliver a meaningful uplift in performance
beyond the current year.
Nigel Clark
Non-Executive Chairman
5 December 2023
Operational and financial review
Introduction
The Group began the current financial year focused on growth,
supported by relatively resilient end markets, a healthy order book
and an evolving presence in new and emerging growth sectors.
Amidst an inflationary environment, global economic uncertainty
and a backdrop of several industry commentators predicting the
semiconductor market will shrink by double-digit percentage points
in 2023, the delivery of revenue growth through the first six-month
period is a pleasing outcome and serves to highlight the resilience
of our business.
Equally welcome was the completion of the acquisition of
Microwave Technology, Inc ("MwT") on 2 October 2023, ending what
was a protracted process due to US government national security
considerations relating to the technology and skillset the business
possesses. Work is now underway to unlock the global potential of
the MwT product portfolio and to exploit the synergies that
exist.
First half progress has been positive at the revenue level,
although larger than anticipated acquisition costs affected the
underlying growth in operating profitability. Excluding these
one-off costs, profit from operations increased by 9%.
Nevertheless, prior investments in people and products coupled with
the strategy being followed positions CML well to capture
meaningful growth as the enlarged Group moves forward.
Strategy
The Group's vision is to be the first-choice semiconductor
partner to technology innovators, together transforming how the
world communicates.
Our focus is on the definition, development and marketing of
standard semiconductor products that deliver compelling technical
and commercial benefits to our customers. In turn, our customers
utilise these solutions to develop and subsequently market
end-products that are essential for the efficient and reliable
transportation of voice and/or data across a predominantly wireless
medium.
The global communications market is huge, with a myriad of
end-application areas ranging from mobile/cellular networks to
precise positioning systems to short-range remote-control devices.
Within this vast landscape of opportunity, CML is actively
participating in a number of sub-markets that leverage our
strengths and have excellent growth potential on a sustainable
basis. These markets include mission critical communications,
wireless networks and satellite, Industrial Internet of Things
("IIoT") and more recently, broadcast radio. The addressable market
in terms of semiconductor content easily exceeds $1billion.
Continued investment in research and development is essential to
enable CML to take full advantage of the large market opportunity
available. Various new product programmes are underway comprising
mixed-signal complex SoC projects with multi-year engineering
cycles along with more rapid micro/millimetre wave developments.
The blended result is delivering more products to market each year
against what is a relatively stable absolute R&D spend.
Markets and operations
Across the prior full financial year to 31 March 2023, revenues
from Group customers producing voice-centric wireless
communications equipment delivered good growth, with the
contribution from data centric applications slightly weaker due to
some customers having procured inventory in excess of their
end-market needs.
In the first half of the current financial year, across most of
the major customers, the voice equipment manufacturers once again
achieved a solid advance in revenues whereas sales increases from
data applications, such as IIoT, M2M, AMR were more moderate. We
have seen early indications that order intake from this sector is
set to improve but across the next few months, we are nonetheless
taking a cautious stance.
Geographically, performance across the first six months within
Asia was good, with a 7.5% increase in sales revenue. However, the
economic and geo-political situation in parts of the region,
including China and Korea, has the potential to temper growth
prospects. Within China, those customers that are producing
end-products for local consumption have better forecast visibility
than those reliant on exports. We therefore remain mindful of the
backdrop globally and have moderated our expectations for the
second half year period.
The global voice communications markets addressed by the Group
include the Land Mobile Radio/Private Mobile Radio (LMR/PMR)
sector, encompassing high performance mission critical
end-applications through to low-cost digital radio standards for
use in the leisure and retail sector. For data-centric markets,
"smart everything" is driving data throughput increases within
industry verticals such as agriculture, construction, smart
grid/city and marine safety. CML has been a significant player in
these end-application areas for many years and continues to invest
appropriately in growth opportunities.
In recent years, building upon substantial markets knowledge and
"design for manufacturing" capabilities for silicon devices, CML
commenced the development of high-performance Radio Frequency ICs
("RFICs") and Monolithic Microwave ICs ("MMICs") using compound
semiconductor technologies, including GaAs and GaN. The
twelve-month period to 31 March 2023 represented the first full
financial year with availability of a number of new products that
are marketed under CML's SuRF brand and, over time, the flow of
revenue from this expanding portfolio of IC's is expected to
constitute a very sizeable proportion of the Group's total
revenues.
One key R&D initiative outlined at the time of announcing
the FY23 full year results in June 2023, was a low-power radio
receiver solution for Digital Radio Mondiale ("DRM"). DRM is a
digital radio broadcast standard that has been adopted for wide
area broadcasting in China, India and Pakistan and is expected to
be deployed in several other nations. The DRM service provides high
quality stereo audio across long distances and wide areas using
low-cost, low-power infrastructure.
The DRM module was formally announced at the International
Broadcasting Convention (IBC) in Amsterdam in September and is a
complete "antenna to speaker" module, containing all hardware,
software, IP and patent licences required for a radio equipment
manufacturer to easily realise a dual mode (digital and analogue)
DRM capable receiver. The module offers a 60% cost reduction and
80% power reduction over existing DRM technologies in the market.
At IBC, it was announced that the DRM module has been adopted by
leading manufacturer Gospell Digital Radio Technology Co, Ltd for
two new portable radio families.
In support of the broadening product portfolio and expansion
into new sub-markets, we exhibited at a number of trade shows
through the period, including IMS Microwave Week in San Diego,
European Microwave Week in Berlin and the International
Broadcasting Convention (IBC) in Amsterdam.
The multi-year investments in people, products and equipment
have positioned us well to continue to expand the business. The
traditional voice and data centric markets have provided strong
foundations on which to expand into the micro/millimetre wave and,
more latterly, broadcast radio arenas. Within these newer markets
we are at the early stages of a journey to drive the business
forward strongly and sustainably.
Acquisition of Microwave Technology, Inc
On 2 October 2023, immediately following the half year end, we
completed the acquisition of Silicon Valley based semiconductor
company Microwave Technology, Inc. ("MwT"). Founded in 1982, MwT is
a recognised leader in the design, manufacturing and marketing of
GaAs and GaN based MMICs, Discrete Devices, and Hybrid Amplifier
Products for commercial wireless communication, defence, space, and
medical (MRI) applications.
The acquisition expands upon the Group's growing product
portfolio and complements its existing capabilities, providing
essential knowhow and experience in high-frequency system level
understanding, product manufacturing and packaging techniques.
Work is now underway to ensure maximum market exposure for the
product range acquired and investment areas have been identified
that will improve USA-based production capacity and efficiency
positioning the enlarged Group for growth in the years that
follow.
As a Group, CML now has internal final testing capabilities in
the UK, Asia and the Americas, providing the flexibility required
to address regional customer demands as they evolve.
Financial review
Sales revenues for the opening six-month trading period
increased by 5% to GBP10.58m (H1 FY23: GBP10.05m) and include a
currency headwind against the comparable period one year ago.
Re-stated on a constant currency basis, revenues increased by 9%.
Regionally, the improvements came from greater sales into Europe
and the Far East, with the Americas territory posting a decline.
Excess inventory across a handful of customers tempered further
growth following the supply chain dynamics that have been a feature
of the last two years.
Higher sales levels combined with a slight reduction in gross
margin delivered a gross profit of GBP7.94m (H1 FY23: GBP7.62m)
representing an increase of 4%. Given cost of sale pressures, in
part due to supplier raw material price increases that were
experienced across multiple years, maintenance of the gross margin
is a pleasing outcome at this interim stage.
Distribution and administration (D&A) expenses were higher
at GBP6.32m (H1 FY23: GBP5.77m) and whilst an increase over the
previous year was expected, the prolonged process associated with
and leading up to completion of the MwT transaction resulted in
additional costs of GBP0.30m being incurred.
Excluding third-party one-off costs associated with the MwT
acquisition, profit from operations improved by 9% to GBP1.90m (H1
FY23 GBP1.75m). This is a key measure of the Group's performance
over the period under review although under international
accounting standards, the income statement does not highlight these
costs as exceptional, hence the reported figure was lower at
GBP1.61m.
Finance income was noticeably up at GBP0.24m (H1 FY23: GBP0.10m)
and reflected the improved deposit rates being achieved on the
Group's strong cash balances. Finance expenses were negligible.
Adjusted EBITDA came in at GBP3.23m (H1 FY23: GBP3.25m).
Profit before tax was flat at GBP1.87m against GBP1.83m for the
prior year first half.
An income tax charge of GBP0.41m was recorded compared to a
credit of GBP0.04m for the comparable period with the main
contributing factors being lower UK R&D tax credits following
changes to government policy and an increase in the corporation tax
rate from 19% to 25%. The tax charge led to a diluted earnings per
share figure of 9.31p against 11.58p for the prior year.
For some time, the Group has deliberately operated with a raised
level of inventory in keeping with its strategy to help minimise
the impact customers feel from the supply chain dynamics over
recent years. This year is no different and despite the slight drop
in inventory levels to GBP2.19m (H1 FY23: GBP2.30m), expectations
are for this to climb to a higher level over the next 12-18 months
due to an expanded product range along with growth
expectations.
The Group continues to be debt free and had cash balances
amounting to GBP20.95m at 30 September 2023 (31 March 2023: net
cash of GBP22.26m). This follows investments of GBP2.01m in R&D
activities, GBP0.60m in property, plant and equipment and
shareholder returns of GBP2.57m by way of share repurchases (net of
shares issued) and dividend payments. The strong balance sheet
gives us a range of options as we look to win new clients and grow
organically as well as the potential for future acquisitions in the
medium-term.
Chris Gurry
Group Managing Director
5 December 2023
Condensed consolidated income statement
for the six months ended 30 September 2023
Unaudited 6 months end Unaudited 6 months end Audited year end
---------------------------------- ---------------------------------- ----------------------------------
Before Before Before
exceptional Exceptional 30/09/23 exceptional Exceptional 30/09/22 exceptional Exceptional 31/03/23
items items Total items items Total items items Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Continuing
operations
Revenue 10,575 - 10,575 10,045 - 10,045 20,643 - 20,643
Cost of sales (2,631) - (2,631) (2,423) - (2,423) (5,032) - (5,032)
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Gross profit 7,944 - 7,944 7,622 - 7,622 15,611 - 15,611
Distribution and
administration
costs (6,318) - (6,318) (5,765) - (5,765) (12,644) - (12,644)
Share-based
payments (103) - (103) (137) - (137) (234) - (234)
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
1,523 - 1,523 1,720 - 1,720 2,733 - 2,733
Profit on sale
of fixed asset - - - - - - - 2,058 2,058
Other operating
income 85 - 85 30 - 30 199 - 199
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Profit from
operations 1,608 - 1,608 1,750 - 1,750 2,932 2,058 4,990
Other income 50 - 50 4 - 4 18 - 18
Finance income 235 - 235 97 - 97 255 - 255
Finance expense (20) - (20) (21) - (21) (47) - (47)
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Profit before
taxation 1,873 - 1,873 1,830 - 1,830 3,158 2,058 5,216
Income tax
(charge)/credit (406) - (406) 35 - 35 (71) (335) (406)
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Profit after
taxation for
period
attributable to
equity owners
of the parent 1,467 - 1,467 1,865 - 1,865 3,087 1,723 4,810
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
All financial
information
presented
relates to
continuing
activities.
Earnings per
share from total
operations
attributable to
the ordinary
equity
holders of the
Company:
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
Basic earnings
per share 9.44p 11.72p 30.29p
Diluted earnings
per share 9.31p 11.58p 29.93p
---------------- ----------- ----------- -------- ----------- ----------- -------- ----------- ----------- --------
The following measure is considered an alternative performance
measure, not a generally accepted accounting principle. This ratio
is useful to ensure that the level of borrowings in the business
can be supported by the cash flow in the business. For definition
and reconciliation see note 10.
Adjusted EBITDA 3,230 3,252 5,901
----------------- ----- ----- -----
Condensed consolidated statement of total comprehensive
income
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------------------- ------------ ------------ --------
Profit for the period 1,467 1,865 4,810
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of benefit obligation - - 1,393
Deferred tax on actuarial gain - - (348)
-------------------------------------------------------------------------------- ------------ ------------ --------
Items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences (493) 829 (140)
-------------------------------------------------------------------------------- ------------ ------------ --------
Other comprehensive income for the period net of taxation attributable to the
equity holders
of the parent (493) 829 905
-------------------------------------------------------------------------------- ------------ ------------ --------
Total comprehensive income for the period attributable to the equity holders of
the parent 974 2,694 5,715
-------------------------------------------------------------------------------- ------------ ------------ --------
Condensed consolidated statement of financial position
as at 30 September 2023
Unaudited Unaudited Audited
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
---------------------------------------------- --------- --------- ---------
Assets
Non-current assets
Goodwill 7,152 7,861 7,429
Other intangible assets 885 1,107 984
Development costs 14,391 12,738 13,801
Property, plant and equipment 6,087 5,479 5,249
Right-of-use assets 910 338 1,022
Deferred tax assets 618 2,605 766
---------------------------------------------- --------- --------- ---------
30,043 30,128 29,251
---------------------------------------------- --------- --------- ---------
Current assets
Property, plant and equipment - held for sale - - 485
Investment properties - held for sale 1,975 1,975 1,975
Inventories 2,187 2,302 2,425
Trade receivables and prepayments 2,881 2,156 2,413
Current tax assets 71 - 1,659
Cash and cash equivalents 14,300 20,005 21,041
Short-term cash deposits 6,646 2,663 1,218
---------------------------------------------- --------- --------- ---------
28,060 29,101 31,216
---------------------------------------------- --------- --------- ---------
Total assets 58,103 59,229 60,467
---------------------------------------------- --------- --------- ---------
Liabilities
Current liabilities
Trade and other payables 2,230 3,665 3,036
Lease liabilities 198 133 210
Current tax liabilities 4 96 78
---------------------------------------------- --------- --------- ---------
2,432 3,894 3,324
---------------------------------------------- --------- --------- ---------
Non-current liabilities
Deferred tax liabilities 4,450 4,103 4,343
Lease liabilities 751 229 842
Retirement benefit obligation 1,204 2,439 1,204
---------------------------------------------- --------- --------- ---------
6,405 6,771 6,389
---------------------------------------------- --------- --------- ---------
Total liabilities 8,837 10,665 9,713
---------------------------------------------- --------- --------- ---------
Net assets 49,266 48,564 50,754
---------------------------------------------- --------- --------- ---------
Capital and reserves attributable to equity owners of the parent
Share capital 796 796 796
Share premium 2,327 2,462 2,462
Capital redemption reserve 8,372 8,372 8,372
Treasury shares - own share reserve (1,822) - (324)
Share-based payments reserve 566 395 488
Foreign exchange reserve 549 2,011 1,042
Retained earnings 38,478 34,528 37,918
----------------------------------------------------------------- ------- ------ ------
Total shareholders' equity 49,266 48,564 50,754
----------------------------------------------------------------- ------- ------ ------
Condensed consolidated cash flow statement
for the six months ended 30 September 2023
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
-------------------------------------------------------------------- ------------ ------------ --------
Operating activities
Profit for the period before taxation 1,873 1,830 5,216
Adjustments for:
Depreciation - on property, plant and equipment 239 219 367
Depreciation - on right-of-use assets 111 142 300
Amortisation of development costs 1,020 831 1,826
Amortisation of intangibles recognised on acquisition and purchased 99 169 224
Profit on disposal of fixed assets - - (2,058)
Employee Retention Credit US - 109 110
Movement in non-cash items (retirement benefit
obligation) 90 90 158
Share-based payments 103 137 234
Finance income (235) (97) (255)
Finance expense 20 21 47
Movement in working capital (1,381) 32 (653)
-------------------------------------------------------------------- ------------ ------------ --------
Cash flows from operating activities 1,939 3,483 5,516
Income tax received/(paid) 1,483 (75) (104)
-------------------------------------------------------------------- ------------ ------------ --------
Net cash flows from operating activities 3,422 3,408 5,412
-------------------------------------------------------------------- ------------ ------------ --------
Investing activities
--------------------------------------------------------------------------- ------- ------- -------
Proceeds from sale of fixed assets - - 2,500
Purchase of property, plant and equipment (597) (88) (932)
Investment in development costs (1,666) (2,291) (4,455)
Investment in intangibles (32) (67) (98)
Repayment/(investment) in fixed term deposits (net) (5,428) 3,295 4,740
Finance income 235 97 255
--------------------------------------------------------------------------- ------- ------- -------
Net cash (outflow)/inflow investing activities (7,488) 946 2,010
--------------------------------------------------------------------------- ------- ------- -------
Financing activities
Lease liability repayments (122) (153) (321)
Issue of ordinary shares (net of expenses) 117 1,118 1,118
Purchase of own shares for treasury (1,750) (4,442) (4,767)
Dividends paid to shareholders (932) (796) (1,589)
Net cash outflow from financing activities (2,687) (4,273) (5,559)
--------------------------------------------------------------------------- ------- ------- -------
(Decrease)/increase in cash, cash equivalents and short-term cash deposits (6,753) 81 1,863
--------------------------------------------------------------------------- ------- ------- -------
Movement in cash and cash equivalents:
At start of period/year 21,041 19,084 19,084
(Decrease)/increase in cash, cash equivalents and short-term cash deposits (6,753) 81 1,863
Effects of exchange rate changes 12 840 94
--------------------------------------------------------------------------- ------- ------- -------
At end of period 14,300 20,005 21,041
--------------------------------------------------------------------------- ------- ------- -------
Cash flows presented exclude sales taxes. Further cash-related
disclosure details are provided in note 7.
Changes in liabilities arising from financing activities relate
to lease liabilities only.
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2023
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 31 March 2022 865 1,362 8,285 (1,670) 490 1,182 39,339 49,853
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Profit for period 1,865 1,865
Other comprehensive income net of taxes
Foreign exchange differences 829 829
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total comprehensive income for the
period - - - - - 829 1,865 2,694
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
865 1,362 8,285 (1,670) 490 2,011 41,204 52,547
Transactions with owners in their
capacity as owners
Issue of ordinary shares - exercise of
share options 18 1,100 1,118
Purchase of own shares - treasury (4,442) (4,442)
Treasury share cancellation (87) 87 6,112 (6,112) -
Dividend paid (796) (796)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total of transactions with owners in
their capacity as owners (69) 1,100 87 1,670 - - (6,908) (4,120)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Share-based payment charge 137 137
Cancellation/transfer of share-based
payments (232) 232 -
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 30 September 2022 796 2,462 8,372 - 395 2,011 34,528 48,564
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 30 September 2022 796 2,462 8,372 - 395 2,011 34,528 48,564
Profit for period 2,945 2,945
Other comprehensive income net of taxes
Foreign exchange differences (969) (969)
Re-measurement of defined benefit
obligations 1,393 1,393
Deferred tax on actuarial loss (348) (348)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total comprehensive income for the
period - - - - - (969) 3,990 3,021
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
796 2,462 8,372 - 395 1,042 38,518 51,585
Transactions with owners in their
capacity as owners
Purchase of own shares - treasury (325) (325)
Treasury share cancellation 1 (1) -
Dividend paid (793) (793)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total of transactions with owners in
their capacity as owners - - - (324) - - (794) (1,118)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Share-based payment charge 97 97
Deferred tax on share-based payments 190 190
Cancellation/transfer of share-based
payments (4) 4 -
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 31 March 2023 796 2,462 8,372 (324) 488 1,042 37,918 50,754
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Condensed consolidated statement of changes in equity
continued
for the six months ended 30 September 2023
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2023 796 2,462 8,372 (324) 488 1,042 37,918 50,754
Profit for period 1,467 1,467
Other comprehensive income net of taxes
Foreign exchange differences (493) (493)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total comprehensive income for the
period - - - - - (493) 1,467 974
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
796 2,462 8,372 (324) 488 549 39,385 51,728
Transactions with owners in their
capacity as owners
Issue of treasury shares - exercise of
share options (135) 252 117
Purchase of own shares - treasury (1,750) (1,750)
Dividend paid (932) (932)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total of transactions with owners in
their capacity as owners - (135) - (1,498) - - (932) (2,565)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Share-based payments 103 103
Cancellation/transfer of share-based
payments (25) 25 -
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 30 September 2023 796 2,327 8,372 (1,822) 566 549 38,478 49,266
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2023
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 Group Managing Director who is the Chief
Operating Decision Maker. The measurement policies the Group uses
for segmental reporting under IFRS 8 are the same as those used in
its 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 single segment, being
semiconductor components for the communications industry.
Geographical segments (by origin)
UK Americas Far East Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- -------- -------- -------
Six months ended 30 September 2023
Revenue to third parties - by origin 2,613 1,243 6,719 10,575
Total assets 44,942 1,512 11,649 58,103
------------------------------------- ------- -------- -------- -------
UK Americas Far East Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- -------- -------- -------
Six months ended 30 September 2022
Revenue to third parties - by origin 2,167 1,622 6,256 10,045
Total assets 44,315 1,043 13,871 59,229
------------------------------------- ------- -------- -------- -------
UK Americas Far East Total
Audited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------- -------- -------- -------
Year ended 31 March 2023
Revenue to third parties - by origin 5,024 3,413 12,206 20,643
Total assets 47,151 1,575 11,741 60,467
------------------------------------- ------- -------- -------- -------
2 Revenue
The geographical classification of business turnover (by
destination) is as follows
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
--------- ------------ ------------ --------
Europe 2,115 1,634 4,009
Far East 6,660 6,194 12,036
Americas 1,471 1,943 3,910
Other 329 274 688
--------- ------------ ------------ --------
10,575 10,045 20,643
--------- ------------ ------------ --------
The operational classification of business turnover (by market)
is as follows:
Unaudited Unaudited Audited
6 months end 6 months end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000s
----------------------- ------------ ------------ --------
Semiconductor 10,166 9,595 19,551
Design and development 409 450 1,092
----------------------- ------------ ------------ --------
10,575 10,045 20,643
----------------------- ------------ ------------ --------
Semiconductor products, goods and services are transferred at a
point in time whereas design and development revenue is transferred
over the period of the contract on a percentage basis of contract
completion, as detailed in the Group's revenue recognition policy
within its published Annual Report.
The Group does not have any contract assets or liabilities at 30
September 2023 (GBPNil at 31 March 2023) from semiconductors as it
does not fulfil any of its performance obligations in advance of
invoicing to its customer. The Group has contract assets of
GBP242,000 as at 30 September 2023 (GBP363,000 at 31 March 2023)
from design and development and contract liabilities of GBP4,000 as
at 30 September 2023 (GBP17,000 at 31 March 2023) from design and
development. The Group has contractual balances in the form of
trade receivables. See note 20 for disclosure of this in the Annual
Report and Accounts for the year ended 31 March 2023.
The Group expects all contractual costs capitalised or any
outstanding performance obligations will be completed within the
next twelve months.
3 Dividend paid and interim dividend
The Board is declaring an interim dividend of 5p per ordinary
share for the half year ended 30 September 2023, payable on 12
January 2024 to shareholders on the Register on 22 December
2023.
A final dividend of 6p per ordinary share was paid on 18 August
2023 and an interim dividend of 5p per ordinary share was paid on
16 December 2022, totalling 11p per ordinary share paid for the
year ended 31 March 2023 (2022: 9.0p per ordinary share paid for
the year ended 31 March 2022).
4 Income tax expense/(credit)
Unaudited Unaudited
6 months end 6 months Audited
end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- ------------ --------- ---------
Current tax
UK corporation tax on results of the year (9) (23) (809)
Adjustment in respect of previous years 101 366 (372)
----------------------------------------------------------------- ------------ --------- ---------
92 343 (1,183)
Foreign tax on results of the year 139 192 319
----------------------------------------------------------------- ------------ --------- ---------
Total current tax 231 535 (864)
----------------------------------------------------------------- ------------ --------- ---------
Deferred tax
Deferred tax - origination and reversal of temporary differences 153 (99) 683
Change in deferred tax rate - - 103
Adjustments to deferred tax charge in respect of previous years 22 (471) 484
----------------------------------------------------------------- ------------ --------- ---------
Total deferred tax 175 (570) 1,270
----------------------------------------------------------------- ------------ --------- ---------
Tax expense/(credit) on profit on ordinary activities 406 (35) 406
----------------------------------------------------------------- ------------ --------- ---------
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.
The tax charge for the six months ended 30 September 2023 has
been calculated by applying the effective tax rate which is
expected to apply to the Group for the year ending 31 March 2024,
using rates substantially enacted by 30 September 2023.
5 Earnings per share
Unaudited Unaudited
6 months end 6 months end Audited
year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ------------ ------------ ---------
Earnings per share from total operations attributable
to the ordinary equity holders of the Company
Basic earnings per share 9.44p 11.72p 30.29p
Diluted earnings per share 9.31p 11.58p 29.93p
------------------------------------------------------ ------------ ------------ ---------
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 2023 15,546,906 15,765,610
Six months ended 30 September 2022 15,912,744 16,111,674
Year ended 31 March 2023 15,878,401 16,072,444
----------------------------------- ---------- ----------
6 Investment properties
Investment properties were measured at current market valuation.
No depreciation is provided on freehold investment properties or on
long leasehold investment properties. In accordance with IAS 40,
gains and losses arising on revaluation of investment properties
are shown in the income statement. The open market valuation of
investment properties recognised is GBPNil (2023: GBPNil).
Investment properties held for sale is GBP1,975,000 (GBP1,975,000
at 31 March 2023).
The investment property was reclassified on 31 March 2022 as
held for sale as the property became vacant with no prospective
tenant in place and is held based upon the current market valuation
methodology. The property is currently expected to sell within the
next twelve months.
7 Cash, cash equivalents and short-term deposits
Unaudited Unaudited
6 months end 6 months end Audited
30/09/23 30/09/22 year end
31/03/23
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------ ---------
Cash on deposit 3,016 14,157 13
Cash at bank 11,284 5,848 21,628
------------------------- ------------ ------------ ---------
14,300 20,005 21,041
Short-term cash deposits 6,646 2,663 1,218
------------------------- ------------ ------------ ---------
20,946 22,668 22,259
------------------------- ------------ ------------ ---------
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 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
in accordance with IAS 34 Interim Financial Reporting; 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. Full disclosures can be found in
Annual Report and Accounts for year ended 31 March 2023 within
Strategic Report.
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.
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 2023 financial statements.
10 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
6 months end 6 months Audited
end year end
30/09/23 30/09/22 31/03/23
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ --------- ---------
Profit before taxation (earnings) 1,873 1,830 5,216
Adjustments for:
Finance income (235) (97) (255)
Finance expense 20 21 47
Depreciation 239 219 367
Depreciation - right-of-use assets 111 142 300
Amortisation of development costs 1,020 831 1,826
Amortisation of intangibles of purchased and
acquired intangibles recognised on acquisition 99 169 224
Share-based payments 103 137 234
Profit on sale of fixed asset - - (2,058)
----------------------------------------------- ------------ --------- ---------
Adjusted EBITDA 3,230 3,252 5,901
----------------------------------------------- ------------ --------- ---------
11 Events occurring after the reporting period
Acquisition of Microwave Technology, Inc.
Following the announcement on 17 January 2023 that a definitive
agreement had been signed to acquire a Silicon Valley based
semiconductor company Microwave Technology, Inc (MwT) and having
obtained US regulatory clearance, the acquisition completed on 2
October 2023. The Group acquired 100% of the issued share capital
for a total consideration of $13.18m, of which $7.65m is payable in
cash and $5.53m is payable in shares.
Founded in 1982, MwT is a Silicon Valley based company involved
in the design, manufacturing and marketing of GaAs and GaN based
MMICs, Discrete Devices and Hybrid Amplifier Products for
Commercial Wireless Communication, Defence, Space and Medical (MRI)
applications
The financial effects of the transaction have not been included
in the results to 30 September 2023. The operating results and
assets and liabilities of the company will be included from 2
October 2023.
12 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 financial information contained in this Half Yearly Report
has been prepared in accordance with UK adopted International
Accounting Standards. 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 2023 is
based on the statutory accounts for the financial year ended 31
March 2023 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 .
13 Approvals
The Directors approved this Half Yearly Report on 5 December
2023.
This information is provided by RNS, the news service of the
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END
IR DZMGZNDNGFZM
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