TIDMCML
RNS Number : 1261H
CML Microsystems PLC
22 November 2022
22 November 2022
CML Microsystems Plc
("CML", the "Company" or the "Group")
Half Year Results
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 2022.
Financial Highlights
-- Revenue increased by 22% to GBP10.05m (H1 FY22: GBP8.26m)
-- Profit from operations increased to GBP1.75m (H1 FY22: GBP0.53m)
-- Profit before taxation improved by 81% to GBP1.83m (H1 FY22:
GBP1.01m)
-- Diluted EPS increased to 11.58p (H1 FY22: 4.80p)
-- Cash balances at period end of GBP22.67m (31 March 2022: net
cash of GBP25.04m) following significant share buyback, investments
in R&D and dividend payments, together totalling GBP6.84m
-- Recommended half year dividend of 5p per share (H1 FY22: 4.0p
per share)
Operational Highlights
-- Revenues ahead of both management and market expectations
-- Fourth consecutive six-month period of revenue growth for
continuing business
-- Recovery in existing markets, driving growth
-- Strong order book stretching beyond 12 months
-- Expanding product range significantly increases total addressable
market
-- New product developments show early signs of success
Chris Gurry, Managing Director of CML Microsystems Plc,
commented on the results:
"The results achieved for the opening six months have been
strong in absolute terms with the Board now expecting trading for
the full year to be ahead of market expectations.
"This positive performance has been made possible through a
clear strategy for growth which has built upon the strong
foundations laid during previous years. Achieving these results in
the current macroeconomic environment validates our strategy and
business model whilst highlighting the dedication and determination
of our staff.
"The strong progress made in the six months to 30 September
2022, coupled with the increasing opportunities within the market
for organic and acquisitive growth, 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
John More
Alma PR 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
Given the current macroeconomic environment, I can only say how
pleased I am with the exceptionally strong first half results that
we have reported. CML continues to execute on our defined strategy
which has proven to be successful despite the general economic
conditions. However, a degree of prudence and caution needs to be
followed as it may be some time before the global situation
improves.
Against this backdrop, we continue to see opportunities both for
growing organically and by selective acquisition. We are
maintaining a strong focus on R&D in order to capitalise on
existing and new market opportunities that we can see. The
prospects are good but the headwinds strong.
Results and trading
The reported comparative figures for H1 FY22 have been restated
to reflect the presentational changes made in the year end 31 March
2022 Annual Report, although these changes do not alter the profit
before taxation, profit after taxation or the net asset values and
are purely changes to the presentation of the financials.
Although growth at the pre-tax level is very important, this
does capture the benefits from one-off gains and does not reflect
the underlying performance of the business. Our long-term focus has
been to grow profitability at the operational level and this is now
beginning to show through.
The financial performance for the six months to 30 September
2022 was very strong and is well ahead of the comparative period
(April to September 2021). Even though good growth was expected
this year, revenues were driven further ahead of management's
original expectations due to the strength of the US Dollar. This
has had a positive effect through the income statement but to a
much lesser extent below the revenue line as we incur significant
costs denominated in other currencies.
Revenue for the six months increased by just under 22% to
GBP10.05m compared to the prior year (H1 FY22: GBP8.26m). This
increase in revenues coupled with a slight improvement in margins
and tight cost control led to the significant improvement in profit
from operations of 230% to GBP1.75m (H1 FY22: GBP0.53m). With no
material one-off non-recurring items the profit before tax improved
by 81% to GBP1.83m (H1 FY22: GBP1.01m) which, after an income tax
credit, results in a 131% increase in profit after tax to GBP1.87m
(H1 FY22: GBP0.81m). EBITDA improved 54% to GBP3.25m (H1 FY22:
GBP2.12m) and diluted EPS increased 141% to 11.58p (H1 FY22:
4.80p). Cash balances at the end of the period stood at GBP22.67m
(31 March 22: GBP25.04m) following significant share buyback and
dividend payments.
The share buyback programme that resulted in GBP3m of shares
being purchased at the start of the year was re-introduced at the
start of October to a lesser extent and has resulted in a small
number of shares being repurchased on a regular basis since the
half year end.
Dividend
The Board is recommending a half year dividend of 5.0p per share
(H1 FY22: 4.0p per share), payable on 16 December 2022 to
shareholders on the Register on 2 December 2022.
Property
As I stated at the time of the year end results and further
enlarged upon within the RNS announcement made on 26 September
2022, we have applied to commercially develop the excess land at
Oval Park with contracts signed to sell some of this land to third
parties, subject to a successful planning application. This is
progressing, but slowly, and I now believe the application will be
considered by Maldon District Council during the first calendar
half of 2023. The Group also has one further property in Hampshire
that it no longer trades from and so is held for sale. Discussions
are progressing with relevant parties but again, until contracts
are exchanged uncertainty exists. The disposal of the Group's
property interests will be cash generative and will assist our
growth objectives. That said, I must stress they are one-off
transactions and below the operating profit line.
Employees
The key to any successful business is the employees and without
them the Group cannot achieve the success it strives for. We are
very lucky in having a dedicated, highly talented and hardworking
team at multiple locations throughout the world, and on behalf of
the Board I wish to thank them all.
Prospects and outlook
We are expecting a further improvement in revenues for the
second half year although with inflationary pressures the
distribution and administration expenses are expected to increase.
That said, a meaningful full year uplift in both operating and
pre-tax profitability is expected meaning that current market
expectations should be surpassed.
For the longer term, exciting opportunities continue to be
worked in all of the market areas being addressed and they are
expected to provide strong organic growth along with potential
inorganic additions to the Group's existing capabilities.
In summary, despite the challenging times, I feel your Company
is well placed to make significant progress forward over the
remainder of the year.
Nigel Clark
Executive Chairman
22 November 2022
Operational and financial review
Introduction
The Group entered the current financial year on a positive
footing, backed by a recovery in the traditional end markets for
wireless voice and data communications along with a strong order
book stretching beyond twelve months. Our established markets have
continued to recover whilst the expansion into wider application
areas through higher frequency semiconductor developments is
gathering pace.
In conjunction with the operational advances being made, i t is
pleasing to report revenues ahead of original management and market
expectations at the halfway stage, despite a backdrop of selected
raw material supply chain issues, particularly within China, which
continues to suffer from pandemic related rolling lockdowns.
Investments made over recent years into new product developments
and related activities are bearing fruit and are expected to drive
meaningful growth in the future. Coupled with the now entrenched
strategy being followed, this positions the Group well to take
advantage of the increasing number of opportunities being
presented.
Strategy
The Group's vision is to be the first-choice semiconductor
partner to technology innovators, together transforming how the
world communicates.
We are focused on our customers' success by delivering
advantages through the improved functionality and performance of
class leading Integrated Circuit ("IC") solutions. R&D activity
is targeted at developing the product portfolio to support emerging
and evolving customer requirements for size, cost and performance
whilst striving to remain each customer's first choice supplier
within their advanced communication platforms.
A more connected world is fuelling the insatiable appetite for
data consumption - driving growth across communications markets
globally. As a result of focused market and customer intelligence
activities, our new product development teams are supporting the
expansion of our total addressable market to include applications
within 5G, Satellite and the Industrial Internet of Things
("IIoT"). This complements the existing markets of public safety,
maritime and mission critical wireless voice and data
communications, leveraging our systems knowledge, semiconductor
engineering capabilities and routes to market.
Markets and operations
For the comparable prior year period (April to September 2021
inclusive), revenues from voice-centric wireless applications had
started to improve, with the situation across a wide range of
data-centric IIoT customers faring somewhat better. Fast forward to
the end of September 2022 and the progress has been more
pronounced, with the level of new order bookings and product
shipments delivering a fourth consecutive six-month period of
revenue growth for the continuing business (excluding revenues from
the sale of the Storage Division in March 2021).
This improved performance was driven by our disciplined
execution of a clearly defined strategy to take market share and
widen the addressable market. Sales grew 22% on a year-over-year
basis and 15% sequentially. Geographically, sales into Asia grew by
21% whilst revenue from the Americas almost doubled. Conditions
within Europe were a little tougher due to the impact of lower
demand from one of the Group's significant voice communications
customers. At the period end, our total order book had advanced
once again, despite demand fluctuations that typically occur
following the supply chain disruptions that have been a feature of
the semiconductor industry over the last 18-24 months.
The global communications markets addressed by the Group are
exhibiting a number of growth areas. Within the Land Mobile
Radio/Private Mobile Radio arena (LMR/PMR), systems are constantly
evolving from analogue to digital with some customers focusing on
new products to integrate with LTE technology. Public safety
agencies prefer the spectrum efficiency associated with digital
networks and the ease with which communications can be encrypted
for security purposes. Interoperability has become a key success
factor, with P25 the dominant standard in North America and TETRA
the leading standard in Europe and some other regions. DMR is a
global private industry version of a digital standard where the
radios of multiple suppliers designed using the DMR standard can be
used in conjunction with each other. The Group is an established
supplier to a number of the major equipment manufacturers
throughout the world and continues to take market share through
product evolution and function integration.
For data-centric markets, 'smart everything' is driving data
throughput increases within industry verticals such as agriculture,
construction and smart grid/city. The use of established
geostationary satellite networks and more recently deployed
low-earth orbit networks is another important wireless medium being
used to satisfy the requirement to connect to everything from
anywhere. Whether the transmission technology is terrestrial, via
space or a combination of both, semiconductor needs vary according
to frequency range, channel bandwidth, power requirements and other
key technical performance characteristics. CML is positioning
itself to be a significant player in each of the chosen
end-application areas and possesses the people and the know-how to
succeed.
More recently, the Group has been releasing products to market
that are intended to capture share of the enormous revenue
opportunities within end applications that utilise microwave and
millimetre wave radio frequencies. Some of these market areas blur
the line between the Group's traditional "industrial" markets focus
and other more commercially oriented applications but the technical
requirements and quality demands to be successful play to our
strengths. These markets are many times larger than the Group's
already established markets within the sub 1GHz RF arena. In
support of this, an intensive product development roadmap and
associated release schedule is well underway. Through the first six
months of the financial year new IC's were released to market
including a 28GHz Power Amplifier product along with Positive Gain
Slope Amplifiers designed to compensate for frequency related gain
losses that occur when designing wide band wireless products.
Further new products are scheduled for release across the second
half of the year. All products operating above the frequency range
of 1GHz are marketed under the SuRF brand.
Prior to the disposal of the Storage Division in March 2021, the
Group was addressing an annual serviceable market of close to $360
million, split almost 50/50 between communication and storage
application areas. Post the disposal, under our enhanced strategy,
the addressable market has expanded to include a number of key
growth areas, including critical infrastructure, 5G and satellite
communications. As a result, the Group's annual addressable market
has increased substantially and now easily exceeds $1 billion.
For some of the newer markets we are at the early stages of a
journey to drive the business forward strongly but across the whole
product portfolio we continue to gain market share and achieve
meaningful design wins.
CML has excellent routes to market and over recent years has
invested significant effort in ensuring sales channels globally are
appropriate for the direction of travel that the business is
taking. The process is one of evolution and refinement, with
ongoing adjustments needed and, in that regard, two new
representatives were appointed, one to cover Southeast USA and one
to support our activities in South Africa.
Our people represent our single biggest asset and without them
we could not achieve the results being delivered. Our average
length of service is 19 years, with 40% of our team having worked
for our businesses for over 10 years. Importantly, we remain
focused on attracting new talent into the Company to ensure both
continuity and expansion of our capabilities over time. It is
therefore pleasing to see we are being successful with our
recruitment programmes across the business in several areas
including engineering, operations and sales.
Outlook
The financial year commenced with the business positioned nicely
to grow well, despite the various macroeconomic headwinds that have
been a feature of the last two years. The results achieved for the
opening six months have been strong in absolute terms, delivered
through a clear strategy for growth and backed by a disciplined and
determined workforce.
The effort being expended towards capturing the organic growth
opportunities in front of us is delivering tangible results, both
operationally and financially. Opportunities exist to accelerate
delivery of our objectives via complementary acquisitions and
management continue to devote an appropriate amount of time towards
exploring them.
The good progress being made is built upon strong foundations
laid during previous years. This, coupled with the energy and
enthusiasm to succeed and a clear strategy for growth, enables the
Board to have confidence that continuing progress will be made
through the second half year period, delivering a very positive
outcome for the year as a whole.
Financial review
Total revenues for the first six months of the financial year
increased by a very healthy 22% over the comparative half year
period, totalling GBP10.05m (H1 FY22: GBP8.26m). The improvement
was broad-based across the customer base and driven by strong
growth in Asia and the Americas from a regional perspective.
The higher revenue drove a 24% uplift in gross profitability to
GBP7.62m (H1 FY22: GBP6.15m). Gross margin as a percentage improved
slightly due to product mix and the Group's prior decision to
increase inventory levels against an extended order book. Having
said that, cost of sale pressures remain due to ongoing raw
material price increases from a selection of our third-party
suppliers.
Distribution and administration expenses were slightly up at
GBP5.77m (H1 FY22: GBP5.61m) although it is noteworthy that the
prior year comparison included one-off costs associated with the
move to an AIM listing (GBP0.25m).
Profit from operations improved threefold to GBP1.75m (H1 FY22:
GBP0.53m) and, after accounting for net finance income, the Group
recorded a profit before tax of GBP1.83m, against GBP1.01m for the
prior year first half.
A marginal income tax credit of GBP0.04m was recorded compared
to a charge of GBP0.20m for the comparable period, leading to a
diluted earnings per share figure of 11.58p against 4.80p for the
prior year.
Adjusted EBITDA came in at GBP3.25m (H1 FY22: GBP2.12m).
In line with the previously communicated policy, inventory
levels increased significantly. This strategy continues to help
minimise the impact our customers feel from ongoing supply issues
within the global semiconductor supply chain. Delays do remain and
capacity constraints are expected to start to ease over the next
six-months. At 30 September 2022 inventory levels were GBP2.30m
(H1FY22: GBP1.53m).
The Group has no debt and cash balances stood at GBP22.67m at 30
September 2022 (31 March 2022: net cash of GBP25.04m). The cash
levels are particularly pleasing given the Company had a net spend
of GBP3.30m on share buybacks, invested GBP2.74m in research and
development activities and paid a dividend of GBP0.80m during
August.
Chris Gurry
Group Managing Director
22 November 2022
Condensed consolidated income statement
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end Restated 31/03/22
30/09/22
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------------------- --------- --------- ---------
Continuing operations
Revenue 10,045 8,256 16,964
Cost of sales (2,423) (2,107) (4,169)
----------------------------------------------------------------------------- --------- --------- ---------
Gross profit 7,622 6,149 12,795
Distribution and administration costs (5,765) (5,611) (11,562)
Share-based payments (137) (45) (98)
----------------------------------------------------------------------------- --------- --------- ---------
1,720 493 1,135
Other operating income 30 37 79
----------------------------------------------------------------------------- --------- --------- ---------
Profit from operations 1,750 530 1,214
Other income 4 437 500
Loss on sale of investment property - - (50)
Finance income 97 57 106
Finance expense (21) (13) (33)
----------------------------------------------------------------------------- --------- --------- ---------
Profit before taxation 1,830 1,011 1,737
Income tax credit/(charge) 35 (202) (499)
----------------------------------------------------------------------------- --------- --------- ---------
Profit after taxation for period attributable to equity owners of the parent 1,865 809 1,238
----------------------------------------------------------------------------- --------- --------- ---------
The condensed consolidated income statement has been restated for
unaudited six months ended 30 September 2021. See note 13 for further
details.
Earnings per share from total operations attributable to the ordinary equity
holders of the Company:
----------------------------------------------------------------------------- --------- --------- ---------
Basic earnings per share 11.72p 4.87p 7.45p
Diluted earnings per share 11.58p 4.80p 7.35p
----------------------------------------------------------------------------- --------- --------- ---------
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 3,252 2,118 4,308
---------------- ----- ----- -----
Condensed consolidated statement of total comprehensive
income
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
---------------------------------------------------------------------- --------- --------- --------
Profit for the period 1,865 809 1,238
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Re-measurement of benefit obligation - - 3,307
Deferred tax on actuarial loss - - (827)
---------------------------------------------------------------------- --------- --------- --------
Change in deferred tax rate on defined benefit obligation - - 345
Items reclassified subsequently to profit or loss upon derecognition:
Foreign exchange differences 829 410 880
---------------------------------------------------------------------- --------- --------- --------
Other comprehensive income for the period
net of taxation attributable to the equity holders of the parent 829 410 3,705
---------------------------------------------------------------------- --------- --------- --------
Total comprehensive income for the period
attributable to the equity holders of the parent 2,694 1,219 4,943
---------------------------------------------------------------------- --------- --------- --------
Condensed consolidated statement of financial position
as at 30 September 2022
Unaudited
Unaudited 30/09/21 Audited
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- --------- --------- ---------
Assets
Non-current assets
Goodwill 7,861 7,282 7,531
Other intangible assets 1,107 1,198 1,119
Development costs 12,738 10,727 11,197
Property, plant and equipment 5,479 5,576 5,593
Right-of-use assets 338 524 458
Investment properties - 3,775 -
Deferred tax assets 2,605 1,822 1,550
----------------------------------------------------------------- --------- --------- ---------
30,128 30,904 27,448
----------------------------------------------------------------- --------- --------- ---------
Current assets
Investment properties - held for sale 1,975 - 1,975
Inventories 2,302 1,532 2,258
Trade receivables and prepayments 2,156 2,433 2,199
Current tax assets - 1,479 409
Cash and cash equivalents 20,005 11,227 19,084
Short term cash deposits 2,663 11,360 5,958
----------------------------------------------------------------- --------- --------- ---------
29,101 28,031 31,883
----------------------------------------------------------------- --------- --------- ---------
Total assets 59,229 58,935 59,331
----------------------------------------------------------------- --------- --------- ---------
Liabilities
Current liabilities
Trade and other payables 3,665 3,122 2,827
Lease liabilities 133 174 230
Current tax liabilities 96 42 42
----------------------------------------------------------------- --------- --------- ---------
3,894 3,338 3,099
----------------------------------------------------------------- --------- --------- ---------
Non-current liabilities
Deferred tax liabilities 4,103 3,207 3,702
Lease liabilities 229 220 238
Retirement benefit obligation 2,439 5,570 2,439
----------------------------------------------------------------- --------- --------- ---------
6,771 8,997 6,379
----------------------------------------------------------------- --------- --------- ---------
Total liabilities 10,665 12,335 9,478
----------------------------------------------------------------- --------- --------- ---------
Net assets 48,564 46,600 49,853
----------------------------------------------------------------- --------- --------- ---------
Capital and reserves attributable to equity owners of the parent
Share capital 796 863 865
Share premium 2,462 1,222 1,362
Capital redemption reserve 8,372 8,285 8,285
Treasury shares - own share reserve - (1,670) (1,670)
Share-based payments reserve 395 497 490
Foreign exchange reserve 2,011 712 1,182
Retained earnings 34,528 36,691 39,339
----------------------------------------------------------------- --------- --------- ---------
Total shareholders' equity 48,564 46,600 49,853
----------------------------------------------------------------- --------- --------- ---------
Condensed consolidated cash flow statement
for the six months ended 30 September 2022
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
--------------------------------------------------------------------------- --------- --------- --------
Operating activities
Profit for the period before taxation - continuing operations 1,830 1,011 1,737
Adjustments for:
Depreciation - on property, plant and equipment 219 171 375
Depreciation - on right-of-use assets 142 126 258
Impairment of development costs - - 123
Amortisation of development costs 831 673 1,507
Amortisation of intangibles recognised on acquisition and purchased 169 136 283
Loss on disposal of investment properties - - 50
Rental income - (157) (215)
Forgiveness US PPP loan _ _ (284)
Employee Retention Credit US 109 - -
Movement in non-cash items (retirement benefit
obligation) 90 (190) 176
Share-based payments 137 45 98
Finance income (97) (57) (106)
Finance expense 21 13 33
Movement in working capital 32 (286) (1,025)
--------------------------------------------------------------------------- --------- --------- --------
Cash flows from operating activities 3,483 1,485 3,010
Income tax (paid)/received (75) (118) 905
--------------------------------------------------------------------------- --------- --------- --------
Net cash flows from operating activities 3,408 1,367 3,915
--------------------------------------------------------------------------- --------- --------- --------
Investing activities
Proceeds from sale of investment properties - - 1,750
Purchase of property, plant and equipment (88) (882) (1,105)
Investment in development costs (2,291) (2,161) (3,532)
Investment in intangibles (67) - -
Repayment/(Investment) in fixed term deposits (net) 3,295 (1,210) 4,192
Repayment of investment loan note - _ 293
Rental income - 157 215
Finance income 97 57 106
--------------------------------------------------------------------------- --------- --------- --------
Net cash inflow/(outflow) investing activities 946 (4,039) 1,919
--------------------------------------------------------------------------- --------- --------- --------
Financing activities
Lease liability repayments (153) (142) (287)
Issue of ordinary shares (net of expenses) 1,118 186 329
Purchase of own shares for treasury (4,442) - -
Dividends paid to shareholders (796) (8,298) (8,964)
Finance expense - 3 -
--------------------------------------------------------------------------- --------- --------- --------
Net cash outflow from financing activities (4,273) (8,251) (8,922)
--------------------------------------------------------------------------- --------- --------- --------
Increase/(decrease) in cash, cash equivalents and short-term cash deposits 81 (10,923) (3,088)
--------------------------------------------------------------------------- --------- --------- --------
Movement in cash and cash equivalents:
At start of period/year 19,084 22,046 22,046
Increase/(decrease) in cash, cash equivalents and short-term cash deposits 81 (10,923) (3,088)
Effects of exchange rate changes 840 104 126
--------------------------------------------------------------------------- --------- --------- --------
At end of period 20,005 11,227 19,084
--------------------------------------------------------------------------- --------- --------- --------
The Consolidated cash flow statements have been restated for
unaudited six months ended 30 September 2021. See note 13 for
further details.
Cash flows presented exclude sales taxes. Further cash-related
disclosure details are provided in note 6.
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 2022
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 2021 (restated) 859 1,039 8,285 (1,670) 570 302 44,062 53,447
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Profit for period 809 809
Other comprehensive income
net of taxes
Foreign exchange differences 410 410
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total comprehensive income
for the period - - - - - 410 809 1,219
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
859 1,039 8,285 (1,670) 570 712 44,871 54,666
Transactions with owners in
their capacity as owners
Issue of ordinary shares
- exercise of share options 4 183 187
Dividend paid (8,298) (8,298)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total of transactions with owners in
their capacity as owners 4 183 - - - - (8,298) (8,111)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Share-based payment charge 45 45
Cancellation/transfer of
share-based payments (118) 118 -
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 30 September 2021 (unaudited) 863 1,222 8,285 (1,670) 497 712 36,691 46,600
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Profit for period 429 429
Other comprehensive income
net of taxes
Foreign exchange differences 470 470
Re-measurement of defined
benefit obligations 3,307 3,307
Deferred tax on actuarial loss (827) (827)
Change in deferred tax rate on defined
benefit obligation 345 345
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total comprehensive
income for the period - - - - - 470 3,254 3,724
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
863 1,222 8,285 (1,670) 497 1,182 39,945 50,324
Transactions with owners in
their capacity as owners
Issue of ordinary shares
- exercise of share options 2 140 142
Dividend paid (666) (666)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Total of transactions with owners
in their capacity as owners 2 140 - - - - (666) (524)
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Share-based payment charge 53 53
Cancellation/transfer of
share-based payments (60) 60 -
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
At 31 March 2022 865 1,362 8,285 (1,670) 490 1,182 39,339 49,853
--------------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Capital Share- Foreign
Share Share redemption Treasury based exchange Retained
capital premium reserve shares payments reserve earnings Total
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 payments 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
---------------------------------- ------- ------- ---------- -------- -------- -------- -------- -------
Notes to the condensed consolidated financial statements
for the six months ended 30 September 2022
1 Segmental analysis
Reported segments and their results, in accordance with IFRS 8,
are based on internal management reporting information that is
regularly reviewed by the Chief Operating Decision Maker (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 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 2022
Revenue to third parties - by origin 2,167 1,622 6,256 10,045
Property, plant and equipment 5,375 13 91 5,479
Right-of-use assets 176 17 145 338
Investment properties - held for sale 1,975 - - 1,975
Development costs 11,318 - 1,420 12,738
Intangible assets - software and intellectual property 298 - 2 300
Goodwill 1,531 - 6,330 7,861
Other intangible assets arising on acquisition 171 - 636 807
Total assets 44,315 1,043 13,871 59,229
------------------------------------------------------- ------- -------- -------- -------
UK Americas Far East Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------- -------- -------- -------
Six months ended 30 September 2021
Revenue to third parties - by origin 1,837 916 5,503 8,256
Property, plant and equipment 5,475 17 84 5,576
Right-of-use assets 100 226 198 524
Investment properties 3,775 - - 3,775
Development costs 9,175 - 1,552 10,727
Intangible assets - software and intellectual property 254 - 98 352
Goodwill 1,531 - 5,751 7,282
Other intangible assets arising on acquisition 197 - 649 846
Total assets 46,109 1,606 11,220 58,935
------------------------------------------------------- ------- -------- -------- -------
UK Americas Far East Total
Audited GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------- ------- -------- -------- -------
Year ended 31 March 2022
Revenue to third parties - by origin 4,569 2,572 9,823 16,964
Property, plant and equipment 5,504 12-2 77 5,593
Right-of-use assets 227 60 171 458
Investment properties - held for sale 1,975 - - 1,975
Development costs 9,714 - 1,483 11,197
Intangible assets - software and intellectual property 243 - 96 339
Goodwill 1,531 - 6,000 7,531
Other intangible assets arising on acquisition 184 - 596 780
Total assets 46,024 1,163 12,144 59,331
------------------------------------------------------- ------- -------- -------- -------
Revenue
The geographical classification of business turnover (by
destination) is as follows:
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
--------- --------- --------- --------
Europe 1,634 1,927 3,705
Far East 6,194 5,092 9,603
Americas 1,943 986 2,901
Other 274 251 755
--------- --------- --------- --------
10,045 8,256 16,964
--------- --------- --------- --------
The operational classification of business turnover (by market)
is as follows:
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------
Semiconductor 9,595 7,907 15,909
Design and development 450 349 1,055
----------------------- --------- --------- --------
10,045 8,256 16,964
----------------------- --------- --------- --------
Semiconductor products, goods and services are transferred at a
point in time, design and development 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 at 30 September 2022
(GBPNil at 31 March 2022) 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 GBP476,000 as at 30
September 2022 (GBP157,000 at 31 March 2022) from design and
development. The Group, however, does have contractual balances in
the form of trade receivables. See note 21 for disclosure of this
in the Annual Report and Accounts for the year ended 31 March 2022.
The Group does not have any contractual liabilities at 30 September
2022 (GBPNil at 31 March 2022).
The Group expects all contractual costs capitalised or any
outstanding performance obligations will be completed within the
next twelve months.
2 Dividend paid and interim dividend
The Board is declaring an interim dividend of 5p per ordinary
share of 5p for the half year ended 30 September 2022, payable on
16 December 2022 to shareholders on the Register on 2 December
2022.
A final dividend of 5p per ordinary share of 5p was paid on 19
August 2022 and an interim dividend of 4p per ordinary share of 5p
was paid on 17 December 2021, totalling 9p per ordinary share of 5p
paid for the year ended 31 March 2022 (2021: 52.0p per ordinary
share of 5p paid for the year ended 31 March 2021).
3 Income tax (credit)/expense
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
----------------------------------------------------------------- --------- --------- --------
Current tax
UK corporation tax on results of the year (23) (469) (415)
Adjustment in respect of previous years 366 8 (6)
----------------------------------------------------------------- --------- --------- --------
343 (461) (421)
Foreign tax on results of the year 192 89 121
----------------------------------------------------------------- --------- --------- --------
Total current tax 535 (372) (300)
----------------------------------------------------------------- --------- --------- --------
Deferred tax
Deferred tax - origination and reversal of temporary differences (99) 500 6
Change in deferred tax rate - 114 833
Adjustments to deferred tax charge in respect of previous years (471) (40) (40)
----------------------------------------------------------------- --------- --------- --------
Total deferred tax (570) 574 799
----------------------------------------------------------------- --------- --------- --------
Tax (credit)/expense on profit on ordinary activities (35) 202 499
----------------------------------------------------------------- --------- --------- --------
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 2022 has
been calculated by applying the effective tax rate which is
expected to apply to the Group for the year ended 31 March 2023,
using rates substantially enacted by 30 September 2022 as required
by IAS 34 - Interim Financial Reporting.
4 Earnings per share
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
------------------------------------------------------ --------- --------- --------
Earnings per share from total operations attributable
to the ordinary equity holders of the Company
(comparatives include discontinued operations):
Basic earnings per share 11.72p 4.87p 7.45p
Diluted earnings per share 11.58p 4.80p 7.35p
------------------------------------------------------ --------- --------- --------
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 2022 15,912,744 16,111,674
Six months ended 30 September 2021 16,692,935 16,718,813
Year ended 31 March 2022 16,628,301 16,848,252
----------------------------------- ---------- ----------
5 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 (2022: GBPNil).
Investment properties held for sale is GBP1,975,000 (GBP1,975,000
at 31 March 2022).
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.
6 Cash, cash equivalents and short-term deposits
Unaudited
Unaudited 6 months Audited
end
6 months 30/09/21 year ended
end Restated 31/03/22
30/09/22
GBP'000 GBP'000 GBP'000
------------------------- ----------- --------- ----------
Cash on deposit 14,157 5,509 10,275
Cash at bank 5,848 5,718 8,809
------------------------- ----------- --------- ----------
20,005 11,227 19,084
Short-term cash deposits 2,663 11,360 5,958
------------------------- ----------- --------- ----------
22,668 22,587 25,042
------------------------- ----------- --------- ----------
7 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.
8 Principal risks and uncertainties
Key risks of a financial nature
The principal risks and uncertainties facing the Group are with
foreign currencies and customer dependency. With the majority of
the Group's earnings being linked to the US Dollar, a decline in
this currency will have a direct effect on revenue, although since
the majority of the cost of sales are also linked to the US Dollar,
this risk is reduced at the gross profit line. Additionally, though
the Group has a very diverse customer base in certain market
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. The Group's
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
Following the effect of the COVID-19 pandemic, the Group
followed the guidance of the World Health Organization and other
government health agencies in safeguarding the health and wellbeing
of its employees and continue to operate a hybrid working policy.
The Group did not make use of the government's staff retention
schemes in the UK, nor make any redundancies. In the United States,
the government provided support in the form of a loan under the
Paycheck Protection Program ($388,400) which was forgiven on 23 May
2021.
There continues to be localised COVID-19 outbreaks, and the
Board closely monitors the impact taking prudent steps to mitigate
any potential impacts on our employees, customers, suppliers and
other stakeholders. The Group remains prepared to implement
appropriate mitigating strategies to minimise any potential
business disruption.
Given the nature of the markets we operate within, we anticipate
our end customers being insulated from a consumer downturn to some
extent, although the roll-out of some of the new products may be
delayed, dampening demand for our semiconductors. Even in these
difficult times, we still maintain the belief that the Group is
well placed to move positively forward in the medium to long term.
This belief is underpinned by a strong balance sheet and no debt,
along with a product portfolio that addresses markets that have a
positive outlook.
Russia and Ukraine conflict
Following Russia's invasion of Ukraine, the Group took the
decision to cease all supplies to customers based in Russia,
resulting in the non-payment of a debt totalling GBP16,000
($20,000) which has been fully provided for.
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.
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 2022 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 Audited
end
6 months 30/09/21 year end
end
30/09/22 Restated 31/03/22
GBP'000 GBP'000 GBP'000
----------------------------------------------- --------- --------- --------
Profit before taxation (earnings) 1,830 1,011 1,737
Adjustments for:
Finance income (97) (57) (106)
Finance expense 21 13 33
Depreciation 219 171 375
Depreciation - right-of-use assets 142 126 258
Impairment of development costs - - 123
Amortisation of development costs 831 673 1,507
Amortisation of intangibles of purchased and
acquired intangibles recognised on acquisition 169 136 283
Share-based payments 137 45 98
----------------------------------------------- --------- --------- --------
Adjusted EBITDA 3,252 2,118 4,308
----------------------------------------------- --------- --------- --------
11 Disposal of the Storage Division
On 10 December 2020, the Group announced it had entered into a
definitive agreement to divest its Storage Division,
Hyperstone.
Hyperstone was sold on 4 February 2021 and is reported in the
prior period as a discontinued operation. For financial information
relating to the discontinued operations. See note 13 for disclosure
of this in the Annual Report and Accounts for the year ended 31
March 2022.
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 principal risks and uncertainties within the business are
contained within this report in note 8 above.
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 2022 is
based on the statutory accounts for the financial year ended 31
March 2022 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 Unaudited six months ended 30 September 2021 restatement
The Consolidated Statement of Comprehensive Income
Third-party product re-sales have been reclassified from other
operating income to revenue and presented on a gross basis to
correctly reflect the Group's role as principal in a revenue
arrangement. In the prior year, Revenue of GBP255,000 and Cost of
sales of GBP174,000 were presented net as other operating income.
This has now been correctly classified as Revenue and Cost of sales
respectively on a gross basis in the restated statement of
comprehensive income. The reclassification of these items has had
no effect on the profit before taxation or net assets.
Rental income and government grants have been reclassified as
other income to be included within profit/(loss) from operations,
having previously been incorrectly classified as other operating
income after profit/(loss) from operations. The reclassification
has resulted in a decrease in the loss on operations of
GBP437,000.
Share-based payment expense was incorrectly presented below
profit/(loss) from operations. They have been reclassified to be
included within profit/(loss) from operations to properly reflect
the nature of the expense. This has resulted in an increase in the
loss from operations of GBP45,000.
The reclassification of the rental income, government grants
income and share-based payment expenditure provides a better
measure of operating profit/(loss) in the consolidated statement of
comprehensive income. The reclassification of these items has had
no effect on the profit before taxation or net assets.
The Consolidated statement of financial position
An omission of a transfer within the statement of changes in
equity in relation to the B shares that were issued, redeemed, and
subsequently cancelled has been corrected. The adjustment
recognises a transfer of GBP8,276,000 from retained earnings to the
capital redemption reserve as required by the Companies Act 2006
and has had no effect on the profit before taxation or net
assets.
Short-term cash deposits with initial maturity of more than 3
months were incorrectly included within cash and cash equivalents.
Therefore, the short-term cash deposits of GBP11,360,000 have been
reclassified as financial assets.
The Consolidated cash flow statements
Short term cash deposits totalling GBP11,360,000 with initial
maturity of more than 3 months were incorrectly included within
cash and cash equivalents. Cash flows from investing activities
have therefore been corrected to reflect the movements in the
short-term cash deposits instead of reflecting these in cash and
cash equivalents. Cash flows from rental income have been
reclassified as investing activities from operating activities
within the Consolidated and Company cash flow statements to ensure
consistent presentation with rental income within the Consolidated
Statement of Comprehensive Income. The reclassification of these
items has had no effect on the profit before taxation or net
assets.
The Consolidated statement of changes in equity
An omission of a transfer within the statement of changes in
equity in relation to the B shares that were issued, redeemed, and
subsequently cancelled has been corrected. The adjustment
recognises a transfer of GBP8,276,000 from retained earnings to the
capital redemption reserve as required by the Companies Act 2006
and has had no effect on the profit before taxation or net
assets.
14 Approvals
The Directors approved this Half Yearly Report on 22 November
2022.
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