TIDMCML
RNS Number : 0674B
CML Microsystems PLC
14 June 2016
CML Microsystems Plc
FULL YEAR RESULTS
CML Microsystems Plc ("CML" or "the Group"), which designs,
manufactures and markets mixed-signal and Radio Frequency (RF)
semiconductors, primarily for global communication and solid state
storage markets, announces Full Year Results for the year ended 31
March 2016.
These results reflect a full year return to profitable growth
with new product releases achieving market penetration across their
target segments during the year. The Company also continued to make
significant investments in new product development and operational
improvements during the year to ensure this profitable growth
trajectory can be sustained in the current year and beyond.
Financial Highlights
-- Group revenues of GBP22.83m (2015: GBP21.80m)
-- Gross profit of GBP16.25m (2015: GBP15.47m)
-- Profit before tax of GBP3.32m (2015: GBP3.18m)
-- Basic EPS up 8% to 18.03p (2015: 16.71p)
-- Final dividend increased to 7.0p (2015: 6.9p)
-- Debt free and net cash increased to GBP13.60m (2015: GBP13.19m)
Operational Highlights
-- Storage: 51% of group revenue
o Revenue up 8% to GBP11.65m (2015: GBP10.82m)
o Product range now includes CompactFlash, SATA, SD and
USB2/USB3 interface technologies, with the USB3 launched in
February this year
o Growth drivers included increased sales of new products and
the growth in in-vehicle infotainment (IVI) markets
o Operational investments and improvements delivered on budget
and on-time respectively with further investment in field-based
application engineers completed during the period
-- Wireless: 36% of group revenues
o Revenue marginally down at GBP8.21m (2015: GBP8.28m)
o Delayed customer product shipments, announced at the half year
stage, re-commenced by the financial year end
o Voice-centric markets, transitioning from analogue to digital,
present significant growth opportunity going forward
-- Wireline telecom: 11% of group revenues
o Revenue up 13% to GBP2.57m (GBP2.28m)
o Market share growth across all major regions with China
showing year-on-year growth, particularly for high-speed wireline
modems
Chris Gurry, Group Managing Director of CML, said: "Financial
year 2016 represented a steady period of organic progress and
delivered a return to sales and profit growth, as expected. It was
a record year of R&D investment, with an amount equal to 27% of
Group turnover invested in new products that will ultimately
position the Group to increase its market share. New ICs that were
launched during the year offered either enhanced performance or
closed a gap in the existing product range.
"Over the current year, the Board expects a further advance in
revenues and profitability and a continuing pipeline of new
semiconductor solutions that address a wider range of end-customer
requirements and additional market areas. Our goal is to be the
first choice key component supplier within our chosen
end-markets."
CML Microsystems plc www.cmlmicroplc.com
Chris Gurry, Group Managing Tel: +44 (0) 1621 875 500
Director
Neil Pritchard, Group
Financial Director
Cenkos Securities plc Tel: +44 (0) 20 7397 8900
Jeremy Warner Allen (Sales)
Max Hartley (Corporate
Finance)
SP Angel Corporate Finance Tel: +44 (0) 20 3463 2260
LLP
Jeff Keating
Walbrook PR Ltd Tel: +44 (0) 20 7933 8780
/ cml@walbrookpr.com
Paul Cornelius
Helen Cresswell
Paul Whittington
CHAIRMAN'S STATEMENT
Introduction
The CML Group is a business based upon world class products, an
inherent knowledge of the markets it addresses and growing global
coverage. This is all supported by a strong balance sheet that
includes significant cash reserves. These factors give CML the
ability to stay focused on its strategic goals in the knowledge
that the fundamental business stability is intact, allowing
investment today where the return on those investments can be some
way in the future.
The need to improve market coverage in the Far East and more
specifically in China to drive growth in that market, coupled with
the opportunity to acquire a company with complementary solutions,
led to the identification of Sicomm and the recently announced
intended acquisition. Although I expect this acquisition will
enhance the Group's performance in the coming year I must also
stress that this is an important strategic move targeted to give a
long term benefit. Sicomm brings improved market access and
customer support geographically whilst also increasing our product
range. This acquisition builds on our existing resources in the
region and provides an established Chinese trading operation with
an instant impact. Coupling these benefits with those of the
complimentary product line, which has yet to be fully marketed
globally, demonstrates the compelling nature of this
acquisition.
Results and dividend
Revenues increased 5% to GBP22.83m (2015: GBP21.80m) marginally
ahead of market expectations, profit before taxation increased by
4% to GBP3.32m (2015: GBP3.18m) and basic EPS increased 8% to
18.03p (2015: 16.71p). Importantly, in a year of significant
development expenditure, cash increased to GBP13.60m (2015:
GBP13.19m) and net assets moved up to a record GBP32.58m (2015:
GBP28.97m).
The need for strong cash reserves in the business is important
in fulfilling the expansion strategy and so, as always, there is a
requirement to balance the needs of the Group whilst also being
mindful that shareholder return expectations are met in both the
short and long term. In light of the progress made this year,
coupled with the continued confidence in the Group's financial
position and future prospects the Board is pleased to recommend a
slightly increased dividend to 7.0p (2015: 6.9p). If approved, this
dividend will be paid on 29 July 2016 to shareholders whose names
appear on the register at the close of business on 24 June
2016.
Management
With the reorganisation and strengthening of the Group's senior
management team in 2015 we have had the opportunity through this
year to focus on improving operational effectiveness globally. This
process, though started, is ongoing and is expected to be enhanced
still further with the technical capabilities and market knowledge
of the new Sicomm team. Product innovation, focussed sales efforts
and driving efficiency are all priorities for the management
team.
Prospects and outlook
The Board's core strategy of sustainable growth remains
paramount and as stated in my report last year we will pursue this
strategy utilising our strong balance sheet to invest in growth,
both organically and through targeted acquisitions. Through this
year we expect to be integrating Sicomm but this will not detract
from pursuing appropriate opportunities should they be
presented.
What must not be forgotten is that the key to moving forward in
any business is the contribution from the workforce and our
employees across the world, as always, have been crucial to
achieving our goals. They have consistently met the demands placed
on them with innovation, passion and commitment which is much
appreciated and I would like to place on record the Board's
appreciation and gratitude for this.
In summary we start this year with a clear direction but still
have much to do. We have returned to growth and I am confident CML
is well positioned for further progress in the year ahead on the
back of our innovative products and market traction gained, but as
always, there will likely be challenges. What is pleasing is that
the fundamentals of the business remain sound, and my confidence
this year is underpinned by the positive trend in order bookings in
the second half of the year just finished coupled with the strong
and enthusiastic management team.
N G Clark
Group Non-Executive Chairman
OPERATING AND FINANCIAL REVIEW
Introduction
At the beginning of the financial year under review we predicted
revenue and profits growth, high levels of engineering investment,
and expansion of our marketing and customer facing resources. It is
pleasing to report that we have made firm progress in each of those
areas placing the business in a stronger position than it was one
year ago.
Total sales for the period moved higher, key new product
launches occurred within both the Storage and Wireless
semiconductor categories, additional selling and support resources
were added in each major region and the number of meaningful
customer opportunities grew.
Towards the end of the financial year we also took the decision
to re-organise our operational structure in the Americas region.
The changes made, once fully enacted, will enhance our focus within
this important market region and also provide a scalable structure
that better suits the Group's multi-faceted growth strategy.
Results
Group turnover for the year to 31 March 2016 amounted to
GBP22.83m representing an increase of 5% against the prior full
year (2015: GBP21.80m). The growth was driven by advances in
Storage and Wireline Telecom revenues whilst geographically,
improvements were recorded in each of the main territories
addressed; namely the Far East, Americas and Europe. That said, it
is important to note that annual revenue comparisons by region can
be misleading as some customers can and do alter their
manufacturing locations periodically. Revenue analysis at a market
sector level is covered later in this report.
Sales in the second half of the year improved by 8% compared to
the first six-month period and new order bookings in the final
months of the year were notably stronger.
Stable gross margins delivered a gross profit for the period of
GBP16.25m (2015: GBP15.47m).
Distribution and administration (D&A) costs rose to
GBP13.27m (2015: GBP12.78m) due partly to an increase in staff
costs, associated with the investment in sales, marketing and
engineering support resources (GBP0.29m) but also resulting from
the lack of the prior year IAS19 pension credit (GBP0.22m). The
overall amortisation level was higher at GBP3.33m (2015: GBP3.22m),
with the positive effect of aligning amortisation and
capitalisation procedures across the Group cancelled out by a
GBP0.58m negative swing in foreign exchange benefit compared to the
previous year.
R&D costs for the year were markedly higher, as expected.
Total expenditure for the year amounted to GBP6.09m and represents
an increase of 16% (2015: GBP5.21m). Of this total, GBP0.73m was
expensed and is included within the D&A figure (2015:
GBP0.85m).
Other income consists of amounts received from the commercial
rental of Group-owned property assets that are now surplus to
operational requirements and from the award of EU grants associated
with specific engineering development activities. The amount
recorded this year was GBP0.41m (2015: GBP0.42m). Rental income
increased through the year and EU funding decreased.
Profit from operations increased by 9% to GBP3.39m compared to a
figure of GBP3.11m for the prior year. Despite healthy cash
balances, finance income reflected the low prevailing interest
rates that exist globally. After accounting for share-based
payments and finance income, a profit before tax of GBP3.32m was
posted (2015: GBP3.18m) representing growth of 4%.
The Group continued to benefit from UK tax credits associated
with some of its R&D activities and that is the primary driver
behind the lower than average tax rate achieved. An income tax
expense of GBP0.40m was posted against a prior year expense of
GBP0.48m.
Profit after tax amounted to GBP2.93m (2015: GBP2.70m).
The Group's cash reserves at 31 March 2016 stood at GBP13.60m,
representing an increase of GBP0.41m when compared to the same
cut-off date one year earlier (31/3/15: GBP13.19m). The balance
reported follows a record spend on R&D (GBP6.09m), payment of a
dividend in respect of the prior financial year (GBP1.12m), capital
expenditure of GBP0.44m and the payment of an escrow deposit in
respect of the Sicomm acquisition that was announced on 27 May 2016
(GBP0.33m).
Included in the cash balance is a conditional customer
prepayment of approximately GBP1.39m (2015: GBP0.67m) against
future product purchases. Initial deliveries to the customer in
question commenced in the final months of the financial year.
Inventory levels at the year-end totalled GBP1.57m (2015:
GBP1.76m) and comprised slightly higher raw material levels and
lower finished goods stock levels when compared to the previous
year.
Pension scheme
The Group operates a number of pension schemes globally which
are generally money purchase type schemes with a minimum employee
contribution level required in order to trigger a company
contribution. The one exception is an historic UK final salary
scheme that has been closed to both new members and future accruals
for a number of years. At the time of publishing the 2015 Annual
Report, the Group was taking professional advice relating to this
scheme with the objective of achieving the right balance between
adequate scheme funding and business growth objectives. As a
result, the scheme funding position has improved and, with a higher
discount rate of 3.8% (2015: 3.6%) being applied for the IAS19
accounting standard, a net deficit of GBP2.07m has been recorded
(2015: net deficit of GBP3.62m). The pension assets increased
through the year and the liabilities decreased. The company also
benefited from a reduction in annual contributions to clear the
deficit.
Customer dependency
There was relatively little movement through the year in terms
of customer dependency. Only two customers contributed greater than
10% to Group turnover. These customers each purchase Storage
semiconductors from us and then manufacture and supply a storage
module/product to a wide range of end-customers. Together, these
two customers have a combined contribution of approximately 27% of
overall revenues. Customer number three contributed approximately
6% and all remaining customers are below the 4% threshold.
Property
The Group headquarters is located on a 28 acre freehold site in
Essex with existent planning permission for additional commercial
space. A residential planning application directed at a separate
part of the site is currently awaiting determination following an
appeal inquiry in October 2015.
STORAGE
The contribution to Group turnover from Storage products rose by
8% to GBP11.65m (2015: GBP10.82m) representing 51% of total Group
revenues. Sales into Europe and the Far East were responsible for
the gain with the Americas posting a flat year. As mentioned
earlier, revenue at a geographical level is attributed to the
territory in which the goods are actually sold (e.g. the customers
own manufacturing location or the customers sub-contract location)
and does not necessarily relate to the region in which the original
design win was recorded.
Our objectives for the year were to increase sales, commence
initial revenues from the new products that were recently launched
and to execute our engineering developments on-time and to budget.
The level of achievement against these objectives was good.
Product shipments for the year went into a variety of
end-customer products across a range of application areas. Within
telecoms/Infrastructure markets, historically our largest
sub-market, our Storage IC's were used within equipment for
internet switching and routing and within wireless base stations
for mobile connectivity. Our Hyperstone brand is becoming well
known in these markets and associated with high quality and
reliability; two essential pre-requisites for being accepted in the
market.
Within the automotive market, our sales into in-vehicle
infotainment (IVI) applications progressed well with multiple car
manufacturers utilising Hyperstone-driven solutions and additional
manufacturers entering the qualification process. Our customised
automotive solution provides application-specific features that
maximise the life of the solid state drive itself and delivers
class leading reliability and recovery in the event of power supply
interruptions. Other end-applications served through the year
included industrial automation and embedded computing for licensed
Gaming machines.
The outlook at the interim stage was for automotive revenue
growth and an expansion of our market and customer share in the
telecoms/infrastructure and Industrial/embedded areas. The sales
levels reported coupled with the progress made with new customer
opportunities and qualification activities means that we are on
track.
In previous reporting we have commented on our strategy to
expand the product portfolio to fill the gaps that we saw in order
to maximise growth in our chosen end-markets. We have made good
progress with that strategy and now have a product range that
includes flash memory controllers equipped with CompactFlash, SATA,
SD and USB2/USB3 interface technologies.
The new USB3 product was announced to the market in February
2016 at the Embedded World show in Nuremburg, Germany, and,
together with the hyMap technology that has further evolved since
being launched in the prior year, we are building an impressive
platform portfolio that we can leverage well into the future. The
engineering team continue to excel and, as with the hyMap
development, the USB3 project was an impressive achievement. It
uses 65nm process geometry and resulted in right first time silicon
being sampled to customers on schedule.
Through the year, we continued to invest in the technology we
will need in the future to be able to maximise growth in the
markets we are working hard to penetrate. Trends in flash memory
technology are one important consideration and our expanding
relationships with tier 1 flash memory providers are key supporting
factors.
We made specific investments in marketing and field-based
application engineering roles during the year to ensure we continue
to capitalise on the customer opportunities that the enlarged
product portfolio is uncovering. Additional investments were made
in customer facing tools and internal testing environments all
ultimately expected to improve the customer experience and enhance
our product performance and quality even further.
WIRELESS
Revenues received from the shipment of semiconductors into
wireless end-applications were marginally down against the prior
year at GBP8.21m (2015: GBP8.28m) but broadly in line with
expectations that were set following the delays to one or two
customer product launches, as communicated at the interim stage. By
financial year end shipments into these customer projects had
commenced.
Regionally the business mix was a little different for the year
as a whole. Good growth was seen in the Americas as customer
production schedules began to ramp whilst in the Far East, China
was adversely affected by weaker local manufacturing and to some
extent by reduced government spending on infrastructure-related
projects such as power networks and railways. Europe also posted a
weaker performance, partly due to the one or two project delays
that have previously been communicated.
Wireless goals for the year were underpinned by a focus on
securing significant chip-set design-wins, in all regions, capable
of driving sustainably higher business levels. Continuing effort
was put into positioning the Group to participate in the growth
expected to come from voice-centric markets as they transition from
analogue technology to the newer digital standards. Within wireless
data, additional revenues from chip-set solutions for satellite M2M
applications made a meaningful contribution.
The majority of IC shipments categorised as Wireless were
delivered to customers who manufactured professional voice
communication terminals and industrial quality radio equipment for
the transmission and reception of data. Customers deployed varying
combinations of our baseband, modem and RF IC's into these
applications and particularly pleasing was the strong performance
from our RF product portfolio. Evolving from a pure baseband/modem
semiconductor supplier, CML is now an established provider of
complementary high performance RF IC's to a growing number of the
leading companies in each of the chosen target markets.
Our strategy within Wireless communications application areas
has been to continue evolving the product range so that we can
target new end-applications and expand the total available market.
We progressed well with this strategy through the year, releasing
two new RF products; one of which raised the bar in terms of direct
conversion receiver performance, and one which offered the customer
base greater flexibility in reducing power consumption within
applications that are not as technically demanding. We launched a
baseband processor IC specifically targeted at the DMR standard
which is predicted to be the dominant choice for non-public safety
applications as customers replace currently installed analogue
terminals and base stations.
Engineering capabilities within the baseband and modem teams
were enhanced through the year with specific investments being made
in prototyping systems and, more generally for enhanced internal
information systems. We have a multi-site, multi-disciplinary
engineering team and these investments will help minimise the risks
and costs associated with developing new products on increasingly
lower geometry silicon processes.
Current R&D programmes are focussed on being able to offer
the customers elements of our existing RF product portfolio across
a wider range of radio frequencies and to ensure our baseband and
modem platforms are suitably advanced to cope with the demanding
performance requirements that our customers need in the future.
As with our Storage resource levels, we made specific
investments in customer-facing application engineering roles during
the year to provide key support to our customers and help to
minimise their development timelines. CML is renowned for the
superior levels of technical support we provide and it is important
to maintain that reputation as we grow.
WIRELINE TELECOM
Revenues from the Wireline Telecom product portfolio delivered a
pleasing growth rate of 13% following a somewhat weaker previous
year. A full year figure GBP2.57m was posted (2015: GBP2.28m).
Each major region saw advances for the full year. Within China,
shipments into higher speed point of payment terminals were
stronger and the Group reaped the rewards from design-wins secured
for our higher data rate modem IC's. In North America, sales
improved for telephone signalling and data transfer IC's used
within residential and commercial alarm communicators. These
products typically have dual mode telephone line & 3G/4G
wireless connectivity capabilities and Group products handle the
wireline communications functionality.
We are one of a reducing number of semiconductor companies
supplying dedicated solutions for inclusion within equipment
intended for operation on analogue telephony networks. This
continues to present us with new design-in opportunities and
customers value the longevity of product supply the Group typically
offers. This is an important advantage when dealing with
multi-national industrial organisations who are constantly
concerned about component level product obsolescence.
Aside from the Storage, Wireless and Wireline Telecom revenue
generating markets already reviewed, the Group received additional
revenue from the sale of miscellaneous semiconductor products and
services derived from historic operational activities. The sale of
products classified under this category amounted to GBP0.40m (2015:
GBP0.43m) for the year under review.
SUMMARY AND OUTLOOK
Financial year 2016 represented a steady period of organic
progress and delivered a return to sales and profit growth, as
expected. It was a record year of R&D investment, with an
amount equal to 27% of Group turnover invested in new products that
will ultimately position the Group to increase its market share.
New IC's that were launched during the year offered either enhanced
performance or closed a gap in the existing product range.
Operationally, important investments were made in sales,
marketing and engineering support resources to handle the
increasing customer engagement levels that an expanding product
range demands.
Internally, structural changes took place that will maximise
efficiency, increase productivity and provide a scalable operating
structure in anticipation of focussed bolt-on acquisitions.
For the 2017 financial year, we currently expect a firmer
revenue contribution from those customer projects that have already
commenced meaningful shipments in the last twelve months or so. Our
customer facing resources will be supporting our more recent
product introductions through the promotion, sampling and multiple
qualification processes that are required prior to end-customers
launching their own products to market.
Taking a medium term view, it is important to mention that the
gestation period from initial customer contact through to shipping
production quantities against a specific customer project typically
exceeds one year and, for some industrial markets, can extend
beyond three. Although this lengthy gestation period can sometimes
be frustrating, we are not at the start of the process and have
been seeding a number of customer projects for some time.
Conversely, typical Group customers do not rapidly re-design their
own products which usually results in a multi-year revenue
generating period for us.
Our main market areas for Storage and Wireless continue to offer
compelling growth opportunities. For Storage, we are making steady
progress within the automotive market and for
telecoms/infrastructure applications, the product range we have is
well suited to the needs of the customer base. The number of top
tier equipment manufacturers approving our IC's for use within
their own products is increasing.
In Wireless end-markets, the transition from analogue voice to
digital is now gathering pace and for our data communication
solutions, the chip-set design wins that we have already secured
are now beginning to contribute revenues. Within our industrial
markets, the move by some regulatory authorities to increase RF
performance requirements should play to our strengths.
Over the current year, the Board expects a further advance in
revenues and profitability and a continuing pipeline of new
semiconductor solutions that address a wider range of end-customer
requirements and additional market areas. Our goal is to be the
first choice key component supplier within our chosen
end-markets.
C A Gurry
Group Managing Director
Consolidated income statement for the year ended 31 March
2016
Unaudited Audited
2016 2015
GBP'000 GBP'000
------------------------------------ ---------- ---------
Continuing operations
Revenue 22,833 21,804
Cost of sales (6,580) (6,339)
------------------------------------- ---------- ---------
Gross profit 16,253 15,465
Distribution and administration
costs (13,272) (12,777)
------------------------------------- ---------- ---------
2,981 2,688
Other operating income 405 419
------------------------------------- ---------- ---------
Profit from operations 3,386 3,107
Share--based payments (117) (95)
------------------------------------- ---------- ---------
Profit after share--based
payments 3,269 3,012
Revaluation of investment
properties - 100
Finance income 55 66
------------------------------------- ---------- ---------
Profit before taxation from
continuing operations 3,324 3,178
Income tax expense (399) (476)
------------------------------------- ---------- ---------
Profit after taxation from
continuing operations 2,925 2,702
------------------------------------- ---------- ---------
Profit after taxation attributable
to equity owners of the parent 2,925 2,702
------------------------------------- ---------- ---------
Basic earnings per share
------------------------------------ ---------- ---------
From profit for year 18.03p 16.71p
------------------------------------- ---------- ---------
Diluted earnings per share
From profit for year 17.94p 16.51p
------------------------------------- ---------- ---------
Consolidated statement of total comprehensive income for the
year ended 31 March 2016
Unaudited Unaudited
2016 2016 Audited 2015 Audited 2015
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------------------------- ---------- ---------- ------------- -------------
Profit for the year 2,925 2,702
Other comprehensive income, net of tax
Items that will not be reclassified subsequently to profit
or loss
Actuarial gain/(loss) on retirement benefit obligations 1,570 (1,133)
Deferred tax on actuarial (gains)/losses (283) 227
-------------------------------------------------------------- ---------- ---------- ------------- -------------
Items reclassified subsequently to profit or loss upon
derecognition
Foreign exchange differences 584 (477)
-------------------------------------------------------------- ---------- ---------- ------------- -------------
Other comprehensive income/(expense) for the year net of
taxation attributable to equity owners
of the parent 1,871 (1,383)
-------------------------------------------------------------- ---------- ---------- ------------- -------------
Total comprehensive income for the year attributable to the
equity holders of the parent 4,796 1,319
-------------------------------------------------------------- ---------- ---------- ------------- -------------
Consolidated statement of financial position as at 31 March
2016
Unaudited Unaudited Audited Audited
2016 2016 2015 2015
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ---------- ---------- -------- ---------
Assets
Non--current assets
Property, plant
and equipment 5,171 4,976
Investment properties 3,550 3,550
Development costs 9,292 6,984
Goodwill 3,512 3,512
Deferred tax asset 893 1,310
---------------------------- ---------- ---------- -------- ---------
22,418 20,332
Current assets
Inventories 1,571 1,763
Trade receivables
and prepayments 3,458 2,864
Current tax assets 830 628
Cash and cash equivalents 13,596 13,188
---------------------------- ---------- ---------- -------- ---------
19,455 18,443
Total assets 41,873 38,775
---------------------------- ---------- ---------- -------- ---------
Liabilities
Current liabilities
Trade and other
payables 4,190 3,471
Current tax liabilities 39 196
---------------------------- ---------- ---------- -------- ---------
4,229 3,667
Non--current liabilities
Deferred tax liabilities 3,001 2,513
Retirement benefit
obligation 2,067 3,624
---------------------------- ---------- ---------- -------- ---------
5,068 6,137
--------------------------- ---------- ---------- -------- ---------
Total liabilities 9,297 9,804
---------------------------- ---------- ---------- -------- ---------
Net assets 32,576 28,971
---------------------------- ---------- ---------- -------- ---------
Capital and reserves
attributable to
equity owners of
the parent
Share capital 813 813
Share premium 5,700 5,700
Treasury shares (190) -
- own share reserve
Share--based payments
reserve 388 287
Foreign exchange
reserve 318 (266)
Accumulated profits 25,547 22,437
---------------------------- ---------- ---------- -------- ---------
Total shareholders'
equity 32,576 28,971
---------------------------- ---------- ---------- -------- ---------
Consolidated cash flow statement for the year ended 31 March
2016
Unaudited Audited
2016 2015
GBP'000 GBP'000
----------------------------- ----------- --------
Operating activities
Net profit for the
year before taxation 3,324 3,178
Adjustments for:
Depreciation 254 267
Amortisation of development
costs 3,330 3,224
Revaluation of investment
properties - (100)
Movement in pensions
net costs 13 (207)
Share--based payments 117 95
Profit on sale of
plant and equipment - (4)
Finance income (55) (66)
Movement in working
capital 317 852
-------------------------------- ----------- --------
Cash flows from operating
activities 7,300 7,239
Income tax received/(paid) 279 (270)
-------------------------------- ----------- --------
Net cash flows from
operating activities 7,579 6,969
-------------------------------- ----------- --------
Investing activities
Purchase of property,
plant and equipment (443) (318)
Investment in development
costs (5,356) (4,363)
Payment of escrow (331) -
cash deposit
Disposal of property,
plant and equipment - 12
Finance income 55 66
-------------------------------- ----------- --------
Net cash flows from
investing activities (6,075) (4,603)
-------------------------------- ----------- --------
Financing activities
Issue of ordinary
shares - 645
Purchase of treasury (190) -
shares
Dividend paid to
shareholders (1,118) (1,013)
Net cash flows from
financing activities (1,308) (368)
-------------------------------- ----------- --------
Increase/(decrease)
in cash and cash
equivalents 196 1,998
-------------------------------- ----------- --------
Movement in cash
and cash equivalents:
At start of year 13,188 11,373
Increase/(decrease)
in cash and cash
equivalents 196 1,998
Effects of exchange
rate changes 212 (183)
-------------------------------- ----------- --------
At end of year 13,596 13,188
-------------------------------- ----------- --------
Consolidated statement of changes in equity for the year ended
31 March 2016
Treasury Share Foreign
Share Share shares -based exchange Acc-umulated
capital premium payments reserve profits Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- --------- --------- ------------ ---------
At 31 March
2014 - audited 798 5,070 - 327 211 21,519 27,925
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Profit for year 2,702 2,702
Other comprehensive
income net of
taxes
Foreign exchange
differences (477) (477)
Net actuarial
loss recognised
directly to
equity (1,133) (1,133)
Deferred tax
on actuarial
loss 227 227
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Total comprehensive
income for year - - - - (477) 1,796 1,319
---------------------- -------- -------- -------- --------- --------- ------------ ---------
798 5,070 327 (266) 23,315 29,244
Transactions
with owners
in their capacity
as owners
Issue of ordinary
shares 15 630 645
Dividend paid (1,013) (1,013)
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Total transactions
with owners
in their capacity
as owners 15 630 - - - (1,013) (368)
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Share--based
payments in
year 95 95
Cancellation/transfer
of share--based
payments (135) 135 -
---------------------- -------- -------- -------- --------- --------- ------------ ---------
At 31 March
2015 - audited 813 5,700 - 287 (266) 22,437 28,971
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Profit for year 2,925 2,925
Other comprehensive
income net of
taxes
Foreign exchange
differences 584 584
Net actuarial
gain recognised
directly to
equity 1,570 1,570
Deferred tax
on actuarial
gain (283) (283)
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Total comprehensive
income for year - - - - 584 4,212 4,796
---------------------- -------- -------- -------- --------- --------- ------------ ---------
813 5,700 - 287 318 26,649 33,767
Transactions
with owners
in their capacity
as owners
Dividend paid (1,118) (1,118)
Purchase of
treasury shares (190) (190)
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Total transactions
with owners
in their capacity
as owners - - (190) - - (1,118) (1,308)
---------------------- -------- -------- -------- --------- --------- ------------ ---------
Share--based
payments in
year 117 117
Cancellation/transfer
of share--based
payments (16) 16 -
---------------------- -------- -------- -------- --------- --------- ------------ ---------
At 31 March
2016 - unaudited 813 5,700 (190) 388 318 25,547 32,576
---------------------- -------- -------- -------- --------- --------- ------------ ---------
1 Segmental analysis
Reported segments and their results in accordance with IFRS 8,
are based on internal management reporting information that is
regularly reviewed by the chief operating decision maker (C. A.
Gurry). The measurement policies the Group uses for segmental
reporting under IFRS 8 are the same as those used in its financial
statements.
Information about revenue, profit/loss, assets and
liabilities:
Unaudited
2016 Audited 2015
------------- -------- ------------- --------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ------------- -------- ------------- --------
Revenue
By origin 35,924 35,924 34,031 34,031
Inter--segmental
revenue (13,091) (13,091) (12,227) (12,227)
------------------------- ------------- -------- ------------- --------
Total segmental
revenue 22,833 22,833 21,804 21,804
------------------------- ------------- -------- ------------- --------
Segmental result 3,269 3,269 3,012 3,012
------------- -------------
Revaluation of
investment properties - 100
Finance income 55 66
Income tax expense (399) (476)
------------------------- ------------- -------- ------------- --------
Profit after
taxation 2,925 2,702
------------------------- ------------- -------- ------------- --------
Assets and liabilities
Segmental assets 36,600 36,600 33,287 33,287
------------- -------------
Unallocated corporate
assets
Investment properties 3,550 3,550
Deferred tax
assets 893 1,310
Current tax assets 830 628
------------------------- ------------- -------- ------------- --------
Consolidated
total assets 41,873 38,775
------------------------- ------------- -------- ------------- --------
Segmental liabilities 4,190 4,190 3,471 3,471
------------- -------------
Unallocated corporate
liabilities
Deferred tax
liabilities 3,001 2,513
Current tax liabilities 39 196
Retirement benefit
obligation 2,067 3,624
------------------------- ------------- -------- ------------- --------
Consolidated
total liabilities 9,297 9,804
------------------------- ------------- -------- ------------- --------
Other segmental information:
Audited
Unaudited 2016 2015
--------------- -------- -------------- --------
Semiconductor Semiconductor
components Group components Group
GBP'000 GBP'000 GBP'000 GBP'000
------------------- --------------- -------- -------------- --------
Property,
plant and
equipment
additions 443 443 318 318
------------------- --------------- -------- -------------- --------
Development
cost additions 5,356 5,356 4,363 4,363
------------------- --------------- -------- -------------- --------
Depreciation 254 254 267 267
------------------- --------------- -------- -------------- --------
Amortisation 3,330 3,330 3,224 3,224
------------------- --------------- -------- -------------- --------
Other non--cash
(expense)/income (13) (13) 307 307
------------------- --------------- -------- -------------- --------
Geographical information:
UK Rest of Americas Far East Total
Europe
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ -------- -------- --------- --------- ---------
Year ended 31
March 2016 -
Unaudited
Revenue by origination 10,563 11,647 4,858 8,856 35,924
Inter--segmental
revenue (5,526) (7,565) - - (13,091)
------------------------ -------- -------- --------- --------- ---------
Revenue to third
parties 5,037 4,082 4,858 8,856 22,833
------------------------ -------- -------- --------- --------- ---------
Property, plant
and equipment 4,997 143 12 19 5,171
------------------------ -------- -------- --------- --------- ---------
Investment properties 3,550 - - - 3,550
------------------------ -------- -------- --------- --------- ---------
Development
costs 3,121 6,171 - - 9,292
------------------------ -------- -------- --------- --------- ---------
Goodwill 3,512 - - - 3,512
------------------------ -------- -------- --------- --------- ---------
Total assets 28,281 10,100 1,412 2,080 41,873
------------------------ -------- -------- --------- --------- ---------
Year ended 31
March 2015 -
Audited
Revenue by origination 10,134 10,627 4,688 8,582 34,031
Inter--segmental
revenue (5,036) (7,190) - (1) (12,227)
------------------------ -------- -------- --------- --------- ---------
Revenue to third
parties 5,098 3,437 4,688 8,581 21,804
------------------------ -------- -------- --------- --------- ---------
Property, plant
and equipment 4,849 104 14 9 4,976
------------------------ -------- -------- --------- --------- ---------
Investment properties 3,550 - - - 3,550
------------------------ -------- -------- --------- --------- ---------
Development
costs 2,440 4,544 - - 6,984
------------------------ -------- -------- --------- --------- ---------
Goodwill 3,512 - - - 3,512
------------------------ -------- -------- --------- --------- ---------
Total assets 27,060 8,388 1,370 1,957 38,775
------------------------ -------- -------- --------- --------- ---------
Inter--segmental transfers or transactions are entered into
under commercial terms and conditions appropriate to the location
of the business entity whilst considering that the parties are
related.
2 Revenue
Unaudited Audited
2016 2015
GBP'000 GBP'000
-------------------------------- ---------- --------
Geographical classification
of turnover (by destination):
United Kingdom 950 853
Rest of Europe 5,621 5,220
Far East 10,704 10,438
Americas 5,122 4,804
Others 436 489
-------------------------------- ---------- --------
22,833 21,804
-------------------------------- ---------- --------
3 Dividend - paid and proposed
It is proposed to pay a dividend of 7.0p per ordinary share of
5p in respect of the year ended 31 March 2016. During the year a
dividend of 6.9p per ordinary share of 5p was paid in respect of
the year ended 31 March 2015.
4 Income tax expense
The Directors consider that tax will be payable at varying rates
according to the country of incorporation of a subsidiary and have
provided on that basis.
Unaudited Audited
2016 2015
GBP'000 GBP'000
--------------------------- ---------- --------
Current tax
UK corporation tax
on results of the period (501) (597)
Adjustment in respect
of previous periods - (1)
--------------------------- ---------- --------
(501) (598)
Foreign tax on results
of the period 433 430
Foreign tax - adjustment (2) -
in respect of previous
periods
--------------------------- ---------- --------
Total current tax (70) (168)
--------------------------- ---------- --------
Deferred tax
Current period movement 453 652
Adjustments to deferred
tax charge in respect
of previous periods 16 (8)
--------------------------- ---------- --------
Total deferred tax 469 644
--------------------------- ---------- --------
Tax charge on profit
on ordinary activities 399 476
--------------------------- ---------- --------
5 Earnings per ordinary share
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.
Unaudited 2016 Audited 2015
------------------------------ ------------------------------
Weighted Weighted
average average
number Profit number Profit
per per
Profit of shares share Profit of shares share
GBP'000 Number p GBP'000 Number p
------------------- -------- ----------- ------- -------- ----------- -------
Basic earnings
per share 2,925 16,219,037 18.03 2,702 16,167,635 16.71
------------------- -------- ----------- ------- -------- ----------- -------
Diluted earnings
per share
Basic earnings
per share 2,925 16,219,037 18.03 2,702 16,167,635 16.71
Dilutive effect
of share options - 86,877 (0.09) - 200,100 (0.20)
------------------- -------- ----------- ------- -------- ----------- -------
Diluted earnings
per share 2,925 16,305,914 17.94 2,702 16,367,735 16.51
------------------- -------- ----------- ------- -------- ----------- -------
6 Investment properties
Investment properties are revalued at each discrete period end
by the directors and every third year by independent Chartered
Surveyors on an open market basis. No depreciation is provided on
freehold investment properties or on leasehold investment
properties. In accordance with IAS 40, gains and losses arising on
revaluation of investment properties are shown in the income
statement. Everett Newlyn, Chartered Surveyors and Commercial
Property Consultants professionally valued the investment
properties on the basis of open market value as at 31 March 2015.
The Directors do not consider that the present valuation has
materially changed as at 31 March 2016 having considered the local
property market.
7 Analysis of cash flow movement in net cash
The cash flow below is a combination of the actual cash flow and
the exchange movement:
Unaudited
Net cash
Audited at
Net cash
at
1 April Cash Exchange 31 March
2015 flow movement 2016
GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------- -------- ---------- ----------
Cash and cash
equivalents 13,188 196 212 13,596
13,188 196 212 13,596
--------------- --------- -------- ---------- ----------
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
segments, 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, which is undergoing continual and geographical
change. The Group's ability to respond to many competitive factors
including, but not limited to pricing, technological innovations,
product quality, customer service, manufacturing capabilities and
employment of qualified personnel will be key in the achievement of
its objectives, but its ultimate success will depend on the demand
for its customers' products since the Group is a component
supplier.
A substantial proportion of the Group's revenue and earnings are
derived from outside the UK and so the Group's ability to achieve
its financial objectives could be impacted by risks and
uncertainties associated with local legal requirements, the
enforceability of laws and contracts, changes in the tax laws,
terrorist activities, natural disasters or health epidemics.
9. Directors' statement pursuant to the disclosure and
transparency rules
The directors confirm that, to the best of their knowledge:
a. the consolidated financial statements, prepared in accordance
with IFRS as adopted by the EU give a true and fair view of the
assets, liabilities, financial position of the company and the
undertakings included in the consolidation taken as a whole;
and
b. the Group Non-Executive Chairman's Statement and Group
Managing Director's Operating and Financial Review includes 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.
10. Significant accounting policies
The accounting policies used in preparation of the annual
results announcement are the same accounting policies set out in
the year ended 31 March 2015 financial statements.
11. Post balance sheet event - Acquisition subject to regulatory
clearance
On 27 May 2016 the Company announced that it has entered into a
definitive agreement to acquire China-based Wuxi Sicomm
Technologies Ltd ("Sicomm") and affiliated companies.
Founded in 2003, Sicomm is a fabless semiconductor company and
solutions provider specialising in the development of integrated
baseband processors and RF semiconductors for global wireless
communication markets. Sicomm has approximately 30 employees and is
headquartered in Wuxi, China, with offices in Shanghai and
Quanzhou. The company's product range, which partially competes
with existing CML solutions, is targeted for use within consumer,
industrial and professional radio products and focusses on the
customer need to achieve the right balance between cost,
functionality and technical performance.
This acquisition expands the Group's product portfolio,
strengthens its Far Eastern regional support resources and
reinforces CML's position as a leader in the professional and
industrial wireless communication semiconductor market.
The acquisition, which is subject to normal Chinese domestic
regulatory clearance, has an agreed consideration of US$11m and
will be funded from a mixture of existing cash resources and the
issue of 774,181 new CML shares. The majority of the shares are
subject to specific lock-in restrictions over a three year period
and are provided under existing AGM resolution approval. The deal
is expected to close during the first half of the current financial
year to 31 March 2017 and a further announcement will be made at
that time. Consequently, further disclosures will be made when the
initial accounting of the business combination, in line with IFRS
and CML Group policies, is able to be completed.
12. General
The results for the year have been prepared using the
recognition and measurement principles of international financial
reporting standards as adopted by the EU.
The audited financial information for the year ended 31 March
2015 is based on the statutory accounts for the financial year
ended 31 March 2015 that has been filed with the Registrar of
Companies. The auditor reported on those accounts: their report was
(i) unqualified, (ii) did not include references to any matters to
which the auditor drew attention by way of emphasis without
qualifying the reports and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2016 are
expected to be finalised and signed following approval by the Board
of Directors on 24 June 2016 and delivered to the Registrar of
Companies following the Company's Annual General Meeting on 27 July
2016.
The financial information contained in this announcement does
not constitute statutory accounts for the year ended 31 March 2016
or 2015 as defined by Section 434 of the Companies Act 2006.
A copy of this announcement can be viewed on the company website
http://www.cmlmicroplc.com.
13. Approval
The Directors approved this annual results announcement on 14
June 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFFFADFMSEEM
(END) Dow Jones Newswires
June 14, 2016 02:00 ET (06:00 GMT)
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